<Page>
-----------------------------
OMB APPROVAL
-----------------------------
OMB Number: 3235-0570
Expires: November 30, 2005
Estimated average burden
hours per response....... 5.0
-----------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-8798
----------------------------------------------
The Bear Stearns Funds
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
383 Madison Avenue, New York, NY 10179
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Stephen A. Bornstein, Esq. 383 Madison Ave, New York, NY
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-272-2553
-----------------------------
Date of fiscal year end: March 31, 2003
-------------------------------------------
Date of reporting period: April 1, 2002 through March 31, 2003
-------------------------------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
Include a copy of the report transmitted to stockholders pursuant to Rule
30e-1 under the Act (17 CFR 270.30e-1).
<Page>
THE
BEAR STEARNS
FUNDS
FIXED INCOME FUNDS
Income Portfolio
High Yield Total Return Portfolio
ANNUAL REPORT
MARCH 31, 2003
[BEAR STEARNS LOGO]
BSF-R-016-12
<Page>
THE BEAR STEARNS FUNDS
Income Portfolio
High Yield Total Return Portfolio
LETTER TO SHAREHOLDERS
April 30, 2003
Dear Shareholders:
We are pleased to present the annual report to shareholders for the Income
Portfolio and High Yield Total Return Portfolio ("High Yield Portfolio") for the
fiscal year ended March 31, 2003. Detailed performance data for each class of
shares of each Portfolio can be found in the "Financial Highlights" and line
graph sections of this report.
INCOME PORTFOLIO
The fiscal year was exceptionally challenging for both equity and fixed income
investors. As the year began, a series of large-scale corporate accounting
scandals, rising geopolitical risk and news of a slowing U.S. economy drove
investors out of both equities and corporate bonds and into Treasuries, causing
Treasury yields to fall across the entire maturity spectrum. Yield spreads on
the bonds of even high quality corporations with solid accounting practices
widened dramatically as investors sought to avoid credit risk.
In order to better reflect our focus on the intermediate range of the maturity
spectrum, the Income Portfolio's benchmark was changed effective April 2002 to
the Lehman Intermediate Government/Credit Index. For the fiscal year, the Income
Portfolio underperformed the benchmark, largely due to our allocation to the
high yield sector during the first seven months of the year. High yield is
typically the hardest-hit sector of the fixed income market during times of
heightened uncertainty. The growing number of corporate governance scandals and
successive chain of earnings disappointments caused price depreciation and
widening spreads in high yield securities. During the fall of 2002, high yield
spreads reached their widest levels over Treasuries since 1990.
In October of 2002, the fixed income markets experienced a course reversal as
investors, believing that many corporate issues had been oversold, began to bid
up prices. Corporate bonds rebounded strongly, while Treasuries underperformed.
In this rally, the lowest-rated securities experienced the best performance. The
new year saw a continuation of this trend, with lower-quality credits
outperforming once again as investors sought yield. The high yield sector
performed strongly: default rates declined, credit profiles continued to
improve, and the sector benefited greatly from asset class rotation. The Income
Portfolio outperformed the benchmark in the most recent quarter, largely due to
our allocations to investment grade and high yield corporate bonds. Both sectors
began the quarter with attractive valuations: yield spreads over Treasuries were
at recession-like levels, and were priced with an expectation for negative GDP
growth going forward. As the quarter progressed, demand for both sectors
increased as it became apparent that GDP growth would remain positive. In
addition, because Treasury yields had been driven so low, there was an increase
in demand for higher-yielding sectors. As a result, corporate bonds outperformed
all other sectors of the fixed income market as investors sought higher returns
than Treasuries and the equity markets were likely to offer.
Our decision to position the Income Portfolio defensively with respect to our
mortgage-backed holdings also contributed positively to performance during the
year. We pursued this strategy by allocating less money to the sector, and by
focusing on securities with lower coupons, as well as on well-structured
collateralized mortgage obligations. Within the mortgage-backed sector,
durations became very short due to the high level of mortgage refinancings
taking place. Mortgage refinancing activity reached a record high during the
year as homeowners sought to take advantage of lower interest rates. This
strategy helped insulate the Income Portfolio from record levels of prepayment
activity.
In the months ahead, we expect the economy to continue to grow at a slow but
steady pace. For the fixed income markets, we see room for the corporate sector
to outperform, driven more by higher income than by further spread tightening.
1
<Page>
For the Income Portfolio, we plan to maintain an underweighted position in
mortgage-backed securities, with a focus on areas that are least vulnerable to
an increase in interest rates. When interest rates begin to rise again, the
average duration of mortgage-backed securities will lengthen dramatically as
refinancing activity drops off, leading to the potential for significant
underperformance. We intend to continue to overweight the corporate sector,
which should benefit from a growing economy, as well as asset-backed securities,
which are not subject to prepayment uncertainty.
HIGH YIELD TOTAL RETURN PORTFOLIO*
Fiscal year 2003 was a mixed year. Economic recovery was slow, there were
several cases of corporate governance issues, and geopolitical tensions came to
a head. The Federal Reserve tried to resuscitate the economy by reducing the
already low Federal Funds rate by 50 basis points to an historical low of 1.25%.
Against this backdrop, the high yield market had a fairly positive year. The
first half of the fiscal year was marked by defaults, downgrades, and general
volatility in the broader capital markets. The latter half of the year saw more
positive signs for the high yield market, including declining default rates,
stronger supply/demand momentum, and improved signs in economic indicators.
While investors were cognizant of corporate malfeasance for most of the year,
high yield investors were still able to reap positive returns.
The transportation, telecommunications, and utilities sectors were the worst
performing sectors for the fiscal year. The utilities sector suffered throughout
the year, as news of accounting issues and, subsequently, defaults compounded
poor fundamentals, weakening the entire sector. We avoided the sector for most
of the year, adding small positions at the end of the fiscal year as
fundamentals began to turn around. Similarly, we avoided the transportation
sector, which was negatively impacted by waning traveler interest stemming from
the events of September 11th and consumer spending. As a result of our being
underweighted in these sectors, the High Yield Portfolio outperformed against
the greater market.
Our conservative investment philosophy also led to the avoidance of corporate
defaults during the year. We were overweighted in defensive sectors with
attractive fundamentals, and generally avoided lower-quality companies in
volatile sectors. As a result, the High Yield Portfolio outperformed both the
Lehman High Yield Index benchmark and the Lipper High Yield Bond Fund Index.
Throughout the year, we were overweighted in higher-quality securities in the
technology, healthcare, energy, cable, and gaming & lodging sectors.
Technology posted the strongest returns during the year for both the High Yield
Portfolio and the overall high yield market. Our overweight in technology was
rooted in our conservative focus on investments in better capitalized companies
with strong liquidity. As market and economic conditions began to show signs of
improvement in the fall of 2002, the sector improved and ended the fiscal year
as the top performing sector.
The healthcare sector was another strong sector for the High Yield Portfolio
during the year. We increased our exposure to the diagnostic imaging sub-sector,
which traded at a premium for most of the year based on strong and stable
operating fundamentals. We continue to have positive sentiments on the imaging
sector based on healthy growth prospects, compelling operating margins, and the
aforementioned operating fundamentals.
One of the most trying features of the high yield market for most of the year
was the amount of defaults brought on primarily by corporate governance issues.
Several large companies admitted to various forms of improprieties, leading to a
strong deterioration in investor confidence that has yet to dissipate. In May
and June 2002, a staggering $68.4 billion of investment grade companies were
downgraded into the high yield market. As corporate governance issues and
defaults continued to surface for the remainder of the year, regulatory and
legislative bodies responded with guidelines that set forth criminal penalties
for such activity. On July 30, 2002, President Bush signed the Sarbanes-Oxley
Act, broadening the SEC's powers and plugging some of the agency's regulatory
holes. The first and most major milestone under the Act was an August 14, 2002
deadline for senior management to certify financial statements. While the High
Yield Portfolio had limited exposure to companies with corporate governance
issues, the associated anxiety caused many investors to remain uneasy.
Looking ahead, we believe the focus will shift from the conflict in Iraq to
macro data points, which could intimate signs of an economic turnaround now that
most of the war uncertainties have dissolved with the end of the heavy warfare
in Iraq. In addition, the high yield market continues to be a compelling asset
class for many investors, based on strong
2
<Page>
supply/demand factors, low default rates, attractive spreads, and its portfolio
diversification benefits. As economic improvement unfolds, high yield issuers
will likely benefit as increased capital spending and end-market demand drives
top-line revenue growth, creating a stronger credit environment that will allow
companies to fund future growth and pursue acquisition strategies. We also note
that many companies have successfully implemented cost savings and productivity
initiatives that have and will likely continue to translate into earnings
improvements.
In the months ahead, we will maintain our conservative investment philosophy,
with a focus on higher quality names in favored sectors until we see evidence of
improvement in the economy.
In conclusion, we value the confidence you have placed in us and would be
pleased to address any questions or concerns you may have. Please feel free to
call us at 1-800-766-4111.
Sincerely,
/s/ Doni L. Fordyce
Doni L. Fordyce
President and Trustee
The Bear Stearns Funds
- ------------
* Investing in high yield debt securities generally involves greater risks
than investing in more highly rated debt securities such as the risk of
greater price fluctuation and the possible loss of principal and income.
Performance results do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
On the accompanying line charts and total return tables found on pages 4 and
5, the returns of each Portfolio assumes reinvestment of all dividends and
capital gains distributions at net asset value on the ex-dividend date.
3
<Page>
BEAR STEARNS FUNDS
Income Portfolio
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A AND C SHARES(1)(2)(5) VS. VARIOUS INDICES
[CHART]
<Table>
<Caption>
LEHMAN INTERMEDIATE SALOMON SMITH BARNEY BROAD LIPPER A RATED
CLASS A SHARES CLASS C SHARES GOVERNMENT/CREDIT INDEX INVESTMENT GRADE BOND INDEX BOND FUND INDEX
5-Apr-95 $9,550 $10,000 $10,000 $10,000 $10,000
30-Sep-95 $10,145 $10,602 $10,628 $10,771 $10,884
31-Mar-96 $10,365 $10,811 $10,909 $11,042 $11,114
30-Sep-96 $10,575 $11,009 $11,173 $11,303 $11,346
31-Mar-97 $10,822 $11,244 $11,433 $11,584 $11,625
30-Sep-97 $11,572 $11,998 $12,088 $12,400 $12,500
31-Mar-98 $11,841 $12,243 $12,539 $12,971 $13,035
30-Sep-98 $12,504 $12,887 $13,350 $13,822 $13,776
31-Mar-99 $12,525 $12,858 $13,364 $13,814 $13,692
30-Sep-99 $12,432 $12,720 $13,433 $13,785 $13,546
31-Mar-00 $12,623 $12,887 $13,642 $14,064 $13,812
30-Sep-00 $13,109 $13,340 $14,273 $14,739 $14,333
31-Mar-01 $13,971 $14,170 $15,302 $15,832 $15,374
30-Sep-01 $14,593 $14,750 $16,113 $16,664 $16,040
31-Mar-02 $14,514 $14,619 $16,091 $16,678 $16,038
30-Sep-02 $15,482 $15,543 $17,418 $18,060 $17,182
31-Mar-03 $15,973 $15,984 $17,979 $18,607 $17,721
</Table>
Past performance is not predictive of future performance.
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003
----------------------------------------------
5-YEAR SINCE INCEPTION
ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7)
-------- -------------- -----------------
Income Portfolio(2)
Class A shares(5) ......................... 5.08% 5.19% 6.02%
Class B shares(4) ......................... 4.34 5.15 5.14
Class C shares(6) ......................... 8.34 5.48 6.04
Class Y shares(3) ......................... 10.35 6.50 6.61
Lehman Intermediate Government/Credit Index(1).. 11.74 7.47 7.62
Salomon Smith Barney Broad Investment Grade
Bond Index(1) ............................... 11.56 7.48 8.08
Lipper A Rated Bond Fund Index(1) .............. 10.50 6.34 7.41
- -------------------------------------------------------------------------------------------------
</Table>
- ------------
(1) The chart assumes a hypothetical $10,000 initial investment in the Income
Portfolio and reflects all portfolio expenses. Investors should note that
the Income Portfolio is a professionally managed mutual fund while the
indices are unmanaged, do not incur sales charges or expenses and are not
available for investment. Performance of the indices corresponds to the
performance of Class A and C shares.
(2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to
reimburse a portion of the Income Portfolio's operating expenses, as
necessary, to maintain the expense limitation, as set forth in the notes to
the financial statements. Total returns shown include fee waivers and
expense reimbursements; total returns would have been lower had there been
no assumption of fees and expenses in excess of expense limitations.
(3) The returns of Class Y shares (for which September 8, 1995, was the initial
public offering date) are higher than Class A, B and C shares due to the
fact that there is no sales load, contingent deferred sales charge or 12b-1
fee charged to Class Y shares.
(4) Assuming no redemption of shares at the end of the period, the returns of
Class B shares (for which February 2, 1998, was the initial public offering
date) would have been higher than Class A shares and would have been
substantially the same as Class C shares if operations were commenced on
the same day. The higher return is due to the fact that there is no initial
sales charge on Class B shares. Total returns reflect the applicable
contingent deferred sales charge. Without the applicable sales charge, the
total returns would have been 9.34%, 5.48% and 5.29%, respectively, for
each period shown.
(5) Reflects the initial maximum sales charge of 4.50%. Without the applicable
sales charge, the total returns would have been 10.05%, 6.16% and 6.64%,
respectively, for each period shown.
(6) Reflects the applicable contingent deferred sales charge. Without the
applicable sales charge, the total return for the one year ended March 31,
2003 would have been 9.34%.
(7) Inception dates: Class A and C shares commenced on April 5, 1995, Class B
shares commenced on February 2, 1998 and Class Y shares commenced on
September 8, 1995.
4
<Page>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A, B AND C SHARES(1)(2)(4)(5) VS. VARIOUS INDICES
[CHART]
<Table>
<Caption>
CREDIT SUISSE FIRST BOSTON
HIGH YIELD INDEX, LIPPER HIGH YIELD
CLASS A SHARES CLASS B SHARES CLASS C SHARES LEHMAN HIGH YIELD INDEX DEVELOPED COUNTRIES ONLY BOND FUND INDEX
2-Jan-98 $9,550 $10,000 $10,000 $10,000 $10,000 $10,000
31-Mar-98 $10,338 $10,809 $10,809 $10,336 $10,301 $10,440
30-Sep-98 $9,778 $10,188 $10,188 $9,974 $9,790 $9,688
31-Mar-99 $10,176 $10,568 $10,568 $10,375 $10,216 $10,312
30-Sep-99 $9,929 $10,275 $10,275 $10,263 $10,114 $10,196
31-Mar-00 $9,702 $10,006 $10,006 $10,187 $10,075 $10,311
30-Sep-00 $9,613 $9,885 $9,885 $10,362 $10,188 $10,189
31-Mar-01 $9,596 $9,834 $9,834 $10,443 $10,160 $9,776
30-Sep-01 $9,242 $9,439 $9,439 $9,773 $9,670 $8,888
31-Mar-02 $9,999 $10,179 $10,179 $10,511 $10,504 $9,394
30-Sep-02 $9,643 $9,798 $9,798 $9,548 $9,967 $8,604
31-Mar-03 $10,517 $10,584 $10,639 $10,968 $11,306 $9,693
</Table>
Past performance is not predictive of future performance.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003
----------------------------------------------
5-YEAR SINCE INCEPTION
ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7)
-------- -------------- -----------------
High Yield Total Return Portfolio(2)
Class A shares(4) ..................... 0.49% (0.60)% 0.94%
Class B shares(5) ..................... (0.22) (0.56) 1.08
Class C shares(6) ..................... 3.53 (0.33) 1.18
Class Y shares(3) ..................... 5.69 N/A 6.22
Lehman High Yield Index(1) ................. 4.34 1.19 1.77
Credit Suisse First Boston High Yield Index,
Developed Countries Only(1) ............. 7.62 1.88 2.36
Lipper High Yield Bond Fund Index(1) ....... 3.18 (1.47) (0.59)
- ----------------------------------------------------------------------------------------------------
</Table>
- ------------
(1) The chart assumes a hypothetical $10,000 initial investment in the High
Yield Portfolio and reflects all portfolio expenses. Investors should note
that the High Yield Portfolio is a professionally managed mutual fund while
the indices are unmanaged, do not incur sales charges or expenses and are
not available for investment. The Credit Suisse First Boston High Yield
Index, Developed Countries Only, was created on January 1, 1999. Prior to
January 1, 1999, the Credit Suisse First Boston High Yield Index was used.
The total returns and values for the Credit Suisse First Boston High Yield
Index, Developed Countries Only is a blend of the two indices. Performance
of the indices corresponds to the performance of Class A, B and C shares.
(2) Bear Stearns Asset Management Inc. waived a portion of its advisory fee and
agreed to reimburse a portion of the High Yield Portfolio's operating
expenses, as necessary, to maintain the expense limitation, as set forth in
the notes to the financial statements. Total returns shown include fee
waivers and expense reimbursements; total returns would have been lower had
there been no assumption of fees and expenses in excess of expense
limitations.
(3) The returns of Class Y shares (for which July 11, 2001 was the initial
public offering date) are higher than Class A, B and C shares due to the
fact that there is no sales load, contingent deferred sales charge or 12b-1
fee charged to Class Y shares.
(4) Reflects the initial maximum sales charge of 4.50%. Without the applicable
sales charge, the total returns would have been 5.18%, 0.32% and 1.84%,
respectively, for each period shown.
(5) Reflects the applicable contingent deferred sales charge. Without the
applicable sales charge, the total returns would have been 4.63%, (0.30)%
and 1.21%, respectively, for each period shown.
(6) Reflects the applicable contingent deferred sales charge. Without the
applicable sales charge, the total return for the one year ended March 31,
2003 would have been 4.50%.
(7) Inception dates: Class A, B and C shares commenced on January 2, 1998 and
Class Y shares commenced on July 11, 2001.
5
<Page>
THE BEAR STEARNS FUNDS
Income Portfolio
MARCH 31, 2003
(UNAUDITED)
================================================================================
TOP TEN INDUSTRY/SECTOR WEIGHTINGS
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK INDUSTRY/SECTOR NET ASSETS
---- ---------------------------------------------------------- ----------
1. Mortgage-Backed Securities - Pass-Through ................ 20.06
2. U.S. Government Agency Obligations ....................... 14.11
3. Mortgage-Backed Securities - Structured .................. 11.55
4. U.S. Government Obligations .............................. 7.98
5. Asset-Backed Securities .................................. 6.47
6. Bank Holding Companies ................................... 4.70
7. Crude Petroleum & Natural Gas ............................ 3.14
8. Motion Picture & Video Production ........................ 2.46
9. Personal Credit Institutions ............................. 2.37
10. Grocery Stores ........................................... 1.89
============================================================================================================
</Table>
TOP TEN HOLDINGS*
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------
PERCENT OF
RANK HOLDINGS INDUSTRY/SECTOR NET ASSETS
- ---- ---------------------------------------------- ------------------------------------- ----------
1. Fannie Mae ................................... Mortgage-Backed Securities 14.75
2. Freddie Mac .................................. Mortgage-Backed Securities 9.80
3. U.S. Treasuries .............................. U.S. Government Obligations 7.98
4. Fannie Mae ................................... U.S. Government Agency Obligations 7.06
5. Freddie Mac .................................. U.S. Government Agency Obligations 4.42
6. Federal Home Loan Bank ....................... U.S. Government Agency Obligations 2.63
7. Americredit Automobile Receivables Trust ..... Asset-Backed Securities 1.61
8. AOL Time Warner, Inc. ........................ Motion Picture & Video Production 1.29
9. Nomura Asset Capital Corp. ................... Mortgage-Backed Securities 1.24
10. Comm 2000-C1 ................................. Mortgage-Backed Securities 1.18
</Table>
- ------------
* Top ten holdings are provided for informational purposes only and should
not be deemed as a recommendation to purchase or sell the securities
mentioned. The portfolio is actively managed, therefore holdings may not be
current. Bear, Stearns & Co. Inc. or its affiliates may hold positions in
or may seek to perform investment banking services for the companies
listed.
6
<Page>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
MARCH 31, 2003
(UNAUDITED)
================================================================================
TOP TEN INDUSTRY WEIGHTINGS
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK INDUSTRY NET ASSETS
---- ---------------------------------------------------------- ----------
1. Health Care .............................................. 8.95
2. Hotels/Motels/Casinos .................................... 8.45
3. Electronic Components .................................... 7.61
4. Oil & Gas ................................................ 6.72
5. Building/Development ..................................... 5.67
6. Retailers ................................................ 4.88
7. Publishing ............................................... 4.36
8. Radio/Television ......................................... 3.55
9. Leisure .................................................. 3.37
10. Ecological Services/Equipment ............................ 3.34
=======================================================================================================
</Table>
TOP TEN HOLDINGS*
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------
PERCENT OF
RANK HOLDINGS INDUSTRY NET ASSETS
---- ---------------------------------------------------- ----------------------------- ----------
1. Ameristar Casinos, Inc. ............................ Hotels/Motels/Casinos 1.98
2. William Carter Co. (The) ........................... Clothing/Textiles 1.83
3. Nextel Communications, Inc. ........................ Wireless Telecommunications 1.70
4. ALARIS Medical, Inc. ............................... Health Care 1.68
5. DIRECTV Holdings/Finance ........................... Cable Television 1.68
6. Simmons Co. ........................................ Home Furnishings 1.64
7. Amkor Technology, Inc. ............................. Electronic Components 1.63
8. R.H. Donnelley Finance Corp. I ..................... Publishing 1.59
9. United Rentals (N.A.), Inc. ........................ Equipment Leasing 1.58
10. Dex Media East LLC & Dex Media East Finance, Inc. .. Publishing 1.54
</Table>
- -------------
* Top ten holdings are provided for informational purposes only and should
not be deemed as a recommendation to purchase or sell the securities
mentioned. The portfolio is actively managed, therefore holdings may not be
current. Bear, Stearns & Co. Inc. or its affiliates may hold positions in
or may seek to perform investment banking services for the companies
listed.
7
<Page>
THE BEAR STEARNS FUNDS
Income Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE(S) DATE(S) VALUE
- -----------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS -- 102.51%
ASSET-BACKED SECURITIES - 6.47%
$1,300 Americredit Automobile Receivables Trust, Series 2002-EM,
Class A3A .................................................. 2.970% 03/06/07 $ 1,329,647
900 CIT Group Home Equity Loan Trust, Series 2002-1, Class AF4 ... 5.970 03/25/29 951,240
250 Citibank Credit Card Master Trust, Series A .................. 5.950 10/07/04 255,171
555 Fannie Mae, Whole Loan, Series 2002-W2, Class AF3 ............ 5.127 02/25/30 575,656
755 Mitsubishi Motors Credit of America, Inc., Automobile Trust,
Series 2002-2, Class A3 .................................... 3.670 07/17/06 773,261
675 Triad Auto Receivables Owner Trust, Series 2002-A, Class A4 .. 3.240 08/12/09 692,083
750 WFS Financial Inc., Owner Trust, Series 2002-3, Class A3 ..... 2.760 02/20/07 762,665
-----------
Total Asset-Backed Securities (cost - $5,270,446)............. 5,339,723
-----------
CORPORATE OBLIGATIONS - 42.34%
AEROSPACE & DEFENSE - 0.39%
300 K&F Industries, Inc., Unsecured Senior Subordinated Notes,
Series B ................................................... 9.625 12/15/10 319,500
-----------
AIR TRANSPORTATION - 0.32%
250 Southwest Airlines Co., Unsecured Notes ...................... 6.500 03/01/12 265,670
-----------
AUTOMOTIVE - 0.30%
250 TRW Automotive Inc., Senior Notes* ........................... 9.375 02/15/13 251,250
-----------
BANK HOLDING COMPANIES - 4.70%
775 Bank of America Corp., Unsecured Senior Notes ................ 4.875 01/15/13 790,316
800 Bank One Corp., Notes ........................................ 6.000 08/01/08 894,011
750 National City Corp., Notes ................................... 3.200 04/01/08 746,304
750 SunTrust Banks, Inc., Unsecured Senior Notes ................. 6.250 06/01/08 860,661
350 Washington Mutual Capital I, Subordinated Capital Income
Securities, Company Guaranteed ............................. 8.375 06/01/27 397,688
175 Wells Fargo Financial, Inc., Senior Notes .................... 6.750 06/01/05 193,375
-----------
3,882,355
-----------
BOTTLED & CANNED SOFT DRINKS - 1.01%
800 Coca-Cola Enterprises, Inc., Unsecured Unsubordinated Notes .. 4.375 09/15/09 831,781
-----------
BUILDING/DEVELOPMENT - 0.37%
300 iStar Financial Inc., Senior Notes ........................... 7.000 03/15/08 305,613
-----------
BUSINESS SERVICES - 1.04%
800 Cendant Corp., Unsecured Notes ............................... 6.875 08/15/06 858,326
-----------
CABLE TELEVISION - 1.03%
500 Comcast Corp., Unsecured Senior Notes, Company Guaranteed .... 5.850 01/15/10 518,854
300 DIRECTV Holdings/Finance, Senior Notes* ...................... 8.375 03/15/13 332,250
-----------
851,104
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
8
<Page>
THE BEAR STEARNS FUNDS
Income Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE(S) DATE(S) VALUE
- -----------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
CEREAL BREAKFAST FOODS - 0.90%
$ 675 General Mills, Inc., Notes ................................... 6.000% 02/15/12 $ 741,840
-----------
COMPUTER INTEGRATED SYSTEMS DESIGN - 0.48%
350 Computer Sciences Corp., Unsecured Notes ..................... 7.375 - 7.500 08/08/05 - 06/15/11 396,234
-----------
CONTAINERS - METAL/GLASS - 0.38%
300 Owens-Brockway Glass Container Inc., Secured Notes* .......... 8.750 11/15/12 310,125
-----------
CRUDE PETROLEUM & NATURAL GAS - 3.14%
745 Apache Corp., Unsecured Senior Notes ......................... 6.250 04/15/12 845,324
700 BP Amoco plc, Notes .......................................... 5.900 04/15/09 785,033
700 Conoco Funding, Co., Notes, Company Guaranteed ............... 5.450 10/15/06 762,948
200 Forest Oil Corp., Unsecured Senior Notes, Company Guaranteed . 7.750 05/01/14 202,000
-----------
2,595,305
-----------
DEPARTMENT STORES - 1.37%
300 JC Penney Co., Inc., Notes ................................... 8.000 03/01/10 312,000
750 Target Corp., Notes .......................................... 5.875 03/01/12 815,993
-----------
1,127,993
-----------
ECOLOGICAL SERVICES/EQUIPMENT - 0.32%
250 Allied Waste North America, Inc., Senior Subordinated Notes,
Series B, Company Guaranteed ............................... 8.500 12/01/08 264,063
-----------
ELECTRIC & ELECTRONIC EQUIPMENT - 0.43%
350 General Electric Co., Notes .................................. 5.000 02/01/13 358,623
-----------
ELECTRONIC COMPONENTS - 0.34%
250 Fairchild Semiconductor International, Inc., Unsecured Senior
Subordinated Notes ......................................... 10.500 02/01/09 281,250
-----------
EQUIPMENT LEASING - 0.32%
250 United Rentals (N.A.), Inc., Unsecured Senior Notes,
Company Guaranteed* ........................................ 10.750 04/15/08 260,000
-----------
FINANCE SERVICES - 0.90%
661 Unilever Capital Corp., Unsecured Senior Unsubordinated Notes,
Company Guaranteed ......................................... 6.875 11/01/05 739,428
-----------
FIRE, MARINE & CASUALTY INSURANCE - 0.88%
650 Allstate Corp., Unsecured Senior Notes ....................... 7.875 05/01/05 726,575
-----------
FOOD & KINDRED PRODUCTS - 0.73%
600 Kraft Foods, Inc., Notes ..................................... 5.625 11/01/11 603,211
-----------
FOOD SERVICES - 0.33%
250 YUM! Brands, Inc., Unsecured Senior Notes .................... 7.700 07/01/12 271,250
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
9
<Page>
THE BEAR STEARNS FUNDS
Income Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE(S) DATE(S) VALUE
- -----------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
GAS TRANSMISSION & DISTRIBUTION - 0.85%
$ 650 Consolidated Natural Gas Co., Unsecured Senior Unsubordinated
Notes, Series B ............................................ 5.375% 11/01/06 $ 703,698
-----------
GENERAL INDUSTRIAL MACHINERY - 0.40%
350 Tyco International Group S.A., Unsecured Yankee Bonds, Company
Guaranteed (1) ............................................. 6.125 11/01/08 330,750
-----------
GENERAL MERCHANDISE STORES - 1.15%
800 Wal-Mart Stores, Inc., Unsecured Senior Notes ................ 6.875 08/10/09 946,818
-----------
GROCERY STORES - 1.89%
800 Kroger Co. (The), Unsecured Senior Notes ..................... 7.650 04/15/07 906,322
630 Safeway, Inc., Unsecured Senior Notes ........................ 4.800 07/16/07 654,067
-----------
1,560,389
-----------
HEALTH CARE - 0.31%
250 Tenet Healthcare Corp., Notes ................................ 7.375 02/01/13 252,500
-----------
INDUSTRIAL EQUIPMENT - 0.32%
250 SPX Corp., Unsecured Senior Notes ............................ 7.500 01/01/13 266,875
-----------
INSURANCE - 0.77%
625 Marsh & McLennan Cos., Inc., Bonds ........................... 4.850 02/15/13 635,634
-----------
LEISURE - 0.26%
250 Bally Total Fitness Holding Corp., Unsecured Senior
Subordinated Notes, Series D ............................... 9.875 10/15/07 216,250
-----------
MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS - 1.71%
600 CIT Group, Inc., Notes ....................................... 6.500 02/07/06 639,848
700 National Rural Utilities Cooperative Finance Corp.,
Collateral Trust Senior Bonds .............................. 6.000 05/15/06 767,230
-----------
1,407,078
-----------
MOTION PICTURE & VIDEO PRODUCTION - 2.46%
200 AOL Time Warner, Inc., Unsecured Bonds, Company Guaranteed ... 7.700 05/01/32 214,972
800 AOL Time Warner, Inc., Unsecured Notes, Company Guaranteed ... 6.150 05/01/07 849,225
800 Viacom, Inc., Unsecured Senior Notes, Company Guaranteed ..... 7.700 07/30/10 966,072
-----------
2,030,269
-----------
MOTOR VEHICLES & CAR BODIES - 0.58%
475 DaimlerChrysler N.A. Holdings, Notes ......................... 4.750 01/15/08 482,174
-----------
NATURAL GAS DISTRIBUTION - 0.95%
700 Keyspan Corp., Unsecured Senior Notes ........................ 7.250 11/15/05 786,150
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
10
<Page>
THE BEAR STEARNS FUNDS
Income Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE(S) DATE(S) VALUE
- -----------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
NON-FERROUS METALS - 0.31%
$ 250 Peabody Energy Corp., Senior Notes* .......................... 6.875% 03/15/13 $ 254,375
-----------
OIL & GAS - 0.68%
300 Denbury Resources Inc., Senior Subordinated Notes* ........... 7.500 04/01/13 301,500
250 Swift Energy Co., Unsecured Senior Subordinated Notes ........ 10.250 08/01/09 262,500
-----------
564,000
-----------
PAPER COATED & LAMINATED PACKAGING - 0.87%
650 International Paper Co., Notes ............................... 7.000 08/15/06 716,395
-----------
PERSONAL CREDIT INSTITUTIONS - 2.37%
400 Ford Motor Credit Co., Notes ................................. 7.875 06/15/10 382,967
650 General Electric Capital Corp., Medium Term Notes, Series A .. 6.500 12/10/07 738,018
750 Household Financial Corp., Unsecured Senior Notes ............ 6.500 11/15/08 835,054
-----------
1,956,039
-----------
PETROLEUM REFINING - 0.86%
700 ChevronTexaco Capital Co., Notes ............................. 3.375 02/15/08 709,885
-----------
PHARMACEUTICAL PREPARATIONS - 1.25%
200 Bristol-Myers Squibb Co., Notes .............................. 4.750 10/01/06 212,015
800 Wyeth, Notes ................................................. 5.250 03/15/13 819,525
-----------
1,031,540
-----------
PUBLISHING - 0.76%
300 Dex Media East LLC & Dex Media East Finance, Inc.,
Senior Notes* .............................................. 9.875 11/15/09 339,750
250 R.H. Donnelly Finance Corp. I, Senior Subordinated Notes* .... 10.875 12/15/12 286,875
-----------
626,625
-----------
PULP MILLS - 0.77%
600 Weyerhaeuser Co., Unsecured Notes ............................ 5.500 03/15/05 631,873
-----------
SECURITY BROKERS & DEALERS - 0.72%
550 Goldman Sachs Group, Inc., Unsecured Senior Notes ............ 5.700 - 6.600 01/15/12 - 09/01/12 593,427
-----------
TELEPHONE COMMUNICATIONS - 1.67%
515 AT&T Wireless Services, Inc., Unsecured Senior Notes ......... 7.875 03/01/11 577,036
600 GTE Northwest, Inc., Unsecured Debentures, Series D .......... 5.550 10/15/08 647,793
150 Southern New England Telephone Co., Medium Term Notes,
Series C ................................................... 6.125 12/15/03 155,093
-----------
1,379,922
-----------
UTILITIES HOLDING COMPANY - 0.75%
600 NiSource Finance Corp., Unsecured Senior Notes,
Company Guaranteed ......................................... 7.500 11/15/03 619,868
-----------
Total Corporate Obligations (cost - 33,825,250) .............. 34,944,030
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
11
<Page>
THE BEAR STEARNS FUNDS
Income Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE(S) DATE(S) VALUE
- -----------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
MORTGAGE-BACKED SECURITIES - 31.61%
PASS-THROUGH - 20.06%
$ 872 Comm 2000-C1, Commercial Mortgage Pass-Through
Certificates, Class A1 ..................................... 7.206% 08/15/33 $ 969,904
7,965 Fannie Mae, Pass-through Pools ............................... 6.000 04/01/16 - 08/01/17 8,339,228
475 Fannie Mae, TBA .............................................. 5.000 04/01/18 487,914
6,000 Freddie Mac, TBA ............................................. 6.000 04/01/33 6,215,627
541 Lehman Brothers Commercial Conduit Mortgage Trust,
Commercial Mortgage Pass-Through Certificates,
Series 1998-C1, Class A1 ................................... 6.330 02/18/30 544,250
-----------
16,556,923
-----------
STRUCTURED - 11.55%
675 Fannie Mae, Series 2001-68, Class PM ......................... 5.000 12/25/24 688,239
1,000 Fannie Mae, Series 2002-93, Class TB ......................... 4.500 02/25/18 1,035,610
689 Fannie Mae, Series 2003-13, Class PG ......................... 5.000 11/25/32 711,955
875 Fannie Mae, Series 2003-16, Class PA ......................... 4.500 11/25/09 909,719
1,000 Freddie Mac, Series 2545, Class HT ........................... 4.500 04/15/18 1,033,438
818 Freddie Mac, Series 2580, Class QJ ........................... 4.000 03/15/18 839,450
875 Government National Mortgage Association, Series 2003-19,
Class CA ................................................... 4.500 01/16/24 902,363
675 JP Morgan Commercial Mortgage Finance Corp.,
Series 1998-C6, Class A2 ................................... 6.533 01/15/30 736,193
475 Lehman Large Loan, Series 1997-LL1, Class A3 ................. 6.900 03/12/07 533,890
900 Nomura Asset Capital Corp., Series 1998-D6, Class A1B ........ 6.590 03/15/30 1,022,449
607 PNC Mortgage Acceptance Corp., Series 2000-C1, Class A1 ...... 7.520 07/15/08 685,060
426 Washington Mutual, Collateralized Mortgage Obligation,
Series 2002-S7, Class 4A7 .................................. 6.000 11/25/32 429,760
-----------
9,528,126
-----------
Total Mortgage-Backed Securities (cost - $25,915,643) ........ 26,085,049
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 14.11%
FANNIE MAE - 7.06%
5,320 Unsecured Notes .............................................. 5.250 - 5.625 05/14/04 - 11/15/11 5,823,671
-----------
FEDERAL HOME LOAN BANK - 2.63%
2,125 Unsecured Bonds, Series 7Y07 ................................. 3.500 11/15/07 2,173,752
-----------
FREDDIE MAC - 4.42%
3,550 Unsecured Reference Notes (2) ................................ 3.875 - 5.000 01/15/04 - 09/13/07 3,647,070
-----------
Total U.S. Government Agency Obligations (cost - $11,500,135) 11,644,493
-----------
U.S. GOVERNMENT OBLIGATIONS - 7.98%
U.S. TREASURIES - 7.98%
6,070 Notes (cost - $6,507,199) .................................... 3.250 - 5.75 011/15/05 - 02/15/11 6,586,130
-----------
Total Long-Term Debt Investments
(cost - $83,018,673) ....................................... 84,599,425
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
12
<Page>
THE BEAR STEARNS FUNDS
Income Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE(S) DATE(S) VALUE
- -----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 7.51%
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 7.51%
$6,198 Fannie Mae, Discount Notes (2) (cost - $6,197,573) ........... 1.091% 04/14/03 $ 6,197,573
-----------
Total Investments -- 110.02% (cost - $89,216,246) ............ 90,796,998
Liabilities in excess of other assets -- (10.02)% ............ (8,269,557)
-----------
Net Assets -- 100.00% ........................................ $82,527,441
===========
</Table>
- ---------
* SEC Rule 144A security. Such securities are traded only among qualified
institutional buyers.
(1) Domiciled in Luxembourg.
(2) All or a portion of which was segregated as collateral for TBA securities.
TBA To Be Announced.
The accompanying notes are an integral part of the financial statements.
13
<Page>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS -- 93.85%
UNITED STATES - 91.89%
AEROSPACE & DEFENSE - 2.01%
$1,000 K&F Industries, Inc., Unsecured Senior Subordinated Notes, Series B ...... 9.625% 12/15/10 $ 1,065,000
2,750 TransDigm Inc., Unsecured Senior Subordinated Notes, Company Guaranteed .. 10.375 12/01/08 2,908,125
-----------
3,973,125
-----------
AUTOMOTIVE - 2.67%
1,500 Collins & Aikman Products Co., Unsecured Senior Notes, Company Guaranteed 10.750 12/31/11 1,456,200
1,800 Stoneridge, Inc., Unsecured Senior Notes, Company Guaranteed ............. 11.500 05/01/12 1,836,000
2,000 TRW Automotive Inc., Senior Notes* ....................................... 9.375 02/15/13 2,010,000
-----------
5,302,200
-----------
BUILDING/DEVELOPMENT - 5.67%
2,250 Corrections Corp. of America, Unsecured Senior Notes, Company Guaranteed . 9.875 05/01/09 2,435,625
1,000 iStar Financial Inc., Senior Notes ....................................... 7.000 03/15/08 1,018,710
2,000 KB HOME, Senior Subordinated Notes ....................................... 7.750 02/01/10 2,050,000
1,250 Meritage Corp., Unsecured Senior Notes, Company Guaranteed ............... 9.750 06/01/11 1,325,000
2,250 Schuler Homes, Inc., Unsecured Senior Notes, Company Guaranteed .......... 9.000 04/15/08 2,356,875
2,000 WCI Communities, Inc., Unsecured Senior Subordinated Notes, Company
Guaranteed ............................................................ 10.625 02/15/11 2,050,000
-----------
11,236,210
-----------
BUSINESS EQUIPMENT/SERVICES - 1.98%
2,000 Buhrmann US, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed 12.250 11/01/09 1,850,000
2,000 Moore North American Finance, Senior Notes* .............................. 7.875 01/15/11 2,080,000
-----------
3,930,000
-----------
CABLE TELEVISION - 3.21%
3,000 DIRECTV Holdings/Finance, Senior Notes* .................................. 8.375 03/15/13 3,322,500
2,750 EchoStar DBS Corp., Senior Notes ......................................... 10.375 10/01/07 3,038,750
-----------
6,361,250
-----------
CHEMICALS/PLASTICS - 2.02%
1,500 Berry Plastics Corp., Unsecured Senior Subordinated Notes, Company
Guaranteed ............................................................ 10.750 07/15/12 1,590,000
2,250 Huntsman International LLC, Unsecured Senior Notes, Company Guaranteed ... 9.875 03/01/09 2,407,500
-----------
3,997,500
-----------
CLOTHING/TEXTILES - 1.83%
3,250 William Carter Co. (The), Unsecured Senior Subordinated Notes, Series B,
Company Guaranteed .................................................... 10.875 08/15/11 3,631,875
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
14
<Page>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
CONTAINERS - METAL/GLASS - 2.77%
$2,750 BWAY Corp., Senior Subordinated Notes* .................................... 10.000% 10/15/10 $ 2,901,250
2,500 Owens-Brockway Glass Container Inc., Secured Notes* ....................... 8.750 11/15/12 2,584,375
-----------
5,485,625
-----------
ECOLOGICAL SERVICES/EQUIPMENT - 3.34%
2,750 Allied Waste North America, Inc., Senior Subordinated Notes, Series B,
Company Guaranteed ..................................................... 8.500 12/01/08 2,904,688
1,250 Casella Waste Systems, Inc., Senior Subordinated Notes* ................... 9.750 02/01/13 1,337,500
2,050 Stericycle, Inc., Unsecured Senior Subordinated Notes, Series B, Company
Guaranteed ............................................................. 12.375 11/15/09 2,388,250
-----------
6,630,438
-----------
ELECTRONIC COMPONENTS - 7.61%
2,500 Amkor Technology, Inc., Unsecured Senior Notes ............................ 9.250 05/01/06 2,462,500
800 Amkor Technology, Inc., Unsecured Senior Subordinated Notes ............... 10.500 05/01/09 764,000
2,600 Fairchild Semiconductor International, Inc., Unsecured Senior Subordinated
Notes .................................................................. 10.500 02/01/09 2,925,000
2,400 ON Semiconductor Corp., Secured Senior Notes* ............................. 12.000 03/15/10 2,544,000
2,750 Sanmina - SCI Corp., Secured Senior Notes* ................................ 10.375 01/15/10 2,983,750
2,250 Seagate Technology HDD Holdings, Unsecured Notes, Company Guaranteed ...... 8.000 05/15/09 2,368,125
1,000 Solectron Corp., Unsecured Senior Notes ................................... 9.625 02/15/09 1,050,000
-----------
15,097,375
-----------
EQUIPMENT LEASING - 1.58%
1,750 United Rentals (N.A.), Inc., Unsecured Senior Notes, Company Guaranteed* .. 10.750 04/15/08 1,820,000
1,500 United Rentals (N.A.), Inc., Unsecured Senior Subordinated Notes, Series B,
Company Guaranteed ..................................................... 9.250 01/15/09 1,312,500
-----------
3,132,500
-----------
FOOD PRODUCTS - 1.63%
2,250 American Seafoods Group LLC and American Seafoods, Inc., Unsecured Senior
Subordinated Notes, Company Guaranteed ................................. 10.125 04/15/10 2,390,625
800 Dole Food Co., Inc., Senior Notes* ........................................ 8.875 03/15/11 836,000
-----------
3,226,625
-----------
FOOD SERVICES - 3.21%
2,589 Carrols Corp., Unsecured Senior Subordinated Notes, Company Guaranteed .... 9.500 12/01/08 2,466,023
2,250 Friendly Ice Cream Corp., Unsecured Senior Notes, Company Guaranteed ...... 10.500 12/01/07 2,272,500
1,500 YUM! Brands, Inc., Unsecured Senior Notes ................................. 7.700 07/01/12 1,627,500
-----------
6,366,023
-----------
FOREST PRODUCTS - 0.80%
1,500 Georgia-Pacific Corp., Unsecured Senior Notes* ............................ 9.375 02/01/13 1,590,000
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
15
<Page>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
HEALTH CARE - 8.95%
$3,250 ALARIS Medical, Inc., Senior Discount Notes (1) ......................... 11.175% 08/01/08 $ 3,331,250
2,750 Alliance Imaging, Inc., Unsecured Senior Subordinated Notes ............. 10.375 04/15/11 2,640,000
2,000 AmeriPath, Inc., Senior Subordinated Notes* ............................. 10.500 04/01/13 2,070,000
2,250 MedQuest, Inc., Unsecured Senior Subordinated Notes, Series B, Company
Guaranteed ........................................................... 11.875 08/15/12 2,092,500
2,500 NDCHealth Corp., Unsecured Senior Subordinated Notes, Company Guaranteed* 10.500 12/01/12 2,631,250
2,250 PacifiCare Health Systems, Inc., Unsecured Senior Notes, Company
Guaranteed ........................................................... 10.750 06/01/09 2,452,500
2,500 Tenet Healthcare Corp., Notes ........................................... 7.375 02/01/13 2,525,000
-----------
17,742,500
-----------
HOME FURNISHINGS - 1.64%
3,000 Simmons Co., Unsecured Senior Subordinated Notes, Series B .............. 10.250 03/15/09 3,247,500
-----------
HOTELS/MOTELS/CASINOS - 8.45%
3,600 Ameristar Casinos, Inc., Unsecured Senior Subordinated Notes, Company
Guaranteed ........................................................... 10.750 02/15/09 3,924,000
2,000 Boyd Gaming Corp., Unsecured Senior Notes, Company Guaranteed ........... 9.250 08/01/09 2,200,000
2,550 Felcor Lodging L.P., Unsecured Senior Notes, Company Guaranteed ......... 9.500 09/15/08 2,346,000
2,750 HMH Properties, Inc., Secured Senior Notes, Series B, Company Guaranteed 7.875 08/01/08 2,598,750
2,000 Mandalay Resort Group, Unsecured Senior Subordinated Notes .............. 9.375 02/15/10 2,105,000
2,000 Starwood Hotels & Resorts Worldwide, Inc., Notes* ....................... 8.375 05/01/12 2,002,500
1,500 Turning Stone Casino Resort Enterprise, Senior Notes* ................... 9.125 12/15/10 1,575,000
-----------
16,751,250
-----------
INDUSTRIAL EQUIPMENT - 1.21%
2,250 SPX Corp., Unsecured Senior Notes ....................................... 7.500 01/01/13 2,401,875
-----------
LEISURE - 3.37%
3,250 Bally Total Fitness Holding Corp., Unsecured Senior Subordinated Notes,
Series D ............................................................. 9.875 10/15/07 2,811,250
1,850 Intrawest Corp., Unsecured Senior Notes, Company Guaranteed ............. 10.500 02/01/10 1,993,375
1,750 Remington Arms Co., Inc., Unsecured Senior Notes, Company Guaranteed* ... 10.500 02/01/11 1,881,250
-----------
6,685,875
-----------
NON-FERROUS METALS - 1.94%
1,900 Compass Minerals Group, Inc., Unsecured Senior Subordinated Notes,
Company Guaranteed ................................................... 10.000 08/15/11 2,109,000
1,700 Peabody Energy Corp., Senior Notes* ..................................... 6.875 03/15/13 1,729,750
-----------
3,838,750
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
16
<Page>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
OIL & GAS - 6.72%
$2,825 Comstock Resources, Inc., Unsecured Senior Notes, Company Guaranteed .... 11.250% 05/01/07 $ 3,036,875
2,800 Denbury Resources Inc., Senior Subordinated Notes* ...................... 7.500 04/01/13 2,814,000
1,500 EL Paso Energy Partners, L.P., Senior Subordinated Notes* ............... 10.625 12/01/12 1,665,000
2,750 SESI, L.L.C., Unsecured Senior Notes, Company Guaranteed ................ 8.875 05/15/11 2,928,750
2,750 Swift Energy Co., Unsecured Senior Subordinated Notes ................... 10.250 08/01/09 2,887,500
-----------
13,332,125
-----------
PUBLISHING - 4.36%
2,250 American Media, Inc., Senior Subordinated Notes* ........................ 8.875 01/15/11 2,441,250
2,700 Dex Media East LLC & Dex Media East Finance, Inc., Senior Notes* ........ 9.875 11/15/09 3,057,750
2,750 R.H. Donnelley Finance Corp. I, Senior Subordinated Notes* .............. 10.875 12/15/12 3,155,625
-----------
8,654,625
-----------
RADIO/TELEVISION - 3.55%
2,300 Entravision Communications Corp., Unsecured Senior Subordinated Notes,
Company Guaranteed ................................................... 8.125 03/15/09 2,374,750
2,250 LBI Media, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed* 10.125 07/15/12 2,393,438
2,250 Salem Communications Corp., Unsecured Senior Subordinated Notes, Company
Guaranteed ........................................................... 7.750 12/15/10 2,272,500
-----------
7,040,688
-----------
RETAILERS - 4.88%
2,500 CSK Auto Inc., Unsecured Senior Notes, Company Guaranteed ............... 12.000 06/15/06 2,725,000
2,750 Mothers Work, Inc., Unsecured Senior Notes, Company Guaranteed .......... 11.250 08/01/10 3,004,375
1,600 Rite Aid Corp., Secured Notes* .......................................... 9.500 02/15/11 1,664,000
2,300 Toys "R" Us, Inc., Unsecured Notes ...................................... 7.625 08/01/11 2,274,615
-----------
9,667,990
-----------
STEEL - 1.60%
1,200 AK Steel Corp., Unsecured Senior Notes, Company Guaranteed .............. 7.750 06/15/12 1,104,000
2,000 Jorgensen, Earle M. Co., Secured Notes .................................. 9.750 06/01/12 2,070,000
-----------
3,174,000
-----------
SURFACE TRANSPORTATION - 2.15%
2,265 Accuride Corp., Unsecured Senior Subordinated Notes, Series B ........... 9.250 02/01/08 1,704,413
2,500 General Maritime Corp., Senior Notes* ................................... 10.000 03/15/13 2,562,500
-----------
4,266,913
-----------
UTILITIES - 1.04%
2,400 AES Corp. (The), Unsecured Senior Notes ................................. 9.500 06/01/09 2,070,000
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
17
<Page>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
WIRELESS TELECOMMUNICATIONS - 1.70%
$3,200 Nextel Communications, Inc., Unsecured Senior Serial Redeemable Notes .. 9.375% 11/15/09 $ 3,376,000
------------
Total United States (cost - $174,873,096)** ............................ 182,210,837
------------
CANADA - 1.23%
CHEMICALS/PLASTICS - 1.23%
2,250 Acetex Corp., Unsecured Senior Notes (cost - $2,248,814) ............... 10.875 08/01/09 2,446,875
------------
LUXEMBOURG - 0.73%
CONGLOMERATES - 0.73%
1,500 Tyco International Group S.A., Unsecured Senior Yankee Notes,
Company Guaranteed (cost - $1,321,680) .............................. 6.750 02/15/11 1,440,000
------------
Total Long-Term Debt Investments
(cost - $178,443,590) ............................................... 186,097,712
------------
<Caption>
SHARES
------
EQUITY INVESTMENT -- 0.00%
PREFERRED STOCK - UNITED STATES - 0.00%
CLOTHING/TEXTILES - 0.00%
48 Cluett American Corp., Senior Exchangeable Preferred Stock, Series B (2)
(cost - $451) ....................................................... 12.500 -- 972
------------
SHORT-TERM INVESTMENT -- 3.35%
INVESTMENT COMPANY - 3.35%
6,635,645 Federated Government Obligations Fund*** (cost - $6,635,645) ........... 1.160 -- 6,635,645
------------
Total Investments -- 97.20% (cost - $185,079,686) ...................... 192,734,329
Other assets in excess of liabilities -- 2.80% ......................... 5,564,572
------------
Net Assets -- 100.00% .................................................. $198,298,901
============
</Table>
- ----------
* SEC Rule 144A security. Such securities are traded only among qualified
institutional buyers.
** Included in the cost is $8,750 relating to investments in 13 warrants of
Imperial Credit Industry Corp. (expiring 01/31/08) and 250 warrants of
Mpower Holding Corp. (expiring 10/01/04); with no market value,
respectively.
*** Money market fund; interest rate reflects SEC seven-day yield at March 31,
2003.
(1) Step-up bond; coupon rate is zero until step-up date. Step-up rate is
provided.
(2) Payment-in-kind; of which all or a portion of the coupon is being
capitalized at periodic intervals.
The accompanying notes are an integral part of the financial statements.
18
<Page>
THE BEAR STEARNS FUNDS
STATEMENTS OF ASSETS & LIABILITIES
MARCH 31, 2003
<Table>
<Caption>
HIGH YIELD
INCOME TOTAL RETURN
PORTFOLIO PORTFOLIO
----------- ------------
ASSETS
Investments, at value (cost - $89,216,246 and $185,079,686, respectively) .......................... $90,796,998 $192,734,329
Interest and dividends receivable .................................................................. 852,153 4,284,077
Receivable for Portfolio shares sold ............................................................... 128,201 1,333,517
Receivable for investments sold .................................................................... 378,722 824,300
Receivable from investment adviser ................................................................. 8,438 --
Prepaid expenses ................................................................................... 35,224 39,617
----------- ------------
Total assets .................................................................................. 92,199,736 199,215,840
----------- ------------
LIABILITIES
Payable for investments purchased .................................................................. 7,248,825 --
Loan payable ....................................................................................... 2,025,600 --
Dividends payable .................................................................................. 87,088 450,206
Distribution and service fees payable (Class A, B and C shares) .................................... 89,249 309,728
Payable for Portfolio shares repurchased ........................................................... 168,598 19,796
Advisory fee payable ............................................................................... -- 35,636
Administration fee payable ......................................................................... 10,445 24,721
Custodian fee payable .............................................................................. 1,452 2,274
Accrued expenses ................................................................................... 41,038 74,578
----------- ------------
Total liabilities ............................................................................. 9,672,295 916,939
----------- ------------
NET ASSETS
Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) ............... 6,605 24,468
Paid-in capital .................................................................................... 80,350,726 241,928,665
Undistributed net investment income/(loss) ......................................................... (26,251 34,123
Accumulated net realized gain/(loss) from investments .............................................. 615,609 (51,342,998)
Net unrealized appreciation on investments ......................................................... 1,580,752 7,654,643
----------- ------------
Net assets .................................................................................... $82,527,441 $198,298,901
=========== ============
CLASS A
Net assets ......................................................................................... $23,593,709 $ 84,889,266
----------- ------------
Shares of beneficial interest outstanding .......................................................... 1,887,948 10,475,851
----------- ------------
Net asset value per share .......................................................................... $12.50 $8.10
====== =====
Maximum offering price per share (net asset value plus sales charge of 4.50%* of the offering price) $13.09 $8.48
====== =====
CLASS B
Net assets ......................................................................................... $19,184,594 $ 43,853,256
----------- ------------
Shares of beneficial interest outstanding .......................................................... 1,535,319 5,408,333
----------- ------------
Net asset value and offering price per share** ..................................................... $12.50 $8.11
====== =====
CLASS C
Net assets ......................................................................................... $11,442,588 $ 46,263,385
----------- ------------
Shares of beneficial interest outstanding .......................................................... 915,407 5,710,391
----------- ------------
Net asset value and offering price per share** ..................................................... $12.50 $8.10
====== =====
CLASS Y
Net assets ......................................................................................... $28,306,550 $ 23,292,994
----------- ------------
Shares of beneficial interest outstanding .......................................................... 2,265,958 2,873,493
----------- ------------
Net asset value, offering and redemption price per share ........................................... $12.49 $8.11
====== =====
</Table>
- ----------
* On investments of $50,000 or more, the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
19
<Page>
THE BEAR STEARNS FUNDS
STATEMENTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
<Table>
<Caption>
HIGH YIELD
INCOME TOTAL RETURN
PORTFOLIO PORTFOLIO
---------- -----------
INVESTMENT INCOME
Interest .......................................................... $2,650,243 $15,212,521
Dividends ......................................................... 9,194 38,742
---------- -----------
2,659,437 15,251,263
---------- -----------
EXPENSES
Advisory fees ..................................................... 272,794 994,928
Distribution and service fees - Class A ........................... 56,835 258,257
Distribution and service fees - Class B ........................... 141,527 356,052
Distribution and service fees - Class C ........................... 91,841 356,510
Transfer agent fees and expenses .................................. 153,746 189,266
Administration fees ............................................... 90,932 249,273
Legal and auditing fees ........................................... 58,502 69,499
Accounting fees ................................................... 30,001 68,114
Federal and state registration fees ............................... 44,794 48,048
Reports and notices to shareholders ............................... 14,100 37,697
Custodian fees and expenses ....................................... 16,688 24,525
Trustees' fees and expenses ....................................... 11,985 12,201
Insurance expenses ................................................ 6,851 6,846
Amortization of organization expenses ............................. -- 9,300
Other ............................................................. 3,313 6,477
---------- -----------
Total expenses before waivers and related reimbursements ..... 993,909 2,686,993
Less: waivers and related reimbursements ..................... (430,892) (638,911)
---------- -----------
Total expenses after waivers and related reimbursements ...... 563,017 2,048,082
---------- -----------
Net investment income ............................................. 2,096,420 13,203,181
---------- -----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain/(loss) from investments ......................... 1,239,185 (9,773,653)
Net change in unrealized appreciation/(depreciation) on investments 2,049,098 5,790,271
---------- -----------
Net realized and unrealized gain/(loss) on investments ............ 3,288,283 (3,983,382)
---------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................. $5,384,703 $ 9,219,799
========== ===========
</Table>
The accompanying notes are an integral part of the financial statements.
20
<Page>
THE BEAR STEARNS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
INCOME
PORTFOLIO
---------------------------
FOR THE
FISCAL YEARS
ENDED MARCH 31,
---------------------------
2003 2002
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income ............................................................ $ 2,096,420 $ 1,458,432
Net realized gain/(loss) from investments ........................................ 1,239,185 243,858
Net change in unrealized appreciation/(depreciation) on investments .............. 2,049,098 (826,015)
------------ ------------
Net increase in net assets resulting from operations ............................. 5,384,703 876,275
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A shares ................................................................. (621,839) (461,744)
Class B shares ................................................................. (447,104) (282,636)
Class C shares ................................................................. (293,523) (201,480)
Class Y shares ................................................................. (881,676) (541,015)
------------ ------------
(2,244,142) (1,486,875)
------------ ------------
Net realized capital gains
Class A shares ................................................................. (44,489) --
Class B shares ................................................................. (38,437) --
Class C shares ................................................................. (25,707) --
Class Y shares ................................................................. (61,911) --
------------ ------------
(170,544) --
------------ ------------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares ............................................. 67,589,024 27,437,838
Cost of shares repurchased ....................................................... (25,383,270) (17,244,182)
Shares issued in reinvestment of dividends ....................................... 1,871,830 1,059,856
------------ ------------
Net increase in net assets derived from shares of beneficial interest transactions 44,077,584 11,253,512
------------ ------------
Total increase in net assets ..................................................... 47,047,601 10,642,912
NET ASSETS
Beginning of year ................................................................ 35,479,840 24,836,928
------------ ------------
End of year ...................................................................... $ 82,527,441 $ 35,479,840
============ ============
<Caption>
HIGH YIELD TOTAL
RETURN PORTFOLIO
-----------------------------
FOR THE
FISCAL YEARS
ENDED MARCH 31,
-----------------------------
2003 2002
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income ............................................................ $ 13,203,181 $ 10,597,794
Net realized gain/(loss) from investments ........................................ (9,773,653) (6,894,426)
Net change in unrealized appreciation/(depreciation) on investments .............. 5,790,271 1,060,215
------------ ------------
Net increase in net assets resulting from operations ............................. 9,219,799 4,763,583
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A shares ................................................................. (6,054,300) (5,984,172)
Class B shares ................................................................. (2,692,060) (2,283,599)
Class C shares ................................................................. (2,685,695) (1,887,284)
Class Y shares ................................................................. (1,775,411) (466,355)
------------ ------------
(13,207,466) (10,621,410)
------------ ------------
Net realized capital gains
Class A shares ................................................................. -- --
Class B shares ................................................................. -- --
Class C shares ................................................................. -- --
Class Y shares ................................................................. -- --
------------ ------------
-- --
------------ ------------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares ............................................. 102,263,758 70,670,903
Cost of shares repurchased ....................................................... (59,204,597) (37,702,374)
Shares issued in reinvestment of dividends ....................................... 8,107,135 6,224,396
------------ ------------
Net increase in net assets derived from shares of beneficial interest transactions 51,166,296 39,192,925
------------ ------------
Total increase in net assets ..................................................... 47,178,629 33,335,098
NET ASSETS
Beginning of year ................................................................ 151,120,272 117,785,174
------------ ------------
End of year ...................................................................... $198,298,901* $151,120,272*
============ ============
</Table>
- -------------
* Includes undistributed net investment income of $34,123 and $35,079,
respectively.
The accompanying notes are an integral part of the financial statements.
21
<Page>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each class of shares
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each year indicated. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET NET
ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED
OF YEAR INCOME*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS
----------- ------------- ----------------- ----------- ---------------
INCOME PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ............ $ 11.84 $ 0.44 $ 0.73 $ (0.48) $ (0.03)
For the fiscal year ended March 31, 2002 ............ 11.99 0.60 (0.15) (0.60) --
For the fiscal year ended March 31, 2001 ............ 11.53 0.73 0.46 (0.73) --
For the fiscal year ended March 31, 2000 ............ 12.15 0.70 (0.62) (0.70) --
For the fiscal year ended March 31, 1999 ............ 12.37 0.74 (0.03) (0.74) (0.19)
CLASS B
For the fiscal year ended March 31, 2003 ............ 11.84 0.36 0.73 (0.40) (0.03)
For the fiscal year ended March 31, 2002 ............ 11.99 0.52 (0.15) (0.52) --
For the fiscal year ended March 31, 2001 ............ 11.53 0.65 0.46 (0.65) --
For the fiscal year ended March 31, 2000 ............ 12.15 0.63 (0.62) (0.63) --
For the fiscal year ended March 31, 1999 ............ 12.37 0.65 (0.03) (0.65) (0.19)
CLASS C
For the fiscal year ended March 31, 2003 ............ 11.84 0.36 0.73 (0.40) (0.03)
For the fiscal year ended March 31, 2002 ............ 11.99 0.52 (0.15) (0.52) --
For the fiscal year ended March 31, 2001 ............ 11.53 0.65 0.46 (0.65) --
For the fiscal year ended March 31, 2000 ............ 12.15 0.63 (0.62) (0.63) --
For the fiscal year ended March 31, 1999 ............ 12.37 0.65 (0.03) (0.65) (0.19)
CLASS Y
For the fiscal year ended March 31, 2003 ............ 11.84 0.48 0.72 (0.52) (0.03)
For the fiscal year ended March 31, 2002 ............ 11.99 0.64 (0.15) (0.64) --
For the fiscal year ended March 31, 2001 ............ 11.53 0.77 0.46 (0.77) --
For the fiscal year ended March 31, 2000 ............ 12.15 0.74 (0.62) (0.74) --
For the fiscal year ended March 31, 1999 ............ 12.37 0.78 (0.03) (0.78) (0.19)
</Table>
- ----------
* Calculated based on average settled shares outstanding during the
respective years, except for dividends and distributions, if any, which are
based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and related reimbursements.
(2) The amounts shown for a share outstanding throughout the respective years
are not in accord with the changes in the aggregate gains and losses on
investments during the respective years because of the timing of the sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective years.
The accompanying notes are an integral part of the financial statements.
22
<Page>
<Table>
<Caption>
NET
ASSET
VALUE, TOTAL NET ASSETS, RATIO OF
END OF INVESTMENT END OF YEAR EXPENSES TO
YEAR RETURN(3) (000's omitted) AVERAGE NET ASSETS(1)
--------- ------------ ----------------- ---------------------
INCOME PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ............ $ 12.50 10.05% $23,594 0.80%
For the fiscal year ended March 31, 2002 ............ 11.84 3.86 9,757 0.80
For the fiscal year ended March 31, 2001 ............ 11.99 10.68 8,316 0.80
For the fiscal year ended March 31, 2000 ............ 11.53 0.77 5,071 0.80
For the fiscal year ended March 31, 1999 ............ 12.15 5.77 4,775 0.80
CLASS B
For the fiscal year ended March 31, 2003 ............ 12.50 9.34 19,185 1.45
For the fiscal year ended March 31, 2002 ............ 11.84 3.19 6,773 1.45
For the fiscal year ended March 31, 2001 ............ 11.99 9.96 4,861 1.45
For the fiscal year ended March 31, 2000 ............ 11.53 0.12 2,027 1.45
For the fiscal year ended March 31, 1999 ............ 12.15 5.09 1,121 1.45
CLASS C
For the fiscal year ended March 31, 2003 ............ 12.50 9.34 11,443 1.45
For the fiscal year ended March 31, 2002 ............ 11.84 3.19 6,066 1.45
For the fiscal year ended March 31, 2001 ............ 11.99 9.96 3,339 1.45
For the fiscal year ended March 31, 2000 ............ 11.53 0.12 1,971 1.45
For the fiscal year ended March 31, 1999 ............ 12.15 5.08 2,067 1.45
CLASS Y
For the fiscal year ended March 31, 2003 ............ 12.49 10.35 28,307 0.45
For the fiscal year ended March 31, 2002 ............ 11.84 4.22 12,884 0.45
For the fiscal year ended March 31, 2001 ............ 11.99 11.07 8,321 0.45
For the fiscal year ended March 31, 2000 ............ 11.53 1.13 4,763 0.45
For the fiscal year ended March 31, 1999 ............ 12.15 6.13 4,406 0.45
<Caption>
INCREASE/(DECREASE)
REFLECTED IN
RATIO OF EXPENSE AND NET
NET INVESTMENT INVESTMENT INCOME RATIOS PORTFOLIO
INCOME TO DUE TO WAIVERS AND TURNOVER
AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE
--------------------- ------------------------ ---------
INCOME PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ............ 3.58% 0.71% 161.09%
For the fiscal year ended March 31, 2002 ............ 4.99 1.45 240.84
For the fiscal year ended March 31, 2001 ............ 6.22 2.48 174.46
For the fiscal year ended March 31, 2000 ............ 5.99 3.13 158.47
For the fiscal year ended March 31, 1999 ............ 5.83 2.98 107.21
CLASS B
For the fiscal year ended March 31, 2003 ............ 2.91 0.71 161.09
For the fiscal year ended March 31, 2002 ............ 4.27 1.45 240.84
For the fiscal year ended March 31, 2001 ............ 5.55 2.48 174.46
For the fiscal year ended March 31, 2000 ............ 5.34 3.13 158.47
For the fiscal year ended March 31, 1999 ............ 5.16 2.81 107.21
CLASS C
For the fiscal year ended March 31, 2003 ............ 2.95 0.71 161.09
For the fiscal year ended March 31, 2002 ............ 4.27 1.45 240.84
For the fiscal year ended March 31, 2001 ............ 5.55 2.48 174.46
For the fiscal year ended March 31, 2000 ............ 5.33 3.13 158.47
For the fiscal year ended March 31, 1999 ............ 5.28 3.18 107.21
CLASS Y
For the fiscal year ended March 31, 2003 ............ 3.94 0.71 161.09
For the fiscal year ended March 31, 2002 ............ 5.35 1.45 240.84
For the fiscal year ended March 31, 2001 ............ 6.52 2.48 174.46
For the fiscal year ended March 31, 2000 ............ 6.36 3.13 158.47
For the fiscal year ended March 31, 1999 ............ 6.27 3.23 107.21
</Table>
- ----------
(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 year reported and includes reinvestment of dividends and
distributions.
23
<Page>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each class of shares
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each period indicated. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET NET
ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED
OF YEAR INCOME*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS
----------- ------------- ----------------- ----------- ---------------
HIGH YIELD TOTAL RETURN PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ............. $ 8.36 $ 0.66 $ (0.26) $ (0.66) --
For the fiscal year ended March 31, 2002 ............. 8.74 0.72 (0.38) (0.72) --
For the fiscal year ended March 31, 2001 ............. 9.78 0.94 (1.04) (0.94) --
For the fiscal year ended March 31, 2000 ............. 11.36 1.08 (1.58) (1.08) --
For the fiscal year ended March 31, 1999 ............. 12.73 1.11 (1.32) (1.11) $ (0.05)
CLASS B
For the fiscal year ended March 31, 2003 ............. 8.36 0.60 (0.24) (0.61) --
For the fiscal year ended March 31, 2002 ............. 8.74 0.67 (0.38) (0.67) --
For the fiscal year ended March 31, 2001 ............. 9.78 0.88 (1.04) (0.88) --
For the fiscal year ended March 31, 2000 ............. 11.36 1.01 (1.58) (1.01) --
For the fiscal year ended March 31, 1999 ............. 12.73 1.04 (1.32) (1.04) (0.05)
CLASS C
For the fiscal year ended March 31, 2003 ............. 8.36 0.60 (0.25) (0.61) --
For the fiscal year ended March 31, 2002 ............. 8.74 0.67 (0.38) (0.67) --
For the fiscal year ended March 31, 2001 ............. 9.78 0.88 (1.04) (0.88) --
For the fiscal year ended March 31, 2000 ............. 11.36 1.01 (1.58) (1.01) --
For the fiscal year ended March 31, 1999 ............. 12.73 1.04 (1.32) (1.04) (0.05)
CLASS Y
For the fiscal year ended March 31, 2003 ............. 8.36 0.68 (0.24) (0.69) --
For the period July 11, 2001** through March 31, 2002. 8.46 0.53 (0.10) (0.53) --
</Table>
- ----------
* Calculated based on average settled shares outstanding during the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
** Commencement of initial public offering.
(1) Reflects waivers and related 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 the
sales and repurchases of Portfolio shares in relation to fluctuating net
asset values during the respective periods.
The accompanying notes are an integral part of the financial statements.
24
<Page>
<Table>
<Caption>
NET
ASSET
VALUE, TOTAL NET ASSETS, RATIO OF
END OF INVESTMENT END OF YEAR EXPENSES TO
YEAR RETURN(3) (000's omitted) AVERAGE NET ASSETS(1)
--------- ------------ ---------------- ---------------------
HIGH YIELD TOTAL RETURN PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ............. $ 8.10 5.18% $84,889 1.00%
For the fiscal year ended March 31, 2002 ............. 8.36 4.16 72,491 1.00
For the fiscal year ended March 31, 2001 ............. 8.74 (1.07) 69,132 1.00
For the fiscal year ended March 31, 2000 ............. 9.78 (4.68) 44,991 1.00
For the fiscal year ended March 31, 1999 ............. 11.36 (1.57) 55,367 1.00
CLASS B
For the fiscal year ended March 31, 2003 ............. 8.11 4.63 43,853 1.65
For the fiscal year ended March 31, 2002 ............. 8.36 3.49 32,233 1.65
For the fiscal year ended March 31, 2001 ............. 8.74 (1.71) 26,336 1.65
For the fiscal year ended March 31, 2000 ............. 9.78 (5.29) 23,520 1.65
For the fiscal year ended March 31, 1999 ............. 11.36 (2.21) 23,395 1.65
CLASS C
For the fiscal year ended March 31, 2003 ............. 8.10 4.50 46,263 1.65
For the fiscal year ended March 31, 2002 ............. 8.36 3.49 29,535 1.65
For the fiscal year ended March 31, 2001 ............. 8.74 (1.71) 22,317 1.65
For the fiscal year ended March 31, 2000 ............. 9.78 (5.29) 18,707 1.65
For the fiscal year ended March 31, 1999 ............. 11.36 (2.21) 26,064 1.65
CLASS Y
For the fiscal year ended March 31, 2003 ............. 8.11 5.69 23,293 0.65
For the period July 11, 2001** through March 31, 2002. 8.36 4.99(4) 16,862 0.65(5)
<Caption>
INCREASE/(DECREASE)
REFLECTED IN
RATIO OF EXPENSE AND NET
NET INVESTMENT INVESTMENT INCOME RATIOS PORTFOLIO
INCOME TO DUE TO WAIVERS AND TURNOVER
AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE
--------------------- ------------------------ ---------
HIGH YIELD TOTAL RETURN PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ............. 8.20% 0.39% 103.22%
For the fiscal year ended March 31, 2002 ............. 8.51 0.49 212.94
For the fiscal year ended March 31, 2001 ............. 10.03 0.64 122.83
For the fiscal year ended March 31, 2000 ............. 10.14 0.58 70.61
For the fiscal year ended March 31, 1999 ............. 9.37 0.74 101.75
CLASS B
For the fiscal year ended March 31, 2003 ............. 7.55 0.38 103.22
For the fiscal year ended March 31, 2002 ............. 7.86 0.49 212.94
For the fiscal year ended March 31, 2001 ............. 9.45 0.64 122.83
For the fiscal year ended March 31, 2000 ............. 9.49 0.59 70.61
For the fiscal year ended March 31, 1999 ............. 8.76 0.73 101.75
CLASS C
For the fiscal year ended March 31, 2003 ............. 7.52 0.38 103.22
For the fiscal year ended March 31, 2002 ............. 7.84 0.49 212.94
For the fiscal year ended March 31, 2001 ............. 9.45 0.64 122.83
For the fiscal year ended March 31, 2000 ............. 9.49 0.59 70.61
For the fiscal year ended March 31, 1999 ............. 8.73 0.73 101.75
CLASS Y
For the fiscal year ended March 31, 2003 ............. 8.55 0.39 103.22
For the period July 11, 2001** through March 31, 2002. 8.67(4)(5) 0.49(4)(5) 212.94
</Table>
- ----------
(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. Total investment return is not annualized.
(4) The total investment return and ratios for a class of shares are not
necessarily comparable to those of any other outstanding class of shares,
due to the timing differences in the commencement of initial public
offerings.
(5) Annualized.
25
<Page>
THE BEAR STEARNS FUNDS
INCOME PORTFOLIO
HIGH YIELD TOTAL RETURN PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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 "SEC") under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), as an open-end management investment company. The
Fund currently consists of ten separate portfolios: six diversified portfolios,
Prime Money Market Portfolio, Intrinsic Value Portfolio, Small Cap Value
Portfolio, International Equity Portfolio, High Yield Total Return Portfolio
("High Yield Portfolio") and Income Portfolio, and four non-diversified
portfolios, The Insiders Select Fund, Alpha Growth Portfolio, S&P STARS
Portfolio and S&P STARS Opportunities Portfolio. As of the date hereof, the
Income Portfolio and High Yield Portfolio (each a "Portfolio" and collectively,
the "Portfolios") offer four classes of shares, which have been designated as
Class A, B, C and Y shares. 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.
MANAGEMENT ESTIMATES--The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make certain estimates and assumptions that may
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATION--Each Portfolio calculates the net asset value of and
completes orders to purchase or repurchase its shares of beneficial interest as
of the close of regular trading on The New York Stock Exchange, Inc. (the
"Exchange") (generally 4:00 p.m. Eastern time) on each day that the Exchange is
open for trading.
Substantially all fixed-income securities (including short-term investments that
are not valued using the amortized cost method) are valued each business day as
of the close of regular trading on the Exchange by one or more independent
pricing services (the "Pricing Services") approved by the Fund's Board of
Trustees (the "Board"). When quoted bid prices are readily available, the
Pricing Services generally value fixed-income securities at the mean of the bid
and asked prices, provided that the Pricing Services believe those prices to
reflect the fair market value of the securities. Other investments valued by the
Pricing Services are carried at fair value as determined by the Pricing
Services, based on methods which include consideration of: yields or prices of
securities of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. Pricing Services may take
other factors into consideration in pricing securities, including institutional
size transactions in similar groups of securities as well as developments
related to specific securities. Securities that are not valued by a Pricing
Service are valued at the average of the most recent bid and asked prices in the
market in which such securities are primarily traded, or at the last sales price
for securities traded primarily on an exchange or a national securities market.
In the absence of reported sales of securities traded primarily on an exchange
or a national securities market, the average of the most recent bid and asked
prices are used. Bid price is used when no asked price is available.
Equity securities, including written covered call options, are valued each
business day at the last sale price as of the close of regular trading on the
Exchange by one or more Pricing Services. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices,
except in the case of open short positions where the asked price is used for
valuation purposes. Bid price is used when no asked price is available.
Other assets and securities for which no quotations are readily available or
which are restricted as to sale (or resale) are valued by such methods as the
Fund's Board deems in good faith to reflect the fair value. Restricted
securities, as well as securities or other assets for which market quotations
are not readily available, or are not valued by a Pricing Service approved by
the Fund's Board, are valued at fair value as determined in good faith by
Bear Stearns Asset Management Inc.'s ("BSAM" or the "Adviser") Valuation
Committee, pursuant to procedures approved by the Fund's Board. The Board
reviews the methods of valuation quarterly.
26
<Page>
Short-term investments (those acquired with remaining maturities of 60 days or
less) are valued at cost, plus or minus any amortized discount or premium, which
approximates market value.
Expenses and fees, including the respective investment advisory, administration,
distribution and service fees, are accrued daily and taken into account for the
purpose of determining the net asset value of each Portfolio's shares. Because
of the differences in operating expenses incurred by each class, the per share
net asset value of each class may differ.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date (the date on which the order to buy or sell is
executed). Realized gains and losses from securities transactions are calculated
on the identified cost basis. Interest income is recorded on an accrual basis.
Dividend income is recorded on the ex-dividend date. Discounts and premiums are
treated as adjustments to interest income and identified costs of investments
over the lives of the respective investments. The Portfolios' net investment
income (other than distribution and service fees) and unrealized and realized
gains or losses are allocated daily to each class of shares based upon the
relative proportion of the settled shares value of each class at the end of the
day.
U.S. FEDERAL TAX STATUS--Each Portfolio intends to distribute substantially all
of its taxable income and to comply with the other requirements of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing during each calendar year substantially all of its
ordinary income and capital gains, if any, each Portfolio intends not to be
subject to a U.S. federal excise tax.
The tax character of dividends and distributions paid during the fiscal year
ended March 31, 2003 were as follows:
<Table>
<Caption>
ORDINARY LONG-TERM TOTAL
PORTFOLIO INCOME CAPITAL GAIN DISTRIBUTIONS
- --------- ----------- ------------ -------------
Income Portfolio....................................................... $ 2,278,773 $98,648 $ 2,377,421
High Yield Portfolio................................................... 13,159,828 -- 13,159,828
</Table>
At March 31, 2003, the components of distributable earnings on a tax basis were
as follows:
<Table>
<Caption>
ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED CAPITAL TOTAL
ORDINARY LONG-TERM AND OTHER UNREALIZED ACCUMULATED
PORTFOLIO INCOME CAPITAL GAINS LOSSES APPRECIATION EARNINGS/(DEFICIT)
- --------- ------------- ------------- ----------- ------------ ------------------
Income Portfolio........................ $434,654 $156,781 -- $1,578,675 $ 2,170,110
High Yield Portfolio.................... 34,123 -- $(51,236,485) 7,548,130 (43,654,232)
</Table>
The difference between book-basis and tax-basis unrealized appreciation is
attributable primarily to the tax deferral of losses on wash sales.
At March 31, 2003, the High Yield Portfolio had capital loss carryforwards
available as a reduction to the extent provided in regulations of any future net
capital gains realized before the end of fiscal year 2011. To the extent that
the capital loss carryforwards are used to offset future capital gains, it is
probable that the gains so offset will not be distributed to shareholders. The
High Yield Portfolio had the following capital loss carryforwards at March 31,
2003:
<Table>
<Caption>
GROSS CAPITAL AMOUNTS EXPIRING IN
LOSS ---------------------------------------------------------------------
PORTFOLIO CARRYFORWARD 2007 2008 2009 2010 2011
- --------- ------------ -------- ---------- ----------- ----------- ----------
High Yield Portfolio.......... $48,598,104 $175,885 $5,403,558 $13,786,496 $20,187,320 $9,044,845
</Table>
For U.S. federal income tax purposes, net realized capital losses from
investments incurred after October 31, 2002, within the current fiscal year are
deemed to arise on the first day of the following fiscal year. The High Yield
Portfolio incurred and elected to defer such losses of $2,638,381.
27
<Page>
For U.S. federal income tax purposes, the cost of securities owned at March 31,
2003, were $89,218,323 and $185,186,199 for the Income Portfolio and High Yield
Portfolio, respectively. Accordingly, the net unrealized appreciation on
investments for each Portfolio were as follows:
<Table>
<Caption>
GROSS GROSS NET
PORTFOLIO APPRECIATION DEPRECIATION APPRECIATION
- --------- ------------ ------------ ------------
Income Portfolio....................................................... $1,716,574 $ (137,899) $1,578,675
High Yield Portfolio................................................... 9,022,566 (1,474,436) 7,548,130
</Table>
At March 31, 2003, the Income Portfolio reclassified within the composition of
net assets, $146,218 from accumulated net realized gain/(loss) from investments,
of which $142,277 was reclassified to undistributed net investment income/(loss)
and $3,941 was reclassified to paid-in capital. In addition, the High Yield
Portfolio reclassified $3,329 from undistributed net investment income/(loss),
of which $720 was reclassified to accumulated net realized gain/(loss) from
investments and $2,609 was reclassified to paid-in capital.
DIVIDENDS AND DISTRIBUTIONS--Each Portfolio declares dividends from net
investment income on each day the Exchange is open for business. These dividends
are paid usually on or about the twentieth day of each month. Distributions of
net realized gains, if any, will be declared and paid at least annually by each
Portfolio. Dividends and distributions to shareholders are recorded on the
ex-dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from GAAP. These
"book/tax" differences are either considered temporary or permanent in nature.
To the extent these differences are permanent in nature, such amounts are
reclassified within capital accounts based on their U.S. federal tax-basis
treatment; temporary differences do not require reclassification.
TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
For the fiscal year ended March 31, 2003, BSAM, a wholly-owned subsidiary of The
Bear Stearns Companies Inc., served as investment adviser pursuant to an
Investment Advisory Agreement with respect to each Portfolio. Under the terms of
the Investment Advisory Agreement, the Income Portfolio and High Yield Portfolio
have agreed to pay BSAM a monthly fee at an annual rate of 0.45% and 0.60%,
respectively, of each Portfolio's average daily net assets.
For the fiscal year ended March 31, 2003, Bear Stearns Funds Management Inc.
("BSFM" or the "Administrator") served as administrator to each Portfolio
pursuant to an Administration Agreement. BSFM is entitled to receive from each
Portfolio a monthly fee equal to an annual rate of 0.15% of each Portfolio's
average daily net assets up to $1 billion, 0.12% of the next $1 billion, 0.10%
of the next $3 billion and 0.08% of average daily net assets above $5 billion.
For the fiscal year ended March 31, 2003, BSAM has undertaken to limit each
Portfolio's total operating expenses (exclusive of brokerage commissions, taxes,
interest and extraordinary items) to a maximum annual level as a percent of each
Portfolio's average daily net assets as follows:
<Table>
<Caption>
PORTFOLIO CLASS A CLASS B CLASS C CLASS Y
- --------- ------- ------- ------- -------
Income Portfolio................................................................ 0.80% 1.45% 1.45% 0.45%
High Yield Portfolio............................................................ 1.00 1.65 1.65 0.65
</Table>
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
fiscal year ended March 31, 2003, the advisory fee waivers and reimbursements of
expenses (in order to maintain the expense limitation) were as follows:
<Table>
<Caption>
PORTFOLIO ADVISORY FEE WAIVERS EXPENSE REIMBURSEMENTS
- --------- -------------------- ----------------------
Income Portfolio.......................................................... $272,794 $158,098
High Yield Portfolio...................................................... 638,911 --
</Table>
The Portfolios will not pay BSAM at a later time for any amounts BSAM may waive,
nor will the Portfolios reimburse BSAM for any amounts BSAM may assume.
28
<Page>
Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies
Inc. and an affiliate of BSAM, BSFM and Bear, Stearns & Co. Inc. ("Bear Stearns"
or the "Distributor"), serves as custodian to each Portfolio.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICING PLAN
The Fund, on behalf of the Portfolios, has entered into a Distribution Plan
pursuant to Rule 12b-1 under the Investment Company Act. Under the Distribution
Plan, each Portfolio paid Bear Stearns a fee at an annual rate of 0.10% for
Class A shares and 0.75% for both Class B and C shares. The Fund, on behalf of
the Portfolios, has adopted a Shareholder Servicing Plan whereby each Portfolio
paid Bear Stearns fees of up to 0.25% of its Class A, B and C shares.
Such fees are based on the average daily net assets in each class of the
respective Portfolios and are accrued daily and paid quarterly or at such
intervals as the Board may determine. The fees paid to Bear Stearns under the
Distribution Plan are payable without regard to actual expenses incurred. Bear
Stearns uses the distribution fee to pay broker-dealers or other financial
institutions whose clients hold each Portfolio's shares and other
distribution-related activities. Bear Stearns uses shareholder servicing fees to
pay broker-dealers or other financial institutions that provide personal service
in connection with the maintenance of shareholder accounts.
For the fiscal year ended March 31, 2003, the distribution and shareholder
servicing fees paid to Bear Stearns under each Plan were as follows:
<Table>
<Caption>
PORTFOLIO DISTRIBUTION FEES SHAREHOLDER SERVICING FEES
- --------- ----------------- --------------------------
Income Portfolio....................................................... $191,266 $ 98,937
High Yield Portfolio................................................... 608,210 362,609
</Table>
In addition, as Distributor of the Portfolios, Bear Stearns collects the sales
charges imposed on sales of each Portfolio's Class A shares, and reallows a
portion of such charges to dealers through which the sales are made. In
addition, Bear Stearns advanced 4.25% and 1.00% in sales commissions on the sale
of Class B and C shares, respectively, to dealers at the time of such sales.
For the fiscal year ended March 31, 2003, Bear Stearns has advised each
Portfolio that it received the amounts noted below in front-end sales charges
resulting from sales of Class A shares and contingent deferred sales charges
("CDSC") upon certain redemptions by Class A, B and C shareholders,
respectively. The amounts were as follows:
<Table>
<Caption>
CDSC
FRONT-END SALES CHARGES ------------------------------
PORTFOLIO CLASS A CLASS A CLASS B CLASS C
- --------- ----------------------- ------- -------- -------
Income Portfolio....................................... $ 68,136 $1,881 $ 76,261 $3,727
High Yield Portfolio................................... 328,491 1,610 138,972 8,580
</Table>
INVESTMENTS IN SECURITIES
For the fiscal year ended March 31, 2003, aggregate purchases and sales of
portfolio securities (excluding short-term investments) for each Portfolio were
as follows:
<Table>
<Caption>
PORTFOLIO PURCHASES SALES
- --------- ------------ ------------
Income Portfolio.................................................................. $131,301,404 $ 84,496,035
High Yield Portfolio.............................................................. 209,782,697 160,190,668
</Table>
SHARES OF BENEFICIAL INTEREST
Each Portfolio offers Class A, B, C and Y shares. Class A shares are sold with a
front-end sales charge of up to 4.50% for each Portfolio. Class B shares are
sold with a CDSC of up to 5.00% within six years of purchase. Class C shares are
sold with a CDSC of 1.00% within the first year of purchase. There is no sales
charge or CDSC on Class Y shares, which are offered primarily to institutional
investors.
29
<Page>
Transactions in shares of beneficial interest for each Portfolio were as
follows:
<Table>
<Caption>
INCOME PORTFOLIO HIGH YIELD PORTFOLIO
---------------------------------------- ----------------------------------------
SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS
------------ ----------- ------------- ----------- ----------- -------------
CLASS A
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ................................ 1,918,416 892,665 38,049 6,370,363 4,975,324 408,346
Value.................................. $23,511,749 $10,924,899 $466,500 $50,751,493 $39,763,822 $3,257,445
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares ................................ 794,472 688,148 24,544 3,756,865 3,398,078 407,597
Value.................................. $ 9,532,988 $ 8,218,320 $295,102 $32,035,477 $28,817,466 $3,446,664
CLASS B
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares................................. 1,516,519 580,387 27,109 2,581,257 1,206,435 177,294
Value.................................. $18,475,988 $ 7,071,143 $332,372 $20,618,000 $ 9,586,223 $1,414,056
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares................................. 603,678 450,445 13,598 1,370,939 669,402 142,929
Value.................................. $ 7,318,268 $ 5,427,360 $163,506 $11,652,781 $ 5,655,996 $1,207,816
CLASS C
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares................................. 706,186 325,220 22,051 2,873,843 910,780 213,931
Value.................................. $ 8,630,729 $ 3,975,476 $269,870 $22,966,703 $ 7,229,012 $1,702,053
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares................................. 429,355 209,437 14,073 1,174,111 328,871 135,936
Value.................................. $ 5,167,296 $ 2,510,222 $169,147 $ 9,955,418 $ 2,780,854 $1,148,557
CLASS Y
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares................................. 1,390,146 278,085 65,567 970,032 331,419 217,625
Value.................................. $16,970,558 $ 3,411,752 $803,088 $ 7,927,562 $ 2,625,540 $1,733,581
FOR THE FISCAL YEAR ENDED MARCH 31, 2002*
Shares................................. 449,139 90,492 35,969 2,020,342 53,273 50,186
Value.................................. $ 5,419,286 $ 1,088,280 $432,101 $17,027,227 $ 448,058 $ 421,359
</Table>
- ----------
* Class Y shares of the High Yield Portfolio commenced its initial public
offering on July 11, 2001.
CREDIT FACILITY
The Fund has entered into a demand promissory note arrangement with JPMorgan
Chase Bank (the "Bank") to provide an uncommitted credit facility to the Fund
(on behalf of each 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.
High Yield Portfolio as a fundamental policy is permitted to borrow in an
amount up to 33 1/3% of its total assets. Income Portfolio intends to borrow
money only for temporary or emergency (not leveraging) purposes and only in
amounts up to 15% of its total assets.
Each loan is payable on demand or upon termination of this credit facility or on
the last day of the interest period and, in any event, not later than 14 days
from the date the loan was advanced.
Amounts outstanding under the credit facility during the fiscal year ended
March 31, 2003, were as follows:
<Table>
<Caption>
MAXIMUM LOAN AMOUNT
PORTFOLIO AVERAGE LOAN BALANCE OUTSTANDING AVERAGE INTEREST RATE
- --------- -------------------- ------------------- ---------------------
Income Portfolio............................... $22,737 $2,025,600 1.81%
High Yield Portfolio........................... 19,982 2,351,500 2.25
</Table>
The Income Portfolio had $2,025,600 outstanding under the line of credit
facility at March 31, 2003. The High Yield Portfolio had no amount outstanding
under the credit facility at March 31, 2003.
30
<Page>
CONCENTRATION OF RISK -- HIGH YIELD PORTFOLIO
Lower-rated debt securities (commonly known as "junk bonds") possess speculative
characteristics and are subject to greater market fluctuations and risk of lost
income and principal than higher-rated debt securities for a variety of reasons.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service their principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. In addition, periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of lower-rated debt
securities and the High Yield Portfolio's net asset value.
31
<Page>
THE BEAR STEARNS FUNDS
INCOME PORTFOLIO
HIGH YIELD TOTAL RETURN PORTFOLIO
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders,
Income Portfolio
High Yield Total Return Portfolio
(Series of The Bear Stearns Funds):
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Income Portfolio and High Yield Total Return
Portfolio (collectively, the "Portfolios") as of March 31, 2003, and the related
statements of operations for the year then ended, and the statements of changes
in net assets and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Portfolios' management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2003, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Portfolios as of March 31, 2003, the results of their operations for the year
then ended, and the changes in their net assets and the financial highlights for
the respective stated periods, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
May 9, 2003
32
<Page>
THE BEAR STEARNS FUNDS
INCOME PORTFOLIO
HIGH YIELD TOTAL RETURN PORTFOLIO
SHAREHOLDER TAX INFORMATION - (UNAUDITED)
Each Portfolio is required by Subchapter M of the Internal Revenue Code of 1986,
as amended, to advise its shareholders within 60 days of each Portfolio's fiscal
year end (March 31, 2003) as to the U.S. federal tax status of distributions
received by each Portfolio's shareholders in respect of such fiscal year. During
the fiscal year ended March 31, 2003, the following dividends and distributions
per share were paid by each of the Portfolios:
<Table>
<Caption>
NET INVESTMENT SHORT-TERM LONG-TERM
INCOME CAPITAL GAINS CAPITAL GAINS
-------------- -------------- --------------
Income Portfolio:
Class A ....................... $0.481346798 $0.0129 $0.0177
Class B ....................... 0.402205564 0.0129 0.0177
Class C ....................... 0.402072497 0.0129 0.0177
Class Y ....................... 0.524799040 0.0129 0.0177
High Yield Total Return Portfolio:
Class A ....................... 0.658631864 -- --
Class B ....................... 0.607033054 -- --
Class C ....................... 0.606589985 -- --
Class Y ....................... 0.687795886 -- --
</Table>
Ordinary income dividends, which include short-term gain distributions, should
be reported as dividend income on Form 1040. Income dividends are taxable as
ordinary income, as are short-term capital gain distributions.
With respect to each Portfolio, none of its ordinary income dividends qualify
for the corporate dividends received deduction.
Because each Portfolio's fiscal year is not the calendar year, another
notification will be sent with respect to calendar year 2003. The second
notification, which will reflect the amount to be used by calendar year
taxpayers on their U.S. federal income tax returns, will be made in conjunction
with Form 1099-DIV and will be mailed in January 2004.
Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their actual ordinary dividends. They will generally not be entitled
to a foreign tax credit or deduction for the withholding taxes paid by the
Portfolios, if any.
In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs)
need not be reported as taxable income for U.S. federal income tax purposes.
However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may
need this information for their annual information reporting.
Shareholders are advised to consult with their own tax advisers with respect to
the tax consequences of their investment in the Portfolios.
33
<Page>
THE BEAR STEARNS FUNDS
TRUSTEES AND OFFICERS
The following information is provided for each Trustee, Officer and the Advisory
Trustee of The Bear Stearns Funds (the "Trust") as of March 31, 2003. Each
Trustee oversees all 10 portfolios of the Trust. The Statement of Additional
Information includes additional information about the Trustees and is available
without charge, upon request, by calling PFPC Inc. at 1-800-447-1139 or
1-800-766-4111. The mailing address of the Trustees and Officers is 383 Madison
Avenue, New York, New York 10179.
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
POSITION(S) WITH
THE TRUST AND
LENGTH OF TIME OTHER DIRECTORSHIPS
NAME AND AGE SERVED(1) PRINCIPAL OCCUPATION(S) IN THE PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Peter M. Bren - 69 Trustee, since 1995 Chairman and President, Koll Bren Schreiber None
Realty Advisers (realty)
- ------------------------------------------------------------------------------------------------------------------------------------
John S. Levy - 67 Trustee, since 2000 Managing Partner, Fayerrwearther Capital SL Green Realty Corp.
Partners (private investment partnership)
- ------------------------------------------------------------------------------------------------------------------------------------
M.B. Oglesby, Jr. - 59 Trustee, since 1995 Consultant; Vice Chairman, BKSH & None
Associates, Washington DC (government
lobbyists) (2002 - present); Formerly, Chief of
Staff to United States Trade Representative,
Executive Office of the President (2001-2002);
Consultant, Chairman, Oglesby Properties, Inc.;
President and Chief Executive Officer,
Association of American Railroads; Vice
Chairman, Cassidy & Associates
- ------------------------------------------------------------------------------------------------------------------------------------
Robert E. Trustee, since 2000 Retired; Formerly, Vice President, Broker/ None
Richardson - 61 Dealer Department, Mellon Bank
(financial services) (1991-1999)
- ------------------------------------------------------------------------------------------------------------------------------------
"INTERESTED" TRUSTEES(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Michael Minikes - 59 Chairman of the Treasurer, The Bear Stearns Companies Inc. None
Board and Trustee, and Bear, Stearns & Co. Inc. ("Bear Stearns");
since 1999 Senior Managing Director, Bear Stearns;
Co-President, Bear, Stearns Securities
Corporation (1999-present); Director,
Custodial Trust Company ("CTC") and
Bear Stearns Bank plc
- ------------------------------------------------------------------------------------------------------------------------------------
Doni L. Fordyce - 43 President and Director, Chairman of the Board, President, None
Trustee, since 2000 Senior Managing Director, Bear Stearns Asset
Management Inc. (`BSAM") and, since 2000,
Chief Executive Officer and Chief Operating
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Robert M. Trustee, since 2001 Senior Managing Director, Bear Stearns; None
Steinberg - 57 Director of CTC
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The term of office for a Trustee is indefinite, until he or she resigns, is
removed or a successor has been duly elected and qualified.
(2) The Interested Trustees are considered to be "interested persons" (as
defined by the Investment Company Act of 1940, as amended) because of their
employment with the Trust's adviser or principal underwriter.
34
<Page>
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
POSITION(S) WITH
THE TRUST AND
LENGTH OF TIME
NAME AND AGE SERVED(1) PRINCIPAL OCCUPATION(S) IN THE PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------------------
ADVISORY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------
Senator Alan Advisory Trustee, Partner - Corporate Business and Legislative Law, Bryan Cave (law firm);
Dixon - 76 since 1995 Formerly, United States Senator (1981-1992)
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------
Barry Executive Vice Senior Managing Director, Bear Stearns (2000-present); Head of
Sommers - 34 President, since Marketing and Sales for the Trust (1997-present); Managing Director,
1998 Bear Stearns (1997-2000)
- --------------------------------------------------------------------------------------------------------------------------
Stephen A. Vice President and General Counsel, Managing Director/Principal and Executive Vice President,
Bornstein - 59 Secretary, since BSAM; Managing Director/Principal, Bear Stearns; Vice President, General
1995 Counsel and Secretary, Bear Stearns Funds Management Inc. ("BSFM")
- --------------------------------------------------------------------------------------------------------------------------
Frank J. Vice President and President and Chief Executive Officer, BSFM; Senior Managing Director,
Maresca - 44 Treasurer, since 1995 Bear Stearns (2001-present); Managing Director, Bear Stearns
- --------------------------------------------------------------------------------------------------------------------------
Vincent L. Assistant Treasurer, Executive Vice President, BSFM; Managing Director (1999-present) and
Pereira - 37 since 1995 Associate Director (1997-1999), Bear Stearns
- --------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The term of office for an Officer is indefinite, until he or she resigns,
is removed or a successor has been duly elected and qualified.
35
<Page>
THE BEAR STEARNS FUNDS
INCOME PORTFOLIO
HIGH YIELD TOTAL RETURN PORTFOLIO
PRIVACY NOTICE
While information is the cornerstone of our ability to provide superior service,
our most important assets are our shareholders and the trust that they place in
us. Keeping shareholder information secure and using it only as our shareholders
would want us to are top priorities at The Bear Stearns Funds.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
personal information about you. This is the information we collect from you on
applications or other forms, and from the transactions you make with us or third
parties. It may include your name, address, social security number, account
transactions and balances, and information investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone
except as permitted by law. Specifically, we may disclose the information we
collect to companies that perform services on our behalf, such as the transfer
agent that processes shareholder accounts and mailers that assist us in the
distribution of shareholder materials. This allows us to continue to meet your
investing needs, and to effect transactions that you request or authorize.
These companies will use this information only for the services for which we
hired them, and are not permitted to use or share this information for any other
purpose. To protect your personal information internally, we permit access only
by authorized employees and maintain physical, electronic and procedural
safeguards to guard your personal information.
You may have received communications regarding information privacy on policies
from other financial institutions that gave you the opportunity to "opt-out" of
certain information sharing with companies that are not affiliated with that
financial institution. The Bear Stearns Funds does not share information with
other companies for purposes of marketing solicitations. Therefore, The Bear
Stearns Funds does not provide opt-out options to its shareholders.
We reserve the right to change our privacy policy at any time. The examples
contained within this notice are illustrations; they are not intended to be
exclusive. This notice complies with a recently enacted Federal law and new SEC
regulations regarding privacy. You may have additional rights under foreign or
other domestic laws that may apply to you.
36
<Page>
The
Bear Stearns
Funds
383 MADISON AVENUE, NEW YORK, NY 10179 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 TRANSFER AND DIVIDEND
Bear Stearns Asset DISBURSEMENT AGENT
Management Inc. PFPC Inc.
383 Madison Avenue Bellevue Corporate Center
New York, NY 10179 400 Bellevue Parkway
Wilmington, DE 19809
ADMINISTRATOR
Bear Stearns Funds INDEPENDENT AUDITORS
Management Inc. Deloitte & Touche LLP
383 Madison Avenue Two World Financial Center
New York, NY 10179 New York, NY 10281
DISTRIBUTOR COUNSEL
Bear, Stearns & Co. Inc. Kramer Levin
383 Madison Avenue Naftalis & Frankel LLP
New York, NY 10179 919 Third Avenue
New York, NY 10022
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
This report is submitted for the general information of the shareholders of each
Portfolio. It is not authorized for distribution to prospective investors in
each Portfolio unless it is preceded or accompanied by a current prospectus
which includes details regarding each Portfolio's objectives, policies, sales
commissions and other information. Total investment return is based on
historical results and is not intended to indicate future performance. The
investment return and principal value of an investment in each Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than original cost.
<Page>
THE
BEAR STEARNS
FUNDS
EQUITY FUNDS
S&P STARS Portfolio
S&P STARS Opportunities Portfolio
The Insiders Select Fund
Intrinsic Value Portfolio
Small Cap Value Portfolio
Alpha Growth Portfolio
International Equity Portfolio
ANNUAL REPORT
MARCH 31, 2003
BSF-R-015-12 [BEAR STEARNS LOGO]
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
S&P STARS Opportunities Portfolio
The Insiders Select Fund
Intrinsic Value Portfolio
Small Cap Value Portfolio
Alpha Growth Portfolio
International Equity Portfolio
LETTER TO SHAREHOLDERS
April 30, 2003
Dear Shareholders:
We are pleased to present the annual report to shareholders for the S&P STARS
Portfolio, S&P STARS Opportunities Portfolio, The Insiders Select Fund,
Intrinsic Value Portfolio, Small Cap Value Portfolio, Alpha Growth Portfolio and
International Equity Portfolio (each a "Portfolio"), for the year ended
March 31, 2003. Detailed performance data for each class of shares of each
Portfolio can be found in the "Financial Highlights" and line graph sections of
this report.
S&P STARS PORTFOLIO
As the fiscal year began in April 2002, the nation's equity markets were heavily
impacted by a number of factors. Positive signs of a slowly recovering economy
were overshadowed by escalating geopolitical tensions, a liquidity crisis among
some of the country's largest growth companies, and a series of highly
publicized corporate governance scandals, in which a number of large, well
respected corporations from several sectors admitted to fraudulent accounting
practices and earnings overstatements in the billions of dollars. Investors
reacted with panic, leading to record stock market volatility and a sharp
decline in business confidence. In this exceptionally challenging environment,
growth stocks in economically sensitive sectors were among the hardest hit. In
particular, companies that were heavily dependent on the credit markets saw
their stock prices tumble as investors became wary of highly leveraged balance
sheets.
For the Portfolio, we entered the fiscal year with the view that the economic
recovery would continue at a moderate pace, picking up steam as the year
progressed. In hindsight, we underestimated the near-term impact on many of the
Portfolio's growth stocks of geopolitical and corporate governance concerns and
the consequent panicked investor mentality that resulted. In the first fiscal
quarter of the year (April to June), our emphasis on growth over value, with a
particular emphasis on cable, wireless telecommunications, and technology
companies, was the primary driver behind our underperformance versus the S&P 500
Index, the Portfolio's benchmark, for the fiscal year. Our decision to
overweight these sectors was based on our expectation that the economic recovery
would continue, which, in fact, it has. Unfortunately, our telecommunications
and cable holdings were dragged down with the rest of their respective sectors
on news of accounting scandals at some of the country's largest providers.
Technology stocks also suffered during the period.
Since June 2002, many of the Portfolio's stocks that suffered the most have
recovered, and we believe these companies remain fundamentally sound. Today,
they continue to exhibit growth characteristics well in excess of the average
company in the S&P 500 Index, and are attractively valued. Indeed, earnings
growth over the next three to five years for all companies we owned as of the
fiscal year end was expected to exceed expected growth for all firms in the
S&P 500 Index; yet, overall, the Portfolio's stocks still trade at below average
price-to-earnings, price-to-cash-flow, price-to-book-value, and price-to-sales
ratios.
1
<Page>
In the months ahead, we plan to keep a close watch on employment levels and
consumer sentiment as barometers of the economy's health. With the war over, we
expect improvements in consumer confidence to lead to increased household
spending. We also expect employment levels to steadily improve. These trends
should have the secondary effect of improving business investment, which had
shown signs of modest growth in the second half of 2002, but which stagnated in
the first quarter due to war anxieties. For the Portfolio, we plan to focus on
consumer discretionary and technology, which have historically outperformed
during times of economic expansion.
It is important for our investors to remember that, although the pace of the
economic recovery, as well as that of domestic stock prices, are unclear, it is
becoming more likely that we have seen the low points. Historically, the
Portfolio has performed well in rising equity markets. As the clouds clear, we
believe our focus on growth at a reasonable price will prove quite rewarding to
investors who have stayed the course.
S&P STARS OPPORTUNITIES PORTFOLIO
During the Portfolio's fiscal year, the stock market was profoundly affected by
a number of factors. Positive signs from a gradual economic recovery were
overshadowed by escalating geopolitical tensions, a series of large-scale
corporate governance scandals and the continued negative impact of the prolonged
bear market on stock prices. In this turbulent environment, defensive sectors of
the economy largely outperformed economically sensitive sectors as investors
sought a safe haven from this volatility. The Portfolio underperformed the S&P
MidCap 400 Index, its benchmark, for the year.
Stock selection within the financial services sector helped performance during
the period. Regional banks, as a defensive industry, benefited from high levels
of market uncertainty, as well as from an environment of declining interest
rates, which led to favorable interest rate spreads. In addition, our investment
in a leading rating agency performed well. Over the past two years, falling
interest rates have allowed many companies to refinance their balance sheets, a
decision that requires the services of rating agencies. Subsequently, our
overweighted position in real estate investment trusts (REITs) helped
performance. REITs provided a bastion of safety during the year, paying 6% to 7%
dividend yields in an environment where both stock prices and bond yields had
declined precipitously.
Within the industrials sector, our investment in a bankruptcy consulting firm --
one of the Portfolio's largest holding -- performed especially well. This
company has benefited from the weak economic environment of the past three
years, which has led to an increase in demand for its services. In addition, our
exposure to a well diversified engineering and construction company contributed
positively to performance.
Conversely, while the consumer discretionary sector as a whole performed
strongly for the year, the Portfolio's investment decisions in this sector
detracted from performance. Specifically, our investments in a leading
bookseller and video game retailer experienced disappointing earnings due to a
weaker than expected holiday sales season. Soft sales resulted from a decline in
consumer confidence, driven by rising unemployment and a falling stock market,
among other things. Several of our telecommunications holdings also detracted
from performance. Our investment in a wireless telecommunications company was
negatively impacted by bankruptcy fears resulting from the corporate fraud and
subsequent bankruptcy filing of WorldCom. While the company was not involved in
accounting corruption, its highly leveraged balance sheet was viewed unfavorably
by investors.
Our outlook for the U.S. economy remains cautiously optimistic. Powerful
monetary and fiscal stimulus packages are now in place to propel growth, while
lower oil prices should begin to take some pressure off the economy. Going
forward, the equity markets should benefit from historically low fixed income
yields, which we expect will eventually cause investors to look to the equity
markets for higher return potential. Should today's geopolitical circumstances
continue to be resolved in a constructive fashion, we would expect corporate
earnings to move back to higher levels, with stock prices following suit. In the
months ahead, we believe mid cap stocks will continue to provide above-average
growth opportunities for investors, as these companies have grown beyond the
small cap threshold, but have not yet reached full maturity as large caps.
2
<Page>
THE INSIDERS SELECT FUND
The fiscal year proved to be an exceptionally difficult one for the equity
markets. Signs of a slowly recovering economy were overshadowed by escalating
geopolitical tensions, a series of large-scale corporate governance scandals,
plummeting stock prices, and a sharp decline in consumer confidence. As they
have often done in the past, investors continued to look in the rearview mirror
when making investment decisions, shifting assets away from the worst performing
asset class and toward the best performing asset class. This was evidenced by
the record amount of money flowing into fixed income mutual funds during the
period, as well as by the more than $4 trillion currently positioned in money
market funds. In this challenging environment, the Portfolio underperformed the
S&P MidCap 400 Index, its benchmark, for the year.
For the most part, 2002 witnessed a continuation of the trend that began in 2000
in which insider selling exceeded insider buying by a wide margin. In the fourth
quarter of 2002, however, we began to see this trend change, with insider
selling stemming off and buying picking up. While the first quarter showed
similar results, it is still too early to tell whether this marks the start of a
new trend. Share repurchase programs remained strong throughout the year as
corporations took advantage of what they perceived to be the undervalued prices
of their stocks.
The Portfolio's underperformance for the year was largely attributable to stock
selection in the consumer discretionary, consumer staples and technology
sectors. Within consumer discretionary, our investments in advertising, retail,
and fast-food were particularly hard hit. Our investment in an advertising
agency was adversely affected by the sluggish economy, which led many companies
to cut back on advertising budgets. Our retail holdings were also affected by
the economy and by a decline in consumer confidence that led to decreased
spending, most notably during the holiday shopping season. Our investment in a
fast-food chain posted disappointing results due to heightened competition, and
a deterioration in its quality and service. Within consumer staples, one stock
detracted from performance during the year. In spite of having above-average
fundamentals, our investment in a large grocery store chain suffered from an
increase in competition from discount mega-stores.
Two of the Portfolio's technology holdings, a semiconductor company and a
technology consulting business, also underperformed for the quarter. The
semiconductor company was hurt by a decline in demand for personal computers. We
sold the position on the belief that it will be difficult for the company to
regain the market share it lost in the last year. The technology consulting
business was forced to adjust its earnings estimates downward due to accounting
issues with some of its clients.
By contrast, the Portfolio's investment in a regional hospital chain within the
healthcare sector contributed positively to performance as the company is now
reaping the benefits from the restructuring it went through in 2000 and 2001.
The company's restructuring has led to increasing market share and improving
cash flow and earnings growth.
In the near-term, the equity markets face some significant difficulties. Anxiety
about the war and relatively high unemployment has caused a sharp decline in
consumer confidence, putting a damper on spending. In addition, a host of
industries face downward earnings pressure due to weak profitability, leaving
capital expenditures anemic as a result. Yet, there are several reasons to
expect equity returns to pick up as the year progresses. Powerful monetary and
fiscal stimulus packages are in place to propel growth, and lower oil prices
have taken some pressure off the economy. In addition, the rally in technology
stocks that took place in the last half of the fiscal year supports the belief
among many investors that the underlying foundation of the economy is sound, and
that once the war is behind us, the economy will be poised for a meaningful
recovery. Should today's geopolitical concerns be resolved in a positive
fashion, we would expect earnings to move back to higher levels, with stock
prices following suit.
INTRINSIC VALUE PORTFOLIO
The fiscal year proved to be an exceptionally difficult one for the equity
markets. Signs of a slowly recovering economy were overshadowed by escalating
geopolitical tensions, a series of large-scale corporate governance scandals,
plummeting stock prices and a sharp decline in consumer confidence. As they have
often done in the past, investors continued to look in the rearview mirror when
making investment decisions, shifting assets away from the worst performing
asset class and toward the best performing asset class. This was evidenced by
the record amount of money flowing into fixed income
3
<Page>
mutual funds during the period, as well as by the more than $4 trillion
currently positioned in money market funds. In this challenging environment, the
Portfolio's performance trailed the S&P 500 Index, its benchmark.
The Portfolio's underperformance for the fiscal year was largely attributable to
our stock selection within the consumer discretionary sector, in which we
focused on media-related companies. Because they typically perform in line with
expectations for the economy, media stocks suffered due to the factors mentioned
above. In addition, our decision to overweight consumer discretionary also
detracted from performance since the sector underperformed the benchmark.
Our underweighted position in the consumer staples sector also hurt performance.
As a defensive sector, consumer staples fared better than average in a year in
which investors sought a safe haven from more volatile sectors. Even in a down
economy, consumers' buying patterns of consumer staples typically stay the same,
generally causing the sector to outperform in times of economic uncertainty.
By contrast, our decision to overweight financial services -- a sector that
performed strongly during the year -- helped performance, as did our stock
selection within this category. We were underweighted in the financial stocks
that experienced deteriorating fundamentals, as well as those affected by
corporate scandals.
In addition, our one holding in the utilities sector, a regulated company,
contributed positively to performance. We deliberately avoided deregulated
utilities, many of which were found to be involved in the corrupt practice of
artificially inflating trading revenues, and which were subsequently caught in a
downward spiral of electricity prices.
In the near-term, the equity markets face some significant difficulties. Anxiety
about the war and relatively high unemployment has caused a sharp decline in
consumer confidence, putting a damper on spending. In addition, a host of
industries face downward earnings pressure due to weak profitability, leaving
capital expenditures anemic as a result. Yet, there are several reasons to
expect equity returns to pick up as the year progresses. Powerful monetary and
fiscal stimulus packages are in place to propel growth, and lower oil prices
have taken some pressure off the economy. In addition, the rally in technology
stocks that took place in the last half of the fiscal year supports the belief
among many investors that the underlying foundation of the economy is sound, and
that once the war is behind us, the economy will be poised for a meaningful
recovery. Should today's geopolitical concerns be resolved in a positive
fashion, we would expect earnings to move back to higher levels, with stock
prices following suit.
SMALL CAP VALUE PORTFOLIO*
The fiscal year proved to be an exceptionally difficult one for the equity
markets and for small caps in particular. Signs of a slowly recovering economy
were overshadowed by escalating geopolitical tensions, a series of large-scale
corporate governance scandals, plummeting stock prices, and a sharp decline in
consumer confidence. In this challenging environment, the Portfolio's
performance trailed that of the Russell 2000 Index, its benchmark for the year.
The Portfolio's underperformance was due in part to our overweighted position in
the consumer discretionary sector. From July 2002 onward, the sector suffered
from weak sales due to declining levels of consumer confidence. Within the
retail industry, apparel manufacturers were particularly hard hit. While
consumer spending for big-ticket items such as autos and home furnishings
remained surprisingly strong throughout most of the year, spending on apparel
weakened considerably, culminating in a disappointing holiday shopping season,
which is when retailers typically make between 70% and 80% of their annual
profits. Retail was also hurt by a series of winter storms that kept shoppers at
home. In addition, our investment in a small oil and gas exploration and
production company detracted from performance; in the fourth quarter, the
company's stock price fell on news that a major gas project didn't meet
productivity expectations.
By contrast, our investments in the healthcare sector performed strongly during
the year, partly because of our limited exposure to the biotechnology and
pharmaceutical industries. In addition, the stocks we did own in these
industries performed far better than their competitors. During the year, some of
our best-performing companies were a supplier of laboratory materials, and a
drug company that experienced success not only with its generic product line,
but also with a promising new proprietary drug for breast cancer that was in
phase-three trials at the close of the period.
Our investments in the materials processing sector also helped performance:
specifically, all three of our chemical company holdings announced price
increases -- an indicator of strength and of increased earnings potential. As an
economically sensitive industry, chemicals tend to perform well in the
preliminary stages of an economic recovery.
4
<Page>
Our outlook for the remainder of the year is for a slow but steady economic
recovery. Historically, small caps have tended to outperform other asset classes
coming out of economic downturns. Given the current level of small cap
valuations and the lack of small cap coverage relative to mid and large cap
stocks, we see ample opportunity for above-average performance from this asset
class in the months ahead.
ALPHA GROWTH PORTFOLIO
During the fiscal year, the equity markets experienced their third consecutive
year of negative returns -- the first time the markets have delivered three
years of negative returns since the Great Depression. It was a troubling time
for most equity investors -- a time that required great patience, and the
discipline to keep a long-term view in the face of near-term panic. We are
pleased to have outperformed the S&P 500 Index, the Portfolio's benchmark, in
such a challenging environment.
The Portfolio's outperformance was due to a number of factors -- among them, our
proprietary systematic screening process, which searches a universe of large cap
companies for stocks exhibiting positive price and earnings momentum, high
projected earnings growth over the next three to five years, and reasonable
valuations. This process led us to underweight the technology sector from the
time we took over management of the Portfolio in August 2002, and to overweight
technology after the Portfolio underwent its annual rebalancing in January 2003.
With the exception of a few weeks in the fourth quarter when technology rallied,
both decisions contributed significantly to the Portfolio's outperformance for
the year.
The Portfolio's overweighted position in the consumer discretionary sector
during the first half of the fiscal year also helped performance. In fact, the
sector's outperformance more than made up for losses incurred in the second half
of the fiscal year, when consumer discretionary underperformed. As an
economically sensitive sector, consumer discretionary fared poorly in the second
half due to heightened uncertainty about the war with Iraq and evidence of
slowing Gross Domestic Product growth. The sector was further strained by a
disappointing holiday shopping season, and by a series of severe winter storms,
which kept shoppers at home. Finally, given that consumer discretionary stocks
had performed so strongly over the past several years, many stocks that had
become overvalued traded down to more reasonable levels as the year drew to a
close.
Our overweighted position in the consumer staples sector also contributed
positively to performance. As a defensive sector, consumer staples fared better
than average in a year in which investors sought a safe haven from volatility.
Even in a down economy, consumers' buying patterns of consumer staples products
typically stay the same, causing the sector to outperform during times of
economic uncertainty. The Portfolio's consumer staples holdings showed strong
relative price strength, and were able to meet earnings estimates in a difficult
economic environment.
Now that the war has reached a conclusion, we expect to see greater clarity
emerge in the stock market. Large cap stocks today are no longer overvalued, in
our opinion, but have traded down to fair prices. After three consecutive years
of negative returns, large cap growth stocks are due for a rebound, in our view.
We therefore believe that now is a good time for investors to maintain or add to
large cap growth as part of a well diversified investment strategy. In the
months ahead, we expect the Portfolio to continue to add value over its
benchmark by maintaining its disciplined approach to investing, which is the
hallmark of our investment strategy.
INTERNATIONAL EQUITY PORTFOLIO**
The fiscal year was an exceptionally difficult one for the global equity
markets. Geopolitical concerns and large-scale corporate scandals dominated most
of the year, driving stock indices to a low in October 2002. In spite of
declining interest rates around the world, growth remained subdued.
The equity markets underwent a dramatic reversal in the fourth quarter as
investor pessimism gave way to a wave of renewed optimism, driven by investors'
belief that many stocks that had traded down during the year had now reached
bargain prices. The result was a stock market rotation toward countries and
sectors that had been the year's worst performers. Specifically, Sweden,
Finland, Germany and France, which had declined approximately 30% from January
to September, increased between 15% and 25% during the fourth quarter. Likewise,
the technology and telecommunications sectors, which had declined 45%-50% in the
first three quarters, outperformed sharply in the fourth quarter, posting gains
of 20%-30%. Lower-quality bank and insurance stocks also performed strongly.
5
<Page>
The Portfolio underperformed the MSCI EAFE Index, its benchmark, for the fiscal
year due to our lack of exposure to the lower-quality stocks that benefited the
most from the fourth quarter rally. For the Portfolio, we focus on fundamentally
strong, well capitalized companies with strong, capable management teams that
are typically number one or two in their industries. We believe these stocks
have the strongest prospects for growth over the long run. While the Portfolio
did hold overweighted positions in the telecommunications and technology sectors
during the fourth quarter rally, our investments were focused on the Asia
ex-Japan region, which underperformed during the quarter. We also underweighted
the lower-quality bank and insurance stocks that participated in the rally.
Finally, we were underweighted in Europe, which benefited from a 5% appreciation
of the euro versus the U.S. dollar during the quarter.
Helping to offset these losses, our decision to overweight the Asia ex-Japan
region contributed positively to performance during the first, second and fourth
quarters of the Portfolio's fiscal year. Asia ex-Japan's growth was largely
centered on China and the transformation taking place there. In spite of the
global economic slowdown of the past three years, China has been growing at a
rate of about 8% per year. The country's growth is predominantly export driven
as China has become increasingly competitive in manufacturing. As a result,
about $50 billion of direct foreign investment has been flowing into China per
year. Steadily improving employment rates and income levels have led to
increases in domestic demand, which has been further supported by the trends of
urbanization and private housing. China's success has stimulated growth around
the region.
To take advantage of this trend, we invested in several companies that operate
solely in China during the year, such as utilities and energy companies. We also
held a financial services company in Hong Kong that will likely be among the
first to take advantage of financial services liberalization in China.
In the months ahead, given a reasonable resolution to the Iraqi situation, we
believe investors will shift their attention once again to economic conditions.
We expect to see moderate economic growth going forward. Global markets are
currently highly liquid due to historically low levels of interest rates. For
the Portfolio, we plan to maintain our focus on Asia ex-Japan, which has the
most dynamic growth prospects and most attractive valuation profile of anywhere
in the world, in our opinion. Although Europe saw some improvement during the
year, we continue to be cautious on the region due to its high tax rates,
restrictive monetary and fiscal policies, and its tight immigration policies and
relatively low birth rates, which have brought the region's population growth to
close to 0%.
In conclusion, we value the confidence you have placed in us and would be
pleased to address any questions or concerns you may have. Please feel free to
call us at 1-800-766-4111.
Sincerely,
/s/ Doni L. Fordyce
Doni L. Fordyce
President
The Bear Stearns Funds
- ----------
* Small-cap funds typically carry additional risks, since smaller companies
generally have a higher risk of failure than well-established larger
companies. Historically, stocks of smaller companies have experienced a
greater degree of market volatility than stocks on average.
** International investing involves risks such as currency exchange-rate
volatility, possible political, social, or economic instability and
differences in taxation and other financial standards.
Performance results do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or the redemption of Portfolio shares. On
the accompanying line charts and total return tables found on pages 7 through
13, the returns of each Portfolio assumes reinvestment of all dividends and
capital gains distributions at net asset value on the ex-dividend date.
6
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A AND C SHARES(1)(2)(5) VS. ITS BROAD-BASED INDEX
<Table>
<Caption>
DOLLARS
CLASS A SHARES CLASS C SHARES S&P 500 COMPOSITE INDEX
5-Apr-95 $9,450 $10,000 $10,000
30-Sep-95 $11,357 $11,974 $11,714
31-Mar-96 $12,066 $12,689 $13,086
30-Sep-96 $13,182 $13,835 $14,095
31-Mar-97 $14,100 $14,764 $15,680
30-Sep-97 $19,203 $20,055 $19,797
31-Mar-98 $20,236 $21,077 $23,206
30-Sep-98 $18,909 $19,646 $21,587
31-Mar-99 $25,792 $26,717 $27,489
30-Sep-99 $26,701 $27,604 $27,588
31-Mar-00 $38,901 $40,116 $32,420
30-Sep-00 $40,098 $41,257 $31,253
31-Mar-01 $30,204 $30,994 $25,392
30-Sep-01 $26,257 $26,875 $22,933
31-Mar-02 $27,245 $27,805 $25,454
30-Sep-02 $17,170 $17,481 $18,235
31-Mar-03 $17,148 $17,412 $19,150
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
S&P STARS PORTFOLIO
<Table>
Class A shares $17,148
Class C shares 17,412
S&P 500 Composite Index 19,150
</Table>
<Table>
<Caption>
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003
--------------------------------------------------
5-YEAR SINCE INCEPTION
ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7)
-------- -------------- -----------------
S&P STARS Portfolio(2)
Class A shares(5) ............... (40.52)% (4.35)% 6.98%
Class B shares(4) ............... (40.50) (4.11) (1.26)
Class C shares(6) ............... (38.01) (3.75) 7.19
Class Y shares(3) ............... (36.60) (2.74) 6.41
S&P 500 Composite Index(1) ........... (24.76) (3.77) 8.47
</Table>
- ----------
(1) The chart assumes a hypothetical $10,000 initial investment in the
Portfolio and reflects all Portfolio expenses. Investors should note that
the Portfolio is a professionally managed mutual fund while the index is
unmanaged, does not incur sales charges or expenses and is not available
for investment.
(2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to
reimburse a portion of the Portfolio's operating expenses, if necessary, to
maintain the expense limitation, as set forth in the notes to the financial
statements. Total returns shown include fee waivers and expense
reimbursements, if any; total returns would have been lower had there been
no assumption of fees and expenses in excess of expense limitations.
(3) The returns of Class Y shares (for which August 7, 1995 was the initial
public offering date) are higher than Class A, B and C shares. The higher
returns are due to the fact that there is no sales load, CDSC or 12b-1 fee
charged to Class Y shares.
(4) Reflects the applicable CDSC. Without the applicable sales charge, the
total returns would have been (37.37)%, (3.75)% and (1.08)%, respectively,
for each period shown. Assuming no redemption of shares at the end of the
period, the return of Class B shares (for which January 5, 1998 was the
initial public offering date) would have been higher than Class A shares
and would have been substantially the same as Class C shares if operations
were commenced on the same day. The higher return is due to the fact that
there is no initial sales charge on Class B shares.
(5) Reflects the initial maximum sales charge of 5.50%, for each period shown.
Without the applicable sales charge, the total returns would have been
(37.06)%, (3.26)% and 7.74%, respectively, for each period shown.
(6) Reflects the applicable CDSC. Without the applicable sales charge, the
total return for the one year ended March 31, 2003 would have been
(37.38)%.
(7) For the period April 5, 1995 (commencement of investment operations)
through March 31, 2003, unless otherwise indicated.
CDSC - Contingent Deferred Sales Charge
7
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Opportunities Portfolio
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A, B AND C SHARES(1)(2)(5) VS. ITS BROAD-BASED INDEX
<Table>
<Caption>
DOLLARS
CLASS A SHARES CLASS B SHARES CLASS C SHARES S&P MIDCAP 400 INDEX
1-Oct-01 $9,450 $10,000 $10,000 $10,000
31-Oct-01 $9,859 $10,433 $10,433 $10,442
30-Nov-01 $10,544 $11,141 $11,150 $11,219
31-Dec-01 $11,103 $11,725 $11,733 $11,799
31-Jan-02 $10,899 $11,508 $11,508 $11,737
28-Feb-02 $10,521 $11,108 $11,107 $11,752
31-Mar-02 $11,237 $11,858 $11,857 $12,592
30-Apr-02 $11,072 $11,682 $11,681 $12,533
31-May-02 $10,812 $11,398 $11,398 $12,322
30-Jun-02 $9,977 $10,507 $10,506 $11,420
31-Jul-02 $8,899 $9,366 $9,365 $10,314
31-Aug-02 $8,954 $9,424 $9,432 $10,365
30-Sep-02 $8,340 $8,765 $8,773 $9,530
31-Oct-02 $8,631 $9,065 $9,073 $9,943
30-Nov-02 $9,229 $9,690 $9,699 $10,519
31-Dec-02 $8,595 $9,027 $9,036 $10,086
31-Jan-03 $8,483 $8,899 $8,910 $9,792
28-Feb-03 $8,307 $8,721 $8,724 $9,559
31-Mar-03 $8,387 $8,450 $8,799 $9,639
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
S&P STARS OPPORTUNITIES PORTFOLIO
<Table>
Class A shares $8,387
Class B shares 8,450
Class C shares 8,799
S&P MidCap 400 Index 9,639
</Table>
<Table>
<Caption>
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003
----------------------------------------------
SINCE INCEPTION
ONE YEAR AVERAGE ANNUAL(7)
-------- -----------------
S&P STARS Opportunities Portfolio(2)
Class A shares(5) ..................... (29.47)% (11.10)%
Class B shares(4) ..................... (29.44) (10.62)
Class C shares(6) ..................... (26.52) (8.19)
Class Y shares(3) ..................... (25.03) (7.26)
S&P MidCap 400 Index(1) .................. (23.45) (2.43)
</Table>
- ----------
(1) The chart assumes a hypothetical $10,000 initial investment in the
Portfolio and reflects all Portfolio expenses. Investors should note that
the Portfolio is a professionally managed mutual fund while the index is
unmanaged, does not incur sales charges or expenses and is not available
for investment.
(2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to
reimburse a portion of the Portfolio's operating expenses, if necessary, to
maintain the expense limitation, as set forth in the notes to the financial
statements. Total returns shown include fee waivers and expense
reimbursements, if any; total returns would have been lower had there been
no assumption of fees and expenses in excess of expense limitations.
(3) The returns of Class Y shares are higher than Class A, B and C shares. The
higher returns are due to the fact that there is no sales load, CDSC or
12b-1 fee charged to Class Y shares.
(4) Reflects the applicable CDSC. Without the applicable sales charge, the
total returns would have been (25.79)% and (8.19)%, respectively, for each
period shown. Assuming no redemption of shares at the end of the period,
the return of Class B shares would have been higher than Class A shares and
would have been substantially the same as Class C shares. The higher return
is due to the fact that there is no initial sales charge on Class B shares.
(5) Reflects the initial maximum sales charge of 5.50%, for each period shown.
Without the applicable sales charge, the total returns would have been
(25.36)% and (7.67)% respectively, for each period shown.
(6) Reflects the applicable CDSC. Without the applicable sales charge, the
total return for the one year ended March 31, 2003 would have been
(25.79)%.
(7) For the period October 1, 2001 (commencement of investment operations)
through March 31, 2003.
CDSC - Contingent Deferred Sales Charge
8
<Page>
THE BEAR STEARNS FUNDS
The Insiders Select Fund
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A AND C SHARES(1)(2)(5) VS. ITS BROAD-BASED INDEX
<Table>
<Caption>
DOLLARS
CLASS A SHARES CLASS C SHARES S&P MIDCAP 400 INDEX
16-Jun-95 $9,450 $10,000 $10,000
30-Sep-95 $10,387 $10,975 $11,123
31-Mar-96 $11,033 $11,624 $11,977
30-Sep-96 $12,114 $12,732 $12,680
31-Mar-97 $13,055 $13,689 $13,249
30-Sep-97 $16,629 $17,386 $17,639
31-Mar-98 $19,064 $19,873 $19,745
30-Sep-98 $15,845 $16,478 $16,526
31-Mar-99 $19,121 $19,841 $19,834
30-Sep-99 $18,616 $19,273 $20,740
31-Mar-00 $19,198 $19,830 $27,388
30-Sep-00 $21,638 $22,299 $29,702
31-Mar-01 $22,632 $23,264 $25,482
30-Sep-01 $19,957 $20,473 $24,058
31-Mar-02 $23,684 $24,228 $30,294
30-Sep-02 $17,183 $17,529 $22,928
31-Mar-03 $17,337 $17,633 $23,190
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE INSIDERS SELECT FUND
<Table>
Class A shares $17,337
Class C shares 17,633
S&P MidCap 400 Index 23,190
</Table>
<Table>
<Caption>
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003
---------------------------------------------------
5-YEAR SINCE INCEPTION
ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7)
-------- -------------- -----------------
The Insiders Select Fund(2)
Class A shares(5) ................. (30.82)% (2.98)% 7.31%
Class B shares(4) ................. (30.74) (2.65) (0.16)
Class C shares(6) ................. (27.95) (2.37) 7.55
Class Y shares(3) ................. (26.18) (1.38) 8.49
S&P MidCap 400 Index(1) ................ (23.45) 3.27 11.40
</Table>
- ----------
(1) The chart assumes a hypothetical $10,000 initial investment in the
Portfolio and reflects all Portfolio expenses. Investors should note that
the Portfolio is a professionally managed mutual fund while the index is
unmanaged, does not incur sales charges or expenses and is not available
for investment.
(2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to
reimburse a portion of the Portfolio's operating expenses, if necessary, to
maintain the expense limitation, as set forth in the notes to the financial
statements. Total returns shown include fee waivers and expense
reimbursements, if any; total returns would have been lower had there been
no assumption of fees and expenses in excess of expense limitations. '
(3) The returns of Class Y shares (for which June 20, 1995 was the initial
public offering date) are higher than Class A, B and C shares. The higher
returns are due to the fact that there is no sales load, CDSC or 12b-1 fee
charged to Class Y shares.
(4) Reflects the applicable CDSC. Without the applicable sales charge, the
total returns would have been (27.10)%, (2.35)% and (0.02)%, respectively,
for each period shown. Assuming no redemption of shares at the end of the
period, the return of Class B shares (for which January 6, 1998 was the
initial public offering date) would have been higher than Class A shares
and would have been substantially the same as Class C shares if operations
were commenced on the same day. The higher return is due to the fact that
there is no initial sales charge on Class B shares.
(5) Reflects the initial maximum sales charge of 5.50%, for each period shown.
Without the applicable sales charge, the total returns would have been
(26.80)%, (1.88)% and 8.10% respectively, for each period shown.
(6) Reflects the applicable CDSC. Without the applicable sales charge, the
total return for the one year ended March 31, 2003 would have been
(27.22)%.
(7) For the period of June 16, 1995 (commencement of investment operations)
through March 31, 2003, unless otherwise indicated.
CDSC - Contingent Deferred Sales Charge
9
<Page>
THE BEAR STEARNS FUNDS
Intrinsic Value Portfolio
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A AND C SHARES(1)(2)(5) VS. ITS BROAD-BASED INDEX
<Table>
<Caption>
DOLLARS
CLASS A SHARES CLASS C SHARES S&P 500 COMPOSITE INDEX
4-Apr-95 $9,450 $10,000 $10,000
30-Sep-95 $11,206 $11,824 $11,796
31-Mar-96 $11,941 $12,569 $13,177
30-Sep-96 $12,161 $12,769 $14,194
31-Mar-97 $13,781 $14,422 $15,790
30-Sep-97 $17,385 $18,139 $19,936
31-Mar-98 $19,926 $20,760 $23,369
30-Sep-98 $17,574 $18,259 $21,739
31-Mar-99 $20,660 $21,425 $27,682
30-Sep-99 $20,117 $20,804 $27,782
31-Mar-00 $19,649 $20,273 $32,648
30-Sep-00 $22,128 $22,772 $31,472
31-Mar-01 $24,322 $24,969 $25,570
30-Sep-01 $22,069 $22,605 $23,094
31-Mar-02 $25,471 $26,015 $25,632
30-Sep-02 $18,140 $18,477 $18,363
31-Mar-03 $18,953 $19,263 $19,284
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INTRINSIC VALUE PORTFOLIO
<Table>
Class A shares $18,953
Class C shares 19,263
S&P 500 Composite Index 19,284
</Table>
<Table>
<Caption>
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003
------------------------------------------------
5-YEAR SINCE INCEPTION
ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7)
-------- -------------- -----------------
Intrinsic Value Portfolio(2)
Class A shares(5) ................. (29.70)% (2.11)% 8.33%
Class B shares(4) ................. (29.71) (1.81) 0.87
Class C shares(6) ................. (26.69) (1.48) 8.55
Class Y shares(3) ................. (24.92) (0.42) 8.05
S&P 500 Composite Index(1) ............. (24.76) (3.77) 8.56
</Table>
- ----------
(1) The chart assumes a hypothetical $10,000 initial investment in the
Portfolio and reflects all Portfolio expenses. Investors should note that
the Portfolio is a professionally managed mutual fund while the index is
unmanaged, does not incur sales charges or expenses and is not available
for investment.
(2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to
reimburse a portion of the Portfolio's operating expenses, if necessary, to
maintain the expense limitation, as set forth in the notes to the financial
statements. Total returns shown include fee waivers and expense
reimbursements, if any; total returns would have been lower had there been
no assumption of fees and expenses in excess of expense limitations.
(3) The returns of Class Y shares (for which September 11, 1995 was the initial
public offering date) for the one year and 5-year average annual periods
are higher than Class A, B and C shares. The higher returns are due to the
fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y
shares. The Class Y since inception average annual returns are not
comparable to Class A, B and C shares due to the timing differences in the
commencement of initial public offerings.
(4) Reflects the applicable CDSC. Without the applicable sales charge, the
total returns would have been (26.02)%, (1.51)% and 1.02%, respectively,
for each period shown. Assuming no redemption of shares at the end of the
period, the average annual return of Class B shares (for which January 28,
1998 was the initial public offering date) would have been higher than
Class A shares and would have been substantially the same as Class C shares
if operations were commenced on the same day. The higher return is due to
the fact that there is no initial sales charge on Class B shares.
(5) Reflects the initial maximum sales charge of 5.50%, for each period shown.
Without the applicable sales charge, the total returns would have been
(25.60)%, (1.00)% and 9.10% respectively, for each period shown.
(6) Reflects the applicable CDSC. Without the applicable sales charge, the
total return for the one year ended March 31, 2003 would have been
(25.95)%.
(7) For the period April 4, 1995 (commencement of investment operations)
through March 31, 2003, unless otherwise indicated.
CDSC - Contingent Deferred Sales Charge
10
<Page>
THE BEAR STEARNS FUNDS
Small Cap Value Portfolio
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A AND C SHARES(1)(2)(5) VS. ITS BROAD-BASED INDEX
<Table>
<Caption>
DOLLARS
CLASS A SHARES CLASS C SHARES RUSSELL 2000 INDEX
3-Apr-95 $9,450 $10,000 $10,000
30-Sep-95 $11,963 $12,625 $12,000
31-Mar-96 $12,698 $13,361 $12,885
30-Sep-96 $14,139 $14,824 $13,576
31-Mar-97 $14,187 $14,845 $13,543
30-Sep-97 $18,528 $19,337 $18,081
31-Mar-98 $20,832 $21,689 $19,233
30-Sep-98 $14,885 $15,462 $14,643
31-Mar-99 $16,610 $17,203 $16,107
30-Sep-99 $18,898 $19,525 $17,435
31-Mar-00 $22,956 $23,671 $22,114
30-Sep-00 $21,984 $22,601 $21,513
31-Mar-01 $20,283 $20,813 $18,724
30-Sep-01 $19,578 $20,028 $16,951
31-Mar-02 $24,037 $24,508 $21,342
30-Sep-02 $17,022 $17,291 $15,374
31-Mar-03 $16,361 $16,555 $15,588
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
SMALL CAP VALUE PORTFOLIO
<Table>
Class A shares $16,361
Class C shares 16,555
Russell 2000 Index 15,588
</Table>
<Table>
<Caption>
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003
-------------------------------------------------
5-YEAR SINCE INCEPTION
ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7)
-------- -------------- -----------------
Small Cap Value Portfolio(2)
Class A shares(5) ................. (35.70)% (5.79)% 6.35%
Class B shares(4) ................. (35.65) (5.55) (2.20)
Class C shares(6) ................. (33.08) (5.25) 6.51
Class Y shares(3) ................. (31.59) (4.25) 6.61
Russell 2000 Index(1) .................. (26.96) (4.12) 5.71
</Table>
- ----------
(1) The chart assumes a hypothetical $10,000 initial investment in the
Portfolio and reflects all Portfolio expenses. Investors should note that
the Portfolio is a professionally managed mutual fund while the index is
unmanaged, does not incur sales charges or expenses, and is not available
for investment.
(2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to
reimburse a portion of the Portfolio's operating expenses, if necessary, to
maintain the expense limitation, as set forth in the notes to the financial
statements. Total returns shown include fee waivers and expense
reimbursements, if any; total returns would have been lower had there been
no assumption of fees and expenses in excess of expense limitations.
(3) The returns of Class Y shares (for which June 22, 1995 was the initial
public offering date) are higher than Class A, B and C shares. The higher
returns are due to the fact that there is no sales load, CDSC or 12b-1 fee
charged to Class Y shares.
(4) Reflects the applicable CDSC. Without the applicable sales charge, the
total returns would have been (32.52)%, (5.28)% and (2.07)%, respectively,
for each period shown. Assuming no redemption of shares at the end of the
period, the return of Class B shares (for which January 21, 1998 was the
initial public offering date) would have been higher than Class A shares
and would have been substantially the same as Class C shares if operations
were commenced on the same day. The higher return is due to the fact that
there is no initial sales charge on Class B shares.
(5) Reflects the maximum sales charge of 5.50%, for each period shown. Without
the applicable sales charge, the total returns would have been (31.94)%,
(4.72)% and 7.11%, respectively, for each period shown.
(6) Reflects the applicable CDSC. Without the applicable sales charge, the
total return for the one year ended March 31, 2003 would have been
(32.45)%.
(7) For the period April 3, 1995 (commencement of investment operations)
through March 31, 2003, unless otherwise indicated.
CDSC - Contingent Deferred Sales Charge
11
<Page>
THE BEAR STEARNS FUNDS
Alpha Growth Portfolio
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A, B AND C SHARES(1)(2)(4)(5) VS. ITS BROAD-BASED INDEX
<Table>
<Caption>
DOLLARS
CLASS A SHARES CLASS B SHARES CLASS C SHARES S&P 500 COMPOSITE INDEX
31-Dec-97 $9,450 $10,000 $10,000 $10,000
31-Mar-98 $10,553 $11,149 $11,149 $11,395
30-Sep-98 $9,515 $10,024 $10,024 $10,600
31-Mar-99 $13,664 $14,338 $14,348 $13,498
30-Sep-99 $13,428 $14,046 $14,055 $13,547
31-Mar-00 $16,735 $17,468 $17,477 $15,920
30-Sep-00 $14,643 $15,246 $15,258 $15,346
31-Mar-01 $13,215 $13,738 $13,739 $12,469
30-Sep-01 $12,102 $12,544 $12,546 $11,261
31-Mar-02 $14,863 $15,367 $15,377 $12,499
30-Sep-02 $12,456 $12,862 $12,857 $8,954
31-Mar-03 $12,281 $12,564 $12,681 $9,403
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
ALPHA GROWTH PORTFOLIO
<Table>
Class A shares $12,281
Class B shares 12,564
Class C shares 12,681
S&P 500 Composite Index 9,403
</Table>
<Table>
<Caption>
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003
----------------------------------------------------
5-YEAR SINCE INCEPTION
ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(3)
-------- -------------- -----------------
Alpha Growth Portfolio(2)
Class A shares(4) ................. (21.92)% 1.92% 3.99%
Class B shares(5) ................. (21.72) 2.21 4.44
Class C shares(6) ................. (18.36) 2.60 4.62
S&P 500 Composite Index(1) ............. (24.76) (3.77) (0.48)
</Table>
- ----------
(1) The chart assumes a hypothetical $10,000 initial investment in the
Portfolio and reflects all Portfolio expenses. Investors should note that
the Portfolio is a professionally managed mutual fund while the index is
unmanaged, does not incur sales charges or expenses and is not available
for investment.
(2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to
reimburse a portion of the Portfolio's operating expenses to maintain the
expense limitation, as set forth in the notes to the financial statements.
Total returns shown include fee waivers and expense reimbursements, if any;
total returns would have been lower had there been no assumption of fees
and expenses in excess of expense limitations.
(3) For the period of December 29, 1997 (commencement of investment operations)
through March 31, 2003.
(4) Reflects the initial maximum sales charge of 5.50%, for each period.
Without the applicable sales charge, the total returns would have been
(17.36)%, 3.08% and 5.12%, respectively, for each period shown.
(5) Reflects the applicable CDSC. Without the applicable sales charge, the
total returns would have been (17.60)%, 2.58% and 4.60%, respectively, for
each period shown.
(6) Reflects the applicable CDSC. Without the applicable sales charge, the
total return for the one year ended March 31, 2003 would have been
(17.54)%.
CDSC - Contingent Deferred Sales Charge
12
<Page>
THE BEAR STEARNS FUNDS
International Equity Portfolio
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A, B AND C SHARES(1)(2)(5)(6) VS. ITS BROAD-BASED INDEX
<Table>
<Caption>
DOLLARS
CLASS A SHARES CLASS B SHARES CLASS C SHARES MSCI EAFE INDEX
31-Dec-97 $9,450 $10,000 $10,000 $10,000
31-Mar-98 $10,843 $11,458 $11,458 $11,479
30-Sep-98 $10,197 $10,751 $10,751 $9,966
31-Mar-99 $11,924 $12,544 $12,545 $12,209
30-Sep-99 $13,507 $14,170 $14,171 $13,086
31-Mar-00 $22,141 $23,164 $23,165 $15,311
30-Sep-00 $17,028 $17,768 $17,769 $13,535
31-Mar-01 $14,173 $14,754 $14,745 $11,380
30-Sep-01 $11,652 $12,086 $12,086 $9,708
31-Mar-02 $11,821 $12,240 $12,241 $10,444
30-Sep-02 $9,367 $9,675 $9,676 $8,226
31-Mar-03 $8,327 $8,480 $8,573 $8,047
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INTERNATIONAL EQUITY PORTFOLIO
<Table>
Class A shares $8,327
Class B shares 8,480
Class C shares 8,573
MSCI EAFE Index 8,047
</Table>
<Table>
<Caption>
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003
-------------------------------------------------
5-YEAR SINCE INCEPTION
ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(3)
-------- -------------- -----------------
International Equity(2)
Class A shares(5) ................. (33.44)% (6.21)% (3.43)%
Class B shares(6) ................. (33.53) (6.02) (3.09)
Class C shares(7) ................. (30.66) (5.63) (2.89)
Class Y Shares(4) ................. (29.07) N/A (23.91)
MSCI EAFE Index(1) ..................... (22.95) (6.86) (3.65)
</Table>
- ----------
(1) The chart assumes a hypothetical $10,000 initial investment in the
Portfolio and reflects all Portfolio expenses. Investors should note that
the Portfolio is a professionally managed mutual fund while the index is
unmanaged, does not incur sales charges or expenses and is not available
for investment.
(2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to
reimburse a portion of the Portfolio's operating expenses, if necessary, to
maintain the expense limitation, as set forth in the notes to the financial
statements. Total returns shown include fee waivers and expense
reimbursements, if any; total returns would have been lower had there been
no assumption of fees and expenses in excess of expense limitations.
(3) For the period of December 29, 1997 (commencement of investment operations)
through March 31, 2003.
(4) The returns of Class Y (for which July 5, 2001 was the initial public
offering date) for the one year period are higher than Class A, B and C
shares. The higher return is due to the fact that there is no sales load,
CDSC or 12b-1 fee charged to Class Y shares. The Class Y since inception
average annual returns are not comparable to Class A, B and C shares due to
the timing differences in the commencement of initial public offerings.
(5) Reflects the initial maximum sales charge of 5.50%, for each period.
Without the applicable sales charge, the total returns would have been
(29.58)%, (5.15)% and (2.38)% respectively, for each period shown.
(6) Reflects the applicable CDSC. Without the applicable sales charge, total
returns would have been (30.03)%, (5.65)% and (2.91)%, respectively, for
each period shown.
(7) Reflects the applicable CDSC. Without the applicable sales charge, the
total return for the one year ended March 31, 2003 would have been
(29.96)%.
CDSC - Contingent Deferred Sales Charge
13
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
MARCH 31, 2003
(UNAUDITED)
================================================================================
TOP TEN INDUSTRY WEIGHTINGS
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK INDUSTRY NET ASSETS
- ---- --------------------------------------------------------------------------- ----------
1. Pharmaceutical Preparations ............................................... 6.81
2. Eating Places ............................................................. 4.77
3. Cable & Other Pay TV Services ............................................. 4.02
4. Drilling Oil & Gas Wells .................................................. 3.84
5. Surgical & Medical Instruments ............................................ 3.43
6. Bank Holding Companies .................................................... 3.34
7. Security Brokers & Dealers ................................................ 3.21
8. Crude Petroleum & Natural Gas ............................................. 3.19
9. Prepackaged Software ...................................................... 3.12
10. Telephone Communications .................................................. 3.06
</Table>
================================================================================
TOP TEN HOLDINGS*
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK HOLDINGS INDUSTRY NET ASSETS
- ---- ------------------------------------- ----------------------------------- ----------
1. Pfizer Inc. ......................... Pharmaceutical Preparations 4.44
2. Comcast Corp. ....................... Cable & Other Pay TV Services 4.02
3. Lehman Brothers Holdings Inc. ....... Security Brokers & Dealers 3.21
4. DoubleClick, Inc. ................... Advertising 2.95
5. MetLife, Inc. ....................... Life Insurance 2.77
6. Wendy's International, Inc. ......... Eating Places 2.70
7. Analog Devices, Inc. ................ Semiconductors & Related Devices 2.70
8. Cisco Systems, Inc. ................. Computer Peripheral Equipment 2.67
9. Eaton Vance Corp. ................... Investment Advisory Service 2.53
10. Constellation Brands, Inc. .......... Wines, Brandy & Brandy Spirits 2.46
</Table>
- ----------
* Top ten holdings are provided for informational purposes only and should
not be deemed as a recommendation to purchase or sell securities mentioned.
The Portfolio is actively managed, therefore holdings may not be current.
Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may
seek to perform investment banking services for the companies listed.
14
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Opportunities Portfolio
MARCH 31, 2003
(UNAUDITED)
================================================================================
TOP TEN INDUSTRY WEIGHTINGS
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK INDUSTRY NET ASSETS
- ---- --------------------------------------------------------------------------- ----------
1. Bank Holding Companies .................................................... 6.63
2. Pharmaceutical Preparations ............................................... 6.55
3. Semiconductors & Related Devices .......................................... 4.04
4. Eating Places ............................................................. 3.91
5. Drilling Oil & Gas Wells .................................................. 3.83
6. Prepackaged Software ...................................................... 3.74
7. Business Services ......................................................... 3.16
8. Biological Products ....................................................... 2.64
9. Business Consulting ....................................................... 2.42
10. Real Estate Investment Trusts ............................................. 2.24
</Table>
================================================================================
TOP TEN HOLDINGS*
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK HOLDINGS INDUSTRY NET ASSETS
- ---- ---------------------------------------- ----------------------------------- ----------
1. Laboratory Corp. of America Holdings ... Pharmaceutical Preparations 2.98
2. FTI Consulting, Inc. ................... Business Consulting 2.42
3. Regis Corp. ............................ Beauty Shops 2.02
4. Praxair, Inc. .......................... Chemicals & Allied Products 1.77
5. Constellation Brands, Inc. ............. Wines, Brandy & Brandy Spirits 1.76
6. American Standard Cos. Inc. ............ Refrigeration & Heating Equipment 1.73
7. National Commerce Financial Corp. ...... National Banks 1.72
8. ALLTEL Corp. ........................... Telephone Communications 1.69
9. Lehman Brothers Holdings Inc. .......... Security Brokers & Dealers 1.68
10. Banknorth Group, Inc. .................. Bank Holding Companies 1.65
</Table>
- ----------
* Top ten holdings are provided for informational purposes only and should
not be deemed as a recommendation to purchase or sell securities mentioned.
The Portfolio is actively managed, therefore holdings may not be current.
Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may
seek to perform investment banking services for the companies listed.
15
<Page>
THE BEAR STEARNS FUNDS
The Insiders Select Fund
MARCH 31, 2003
(UNAUDITED)
================================================================================
TOP TEN INDUSTRY WEIGHTINGS
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK INDUSTRY NET ASSETS
- ---- --------------------------------------------------------------------------- ----------
1. Bank Holding Companies .................................................... 9.05
2. Department Stores ......................................................... 5.38
3. Crude Petroleum & Natural Gas ............................................. 5.06
4. Motion Picture & Video Production ......................................... 3.99
5. Life Insurance ............................................................ 3.51
6. General Medical & Surgical Hospitals ...................................... 3.34
7. Electric Services ......................................................... 3.32
8. Woodworking Machinery ..................................................... 3.31
9. Accident & Health Insurance ............................................... 3.26
10. Semiconductors & Related Devices .......................................... 3.20
</Table>
================================================================================
TOP TEN HOLDINGS*
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK HOLDINGS INDUSTRY NET ASSETS
- ---- ------------------------------------------ ------------------------------------- ----------
1. Liberty Media Corp. ...................... Motion Picture & Video Production 3.99
2. Lincoln National Corp. ................... Life Insurance 3.51
3. Washington Mutual, Inc. .................. Bank Holding Companies 3.48
4. PNC Financial Services Group, Inc. (The) . Bank Holding Companies 3.42
5. HCA Inc. ................................. General Medical & Surgical Hospitals 3.34
6. FPL Group, Inc. .......................... Electric Services 3.32
7. Pentair, Inc. ............................ Woodworking Machinery 3.31
8. AFLAC Inc. ............................... Accident & Health Insurance 3.26
9. National Semiconductor Corp. ............. Semiconductors & Related Devices 3.20
10. Sunoco, Inc. ............................. Petroleum Refining 3.19
</Table>
- ----------
* Top ten holdings are provided for informational purposes only and should
not be deemed as a recommendation to purchase or sell securities mentioned.
The Portfolio is actively managed, therefore holdings may not be current.
Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may
seek to perform investment banking services for the companies listed.
16
<Page>
THE BEAR STEARNS FUNDS
Intrinsic Value Portfolio
MARCH 31, 2003
(UNAUDITED)
================================================================================
TOP TEN INDUSTRY WEIGHTINGS
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK INDUSTRY NET ASSETS
- ---- --------------------------------------------------------------------------- ----------
1. Bank Holding Companies .................................................... 10.06
2. Motion Picture & Video Production ......................................... 5.46
3. Petroleum Refining ........................................................ 4.95
4. National Banks ............................................................ 4.92
5. Pharmaceutical Preparations ............................................... 4.65
6. Department Stores ......................................................... 4.39
7. Telephone Communications .................................................. 4.31
8. Fire, Marine & Casualty Insurance ......................................... 4.16
9. Commercial Banks .......................................................... 3.98
10. Life Insurance ............................................................ 3.61
</Table>
================================================================================
TOP TEN HOLDINGS*
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK HOLDINGS INDUSTRY NET ASSETS
- ---- ------------------------------------------ ------------------------------------- ----------
1. Citigroup Inc. ........................... Commercial Banks 3.98
2. Liberty Media Corp. ...................... Motion Picture & Video Production 3.62
3. Fannie Mae ............................... U.S. Government Agency 3.10
4. Bank of America Corp. .................... Bank Holding Companies 2.96
5. General Electric Co. ..................... Electric & Electronic Equipment 2.95
6. Interpublic Group of Cos., Inc. (The) .... Advertising Agencies 2.91
7. American International Group, Inc. ....... Fire, Marine & Casualty Insurance 2.63
8. J.P. Morgan Chase & Co. .................. Bank Holding Companies 2.62
9. McDonald's Corp. ......................... Eating Places 2.60
10. MGIC Investment Corp. .................... Holding Offices 2.58
</Table>
- ----------
* Top ten holdings are provided for informational purposes only and should
not be deemed as a recommendation to purchase or sell securities mentioned.
The Portfolio is actively managed, therefore holdings may not be current.
Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may
seek to perform investment banking services for the companies listed.
17
<Page>
THE BEAR STEARNS FUNDS
Small Cap Value Portfolio
MARCH 31, 2003
(UNAUDITED)
================================================================================
TOP TEN INDUSTRY WEIGHTINGS
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK INDUSTRY NET ASSETS
- ---- --------------------------------------------------------------------------- ----------
1. Bank Holding Companies .................................................... 7.83
2. Real Estate Investment Trusts ............................................. 7.23
3. Electric Services ......................................................... 4.40
4. Semiconductors & Related Devices .......................................... 3.78
5. State Banks ............................................................... 3.39
6. Information Retrieval Services ............................................ 3.16
7. Alkalies & Chlorine ....................................................... 3.08
8. Oil & Gas Field Services .................................................. 3.06
9. Analytical Instruments .................................................... 2.82
10. Plastics Products ......................................................... 2.69
</Table>
================================================================================
TOP TEN HOLDINGS*
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK HOLDINGS INDUSTRY NET ASSETS
- ---- ------------------------------------------ ------------------------------------- ----------
1. FactSet Research Systems Inc. ............ Information Retrieval Services 3.16
2. Olin Corp. ............................... Alkalies & Chlorine 3.08
3. Key Energy Services, Inc. ................ Oil & Gas Field Services 3.06
4. Tupperware Corp. ......................... Plastics Products 2.69
5. Glenborough Realty Trust Inc. ............ Real Estate Investment Trusts 2.63
6. First BanCorp. ........................... State Banks 2.63
7. Adaptec, Inc. ............................ Electronic Computers 2.62
8. Electronics For Imaging, Inc. ............ Prepackaged Software 2.55
9. Mueller Industries, Inc. ................. Copper Foundries 2.55
10. Renal Care Group, Inc. ................... Kidney Dialysis Centers 2.55
</Table>
- ----------
* Top ten holdings are provided for informational purposes only and should
not be deemed as a recommendation to purchase or sell securities mentioned.
The Portfolio is actively managed, therefore holdings may not be current.
Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may
seek to perform investment banking services for the companies listed.
18
<Page>
THE BEAR STEARNS FUNDS
Alpha Growth Portfolio
MARCH 31, 2003
(UNAUDITED)
================================================================================
TOP TEN INDUSTRY WEIGHTINGS
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK INDUSTRY NET ASSETS
- ---- --------------------------------------------------------------------------- ----------
1. Prepackaged Software ...................................................... 5.59
2. Bank Holding Companies .................................................... 5.35
3. Business Services ......................................................... 4.26
4. Crude Petroleum & Natural Gas ............................................. 4.13
5. Computer Peripheral Equipment ............................................. 4.06
6. Electric & Other Services Combined ........................................ 3.88
7. Electric Services ......................................................... 3.54
8. Newspapers ................................................................ 3.48
9. Photographic Equipment & Supplies ......................................... 3.47
10. Misc. Food Stores ......................................................... 2.46
</Table>
================================================================================
TOP TEN HOLDINGS*
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK HOLDINGS INDUSTRY NET ASSETS
- ---- ---------------------------------------------- ------------------------------------- ----------
1. Starbucks Corp. .............................. Misc. Food Stores 2.46
2. eBay Inc. .................................... Business Services 2.46
3. Genzyme General .............................. Diagnostic Substances 2.44
4. Apollo Group, Inc. ........................... Colleges & Universities 2.21
5. Burlington Resources Inc. .................... Crude Petroleum & Natural Gas 2.21
6. Expeditors International of Washington, Inc. . Freight Transportation Arrangement 2.17
7. Lexmark International, Inc. .................. Computer Peripheral Equipment 2.16
8. PACCAR Inc. .................................. Construction Machinery 2.12
9. International Game Technology ................ Manufacturing Industries 2.12
10. Avon Products, Inc. .......................... Toilet Preparations 2.10
</Table>
- ----------
* Top ten holdings are provided for informational purposes only and should
not be deemed as a recommendation to purchase or sell securities mentioned.
Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may
seek to perform investment banking services for the companies listed. All
holdings were equally weighted on January 1, 2003. Differences in
percentage holdings of each security after January 1, 2003 are due to
market movement.
19
<Page>
THE BEAR STEARNS FUNDS
International Equity Portfolio
MARCH 31, 2003
(UNAUDITED)
================================================================================
TOP TEN INDUSTRY WEIGHTINGS
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK INDUSTRY NET ASSETS
- ---- --------------------------------------------------------------------------- ----------
1. Foreign Banks, Branches & Agencies ........................................ 10.95
2. Photographic Equipment & Supplies ......................................... 6.18
3. Pharmaceutical Preparations ............................................... 5.46
4. Telephone Communications .................................................. 4.94
5. Radio & Telephone Communications .......................................... 4.57
6. Television Broadcasting ................................................... 4.38
7. Coal, Other Minerals & Ores ............................................... 4.19
8. Metal Ores ................................................................ 3.93
9. Bank Holding Companies .................................................... 3.83
10. Electronic Components ..................................................... 3.60
</Table>
================================================================================
TOP TEN HOLDINGS*
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
RANK HOLDINGS INDUSTRY NET ASSETS
- ---- ---------------------------------------------- ------------------------------------- ----------
1. Vodafone Group plc ........................... Radio & Telephone Communications 4.21
2. BHP Billiton Ltd. ............................ Coal, Other Minerals & Ores 4.19
3. Canon, Inc. .................................. Photographic Equipment & Supplies 4.04
4. Rio Tinto plc ................................ Metal Ores 3.93
5. British Sky Broadcasting Group plc ........... Television Broadcasting 3.86
6. Standard Chartered plc ....................... Foreign Banks, Branches & Agencies 3.84
7. HSBC Holdings plc ............................ Bank Holding Companies 3.83
8. Nokia Oyj .................................... Communications Equipment 2.44
9. News Corp. Ltd. (The) ........................ Newspapers 2.41
10. Telefonica, S.A. ............................. Telephone Communications 2.34
</Table>
- ----------
* Top ten holdings are provided for informational purposes only and should
not be deemed as a recommendation to purchase or sell securities mentioned.
The Portfolio is actively managed, therefore holdings may not be current.
Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may
seek to perform investment banking services for the companies listed.
20
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 102.42%
ADVERTISING - 2.95%
4,450,000 DoubleClick, Inc.++* ............................. $ 34,576,500
--------------
AUTO & HOME SUPPLY STORES - 1.82%
310,000 AutoZone, Inc.* .................................. 21,300,100
--------------
BANK HOLDING COMPANIES - 3.34%
350,000 Bank of America Corp. ............................ 23,394,000
450,000 Sovereign Bancorp, Inc. .......................... 6,232,500
270,000 Washington Mutual, Inc. .......................... 9,522,900
--------------
39,149,400
--------------
BIOLOGICAL PRODUCTS - 2.41%
490,000 Amgen Inc.* ...................................... 28,199,500
--------------
BLAST FURNACES & STEEL MILLS - 0.96%
295,000 Nucor Corp. ...................................... 11,260,150
--------------
BOOK PUBLISHING - 0.60%
260,000 Scholastic Corp.++ * ............................. 6,994,000
--------------
BOOK STORES - 1.95%
1,200,000 Barnes & Noble, Inc.++ * ......................... 22,788,000
--------------
BOTTLED & CANNED SOFT DRINKS - 1.98%
580,000 PepsiCo, Inc. .................................... 23,200,000
--------------
BUSINESS SERVICES - 0.57%
330,000 Watson Wyatt & Co. Holdings+ * ................... 6,633,000
--------------
CABLE & OTHER PAY TV SERVICES - 4.02%
1,710,000 Comcast Corp., Special Class A* .................. 47,007,900
--------------
CIRCUIT BOARDS - 2.45%
3,290,000 Flextronics International Ltd.* .................. 28,688,800
--------------
COMMERCIAL BANKS - 2.44%
830,000 Citigroup Inc. ................................... 28,593,500
--------------
COMMERCIAL NONPHYSICAL RESEARCH - 0.39%
100,000 Moody's Corp.+ ................................... 4,623,000
--------------
COMPUTER PERIPHERAL EQUIPMENT - 2.67%
2,410,000 Cisco Systems, Inc.* ............................. 31,281,800
--------------
COMPUTER RELATED SERVICES - 1.71%
8,000,000 CNET Networks, Inc.^*(a) ......................... 20,080,000
--------------
CRUDE PETROLEUM & NATURAL GAS - 3.19%
463,000 Apache Corp. ..................................... $ 28,585,620
440,000 Ocean Energy, Inc. ............................... 8,800,000
--------------
37,385,620
--------------
DRILLING OIL & GAS WELLS - 3.84%
970,000 GlobalSantaFe Corp. .............................. 20,030,500
790,000 Noble Corp.+* .................................... 24,821,800
--------------
44,852,300
--------------
DRUG STORES & PROPRIETARY STORES - 2.24%
1,100,000 CVS Corp. ........................................ 26,235,000
--------------
DRUGS, PROPRIETARIES & SUNDRIES - 2.29%
470,000 Cardinal Health, Inc. ............................ 26,775,900
--------------
EATING PLACES - 4.77%
860,000 Applebee's International, Inc. ................... 24,114,400
1,150,000 Wendy's International, Inc. ...................... 31,636,500
--------------
55,750,900
--------------
ELECTRIC SERVICES - 0.36%
2,600,000 Mirant Corp.++* .................................. 4,160,000
--------------
ELECTRONIC RESISTORS - 2.00%
2,300,000 Vishay Intertechnology, Inc.++* .................. 23,414,000
--------------
HEALTH & ALLIED SERVICES - 2.03%
310,000 WellPoint Health Networks Inc.+* ................. 23,792,500
--------------
HOBBY, TOY & GAME SHOPS - 1.50%
2,100,000 Toys "R" Us, Inc.+* .............................. 17,577,000
--------------
INFORMATION RETRIEVAL SERVICES - 0.32%
3,870,000 SportsLine.com, Inc.^*(a) ........................ 3,792,600
--------------
INVESTMENT ADVISORY SERVICE - 2.53%
1,110,000 Eaton Vance Corp.++ .............................. 29,670,300
--------------
LIFE INSURANCE - 2.77%
1,230,000 MetLife, Inc. .................................... 32,447,400
--------------
PAPERBOARD MILLS - 1.12%
980,000 Smurfit-Stone Container Corp.* ................... 13,091,820
--------------
PETROLEUM REFINING - 1.31%
440,000 Exxon Mobil Corp. ................................ 15,378,000
--------------
</Table>
The accompanying notes are an integral part of the financial statements.
21
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICAL PREPARATIONS - 6.81%
930,000 Laboratory Corp. of America Holdings+* ........... $ 27,574,500
1,670,000 Pfizer Inc. ...................................... 52,037,200
--------------
79,611,700
--------------
PREPACKAGED SOFTWARE - 3.12%
2,180,000 E.piphany, Inc.^* ................................ 8,676,400
1,150,000 Microsoft Corp. .................................. 27,841,500
--------------
36,517,900
--------------
PUBLIC BUILDING & RELATED FURNITURE - 1.96%
650,000 Lear Corp.* ...................................... 22,977,500
--------------
RAILROADS - 2.25%
480,000 Union Pacific Corp.+ ............................. 26,400,000
--------------
REAL ESTATE INVESTMENT TRUSTS - 2.00%
630,000 Chelsea Property Group, Inc. ..................... 23,467,500
--------------
REFRIGERATION & HEATING EQUIPMENT - 2.35%
400,000 American Standard Cos. Inc.* ..................... 27,508,000
--------------
SECURITY BROKERS & DEALERS - 3.21%
650,000 Lehman Brothers Holdings Inc.(b) ................. 37,537,500
--------------
SECURITY SYSTEMS SERVICES - 1.43%
1,300,000 Tyco International Ltd.++ ........................ 16,718,000
--------------
SEMICONDUCTORS & RELATED DEVICES - 2.70%
1,150,000 Analog Devices, Inc.* ............................ 31,625,000
--------------
SOAP & OTHER DETERGENTS - 2.09%
275,000 Procter & Gamble Co. (The) ....................... 24,488,750
--------------
SPECIAL INDUSTRY MACHINERY - 0.95%
410,000 Novellus Systems, Inc.* .......................... 11,180,700
--------------
SURETY INSURANCE - 2.07%
480,000 Ambac Financial Group, Inc.+ ..................... 24,249,600
--------------
SURGICAL & MEDICAL INSTRUMENTS - 3.43%
490,000 Boston Scientific Corp.* ......................... 19,972,400
3,130,000 Intuitive Surgical, Inc.++*(a) ................... 20,219,800
--------------
40,192,200
--------------
TELEPHONE COMMUNICATIONS - 3.06%
340,000 ALLTEL Corp. ..................................... $ 15,218,400
4,720,000 Sprint Corp. (PCS Group)+++* ..................... 20,579,200
--------------
35,797,600
--------------
TRANSMISSION EQUIPMENT - 0.51%
320,000 Kaydon Corp. ..................................... 6,022,400
--------------
WINES, BRANDY & BRANDY SPIRITS - 2.46%
1,270,000 Constellation Brands, Inc., Class A* ............. 28,829,000
--------------
X-RAY APPARATUS & TUBES - 1.49%
500,000 DENTSPLY International Inc. ...................... 17,395,000
--------------
Total Common Stocks
(cost -- $1,535,656,140) ....................... 1,199,217,340
--------------
SHORT-TERM INVESTMENT -- 0.00%
INVESTMENT COMPANY - 0.00%
91 Federated Government Obligations
1.16%^**
(cost - $91) ................................... 91
--------------
Total Investments -- 102.42%
(cost - $1,535,656,231) ........................ 1,199,217,431
Securities Lending Collateral(c) -- 4.85% 56,772,017
Liabilities in excess of other
assets -- (7.27)% .............................. (85,088,431)
--------------
Net Assets -- 100.00% ............................ $1,170,901,017
==============
</Table>
The accompanying notes are an integral part of the financial statements.
22
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
SHORT SALES OF COMMON STOCKS -- (1.08)%
GROCERY STORES - (0.03)%
80,000 Great Atlantic & Pacific
Tea Co., Inc. (The)++++* ....................... $ 344,800
-----------
ICE CREAM & FROZEN DESSERTS - (0.71)%
120,000 Dreyer's Grand Ice Cream, Inc.++++ ............... 8,318,400
-----------
MOTOR VEHICLES & CAR BODIES - (0.34)%
160,000 Navistar International Corp.++++ ................. 3,937,600
-----------
Total Short Sales of Common Stocks
(proceeds received - $12,228,002) .............. $12,600,800
===========
</Table>
- ----------
Unless otherwise indicated, all common stocks held long are ranked as five
stars.
+ Currently ranked as four stars.
++ Currently ranked as three stars.
+++ Currently ranked as two stars.
++++ Currently ranked as one star.
^ Not ranked by stars.
* Non-income producing security.
** Money market fund; interest rate reflects SEC seven-day yield at March 31,
2003.
(a) Affiliated company; see additional disclosure in the financial
statements and notes thereto.
(b) A portion of this security is used as collateral for securities sold
short.
(c) Cash collateral invested in various money market mutual funds.
S&P STARS RANKING:
Five stars -- Buy -- Expect to be among best performers over next 12 months and
to rise in price.
Four stars -- Accumulate -- Expect to be an above average performer.
Three stars -- Hold -- Expect to be an average performer.
Two stars -- Avoid -- Expect to be a below average performer.
One star -- Sell -- Expect to be a well below average performer and to fall in
price.
The accompanying notes are an integral part of the financial statements.
23
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Opportunities Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 97.60%
ADVERTISING - 0.74%
45,400 DoubleClick, Inc.++* ............................. $ 352,758
-----------
ALUMINUM FOUNDRIES - 0.95%
16,000 Newell Rubbermaid Inc. ........................... 453,600
-----------
ANALYTICAL INSTRUMENTS - 0.81%
32,000 Molecular Devices Corp.^* ........................ 387,200
-----------
AUTO & HOME SUPPLY STORES - 0.86%
6,000 AutoZone, Inc.* .................................. 412,260
-----------
BAGS - PLASTIC, LAMINATED & COATED - 1.07%
25,200 Pactiv Corp.+* ................................... 511,560
-----------
BANK HOLDING COMPANIES - 6.63%
36,000 Banknorth Group, Inc. ............................ 785,159
15,000 City National Corp. .............................. 659,100
17,000 Commerce Bancorp, Inc. ........................... 675,580
18,000 Compass Bancshares, Inc. ......................... 562,860
34,000 Sovereign Bancorp, Inc. .......................... 470,900
-----------
3,153,599
-----------
BEAUTY SHOPS - 2.02%
38,600 Regis Corp.+ ..................................... 961,526
-----------
BIOLOGICAL PRODUCTS - 2.64%
13,000 Cephalon, Inc.* .................................. 519,220
24,200 Invitrogen Corp.* ................................ 741,246
-----------
1,260,466
-----------
BLAST FURNACES & STEEL MILLS - 1.20%
15,000 Nucor Corp. ...................................... 572,550
-----------
BOOK PUBLISHING - 0.76%
13,450 Scholastic Corp.++* .............................. 361,805
-----------
BOOK STORES - 1.22%
30,550 Barnes & Noble, Inc.++*(a) ....................... 580,145
-----------
BUSINESS CONSULTING - 2.42%
25,000 FTI Consulting, Inc.* ............................ 1,155,500
-----------
BUSINESS SERVICES - 3.16%
41,000 Cendant Corp.+* .................................. 520,700
10,000 Fair, Issac & Co., Inc. .......................... 508,200
23,900 Watson Wyatt & Co. Holdings+* .................... 480,390
-----------
1,509,290
-----------
CALCULATING & ACCOUNTING EQUIPMENT - 1.00%
14,000 Diebold, Inc.++ .................................. $ 475,160
-----------
CHEMICALS & ALLIED PRODUCTS - 1.77%
15,000 Praxair, Inc. .................................... 845,250
-----------
CIRCUIT BOARDS - 1.43%
78,200 Flextronics International Ltd.* .................. 681,904
-----------
COLLEGES & UNIVERSITIES - 0.99%
12,000 Corinthian Colleges, Inc.* ....................... 474,000
-----------
COMMERCIAL NONPHYSICAL RESEARCH - 0.39%
4,000 Moody's Corp.+ ................................... 184,920
-----------
COMPUTER INTEGRATED SYSTEMS DESIGN - 0.02%
1,000 Cadence Design Systems, Inc.+* ................... 10,000
-----------
COMPUTER PROGRAMMING SERVICES -- 0.15%
30,000 Aspen Technology, Inc.^* ......................... 72,000
-----------
COMPUTERS, PERIPHERALS & SOFTWARE - 0.80%
16,000 Tech Data Corp.++* ............................... 383,040
-----------
CRUDE PETROLEUM & NATURAL GAS - 1.98%
5,000 Apache Corp. ..................................... 308,700
14,000 Evergreen Resources, Inc.* ....................... 634,340
-----------
943,040
-----------
DATA PROCESSING & PREPARATION - 1.48%
16,000 Affiliated Computer Services, Inc., Class A* ..... 708,160
-----------
DEEP SEA PASSENGER TRANSPORTATION - 0.69%
22,000 Royal Caribbean Cruises Ltd.^ .................... 330,660
-----------
DRILLING OIL & GAS WELLS - 3.83%
27,950 GlobalSantaFe Corp. .............................. 577,168
18,000 Nabors Industries Ltd.* .......................... 717,660
16,900 Noble Corp.+* .................................... 530,998
-----------
1,825,826
-----------
EATING PLACES - 3.91%
25,000 Applebee's International, Inc. ................... 701,000
20,000 Brinker International, Inc.++* ................... 610,000
3,000 P.F. Chang's China Bistro, Inc.* ................. 111,000
16,000 Wendy's International, Inc. ...................... 440,160
-----------
1,862,160
-----------
ELECTRIC SERVICES - 0.46%
18,000 DQE, Inc.+++ ..................................... 219,420
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
24
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Opportunities Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRONIC COMPONENTS - 1.13%
38,000 American Power Conversion Corp.++* ............... $ 541,120
-----------
ELECTRONIC COMPUTERS - 1.26%
100,000 Adaptec, Inc.++* ................................. 603,000
-----------
FIRE, MARINE & CASUALTY INSURANCE - 0.09%
1,000 Chubb Corp. (The)+ ............................... 44,320
-----------
FURNITURE STORES - 0.62%
15,000 Furniture Brands International, Inc.+* ........... 293,400
-----------
GAS TRANSMISSION & DISTRIBUTION - 1.12%
18,000 Questar Corp. .................................... 532,260
-----------
GENERAL INDUSTRIAL MACHINERY - 0.16%
4,000 ATMI Inc.* ....................................... 77,040
-----------
HAND & EDGE TOOLS - 0.50%
7,000 SPX Corp.+* ...................................... 239,120
-----------
HEALTH & ALLIED SERVICES - 1.29%
8,000 WellPoint Health Networks Inc.+* ................. 614,000
-----------
HEAVY CONSTRUCTION - 1.41%
16,000 Jacobs Engineering Group Inc.* ................... 672,160
-----------
HOBBY, TOY & GAME SHOPS - 0.84%
48,000 Toys "R" Us, Inc.+* .............................. 401,760
-----------
INFORMATION RETRIEVAL SERVICES - 0.95%
14,000 FactSet Research Systems Inc.+ ................... 454,300
-----------
INVESTMENT ADVISORY SERVICE - 1.06%
19,000 Eaton Vance Corp.++ .............................. 507,870
-----------
LIFE INSURANCE - 1.33%
24,000 MetLife, Inc. .................................... 633,120
-----------
MATTRESSES & BEDSPRINGS - 0.80%
21,000 Leggett & Platt, Inc.+ ........................... 383,880
-----------
MEN'S & BOYS' CLOTHING - 0.90%
14,000 Quiksilver, Inc.* ................................ 428,680
-----------
MISC. HOME FURNISHING STORES - 0.47%
11,000 Linens 'n Things, Inc.++* ........................ 223,520
-----------
MOTOR VEHICLES & CAR BODIES - 0.24%
8,000 Federal Signal Corp. ............................. $ 113,600
-----------
NATIONAL BANKS - 1.72%
34,600 National Commerce Financial Corp. ................ 820,020
-----------
OIL & GAS FIELD SERVICES - 1.45%
20,100 BJ Services Co.+* ................................ 691,239
-----------
PAPERBOARD MILLS - 1.12%
40,100 Smurfit-Stone Container Corp.* ................... 535,696
-----------
PHARMACEUTICAL PREPARATIONS - 6.55%
4,000 Barr Laboratories, Inc.* ......................... 228,000
13,000 Gilead Sciences, Inc.* ........................... 545,870
48,000 Laboratory Corp. of America Holdings+* ........... 1,423,200
25,000 SICOR Inc.^* ..................................... 417,500
12,000 Teva Pharmaceutical Industries Ltd., ADR ......... 499,800
-----------
3,114,370
-----------
POULTRY SLAUGHTERING & PROCESSING - 0.55%
34,000 Tyson Foods, Inc., Class A++ ..................... 263,500
-----------
PREPACKAGED SOFTWARE - 3.74%
17,000 Barra, Inc.^* .................................... 504,730
19,000 Business Objects S.A., ADR^* ..................... 310,650
36,000 Sybase, Inc.* .................................... 466,200
2,000 Symantec Corp.* .................................. 78,360
10,000 Synopsys, Inc.+* ................................. 425,600
-----------
1,785,540
-----------
PUBLIC BUILDING & RELATED FURNITURE - 0.59%
8,000 Lear Corp.* ...................................... 282,800
-----------
RADIO BROADCASTING - 0.42%
15,000 Radio One, Inc., Class D++* ...................... 198,600
-----------
RAILROADS - 1.38%
12,000 Union Pacific Corp.+ ............................. 660,000
-----------
REAL ESTATE INVESTMENT TRUSTS - 2.24%
18,000 Chelsea Property Group, Inc. ..................... 670,500
13,000 Hospitality Properties Trust ..................... 397,150
-----------
1,067,650
-----------
REFRIGERATION & HEATING EQUIPMENT - 1.73%
12,000 American Standard Cos. Inc.* ..................... 825,240
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
25
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Opportunities Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SECURITY BROKERS & DEALERS - 1.68%
13,900 Lehman Brothers Holdings Inc. .................... $ 802,725
-----------
SEMICONDUCTORS & RELATED DEVICES - 4.04%
14,000 Analog Devices, Inc.* ............................ 385,000
37,200 Exar Corp.++++* .................................. 472,812
56,500 Fairchild Semiconductor International,
Inc., Class A+* ................................ 590,990
89,000 GlobespanVirata, Inc.^* .......................... 400,500
4,000 Microchip Technology, Inc.+ ...................... 79,600
-----------
1,928,902
-----------
SINGLE-FAMILY HOUSING CONSTRUCTION - 1.23%
11,000 Lennar Corp. ..................................... 589,050
-----------
SPECIAL INDUSTRY MACHINERY - 0.23%
4,000 Novellus Systems, Inc.* .......................... 109,080
-----------
SURETY INSURANCE - 1.17%
11,000 Ambac Financial Group, Inc.+ ..................... 555,720
-----------
SURGICAL & MEDICAL INSTRUMENTS - 2.09%
18,000 Boston Scientific Corp.* ......................... 733,680
41,000 Intuitive Surgical, Inc.++* ...................... 264,860
-----------
998,540
-----------
TELEPHONE COMMUNICATIONS - 1.69%
18,000 ALLTEL Corp. ..................................... 805,680
-----------
THEATRICAL PRODUCERS & SERVICES - 0.59%
9,000 Westwood One, Inc.+* ............................. 281,160
-----------
TRANSMISSION EQUIPMENT - 0.95%
24,000 Kaydon Corp. ..................................... 451,680
-----------
TRUCKING - 1.01%
20,000 Yellow Corp.* .................................... 482,600
-----------
WINES, BRANDY & BRANDY SPIRITS - 1.76%
37,000 Constellation Brands, Inc., Class A*(a) .......... 839,900
-----------
WOMEN'S READY-TO-WEAR STORES - 1.22%
29,200 Chico's FAS, Inc.++* ............................. 584,000
-----------
WOVEN CARPETS & RUGS - 0.90%
9,000 Mohawk Industries, Inc.++* ....................... 431,460
-----------
Total Common Stocks
(cost - $46,727,732) ........................... 46,556,101
-----------
SHORT-TERM INVESTMENT - 1.30%
INVESTMENT COMPANY - 1.30%
620,056 Federated Government Obligations
1.16%^**
(cost - $620,056) .............................. $ 620,056
-----------
Total Investments -- 98.90%
(cost - $47,347,788) ........................... 47,176,157
Other assets in excess of liabilities -- 1.10% ... 524,577
-----------
Net Assets -- 100.00% ............................ $47,700,734
===========
SHORT SALES OF COMMON STOCKS - (1.55)%
AIR TRANSPORTATION - (0.02)%
1,000 Delta Air Lines, Inc.++++ ........................ 8,900
-----------
ELECTRONIC COMPUTERS - (0.36)%
8,000 Cognex Corp.++++* ................................ 169,360
-----------
HOTELS, MOTELS & TOURIST COURTS - (0.28)%
5,000 Four Seasons Hotels Inc.++++ ..................... 135,850
-----------
ICE CREAM & FROZEN DESSERTS - (0.73)%
5,000 Dreyer's Grand Ice Cream, Inc.++++ ............... 346,600
-----------
SEMICONDUCTORS & RELATED DEVICES - (0.16)%
4,000 International Rectifier Corp.++++* ............... 78,680
-----------
Total Short Sales of Common Stocks
(proceeds received -- $684,748) .................. $ 739,390
===========
</Table>
- ----------
ADR American Depositary Receipts.
Unless otherwise indicated, all common stocks held long are ranked as five
stars.
+ Currently ranked as four stars.
++ Currently ranked as three stars.
+++ Currently ranked as two stars.
++++ Currently ranked as one star.
^ Not ranked by stars.
* Non-income producing security.
** Money market fund; interest rate reflects SEC seven-day yield at March 31,
2003.
(a) A portion of this security is used as collateral for securities sold
short.
S&P STARS RANKING:
Five stars -- Buy -- Expect to be among best performers over next 12 months and
to rise in price.
Four stars -- Accumulate -- Expect to be an above average performer.
Three stars -- Hold -- Expect to be an average performer.
Two stars -- Avoid -- Expect to be a below average performer.
One star -- Sell -- Expect to be a well below average performer and to fall in
price.
The accompanying notes are an integral part of the financial statements.
26
<Page>
THE BEAR STEARNS FUNDS
The Insiders Select Fund
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 95.68%
ACCIDENT & HEALTH INSURANCE - 3.26%
27,800 AFLAC Inc. ....................................... $ 890,990
-----------
ADVERTISING AGENCIES - 2.27%
66,800 Interpublic Group of Cos., Inc. (The) ............ 621,240
-----------
AIRCRAFT ENGINES & ENGINE PARTS - 2.98%
14,100 United Technologies Corp. ........................ 814,698
-----------
BANK HOLDING COMPANIES - 9.05%
15,600 Comerica Inc. .................................... 590,928
22,100 PNC Financial Services Group, Inc. (The) ......... 936,598
27,000 Washington Mutual, Inc. .......................... 952,290
-----------
2,479,816
-----------
CABLE & OTHER PAY TV SERVICES - 3.07%
8,443 Comcast Corp., Class A* .......................... 241,385
21,800 Comcast Corp., Special Class A* .................. 599,282
-----------
840,667
-----------
COMPUTER RELATED SERVICES - 1.29%
20,000 Electronic Data Systems Corp. .................... 352,000
-----------
CREDIT REPORTING SERVICES - 2.59%
18,500 Dun & Bradstreet Corp. (The)* .................... 707,625
-----------
CRUDE PETROLEUM & NATURAL GAS - 5.06%
9,317 Apache Corp. ..................................... 575,232
30,800 Unocal Corp. ..................................... 810,348
-----------
1,385,580
-----------
DEPARTMENT STORES - 5.38%
33,100 May Department Stores Co. (The) .................. 658,359
33,800 Sears, Roebuck & Co. ............................. 816,270
-----------
1,474,629
-----------
EATING PLACES - 2.20%
41,600 McDonald's Corp. ................................. 601,536
-----------
ELECTRIC SERVICES - 3.32%
15,400 FPL Group, Inc. .................................. 907,522
-----------
ELEVATORS & MOVING STAIRWAYS - 2.46%
27,800 Dover Corp. ...................................... 673,316
-----------
FLAT GLASS - 3.16%
19,200 PPG Industries, Inc. ............................. 865,536
GENERAL MEDICAL & SURGICAL HOSPITALS - 3.34%
22,100 HCA Inc. ......................................... $ 914,056
-----------
GROCERY STORES - 2.73%
39,400 Safeway Inc.* .................................... 745,842
-----------
HOLDING OFFICES - 2.64%
18,400 MGIC Investment Corp. ............................ 722,568
-----------
LIFE INSURANCE - 3.51%
34,300 Lincoln National Corp. ........................... 960,400
-----------
LUMBER & OTHER BUILDING MATERIALS - 2.36%
26,500 Home Depot, Inc. (The) ........................... 645,540
-----------
MOTION PICTURE & VIDEO PRODUCTION - 3.99%
112,237 Liberty Media Corp., Class A* .................... 1,092,066
-----------
MOTORS & GENERATORS - 1.21%
7,300 Emerson Electric Co. ............................. 331,055
-----------
NATIONAL BANKS - 3.07%
35,200 FleetBoston Financial Corp. ...................... 840,576
-----------
NEWSPAPERS - 1.69%
7,900 Knight-Ridder, Inc. .............................. 462,150
-----------
PERSONAL CREDIT INSTITUTIONS - 3.08%
25,400 American Express Co. ............................. 844,042
-----------
PETROLEUM REFINING - 3.19%
23,900 Sunoco, Inc. ..................................... 874,023
-----------
SANITARY PAPER PRODUCTS - 2.94%
17,700 Kimberly-Clark Corp. ............................. 804,642
-----------
SECURITY SYSTEMS SERVICES - 1.42%
30,200 Tyco International Ltd. .......................... 388,372
-----------
SEMICONDUCTORS & RELATED DEVICES - 3.20%
51,400 National Semiconductor Corp.* .................... 875,856
-----------
SURETY INSURANCE - 2.54%
18,000 MBIA Inc. ........................................ 695,520
-----------
TELEPHONE COMMUNICATIONS - 1.47%
34,300 Sprint Corp. (FON Group) ......................... 403,025
-----------
U.S. GOVERNMENT AGENCY - 2.22%
9,300 Fannie Mae ....................................... 607,755
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
27
<Page>
THE BEAR STEARNS FUNDS
The Insiders Select Fund
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
WOMEN'S READY-TO-WEAR STORES - 1.68%
35,700 Limited Brands, Inc. ............................. $ 459,459
-----------
WOODWORKING MACHINERY - 3.31%
25,600 Pentair, Inc. .................................... 904,960
-----------
Total Common Stocks
(cost - $29,487,378) ........................... 26,187,062
-----------
SHORT-TERM INVESTMENT -- 4.53%
INVESTMENT COMPANY - 4.53%
1,239,903 Federated Government Obligations 1.16%**
(cost - $1,239,903) ............................ $ 1,239,903
-----------
Total Investments -- 100.21%
(cost - $30,727,281) ........................... 27,426,965
Liabilities in excess of other
assets -- (0.21)% .............................. (56,211)
-----------
Net Assets -- 100.00% ............................ $27,370,754
===========
</Table>
- ----------
* Non-income producing security.
** Money market fund; interest rate reflects SEC seven-day yield at March 31,
2003.
The accompanying notes are an integral part of the financial statements.
28
<Page>
THE BEAR STEARNS FUNDS
Intrinsic Value Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 95.60%
ADVERTISING AGENCIES - 2.91%
188,300 Interpublic Group of Cos., Inc. (The) ............ $ 1,751,190
-----------
AIRCRAFT ENGINES & ENGINE PARTS - 1.97%
20,500 United Technologies Corp. ........................ 1,184,490
-----------
BANK HOLDING COMPANIES - 10.06%
26,700 Bank of America Corp. ............................ 1,784,628
66,500 J.P. Morgan Chase & Co. .......................... 1,576,715
61,700 MBNA Corp. ....................................... 928,585
13,700 PNC Financial Services Group, Inc. (The) ......... 580,606
33,627 Washington Mutual, Inc. .......................... 1,186,024
-----------
6,056,558
-----------
CABLE & OTHER PAY TV SERVICES - 0.95%
20,130 Comcast Corp., Class A* .......................... 575,517
-----------
COMMERCIAL BANKS - 3.98%
69,633 Citigroup Inc. ................................... 2,398,857
-----------
COMPUTER RELATED SERVICES - 1.78%
60,800 Electronic Data Systems Corp. .................... 1,070,080
-----------
CRUDE PETROLEUM & NATURAL GAS - 3.02%
30,000 Occidental Petroleum Corp. ....................... 898,800
35,000 Unocal Corp. ..................................... 920,850
-----------
1,819,650
-----------
DEPARTMENT STORES - 4.39%
59,000 May Department Stores Co. (The) .................. 1,173,510
60,900 Sears, Roebuck & Co. ............................. 1,470,735
-----------
2,644,245
-----------
EATING PLACES - 2.60%
108,400 McDonald's Corp. ................................. 1,567,464
-----------
ELECTRIC & ELECTRONIC EQUIPMENT - 2.95%
69,800 General Electric Co. ............................. 1,779,900
-----------
ELECTRIC SERVICES - 1.26%
12,900 FPL Group, Inc. .................................. 760,197
-----------
ELECTRONIC COMPUTERS - 1.78%
69,100 Hewlett-Packard Co. .............................. 1,074,505
-----------
ELEVATORS & MOVING STAIRWAYS - 1.36%
33,900 Dover Corp. ...................................... 821,058
-----------
FIRE, MARINE & CASUALTY INSURANCE - 4.16%
27,700 Allstate Corp. (The) ............................. $ 918,809
32,100 American International Group, Inc. ............... 1,587,345
-----------
2,506,154
-----------
GROCERY STORES - 1.50%
47,700 Safeway Inc.* .................................... 902,961
-----------
HOLDING OFFICES - 2.58%
39,600 MGIC Investment Corp. ............................ 1,555,092
-----------
LIFE INSURANCE - 3.61%
44,000 Lincoln National Corp. ........................... 1,232,000
26,400 Torchmark Corp. .................................. 945,120
-----------
2,177,120
-----------
LUMBER & OTHER BUILDING MATERIALS - 2.07%
51,200 Home Depot, Inc. (The) ........................... 1,247,232
-----------
MOTION PICTURE & VIDEO PRODUCTION - 5.46%
102,100 AOL Time Warner Inc.* ............................ 1,108,806
224,006 Liberty Media Corp., Class A* .................... 2,179,578
-----------
3,288,384
-----------
NATIONAL BANKS - 4.92%
62,600 FleetBoston Financial Corp. ...................... 1,494,888
77,600 U.S. Bancorp ..................................... 1,472,848
-----------
2,967,736
-----------
OFFICE MACHINES - 0.76%
14,400 Pitney Bowes Inc. ................................ 459,648
-----------
PERSONAL CREDIT INSTITUTIONS - 2.37%
42,900 American Express Co. ............................. 1,425,567
-----------
PETROLEUM REFINING - 4.95%
23,575 ChevronTexaco Corp. .............................. 1,524,124
41,800 Exxon Mobil Corp. ................................ 1,460,910
-----------
2,985,034
-----------
PHARMACEUTICAL PREPARATIONS - 4.65%
33,600 Abbott Laboratories .............................. 1,263,696
11,100 Merck & Co., Inc. ................................ 608,058
29,900 Pfizer Inc. ...................................... 931,684
-----------
2,803,438
-----------
RADIO & TV COMMUNICATIONS EQUIPMENT - 1.95%
75,400 Koninklijke Philips Electronics N.V. ............. 1,175,486
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
29
<Page>
THE BEAR STEARNS FUNDS
Intrinsic Value Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SANITARY PAPER PRODUCTS - 2.56%
33,900 Kimberly-Clark Corp. ............................. $ 1,541,094
-----------
SECURITY BROKERS & DEALERS - 1.52%
23,900 Morgan Stanley ................................... 916,565
-----------
SECURITY SYSTEMS SERVICES - 2.02%
94,600 Tyco International Ltd. .......................... 1,216,556
-----------
SURETY INSURANCE - 0.38%
6,000 MBIA Inc. ........................................ 231,840
-----------
TELEPHONE COMMUNICATIONS - 4.31%
45,100 SBC Communications Inc. .......................... 904,706
74,800 Sprint Corp. (FON Group) ......................... 878,900
23,100 Verizon Communications Inc. ...................... 816,585
-----------
2,600,191
-----------
TELEVISION BROADCASTING - 0.96%
21,700 USA Interactive, Inc.* ........................... 581,343
-----------
U.S. GOVERNMENT AGENCY - 3.10%
28,600 Fannie Mae ....................................... 1,869,010
-----------
WOMEN'S READY-TO-WEAR STORES - 2.76%
74,200 Limited Brands, Inc. ............................. 954,954
40,400 TJX Cos., Inc. (The) ............................. 711,040
-----------
1,665,994
-----------
Total Common Stocks
(cost - $68,350,664) ........................... 57,620,156
-----------
SHORT-TERM INVESTMENTS -- 5.25%
INVESTMENT COMPANY - 0.69%
417,830 Federated Government Obligations 1.16%**
(cost - $417,830) .............................. $ 417,830
-----------
<Caption>
PRINCIPAL
AMOUNT
(000'S)
- ---------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 4.56%
$2,750 Fannie Mae, Discount Notes, 1.22%,
04/01/03 (cost - $2,750,000) ................... 2,750,000
-----------
Total Short-Term Investments
(cost - $3,167,830) ............................ 3,167,830
-----------
Total Investments -- 100.85%
(cost - $71,518,494) ........................... 60,787,986
Liabilities in excess of other
assets -- (0.85)% .............................. (510,792)
-----------
Net Assets -- 100.00% ............................ $60,277,194
===========
</Table>
- ----------
* Non-income producing security.
** Money market fund; interest rate reflects SEC seven-day yield at March 31,
2003.
The accompanying notes are an integral part of the financial statements.
30
<Page>
THE BEAR STEARNS FUNDS
Small Cap Value Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 91.29%
AIRCRAFT ENGINES & ENGINE PARTS - 0.97%
13,200 Woodward Governor Co. ............................ $ 461,868
-----------
ALKALIES & CHLORINE - 3.08%
80,700 Olin Corp. ....................................... 1,466,319
-----------
ANALYTICAL INSTRUMENTS - 2.82%
19,900 Bio-Rad Laboratories, Inc., Class A* ............. 711,425
52,400 Molecular Devices Corp.* ......................... 634,040
-----------
1,345,465
-----------
BANK HOLDING COMPANIES - 7.83%
30,000 MAF Bancorp, Inc. ................................ 1,009,500
18,733 Pacific Capital Bancorp .......................... 555,246
42,700 Provident Bankshares Corp. ....................... 985,516
50,500 Republic Bancorp, Inc. ........................... 594,890
28,200 Susquehanna Bancshares, Inc. ..................... 584,304
-----------
3,729,456
-----------
COMPUTER INTEGRATED SYSTEMS DESIGN - 1.27%
60,100 JDA Software Group, Inc.* ........................ 607,611
-----------
COPPER FOUNDRIES - 2.55%
48,700 Mueller Industries, Inc.* ........................ 1,216,039
-----------
DEPARTMENT STORES - 0.60%
13,600 Stage Stores, Inc.* .............................. 288,048
-----------
EATING PLACES - 1.18%
31,000 Jack in the Box Inc.* ............................ 561,410
-----------
ELECTRIC SERVICES - 4.40%
39,100 Great Plains Energy Inc. ......................... 933,317
67,300 UniSource Energy Corp. ........................... 1,164,290
-----------
2,097,607
-----------
ELECTRONIC CAPACITORS - 0.69%
42,000 KEMET Corp.* ..................................... 327,600
-----------
ELECTRONIC COMPONENTS - 2.21%
207,000 Three-Five Systems, Inc.* ........................ 1,055,700
-----------
ELECTRONIC COMPUTERS - 2.62%
207,200 Adaptec, Inc.* ................................... 1,249,416
-----------
EMPLOYMENT AGENCIES - 1.63%
66,800 Heidrick & Struggles International, Inc.* ........ 774,880
-----------
FURNITURE STORES - 0.98%
23,900 Furniture Brands International, Inc.* ............ $ 467,484
-----------
GAMES, TOYS & CHILDREN'S VEHICLES - 1.81%
42,900 Shuffle Master, Inc.* ............................ 864,478
-----------
GAS TRANSMISSION & DISTRIBUTION - 2.21%
32,800 Energen Corp. .................................... 1,051,568
-----------
INFORMATION RETRIEVAL SERVICES - 3.16%
46,400 FactSet Research Systems Inc. .................... 1,505,680
-----------
INORGANIC PIGMENTS - 0.99%
29,200 NL Industries, Inc. .............................. 470,120
-----------
KIDNEY DIALYSIS CENTERS - 2.55%
39,000 Renal Care Group, Inc.* .......................... 1,216,020
-----------
MEAT PACKING PLANTS - 1.00%
397,473 Hibernia Foods plc, ADR* ......................... 476,968
-----------
MOTOR VEHICLE PARTS & ACCESSORIES - 1.87%
18,600 BorgWarner Inc. .................................. 889,824
-----------
NONFERROUS WIRE DRAWING & INSULATING - 1.16%
100,200 Andrew Corp.* ...................................... 551,100
-----------
OIL & GAS FIELD SERVICES - 3.06%
144,500 Key Energy Services, Inc.* ....................... 1,456,560
-----------
PATENT OWNERS & LESSORS - 1.34%
54,300 4Kids Entertainment, Inc.* ....................... 640,740
-----------
PERSONAL CREDIT INSTITUTIONS - 1.02%
5,000 Student Loan Corp. (The) ......................... 488,000
-----------
PHARMACEUTICAL PREPARATIONS - 2.33%
93,400 Perrigo Co. ...................................... 1,109,592
-----------
PLASTICS PRODUCTS - 2.69%
92,900 Tupperware Corp. ................................. 1,283,878
-----------
PLASTICS, MATERIALS & RESINS - 0.87%
35,600 Millennium Chemicals Inc. ........................ 415,808
-----------
PREPACKAGED SOFTWARE - 2.55%
68,800 Electronics For Imaging, Inc.* ................... 1,217,003
-----------
PRESSED & BLOWN GLASS - 0.56%
13,400 DuPont Photomasks, Inc.* ......................... 268,804
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
31
<Page>
THE BEAR STEARNS FUNDS
Small Cap Value Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PROCESS CONTROL INSTRUMENTS - 0.86%
28,500 Rudolph Technologies, Inc.* ...................... $ 411,825
-----------
PUMPS & PUMPING EQUIPMENT - 1.31%
53,500 Flowserve Corp.* ................................. 623,275
-----------
RADIO, TV & ELECTRONIC STORES - 1.42%
144,500 InterTAN, Inc.* .................................. 679,150
-----------
REAL ESTATE INVESTMENT TRUSTS - 7.23%
31,700 Colonial Properties Trust ........................ 1,048,636
81,100 Glenborough Realty Trust Inc. .................... 1,253,806
66,600 Keystone Property Trust .......................... 1,145,520
-----------
3,447,962
-----------
SAVINGS & LOAN ASSOCIATIONS - 1.45%
28,000 First Financial Holdings, Inc. ................... 690,760
-----------
SECURITY BROKERS & DEALERS - 1.85%
62,800 SWS Group, Inc. .................................. 884,224
-----------
SEMICONDUCTORS & RELATED DEVICES - 3.78%
108,200 Lattice Semiconductor Corp.* ..................... 815,828
90,100 Microsemi Corp.* ................................. 986,595
-----------
1,802,423
-----------
SHOE STORES - 2.32%
77,700 Genesco Inc.* .................................... 1,104,894
-----------
SPECIALTY OUTPATIENT CLINICS - 1.03%
44,000 U.S. Physical Therapy, Inc.* ..................... 489,280
-----------
STATE BANKS - 3.39%
46,450 First BanCorp .................................... 1,253,221
21,800 Mid-State Bancshares ............................. 364,278
-----------
1,617,499
-----------
TRANSPORTATION EQUIPMENT - 0.59%
18,100 Arctic Cat Inc. .................................. 282,541
-----------
TRUCKING - 2.13%
42,000 Yellow Corp.* .................................... 1,013,460
-----------
TURBINES & TURBINE GENERATOR SETS - 1.93%
84,600 Stewart & Stevenson Services, Inc. ............... $ 922,140
-----------
Total Common Stocks
(cost - $49,174,951) ............................. 43,524,479
-----------
SHORT-TERM INVESTMENTS -- 9.20%
INVESTMENT COMPANY - 0.81%
384,933 Federated Government Obligations
1.16%**
(cost - $384,933) .............................. 384,933
-----------
<Caption>
PRINCIPAL
AMOUNT
(000'S)
- ---------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 8.39%
$4,000 Fannie Mae, Discount Notes,
1.22%, 04/01/03
(cost - $4,000,000) ............................ 4,000,000
-----------
Total Short-Term Investments
(cost - $4,384,933) ............................ 4,384,933
-----------
Total Investments -- 100.49%
(cost - $53,559,884) ........................... 47,909,412
Securities Lending Collateral (a) -- 3.24% 1,543,200
Liabilities in excess of other assets -- (3.73)% (1,776,424)
-----------
Net Assets -- 100.00% $47,676,188
===========
</Table>
- ----------
ADR American Depositary Receipts.
* Non-income producing security.
** Money market fund; interest rate reflects SEC seven-day yield at March 31,
2003.
(a) Cash collateral invested in various money market mutual funds.
The accompanying notes are an integral part of the financial statements.
32
<Page>
THE BEAR STEARNS FUNDS
Alpha Growth Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 99.38%
ACCIDENT & HEALTH INSURANCE - 2.05%
44,200 AFLAC Inc. ....................................... $ 1,416,610
-----------
ALUMINUM FOUNDRIES - 1.85%
45,100 Newell Rubbermaid Inc. ........................... 1,278,585
-----------
BANK HOLDING COMPANIES - 5.35%
37,100 BANK ONE CORP. ................................... 1,284,402
18,900 Golden West Financial Corp. ...................... 1,359,477
69,500 MBNA Corp. ....................................... 1,045,975
-----------
3,689,854
-----------
BUSINESS SERVICES - 4.26%
19,900 eBay Inc.* ....................................... 1,697,271
21,900 United Parcel Service, Inc., Class B ............. 1,248,300
-----------
2,945,571
-----------
CHEMICALS & ALLIED PRODUCTS - 1.94%
23,800 Praxair, Inc. .................................... 1,341,130
-----------
CHEWING & SMOKING TOBACCO - 1.65%
41,200 UST Inc. ......................................... 1,137,120
-----------
CHEWING GUM - 2.01%
24,600 Wm. Wrigley Jr. Co. .............................. 1,389,900
-----------
CIGARETTES - 1.97%
35,600 Gallaher Group plc, ADR .......................... 1,363,836
-----------
COLLEGES & UNIVERSITIES - 2.21%
30,600 Apollo Group, Inc., Class A* ..................... 1,526,940
-----------
COMPUTER INTEGRATED SYSTEMS DESIGN - 1.99%
104,500 Citrix Systems, Inc.* ............................ 1,375,220
-----------
COMPUTER PERIPHERAL EQUIPMENT - 4.06%
101,300 Cisco Systems, Inc.* ............................. 1,314,874
22,300 Lexmark International, Inc.* ..................... 1,492,985
-----------
2,807,859
-----------
CONSTRUCTION MACHINERY - 2.12%
29,200 PACCAR Inc. ...................................... 1,467,884
-----------
CRUDE PETROLEUM & NATURAL GAS - 4.13%
119,900 BHP Billiton Ltd., ADR ........................... 1,330,890
32,000 Burlington Resources Inc. ........................ 1,526,720
-----------
2,857,610
-----------
DIAGNOSTIC SUBSTANCES - 2.44%
46,300 Genzyme General* ................................. $ 1,687,635
-----------
ELECTRIC & OTHER SERVICES COMBINED - 3.88%
32,000 Consolidated Edison, Inc. ........................ 1,231,040
30,100 Entergy Corp. .................................... 1,449,315
-----------
2,680,355
-----------
ELECTRIC SERVICES - 3.54%
29,900 DTE Energy Co. ................................... 1,155,635
25,600 Exelon Corp. ..................................... 1,290,496
-----------
2,446,131
-----------
FAMILY CLOTHING STORES - 1.98%
24,200 Kohl's Corp.* .................................... 1,369,236
-----------
FREIGHT TRANSPORTATION ARRANGEMENT - 2.17%
41,700 Expeditors International of
Washington, Inc. ............................... 1,499,115
-----------
FROZEN BAKERY PRODUCTS - 1.65%
60,800 Sara Lee Corp. ................................... 1,136,960
-----------
GARMENT PRESSING & CLEANERS' AGENTS - 1.42%
29,900 Cintas Corp. ..................................... 983,710
-----------
GOLD ORES - 1.79%
47,300 Newmont Mining Corp. ............................. 1,236,895
-----------
GROCERIES - 1.69%
46,000 SYSCO Corp. ...................................... 1,170,240
-----------
MANUFACTURING INDUSTRIES - 2.12%
17,900 International Game Technology* ................... 1,466,010
-----------
MISC. FOOD & KINDRED PRODUCTS - 1.95%
36,400 Unilever plc, ADR ................................ 1,348,620
-----------
MISC. FOOD STORES - 2.46%
66,000 Starbucks Corp.* ................................. 1,700,160
-----------
MISC. HOME FURNISHINGS STORES - 1.96%
39,300 Bed Bath & Beyond Inc.* .......................... 1,357,422
-----------
MOTOR VEHICLE PARTS & ACCESSORIES - 1.76%
17,400 Eaton Corp. ...................................... 1,217,130
-----------
MOTOR VEHICLES & CAR BODIES - 1.69%
87,800 Nissan Motor Co. Ltd., ADR ....................... 1,168,618
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
33
<Page>
THE BEAR STEARNS FUNDS
Alpha Growth Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
NATIONAL BANKS - 1.67%
36,700 BB&T Corp. ....................................... $ 1,153,481
-----------
NEWSPAPERS - 3.48%
17,400 E.W. Scripps Co. (The), Class A .................. 1,317,876
1,600 Washington Post Co. (The), Class B ............... 1,090,176
-----------
2,408,052
-----------
PERSONAL CREDIT INSTITUTIONS - 1.82%
37,900 American Express Co. ............................. 1,259,417
-----------
PHARMACEUTICAL PREPARATIONS - 2.06%
26,400 Forest Laboratories, Inc.* ....................... 1,424,808
-----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 3.47%
36,800 Canon Inc., ADR .................................. 1,291,312
37,300 Eastman Kodak Co. ................................ 1,104,080
-----------
2,395,392
-----------
POLISHES & SANITATION GOODS - 1.99%
27,900 Ecolab Inc. ...................................... 1,376,307
-----------
PREPACKAGED SOFTWARE - 5.59%
52,400 Microsoft Corp. .................................. 1,268,604
122,800 Oracle Corp.* .................................... 1,332,257
32,000 Symantec Corp.* .................................. 1,253,760
-----------
3,854,621
-----------
RADIO & TV COMMUNICATIONS EQUIPMENT - 2.01%
38,500 QUALCOMM Inc. .................................... 1,388,310
-----------
SAUSAGES & OTHER PREPARED MEATS - 1.58%
54,300 ConAgra Foods, Inc. .............................. 1,090,344
-----------
SURGICAL APPLIANCES & SUPPLIES - 2.02%
20,300 Stryker Corp. .................................... 1,393,595
-----------
SURGICAL & MEDICAL INSTRUMENTS - 1.87%
31,700 Boston Scientific Corp.* ......................... 1,292,092
-----------
THEATRICAL PRODUCERS & SERVICES - 1.63%
36,000 Westwood One, Inc.* .............................. 1,124,640
-----------
TOILET PREPARATIONS - 2.10%
25,500 Avon Products, Inc. .............................. 1,454,775
-----------
Total Common Stocks
(cost - $70,887,829) ........................... 68,682,190
-----------
SHORT-TERM INVESTMENT -- 0.91%
INVESTMENT COMPANY - 0.91%
630,091 Federated Government Obligations 1.16%**
(cost - $630,091) .............................. $ 630,091
-----------
Total Investments -- 100.29%
(cost - $71,517,920) ........................... 69,312,281
Liabilities in excess of other
assets -- (0.29)% .............................. (199,906)
-----------
Net Assets -- 100.00% ............................ $69,112,375
===========
</Table>
- ----------
ADR American Depositary Receipts.
* Non-income producing security.
** Money market fund; interest rate reflects SEC seven-day yield at March 31,
2003.
The accompanying notes are an integral part of the financial statements.
34
<Page>
THE BEAR STEARNS FUNDS
International Equity Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.08%
AUSTRALIA - 7.21%
COAL, OTHER MINERALS & ORES - 4.19%
406,882 BHP Billiton Ltd. ................................ $ 2,281,755
-----------
INSURANCE CARRIERS - 0.61%
65,400 QBE Insurance Group Ltd. ......................... 331,583
-----------
NEWSPAPERS - 2.41%
201,800 News Corp. Ltd. (The) ............................ 1,313,377
-----------
Total Australia
(cost - $3,916,829) ............................ 3,926,715
-----------
BELGIUM - 0.49%
REGULATION, ADMINISTRATION OF UTILITIES - 0.49%
1,100 Electrabel S.A.*
(cost - $261,656) .............................. 265,271
-----------
CANADA - 4.84%
COMMERCIAL BANKS - 1.52%
30,400 Bank of Montreal ................................. 829,157
-----------
COMPUTER-INTEGRATED SYSTEMS - 0.56%
23,400 Research in Motion Ltd.* ......................... 305,370
-----------
FOREIGN BANKS, BRANCHES & AGENCIES - 2.20%
12,300 Bank of Nova Scotia (The) ........................ 433,985
19,600 Royal Bank of Canada ............................. 761,374
-----------
1,195,359
-----------
PHARMACEUTICAL PREPARATIONS - 0.56%
7,700 Biovail Corp.* ................................... 306,999
-----------
Total Canada
(cost - $2,475,612) ............................ 2,636,885
-----------
CHINA - 3.73%
DRILLING OIL & GAS WELLS - 0.50%
1,354,000 China Petroleum & Chemical Corp.,
Class H 270,819
-----------
ELECTRIC SERVICES - 1.81%
1,048,000 Huaneng Power International, Inc. ................ 987,608
-----------
OIL & GAS EXPLORATION SERVICES - 1.42%
3,672,000 PetroChina Co. Ltd., Class H ..................... 772,116
-----------
Total China
(cost - $1,722,988) ............................ 2,030,543
-----------
DENMARK - 0.53%
PHARMACEUTICAL PREPARATIONS - 0.53%
8,700 Novo Nordisk A/S, Class B*
(cost - $274,839) .............................. $ 286,992
-----------
FINLAND - 2.44%
COMMUNICATIONS EQUIPMENT - 2.44%
96,200 Nokia Oyj
(cost - $1,761,252) ............................ 1,328,964
-----------
FRANCE - 4.02%
FLUID MILK - 1.27%
5,500 Groupe Danone .................................... 694,385
-----------
INTERNET SERVICE PROVIDERS - 0.55%
52,600 Groupe Wanadoo SA* ............................... 297,891
-----------
TELEPHONE COMMUNICATIONS - 0.58%
39,700 Orange SA* ....................................... 318,407
-----------
TOILET PREPARATIONS - 1.62%
14,500 L' Oreal SA ...................................... 878,143
-----------
Total France
(cost - $2,405,682) ............................ 2,188,826
-----------
HONG KONG - 3.43%
ELECTRICAL SERVICES - 0.71%
94,000 CLP Holdings Ltd. ................................ 389,284
-----------
FOREIGN BANKS, BRANCHES & AGENCIES - 0.44%
23,400 Hang Seng Bank Ltd. .............................. 238,517
-----------
GAS TRANSMISSION & DISTRIBUTION - 0.71%
315,000 Hong Kong & China Gas Co. Ltd. ................... 387,720
-----------
OIL & GAS EXPLORATION SERVICES - 1.57%
638,500 CNOOC Ltd. ....................................... 851,393
-----------
Total Hong Kong
(cost - $1,910,677) ............................ 1,866,914
-----------
IRELAND - 0.54%
COMMERCIAL BANKS - 0.54%
21,500 Allied Irish Banks, p.l.c.
(cost - $299,728) .............................. 296,075
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
35
<Page>
THE BEAR STEARNS FUNDS
International Equity Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISRAEL - 1.68%
PHARMACEUTICAL PREPARATIONS - 1.68%
22,000 Teva Pharmaceutical Industries Ltd., ADR
(cost - $791,057) .............................. $ 916,300
-----------
ITALY - 1.44%
TELEPHONE COMMUNICATIONS - 0.92%
122,500 Telecom Italia Mobile S.p.A. ..................... 499,933
-----------
TELEVISION BROADCASTING - 0.52%
37,000 Mediaset S.p.A. .................................. 281,006
-----------
Total Italy
(cost - $937,869) .............................. 780,939
-----------
JAPAN - 22.71%
CHEMICALS - 0.71%
12,400 Shin-Etsu Chemical Co. Ltd. ...................... 383,775
-----------
CHEMICALS & ALLIED PRODUCTS - 0.94%
13,700 Takeda Chemical Industries Ltd. .................. 511,815
-----------
CONSTRUCTION MACHINERY - 0.34%
51,000 Komatsu Ltd. ..................................... 187,519
-----------
ELECTRIC & ELECTRONIC EQUIPMENT - 0.34%
1,210 Keyence Corp. .................................... 187,143
-----------
ELECTRIC, GAS & SANITARY SERVICES - 0.59%
103,000 Tokyo Gas Co. Ltd. ............................... 319,649
-----------
ELECTRONIC COMPONENTS - 1.13%
5,700 Rohm Co. Ltd. .................................... 617,684
-----------
HOUSEHOLD AUDIO & VIDEO EQUIPMENT - 2.79%
31,400 Pioneer Corp. .................................... 652,732
88,000 Sharp Corp. ...................................... 868,275
-----------
1,521,007
-----------
MALT BEVERAGES - 1.06%
77,000 Kirin Brewery Co. Ltd. ........................... 575,974
-----------
MOTOR VEHICLES & CAR BODIES - 3.11%
10,100 Honda Motor Co. Ltd. ............................. 336,440
117,000 Nissan Motor Co. Ltd. ............................ 779,473
26,100 Toyota Motor Corp. ............................... 579,976
-----------
1,695,889
-----------
JAPAN (CONTINUED)
OPTICAL INSTRUMENTS & LENSES - 0.41%
3,700 Hoya Corp. ....................................... $ 223,098
-----------
PAINT, GLASS & WALLPAPER STORES - 0.49%
50,000 Asahi Glass Co. Ltd. ............................. 268,173
-----------
PHARMACEUTICAL PREPARATIONS - 2.15%
20,000 Sankyo Co. Ltd. .................................. 264,800
34,700 Yamanouchi Pharmaceutical Co. Ltd. ............... 904,225
-----------
1,169,025
-----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 6.18%
63,000 Canon, Inc. ...................................... 2,199,528
38,000 Fuji Photo Film Co. Ltd. ......................... 1,166,470
-----------
3,365,998
-----------
SECURITY & COMMODITY SERVICES - 1.76%
92,000 Nomura Holdings, Inc. ............................ 958,172
-----------
SOAP, CLEANERS & TOILET GOODS - 0.71%
19,000 Kao Corp. ........................................ 383,749
-----------
Total Japan
(cost - $13,537,734) ........................... 12,368,670
-----------
NETHERLANDS - 0.68%
MISC. FOOD & KINDRED PRODUCTS - 0.68%
6,200 Unilever NV
(cost - $371,745) .............................. 369,055
-----------
PORTUGAL - 1.10%
TELEPHONE COMMUNICATIONS - 1.10%
86,400 Portugal Telecom, SGPS, S.A.
(cost - $617,240) .............................. 598,676
-----------
SINGAPORE - 1.79%
BOOKS, PERIODICALS & NEWSPAPERS - 0.81%
44,000 Singapore Press Holdings Ltd. .................... 443,702
-----------
CIRCUIT BOARDS - 0.48%
30,200 Flextronics International Ltd.* .................. 263,344
-----------
ELECTRONIC COMPONENTS - 0.50%
34,000 Venture Manufacturing (Singapore) Ltd. ........... 269,665
-----------
Total Singapore
(cost - $1,160,329) ............................ 976,711
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
36
<Page>
THE BEAR STEARNS FUNDS
International Equity Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SOUTH AFRICA - 0.48%
GOLD ORES - 0.48%
8,700 AngloGold Ltd., ADR
(cost - $319,837) .............................. $ 262,566
-----------
SOUTH KOREA - 2.35%
ELECTRONIC COMPONENTS - 1.97%
9,500 Samsung Electronics Co. Ltd., GDR(a) ............ 1,073,500
-----------
IRON & STEEL FORGINGS - 0.38%
10,500 POSCO, ADR ....................................... 206,850
-----------
Total South Korea
(cost - $1,484,626) ............................ 1,280,350
-----------
SPAIN - 4.73%
FOREIGN BANKS, BRANCHES & AGENCIES - 1.31%
16,500 Banco Popular Espanol, S.A. ...................... 712,990
-----------
PETROLEUM REFINING - 1.08%
40,600 Repsol YPF, S.A. ................................. 585,682
-----------
TELEPHONE COMMUNICATIONS - 2.34%
136,498 Telefonica, S.A.* ................................ 1,276,473
-----------
Total Spain
(cost - $2,580,756) ............................ 2,575,145
-----------
SWEDEN - 2.77%
FAMILY CLOTHING STORES - 1.81%
47,000 Hennes & Mauritz AB (H&M) ........................ 986,679
-----------
HOUSEHOLD VACUUMS - 0.69%
23,600 Electrolux AB, Series B .......................... 374,362
-----------
MACHINE TOOLS - 0.27%
6,600 Sandvik AB* ...................................... 148,674
-----------
Total Sweden
(cost - $1,543,473) ............................ 1,509,715
-----------
SWITZERLAND - 2.86%
FOREIGN BANKS, BRANCHES & AGENCIES - 1.42%
18,200 UBS AG* .......................................... 774,353
-----------
PHARMACEUTICAL PREPARATIONS - 0.54%
7,980 Novartis AG ...................................... 295,534
-----------
SWITZERLAND (CONTINUED)
SEMICONDUCTORS & RELATED SERVICES - 0.90%
25,800 STMicroelectronics NV ............................ $ 488,454
-----------
Total Switzerland
(cost - $1,752,203) ............................ 1,558,341
-----------
THAILAND - 1.23%
FOREIGN BANKS, BRANCHES & AGENCIES - 0.87%
235,000 Bangkok Bank Public Co. Ltd.* .................... 350,704
151,000 Thai Farmers Bank Public Co. Ltd.* ............... 123,237
-----------
473,941
-----------
RADIO & TELEPHONE COMMUNICATIONS - 0.36%
200,000 Advanced Info Service Public Co. Ltd. ............ 198,205
-----------
Total Thailand
(cost - $728,303) .............................. 672,146
-----------
UNITED KINGDOM - 26.03%
BANK HOLDING COMPANIES - 3.83%
202,800 HSBC Holdings plc, Ord 31.6p ..................... 2,086,647
-----------
FOREIGN BANKS, BRANCHES & AGENCIES - 4.71%
21,200 Royal Bank of Scotland Group plc, Ord 25p ........ 477,514
196,200 Standard Chartered plc, Ord 31.6p ................ 2,088,682
-----------
2,566,196
-----------
LUMBER & OTHER BUILDING PRODUCTS - 0.48%
71,700 Kingfisher plc, Ord 13.75p ....................... 260,665
-----------
MEDICAL INSTRUMENTS & SUPPLIES - 1.27%
113,400 Smith & Nephew plc, Ord 12.222p .................. 693,681
-----------
METAL ORES - 3.93%
114,900 Rio Tinto plc, Ord 10p ........................... 2,141,261
-----------
MISC. FOOD & KINDRED PRODUCTS - 1.87%
109,700 Unilever plc, Ord 1.4p ........................... 1,016,108
-----------
NON-METALLIC MINERALS - 1.13%
43,400 Anglo American plc, Ord 31.6p .................... 616,716
-----------
RADIO & TELEPHONE COMMUNICATIONS - 4.21%
1,284,800 Vodafone Group plc, Ord 6.3p ..................... 2,294,826
-----------
SOAP & OTHER DETERGENTS - 0.74%
24,600 Reckitt Benckiser plc, Ord 10.526p ............... 403,227
-----------
</Table>
The accompanying notes are an integral part of the financial statements.
37
<Page>
THE BEAR STEARNS FUNDS
International Equity Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
TELEVISION BROADCASTING - 3.86%
211,900 British Sky Broadcasting Group plc,
Ord 50p* $ 2,098,397
-----------
Total United Kingdom
(cost - $14,848,306) ........................... 14,177,724
-----------
Total Common Stocks
(cost - $55,702,741) ........................... 52,873,523
-----------
SHORT-TERM INVESTMENTS -- 1.95%
UNITED STATES - 1.95%
INVESTMENT COMPANIES - 1.95%
903,743 Federated Automated Government
Money Trust, 0.71%** ........................... $ 903,743
156,977 Federated Government Obligations 1.16%** ......... 156,977
-----------
Total Short-Term Investments
(cost - $1,060,720) ............................ 1,060,720
-----------
Total Investments -- 99.03%
(cost - $56,763,461) ........................... 53,934,243
Other assets in excess of liabilities -- 0.97% 526,824
-----------
Net Assets -- 100.00% ............................ $54,461,067
===========
</Table>
- ----------
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
* Non-income producing security.
** Money market fund; interest rate reflects SEC seven-day yield at
March 31, 2003.
(a) SEC Rule 144A security. Such securities are traded only among qualified
institutional buyers.
The accompanying notes are an integral part of the financial statements.
38
<Page>
THE BEAR STEARNS FUNDS
STATEMENTS OF ASSETS & LIABILITIES
MARCH 31, 2003
<Table>
<Caption>
S&P STARS INTRINSIC
S&P STARS OPPORTUNITIES THE INSIDERS VALUE
PORTFOLIO PORTFOLIO SELECT FUND PORTFOLIO
-------------- -------------- -------------- --------------
ASSETS
Investments, at value (cost -
$1,535,656,231, $47,347,788,
$30,727,281, $71,518,494,
$53,559,884, $71,517,920, and
$56,763,461, respectively) .......... $ 1,199,217,431 $ 47,176,157 $27,426,965 $ 60,787,986
Deposit with broker for securities
sold short .......................... 12,824,876 818,311 -- --
Collateral received for securities
loaned .............................. 56,772,017 -- -- --
Dividend, interest and reclaims
receivable .......................... 709,504 40,084 45,262 128,089
Receivable for Portfolio shares sold ... 438,222 65,758 53,488 61,606
Receivable for investments sold ........ 4,764,642 658,595 -- 359,188
Open and closed forward foreign
currency exchange contracts ......... -- -- -- --
Receivable from investment adviser ..... -- 20,002 -- --
Prepaid expenses and other assets ...... 3,063 49,758 32,268 29,019
--------------- ------------ ----------- ------------
Total assets ................... 1,274,729,755 48,828,665 27,557,983 61,365,888
--------------- ------------ ----------- ------------
LIABILITIES
Securities sold short, at value
(proceeds received - $12,228,002
and $684,748, respectively) ......... 12,600,800 739,390 -- --
Payable upon return for securities
loaned .............................. 56,772,017 -- -- --
Payable for investments purchased ...... 14,271,923 116,425 -- 894,284
Loan payable ........................... 13,619,800 -- -- --
Payable for Portfolio shares
repurchased ......................... 2,816,922 135,043 75,869 54,959
Advisory fee payable ................... 855,473 -- 10,723 17,954
Administration fee payable ............. 145,166 6,087 3,457 7,603
Distribution and service fees payable
(Class A, B, and C shares) .......... 2,355,085 94,717 55,623 83,103
Custodian fee payable .................. 11,502 3,580 829 680
Accrued expenses ....................... 380,050 32,689 40,728 30,111
--------------- ------------ ----------- ------------
Total liabilities .............. 103,828,738 1,127,931 187,229 1,088,694
--------------- ------------ ----------- ------------
NET ASSETS
Capital stock, $0.001 par value
(unlimited shares of beneficial
interest authorized) ................ 75,002 4,569 2,268 4,082
Paid-in capital ........................ 2,551,856,180 62,917,143 32,253,520 73,710,163
Undistributed net investment
income/(loss) ....................... -- -- 53,348 368,133
Accumulated net realized loss from
investments, foreign currency
related transactions and securities
sold short, if any .................. (1,044,218,567) (14,994,705) (1,638,066) (3,074,676)
Net unrealized depreciation on
investments, foreign currency
related transactions and securities
sold short, if any .................. (336,811,598) (226,273) (3,300,316) (10,730,508)
--------------- ------------ ----------- ------------
Net assets ................... $ 1,170,901,017 $ 47,700,734 $27,370,754 $ 60,277,194
--------------- ------------ ----------- ------------
<Caption>
SMALL CAP ALPHA INTERNATIONAL
VALUE GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- -------------
ASSETS
Investments, at value (cost -
$1,535,656,231, $47,347,788,
$30,727,281, $71,518,494,
$53,559,884, $71,517,920, and
$56,763,461, respectively) .......... $ 47,909,412 $69,312,281 $ 53,934,243
Deposit with broker for securities
sold short .......................... -- -- --
Collateral received for securities
loaned .............................. 1,543,200 -- --
Dividend, interest and reclaims
receivable .......................... 75,232 103,516 385,393
Receivable for Portfolio shares sold ... 13,445 431,072 72,216
Receivable for investments sold ........ -- -- 387,764
Open and closed forward foreign
currency exchange contracts ......... -- -- 27,334
Receivable from investment adviser ..... -- 4,349 11,336
Prepaid expenses and other assets ...... 27,674 35,759 25,363
------------ ----------- ------------
Total assets ................... 49,568,963 69,886,977 54,843,649
------------ ----------- ------------
LIABILITIES
Securities sold short, at value
(proceeds received - $12,228,002
and $684,748, respectively) ......... -- -- --
Payable upon return for securities
loaned .............................. 1,543,200 -- --
Payable for investments purchased ...... 234,847 591,626 --
Loan payable ........................... -- -- --
Payable for Portfolio shares
repurchased ......................... 4,190 20,382 244,526
Advisory fee payable ................... 9,455 -- --
Administration fee payable ............. 6,023 8,440 7,066
Distribution and service fees payable
(Class A, B, and C shares) .......... 53,992 117,429 74,495
Custodian fee payable .................. 3,261 1,606 7,508
Accrued expenses ....................... 37,807 35,119 48,987
------------ ----------- ------------
Total liabilities .............. 1,892,775 774,602 382,582
------------ ----------- ------------
NET ASSETS
Capital stock, $0.001 par value
(unlimited shares of beneficial
interest authorized) ................ 3,703 4,488 5,313
Paid-in capital ........................ 63,426,035 72,771,723 118,497,758
Undistributed net investment
income/(loss) ....................... 185,345 -- (1,003,145)
Accumulated net realized loss from
investments, foreign currency
related transactions and securities
sold short, if any .................. (10,288,423) (1,458,197) (60,266,684)
Net unrealized depreciation on
investments, foreign currency
related transactions and securities
sold short, if any .................. (5,650,472) (2,205,639) (2,772,175)
------------ ----------- ------------
Net assets ..................... $ 47,676,188 $69,112,375 $ 54,461,067
------------ ----------- ------------
</Table>
The accompanying notes are an integral part of the financial statements.
39
<Page>
THE BEAR STEARNS FUNDS
STATEMENTS OF ASSETS & LIABILITIES
MARCH 31, 2003
<Table>
<Caption>
S&P STARS INTRINSIC
S&P STARS OPPORTUNITIES THE INSIDERS VALUE
PORTFOLIO PORTFOLIO SELECT FUND PORTFOLIO
-------------- -------------- -------------- --------------
CLASS A
Net assets ............................. $ 484,873,060 $ 20,520,774 $ 13,049,346 $ 17,733,762
-------------- -------------- -------------- --------------
Shares of beneficial interest
outstanding ......................... 30,672,373 1,956,756 1,057,998 1,197,227
-------------- -------------- -------------- --------------
Net asset value per share .............. $15.81 $10.49 $12.33 $14.81
====== ====== ====== ======
Maximum offering price per share
(net asset value plus sales charge
of 5.50%* of the offering price)..... $16.73 $11.10 $13.05 $15.67
====== ====== ====== ======
CLASS B
Net assets ............................. $ 323,424,996 $ 14,783,546 $ 8,392,026 $ 10,489,470
-------------- -------------- -------------- --------------
Shares of beneficial interest
outstanding ......................... 21,106,444 1,421,696 710,177 723,588
-------------- -------------- -------------- --------------
Net asset value and offering
price per share** ................... $15.32 $10.40 $11.82 $14.50
====== ====== ====== ======
CLASS C
Net assets ............................. $ 253,390,555 $ 11,638,124 $ 5,542,781 $ 11,123,148
-------------- -------------- -------------- --------------
Shares of beneficial interest
outstanding ......................... 16,549,908 1,118,724 469,542 762,687
-------------- -------------- -------------- --------------
Net asset value and offering
price per share** ................... $15.31 $10.40 $11.80 $14.58
====== ====== ====== ======
CLASS Y
Net assets ............................. $ 109,212,406 $ 758,290 $ 386,601 $ 20,930,814
-------------- -------------- -------------- --------------
Shares of beneficial interest
outstanding ......................... 6,673,418 71,804 30,370 1,398,626
-------------- -------------- -------------- --------------
Net asset value, offering and
redemption price per share ......... $16.37 $10.56 $12.73 $14.97
====== ====== ====== ======
<Caption>
SMALL CAP ALPHA INTERNATIONAL
VALUE GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- --------------
CLASS A
Net assets ............................. $ 12,771,310 $ 39,817,269 $ 20,518,016
-------------- -------------- --------------
Shares of beneficial interest
outstanding ......................... 990,333 2,557,453 1,990,895
-------------- -------------- --------------
Net asset value per share .............. $12.90 $15.57 $10.31
====== ====== ======
Maximum offering price per share
(net asset value plus sales charge
of 5.50%* of the offering price) .... $13.65 $16.48 $10.91
====== ====== ======
CLASS B
Net assets ............................. $ 4,975,092 $ 16,058,648 $ 4,217,834
-------------- -------------- --------------
Shares of beneficial interest
outstanding ......................... 401,152 1,058,837 420,773
-------------- -------------- --------------
Net asset value and offering
price per share** ................... $12.40 $15.17 $10.02
====== ====== ======
CLASS C
Net assets ............................. $ 9,203,867 $ 13,236,458 $ 13,256,754
-------------- -------------- --------------
Shares of beneficial interest
outstanding ......................... 741,009 871,612 1,321,656
-------------- -------------- --------------
Net asset value and offering
price per share** ................... $12.42 $15.19 $10.03
====== ====== ======
CLASS Y
Net assets ............................. $ 20,725,919 -- $ 16,468,463
-------------- -------------- --------------
Shares of beneficial interest
outstanding ......................... 1,570,142 -- 1,580,052
-------------- -------------- --------------
Net asset value, offering and
redemption price per share ......... $13.20 -- $10.42
====== ====== ======
</Table>
- ----------
* On investments of $50,000 or more, the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
40
<Page>
THE BEAR STEARNS FUNDS
STATEMENTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
<Table>
<Caption>
S&P STARS INTRINSIC
S&P STARS OPPORTUNITIES THE INSIDERS VALUE
PORTFOLIO PORTFOLIO SELECT FUND PORTFOLIO
------------- -------------- ----------- ------------
INVESTMENT INCOME
Dividends .............................. $ 8,768,200 $ 325,648 $ 651,859 $ 1,527,654
Interest ............................... 173,049 11,970 36,787 19,523
Securities lending income .............. 135,090 800 -- --
Less: Foreign taxes withheld ...... -- -- -- --
------------- ------------ ------------ ------------
9,076,339 338,418 688,646 1,547,177
------------- ------------ ------------ ------------
EXPENSES
Advisory fees .......................... 12,146,262 437,381 198,855 475,657
Administration fees .................... 2,176,306 87,517 50,245 95,695
Distribution and service fees - Class A 3,494,032 124,277 80,095 93,929
Distribution and service fees - Class B 4,299,442 180,128 99,126 103,523
Distribution and service fees - Class C 3,526,873 141,343 70,707 123,200
Transfer agent fees and expenses ....... 2,977,700 159,750 150,963 160,125
Accounting fees ........................ 527,023 30,982 18,917 30,622
Legal and auditing fees ................ 95,211 59,898 63,658 60,626
Custodian fees and expenses ............ 178,360 31,382 10,094 10,741
Insurance expenses ..................... 9,487 986 6,960 6,961
Amortization of organization expenses .. -- -- -- --
Federal and state registration fees .... 141,157 7,158 40,975 46,680
Reports and notices to shareholders .... 235,744 9,001 4,991 7,416
Trustees' fees and expenses ............ 12,801 12,325 11,718 11,704
Other .................................. 177,348 3,881 2,218 3,458
------------- ------------ ------------ ------------
Total expenses before waivers and
related reimbursements ....... 29,997,746 1,286,009 809,522 1,230,337
Less: waivers and related
reimbursements ............... (2,484,380) (256,772) (174,426) (274,718)
------------- ------------ ------------ ------------
Total expenses after waivers and
related reimbursements ....... 27,513,366 1,029,237 635,096 955,619
------------- ------------ ------------ ------------
Net investment income/(loss) ........... (18,437,027) (690,819) 53,550 591,558
------------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS
Net realized gain/(loss) from:
Investments .......................... (530,872,886) (14,494,223) (1,496,027) (2,993,556)
Foreign currency related transactions -- -- -- --
Securities sold short ................ (3,819,086) 399,989 -- --
Net change in unrealized appreciation/
(depreciation) on:
Investments and foreign currency
related transactions, if any ......... (349,004,459) (4,621,135) (9,619,724) (17,383,948)
Securities sold short ................ (372,798) (44,542) -- --
------------- ------------ ------------ ------------
Net realized and unrealized loss
on investments ....................... (884,069,229) (18,759,911) (11,115,751) (20,377,504)
------------- ------------ ------------ ------------
NET DECREASE IN NET
ASSETS RESULTING FROM
OPERATIONS ........................... $(902,506,256) $(19,450,730) $(11,062,201) $(19,785,946)
============= ============ ============ ============
<Caption>
SMALL CAP ALPHA INTERNATIONAL
VALUE GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ -------------
INVESTMENT INCOME
Dividends .............................. $ 1,031,271 $ 573,089 $ 1,593,879
Interest ............................... 28,976 52,617 110,412
Securities lending income .............. 6,474 -- 297
Less: Foreign taxes withheld ...... -- -- (150,884)
------------ ------------ ------------
1,066,721 625,706 1,553,704
------------ ------------ ------------
EXPENSES
Advisory fees .......................... 461,792 324,065 674,950
Administration fees .................... 92,359 75,311 101,243
Distribution and service fees - Class A 86,165 144,010 128,642
Distribution and service fees - Class B 60,233 122,476 58,510
Distribution and service fees - Class C 118,724 88,065 174,923
Transfer agent fees and expenses ....... 164,141 130,261 161,903
Accounting fees ........................ 33,279 25,742 32,504
Legal and auditing fees ................ 62,740 64,100 66,200
Custodian fees and expenses ............ 23,383 29,131 76,798
Insurance expenses ..................... 7,146 6,961 7,320
Amortization of organization expenses .. -- 5,830 20,666
Federal and state registration fees .... 43,431 45,325 51,416
Reports and notices to shareholders .... 7,337 5,600 13,001
Trustees' fees and expenses ............ 10,628 11,625 13,001
Other .................................. 4,210 4,240 5,300
------------ ------------ ------------
Total expenses before waivers and
related reimbursements ....... 1,175,568 1,082,742 1,586,377
Less: waivers and related
reimbursements ............... (294,546) (279,499) (380,613)
------------ ------------ ------------
Total expenses after waivers and
related reimbursements ....... 881,022 803,243 1,205,764
------------ ------------ ------------
Net investment income/(loss) ........... 185,699 (177,537) 347,940
------------ ------------ ------------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS
Net realized gain/(loss) from:
Investments .......................... (10,169,674) 2,029,943 (15,284,247)
Foreign currency related transactions -- -- (1,947,870)
Securities sold short ................ -- -- --
Net change in unrealized appreciation/
(depreciation) on:
Investments and foreign currency
related transactions, if any ......... (16,055,862) (11,016,230) (6,833,766)
Securities sold short ................ -- -- --
------------ ------------ ------------
Net realized and unrealized loss
on investments ....................... (26,225,536) (8,986,287) (24,065,883)
------------ ------------ ------------
NET DECREASE IN NET
ASSETS RESULTING FROM
OPERATIONS ........................... $(26,039,837) $ (9,163,824) $(23,717,943)
============ ============ ============
</Table>
The accompanying notes are an integral part of the financial statements.
41
<Page>
THE BEAR STEARNS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
S&P STARS PORTFOLIO
--------------------------------
FOR THE
FISCAL YEARS
ENDED MARCH 31,
--------------------------------
2003 2002
-------------- --------------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income/(loss) .................................. $ (18,437,027) $ (35,959,530)
Net realized gain/(loss) from investments, foreign currency
related transactions and securities sold short, if any ...... (534,691,972) (344,992,054)
Net change in unrealized appreciation/(depreciation) on
investments, foreign currency related transactions and
securities sold short, if any ............................... (349,377,257) 73,379,674
-------------- --------------
Net increase/(decrease) in net assets, resulting
from operations ............................................. (902,506,256) (307,571,910)
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A shares .............................................. -- --
Class B shares .............................................. -- --
Class C shares .............................................. -- --
Class Y shares .............................................. -- --
-------------- --------------
-- --
-------------- --------------
Net realized capital gains
Class A shares .............................................. -- --
Class B shares .............................................. -- --
Class C shares .............................................. -- --
Class Y shares .............................................. -- --
-------------- --------------
-- --
-------------- --------------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares .......................... 163,983,729 902,204,412
Cost of shares repurchased .................................... (687,251,200) (508,590,833)
Shares issued in reinvestment of dividends and distributions .. -- --
-------------- --------------
Net increase/(decrease) in net assets derived from
shares of beneficial interest transactions .................. (523,267,471) 393,613,579
-------------- --------------
Total increase/(decrease) in net assets ....................... (1,425,773,727) 86,041,669
NET ASSETS
Beginning of period ......................................... 2,596,674,744 2,510,633,075
-------------- --------------
End of period** ............................................. $1,170,901,017 $2,596,674,744
============== ==============
<Caption>
S&P STARS OPPORTUNITIES
PORTFOLIO
---------------------------------
FOR THE FOR THE PERIOD
FISCAL YEAR OCTOBER 1, 2001*
ENDED MARCH 31, THROUGH MARCH 31,
----------------------------------
2003 2002
-------------- -----------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income/(loss) .................................. $ (690,819) $ (239,747)
Net realized gain/(loss) from investments, foreign currency
related transactions and securities sold short, if any ...... (14,094,234) 177,671
Net change in unrealized appreciation/(depreciation) on
investments, foreign currency related transactions and
securities sold short, if any ............................... (4,665,677) 4,439,404
------------ -----------
Net increase/(decrease) in net assets, resulting
from operations ............................................. (19,450,730) 4,377,328
------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A shares .............................................. -- --
Class B shares .............................................. -- --
Class C shares .............................................. -- --
Class Y shares .............................................. -- --
------------ -----------
-- --
------------ -----------
Net realized capital gains
Class A shares .............................................. (358,229) --
Class B shares .............................................. (258,797) --
Class C shares .............................................. (203,086) --
Class Y shares .............................................. (16,521) --
------------ -----------
(836,633) --
------------ -----------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares .......................... 24,602,311 72,480,849
Cost of shares repurchased .................................... (27,421,582) (6,826,090)
Shares issued in reinvestment of dividends and distributions .. 775,281 --
------------ -----------
Net increase/(decrease) in net assets derived from
shares of beneficial interest transactions .................. (2,043,990) 65,654,759
------------ -----------
Total increase/(decrease) in net assets ....................... (22,331,353) 70,032,087
NET ASSETS
Beginning of period ......................................... 70,032,087 --
------------ -----------
End of period** ............................................. $ 47,700,734 $70,032,087
============ ===========
<Caption>
THE INSIDERS SELECT FUND
--------------------------------
FOR THE
FISCAL YEARS
ENDED MARCH 31,
--------------------------------
2003 2002
------------ -----------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income/(loss) .................................. $ 53,550 $ (90,796)
Net realized gain/(loss) from investments, foreign currency
related transactions and securities sold short, if any ...... (1,496,027) 12,305
Net change in unrealized appreciation/(depreciation) on
investments, foreign currency related transactions and
securities sold short, if any ............................... (9,619,724) 1,476,933
------------ -----------
Net increase/(decrease) in net assets, resulting
from operations ............................................. (11,062,201) 1,398,442
------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A shares .............................................. -- --
Class B shares .............................................. -- --
Class C shares .............................................. -- --
Class Y shares .............................................. -- --
------------ -----------
-- --
------------ -----------
Net realized capital gains
Class A shares .............................................. (25,126) (1,609,248)
Class B shares .............................................. (15,796) (957,044)
Class C shares .............................................. (11,229) (802,040)
Class Y shares .............................................. (640) (68,330)
------------ -----------
(52,791) (3,436,662)
------------ -----------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares .......................... 13,299,638 13,976,474
Cost of shares repurchased .................................... (13,545,245) (9,339,567)
Shares issued in reinvestment of dividends and distributions .. 48,418 3,201,070
------------ -----------
Net increase/(decrease) in net assets derived from
shares of beneficial interest transactions .................. (197,189) 7,837,977
------------ -----------
Total increase/(decrease) in net assets ....................... (11,312,181) 5,799,757
NET ASSETS
Beginning of period ......................................... 38,682,935 32,883,178
------------ -----------
End of period** ............................................. $ 27,370,754 $38,682,935
============ ===========
</Table>
- ----------
* Commencement of operations.
** Includes undistributed net investment income as follows:
<Table>
<Caption>
FOR THE FISCAL YEARS ENDED
----------------------------------
MARCH 31, 2003 MARCH 31, 2002
-------------- --------------
The Insiders Select Fund ................... $ 53,348 --
Intrinsic Value Portfolio .................. 368,133 $218,791
Small Cap Value Portfolio .................. 185,345 --
</Table>
The accompanying notes are an integral part of the financial statements.
42
<Page>
<Table>
<Caption>
INTRINSIC VALUE PORTFOLIO
----------------------------
FOR THE
FISCAL YEARS
ENDED MARCH 31,
----------------------------
2003 2002
------------ ------------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income/(loss) .................................. $ 591,558 $ 212,434
Net realized gain/(loss) from investments, foreign currency
related transactions and securities sold short, if any ... (2,993,556) 6,021
Net change in unrealized appreciation/(depreciation) on
investments, foreign currency related transactions and
securities sold short, if any ............................ (17,383,948) 1,982,246
------------ ------------
Net increase/(decrease) in net assets, resulting
from operations .......................................... (19,785,946) 2,200,701
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A shares ........................................... (124,710) (9,294)
Class B shares ........................................... (26,585) --
Class C shares ........................................... (30,467) --
Class Y shares ........................................... (252,926) (29,318)
------------ ------------
(434,688) (38,612)
------------ ------------
Net realized capital gains
Class A shares ........................................... -- (451,116)
Class B shares ........................................... -- (203,076)
Class C shares ........................................... -- (270,475)
Class Y shares ........................................... -- (474,371)
------------ ------------
-- (1,399,038)
------------ ------------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares .......................... 31,578,358 49,387,251
Cost of shares repurchased .................................... (18,042,549) (13,354,763)
Shares issued in reinvestment of dividends and distributions .. 406,998 1,376,746
------------ ------------
Net increase/(decrease) in net assets derived from
shares of beneficial interest transactions ............... 13,942,807 37,409,234
------------ ------------
Total increase/(decrease) in net assets ....................... (6,277,827) 38,172,285
NET ASSETS
Beginning of period ...................................... 66,555,021 28,382,736
------------ ------------
End of period** .......................................... $ 60,277,194 $ 66,555,021
============ ============
<Caption>
SMALL CAP VALUE PORTFOLIO
----------------------------
FOR THE
FISCAL YEARS
ENDED MARCH 31,
----------------------------
2003 2002
------------ ------------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income/(loss) .................................. $ 185,699 $ (111,729)
Net realized gain/(loss) from investments, foreign currency
related transactions and securities sold short, if any ... (10,169,674) 5,377,979
Net change in unrealized appreciation/(depreciation) on
investments, foreign currency related transactions and
securities sold short, if any ............................ (16,055,862) 7,192,546
------------ ------------
Net increase/(decrease) in net assets, resulting
from operations .......................................... (26,039,837) 12,458,796
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A shares ........................................... -- --
Class B shares ........................................... -- --
Class C shares ........................................... -- --
------------ ------------
Class Y shares ........................................... -- --
------------ ------------
Net realized capital gains
Class A shares ........................................... (1,262,957) (1,013,046)
Class B shares ........................................... (427,272) (300,405)
Class C shares ........................................... (826,472) (723,299)
Class Y shares ........................................... (1,639,686) (1,443,389)
------------ ------------
(4,156,387) (3,480,139)
------------ ------------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares .......................... 17,139,387 29,204,613
Cost of shares repurchased .................................... (24,768,254) (25,898,472)
Shares issued in reinvestment of dividends and distributions .. 3,708,819 3,103,122
------------ ------------
Net increase/(decrease) in net assets derived from
shares of beneficial interest transactions ............... (3,920,048) 6,409,263
------------ ------------
Total increase/(decrease) in net assets ....................... (34,116,272) 15,387,920
NET ASSETS
Beginning of period ...................................... 81,792,460 66,404,540
------------ ------------
End of period** .......................................... $ 47,676,188 $ 81,792,460
============ ============
<Caption>
ALPHA GROWTH PORTFOLIO
----------------------------
FOR THE
FISCAL YEARS
ENDED MARCH 31,
----------------------------
2003 2002
------------ ------------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income/(loss) .................................. $ (177,537) $ (192,256)
Net realized gain/(loss) from investments, foreign currency
related transactions and securities sold short, if any ... 2,029,943 (1,271,500)
Net change in unrealized appreciation/(depreciation) on
investments, foreign currency related transactions and
securities sold short, if any ............................ (11,016,230) 5,113,617
------------ ------------
Net increase/(decrease) in net assets, resulting
from operations .......................................... (9,163,824) 3,649,861
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A shares ........................................... -- --
Class B shares ........................................... -- --
Class C shares ........................................... -- --
Class Y shares ........................................... -- --
------------ ------------
-- --
------------ ------------
Net realized capital gains
Class A shares ........................................... -- --
Class B shares ........................................... -- --
Class C shares ........................................... -- --
Class Y shares ........................................... -- --
------------ ------------
-- --
------------ ------------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares .......................... 60,680,183 17,614,962
Cost of shares repurchased .................................... (21,187,371) (12,211,138)
Shares issued in reinvestment of dividends and distributions .. -- --
------------ ------------
Net increase/(decrease) in net assets derived from
shares of beneficial interest transactions ............... 39,492,812 5,403,824
------------ ------------
Total increase/(decrease) in net assets ....................... 30,328,988 9,053,685
NET ASSETS
Beginning of period ...................................... 38,783,387 29,729,702
------------ ------------
End of period** .......................................... $ 69,112,375 $ 38,783,387
============ ============
<Caption>
INTERNATIONAL EQUITY PORTFOLIO
------------------------------
FOR THE
FISCAL YEARS
ENDED MARCH 31,
------------------------------
2003 2002
------------- ------------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income/(loss) .................................. $ 347,940 $ (198,779)
Net realized gain/(loss) from investments, foreign currency
related transactions and securities sold short, if any ... (17,232,117) (26,169,644)
Net change in unrealized appreciation/(depreciation) on
investments, foreign currency related transactions and
securities sold short, if any ............................ (6,833,766) 11,419,276
------------ ------------
Net increase/(decrease) in net assets, resulting
from operations .......................................... (23,717,943) (14,949,147)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A shares ........................................... -- --
Class B shares ........................................... -- --
Class C shares ........................................... -- --
Class Y shares ........................................... -- --
------------ ------------
-- --
------------ ------------
Net realized capital gains
Class A shares ........................................... -- --
Class B shares ........................................... -- --
Class C shares ........................................... -- --
Class Y shares ........................................... -- --
------------ ------------
-- --
------------ ------------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares .......................... 18,424,391 69,154,576
Cost of shares repurchased .................................... (22,089,897) (64,044,379)
Shares issued in reinvestment of dividends and distributions .. -- --
------------ ------------
Net increase/(decrease) in net assets derived from
shares of beneficial interest transactions ............... (3,665,506) 5,110,197
------------ ------------
Total increase/(decrease) in net assets ....................... (27,383,449) (9,838,950)
NET ASSETS
Beginning of period ...................................... 81,844,516 91,683,466
------------ ------------
End of period** .......................................... $ 54,461,067 $ 81,844,516
============ ============
</Table>
43
<Page>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each class of shares
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each year indicated. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET NET NET
ASSET REALIZED AND DISTRIBUTIONS ASSET
VALUE, NET UNREALIZED FROM NET VALUE
BEGINNING INVESTMENT GAIN/(LOSS) ON REALIZED END OF
OF YEAR LOSS*(1) INVESTMENTS*(2) CAPITAL GAINS YEAR
---------- ---------- --------------- ------------- -------
S&P STARS PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ................. $25.11 $(0.21) $(9.09) -- $15.81
For the fiscal year ended March 31, 2002 ................. 27.85 (0.30) (2.44) -- 25.11
For the fiscal year ended March 31, 2001 ................. 36.42 (0.27) (7.82) $(0.48) 27.85
For the fiscal year ended March 31, 2000 ................. 24.39 (0.21) 12.53 (0.29) 36.42
For the fiscal year ended March 31, 1999 ................. 19.97 (0.12) 5.46 (0.92) 24.39
CLASS B
For the fiscal year ended March 31, 2003 ................. 24.46 (0.29) (8.85) -- 15.32
For the fiscal year ended March 31, 2002 ................. 27.26 (0.41) (2.39) -- 24.46
For the fiscal year ended March 31, 2001 ................. 35.83 (0.37) (7.72) (0.48) 27.26
For the fiscal year ended March 31, 2000 ................. 24.11 (0.27) 12.28 (0.29) 35.83
For the fiscal year ended March 31, 1999 ................. 19.86 (0.12) 5.29 (0.92) 24.11
CLASS C
For the fiscal year ended March 31, 2003 ................. 24.45 (0.31) (8.83) -- 15.31
For the fiscal year ended March 31, 2002 ................. 27.25 (0.42) (2.38) -- 24.45
For the fiscal year ended March 31, 2001 ................. 35.82 (0.38) (7.71) (0.48) 27.25
For the fiscal year ended March 31, 2000 ................. 24.10 (0.30) 12.31 (0.29) 35.82
For the fiscal year ended March 31, 1999 ................. 19.85 (0.22) 5.39 (0.92) 24.10
CLASS Y
For the fiscal year ended March 31, 2003 ................. 25.82 (0.09) (9.36) -- 16.37
For the fiscal year ended March 31, 2002 ................. 28.49 (0.16) (2.51) -- 25.82
For the fiscal year ended March 31, 2001 ................. 37.05 (0.14) (7.94) (0.48) 28.49
For the fiscal year ended March 31, 2000 ................. 24.68 (0.12) 12.78 (0.29) 37.05
For the fiscal year ended March 31, 1999 ................. 20.11 (0.05) 5.54 (0.92) 24.68
</Table>
- ----------
* Calculated based on shares outstanding on the first and last day of the
respective years, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and related reimbursements, if any.
(2) The amounts shown for a share outstanding throughout the respective
years are not in accord with the changes in the aggregate gains and
losses on investments during the respective years because of the timing
of the sales and repurchases of Portfolio shares in relation to
fluctuating net asset values during the respective years. Net realized
and unrealized gain/(loss) on investments include short sale
transactions, if any.
The accompanying notes are an integral part of the financial statements.
44
<Page>
<Table>
<Caption>
RATIO OF
TOTAL NET ASSETS, RATIO OF NET INVESTMENT
INVESTMENT END OF YEAR EXPENSES TO LOSS TO
RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1)
---------- --------------- ----------------------- ----------------------
S&P STARS PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ..... (37.06)% $ 484,873 1.50% (0.95)%
For the fiscal year ended March 31, 2002 ..... (9.80) 1,151,482 1.50 (1.12)
For the fiscal year ended March 31, 2001 ..... (22.36) 1,173,464 1.50 (1.04)
For the fiscal year ended March 31, 2000 ..... 50.82 673,550 1.50 (1.12)
For the fiscal year ended March 31, 1999 ..... 27.46 206,130 1.50 (0.73)
CLASS B
For the fiscal year ended March 31, 2003 ..... (37.37) 323,425 2.00 (1.44)
For the fiscal year ended March 31, 2002 ..... (10.27) 672,833 2.00 (1.65)
For the fiscal year ended March 31, 2001 ..... (22.73) 620,784 2.00 (1.58)
For the fiscal year ended March 31, 2000 ..... 50.13 300,693 2.00 (1.63)
For the fiscal year ended March 31, 1999 ..... 26.75 49,319 2.00 (1.23)
CLASS C
For the fiscal year ended March 31, 2003 ..... (37.38) 253,391 2.00 (1.44)
For the fiscal year ended March 31, 2002 ..... (10.28) 568,726 2.00 (1.65)
For the fiscal year ended March 31, 2001 ..... (22.74) 540,150 2.00 (1.58)
For the fiscal year ended March 31, 2000 ..... 50.15 314,794 2.00 (1.63)
For the fiscal year ended March 31, 1999 ..... 26.75 97,654 2.00 (1.23)
CLASS Y
For the fiscal year ended March 31, 2003 ..... (36.60) 109,212 1.00 (0.43)
For the fiscal year ended March 31, 2002 ..... (9.37) 203,633 1.00 (0.65)
For the fiscal year ended March 31, 2001 ..... (21.95) 176,235 1.00 (0.47)
For the fiscal year ended March 31, 2000 ..... 51.61 154,015 1.00 (0.56)
For the fiscal year ended March 31, 1999 ..... 28.02 52,483 1.00 (0.23)
<Caption>
INCREASE/(DECREASE)
REFLECTED IN
EXPENSE AND
NET INVESTMENT LOSS PORTFOLIO
RATIOS DUE TO WAIVERS AND TURNOVER
RELATED REIMBURSEMENTS RATE
------------------------- ---------
S&P STARS PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ................. 0.16% 122.29%
For the fiscal year ended March 31, 2002 ................. 0.08 110.80
For the fiscal year ended March 31, 2001 ................. 0.10 42.93
For the fiscal year ended March 31, 2000 ................. 0.18 54.67
For the fiscal year ended March 31, 1999 ................. 0.27 76.17
CLASS B
For the fiscal year ended March 31, 2003 ................. 0.16 122.29
For the fiscal year ended March 31, 2002 ................. 0.08 110.80
For the fiscal year ended March 31, 2001 ................. 0.10 42.93
For the fiscal year ended March 31, 2000 ................. 0.18 54.67
For the fiscal year ended March 31, 1999 ................. 0.27 76.17
CLASS C
For the fiscal year ended March 31, 2003 ................. 0.16 122.29
For the fiscal year ended March 31, 2002 ................. 0.08 110.80
For the fiscal year ended March 31, 2001 ................. 0.10 42.93
For the fiscal year ended March 31, 2000 ................. 0.18 54.67
For the fiscal year ended March 31, 1999 ................. 0.27 76.17
CLASS Y
For the fiscal year ended March 31, 2003 ................. 0.16 122.29
For the fiscal year ended March 31, 2002 ................. 0.08 110.80
For the fiscal year ended March 31, 2001 ................. 0.10 42.93
For the fiscal year ended March 31, 2000 ................. 0.18 54.67
For the fiscal year ended March 31, 1999 ................. 0.27 76.17
</Table>
- ----------
(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 year reported and includes reinvestment of
dividends and distributions, if any.
45
<Page>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each class of shares
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each period indicated. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET NET NET
ASSET REALIZED AND DISTRIBUTIONS ASSET
VALUE, NET UNREALIZED FROM NET VALUE,
BEGINNING INVESTMENT GAIN/(LOSS) ON REALIZED END OF
OF PERIOD LOSS**(1) INVESTMENTS**(2) CAPITAL GAINS PERIOD
---------- ---------- ---------------- ------------- ---------
S&P STARS OPPORTUNITIES PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 .................. $14.27 $(0.12) $(3.49) $(0.17) $10.49
For the period October 1, 2001* through March 31, 2002 .... 12.00 (0.04) 2.31 -- 14.27
CLASS B
For the fiscal year ended March 31, 2003 .................. 14.23 (0.18) (3.48) (0.17) 10.40
For the period October 1, 2001* through March 31, 2002 .... 12.00 (0.06) 2.29 -- 14.23
CLASS C
For the fiscal year ended March 31, 2003 .................. 14.23 (0.18) (3.48) (0.17) 10.40
For the period October 1, 2001* through March 31, 2002 .... 12.00 (0.06) 2.29 -- 14.23
CLASS Y
For the fiscal year ended March 31, 2003 .................. 14.30 (0.08) (3.49) (0.17) 10.56
For the period October 1, 2001* through March 31, 2002 .... 12.00 (0.02) 2.32 -- 14.30
</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 related reimbursements, if any.
(2) The amounts shown for a share outstanding throughout the respective
periods are not in accord with the changes in the aggregate gains and
losses on investments during the respective periods because of the timing
of the sales and repurchases of Portfolio shares in relation to
fluctuating net asset values during the respective periods. Net realized
and unrealized gain/(loss) on investments include short sale
transactions.
The accompanying notes are an integral part of the financial statements.
46
<Page>
<Table>
<Caption>
TOTAL NET ASSETS, RATIO OF
INVESTMENT END OF PERIOD EXPENSES TO
RETURN(3) (000'S omitted) AVERAGE NET ASSETS(1)
----------- --------------- ------------------------
S&P STARS OPPORTUNITIES PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ................. (25.36)% $20,521 1.50%
For the period October 1, 2001* through March 31, 2002 ... 18.92 30,004 1.50(4)
CLASS B
For the fiscal year ended March 31, 2003 ................. (25.79) 14,784 2.00
For the period October 1, 2001* through March 31, 2002 ... 18.58 21,094 2.00(4)
CLASS C
For the fiscal year ended March 31, 2003 ................. (25.79) 11,638 2.00
For the period October 1, 2001* through March 31, 2002 ... 18.58 16,412 2.00(4)
CLASS Y
For the fiscal year ended March 31, 2003 ................. (25.03) 758 1.00
For the period October 1, 2001* through March 31, 2002 ... 19.17 2,522 1.00(4)
<Caption>
INCREASE/(DECREASE)
REFLECTED IN
RATIO OF EXPENSE AND
NET INVESTMENT NET INVESTMENT LOSS PORTFOLIO
LOSS TO RATIOS DUE TO WAIVERS AND TURNOVER
AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE
---------------------- ------------------------- ---------
S&P STARS OPPORTUNITIES PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ................. (0.92)% 0.44% 174.82%
For the period October 1, 2001* through March 31, 2002 ... (0.90)(4) 0.85(4) 66.89
CLASS B
For the fiscal year ended March 31, 2003 ................. (1.42) 0.44 174.82%
For the period October 1, 2001* through March 31, 2002 ... (1.48)(4) 0.85(4) 66.89
CLASS C
For the fiscal year ended March 31, 2003 ................. (1.42) 0.44% 174.82%
For the period October 1, 2001* through March 31, 2002 ... (1.43)(4) 0.85(4) 66.89
CLASS Y
For the fiscal year ended March 31, 2003 ................. (0.45) 0.44 174.82%
For the period October 1, 2001* through March 31, 2002 ... (0.40)(4) 0.85(4) 66.89
</Table>
- ----------
(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.
47
<Page>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each class of shares
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each year indicated. This information has been derived
from information provided in the financial
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET NET
ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED
OF YEAR INCOME/(LOSS)*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS
------------ ----------------- --------------- ---------- -------------
THE INSIDERS SELECT FUND
CLASS A
For the fiscal year ended March 31, 2003 ......... $16.87 $0.06 $(4.58) -- $(0.02)
For the fiscal year ended March 31, 2002 ......... 17.84 (0.01) 0.73 -- (1.69)
For the fiscal year ended March 31, 2001 ......... 16.90 0.01 3.05 -- (2.12)
For the fiscal year ended March 31, 2000 ......... 17.02 -- 0.07 -- (0.19)
For the fiscal year ended March 31, 1999 ......... 17.88 -- (0.01) -- (0.85)
CLASS B
For the fiscal year ended March 31, 2003 ......... 16.24 (0.01) (4.39) -- (0.02)
For the fiscal year ended March 31, 2002 ......... 17.32 (0.07) 0.68 -- (1.69)
For the fiscal year ended March 31, 2001 ......... 16.54 (0.05) 2.95 -- (2.12)
For the fiscal year ended March 31, 2000 ......... 16.75 (0.05) 0.03 -- (0.19)
For the fiscal year ended March 31, 1999 ......... 17.69 -- (0.09) -- (0.85)
CLASS C
For the fiscal year ended March 31, 2003 ......... 16.24 (0.01) (4.41) -- (0.02)
For the fiscal year ended March 31, 2002 ......... 17.32 (0.08) 0.69 -- (1.69)
For the fiscal year ended March 31, 2001 ......... 16.54 (0.07) 2.97 -- (2.12)
For the fiscal year ended March 31, 2000 ......... 16.74 (0.05) 0.04 -- (0.19)
For the fiscal year ended March 31, 1999 ......... 17.68 -- (0.09) -- (0.85)
CLASS Y
For the fiscal year ended March 31, 2003 ......... 17.27 0.14 (4.66) -- (0.02)
For the fiscal year ended March 31, 2002 ......... 18.13 0.07 0.76 -- (1.69)
For the fiscal year ended March 31, 2001 ......... 17.09 0.09 3.07 -- (2.12)
For the fiscal year ended March 31, 2000 ......... 17.33 -- 0.13 $(0.18) (0.19)
For the fiscal year ended March 31, 1999 ......... 18.09 -- 0.09 -- (0.85)
</Table>
- ----------
* Calculated based on shares outstanding on the first and last day of the
respective years, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and related reimbursements, if any.
(2) The amounts shown for a share outstanding throughout the respective
years are not in accord with the changes in the aggregate gains and
losses on investments during the respective years because of the timing
of the sales and repurchases of Portfolio shares in relation to
fluctuating net asset values during the respective years.
The accompanying notes are an integral part of the financial statements.
48
<Page>
<Table>
<Caption>
NET
ASSET
VALUE, TOTAL NET ASSETS, RATIO OF
END OF INVESTMENT END OF YEAR EXPENSES TO
YEAR RETURN(3) (000'S OMMITTED) AVERAGE NET ASSETS(1)
------ ---------- ---------------- ---------------------
THE INSIDERS SELECT FUND
CLASS A
For the fiscal year ended March 31, 2003 ...... $12.33 (26.80)% $13,049 1.65%
For the fiscal year ended March 31, 2002 ...... 16.87 4.62 19,060 1.65
For the fiscal year ended March 31, 2001 ...... 17.84 17.92 17,372 1.65
For the fiscal year ended March 31, 2000 ...... 16.90 0.40 15,187 1.65
For the fiscal year ended March 31, 1999 ...... 17.02 0.29 24,395 1.65
CLASS B
For the fiscal year ended March 31, 2003 ...... 11.82 (27.10) 8,392 2.15
For the fiscal year ended March 31, 2002 ...... 16.24 4.11 10,357 2.15
For the fiscal year ended March 31, 2001 ...... 17.32 17.32 7,378 2.15
For the fiscal year ended March 31, 2000 ...... 16.54 (0.13) 5,469 2.15
For the fiscal year ended March 31, 1999 ...... 16.75 (0.16) 8,426 2.15
CLASS C
For the fiscal year ended March 31, 2003 ...... 11.80 (27.22) 5,543 2.15
For the fiscal year ended March 31, 2002 ...... 16.24 4.11 8,566 2.15
For the fiscal year ended March 31, 2001 ...... 17.32 17.32 7,328 2.15
For the fiscal year ended March 31, 2000 ...... 16.54 (0.07) 6,908 2.15
For the fiscal year ended March 31, 1999 ...... 16.74 (0.16) 11,902 2.15
CLASS Y
For the fiscal year ended March 31, 2003 ...... 12.73 (26.18) 387 1.15
For the fiscal year ended March 31, 2002 ...... 17.27 5.17 701 1.15
For the fiscal year ended March 31, 2001 ...... 18.13 18.30 805 1.15
For the fiscal year ended March 31, 2000 ...... 17.09 0.72 796 1.15
For the fiscal year ended March 31, 1999 ...... 17.33 0.85 914 1.15
<Caption>
INCREASE/(DECREASE)
REFLECTED IN
RATIO OF EXPENSE AND
NET INVESTMENT NET INVESTMENT INCOME/(LOSS) PORTFOLIO
INCOME/(LOSS) TO RATIOS DUE TO WAIVERS AND TURNOVER
AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE
--------------------- ---------------------------- ---------
THE INSIDERS SELECT FUND
CLASS A
For the fiscal year ended March 31, 2003 ...... 0.40% 0.52% 30.81%
For the fiscal year ended March 31, 2002 ...... (0.04) 1.23 57.26
For the fiscal year ended March 31, 2001 ...... 0.08 1.14 99.36
For the fiscal year ended March 31, 2000 ...... 0.10 0.81 76.06
For the fiscal year ended March 31, 1999 ...... 0.02 0.81 99.71
CLASS B
For the fiscal year ended March 31, 2003 ...... (0.08) 0.52 30.81
For the fiscal year ended March 31, 2002 ...... (0.49) 1.23 57.26
For the fiscal year ended March 31, 2001 ...... (0.42) 1.14 99.36
For the fiscal year ended March 31, 2000 ...... (0.40) 0.81 76.06
For the fiscal year ended March 31, 1999 ...... 0.03 0.81 99.71
CLASS C
For the fiscal year ended March 31, 2003 ...... (0.10) 0.52 30.81
For the fiscal year ended March 31, 2002 ...... (0.52) 1.23 57.26
For the fiscal year ended March 31, 2001 ...... (0.42) 1.14 99.36
For the fiscal year ended March 31, 2000 ...... (0.40) 0.81 76.06
For the fiscal year ended March 31, 1999 ...... 0.02 0.81 99.71
CLASS Y
For the fiscal year ended March 31, 2003 ...... 0.88 0.52 30.81
For the fiscal year ended March 31, 2002 ...... 0.39 1.23 57.26
For the fiscal year ended March 31, 2001 ...... 0.58 1.14 99.36
For the fiscal year ended March 31, 2000 ...... 0.60 0.81 76.06
For the fiscal year ended March 31, 1999 ...... 0.02 0.81 99.71
</Table>
- ----------
(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 year reported and includes reinvestment of dividends and
distributions, if any.
49
<Page>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each class of shares
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each year indicated. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET NET
ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT
OF YEAR INCOME/(LOSS)*(1) INVESTMENTS*(2) INCOME INCOME
---------- ----------------- --------------- ---------- -------------
INTRINSIC VALUE PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ...... $20.04 $0.14 $(5.26) $(0.11) --
For the fiscal year ended March 31, 2002 ...... 19.63 0.04 0.87 (0.01) $(0.49)
For the fiscal year ended March 31, 2001 ...... 16.71 0.11 3.85 (0.13) (0.91)
For the fiscal year ended March 31, 2000 ...... 19.74 0.11 (0.94) (0.10) (2.10)
For the fiscal year ended March 31, 1999 ...... 20.83 0.11 0.59 (0.11) (1.68)
CLASS B
For the fiscal year ended March 31, 2003 ...... 19.65 0.05 (5.16) (0.04) --
For the fiscal year ended March 31, 2002 ...... 19.35 (0.02) 0.81 -- (0.49)
For the fiscal year ended March 31, 2001 ...... 16.49 0.03 3.78 (0.04) (0.91)
For the fiscal year ended March 31, 2000 ...... 19.51 0.01 (0.93) -- (2.10)
For the fiscal year ended March 31, 1999 ...... 20.66 0.08 0.52 (0.07) (1.68)
CLASS C
For the fiscal year ended March 31, 2003 ...... 19.74 0.06 (5.18) (0.04) --
For the fiscal year ended March 31, 2002 ...... 19.43 (0.01) 0.81 -- (0.49)
For the fiscal year ended March 31, 2001 ...... 16.55 0.02 3.80 (0.03) (0.91)
For the fiscal year ended March 31, 2000 ...... 19.57 0.01 (0.93) -- (2.10)
For the fiscal year ended March 31, 1999 ...... 20.66 0.07 0.53 (0.01) (1.68)
CLASS Y
For the fiscal year ended March 31, 2003 ...... 20.17 0.22 (5.23) (0.19) --
For the fiscal year ended March 31, 2002 ...... 19.67 0.11 0.91 (0.03) (0.49)
For the fiscal year ended March 31, 2001 ...... 16.73 0.26 3.80 (0.21) (0.91)
For the fiscal year ended March 31, 2000 ...... 19.78 0.22 (0.97) (0.20) (2.10)
For the fiscal year ended March 31, 1999 ...... 20.84 0.17 0.65 (0.20) (1.68)
</Table>
- ----------
* Calculated based on shares outstanding on the first and last day of the
respective years, except for dividends and distributions, if any, which are
based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and related reimbursements, if any.
(2) The amounts shown for a share outstanding throughout the respective years
are not in accord with the changes in the aggregate gains and losses on
investments during the respective years because of the timing of the sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective years.
The accompanying notes are an integral part of the financial statements.
50
<Page>
<Table>
<Caption>
NET
ASSET
VALUE, TOTAL NET ASSETS, RATIO OF
END OF INVESTMENT END OF YEAR EXPENSES TO
YEAR RETURN(3) (000'S OMMITTED) AVERAGE NET ASSETS(1)
------ ---------- ---------------- ---------------------
INTRINSIC VALUE PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ...... $14.81 (25.60)% $17,734 1.50%
For the fiscal year ended March 31, 2002 ...... 20.04 4.72 20,953 1.50
For the fiscal year ended March 31, 2001 ...... 19.63 23.79 11,983 1.50
For the fiscal year ended March 31, 2000 ...... 16.71 (4.91) 7,950 1.50
For the fiscal year ended March 31, 1999 ...... 19.74 3.68 9,677 1.50
CLASS B
For the fiscal year ended March 31, 2003 ...... 14.50 (26.02) 10,489 2.00
For the fiscal year ended March 31, 2002 ...... 19.65 4.17 9,733 2.00
For the fiscal year ended March 31, 2001 ...... 19.35 23.19 3,687 2.00
For the fiscal year ended March 31, 2000 ...... 16.49 (5.41) 1,379 2.00
For the fiscal year ended March 31, 1999 ...... 19.51 3.21 1,911 2.00
CLASS C
For the fiscal year ended March 31, 2003 ...... 14.58 (25.95) 11,123 2.00
For the fiscal year ended March 31, 2002 ...... 19.74 4.20 13,528 2.00
For the fiscal year ended March 31, 2001 ...... 19.43 23.16 5,675 2.00
For the fiscal year ended March 31, 2000 ...... 16.55 (5.39) 3,359 2.00
For the fiscal year ended March 31, 1999 ...... 19.57 3.22 5,250 2.00
CLASS Y
For the fiscal year ended March 31, 2003 ...... 14.97 (24.92) 20,931 1.00
For the fiscal year ended March 31, 2002 ...... 20.17 5.28 22,341 1.00
For the fiscal year ended March 31, 2001 ...... 19.67 24.38 7,038 1.00
For the fiscal year ended March 31, 2000 ...... 16.73 (4.51) 3,438 1.00
For the fiscal year ended March 31, 1999 ...... 19.78 4.29 4,741 1.00
<Caption>
INCREASE/(DECREASE)
REFLECTED IN
RATIO OF EXPENSE AND
NET INVESTMENT NET INVESTMENT INCOME/(LOSS) PORTFOLIO
INCOME/(LOSS) TO RATIOS DUE TO WAIVERS AND TURNOVER
AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE
--------------------- ---------------------------- ---------
INTRINSIC VALUE PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ...... 0.93% 0.43% 52.98%
For the fiscal year ended March 31, 2002 ...... 0.38 0.75 20.60
For the fiscal year ended March 31, 2001 ...... 0.72 1.50 60.46
For the fiscal year ended March 31, 2000 ...... 0.56 1.78 55.66
For the fiscal year ended March 31, 1999 ...... 0.54 1.46 38.27
CLASS B
For the fiscal year ended March 31, 2003 ...... 0.45 0.43 52.98
For the fiscal year ended March 31, 2002 ...... (0.07) 0.75 20.60
For the fiscal year ended March 31, 2001 ...... 0.15 1.50 60.46
For the fiscal year ended March 31, 2000 ...... 0.03 1.75 55.66
For the fiscal year ended March 31, 1999 ...... 0.08 1.46 38.27
CLASS C
For the fiscal year ended March 31, 2003 ...... 0.44 0.43 52.98
For the fiscal year ended March 31, 2002 ...... 0.02 0.75 20.60
For the fiscal year ended March 31, 2001 ...... 0.11 1.50 60.46
For the fiscal year ended March 31, 2000 ...... 0.03 1.75 55.66
For the fiscal year ended March 31, 1999 ...... 0.08 1.46 38.27
CLASS Y
For the fiscal year ended March 31, 2003 ...... 1.44 0.43 52.98
For the fiscal year ended March 31, 2002 ...... 0.92 0.75 20.60
For the fiscal year ended March 31, 2001 ...... 1.65 1.50 60.46
For the fiscal year ended March 31, 2000 ...... 0.98 1.77 55.66
For the fiscal year ended March 31, 1999 ...... 1.08 1.46 38.27
</Table>
- ----------
(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 year reported and includes reinvestment of dividends and
distributions, if any.
51
<Page>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each class of shares
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each year indicated. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET NET NET
ASSET REALIZED AND DISTRIBUTIONS ASSET
VALUE, NET UNREALIZED FROM NET VALUE,
BEGINNING INVESTMENT GAIN/(LOSS) ON REALIZED END OF
OF YEAR INCOME/(LOSS)*(1) INVESTMENTS*(2) CAPITAL GAINS YEAR
--------- ----------------- --------------- --------------- --------
SMALL CAP VALUE PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 .......... $20.39 $0.04 $(6.47) $(1.06) $12.90
For the fiscal year ended March 31, 2002 .......... 18.13 (0.04) 3.30 (1.00) 20.39
For the fiscal year ended March 31, 2001 .......... 23.10 (0.14) (2.61) (2.22) 18.13
For the fiscal year ended March 31, 2000 .......... 17.93 (0.15) 6.69 (1.37) 23.10
For the fiscal year ended March 31, 1999 .......... 23.65 (0.13) (4.65) (0.94) 17.93
CLASS B
For the fiscal year ended March 31, 2003 .......... 19.82 (0.04) (6.32) (1.06) 12.40
For the fiscal year ended March 31, 2002 .......... 17.76 (0.12) 3.18 (1.00) 19.82
For the fiscal year ended March 31, 2001 .......... 22.80 (0.20) (2.62) (2.22) 17.76
For the fiscal year ended March 31, 2000 .......... 17.71 (0.24) 6.60 (1.27) 22.80
For the fiscal year ended March 31, 1999 .......... 23.48 (0.16) (4.67) (0.94) 17.71
CLASS C
For the fiscal year ended March 31, 2003 .......... 19.83 (0.04) (6.31) (1.06) 12.42
For the fiscal year ended March 31, 2002 .......... 17.77 (0.12) 3.18 (1.00) 19.83
For the fiscal year ended March 31, 2001 .......... 22.80 (0.22) (2.59) (2.22) 17.77
For the fiscal year ended March 31, 2000 .......... 17.70 (0.26) 6.62 (1.26) 22.80
For the fiscal year ended March 31, 1999 .......... 23.48 (0.26) (4.58) (0.94) 17.70
CLASS Y
For the fiscal year ended March 31, 2003 .......... 20.73 0.12 (6.59) (1.06) 13.20
For the fiscal year ended March 31, 2002 .......... 18.34 0.05 3.34 (1.00) 20.73
For the fiscal year ended March 31, 2001 .......... 23.23 (0.03) (2.64) (2.22) 18.34
For the fiscal year ended March 31, 2000 .......... 18.03 (0.05) 6.72 (1.47) 23.23
For the fiscal year ended March 31, 1999 .......... 23.65 (0.02) (4.66) (0.94) 18.03
</Table>
- ----------
* Calculated based on shares outstanding on the first and last day of the
respective years, except for dividends and distributions, if any, which are
based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and related reimbursements, if any.
(2) The amounts shown for a share outstanding throughout the respective years
are not in accord with the changes in the aggregate gains and losses on
investments during the respective years because of the timing of the sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective years.
The accompanying notes are an integral part of the financial statements.
52
<Page>
<Table>
<Caption>
RATIO OF
TOTAL NET ASSETS, RATIO OF NET INVESTMENT
INVESTMENT END OF YEAR EXPENSES TO INCOME/(LOSS) TO
RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1)
---------- --------------- --------------------- ---------------------
SMALL CAP VALUE PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 .......... (31.94)% $12,771 1.50% 0.23%
For the fiscal year ended March 31, 2002 .......... 18.51 23,902 1.50 (0.24)
For the fiscal year ended March 31, 2001 .......... (11.64) 17,194 1.50 (0.63)
For the fiscal year ended March 31, 2000 .......... 38.21 24,086 1.50 (0.75)
For the fiscal year ended March 31, 1999 .......... (20.26) 18,520 1.50 (0.60)
CLASS B
For the fiscal year ended March 31, 2003 .......... (32.52) 4,975 2.00 (0.26)
For the fiscal year ended March 31, 2002 .......... 17.76 6,944 2.00 (0.74)
For the fiscal year ended March 31, 2001 .......... (12.12) 4,301 2.00 (1.14)
For the fiscal year ended March 31, 2000 .......... 37.53 4,030 2.00 (1.24)
For the fiscal year ended March 31, 1999 .......... (20.63) 2,716 2.00 (1.10)
CLASS C
For the fiscal year ended March 31, 2003 .......... (32.45) 9,204 2.00 (0.27)
For the fiscal year ended March 31, 2002 .......... 17.75 16,112 2.00 (0.74)
For the fiscal year ended March 31, 2001 .......... (12.07) 11,460 2.00 (1.14)
For the fiscal year ended March 31, 2000 .......... 37.54 13,399 2.00 (1.24)
For the fiscal year ended March 31, 1999 .......... (20.67) 11,112 2.00 (1.10)
CLASS Y
For the fiscal year ended March 31, 2003 .......... (31.59) 20,726 1.00 0.74
For the fiscal year ended March 31, 2002 .......... 19.02 34,834 1.00 0.26
For the fiscal year ended March 31, 2001 .......... (11.22) 33,449 1.00 (0.13)
For the fiscal year ended March 31, 2000 .......... 38.86 31,091 1.00 (0.24)
For the fiscal year ended March 31, 1999 .......... (19.84) 24,087 1.00 (0.10)
<Caption>
INCREASE/(DECREASE)
REFLECTED IN
EXPENSE AND
NET INVESTMENT INCOME/(LOSS) PORTFOLIO
RATIOS DUE TO WAIVERS AND TURNOVER
RELATED REIMBURSEMENTS RATE
---------------------------- ----------
SMALL CAP VALUE PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 .......... 0.48% 92.42%
For the fiscal year ended March 31, 2002 .......... 0.53 75.76
For the fiscal year ended March 31, 2001 .......... 1.02 65.32
For the fiscal year ended March 31, 2000 .......... 0.65 65.85
For the fiscal year ended March 31, 1999 .......... 0.65 84.12
CLASS B
For the fiscal year ended March 31, 2003 .......... 0.48 92.42
For the fiscal year ended March 31, 2002 .......... 0.53 75.76
For the fiscal year ended March 31, 2001 .......... 1.02 65.32
For the fiscal year ended March 31, 2000 .......... 0.65 65.85
For the fiscal year ended March 31, 1999 .......... 0.65 84.12
CLASS C
For the fiscal year ended March 31, 2003 .......... 0.48 92.42
For the fiscal year ended March 31, 2002 .......... 0.53 75.76
For the fiscal year ended March 31, 2001 .......... 1.02 65.32
For the fiscal year ended March 31, 2000 .......... 0.65 65.85
For the fiscal year ended March 31, 1999 .......... 0.65 84.12
CLASS Y
For the fiscal year ended March 31, 2003 .......... 0.48 92.42
For the fiscal year ended March 31, 2002 .......... 0.53 75.76
For the fiscal year ended March 31, 2001 .......... 1.02 65.32
For the fiscal year ended March 31, 2000 .......... 0.65 65.85
For the fiscal year ended March 31, 1999 .......... 0.65 84.12
</Table>
- ----------
(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 year reported and includes reinvestment of dividends and
distributions, if any.
53
<Page>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each class of shares
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each year indicated. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET NET NET
ASSET REALIZED AND DISTRIBUTIONS ASSET
VALUE, NET UNREALIZED FROM NET VALUE,
BEGINNING INVESTMENT GAIN/(LOSS) ON REALIZED END OF
OF YEAR LOSS*(1) INVESTMENTS*(2) CAPITAL GAINS YEAR
------------- --------------- --------------- ------------- ----------
ALPHA GROWTH PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 ... $18.84 $(0.02) $(3.25) -- $15.57
For the fiscal year ended March 31, 2002 ... 16.75 (0.03) 2.12 -- 18.84
For the fiscal year ended March 31, 2001 ... 21.21 (0.09) (4.37) -- 16.75
For the fiscal year ended March 31, 2000 ... 17.32 (0.07) 3.96 -- 21.21
For the fiscal year ended March 31, 1999 ... 13.40 (0.07) 4.01 $(0.02) 17.32
CLASS B
For the fiscal year ended March 31, 2003 ... 18.41 (0.08) (3.16) -- 15.17
For the fiscal year ended March 31, 2002 ... 16.46 (0.06) 2.01 -- 18.41
For the fiscal year ended March 31, 2001 ... 20.93 (0.17) (4.30) -- 16.46
For the fiscal year ended March 31, 2000 ... 17.18 (0.16) 3.91 -- 20.93
For the fiscal year ended March 31, 1999 ... 13.38 (0.13) 3.95 (0.02) 17.18
CLASS C
For the fiscal year ended March 31, 2003 ... 18.42 (0.06) (3.17) -- 15.19
For the fiscal year ended March 31, 2002 ... 16.46 (0.06) 2.02 -- 18.42
For the fiscal year ended March 31, 2001 ... 20.94 (0.17) (4.31) -- 16.46
For the fiscal year ended March 31, 2000 ... 17.19 (0.18) 3.93 -- 20.94
For the fiscal year ended March 31, 1999 ... 13.38 (0.13) 3.96 (0.02) 17.19
</Table>
- ----------
* Calculated based on shares outstanding on the first and last day of the
respective years, except for dividends and distributions, if any, which are
based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and related reimbursements.
(2) The amounts shown for a share outstanding throughout the respective years
are not in accord with the changes in the aggregate gains and losses on
investments during the respective years because of the timing of the sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective years.
The accompanying notes are an integral part of the financial statements.
54
<Page>
<Table>
<Caption>
RATIO OF
TOTAL NET ASSETS, RATIO OF NET INVESTMENT
INVESTMENT END OF YEAR EXPENSES TO LOSS TO
RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1)
--------------- --------------- --------------------- ---------------------
ALPHA GROWTH PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 .... (17.36)% $39,817 1.40% (0.15)%
For the fiscal year ended March 31, 2002 .... 12.48 23,176 1.40 (0.42)
For the fiscal year ended March 31, 2001 .... (21.03) 17,316 1.40 (0.46)
For the fiscal year ended March 31, 2000 .... 22.46 22,580 1.40 (0.63)
For the fiscal year ended March 31, 1999 .... 29.47 6,542 1.40 (0.57)
CLASS B
For the fiscal year ended March 31, 2003 .... (17.60) 16,059 1.90 (0.65)
For the fiscal year ended March 31, 2002 .... 11.85 9,061 1.90 (0.92)
For the fiscal year ended March 31, 2001 .... (21.36) 7,441 1.90 (0.96)
For the fiscal year ended March 31, 2000 .... 21.83 9,124 1.90 (1.11)
For the fiscal year ended March 31, 1999 .... 28.61 4,460 1.90 (1.07)
CLASS C
For the fiscal year ended March 31, 2003 .... (17.54) 13,236 1.90 (0.63)
For the fiscal year ended March 31, 2002 .... 11.91 6,546 1.90 (0.92)
For the fiscal year ended March 31, 2001 .... (21.40) 4,973 1.90 (0.96)
For the fiscal year ended March 31, 2000 .... 21.81 6,398 1.90 (1.09)
For the fiscal year ended March 31, 1999 .... 28.69 3,304 1.90 (1.07)
<Caption>
INCREASE/(DECREASE)
REFLECTED IN
EXPENSE AND
NET INVESTMENT LOSS PORTFOLIO
RATIOS DUE TO WAIVERS AND TURNOVER
RELATED REIMBURSEMENTS RATE
------------------------- -----------
ALPHA GROWTH PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 .... 0.56% 185.33%
For the fiscal year ended March 31, 2002 .... 1.06 82.40
For the fiscal year ended March 31, 2001 .... 0.97 81.37
For the fiscal year ended March 31, 2000 .... 1.33 56.26
For the fiscal year ended March 31, 1999 .... 2.89 84.49
CLASS B
For the fiscal year ended March 31, 2003 .... 0.56 185.33
For the fiscal year ended March 31, 2002 .... 1.06 82.40
For the fiscal year ended March 31, 2001 .... 0.97 81.37
For the fiscal year ended March 31, 2000 .... 1.33 56.26
For the fiscal year ended March 31, 1999 .... 2.89 84.49
CLASS C
For the fiscal year ended March 31, 2003 .... 0.56 185.33
For the fiscal year ended March 31, 2002 .... 1.06 82.40
For the fiscal year ended March 31, 2001 .... 0.97 81.37
For the fiscal year ended March 31, 2000 .... 1.33 56.26
For the fiscal year ended March 31, 1999 .... 2.89 84.49
</Table>
- ----------
(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 year reported and includes reinvestment of dividends and
distributions, if any.
55
<Page>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each class of shares
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each period indicated. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET NET
ASSET NET REALIZED AND DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT UNREALIZED FROM NET FROM NET
BEGINNING INCOME GAIN/(LOSS) ON INVESTMENT REALIZED
OF PERIOD LOSS**(1) INVESTMENTS**(2) CAPITAL GAINS CAPITAL GAINS
--------------- --------------- ---------------- ------------- -------------
INTERNATIONAL EQUITY PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 .... $14.64 $0.07 $(4.40) -- --
For the fiscal year ended March 31, 2002 .... 17.55 (0.04) (2.87) -- --
For the fiscal year ended March 31, 2001 .... 27.84 (0.06) (9.92) -- $(0.31)
For the fiscal year ended March 31, 2000 .... 15.14 (0.05) 12.98 -- (0.23)
For the fiscal year ended March 31, 1999 .... 13.77 (0.03) 1.40 --+ --
CLASS B
For the fiscal year ended March 31, 2003 .... 14.32 0.01 (4.31) -- --
For the fiscal year ended March 31, 2002 .... 17.26 (0.12) (2.82) -- --
For the fiscal year ended March 31, 2001 .... 27.52 (0.18) (9.77) -- (0.31)
For the fiscal year ended March 31, 2000 .... 15.05 (0.10) 12.80 -- (0.23)
For the fiscal year ended March 31, 1999 .... 13.75 (0.02) 1.32 --+ --
CLASS C
For the fiscal year ended March 31, 2003 .... 14.32 0.01 (4.30) -- --
For the fiscal year ended March 31, 2002 .... 17.25 (0.10) (2.83) -- --
For the fiscal year ended March 31, 2001 .... 27.52 (0.15) (9.81) -- (0.31)
For the fiscal year ended March 31, 2000 .... 15.05 (0.09) 12.79 -- (0.23)
For the fiscal year ended March 31, 1999 .... 13.75 (0.02) 1.32 --+ --
CLASS Y
For the fiscal year ended March 31, 2003 .... 14.69 0.12 (4.39) -- --
For the period July 5, 2001* through
March 31, 2002 ............................. 16.75 0.06 (2.12) -- --
</Table>
- ----------
* Commencement of initial public offering.
** 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.
+ Amount is less than $0.01 per share.
(1) Reflects waivers and related 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 the
sales and repurchases of Portfolio shares in relation to fluctuating net
asset values during the respective periods.
The accompanying notes are an integral part of the financial statements.
56
<Page>
<Table>
<Caption>
NET
ASSET
VALUE, TOTAL NET ASSETS, RATIO OF
BEGINNING INVESTMENT END OF YEAR EXPENSES TO
OF PERIOD RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1)
--------------- --------------- --------------- ---------------------
INTERNATIONAL EQUITY PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 .... $10.31 (29.58)% $20,518 1.75%
For the fiscal year ended March 31, 2002 .... 14.64 (16.58) 31,455 1.75
For the fiscal year ended March 31, 2001 .... 17.55 (35.99) 54,096 1.75
For the fiscal year ended March 31, 2000 .... 27.84 85.67 61,508 1.75
For the fiscal year ended March 31, 1999 .... 15.14 9.97 8,299 1.75
CLASS B
For the fiscal year ended March 31, 2003 .... 10.02 (30.03) 4,218 2.25
For the fiscal year ended March 31, 2002 .... 14.32 (17.03) 7,751 2.25
For the fiscal year ended March 31, 2001 .... 17.26 (36.30) 11,754 2.25
For the fiscal year ended March 31, 2000 .... 27.52 84.66 15,656 2.25
For the fiscal year ended March 31, 1999 .... 15.05 9.48 3,156 2.25
CLASS C
For the fiscal year ended March 31, 2003 .... 10.03 (29.96) 13,257 2.25
For the fiscal year ended March 31, 2002 .... 14.32 (16.99) 21,025 2.25
For the fiscal year ended March 31, 2001 .... 17.25 (36.34) 25,833 2.25
For the fiscal year ended March 31, 2000 .... 27.52 84.65 18,238 2.25
For the fiscal year ended March 31, 1999 .... 15.05 9.48 2,926 2.25
CLASS Y
For the fiscal year ended March 31, 2003 .... 10.42 (29.07) 16,468 1.25
For the period July 5, 2001*
through March 31, 2002 ..................... 14.69 (12.30)(4) 21,614 1.25(4)(5)
<Caption>
INCREASE/(DECREASE)
REFLECTED IN
RATIO OF EXPENSE AND
NET INVESTMENT NET INVESTMENT LOSS PORTFOLIO
INCOME/(LOSS) TO RATIOS DUE TO WAIVERS AND TURNOVER
AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE
--------------------- ------------------------- -----------
INTERNATIONAL EQUITY PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2003 .... 0.55% 0.57% 147.32%
For the fiscal year ended March 31, 2002 .... (0.09) 0.57 168.32
For the fiscal year ended March 31, 2001 .... (0.31) 0.53 168.04
For the fiscal year ended March 31, 2000 .... (0.77) 1.12 96.36
For the fiscal year ended March 31, 1999 .... 0.05 2.38 114.68
CLASS B
For the fiscal year ended March 31, 2003 .... 0.07 0.57 147.32
For the fiscal year ended March 31, 2002 .... (0.59) 0.57 168.32
For the fiscal year ended March 31, 2001 .... (0.81) 0.53 168.04
For the fiscal year ended March 31, 2000 .... (1.27) 1.12 96.36
For the fiscal year ended March 31, 1999 .... (0.45) 2.38 114.68
CLASS C
For the fiscal year ended March 31, 2003 .... 0.05 0.57 147.32
For the fiscal year ended March 31, 2002 .... (0.59) 0.57 168.32
For the fiscal year ended March 31, 2001 .... (0.81) 0.53 168.04
For the fiscal year ended March 31, 2000 .... (1.27) 1.12 96.36
For the fiscal year ended March 31, 1999 .... (0.45) 2.38 114.68
CLASS Y
For the fiscal year ended March 31, 2003 .... 1.05 0.57 147.32
For the period July 5, 2001*
through March 31, 2002 ..................... 0.55(4)(5) 0.51(4)(5) 168.32
</Table>
- ----------
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) The total investment return and ratios for a class of shares are not
necessarily comparable to those of any other outstanding class of shares,
due to the timing differences in the commencement of initial public
offerings.
(5) Annualized.
57
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
S&P STARS Opportunities Portfolio
The Insiders Select Fund
Intrinsic Value Portfolio
Small Cap Value Portfolio
Alpha Growth Portfolio
International Equity Portfolio
NOTES TO FINANCIAL STATEMENTS
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 "SEC") under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), as an open-end management investment company. The
Fund currently consists of ten separate portfolios: six diversified portfolios,
Prime Money Market Portfolio, Intrinsic Value Portfolio ("Intrinsic Value"),
Small Cap Value Portfolio ("Small Cap"), International Equity Portfolio
("International Equity"), High Yield Total Return Portfolio and Income
Portfolio, and four non-diversified portfolios, The Insiders Select Fund
("Insiders Select"), Alpha Growth Portfolio ("Alpha Growth"), S&P STARS
Portfolio ("S&P STARS") and S&P STARS Opportunities Portfolio ("S&P STARS
Opportunities") (each a "Portfolio" and collectively the "Portfolios"). As of
the date hereof, each Portfolio offers four classes of shares, which have been
designated as Class A, B, C and Y shares (except the Prime Money Market
Portfolio which only offers shares designated as Class Y). Class Y shares of
Alpha Growth have not commenced its initial public offering. 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.
MANAGEMENT ESTIMATES--The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make certain estimates and assumptions that may
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATION--Each Portfolio calculates the net asset value of and
completes orders to purchase or repurchase its shares of beneficial interest as
of the close of regular trading on the New York Stock Exchange, Inc. (the
"Exchange") (generally 4:00 p.m. Eastern time) on each day that the Exchange is
open for trading.
Equity securities, including written covered call options, are valued each
business day at the last sale price as of the close of regular trading on the
Exchange by one or more independent pricing services ("Pricing Services")
approved by the Board of Trustees (the "Board"). Securities not listed on an
exchange or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices,
except in the case of open short positions where the asked price is used for
valuation purposes. Bid price is used when no asked price is available.
Other assets and securities for which no quotations are readily available or
which are restricted as to sale (or resale) are valued by such methods as the
Fund's Board deems in good faith to reflect the fair value. Restricted
securities, as well as securities or other assets for which market quotations
are not readily available, or are not valued by a Pricing Service approved by
the Fund's Board, are valued at fair value as determined in good faith by Bear
Stearns Asset Management Inc.'s ("BSAM" or the "Adviser") Valuation Committee,
pursuant to procedures approved by the Fund's Board. The Board reviews the
methods of valuation quarterly.
Short-term investments (those acquired with remaining maturities of 60 days or
less) are valued at cost, plus or minus any amortized discount or premium, which
approximates market value.
58
<Page>
Expenses and fees, including the respective investment advisory, administration
and distribution fees, are accrued daily and taken into account for the purpose
of determining the net asset value of each Portfolio's shares. Because of the
differences in operating expenses incurred by each class, the per share net
asset value of each class may differ.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date (the date on which the order to buy or sell is
executed). Realized gains and losses from securities and foreign currency
related transactions, if any, are calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
on an accrual basis. Each Portfolio's net investment income (other than
distribution and service fees) and unrealized and realized gains or losses are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class at the beginning of the day.
SHORT SELLING--When the Portfolio makes a short sale, an amount equal to the
proceeds received by the Portfolio is recorded as a liability and is
subsequently adjusted to the current market value of the short sale. Until the
Portfolio replaces the borrowed security, the Portfolio will maintain a
segregated account with cash, U.S. government securities or other liquid
securities sufficient to cover its short position on a daily basis. Short sales
represent obligations of the Portfolio to make future delivery of specific
securities and correspondingly creates an obligation to purchase the security at
market prices prevailing at the later delivery date (or to deliver the security
if already owned by the Portfolio). Upon the termination of a short sale, the
Portfolio will recognize a gain, limited to the price at which the Portfolio
sold the security short, if the market price is less than the proceeds
originally received. The Portfolio will recognize a loss, unlimited in
magnitude, if the market price at termination is greater than the proceeds
originally received. As a result, short sales create the risk that the
Portfolio's ultimate obligation to satisfy the delivery requirements may exceed
the amount of the proceeds initially received or the liability recorded in the
financial statements.
S&P STARS and S&P STARS Opportunities are the only Portfolios that have engaged
in short sales for the fiscal year ended March 31, 2003.
S&P STARS has segregated sufficient liquid assets in a separate account as
collateral for open short sales. Securities sold short at March 31, 2003 for S&P
STARS were as follows:
<Table>
<Caption>
MARKET UNREALIZED
SECURITY PROCEEDS VALUE GAIN/(LOSS)
- -------- ----------- ----------- ----------
Dreyer's Grand Ice Cream, Inc.................... $ 8,124,487 $ 8,318,400 $(193,913)
Great Atlantic & Pacific Tea Co., Inc. (The)..... 508,943 344,800 164,143
Navistar International Corp...................... 3,594,572 3,937,600 (343,028)
----------- ----------- ---------
Total............................................ $12,228,002 $12,600,800 $(372,798)
=========== =========== =========
</Table>
S&P STARS Opportunities has segregated sufficient liquid assets in a separate
account as collateral for open short sales. Securities sold short at March 31,
2003 for S&P STARS Opportunities were as follows:
<Table>
<Caption>
MARKET UNREALIZED
SECURITY PROCEEDS VALUE GAIN/(LOSS)
- -------- ----------- -------- -----------
Cognex Corp...................................... $146,746 $169,360 $(22,614)
Delta Air Lines, Inc............................. 6,710 8,900 (2,190)
Dreyer's Grand Ice Cream, Inc.................... 317,410 346,600 (29,190)
Four Seasons Hotels Inc.......................... 124,760 135,850 (11,090)
International Rectifier Corp..................... 89,122 78,680 10,442
-------- -------- --------
Total............................................ $684,748 $739,390 $(54,642)
======== ======== ========
</Table>
SECURITIES LENDING--Loans of securities are required to be initially secured by
collateral at least equal to 100% of the market value of the securities on loan
and maintained at a level at least equal to the value of loaned securities.
However, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral may be subject to
legal proceedings. In the event that the borrower fails to return securities,
and cash collateral being maintained by the borrower is insufficient to cover
the value of loaned securities and provided such collateral insufficiency is not
the result of investment losses,
59
<Page>
the lending agent has agreed to pay the amount of the shortfall to the
Portfolios. The market value of securities on loan to brokers at March 31, 2003,
were as follows:
<Table>
<Caption>
MARKET VALUE OF
PORTFOLIO SECURITIES ON LOAN
- --------- ------------------
S&P STARS..................... $52,172,304
Small Cap..................... 1,435,324
</Table>
In addition, S&P STARS Opportunities and International Equity engaged in
security lending transactions during the fiscal year ended March 31, 2003,
although none were outstanding as of March 31, 2003. All such income is included
in the Statements of Operations. No other Portfolios had security lending
transactions during the fiscal year ended March 31, 2003.
Pursuant to an exemptive order received from the Securities and Exchange
Commission (the "Order"), Custodial Trust Company ("CTC"), a wholly-owned
subsidiary of The Bear Stearns Companies Inc., custodian to each of the
Portfolios and an affiliate of BSAM, Bear Stearns Funds Management Inc. ("BSFM"
or the "Administrator") and Bear Stearns & Co. Inc., ("Bear Stearns" or the
"Distributor") served as the securities lending agent for the Portfolios and,
subject to the Order, participated in the lending income earned by the
Portfolios. During the fiscal year, CTC has been compensated approximately
$15,469, $199 and $1,026 from S&P STARS, S&P STARS Opportunities and Small Cap,
respectively. In addition, the Order permits (subject to limitations) a
Portfolio to loan its securities to its affiliates. During the fiscal year,
Bear, Stearns Securities Corp., an affiliate of the Portfolios received rebates
in connection with such loans amounting to $59,922, $35 and $858 for S&P STARS,
S&P STARS Opportunities and Small Cap, respectively.
FOREIGN CURRENCY TRANSLATION--The books and records of the Portfolios are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities and other assets and liabilities stated in foreign
currencies are translated at the exchange rates prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the rate
of exchange prevailing on the respective dates of such transactions. The
resulting exchange gains and losses are included in the Statements of
Operations.
The Portfolios do not generally isolate the effect of fluctuations in foreign
exchange rates from the effect of fluctuations in the market prices of
investments. However, the Portfolios do isolate the effect of fluctuations in
foreign exchange rates when determining the gain or loss upon the sale or
maturity of foreign currency-denominated debt obligations pursuant to U.S.
federal income tax regulations; such amount, if any, is categorized as foreign
exchange gain or loss for both financial reporting and income tax reporting
purposes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS--The Portfolios may enter into
forward foreign currency exchange contracts ("forward currency contracts") to
hedge against adverse changes in the relationship of the U.S. dollar to foreign
currencies. The Portfolios may enter into these contracts to fix the U.S. dollar
value of a security that it has agreed to buy or sell for the period between the
date the trade was entered into and the date the security is delivered and paid
for. The Portfolios may also use these contracts to hedge the U.S. dollar value
of securities it already owns that are denominated in foreign currencies.
Forward currency contracts are valued at the forward rate, and are
marked-to-market daily. The change in market value is recorded by the Portfolio
as an unrealized gain or loss. When the contract is closed, the Portfolio
records a realized gain or loss equal to the difference between the value of the
current contract at the time it was opened and the value at the time it was
closed. The use of forward currency contracts does not eliminate fluctuations in
the underlying prices of the Portfolio's securities, but it does establish a
rate of exchange that can be achieved in the future. Although forward currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of currency increase. In addition, the Portfolio could be exposed to risks if
the counterparties to the contracts are unable to meet the terms of their
contracts. For the fiscal year ended March 31, 2003, only International Equity
entered into such forward currency contracts. International Equity's open
forward currency contract at March 31, 2003, was as follows:
<Table>
<Caption>
DELIVERY VALUE SETTLEMENT UNREALIZED
CURRENCY (LOCAL CURRENCY) DATE COMMITMENT VALUE LOSS
- -------- ---------------- ---------- ---------- ---------- ----------
SALE:
Japanese Yen.... 619,030,000 04/04/03 $5,219,650 $5,221,233 $1,583
======
</Table>
60
<Page>
U.S. FEDERAL TAX STATUS--Each Portfolio intends to distribute substantially all
of its taxable income and to comply with the other requirements of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing during each calendar year substantially all of its
ordinary income and capital gains, if any, each Portfolio intends not to be
subject to a U.S. federal excise tax.
The tax character of dividends and distributions paid during the fiscal year
ended March 31, 2003 were as follows:
<Table>
<Caption>
ORDINARY LONG-TERM TOTAL
PORTFOLIO INCOME CAPITAL GAIN DISTRIBUTIONS
- --------- -------- ------------ -------------
S&P STARS Opportunites....... $ 836,305 -- $ 836,305
Insiders Select.............. 202 $ 52,589 52,791
Intrinsic Value.............. 424,797 9,891 434,688
Small Cap.................... 1,608,679 2,547,708 4,156,387
</Table>
At March 31, 2003, the components of distributable earnings on a tax basis were
as follows:
<Table>
<Caption>
UNDISTRIBUTED ACCUMULATED TOTAL
ORDINARY CAPITAL AND UNREALIZED ACCUMULATED
PORTFOLIO INCOME OTHER LOSSES DEPRECIATION DEFICIT
- --------- ------------- -------------- -------------- ----------------
S&P STARS............................ -- $(989,296,952) $(391,733,213) $(1,381,030,165)
S&P STARS Opportunites............... -- (13,183,080) (2,037,898) (15,220,978)
Insiders Select...................... $ 53,348 (1,496,721) (3,441,661) (4,885,034)
Intrinsic Value...................... 368,133 (2,637,251) (11,167,933) (13,437,051)
Small Cap............................ 185,345 (9,847,003) (6,091,892) (15,753,550)
Alpha Growth......................... -- (1,347,640) (2,316,196) (3,663,836)
International Equity................. -- (61,192,165) (2,849,837) (64,042,002)
</Table>
The difference between book basis and tax-basis unrealized depreciation is
attributable primarily to the tax deferral of losses on wash sales.
At March 31, 2003, the Portfolios indicated below had capital loss carryforwards
available as a reduction, to the extent provided in regulations, of any future
net capital gains realized before the end of fiscal year 2011. To the extent
that the capital loss carryforwards are used to offset future capital gains, it
is probable that the gains so offset will not be distributed to shareholders.
The Portfolios which had capital loss carryforwards at March 31, 2003 were as
follows:
<Table>
<Caption>
AMOUNT EXPIRING IN
GROSS CAPITAL LOSS --------------------------------------------
PORTFOLIO CARRYFORWARD 2009 2010 2011
- --------- ------------------ ----------- ------------ ------------
S&P STARS.................... $845,563,457 $75,578,722 $224,199,591 $545,785,144
S&P STARS Opportunities...... 9,462,013 -- -- 9,462,013
Insiders Select.............. 1,100,678 -- -- 1,100,678
Intrinsic Value.............. 880,718 -- -- 880,718
Small Cap.................... 6,119,606 -- -- 6,119,606
Alpha Growth................. 325,792 -- 325,792 --
International Equity......... 54,100,556 11,036,571 22,469,555 20,594,430
</Table>
For U.S. federal income tax purposes, net realized capital losses or foreign
exchange losses incurred after October 31, 2002 within the current fiscal year
are deemed to arise on the first day of the following fiscal year. S&P STARS,
S&P STARS Opportunities, Insiders Select, Intrinsic Value, Small Cap, Alpha
Growth and International Equity incurred and elected to defer such losses of
$143,733,495, $3,721,067, $396,043, $1,756,533, $3,727,397, $1,021,848 and
$6,115,800, respectively.
For U.S. federal income tax purposes, the cost of securities owned, gross
appreciation, gross depreciation and net unrealized depreciation of investments
at March 31, 2003 for each Portfolio were as follows:
<Table>
<Caption>
GROSS GROSS NET
PORTFOLIO COST APPRECIATION DEPRECIATION DEPRECIATION
- --------- -------------- ------------- -------------- --------------
S&P STARS.................... $1,578,349,844 $35,740,531 $(427,473,744) $(391,733,213)
S&P STARS Opportunities...... 48,474,665 2,498,060 (4,535,958) (2,037,898)
Insiders Select.............. 30,868,626 2,690,841 (6,132,502) (3,441,661)
Intrinsic Value.............. 71,955,919 2,151,856 (13,319,789) (11,167,933)
Small Cap.................... 54,001,304 2,721,468 (8,813,360) (6,091,892)
Alpha Growth................. 71,628,477 2,592,047 (4,908,243) (2,316,196)
International Equity......... 56,813,789 1,155,411 (4,034,957) (2,879,546)
</Table>
61
<Page>
DIVIDENDS AND DISTRIBUTIONS--Each Portfolio intends to distribute at least
annually to shareholders substantially all of its net investment income.
Distribution of net realized gains, if any, will be declared and paid at least
annually. Dividends and distributions to shareholders are recorded on the
ex-dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from GAAP. These
"book/tax" differences are either considered temporary or permanent in nature.
To the extent these differences are permanent in nature, such amounts are
reclassified within capital accounts based on their U.S. federal tax-basis
treatment. Temporary differences do not require reclassification.
At March 31, 2003, the reclassifications within the composition of net assets
were as follows: S&P STARS, S&P STARS Opportunities and Alpha Growth
reclassified from net investment losses of $18,343,528, $688,567 and $177,537,
respectively, to paid-in capital. In addition, S&P STARS and S&P STARS
Opportunities reclassified net investment losses of $93,499 and $2,252,
respectively, to accumulated net realized losses. International Equity
reclassified foreign exchange losses of $1,925,382 to net investment losses. In
addition, International Equity reclassified net investment losses of $574,297 to
paid-in capital. Insiders Select and Small Cap reclassified realized accumulated
losses of $202 and $350, respectively, to undistributed net investment income.
Insiders Select reclassified from realized accumulated losses a previous year
miscellaneous adjustment of $50 to paid-in capital. Small Cap reclassified from
undistributed net investment income a previous year miscellaneous adjustment of
$4 to paid-in capital. Intrinsic Value reclassified undistributed net investment
income of $7,528 to realized accumulated losses.
FOREIGN WITHHOLDING TAXES--Income received from sources outside of the United
States may be subject to withholding and other taxes imposed by countries other
than the United States.
OTHER--Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates. Some countries in
which the Portfolios invest require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if there is a deterioration in a country's balance of
payments or for other reasons, a country may impose temporary restrictions on
foreign capital remittances abroad. The securities exchanges of certain foreign
markets are substantially smaller, less liquid and more volatile than the major
securities markets in the United States.
TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
For the fiscal year ended March 31, 2003, BSAM, a wholly-owned subsidiary of The
Bear Stearns Companies Inc., served as the investment adviser pursuant to an
Investment Advisory Agreement with respect to each Portfolio. Under the terms of
the Investment Advisory Agreement, each Portfolio, except Insiders Select, has
agreed to pay BSAM a monthly fee at the annual rate of 0.75% of average daily
net assets for S&P STARS, S&P STARS Opportunities, Intrinsic Value and Small
Cap, 0.65% of average daily net assets for Alpha Growth, and 1.00% of average
daily net assets for International Equity.
For Insiders Select, BSAM is entitled to receive from the Portfolio a monthly
fee equal to an annual rate of 1.00% of the Portfolio's average daily net
assets. In addition, BSAM is entitled to a monthly performance adjustment fee
which may increase or decrease the total advisory fee by up to 0.50% per year of
the value of Insiders Select's average daily net assets. For the fiscal year
ended March 31, 2003, the performance adjustment fee decreased the total
advisory fee by $164,766 or 0.49% based on the value of Insider Select's average
daily net assets due to underperformance of such Portfolio on a trailing
12-month basis in comparison to the performance of the S&P MidCap 400 Index, the
Portfolio's benchmark index, for the twelve months ended March 31, 2003. As a
result, the annual rate was adjusted to 0.51% before any reduction for fee
waivers or expense reimbursements.
BSAM has engaged Marvin & Palmer Associates, Inc. ("Marvin & Palmer") as
International Equity's sub-investment adviser to manage the Portfolio's
day-to-day investment activities. Marvin & Palmer is entitled to receive a
monthly fee from BSAM (not the Portfolio) calculated on an annual basis equal to
0.20% of the Portfolio's total average daily net assets to the extent the
Portfolio's average daily net assets are in excess of $25 million and below $50
million at the relevant month end, 0.45% of the Portfolio's total average daily
net assets to the extent the Portfolio's average daily net assets are in excess
of $50 million and below $65 million at the relevant month end and 0.60% of the
Portfolio's total average daily net assets to the extent the International
Equity's net assets in excess of $65 million at the relevant month end. For the
fiscal year ended March 31, 2003, Marvin & Palmer earned a fee of $136,477.
For the fiscal year ended March 31, 2003, BSFM served as administrator to each
Portfolio pursuant to an Administration Agreement. The Administrator is entitled
to receive from each Portfolio a monthly fee equal to an annual rate of 0.15% of
each Portfolio's
62
<Page>
average daily net assets up to $1 billion, 0.12% of the next $1 billion, 0.10%
of the next $3 billion and 0.08% of the average daily net assets above $5
billion.
For the fiscal year ended March 31, 2003, BSAM has continued its undertaking to
limit each Portfolio's total operating expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary items) to a maximum annual level
as a percent of each Portfolio's average daily net assets as follows:
<Table>
<Caption>
PORTFOLIO CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Y SHARES
- --------- -------------- -------------- -------------- --------------
S&P STARS.................... 1.50% 2.00% 2.00% 1.00%
S&P STARS Opportunities...... 1.50 2.00 2.00 1.00
Insiders Select.............. 1.65 2.15 2.15 1.15
Intrinsic Value.............. 1.50 2.00 2.00 1.00
Small Cap.................... 1.50 2.00 2.00 1.00
Alpha Growth................. 1.40 1.90 1.90 --
International Equity......... 1.75 2.25 2.25 1.25
</Table>
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
fiscal year ended March 31, 2003, the investment advisory fee waivers and
reimbursements of expenses (in order to maintain the expense limitation) were as
follows:
<Table>
<Caption>
PORTFOLIO ADVISORY FEE WAIVERS EXPENSE REIMBURSEMENTS
- --------- -------------------- ----------------------
S&P STARS.................... $2,484,380 --
S&P STARS Opportunities...... 236,770 $20,002
Insiders Select.............. 174,426 --
Intrinsic Value.............. 274,718 --
Small Cap.................... 294,546 --
Alpha Growth................. 275,150 4,349
International Equity......... 369,277 11,336
</Table>
The Portfolios will not pay BSAM at a later time for any amounts BSAM may waive,
nor will the Portfolios reimburse BSAM for any amounts BSAM may assume.
For the fiscal year ended March 31, 2003, Bear Stearns, an affiliate of the
Adviser and the Administrator, earned $1,228,242, $81,393, $15,378, $10,944,
$4,626 and $88,621 in brokerage commissions from portfolio transactions executed
on behalf of S&P STARS, S&P STARS Opportunities, Insiders Select, Intrinsic
Value, Small Cap and Alpha Growth, respectively.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICING PLAN
The Portfolios listed below have entered into a Distribution Plan pursuant to
Rule 12b-1 under the Investment Company Act and a Shareholder Servicing Plan
which are as follows:
<Table>
<Caption>
CLASS A CLASS B CLASS C
------------------------- ------------------------- -------------------------
DISTRIBUTION SHAREHOLDER DISTRIBUTION SHAREHOLDER DISTRIBUTION SHAREHOLDER
PORTFOLIO PLAN SERVICING PLAN SERVICING PLAN SERVICING
- --------- ------------ ----------- ------------ ----------- ------------ -----------
S&P STARS.................... 0.25% 0.25% 0.75% 0.25% 0.75% 0.25%
S&P STARS Opportunities...... 0.25 0.25 0.75 0.25 0.75 0.25
Insiders Select.............. 0.25 0.25 0.75 0.25 0.75 0.25
Intrinsic Value.............. 0.25 0.25 0.75 0.25 0.75 0.25
Small Cap.................... 0.25 0.25 0.75 0.25 0.75 0.25
Alpha Growth................. 0.25 0.25 0.75 0.25 0.75 0.25
International Equity......... 0.25 0.25 0.75 0.25 0.75 0.25
</Table>
Such fees are based on the average daily net assets in each class of the
respective Portfolios and are accrued daily and paid quarterly or at such
intervals as the Board may determine. The fees paid to Bear Stearns under the
Distribution Plan are payable without regard to actual expenses incurred. Bear
Stearns uses the distribution fees to pay broker-dealers or other financial
63
<Page>
institutions whose clients hold each Portfolio's shares and for other
distribution-related activities. Bear Stearns uses shareholder servicing fees to
pay broker-dealers or other financial institutions that provide personal service
in connection with the maintenance of shareholder accounts.
For the fiscal year ended March 31, 2003, the distribution and shareholder
servicing fees paid to Bear Stearns under each Plan were as follows:
<Table>
<Caption>
PORTFOLIO DISTRIBUTION FEES SHAREHOLDER SERVICING FEES
- --------- ----------------- --------------------------
S&P STARS.................... $7,616,752 $3,703,595
S&P STARS Opportunities...... 303,242 142,506
Insiders Select.............. 167,424 82,504
Intrinsic Value.............. 217,008 103,644
Small Cap.................... 177,304 87,818
Alpha Growth................. 229,912 124,639
International Equity......... 239,397 122,678
</Table>
In addition, as Distributor of the Portfolios, Bear Stearns collects the sales
charges imposed on sales of each Portfolio's Class A shares, and reallows a
portion of such charges to dealers through which the sales are made. In
addition, Bear Stearns advanced 4.25% and 1.00% in sales commissions on the sale
of Class B and C shares, respectively, to dealers at the time of such sales.
For the fiscal year ended March 31, 2003, Bear Stearns has advised each
Portfolio that it received the amounts noted below in front-end sales charges
resulting from sales of Class A shares and contingent deferred sales charges
("CDSC") upon certain redemptions by Class A, B and C shareholders,
respectively. The amounts were as follows:
<Table>
<Caption>
FRONT-END SALES CHARGES CDSC CDSC CDSC
PORTFOLIO CLASS A SHARES CLASS A SHARES CLASS B SHARES CLASS C SHARES
- --------- ----------------------- -------------- -------------- --------------
S&P STARS.................... $1,137,238 $22,800 $3,054,572 $149,039
S&P STARS Opportunities...... 176,737 684 105,492 28,023
Insiders Select.............. 66,288 30 52,790 2,374
Intrinsic Value.............. 56,104 12 65,027 2,756
Small Cap.................... 31,612 -- 25,986 1,858
Alpha Growth................. 331,846 -- 61,957 3,202
International Equity......... 26,329 -- 43,284 815
</Table>
INVESTMENTS IN SECURITIES
For the fiscal year ended March 31, 2003, aggregate purchases and sales of
investment securities (excluding short-term investments) for each Portfolio were
as follows:
<Table>
<Caption>
PORTFOLIO PURCHASES SALES
- --------- -------------- --------------
S&P STARS.................... $2,021,866,249 $2,547,867,334
S&P STARS Opportunities...... 100,422,053 103,056,023
Insiders Select.............. 11,013,922 9,611,060
Intrinsic Value.............. 46,894,124 32,543,052
Small Cap.................... 54,827,860 63,278,782
Alpha Growth................. 132,568,597 86,629,005
International Equity......... 95,967,680 97,434,605
</Table>
INVESTMENTS IN AFFILIATES
A summary of transactions for each issuer, which is or was an affiliate at or
during the fiscal year ended March 31, 2003, were as follows:
<Table>
<Caption>
NUMBER OF CAPITAL UNREALIZED
PORTFOLIO AFFILIATE SHARES LOSS LOSS VALUE
- --------- ------------------------ --------- -------- ----------- -----------
S&P STARS CNET Networks, Inc. 8,000,000 $306,343 $27,932,958 $20,080,000
Intuitive Surgical, Inc. 3,130,000 951,628 15,493,320 20,219,800
SportsLine.com, Inc. 3,870,000 -- 33,603,711 3,792,600
</Table>
64
<Page>
SHARES OF BENEFICIAL INTEREST
Each Portfolio offers Class A, B, C and Y shares. Class A shares are sold with a
front-end sales charge of up to 5.50% for each Portfolio. Class B shares are
sold with a CDSC of up to 5.00% within six years of purchase. Class C shares are
sold with a CDSC of 1.00% within the first year of purchase. There is no sales
charge or CDSC on the sale of Class Y shares, which are offered primarily to
institutional investors.
Transactions in shares of beneficial interest for each Portfolio were as
follows:
<Table>
<Caption>
S&P STARS
-------------------------------------------
SALES REPURCHASES REINVESTMENTS
------------ ------------- -------------
CLASS A
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ................................................................ 3,895,224 19,073,752 --
Value ................................................................. $ 76,281,246 $347,895,463 --
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares ................................................................ 14,368,636 10,651,161 --
Value ................................................................. $395,690,142 $281,440,211 --
CLASS B
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ................................................................ 1,674,642 8,079,666 --
Value ................................................................. $ 31,438,483 $143,765,252 --
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares ................................................................ 8,494,754 3,756,954 --
Value ................................................................. $229,724,959 $ 96,832,796 --
CLASS C
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ................................................................ 1,707,019 8,417,201 --
Value ................................................................. $ 32,256,708 $149,851,445 --
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares ................................................................ 7,209,028 3,770,094 --
Value ................................................................. $194,284,555 $ 96,254,761 --
CLASS Y
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ................................................................ 1,265,616 2,478,336 --
Value ................................................................. $ 24,007,292 $ 45,739,040 --
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares ................................................................ 2,961,302 1,260,352 --
Value ................................................................. $ 82,504,756 $ 34,063,065 --
</Table>
<Table>
<Caption>
S&P STARS OPPORTUNITIES
-----------------------------------------
SALES REPURCHASES REINVESTMENTS
----------- ----------- -------------
CLASS A
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ................................................................ 878,968 1,055,372 30,110
Value ................................................................. $10,928,634 $12,146,430 $339,034
FOR THE PERIOD OCTOBER 1, 2001* THROUGH MARCH 31, 2002
Shares ................................................................ 2,325,455 222,405
Value ................................................................. $31,028,865 $ 3,017,221
CLASS B
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ................................................................ 546,134 627,113 20,418
Value ................................................................. $ 6,865,066 $ 7,170,373 $228,272
FOR THE PERIOD OCTOBER 1, 2001* THROUGH MARCH 31, 2002
Shares ................................................................ 1,578,013 95,756 --
Value ................................................................. $21,236,871 $ 1,286,791 --
CLASS C
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ................................................................ 532,785 584,820 17,250
Value ................................................................. $ 6,672,259 $ 6,669,475 $193,031
FOR THE PERIOD OCTOBER 1, 2001* THROUGH MARCH 31, 2002
Shares ................................................................ 1,288,530 135,021 --
Value ................................................................. $17,195,434 $ 1,810,728 --
CLASS Y
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ................................................................ 11,479 117,341 1,320
Value ................................................................. $ 136,352 $ 1,435,304 $ 14,944
FOR THE PERIOD OCTOBER 1, 2001* THROUGH MARCH 31, 2002
Shares ................................................................ 228,429 52,083 --
Value ................................................................. $ 3,019,679 $ 711,350 --
</Table>
- ----------
* Commencement of operations.
65
<Page>
<Table>
<Caption>
INSIDERS SELECT INTRINSIC VALUE
--------------------------------------- ----------------------------------------
SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS
---------- ----------- ------------- ----------- ----------- -------------
CLASS A
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares .................................... 381,563 455,090 1,714 513,159 368,820 7,061
Value ..................................... $5,369,724 $6,163,183 $ 22,765 $ 8,715,103 $6,017,945 $114,948
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares .................................... 384,291 323,743 95,352 669,302 256,724 22,742
Value ..................................... $6,621,242 $5,591,340 $1,514,178 $13,051,249 $4,904,724 $436,638
CLASS B
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares .................................... 383,024 311,664 1,163 496,503 269,735 1,505
Value ..................................... $5,327,083 $3,978,471 $ 14,814 $ 8,340,638 $4,238,099 $ 23,997
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares .................................... 270,831 119,236 60,118 566,093 271,529 10,167
Value ..................................... $4,571,486 $1,900,056 $ 920,405 $10,849,923 $5,133,383 $191,757
CLASS C
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares .................................... 191,683 250,383 802 298,748 223,304 1,770
Value ..................................... $2,601,331 $3,264,497 $ 10,211 $ 5,076,626 $3,561,759 $28,400
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares .................................... 164,299 105,639 45,664 470,809 90,971 13,470
Value ..................................... $2,778,796 $1,705,742 $ 699,111 $ 8,981,522 $1,715,561 $255,120
CLASS Y
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares .................................... 115 10,358 46 537,624 261,360 14,640
Value ..................................... $ 1,500 $ 139,094 $ 628 $ 9,445,991 $4,224,746 $239,653
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares .................................... 311 8,310 4,151 808,588 84,184 25,556
Value ..................................... $ 4,950 $ 142,429 $ 67,376 $16,504,557 $1,601,095 $493,231
</Table>
<Table>
<Caption>
SMALL CAP ALPHA GROWTH
---------------------------------------- ----------------------------------------
SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS
----------- ----------- ------------- ----------- ----------- -------------
CLASS A
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares .................................... 364,832 625,507 78,806 2,127,629 800,655 --
Value ..................................... $ 6,037,964 $ 9,671,143 $1,102,665 $35,129,114 $13,225,130 --
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares .................................... 586,779 412,601 49,702 627,708 430,929 --
Value ..................................... $11,408,425 $ 7,900,324 $ 925,947 $11,013,070 $ 7,410,507 --
CLASS B
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares .................................... 230,356 208,957 29,431 893,338 326,659 --
Value ..................................... $ 3,875,019 $ 3,154,162 $ 396,144 $14,555,453 $ 5,201,059 --
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares .................................... 164,001 70,927 15,031 193,946 153,981 --
Value ..................................... $ 3,253,319 $ 1,283,967 $ 272,654 $ 3,401,228 $ 2,575,446 --
CLASS C
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares .................................... 165,696 289,911 52,759 686,358 170,113 --
Value ..................................... $ 2,592,228 $ 4,318,724 $ 711,205 $10,995,616 $ 2,761,182 --
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares .................................... 222,060 87,502 32,859 185,401 132,091 --
Value ..................................... $ 4,265,305 $ 1,626,664 $ 506,392 $ 3,200,664 $ 2,225,185 --
CLASS Y
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares .................................... 291,446 507,414 105,401 -- -- --
Value ..................................... $ 4,634,176 $ 7,624,225 $1,498,805 -- -- --
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares .................................... 535,829 747,698 69,176 -- -- --
Value ..................................... $10,277,564 $15,087,517 $1,308,129 -- -- --
</Table>
66
<Page>
<Table>
<Caption>
INTERNATIONAL EQUITY
----------------------------------------
SALES REPURCHASES REINVESTMENTS
----------- ----------- -------------
CLASS A
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ............................................ 950,740 1,108,654 --
Value ............................................. $11,728,521 $13,680,368 --
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares ............................................ 1,978,777 2,912,106 --
Value ............................................. $33,391,989 $47,655,604 --
CLASS B
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ............................................ 38,380 158,816 --
Value ............................................. $ 492,186 $ 1,947,580 --
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares ............................................ 84,838 224,692 --
Value ............................................. $ 1,318,717 $ 3,399,318 --
CLASS C
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ............................................ 101,211 247,980 --
Value ............................................. $ 1,369,054 $ 2,869,518 --
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
Shares ............................................ 744,550 773,372 --
Value ............................................. $12,251,095 $12,713,567 --
CLASS Y
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
Shares ............................................ 396,376 287,464 --
Value ............................................. $ 4,834,630 $ 3,592,431 --
FOR THE PERIOD JULY 5, 2001* THROUGH MARCH 31, 2002
Shares ............................................ 1,490,131 18,991 --
Value ............................................. $22,192,775 $ 275,890 --
</Table>
- ----------
* Commencement of its initial public offering.
CREDIT FACILITY
The Fund has entered into a demand promissory note arrangement with JPMorgan
Chase Bank (the "Bank") to provide an uncommitted credit facility to the Fund
(on behalf of each 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. Each Portfolio, as a
fundamental policy, is permitted to borrow in an amount up to 331/3% of the
value of each Portfolio's total assets. However, each Portfolio intends to
borrow money only for temporary or emergency (not leveraging) purposes and only
in amounts not to exceed 15% of its net assets.
Each loan is payable on demand or upon termination of this credit facility or on
the last day of the interest period and, in any event, not later than 14 days
from the date the loan was advanced.
Amounts outstanding under the credit facility during the fiscal year ended
March 31, 2003, were as follows:
<Table>
<Caption>
MAXIMUM LOAN AMOUNT
PORTFOLIO AVERAGE LOAN BALANCE OUTSTANDING AVERAGE INTEREST RATE
- --------- -------------------- ------------------- ---------------------
S&P STARS...................................... $7,249,018 $34,728,500 2.00%
S&P STARS Opportunities........................ 17,590 801,900 2.14
Insiders Select................................ 956 95,100 1.92
Small Cap...................................... 6,187 2,208,200 1.93
Alpha Growth................................... 39,939 2,070,100 1.83
</Table>
S&P STARS had a loan balance of $13,619,800 outstanding under the line of credit
facility at March 31, 2003. None of the other Portfolios had any amounts
outstanding under the line of credit facility at March 31, 2003.
67
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
S&P STARS Opportunities Portfolio
The Insiders Select Fund
Intrinsic Value Portfolio
Small Cap Value Portfolio
Alpha Growth Portfolio
International Equity Portfolio
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders,
S&P STARS Portfolio
S&P STARS Opportunities Portfolio
The Insiders Select Fund
Intrinsic Value Portfolio
Small Cap Value Portfolio
Alpha Growth Portfolio
International Equity Portfolio
(Series of The Bear Stearns Funds):
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of S&P STARS Portfolio, S&P STARS Opportunities
Portfolio, The Insiders Select Fund, Intrinsic Value Portfolio, Small Cap Value
Portfolio, Alpha Growth Portfolio, and International Equity Portfolio
(collectively, the "Portfolios") as of March 31, 2003, and the related
statements of operations for the year then ended, and the statements of changes
in net assets and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Portfolios' management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2003, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Portfolios as of March 31, 2003, the results of their operations for the year
then ended, the changes in their net assets, and the financial highlights for
the respective stated periods, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
May 9, 2003
68
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Opportunities Portfolio
The Insiders Select Fund
Intrinsic Value Portfolio
Small Cap Value Portfolio
SHAREHOLDER TAX INFORMATION - (UNAUDITED)
Each Portfolio is required by Subchapter M of the Internal Revenue Code of 1986,
as amended, to advise its shareholders within 60 days of each Portfolio's fiscal
year end (March 31, 2003) as to the U.S. federal tax status of distributions
received by the Portfolio's shareholders in respect of such fiscal year. During
the fiscal year ended March 31, 2003, the following dividends and distributions
per share were paid by each of the Portfolios:
<Table>
<Caption>
S&P STARS
OPPORTUNITIES THE INSIDERS INTRINSIC SMALL CAP
PORTFOLIO SELECT FUND VALUE PORTFOLIO VALUE PORTFOLIO
------------- ----------- --------------- ---------------
Payment Date: 12/20/02 12/20/02 12/20/02 12/20/02
Net Investment Income:
Class A -- -- $0.1100 --
Class B -- -- 0.0400 --
Class C -- -- 0.0400 --
Class Y -- -- 0.1900 --
Short-Term Capital Gains:
Class A $0.1723 -- -- $0.4093
Class B 0.1723 -- -- 0.4093
Class C 0.1723 -- -- 0.4093
Class Y 0.1723 -- -- 0.4093
Long-Term Capital Gains:
Class A -- $0.0210 -- $0.6483
Class B -- 0.0210 -- 0.6483
Class C -- 0.0210 -- 0.6483
Class Y -- 0.0210 -- 0.6483
</Table>
Ordinary income dividends, which include short-term capital gain distributions,
should be reported as dividend income on Form 1040. Income dividends are taxable
as ordinary income, as are short-term capital gain distributions.
Because each Portfolio's fiscal year is not the calendar year, another
notification will be sent with respect to calendar year 2003. The second
notification, which will reflect the amount to be used by calendar year
taxpayers on their U.S. federal income tax returns, will be made in conjunction
with Form 1099-DIV and will be mailed in January 2004.
Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their actual ordinary dividends. They will generally not be entitled
to a foreign tax credit or deduction for the withholding taxes paid by the
Portfolios, if any.
In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs)
need not be reported as taxable income for U.S. federal income tax purposes.
However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may
need this information for their annual information reporting.
Shareholders are advised to consult their own tax advisers with respect to the
tax consequences of their investment in the Portfolios.
69
<Page>
THE BEAR STEARNS FUNDS
TRUSTEES AND OFFICERS
The following information is provided for each Trustee, Officer and the Advisory
Trustee of The Bear Stearns Funds (the "Trust") as of March 31, 2003. Each
Trustee oversees all 10 portfolios of the Trust. The Statement of Additional
Information includes additional information about the Trustees and is available
without charge, upon request, by calling PFPC Inc. at 1-800-447-1139 or
1-800-766-4111. The mailing address of the Trustees and Officers is 383 Madison
Avenue, New York, New York 10179.
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------
POSITION(S) WITH
THE TRUST AND
LENGTH OF TIME OTHER DIRECTORSHIPS
NAME AND AGE SERVED(1) PRINCIPAL OCCUPATION(S) IN THE PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------
Peter M. Bren - 69 Trustee, since 1995 Chairman and President, Koll Bren Schreiber None
Realty Advisers (realty)
- ------------------------------------------------------------------------------------------------------------------------
John S. Levy - 67 Trustee, since 2000 Managing Partner, Fayerwearther Capital SL Green Realty Corp.
Partners (private investment partnership)
- ------------------------------------------------------------------------------------------------------------------------
M.B. Oglesby, Jr. - 59 Trustee, since 1995 Consultant; Vice Chairman, BKSH & Associates, None
Washington DC (government lobbyists)
(2002 - present); Formerly, Chief of Staff to
United States Trade Representative,
Executive Office of the President (2001-2002);
Consultant, Chairman, Oglesby Properties, Inc.;
President and Chief Executive Officer,
Association of American Railroads;
Vice Chairman, Cassidy & Associates
- ------------------------------------------------------------------------------------------------------------------------
Robert E. Trustee, since 2000 Retired; Formerly, Vice President, None
Richardson - 61 Broker/Dealer Department,
Mellon Bank (financial services) (1991-1999)
- ------------------------------------------------------------------------------------------------------------------------
"INTERESTED" TRUSTEES(2)
- ------------------------------------------------------------------------------------------------------------------------
Michael Minikes - 59 Chairman of the Treasurer, The Bear Stearns Companies Inc. None
Board and Trustee, and Bear, Stearns & Co. Inc. ("Bear Stearns");
since 1999 Senior Managing Director, Bear Stearns;
Co-President, Bear, Stearns Securities
Corporation (1999-present);
Director, Custodial Trust Company ("CTC") and
Bear Stearns Bank plc
- ------------------------------------------------------------------------------------------------------------------------
Doni L. Fordyce - 43 President and Director, Chairman of the Board, President, None
Trustee, since 2000 Senior Managing Director, Bear Stearns Asset
Management Inc. ("BSAM") and, since 2000,
Chief Executive Officer and Chief
Operating Officer
- ------------------------------------------------------------------------------------------------------------------------
Robert M. Trustee, since 2001 Senior Managing Director, Bear Stearns; None
Steinberg - 57 Director of CTC
- ------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The term of office for a Trustee is indefinite, until he or she resigns, is
removed or a successor has been duly elected and qualified.
(2) The Interested Trustees are considered to be "interested persons" (as
defined by the Investment Company Act of 1940), as amended, because of
their employment with the Trust's adviser or principal underwriter.
70
<Page>
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------
POSITION WITH
THE TRUST AND
LENGTH OF TIME
NAME AND AGE SERVED(1) PRINCIPAL OCCUPATION(s) IN THE PAST 5 YEARS
- ---------------------------------------------------------------------------------------------------------------------------
ADVISORY TRUSTEE
- ---------------------------------------------------------------------------------------------------------------------------
Senator Alan Advisory Trustee, Partner - Corporate Business and Legislative Law, Bryan Cave (law firm);
Dixon - 76 since 1995 Formerly, United States Senator (1981-1992)
- ---------------------------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
- ---------------------------------------------------------------------------------------------------------------------------
Barry Sommers - 34 Executive Vice Senior Managing Director (2000-present); Head of Marketing and Sales for
President, since 1998 the Trust (1997-present); Managing Director, Bear Stearns (1997-2000)
- ---------------------------------------------------------------------------------------------------------------------------
Stephen A. Vice President and General Counsel, Managing Director/Principal and Executive Vice President,
Bornstein - 59 Secretary, since 1995 BSAM; Managing Director/Principal, Bear Stearns; Vice President,
General Counsel and Secretary, Bear Stearns Funds Management Inc. ("BSFM")
- ---------------------------------------------------------------------------------------------------------------------------
Frank J. Maresca - 44 Vice President and President and Chief Executive Officer, BSFM; Senior Managing Director,
Treasurer, since 1995 Bear Stearns (2001-present); Managing Director, Bear Stearns
- ---------------------------------------------------------------------------------------------------------------------------
Vincent L. Assistant Treasurer, Executive Vice President, BSFM; Managing Director, (1999-present) and
Pereira - 37 since 1995 Associate Director (1997-1999), Bear Stearns
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The term of the office for an Officer is indefinite, until he or she
resigns, is removed or a successor has been duly elected and qualified.
71
<Page>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
S&P STARS Opportunities Portfolio
The Insiders Select Fund
Intrinsic Value Portfolio
Small Cap Value Portfolio
Alpha Growth Portfolio
International Equity Portfolio
PRIVACY NOTICE
While information is the cornerstone of our ability to provide superior service,
our most important assets are our shareholders and the trust that they place in
us. Keeping shareholder information secure and using it only as our shareholders
would want us to are top priorities at The Bear Stearns Funds.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
personal information about you. This is the information we collect from you on
applications or other forms, and from the transactions you make with us or third
parties. It may include your name, address, social security number, account
transactions and balances, and information on investment goals and risk
tolerance.
We do not disclose any information about you or about former customers to anyone
except as permitted by law. Specifically, we may disclose the information we
collect to companies that perform services on our behalf, such as the transfer
agent that processes shareholder accounts and mailers that assist us in the
distribution of shareholder materials. This allows us to continue to meet your
investing needs, and to effect transactions that you request or authorize.
These companies will use this information only for the services for which we
hired them, and are not permitted to use or share this information for any other
purpose. To protect your personal information internally, we permit access only
by authorized employees and maintain physical, electronic and procedural
safeguards to guard your personal information.
You may have received communications regarding information privacy on policies
from other financial institutions that gave you the opportunity to "opt-out" of
certain information sharing with companies that are not affiliated with that
financial institution. The Bear Stearns Funds does not share information with
other companies for purposes of marketing solicitations. Therefore, The Bear
Stearns Funds does not provide opt-out options to its shareholders.
We reserve the right to change our privacy policy at any time. The examples
contained within this notice are illustrations; they are not intended to be
exclusive. This notice complies with a recently enacted Federal law and new SEC
regulations regarding privacy. You may have additional rights under foreign or
other domestic laws that may apply to you.
72
<Page>
The
Bear Stearns
Funds
383 MADISON AVENUE, NEW YORK, NY 10179 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.
383 Madison Avenue
New York, NY 10179
SUB-ADVISER
INTERNATIONAL EQUITY
PORTFOLIO
Marvin & Palmer
Associates, Inc.
1201 N. Market Street
Suite 2300
Wilmington, DE 19801
ADMINISTRATOR
Bear Stearns Funds
Management Inc.
383 Madison Avenue
New York, NY 10179
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
DISTRIBUTOR
Bear, Stearns & Co. Inc.
383 Madison Avenue
New York, NY 10179
COUNSEL
Kramer Levin
Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
TRANSFER AND DIVIDEND
DISBURSEMENT AGENT
PFPC Inc.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
This report is submitted for the general information of the shareholders of each
Portfolio. It is not authorized for distribution to prospective investors in
each Portfolio unless it is preceded or accompanied by a current prospectus
which includes details regarding each Portfolio's objectives, policies, sales
commissions and other information. Total investment return is based on
historical results and is not intended to indicate future performance. The
investment return and principal value of an investment in each Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than original cost.
"Standard & Poor's(R)" and "S&P(R)" are trademarks of The McGraw-Hill Companies,
Inc. and have been licensed for use by Bear, Stearns & Co. Inc. S&P STARS
Portfolio and S&P STARS Opportunities Portfolio are not sponsored, managed,
advised, sold or promoted by Standard & Poor's.
<Page>
THE
BEAR STEARNS
FUNDS
PRIME MONEY
MARKET PORTFOLIO
ANNUAL REPORT
MARCH 31, 2003
[BEAR STEARNS LOGO]
BSF-R-017-12
<Page>
THE BEAR STEARNS FUNDS
Prime Money Market Portfolio
LETTER TO SHAREHOLDERS
April 28, 2003
Dear Shareholders:
We are pleased to present you with the annual report for the Prime Money Market
Portfolio (the "Portfolio") for the fiscal year ended March 31, 2003.
For much of the Portfolio's fiscal year, corporate governance scandals,
slower-than-expected economic growth, and rising geopolitical risk drove
investors out of equities and into fixed income, causing the U.S.Treasury
market to rally and yields to fall across the entire maturity spectrum. This
flight to quality led to a record amount of money flowing into fixed income
mutual funds during the period. By the close of the year, more than $4
trillion was positioned in money market funds.
To maximize returns, we opportunistically added securities with a yield
advantage in various sectors to the Portfolio throughout the year; securities
such as callable government agency issues, callable certificates of deposit,
and high-grade commercial paper. The Portfolio ranked in the 17th percentile
of its peer group (a universe consisting of 252 funds) for the year ended
March 31, 2003, as represented by iMoney Net tier-one institutional money
funds.
As the fiscal year began, the LIBOR(1) yield curve was positive-sloping (longer
maturity rates were higher than shorter maturity rates) at the short end of the
maturity spectrum (from three months to one year), reflecting investors'
hopefulness that the economic recovery would continue, and that the Federal
Reserve would begin to raise rates. The Portfolio's average maturity was 47
days; a level we held until it became clear that the economy was not growing as
quickly as anticipated. During the summer, a series of large-scale corporate
governance scandals and evidence of slowing growth led to a more pessimistic
outlook. Interest rates responded by shifting downward. By September, the yield
curve had become inverted at the short end (longer maturity rates were lower
than shorter maturity rates), reflecting this gloomier outlook for the economy
and an expectation of further Fed easing. In agreement with this expectation, we
increased the Portfolio's average maturity to 54 days by the end of September.
In an environment of declining interest rates, having a higher average maturity
enabled us to lock in higher rates, thus reducing the risk of having to reinvest
Portfolio assets at lower rates in the future. As expected, the Fed decreased
the targeted Federal Funds rate at its November meeting from 1.75% to 1.25%; its
lowest level in 44 years.
By November, positive sentiment briefly returned to the markets, causing
equities to rally. The yield curve shifted from slightly inverted to flat, and
then to positively-sloping on the expectation that economic growth would once
again begin to accelerate. In response, we lowered the Portfolio's average
maturity to 47 days. The New Year brought escalating uncertainties about the
possibility of war with Iraq, however, along with additional evidence of slowing
economic growth, causing consumer confidence to drop sharply. By the end of the
fiscal year, the yield curve had once again become inverted at the short end,
reflecting an expectation for further Fed easing. In response, we raised the
Portfolio's average maturity back up to 50 days.
Looking ahead, there is much uncertainty as to what the Fed's next move will be.
A difficult, lengthy resolution to the Iraqi situation could dampen consumer
confidence, prompting the Fed to lower rates further. Conversely, a quick
resolution and smooth transition out of Iraq could increase consumer confidence,
causing the Fed to hold rates steady. Because of this uncertainty, we have
positioned the Portfolio to be neutral within its targeted maturity range, which
will enable us to take advantage of an interest rate move in either direction.
1
<Page>
In the months ahead, we will continue our strategy of investing
opportunistically in money market sectors that offer a yield advantage, while at
the same time continuing to focus on high quality issuance. We will keep a
vigilant watch on the Fed's guidance, the release of key economic data, and the
Fed Funds futures market for signs of interest rate movements in either
direction.
We appreciate your continued support. Please feel free to call 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 London Interbank Offer Rate (LIBOR) is the rate at which the most
creditworthy international banks dealing in Eurodollars charge each
other for large loans.
2
<Page>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000'S) RATE(S) DATE(S) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
BANKERS ACCEPTANCE - 0.41%
BANKS - DOMESTIC - 0.41%
$ 10,000 Wachovia Bank N.A. [A-1, P-1]
(cost - $9,965,104)..................................... 1.276 - 1.284% 05/23/03 - 08/28/03 $ 9,965,104
--------------
CERTIFICATES OF DEPOSIT - 30.23%
BANKS - DOMESTIC - 5.47%
9,000 Bank of New York [A-1+, P-1]............................... 2.540 07/07/03 9,033,532
14,500 Citibank N.A. [A-1+, P-1].................................. 1.250 06/10/03 14,500,000
57,000 State Street Bank & Trust Co. [A-1+, P-1].................. 1.440 - 2.290 06/18/03 - 03/23/04 57,009,257
52,000 Wells Fargo Bank N.A. [A-1+, P-1] ......................... 1.250 - 1.260 04/28/03 - 05/06/03 52,000,696
--------------
132,543,485
==============
BANKS - EURO - AUSTRALIA - 1.03%
25,000 National Australia Bank [A-1+, P-1]........................ 1.550 12/10/03 25,041,207
==============
BANKS - EURO - FRANCE - 3.22%
25,000 BNP Paribas [A-1+, P-1] ................................... 1.350 - 1.410 04/09/03 - 09/18/03 25,000,064
12,000 Credit Agricole Indosuez [A-1+, P-1] ...................... 1.220 05/14/03 12,000,285
41,000 Societe Generale [A-1+, P-1] .............................. 1.250 - 1.280 05/02/03 - 06/10/03 41,000,309
--------------
78,000,658
--------------
BANKS - EURO - GERMANY - 2.97%
51,000 Landesbank Hessen-Thuringen Girozentrale [A-1+, P-1]....... 1.320 - 1.900 09/12/03 - 10/24/03 51,005,115
21,000 Norddeutsche Landesbank [A-1+, P-1] ....................... 1.270 06/03/03 21,000,363
--------------
72,005,478
--------------
BANKS - EURO - NETHERLANDS - 1.78%
43,000 ING Bank N.V. [A-1+, P-1] ................................. 1.260 - 1.900 04/22/03 - 09/12/03 43,000,000
--------------
BANKS - EURO - UNITED KINGDOM - 2.31%
16,000 Barclays Bank plc [A-1+, P-1] ............................. 1.610 12/10/03 16,017,542
40,000 Lloyds TSB Bank plc [A-1+, P-1] ........................... 2.600 - 2.650 05/16/03 - 05/20/03 40,018,323
--------------
56,035,865
--------------
BANKS - YANKEE - AUSTRALIA - 0.74%
18,000 Westpac Banking Corp. [A-1+, P-1].......................... 1.160 09/05/03 18,001,204
--------------
BANKS - YANKEE - CANADA - 1.98%
15,000 Bank of Nova Scotia [A-1, P-1]............................. 1.220 04/22/03 14,999,560
15,000 Canadian Imperial Bank of Commerce [A-1, P-1].............. 1.240 06/13/03 15,000,000
18,000 Toronto Dominion Bank NY [A-1, P-1] ....................... 1.310 07/07/03 18,005,132
--------------
48,004,692
--------------
BANKS - YANKEE - FRANCE - 1.26%
30,500 Credit Agricole Indosuez [A-1+, P-1] ...................... 1.270 - 2.980 04/07/03 - 04/21/03 30,501,587
--------------
</Table>
The accompanying notes are an integral part of the financial statements.
3
<Page>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000'S) RATE(S) DATE(S) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (CONTINUED)
BANKS - YANKEE - GERMANY - 3.06%
$ 11,000 Bayerische Landesbank Girozentrale [A-1+, P-1]................. 1.495% 11/18/03 $ 11,000,000
63,000 Westdeutsche Landesbank Girozentrale [A-1+, P-1]............... 1.260 - 1.780 04/22/03 - 05/21/03 63,000,000
------------
74,000,000
------------
BANKS - YANKEE - NETHERLANDS - 1.28%
30,900 ABN-AMRO Bank N.V. [A-1+, P-1]................................. 2.510 - 2.605 04/04/03 - 06/06/03 30,911,035
------------
BANKS - YANKEE - SWEDEN - 1.16%
28,000 Svenska Handelsbanken [A-1, P-1]............................... 1.310 04/09/03 28,000,240
------------
BANKS - YANKEE - UNITED KINGDOM - 3.97%
16,000 Abbey National Treasury Service [A-1+, P-1].................... 1.260 05/06/03 15,999,998
16,000 Abbey National Treasury Service* [A-1+, P-1]................... 1.300 04/01/03 15,999,971
11,000 Lloyds TSB Bank plc [A-1+, P-1]................................ 1.255 04/28/03 11,000,035
53,000 Royal Bank of Scotland plc [A-1+, P-1]......................... 1.195 - 2.730 04/14/03 - 06/18/03 53,003,193
------------
96,003,197
------------
Total Certificates of Deposit
(cost - $732,048,648).......................................... 732,048,648
------------
COMMERCIAL PAPER - 27.49%
BANKS - YANKEE - NETHERLANDS - 2.27%
55,000 Rabobank Nederland N.V. NY [A-1+, P-1]......................... 1.340 04/01/03 55,000,000
------------
COMMERCIAL FINANCE - 3.92%
7,500 General Electric Capital Corp. [A-1+, P-1]..................... 1.251 04/24/03 7,494,010
29,000 Toyota Motor Credit Corp. [A-1+, P-1].......................... 1.202 - 1.252 04/10/03 - 04/24/03 28,986,850
58,400 UBS Finance LLC [A-1+, P-1].................................... 1.251 - 1.390 04/01/03 - 04/24/03 58,379,420
------------
94,860,280
------------
CORPORATE LOAN CONDUIT - 0.11%
2,565 Greyhawk Funding LLC [A-1+, P-1]............................... 1.273 05/19/03 2,560,657
------------
DEPARTMENT STORES - 1.49%
36,000 Wal-Mart Stores, Inc. [A-1+, P-1].............................. 1.271 - 1.350 04/02/03 - 04/08/03 35,995,718
------------
DIVERSIFIED RECEIVABLES CONDUIT - 13.78%
30,000 Alpine Securitization Corp. [A-1, P-1]......................... 1.221 - 1.400 04/08/03 - 04/17/03 29,988,971
5,860 Barton Capital Corp. [A-1+, P-1]............................... 1.231 04/02/03 5,859,800
58,500 Enterprise Funding Corp. [A-1+, P-1]........................... 1.231 - 1.301 04/11/03 - 04/25/03 58,469,151
24,900 Eureka Securitization [A-1+, P-1].............................. 1.282 04/07/03 24,894,687
7,900 Govco, Inc. [A-1+, P-1]........................................ 1.222 05/13/03 7,888,756
5,000 Mont Blanc Capital Corp. [A-1+, P-1]........................... 1.301 04/24/03 4,995,847
52,000 Old Line Funding Corp. [A-1+, P-1]............................. 1.253 - 1.450 04/01/03 - 05/23/03 51,957,247
</Table>
The accompanying notes are an integral part of the financial statements.
4
<Page>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000'S) RATE(S) DATE(S) VALUE
- -------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (CONTINUED)
DIVERSIFIED RECEIVABLES CONDUIT (CONTINUED)
$ 44,796 Park Avenue Receivables Corp. [A-1, P-1]................... 1.223 - 1.380% 04/01/03 - 05/19/03 $ 44,771,229
56,345 Sheffield Receivables Corp. [A-1+, P-1] ................... 1.251 - 1.291 04/11/03 - 04/25/03 56,310,882
48,500 Windmill Funding Corp. [A-1+, P-1]......................... 1.271 - 1.283 04/02/03 - 05/06/03 48,477,138
------------
333,613,708
------------
DRUGS - 1.03%
25,000 Pharmacia Corp. [A-1+, P-1]................................ 1.261 04/08/03 24,993,875
------------
GAS & OIL - 2.07%
50,200 Koch Industries, Inc. [A-1+, P-1] ......................... 1.251 - 1.390 04/01/03 - 04/16/03 50,190,875
------------
INVESTMENT STRUCTURE - 1.30%
31,630 Sigma Finance, Inc. [A-1+, P-1]............................ 1.213 - 1.314 04/03/03 - 05/23/03 31,603,317
------------
METAL - ALUMINUM - 0.37%
9,000 Alcoa Inc. [A-1, P-1] ..................................... 1.251 04/10/03 8,997,188
------------
SECURITY BROKERS & DEALERS - 1.15%
16,020 Goldman Sachs Group, Inc. (The) [A-1, P-1] ................ 1.279 09/12/03 15,927,315
12,000 Morgan Stanley* [A-1, P-1] ................................ 1.480 04/01/03 12,000,000
------------
27,927,315
------------
Total Commercial Paper
(cost - $665,742,933)...................................... 665,742,933
------------
CORPORATE OBLIGATIONS - 9.23%
BANKS - DOMESTIC - 2.33%
18,500 Bank One N.A.* [A-1, P-1] ................................. 1.438 04/07/03 18,500,392
12,000 First Union National Bank* [A-1, P-1] ..................... 1.499 06/16/03 12,034,898
26,000 US Bank N.A.* [A-1, P-1]................................... 1.350 - 1.431 04/16/03 - 04/22/03 26,019,647
------------
56,554,937
------------
BANKS - YANKEE - CANADA - 0.68%
16,500 Royal Bank of Canada* [A-1+, P-1].......................... 1.221 04/22/03 16,497,487
------------
BANKS - YANKEE - GERMANY - 0.64%
15,500 Norddeutsche Landesbank Girozentrale* [A-1+, P-1].......... 1.250 04/22/03 15,498,542
------------
COMMERCIAL FINANCE - 0.87%
21,000 General Electric Capital Corp.* [A-1+, P-1]................ 1.310 - 1.390 04/01/03 - 04/17/03 21,000,567
------------
</Table>
The accompanying notes are an integral part of the financial statements.
5
<Page>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000'S) RATE(S) DATE(S) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (CONTINUED)
INSURANCE - 2.48%
$ 20,000 General Electric Capital Assurance Co.* [A-1+, P-1] ..................... 1.412% 04/07/03 $ 20,000,000
40,000 Travelers Insurance Co.* [A-1+, P-1] .................................... 1.380 - 1.411 04/28/03 40,000,000
------------
60,000,000
------------
INVESTMENT STRUCTURE - 0.91%
22,000 Sigma Finance, Inc.* [A-1+, P-1] ........................................ 1.281 - 1.305 04/09/03 - 04/23/03 21,998,767
------------
SECURITY BROKERS & DEALERS - 1.32%
20,000 Goldman Sachs Group, Inc. (The)* [A-1, P-1].............................. 1.395 04/01/03 20,000,000
12,000 Merrill Lynch & Co., Inc.* [A-1, P-1].................................... 1.518 04/02/03 12,010,609
------------
32,010,609
------------
Total Corporate Obligations
(cost - $223,560,909).................................................... 223,560,909
------------
SHARES
- -----------
INVESTMENT COMPANIES - 4.98%
30,145,949 American AAdvantage Money Market Select Fund** [AAAm/Aaa] ............... 1.220 - 30,145,949
30,106,900 Federated Prime Cash Obligations Fund - Institutional Class** [AAAm/Aaa]. 1.230 - 30,106,900
515 Federated Trust Prime Obligations Fund** [AAAm/Aaa]...................... 1.240 - 515
30,107,582 One Group Prime Money Market - Institutional Class** [AAAm/Aaa].......... 1.250 - 30,107,582
30,139,516 Reserve Primary Fund** [AAAm/Aaa]........................................ 1.310 - 30,139,516
------------
Total Investment Companies
(cost - $120,500,462).................................................... 120,500,462
------------
PRINCIPAL
AMOUNT
(000'S)
- -----------
REPURCHASE AGREEMENTS*** - 23.46%
$209,000 Bank of America LLC [A-1+, P-1].......................................... 1.350 04/01/03 209,000,000
150,000 UBS Warburg [A-1+, F-1+] ................................................ 1.320 04/01/03 150,000,000
209,106 Wachovia Securities Inc. [A-1, P-1] ..................................... 1.380 04/01/03 209,106,000
------------
Total Repurchase Agreements
(cost - $568,106,000).................................................... 568,106,000
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 5.43%
FANNIE MAE - 1.66%
40,000 Unsecured Notes ......................................................... 1.450 - 4.750 11/14/03 - 04/19/04 40,247,408
------------
FEDERAL HOME LOAN BANK - 3.53%
85,500 Unsecured Bonds ......................................................... 1.400 - 2.000 11/21/03 - 04/13/04 85,500,000
------------
</Table>
The accompanying notes are an integral part of the financial statements.
6
<Page>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000'S) RATE(S) DATE(S) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
FREDDIE MAC - 0.24%
$ 5,700 Unsecured Notes, MTN....................................................... 1.650% 12/23/03 $ 5,700,000
--------------
Total U.S. Government Agency Obligations
(cost - $131,447,408)...................................................... 131,447,408
--------------
Total Investments - 101.23%
(cost - $2,451,371,464)**** ............................................... 2,451,371,464
Liabilities in excess of other assets - (1.23)% ........................... (29,803,219)
--------------
Net Assets - 100.00% ...................................................... $2,421,568,245
==============
</Table>
- --------
MTN Medium Term Note.
* Variable Rate Obligations - The rate shown is the rate as of March 31, 2003
and the maturity date as shown is the date the interest rate resets.
** Money market fund; interest rate reflects SEC seven-day yield at March 31,
2003.
*** See notes to financial statements for description of underlying collateral.
**** The cost of investments for federal income tax purposes is substantially
the same for financial reporting purposes.
The accompanying notes are an integral part of the financial statements.
7
<Page>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2003
<Table>
<Caption>
ASSETS
Investments, at amortized cost which approximates market value
(identified and tax cost - $2,451,371,464) ....................................... $2,451,371,464
Interest receivable ................................................................ 6,069,692
Prepaid expenses ................................................................... 66,583
--------------
Total assets ................................................................... 2,457,507,739
--------------
LIABILITIES
Payable for investments purchased .................................................. 33,062,772
Dividends payable .................................................................. 2,423,727
Advisory fee payable ............................................................... 238,105
Administration fee payable ......................................................... 104,856
Custodian fee payable .............................................................. 44,870
Accrued expenses ................................................................... 65,164
--------------
Total liabilities .............................................................. 35,939,494
--------------
NET ASSETS
Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) 2,421,600
Paid-in capital .................................................................... 2,419,177,927
Accumulated net realized loss from investments ..................................... (31,282)
--------------
Net assets ..................................................................... $2,421,568,245
==============
CLASS Y
Net Assets ......................................................................... $2,421,568,245
--------------
Shares of beneficial interest outstanding .......................................... 2,421,599,527
--------------
Net asset value, offering and redemption price per share ........................... $1.00
=====
</Table>
The accompanying notes are an integral part of the financial statements.
8
<Page>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
<Table>
<Caption>
INVESTMENT INCOME
Interest ......................................... $ 42,884,991
------------
EXPENSES
Advisory fees .................................... 4,833,252
Administration fees .............................. 1,208,290
Accounting fees .................................. 381,362
Custodian fees and expenses ...................... 244,867
Legal and auditing fees .......................... 84,399
Transfer agent fees and expenses ................. 29,609
Reports and notices to shareholders .............. 18,638
Federal and state registration fees .............. 14,972
Trustees' fees and expenses ...................... 13,701
Insurance expenses ............................... 8,476
Amortization of organization expenses ............ 3,884
Other ............................................ 53,542
------------
Total expenses before waivers ................ 6,894,992
Less: waivers ................................ (2,061,690)
------------
Total expenses after waivers ................. 4,833,302
------------
Net investment income ............................ 38,051,689
------------
NET REALIZED GAIN ON INVESTMENTS ................... 4,464
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 38,056,153
============
</Table>
The accompanying notes are an integral part of the financial statements.
9
<Page>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE FISCAL
YEARS ENDED MARCH 31,
----------------------------------
2003 2002
--------------- ---------------
INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income ................................... $ 38,051,689 $ 62,276,088
Net realized gain on investments ........................ 4,464 117
--------------- ---------------
Net increase in net assets resulting from operations .... 38,056,153 62,276,205
--------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income ................................... (38,051,689) (62,276,088)
--------------- ---------------
SHARES OF BENEFICIAL INTEREST*
Net proceeds from the sale of shares .................... 8,240,980,188 8,686,821,236
Cost of shares repurchased .............................. (8,491,253,839) (8,071,947,269)
Shares issued in reinvestment of dividends .............. 34,116,859 59,200,452
--------------- ---------------
Net increase/(decrease) in net assets derived from shares
of beneficial interest transactions ................... (216,156,792) 674,074,419
--------------- ---------------
Total increase/(decrease) in net assets ................. (216,152,328) 674,074,536
NET ASSETS
Beginning of year ....................................... 2,637,720,573 1,963,646,037
--------------- ---------------
End of year ............................................. $ 2,421,568,245 $ 2,637,720,573
=============== ===============
</Table>
- -------
* Share transactions at net asset value of $1.00 per share.
The accompanying notes are an integral part of the financial statements.
10
<Page>
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 year indicated. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<Table>
<Caption>
FOR THE FISCAL YEARS ENDED MARCH 31,
--------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year ........ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Net investment income (1) ................. 0.0158 0.0308 0.0622 0.0526 0.0524
---------- ---------- ---------- ---------- ----------
Net increase in net assets resulting
from operations ......................... 0.0158 0.0308 0.0622 0.0526 0.0524
---------- ---------- ---------- ---------- ----------
Dividends to shareholders from net
investment income ....................... (0.0158) (0.0308) (0.0622) (0.0526) (0.0524)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year .............. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
========== ========== ========== ========== ==========
Total investment return (2) ............... 1.59% 3.13% 6.40% 5.39% 5.37%
========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) .. $2,421,568 $2,637,721 $1,963,646 $913,907 $386,201
Ratio of expenses to average net assets (1) 0.20% 0.20% 0.20% 0.20% 0.20%
Ratio of net investment income to
average net assets (1) .................. 1.57% 2.95% 6.15% 5.36% 5.24%
Increase/(decrease) reflected in above
expense and net investment income ratios
due to waivers and related reimbursements 0.09% 0.10% 0.13% 0.17% 0.25%
</Table>
- ----------
(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 year reported
and includes reinvestment of dividends.
The accompanying notes are an integral part of the financial statements.
11
<Page>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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 "SEC") under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), as an open-end management investment company. The
Fund currently consists of ten separate portfolios: six diversified portfolios,
Prime Money Market Portfolio (the "Portfolio"), Intrinsic Value Portfolio, Small
Cap Value Portfolio, International Equity Portfolio, High Yield Total Return
Portfolio and Income Portfolio, and four non-diversified portfolios, The
Insiders Select Fund, Alpha Growth Portfolio, S&P STARS Portfolio and S&P STARS
Opportunities Portfolio. As of the date hereof, the Portfolio offers one class
of shares, which has been designated as Class Y shares. Each portfolio is
treated as a separate entity for certain matters under the Investment Company
Act, and for other purposes, a shareholder of one portfolio is not deemed to be
a shareholder of any other portfolio.
MANAGEMENT ESTIMATES -- The preparation of financial statements in accordance
with accounting principles generally accepted in the United States of America
("GAAP") 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 from securities transactions 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.
The tax character of distributions paid during the fiscal year ended March 31,
2003 was entirely from ordinary income.
At March 31, 2003, the components of distributable earnings on a tax basis were
equal to that shown on the Statement of Assets and Liabilities.
At March 31, 2003, the Portfolio had capital loss carryforwards available as a
reduction, to the extent provided in regulations, of any future net capital
gains realized before the end of fiscal year 2009. To the extent that the
capital loss carryforward is used to offset future capital gains, it is probable
that the gains so offset will not be distributed to shareholders. The Portfolio
had capital loss carryforwards at March 31, 2003 as follows:
<Table>
<Caption>
AMOUNTS EXPIRING IN
GROSS CAPITAL LOSS ----------------------------------
CARRYFORWARD 2007 2008 2009
- ------------------ ---- ---- ----
$31,282 $29,962 $1,279 $41
</Table>
12
<Page>
DIVIDENDS AND DISTRIBUTIONS -- Dividends from net investment income are declared
daily and paid monthly. Any net realized capital gains are distributed at least
annually if not offset by capital loss carryforwards. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from GAAP. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within capital accounts based
on their U.S. federal tax-basis treatment; temporary differences do not require
reclassification.
REPURCHASE AGREEMENTS -- The Portfolio may purchase securities from financial
institutions subject to the seller's agreement to repurchase and the Portfolio's
agreement to resell the securities at par. The investment adviser only enters
into repurchase agreements with financial institutions that are primary dealers
and deemed to be creditworthy by the investment adviser in accordance with
procedures adopted by the Board of Trustees. Securities purchased subject to
repurchase agreements are maintained with the 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 fiscal year ended March 31, 2003, Bear Stearns Asset Management Inc.
("BSAM" or the "Adviser"), a wholly-owned subsidiary of The Bear Stearns
Companies Inc., served as investment 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 fiscal year ended March 31, 2003, 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 an annual rate of 0.05% of the
Portfolio's average daily net assets.
For the fiscal year ended March 31, 2003, the Adviser has undertaken to limit
the Portfolio's operating expenses (exclusive of brokerage commissions,
taxes, interest and extraordinary items) to a maximum annual level of no more
than 0.20% of its average daily net assets. As necessary, this limitation is
effected by waivers by the Adviser of its advisory fees. For the fiscal year
ended March 31, 2003, the Adviser waived advisory fees of $2,061,690 in order
to maintain the expense limitation.
The Portfolio will not pay BSAM at a later time for any amounts BSAM may waive,
nor will the Portfolio reimburse BSAM for any amounts BSAM may assume.
Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies
Inc., and an affiliate of BSAM, BSFM and Bear, Stearns & Co. Inc., serves as
custodian to the Portfolio.
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 March 31, 2003, 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 455,797,517 of Class Y shares or approximately 19% of the
shares outstanding.
13
<Page>
COLLATERAL FOR REPURCHASE AGREEMENTS
Listed below is the collateral associated with the repurchase agreements
outstanding at March 31, 2003:
<Table>
<Caption>
PRINCIPAL ACCRUED
ISSUER AMOUNT MATURITY DATE(S) INTEREST RATE(S) MARKET VALUE INTEREST TOTAL VALUE
- ------ ------ ---------------- ---------------- ------------ -------- -----------
BANK OF AMERICA LLC
- -------------------
Freddie Mac,
Pass-through Pools...... $221,589,042 03/01/23 - 08/01/32 5.500 - 6.500% $212,165,543 $1,014,458 $213,180,001
============ ========== ============
UBS WARBURG
- -----------
Fannie Mae,
Pass-through Pools...... $147,807,992 02/01/18 - 03/01/33 5.000 - 8.500% $127,930,630 $575,926 $128,506,556
Freddie Mac,
Pass-through Pools...... 51,145,042 03/01/13 - 02/01/27 5.500 - 9.000 24,376,200 119,522 24,495,722
------------ ---------- ------------
$152,306,830 $695,448 $153,002,278
============ ========== ============
WACHOVIA SECURITIES INC.
- ------------------------
Fannie Mae,
Pass-through Pools...... $193,659,526 03/01/33 - 04/01/33 4.768 - 5.500% $197,323,799 $871,470 $198,195,269
Freddie Mac,
Pass-through Pools...... 14,503,014 03/01/33 6.000 15,020,337 72,515 15,092,852
------------ ---------- ------------
$212,344,136 $943,985 $213,288,121
============ ========== ============
</Table>
CREDIT FACILITY
The Fund has entered into a demand promissory note agreement with JPMorgan Chase
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 its
total 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 Portfolio had no
amounts outstanding under the credit facility at or for the fiscal year ended
March 31, 2003.
14
<Page>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Prime Money Market Portfolio
(Series of The Bear Stearns Funds):
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Prime Money Market Portfolio (the "Portfolio")
as of March 31, 2003, and the related statement of operations for the year then
ended, and the statements of changes in net assets and the financial highlights
for the periods presented. These financial statements and financial highlights
are the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2003, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Portfolio as of March 31, 2003, the results of its operations for the year then
ended, the changes in its net assets and the financial highlights for the
respective stated periods, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
New York, New York
May 9, 2003
15
<Page>
THE BEAR STEARNS FUNDS
TRUSTEES AND OFFICERS
The following information is provided for each Trustee, Officer and the Advisory
Trustee of The Bear Stearns Funds (the "Trust") as of March 31, 2003. Each
Trustee oversees all 10 portfolios of the Trust. The Statement of Additional
Information includes additional information about the Trustees and is available
without charge, upon request, by calling PFPC Inc. at 1-800-447-1139 or
1-800-766-4111. The mailing address of the Trustees and Officers is 383 Madison
Avenue, New York, New York 10179.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------------
POSITION(S) WITH THE
NAME AND TRUST AND LENGTH PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AGE OF TIME SERVED(1) IN THE PAST 5 YEARS HELD BY TRUSTEE
- ---------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------------
Peter M. Bren - 69 Trustee, since 1995 Chairman and President, Koll Bren Schreiber None
Realty Advisers (realty)
- ---------------------------------------------------------------------------------------------------------------------------------
John S. Levy - 67 Trustee, since 2000 Managing Partner, Fayerwearther Capital Partners SL Green Realty Corp.
(private investment partnership)
- ---------------------------------------------------------------------------------------------------------------------------------
M.B. Oglesby, Jr. - 59 Trustee, since 1995 Consultant;Vice Chairman, BKSH & Associates, None
Washington DC (government lobbyists) (2002-
present); Formerly, Chief of Staff to United States
Trade Representative, Executive Office of the
President (2001-2002); Consultant, Chairman,
Oglesby Properties, Inc.; President and Chief
Executive Officer, Association of American
Railroads;Vice Chairman, Cassidy & Associates
- ---------------------------------------------------------------------------------------------------------------------------------
Robert E. Richardson - 61 Trustee, since 2000 Retired; Formerly,Vice President, Broker/Dealer None
Department, Mellon Bank (financial services)
(1991-1999)
- ---------------------------------------------------------------------------------------------------------------------------------
"INTERESTED" TRUSTEES(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Michael Minikes - 59 Chairman of the Board Treasurer,The Bear Stearns Companies Inc. and None
and Trustee, since 1999 Bear, Stearns & Co. Inc. ("Bear Stearns"); Senior
Managing Director, Bear Stearns; Co-President,
Bear, Stearns Securities Corporation (1999-
present); Director, Custodial Trust Company
("CTC") and Bear Stearns Bank plc
- ---------------------------------------------------------------------------------------------------------------------------------
Doni L. Fordyce - 43 President and Trustee, Director, Chairman of the Board, President, Senior None
since 2000 Managing Director, Bear Stearns Asset
Management Inc. (`BSAM") and, since 2000, Chief
Executive Officer and Chief Operating Officer
- ---------------------------------------------------------------------------------------------------------------------------------
Robert M. Steinberg - 57 Trustee, since 2001 Senior Managing Director, Bear Stearns; None
Director of CTC
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The term of office for a Trustee is indefinite, until he or she resigns, is
removed or a successor has been duly elected and qualified.
(2) The Interested Trustees are considered to be "interested persons" (as
defined by the Investment Company Act of 1940, as amended) because of their
employment with the Trust's adviser or principal underwriter.
16
<Page>
<Table>
<Caption>
POSITION(S) WITH THE
NAME AND TRUST AND LENGTH
AGE OF TIME SERVED(1) PRINCIPAL OCCUPATION(S) IN THE PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
ADVISORY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
Senator Alan Dixon - 76 Advisory Trustee since Partner - Corporate Business and Legislative Law, Bryan Cave (law firm);
1995 Formerly, United States Senator (1981-1992)
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Barry Sommers - 34 Executive Vice President, Senior Managing Director, Bear Stearns (2000-present); Head of Marketing and
since 1998 Sales for the Trust (1997-present); Managing Director, Bear Stearns (1997-2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen A. Bornstein - 59 Vice President and General Counsel, Managing Director/Principal and Executive Vice President, BSAM;
Secretary, since 1995 Managing Director/Principal, Bear Stearns;Vice President, General Counsel and
Secretary, Bear Stearns Funds Management Inc. ("BSFM")
- ------------------------------------------------------------------------------------------------------------------------------------
Frank J. Maresca - 44 Vice President and President and Chief Executive Officer, BSFM; Senior Managing Director,
Bear Stearns Treasurer, since 1995 (2001-present); Managing Director,
Bear Stearns
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent L. Pereira - 37 Assistant Treasurer, Executive Vice President, BSFM; Managing Director (1999-present) and Associate
since 1995 Director (1997-1999), Bear Stearns
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The term of office for an Officer is indefinite, until he or she resigns,
is removed or a successor has been duly elected and qualified.
17
<Page>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
PRIVACY NOTICE
While information is the cornerstone of our ability to provide superior service,
our most important assets are our shareholders and the trust that they place in
us. Keeping shareholder information secure and using it only as our shareholders
would want us to are top priorities at The Bear Stearns Funds.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
personal information about you. This is the information we collect from you on
applications or other forms, and from the transactions you make with us or third
parties. It may include your name, address, social security number, account
transactions and balances, and information investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone
except as permitted by law. Specifically, we may disclose the information we
collect to companies that perform services on our behalf, such as the transfer
agent that processes shareholder accounts and mailers that assist us in the
distribution of shareholder materials. This allows us to continue to meet your
investing needs, and to effect transactions that you request or authorize.
These companies will use this information only for the services for which we
hired them, and are not permitted to use or share this information for any other
purpose. To protect your personal information internally, we permit access only
by authorized employees and maintain physical, electronic and procedural
safeguards to guard your personal information.
You may have received communications regarding information privacy on
policies from other financial institutions that gave you the opportunity to
"opt-out" of certain information sharing with companies that are not
affiliated with that financial institution. The Bear Stearns Funds does not
share information with other companies for purposes of marketing
solicitations. Therefore, The Bear Stearns Funds does not provide opt-out
options to its shareholders.
We reserve the right to change our privacy policy at any time. The examples
contained within this notice are illustrations; they are not intended to be
exclusive. This notice complies with a recently enacted Federal law and new SEC
regulations regarding privacy. You may have additional rights under foreign or
other domestic laws that may apply to you.
18
<Page>
THE
BEAR STEARNS
FUNDS
383 MADISON AVENUE, NEW YORK, NY 10179 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 DISTRIBUTOR
Bear Stearns Asset Bear, Stearns & Co. Inc.
Management Inc. 383 Madison Avenue
383 Madison Avenue New York, NY 10179
New York, NY 10179
TRANSFER AND DIVIDEND
ADMINISTRATOR DISBURSEMENT AGENT
Bear Stearns Funds PFPC Inc.
Management Inc. Bellevue Corporate Center
383 Madison Avenue 400 Bellevue Parkway
New York, NY 10179 Wilmington, DE 19808
CUSTODIAN INDEPENDENT AUDITORS
Custodial Trust Company Deloitte & Touche LLP
101 Carnegie Center Two World Financial Center
Princeton, NJ 08540 New York, NY 10281
COUNSEL
Kramer Levin
Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
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.
<Page>
ITEM 2. CODE OF ETHICS.
(a) Disclose whether, as of the end of the period covered by the report,
the registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party. If the registrant has not adopted such a code
of ethics, explain why it has not done so. NOT APPLICABLE - ONLY EFFECTIVE
FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR AFTER JULY 15, 2003.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) Disclose that the registrant's board of directors has determined
that the registrant either:
(i) Has at least one audit committee financial expert serving on
its audit committee; or
(ii) Does not have an audit committee financial expert serving on
its audit committee.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit
committee financial expert and whether that person is "independent."
In order to be considered "independent" for purposes of this Item, a
member of an audit committee may not, other than in his or her
capacity as a member of the audit committee, the board of directors,
or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or
other compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as
defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)).
(3) If the registrant provides the disclosure required by paragraph
(a)(1)(ii) of this Item, it must explain why it does not have an audit
committee financial expert.
NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR
AFTER JULY 15, 2003.
2
<Page>
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for
each of the last two fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees
billed in each of the last two fiscal years for assurance and related services
by the principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
(c) Disclose, under the caption TAX FEES, the aggregate fees billed in each
of the last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning. Registrants shall
describe the nature of the services comprising the fees disclosed under this
category.
(d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed
in each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
(e) (1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) If greater than 50 percent, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's financial
statements for the most recent fiscal year that were attributed to work
performed by persons other than the principal accountant's full-time, permanent
employees.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant for
each of the last two fiscal years of the registrant.
(h) Disclose whether the registrant's audit committee of the board of
directors has considered whether the provision of nonaudit services that were
rendered to the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountant's independence.
NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR
AFTER DECEMBER 15, 2003.
ITEMS 5-6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
A closed-end management investment company that is filing an annual report
on this Form N-CSR must, unless it invests exclusively in non-voting securities,
describe the policies and procedures that it uses to determine how to vote
proxies relating to portfolio securities, including the procedures that the
company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities.
NOT APPLICABLE
3
<Page>
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Disclose the conclusions of the registrant's principal executive
officer or officers and principal financial officer or officers, or persons
performing similar functions, about the effectiveness of the registrant's
disclosure controls and procedures (as defined in Rule 30a-2(c) under the Act
(17 CFR 270.30a-2(c))) based on their evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report that
includes the disclosure required by this paragraph. NOT APPLICABLE - ONLY
EFFECTIVE FOR FISCAL PERIODS ENDING ON OR AFTER APRIL 1, 2003.
(b) THERE WERE NO SIGNIFICANT CHANGES IN THE REGISTRANT'S INTERNAL CONTROLS
OR IN OTHER FACTORS THAT COULD SIGNIFICANTLY AFFECT THESE CONTROLS SUBSEQUENT TO
THE DATE OF THEIR EVALUATION, INCLUDING ANY CORRECTIVE ACTIONS WITH REGARD TO
SIGNIFICANT DEFICIENCIES AND MATERIAL WEAKNESSES.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit. NOT APPLICABLE.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2 under
the Act (17 CFR 270.30a-2)
4
<Page>
SIGNATURES
[See General Instruction F]
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Bear Stearns Funds
--------------------------------------------------------------------
By (Signature and Title)* /S/ Frank J. Maresca
-------------------------------------------------------
Frank J. Maresca, Vice President and Treasurer
-------------------------------------------------------
Date May 27, 2003
--------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /S/ Frank J. Maresca
-------------------------------------------------------
Frank J. Maresca, Vice President and Treasurer
-------------------------------------------------------
Date May 27, 2003
--------------------------------------
By (Signature and Title)* /S/ Doni L. Fordyce
-------------------------------------------------------
Doni L. Fordyce, President
-------------------------------------------------------
Date May 27, 2003
--------------------------------------
* Print the name and title of each signing officer under his or her signature.
- --------------------------------------------------------------------------------
ALL CERTIFICATIONS (UNDER THE ACT'S SECTION 302 AND 906) SHOULD BE INCLUDED IN
ONE EDGAR EX-99.CERT EXHIBIT DOCUMENT TO FORM N-CSR)