-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RtQgMpmJqoG0T+1KN+mdH+MkGFfu+sLVYuCzaGTlPXR9qWaZYBTEX/mC1CB0DWu+ fmQZR6ZAkSxHS4AlRrSS0A== 0000912057-01-517798.txt : 20010530 0000912057-01-517798.hdr.sgml : 20010530 ACCESSION NUMBER: 0000912057-01-517798 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010529 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEAR STEARNS FUNDS CENTRAL INDEX KEY: 0000931145 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08798 FILM NUMBER: 1649392 BUSINESS ADDRESS: STREET 1: 245 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10167 MAIL ADDRESS: STREET 1: 245 PARK AVE STREET 2: 245 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10167 N-30D 1 a2047150zn-30d.txt N-30D The Bear Stearns Funds 575 LEXINGTON AVENUE NEW YORK, NY 10022 1.800.766.4111 Michael Minikes Chairman of the Board and Trustee Doni L. Fordyce President and Trustee Peter M. Bren Trustee John S. Levy Trustee Robert E. Richardson 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. 575 Lexington Avenue Bellevue Corporate Center New York, NY 10022 400 Bellevue Parkway Wilmington, DE 19809 ADMINISTRATOR Bear Stearns Funds INDEPENDENT AUDITORS Management Inc. Deloitte & Touche LLP 575 Lexington Avenue Two World Financial Center New York, NY 10022 New York, NY 10281 DISTRIBUTOR COUNSEL Bear, Stearns & Co. Inc. Kramer Levin 245 Park Avenue Naftalis & Frankel LLP New York, NY 10167 919 Third Avenue New York, NY 10022 INCOME PORTFOLIO AND EMERGING MARKETS DEBT HIGH YIELD TOTAL RETURN PORTFOLIO: PORTFOLIO: CUSTODIAN CUSTODIAN Custodial Trust Company Brown Brothers Harriman & Co. 101 Carnegie Center 40 Water Street Princeton, NJ 08540 Boston, MA 02109 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. BSF-R-016-08 THE BEAR STEARNS FUNDS FIXED INCOME FUNDS Income Portfolio High Yield Total Return Portfolio Emerging Markets Debt Portfolio ANNUAL REPORT MARCH 31, 2001 [BEAR STEARNS LOGO] THE BEAR STEARNS FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO EMERGING MARKETS DEBT PORTFOLIO LETTER TO SHAREHOLDERS April 30, 2001 Dear Shareholders: We are pleased to present the annual report to shareholders for the Income Portfolio, High Yield Total Return Portfolio ("High Yield Portfolio") and Emerging Markets Debt Portfolio ("EMD Portfolio") for the fiscal year ended March 31, 2001. 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 For the fiscal year ended March 31, 2001, the Income Portfolio's Class A shares had a total return of 10.68% (without giving effect to the sales charge) and both Class B and C shares had a total return of 9.96% (without giving effect to the contingent deferred sales charge).(1) The Income Portfolio's benchmark index, the Salomon Smith Barney Broad Investment Grade Bond Index, returned 12.57% for the same period. The Lipper A Rated Bond Fund Index returned 11.31% for the same period. A YEAR OF RATE INCREASES AND DECREASES When all was said and done, it was a challenging year for fixed income investors. In the first half of 2000, with the stock market climbing to stratospheric highs and economic activity moving at a red hot pace, the Federal Reserve moved short-term rates higher. In the second half of 2000, investors ran for cover as growth stalled, analysts warnings proliferated, earnings disappointed, several of the big and best known names in the markets experienced credit problems and the stock market plunged. Moving into the new year (2001), the Federal Reserve reversed its stance and cut rates, not once but three times in an effort to stabilize the environment. The atmosphere cleared somewhat, but, as investors crept out of their foxholes and surveyed the markets, they favored quality in virtually all sectors. Despite the difficult environment of the period, the Income Portfolio held its ground due to the emphasis on quality. Anticipating a slowing of the economy, exposures to the lower-grade corporate sector were minimal throughout much of the period. What's more, what positions we did hold were concentrated in securities from issuers in sectors and sub-sectors most likely to do well in a slow growth environment. In addition, throughout much of the year, the Income Portfolio was heavily-weighted in asset-backed and agency securities. In the latter half of the period, agencies came back into favor as the government softened its position on the backing of these securities. Asset-backed securities also performed well in the uncertain environment as their structure provides a certain degree of protection. Finally, as the period drew to a close and the Federal Reserve began to lower interest rates, corporate securities began to revive -- allowing them to recoup some of the ground lost over the previous six months. With the Federal Reserve's recent actions and their willingness to do more if necessary, we expect the environment to improve in the months ahead. While short-term rates may be volatile, the intermediate range of the yield curve should remain relatively stable and corporate securities should continue to gain ground. Still, much will depend on the 1 performance -- and the perception of the performance -- of the issuing company. Consequently, while exposures here may be increased in the coming months, we will do so very cautiously, focusing on those sectors and companies that will benefit from the lower rates. Still, we are investing in these firms on an individual basis and only after subjecting each to in-depth scrutiny. HIGH YIELD TOTAL RETURN PORTFOLIO* For the fiscal year ended March 31, 2001, the High Yield Portfolio's Class A shares had a total return of (1.07)% (without giving effect to the sales charge) and both Class B and C shares had a total return of (1.71)% (without giving effect to the contingent deferred sales charge).(2) The High Yield Portfolio's broad-based securities market index, the Credit Suisse First Boston Global High Yield Index, returned 0.76% for the same period. The Lipper High Yield Bond Fund Index returned (5.19)% for the same period. Effective April 1, 2001, the High Yield Portfolio's broad-based securities market index was changed to the Credit Suisse First Boston Domestic Plus High Yield Bond Index (effective May 31, 2001, the name will be changed to the Credit Suisse First Boston High Yield Index, Developed Countries Only), which we believe more closely resembles the High Yield Portfolio's investment philosophy and the universe of securities in which it currently invests. QUALITY WAS THE KEY Just as in the equity markets, earnings concerns dominated the environment in the high yield market during the year ended March 31, 2001. Throughout the first half of the period, as anticipation of a slowdown began to build and then warnings began to appear, investors began moving towards quality. As 2000 drew to a close, liquidity had dried up and spreads to Treasuries had widened to levels not seen since the early `90s. Opportunities had become almost too attractive to ignore. Showing it had no intention of letting the economy sink into recession, the Federal Reserve cut interest rates -- and provided investors with the catalyst needed to capitalize on the situation. As they moved back into the marketplace, however, they clearly favored higher quality issues. Securities of stable, strong companies did well; those of companies showing any weakness whatsoever continue to suffer from neglect. The High Yield Portfolio performed well in the second half of the period due primarily to changes made in the summer and early fall. Then, as opportunities arose, a concerted effort was made to eliminate lower quality positions. New exposures were selected on a company-basis first, and industry-basis, second. Total return, quality and capital preservation were emphasized. Exposures to industries with stable cash flows were increased. The credit quality of the High Yield Portfolio increased significantly. As a result, the High Yield Portfolio suffered less than many of its peers as earnings warnings proliferated in the late fall and many of the highest flying sectors of the previous year (wireline telecommunications, wireless telecommunications and technology) fell in tandem with their equity counterparts. Moreover, with its credit-intensive focus, the High Yield Portfolio was very well positioned for the environment of the first quarter as high quality issues were the market's strongest performers. At present, the market remains concerned with the possibility of a recession -- and recent employment data has done little to alleviate these worries. Given new signs of weakness in the economy, further rate cuts could be in the offing. The high yield market remains focused on higher quality paper and is shifting its industry focus toward industrial and cyclical paper and away from telecommunications. New issuance is picking up again with a bias toward high quality paper in mature and/or stable industries. With its focus fixed firmly on such issues, the High Yield Portfolio is well-positioned for these trends and the market environment we see ahead. 2 EMERGING MARKETS DEBT PORTFOLIO** For the fiscal year ended March 31, 2001, the EMD Portfolio's Class A shares had a total return of 7.98% (without giving effect to the sales charge) and both Class B and C shares had a total return of 7.16% (without giving effect to the contingent deferred sales charge).(3) The EMD Portfolio's benchmark index, the J.P. Morgan Emerging Market Bond Index-Global Constrained, returned 1.22% for the same period. The Salomon Smith Barney Emerging Markets Debt Mutual Fund Index returned 11.49% for the same period. MARKETS WORLDWIDE SLOWDOWN The year overall was a good one for emerging markets and its investors -- one of positive returns and improving credit fundamentals for most emerging countries. Credit ratings improved significantly: in calendar year 2000, nineteen countries were upgraded by at least one of the two major rating agencies, versus nine which were downgraded. Continuing the pattern established in 1999, the upgrades were geographically diversified across a number of regions. The markets that performed best were those that benefited from rising oil prices, restructuring of private debt and/or signs of stabilization after a period of political or economic chaos. Ecuador, the best-performing market, rose 50%; the rise was fueled by declining inflation, a return to positive economic growth and the resumption of debt service following the restructuring of its defaulted Brady debt into new bonds. The Russian market was also a particularly strong performer. Here, as President Putin solidified power, introduced reforms and initiated efforts to strengthen the rule of law, foreign exchange reserves grew and tax collections increased. The weakest market over the same period was Turkey. Turkey fell in response to a sharp rise in political uncertainty and related concerns about the prospects for further progress in the government's efforts to reduce inflation. Two elections marked important transitions to more modern governments in key emerging countries. In Mexico, the defeat of the incumbent administration marked the end of a 70-year monopoly and opened the possibility of resuming economic reform of inefficient government monopolies. It might also lead to a broader tax base less dependent on oil prices. In Russia, Putin's election as president appears to be equally significant, though certainty about the outlook for reform is less. However, it is clear that the new Russian Parliament is vastly more modern and economically pragmatic than the old-guard body of the Yeltsin period. While the outlook for the emerging debt markets in the medium-term remains excellent, the outlook is uncertain in the near-term. Clearly, central bank easings have been positive. At the same time, the uncertainty regarding growth worldwide, the difficulties involved in legislating reforms and increasing political uncertainty in various countries are concerns. At a sovereign spread of over 700 basis points in excess of U.S. Treasuries, emerging markets debt as an asset class remains neither cheap nor expensive versus its historical relationship to Treasuries. As such, macroeconomic and public policy developments in the key industrialized countries will certainly influence the market's future direction. However, developments in specific countries will continue to dominate cyclical considerations in determining the performance of emerging market debt. 3 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. ** International investing involves risks such as currency exchange-rate volatility, possible political, social, or economic instability and differences in taxation and other financial standards. (1) For the fiscal year ended March 31, 2001, the Income Portfolio's Class A shares had a total return of 5.73%, including the initial 4.50% maximum sales charge, Class B shares returned 4.96%, including the 5.00% CDSC and Class C shares returned 8.96%, including the 1.00% CDSC. (2) For the fiscal year ended March 31, 2001, the High Yield Portfolio's Class A shares had a total return of (5.52)%, including the initial 4.50% maximum sales charge, Class B shares returned (6.18)%, including the 5.00% CDSC and Class C shares returned (2.61)%, including the 1.00% CDSC. (3) For the fiscal year ended March 31, 2001, the EMD Portfolio's Class A shares had a total return of 3.10%, including the initial 4.50% maximum sales charge, Class B shares returned 2.25%, including the 5.00% CDSC and Class C shares returned 6.18%, including the 1.00% CDSC. CDSC Contingent deferred sales charge. Bear Stearns Asset Management Inc. has waived a portion of its advisory fee and agreed to reimburse a portion of each 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, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. 4 THE BEAR STEARNS FUNDS INCOME PORTFOLIO COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(3)(4) VS. VARIOUS INDICES [CHART]
Class Class Salomon Smith Barney Broad Lipper A Rated A shares C shares Investment Grade Bond Index Bond Fund Index -------- -------- --------------------------- --------------- Apr. 5, 1995 $9,550.00 $10,000.00 $10,000.00 $10,000.00 Sept. 30, 1995 $10,260.00 $10,587.00 $10,767.00 $10,883.31 Mar. 31, 1996 $10,430.00 $10,797.00 $11,038.00 $11,112.34 Sept. 30, 1996 $10,644.00 $10,996.00 $11,300.00 $11,343.98 Mar. 31, 1997 $10,908.00 $11,245.00 $11,581.00 $11,623.08 Sept. 30, 1997 $11,659.00 $11,998.00 $12,397.00 $12,497.89 Mar. 31, 1998 $11,932.00 $12,247.00 $12,968.31 $13,032.77 Sept. 30, 1998 $12,600.65 $12,890.55 $13,818.34 $13,774.00 Mar. 31, 1999 $12,620.63 $12,869.77 $13,810.83 $13,619.00 Sept. 30, 1999 $12,407.00 $12,603.37 $13,782.00 $13,473.00 Mar. 31, 2000 $12,617.00 $12,885.00 $14,061.00 $13,738.00 Sept. 30, 2000 $13,101.00 $13,336.00 $14,735.00 $14,258.00 Mar. 31, 2001 $13,964.00 $14,169.00 $15,828.00 $15,293.00
Past performance is not predictive of future perfomance. INCOME PORTFOLIO Class A shares ................................. $13,964 Class C shares ................................. 14,169 Salomon Smith Barney Broad Investment Grade Bond Index ............................. 15,828 Lipper A Rated Bond Fund Index ............................. 15,293
TOTAL RETURNS -------------------------------------------------------- ONE YEAR ENDED 5-YEAR MARCH 31, 2001 AVERAGE ANNUAL AVERAGE ANNUAL(7) -------------- -------------- ----------------- Income Portfolio(2) Class A shares(5) ............. 5.73% 5.17% 5.72% Class B shares(4) ............. 4.96 -- 3.87 Class C shares(6) ............. 8.96 5.55 5.98 Class Y shares(3) ............. 11.07 6.52 6.38 Salomon Smith Barney Broad Investment Grade Bond Index(1) .. 12.57 6.87 8.03 Lipper A Rated Bond Fund Index(1) .. 11.31 5.66 7.43
- ---------------- (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 correspond 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) is higher than Class A 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 9.96% and 4.71%, respectively, for each period shown. (5) Reflects the initial maximum sales charge (4.50%). Without the applicable sales charge, the total returns would have been 10.68%, 6.15% and 6.54%, 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, 2001 would have been 9.96%. (7) For the period of April 5, 1995 (commencement of investment operations) through March 31, 2001, unless otherwise indicated. 5 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)(3) VS. VARIOUS INDICES [CHART]
Class Class Class Credit Suisse First Boston Lipper High Yield A shares B shares C shares Global High Yield Index Bond Fund Index -------- -------- -------- ----------------------- --------------- Jan. 2, 1998 $9,550.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00 Mar. 31, 1998 $10,338.50 $10,812.90 $10,812.90 $10,300.53 $10,439.60 Sept. 30, 1998 $9,777.66 $10,192.75 $10,192.75 $9,789.61 $9,687.96 Mar. 31, 1999 $10,175.63 $10,574.00 $10,574.00 $10,223.48 $10,311.39 Sept. 30, 1999 $9,927.00 $10,282.00 $10,282.00 $10,175.86 $10,196.46 Mar. 31, 2000 $9,699.00 $10,014.00 $10,014.00 $10,254.34 $10,311.52 Sept. 30, 2000 $9,612.00 $9,892.00 $9,892.00 $10,371.00 $10,190.00 Mar. 31, 2001 $9,596.00 $9,624.00 $9,843.00 $10,333.00 $9,778.00
Past performance is not predictive of future perfomance. HIGH YIELD TOTAL RETURN PORTFOLIO Class A shares ............................. $9,596 Class B shares ............................. 9,624 Class C shares ............................. 9,843 Credit Suisse First Boston Global High Yield Index .................. 10,333 Lipper High Yield Bond Fund Index .......................... 9,778
TOTAL RETURNS ------------------------------------ ONE YEAR ENDED MARCH 31, 2001 AVERAGE ANNUAL(3) -------------- ----------------- High Yield Total Return Portfolio(2) Class A shares(4) ................................. (5.52)% (1.26)% Class B shares(5) ................................. (6.18) (1.17) Class C shares(6) ................................. (2.61) (0.49) Credit Suisse First Boston Global High Yield Index(1) .. 0.76 (1.01) Lipper High Yield Bond Fund Index(1) ................... (5.19) (0.70)
- -------------- (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 either unmanaged and do not incur sales charges or expenses and/or are not available for investment. The Credit Suisse First Boston Global High Yield Index began in 1986 and is based on monthly returns. (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) For the period January 2, 1998 (commencement of investment operations) through March 31, 2001. (4) Reflects the initial maximum sales charge (4.50%). Without the applicable sales charge, the total returns would have been (1.07)% and 0.16%, respectively, for each period shown. (5) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total returns would have been (1.71)% and (0.49)%, 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, 2001 would have been (1.71)%. 6 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A SHARES(1)(2)(3) VS. VARIOUS INDICES [CHART]
Class J.P. Morgan Emerging Market Salomon Smith Barney Emerging A shares Bond Index - Global Constrained Markets Debt Mutual Fund Index -------- ------------------------------- ------------------------------ May 4, 1995 $9,550 $10,000 $10,000 Sept. 30, 1995 $10,772 $11,275 $11,486 Mar. 31, 1996 $12,572 $12,889 $13,314 Sept. 30, 1996 $15,470 $15,676 $16,331 Mar. 31, 1997 $16,780 $16,964 $18,013 Sept. 30, 1997 $19,817 $19,721 $21,400 Mar. 31, 1998 $20,021 $19,759 $21,960 Sept. 30, 1998 $15,424 $15,290 $17,040 Mar. 31, 1999 $17,485 $18,038 $19,823 Sept. 30, 1999 $17,824 $18,839 $20,553 Mar. 31, 2000 $21,839 $21,642 $25,602 Sept. 30, 2000 $22,484 $22,769 $27,414 Mar. 31, 2001 $23,581 $23,959 $28,564
Past performance is not predictive of future performance. EMERGING MARKETS DEBT PORTFOLIO Class A shares ....................................................... $23,581 J.P. Morgan Emerging Market Bond Index - Global Constrained ..................................... 23,959 Salomon Smith Barney Emerging Markets Debt Mutual Fund Index ....................................... 28,564
TOTAL RETURNS -------------------------------------------------------- ONE YEAR ENDED 5-YEAR MARCH 31, 2001 AVERAGE ANNUAL AVERAGE ANNUAL(4) -------------- -------------- ----------------- Emerging Markets Debt Portfolio(2) Class A shares(5) ................ 3.10% 12.35% 10.99% Class B shares(3) ................ 2.25 - 6.11 Class C shares(3) ................ 6.18 12.75 15.63 J.P. Morgan Emerging Market Bond Index - Global Constrained(1) ...... 1.22 11.19 14.94 Salomon Smith Barney Emerging Markets Debt Mutual Fund Index(1) .. 11.49 16.50 20.00
- ------------ (1) The chart assumes a hypothetical $10,000 initial investment in the EMD Portfolio and reflects all portfolio expenses. Investors should note that the EMD Portfolio is a professionally managed mutual fund while the indices are either unmanaged, do not incur sales charges or expenses and are not available for investment. Performance of the indices correspond to the performance of Class A shares only. (2) Bear Stearns Asset Management Inc. waived a portion of its advisory fee and agreed to reimburse a portion of the EMD 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 the expense limitations. (3) Assuming no redemption of shares at the end of the period, the returns of Class B and C shares (for which January 12, 1998 and July 26, 1995, respectively, were the initial public offering dates) would have been higher than Class A shares if operations were commenced on the same day. The higher returns are due to the fact that there is no initial sales charge on Class B and C shares. Total returns reflect the applicable contingent deferred sales charge. Without the applicable sales charge for Class B shares, the total returns would have been 7.16% and 6.85%, respectively, for each period shown. Without the applicable sales charge for Class C shares, the total return for the one year ended March 31, 2001 would have been 7.16%. (4) Commencing May 4, 1995, Bear Stearns Asset Management Inc. assumed the daily portfolio management responsibility for the EMD Portfolio. Total returns for Class A shares are shown for the period May 4, 1995 through March 31, 2001. For the period May 3, 1993 (commencement of investment operations) through May 3, 1995 the EMD Portfolio's investment adviser was BEA Associates and those results are not shown. (5) Reflects the initial maximum sales charge (4.50%). Without the applicable sales charge, the total returns would have been 7.98%, 13.41% and 11.64%, respectively, for each period shown. 7 THE BEAR STEARNS FUNDS INCOME PORTFOLIO MARCH 31, 2001 (UNAUDITED) - --------------------------------------------------------------------------------
TOP TEN INDUSTRY/SECTOR WEIGHTINGS* - -------------------------------------------------------------------------------------------------------------------- PERCENT OF RANK INDUSTRY/SECTOR NET ASSETS - ------- ----------------------------------------------------------------------------------------------- ---------- 1. U.S. Government Agency Obligations ............................................................ 36.16 2. U.S. Government Obligations ................................................................... 24.07 3. Industrial .................................................................................... 9.23 4. Finance ....................................................................................... 7.80 5. Asset-Backed .................................................................................. 3.67 6. Utilities ..................................................................................... 3.62 7. Telecommunications ............................................................................ 3.33 8. Multimedia .................................................................................... 2.16 9. Computer Services ............................................................................. 0.63 10. Banks ......................................................................................... 0.61 - --------------------------------------------------------------------------------------------------------------------
TOP TEN HOLDINGS* - -------------------------------------------------------------------------------------------------------------------- PERCENT OF RANK HOLDINGS INDUSTRY/SECTOR NET ASSETS - ------- --------------------------------------------------- ------------------------------------------ ---------- 1. Fannie Mae ........................................ U.S. Government Agency Obligations 24.64 2. U.S. Treasuries ................................... U.S. Government Obligations 24.07 3. Freddie Mac ....................................... U.S. Government Agency Obligations 7.14 4. Government National Mortgage Association .......... U.S. Government Agency Obligations 3.59 5. Western Resources, Inc. ........................... Utilities 1.56 6. Qwest Capital Funding ............................. Telecommunications 1.44 7. Cleveland Electric Illuminating Co. ............... Utilities 1.03 8. LG-Caltex Oil Corp. ............................... Industrial 1.01 9. Enron Oil & Gas Co. ............................... Industrial 0.97 10. Comm 2000-C1 ...................................... Asset-Backed 0.92
- ---------------- * The Portfolio's composition will change over time. 8 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO MARCH 31, 2001 (UNAUDITED) - --------------------------------------------------------------------------------
TOP TEN INDUSTRY WEIGHTINGS* - -------------------------------------------------------------------------------------------------------------------- PERCENT OF RANK INDUSTRY NET ASSETS - ------- ----------------------------------------------------------------------------------------------- ---------- 1. Wireless Telecommunications ................................................................... 16.15 2. Hotels/Motels/Casinos ......................................................................... 12.18 3. Cable Television .............................................................................. 11.21 4. Wireline Telecommunications ................................................................... 7.97 5. Health Care ................................................................................... 6.33 6. Forest Products ............................................................................... 5.96 7. Utilities ..................................................................................... 4.47 8. Chemicals/Plastics ............................................................................ 3.31 9. Oil & Gas ..................................................................................... 3.02 10. Food Services ................................................................................. 2.20 - --------------------------------------------------------------------------------------------------------------------
TOP TEN HOLDINGS* - -------------------------------------------------------------------------------------------------------------------- PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------- ------------------------------------------------------------- -------------------------------- ---------- 1. Fleming Companies, Inc. ..................................... Food Services 2.20 2. Allied Waste North America, Inc. ............................ Ecological Services/Equipment 2.17 3. Bally Total Fitness Holding Corporation ..................... Leisure 2.10 4. McLeodUSA Incorporated ...................................... Wireline Telecommunications 2.09 5. Mediacom LLC and Mediacom Capital Corp. ..................... Cable Television 2.09 6. AES Drax Energy Ltd. ........................................ Utilities 1.87 7. Argosy Gaming Company ....................................... Hotels/Motels/Casinos 1.83 8. Buhrmann U.S. Inc ........................................... Business Equipment/Services 1.82 9. Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corporation ....... Cable Television 1.82 10. Park Place Entertainment Corporation ........................ Hotels/Motels/Casinos 1.77
- ------------ * The Portfolio's composition will change over time. 9 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO MARCH 31, 2001 (UNAUDITED) - --------------------------------------------------------------------------------
TOP TEN COUNTRY WEIGHTINGS* - -------------------------------------------------------------------------------------------------------------------- PERCENT OF RANK COUNTRY NET ASSETS - ------- ----------------------------------------------------------------------------------------------- ---------- 1. Mexico ........................................................................................ 19.37 2. Brazil ........................................................................................ 11.10 3. Argentina ..................................................................................... 10.75 4. Russia ........................................................................................ 7.51 5. Venezuela ..................................................................................... 4.57 6. Malaysia ...................................................................................... 4.48 7. Turkey ........................................................................................ 4.18 8. South Korea ................................................................................... 4.02 9. Panama ........................................................................................ 3.95 10. Philippines ................................................................................... 3.85 - --------------------------------------------------------------------------------------------------------------------
TOP TEN ISSUERS* - -------------------------------------------------------------------------------------------------------------------- SECURITY PERCENT OF RANK ISSUER CURRENCY TYPE NET ASSETS - ------- -------------------------------------------------------------- --------------- -------- ---------- 1. United Mexican States ........................................ U.S. dollar/ Mexican peso Sovereign 15.56 2. Federal Republic of Brazil ................................... U.S. dollar Sovereign 11.10 3. Republic of Argentina ........................................ U.S. dollar Sovereign 10.75 4. Russian Federation ........................................... U.S. dollar Sovereign 7.51 5. Republic of Venezuela ........................................ U.S. dollar Sovereign 4.57 6. The Republic of Panama ....................................... U.S. dollar Sovereign 3.95 7. Republic of the Philippines .................................. U.S. dollar Sovereign 3.85 8. The Republic of Poland ....................................... U.S. dollar Sovereign 3.67 9. Republic of Turkey ........................................... U.S. dollar Sovereign 3.43 10. Republic of Bulgaria ......................................... U.S. dollar Sovereign 3.29
- ------------- * The Portfolio's composition will change over time. 10 THE BEAR STEARNS FUNDS INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS -- 91.28% CORPORATE OBLIGATIONS - 31.84% ASSET-BACKED - 3.67% $ 218 Comm 2000-C1, Commercial Mortgage Pass-Through Certificates, Class A1 ....................................... 7.206% 09/15/08 $ 229,686 150 J.P. Morgan Commercial Mortgage Finance Corp., Series 2000-C9, Class A2 ..................................... 7.770 10/15/32 162,323 150 PaineWebber Mortgage Acceptance Corp., Series 2000-HE1, Class A2 .................................... 8.270 02/25/30 157,589 175 Saxon Asset Securities Trust, Series 2000-3, Class AF4 ............ 7.630 09/25/23 182,817 175 UCFC Home Equity Loan, Series 1996-B1, Class A6 ................... 7.975 02/15/22 179,307 ----------- 911,722 ----------- BANKS - 0.61% 150 Key Bank NA, Subordinated Notes ................................... 7.000 02/01/11 152,946 ----------- COMPUTER SERVICES - 0.63% 150 Computer Sciences Corp., Notes .................................... 7.500 08/08/05 156,447 ----------- FINANCE - 7.80% 140 Associates Corp. N.A., Senior Notes ............................... 6.000 07/15/05 141,086 125 AT&T Capital Corp., Medium Term Notes, Series F, CIT Group Inc. Guaranteed ........................................ 6.600 05/15/05 125,882 150 General Electric Capital Corp., Debentures ........................ 8.850 04/01/05 168,076 200 General Motors Acceptance Corp., Medium Term Notes ................ 6.380 01/30/04 203,362 50 Goldman Sachs Group Inc., Global Bonds ............................ 6.875 01/15/11 50,746 200 Lehman Brothers Holdings Inc., Medium Term Notes, Series F ........ 7.500 09/01/06 209,892 200 NISource Finance Corp., Senior Unsecured Notes* ................... 7.500 11/15/03 208,526 150 Salomon Smith Barney Holding Co., Notes ........................... 6.500 02/15/08 151,106 150 Textron Financial Corp., Medium Term Notes, Series E .............. 5.950 03/15/04 151,025 150 Transamerica Finance Corp., Senior Notes .......................... 7.250 08/15/02 153,564 200 Washington Mutual Capital I, Subordinated Capital Income Securities, Washington Mutual Inc. Guaranteed ................ 8.375 06/01/27 191,631 175 Wells Fargo Financial, Inc., Senior Notes ......................... 6.750 06/01/05 181,916 ----------- 1,936,812 ----------- INDUSTRIAL - 9.23% 200 Aetna Inc., Senior Notes .......................................... 7.375 03/01/06 202,222 200 American Home Products, Notes* .................................... 5.875 03/15/04 200,864 200 Coca-Cola Co., Notes .............................................. 5.750 03/15/11 198,373 100 Conoco Inc., Senior Notes ......................................... 6.950 04/15/29 100,026 150 Constellation Brands, Inc., Senior Notes* ......................... 8.000 02/15/08 154,125 150 Electronic Data Systems Corp., Notes .............................. 6.850 10/15/04 155,995 250 Enron Oil & Gas Co., Notes ........................................ 6.000 12/15/08 240,194 250 LG-Caltex Oil Corp., Unsecured Notes* ............................. 7.500 07/15/07 251,948 100 Pitney Bowes Inc., Notes .......................................... 5.950 02/01/05 100,386 150 Raytheon Co., Senior Unsecured Notes .............................. 5.700 11/01/03 147,500 50 Rohm & Haas Co., Debentures ....................................... 7.850 07/15/29 52,913
The accompanying notes are an integral part of the financial statements. 11 THE BEAR STEARNS FUNDS INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000's) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) INDUSTRIAL (CONTINUED) $ 200 Safeway Inc., Notes ............................................... 6.050% 11/15/03 $ 203,131 175 Smith International Inc., Senior Notes ............................ 7.000 09/15/07 180,091 100 Unilever Capital Corp., Senior Unsecured Notes .................... 6.750 11/01/03 103,876 ----------- 2,291,644 ----------- MULTIMEDIA - 2.16% 125 CBS Corp., Senior Unsecured Notes* ................................ 7.150 05/20/05 129,585 150 Charter Communications Holdings, LLC, Senior Notes ................ 8.625 04/01/09 145,125 150 Time Warner Inc., Debentures ...................................... 6.850 01/15/26 152,788 100 Viacom, Inc., Senior Unsecured Notes, Company Guaranteed .......... 7.700 07/30/10 108,931 ----------- 536,429 ----------- TELECOMMUNICATIONS - 3.33% 100 GTE Northwest Inc., Debentures, Series D .......................... 5.550 10/15/08 96,210 150 Nextel Communications, Inc., Senior Serial Redeemable Notes ....... 9.375 11/15/09 127,875 150 Nextlink Communications Inc., Senior Notes ........................ 10.500 12/01/09 92,250 150 Qwest Capital Funding, Unsecured Notes, Company Guaranteed ........ 6.375 07/15/08 145,072 200 Qwest Capital Funding, Unsecured Notes, Company Guaranteed* ....... 7.900 08/15/10 212,228 150 Southern New England Telephone Co., Medium Term Notes, Series C ... 6.125 12/15/03 153,359 ----------- 826,994 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.79% 200 Federal Farm Credit Bank, Medium Term Notes ....................... 5.240 10/01/08 195,873 ----------- UTILITIES - 3.62% 250 Cleveland Electric Illuminating Co., Senior Secured Notes, Series D ..................................................... 7.880 11/01/17 255,778 100 CMS Energy Corp., Senior Notes .................................... 8.500 04/15/11 100,000 150 Consolidated Natural Gas Co., Unsecured Notes ..................... 7.250 10/01/04 156,450 400 Western Resources, Inc., Putable/Callable Notes ................... 6.250 08/15/03 386,618 ----------- 898,846 ----------- Total Corporate Obligations (cost - $7,815,951) ................... 7,907,713 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 35.37% FANNIE MAE - 24.64% 6,100 Pass-thru Pools ................................................... 6.000 - 7.000 03/01/16 - 02/01/31 6,119,033 ----------- FREDDIE MAC - 7.14% 1,675 Reference Notes ................................................... 5.125 10/15/08 1,627,971 142 Structured Pass-thru Securities, Series E4, Class A ............... 7.250 07/15/05 144,712 ----------- 1,772,683 -----------
The accompanying notes are an integral part of the financial statements. 12 THE BEAR STEARNS FUNDS INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000's) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (continued) GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.59% $ 880 Pass-thru Pools ................................................... 6.000 - 8.000% 05/15/13 - 10/15/30 $ 892,922 ----------- Total U.S. Government Agency Obligations (cost - $8,536,574) ...... 8,784,638 ----------- U.S. GOVERNMENT OBLIGATIONS - 24.07% U.S. TREASURIES - 24.07% 1,700 Bonds ............................................................. 5.250 - 7.250 05/15/16 - 02/15/29 1,715,531 4,145 Notes ............................................................. 5.000 - 6.875 11/15/05 - 02/15/11 4,264,320 ----------- Total U.S. Government Obligations (cost - $5,962,008) ............. 5,979,851 ----------- Total Long-Term Debt Investments (cost - $22,314,533) ............. 22,672,202 ----------- SHARES - -------- SHORT-TERM INVESTMENTS-- 10.51% INVESTMENT COMPANY - 0.16% 40,345 Federated Investors, Trust for Short-Term U.S. Government Securities** (cost - $40,345) ................................ 4.870 - 40,345 ----------- PRINCIPAL AMOUNT (000's) - --------- U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 10.35% $2,570 Federal Home Loan Bank, Discount Notes (cost - $2,569,643) ........ 5.000 04/02/01 2,569,643 ----------- Total Short-Term Investments (cost - $2,609,988) .................. 2,609,988 ----------- Total Investments -- 101.79% (cost - $24,924,521) ......................................... 25,282,190 Liabilities in excess of other assets-- (1.79)% ................... (445,262) ----------- Net Assets -- 100.00% ............................................. $24,836,928 ===========
- --------------- * SEC Rule 144A security. Such securities are traded only among qualified institutional buyers. ** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2001. The accompanying notes are an integral part of the financial statements. 13 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS - 88.10% UNITED STATES - 78.17% AEROSPACE & DEFENSE - 1.74% $2,000 BE Aerospace, Inc., Senior Subordinated Notes ...................... 9.500% 11/01/08 $ 2,055,000 ----------- AIR TRANSPORTATION - 0.70% 1,000 Amtran, Inc., Senior Notes, Company Guaranteed ..................... 9.625 12/15/05 825,000 ----------- BEVERAGE/TOBACCO - 1.53% 1,750 Constellation Brands, Inc., Senior Notes* .......................... 8.000 02/15/08 1,798,125 ----------- BUILDING/DEVELOPMENT - 1.68% 1,000 D.R. Horton, Inc., Senior Subordinated Notes ....................... 9.750 09/15/10 1,015,000 1,000 Nortek, Inc., Senior Notes, Series B ............................... 8.875 08/01/08 967,500 ----------- 1,982,500 ----------- BUSINESS EQUIPMENT/SERVICES - 1.82% 2,000 Buhrmann U.S. Inc., Senior Subordinated Notes, Company Guaranteed .. 12.250 11/01/09 2,140,000 ----------- CABLE TELEVISION - 9.75% 1,000 Adelphia Communications Corporation, Senior Notes, Series B ........ 9.875 03/01/07 1,007,500 2,000 Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corporation, Senior Notes .................... 10.750 10/01/09 2,140,000 2,000 EchoStar Broadband Corporation, Senior Notes ....................... 10.375 10/01/07 2,050,000 1,000 Insight Midwest, L.P. and Insight Capital, Inc., Senior Notes ...... 9.750 10/01/09 1,045,000 500 Insight Midwest, L.P. and Insight Capital, Inc., Senior Notes* ..... 10.500 11/01/10 537,500 2,500 Mediacom LLC and Mediacom Capital Corp., Senior Notes* ............. 9.500 01/15/13 2,456,250 1,500 NTL Communications Corp., Senior Notes* ............................ 11.875 10/01/10 1,365,000 1,000 NTL Incorporated, Senior Notes, Series B ........................... 10.000 02/15/07 885,000 ----------- 11,486,250 ----------- CHEMICALS/PLASTICS - 3.31% 1,000 Huntsman ICI Chemicals LLC, Senior Subordinated Notes, Company Guaranteed ............................................ 10.125 07/01/09 1,035,000 2,000 Lyondell Chemical Company, Senior Subordinated Notes, Company Guaranteed ............................................ 10.875 05/01/09 2,030,000 800 PMD Group, Inc., Senior Subordinated Notes, Company Guaranteed* .... 11.000 02/28/11 836,000 ----------- 3,901,000 ----------- COSMETICS/TOILETRIES - 0.72% 800 Elizabeth Arden, Inc., Senior Secured Notes* ....................... 11.750 02/01/11 844,000 -----------
The accompanying notes are an integral part of the financial statements. 14 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) ECOLOGICAL SERVICES/EQUIPMENT - 2.17% $2,500 Allied Waste North America, Inc., Senior Subordinated Notes, Series B, Company Guaranteed .................................. 10.000% 08/01/09 $ 2,562,500 ----------- FOOD SERVICES - 2.20% 2,500 Fleming Companies, Inc., Senior Notes* ............................. 10.125 04/01/08 2,587,500 ----------- FOOD/DRUG RETAILER - 1.01% 1,257 Duane Reade Inc., Senior Subordinated Notes, Company Guaranteed .... 9.250 02/15/08 1,187,865 ----------- FOREST PRODUCTS - 3.34% 2,000 Owens-Illinois, Inc., Senior Notes ................................. 7.850 05/15/04 1,670,000 1,000 Riverwood International Corporation, Senior Notes, Company Guaranteed ............................................ 10.625 08/01/07 1,030,000 1,200 Stone Container Corporation, Senior Notes* ......................... 9.750 02/01/11 1,230,000 ----------- 3,930,000 ----------- HEALTH CARE - 6.33% 2,000 Manor Care, Inc., Senior Notes* .................................... 8.000 03/01/08 2,045,000 1,750 Omnicare, Inc., Senior Subordinated Notes* ......................... 8.125 03/15/11 1,793,750 1,050 Team Health, Inc., Senior Subordinated Notes, Series B, Company Guaranteed ............................................ 12.000 03/15/09 1,120,875 1,000 Tenet Healthcare Corporation, Senior Notes, Series B ............... 9.250 09/01/10 1,111,250 1,250 Triad Hospitals Holdings, Inc., Senior Subordinated Notes, Series B, Company Guaranteed .................................. 11.000 05/15/09 1,381,250 ----------- 7,452,125 ----------- HOME FURNISHINGS - 1.49% 1,750 Simmons Company, Senior Subordinated Notes, Series B ............... 10.250 03/15/09 1,750,000 ----------- HOTELS/MOTELS/CASINOS - 12.18% 2,000 Ameristar Casinos, Inc., Senior Subordinated Notes* ................ 10.750 02/15/09 2,055,000 1,000 Argosy Gaming Company, Senior Subordinated Notes* .................. 10.750 06/01/09 1,080,000 1,000 Argosy Gaming Company, Senior Subordinated Notes, Company Guaranteed ............................................ 10.750 06/01/09 1,080,000 1,000 Choctaw Resort Development Enterprise, Senior Notes* ............... 9.250 04/01/09 1,021,250 2,000 HMH Properties, Inc., Senior Notes, Series B, Company Guaranteed ... 7.875 08/01/08 1,910,000 1,000 Hollywood Casino Corporation, Senior Secured Notes, Company Guaranteed ............................................ 11.250 05/01/07 1,065,000 1,500 Mandalay Resort Group, Senior Subordinated Notes, Series B ......... 10.250 08/01/07 1,552,500 1,500 MGM Mirage Inc., Senior Subordinated Notes, Company Guaranteed ..... 8.375 02/01/11 1,515,000
The accompanying notes are an integral part of the financial statements. 15 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) HOTELS/MOTELS/CASINOS (CONTINUED) $2,000 Park Place Entertainment Corporation, Senior Subordinated Notes .... 9.375% 02/15/07 $ 2,085,000 1,000 Pinnacle Entertainment, Inc., Senior Subordinated Notes, Series B, Company Guaranteed .................................. 9.250 02/15/07 986,250 ----------- 14,350,000 ----------- LEISURE - 2.10% 2,500 Bally Total Fitness Holding Corporation, Senior Subordinated Notes, Series D .................................. 9.875 10/15/07 2,468,750 ----------- OIL & Gas - 3.02% 1,500 Denbury Management, Inc., Senior Subordinated Notes, Company Guaranteed ............................................ 9.000 03/01/08 1,440,000 800 Key Energy Services, Inc., Senior Notes* ........................... 8.375 03/01/08 824,000 1,000 R&B Falcon Corporation, Senior Notes ............................... 12.250 03/15/06 1,298,750 ----------- 3,562,750 ----------- RADIO/TELEVISION - 1.61% 2,000 Young Broadcasting Inc., Senior Subordinated Notes, Series B, Company Guaranteed ............................................ 9.000 01/15/06 1,895,000 ----------- UTILITIES - 2.60% 1,000 AES Corporation (The), Senior Notes ................................ 9.500 06/01/09 1,060,000 2,000 CMS Energy Corporation, Senior Notes ............................... 8.500 04/15/11 2,000,000 ----------- 3,060,000 ----------- WIRELESS TELECOMMUNICATIONS - 12.46% 2,500 AirGate PCS, Inc., Senior Subordinated Discount Notes (1) .......... 13.500 10/01/09 1,525,000 1,600 Alamosa Delaware Inc., Senior Notes* ............................... 12.500 02/01/11 1,596,000 1,250 American Cellular Corporation, Senior Subordinated Notes* .......... 9.500 10/15/09 1,212,500 2,000 American Tower Corporation, Senior Notes* .......................... 9.375 02/01/09 1,925,000 1,000 Crown Castle International Corp., Senior Notes ..................... 10.750 08/01/11 1,037,500 1,500 Nextel Communications, Inc., Senior Serial Redeemable Notes ........ 9.375 11/15/09 1,278,750 1,500 Nextel Partners, Inc., Senior Notes ................................ 11.000 03/15/10 1,308,750 2,000 SBA Communications Corporation, Senior Notes* ...................... 10.250 02/01/09 1,880,000 1,500 TeleCorp PCS, Inc., Senior Subordinated Notes, Company Guaranteed .. 10.625 07/15/10 1,455,000 1,500 Triton PCS Inc., Senior Subordinated Notes* ........................ 9.375 02/01/11 1,455,000 ----------- 14,673,500 -----------
The accompanying notes are an integral part of the financial statements. 16 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) WIRELINE TELECOMMUNICATIONS - 6.41% $1,000 Adelphia Business Solutions, Inc., Senior Subordinated Notes ........ 12.000% 11/01/07 $ 635,000 1,000 Intermedia Communications Inc., Senior Discount Notes (1) ........... 12.500 05/15/06 1,010,000 2,000 Level 3 Communications, Inc., Senior Notes .......................... 11.000 03/15/08 1,575,000 2,500 McLeodUSA Incorporated, Senior Notes ................................ 11.375 01/01/09 2,462,500 800 Time Warner Telecom Inc., Senior Notes* ............................. 10.125 02/01/11 804,000 1,070 Time Warner Telecom LLC and Time Warner Telecom Inc., Senior Notes .. 9.750 07/15/08 1,064,650 ----------- 7,551,150 ----------- Total United States (cost - $91,384,774) ............................ 92,063,015 ----------- BERMUDA - 1.56% WIRELINE TELECOMMUNICATIONS - 1.56% 2,000 Global Crossing Holdings Ltd., Senior Subordinated Debentures* (cost - $1,983,316) ............................................ 8.700 08/01/07 1,840,000 ----------- CANADA - 5.21% FOREST PRODUCTS - 2.62% 1,000 Repap New Brunswick Inc., Senior Yankee Notes ....................... 10.625 04/15/05 1,031,250 500 Tembec Industries Inc., Senior Notes* ............................... 8.500 02/01/11 515,000 1,500 Tembec Industries Inc., Senior Yankee Notes, Company Guaranteed ..... 8.625 06/30/09 1,545,000 ----------- 3,091,250 ----------- WIRELESS TELECOMMUNICATIONS - 2.59% 2,050 Clearnet Communications Inc., Senior Discount Yankee Notes (1) ...... 10.125 05/01/09 1,732,250 1,300 Microcell Telecommunications Inc., Senior Disscount Yankee Notes, Series B (1) ................................................... 14.000 06/01/06 1,313,000 ----------- 3,045,250 ----------- Total Canada (cost - $5,725,915) .................................... 6,136,500 ----------- CAYMAN ISLANDS - 1.91% ELECTRONICS/ELECTRIC - 0.04% 50 Seagate Technology International, Senior Subordinated Notes, Company Guaranteed* ............................................ 12.500 11/15/07 50,000 ----------- UTILITIES - 1.87% 2,000 AES Drax Energy Ltd., Secured Notes* ................................ 11.500 08/30/10 2,200,000 ----------- Total Cayman Islands (cost - $2,192,863) ............................ 2,250,000 ----------- UNITED KINGDOM - 1.25% CABLE TELEVISION - 1.25% 1,500 Telewest Communications plc, Debentures (cost - $1,402,132) ......... 11.000 10/01/07 1,477,500 ----------- Total Long-Term Debt Investments (cost - $102,689,000) .............. 103,767,015 -----------
The accompanying notes are an integral part of the financial statements. 17 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ----------------------------------------------------------------------------------------------------------------------------------- INTEREST MATURITY SHARES RATE(S) DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- EQUITY INVESTMENTS - 1.31% COMMON STOCKS - UNITED STATES - 0.00% WIRELINE TELECOMMUNICATIONS - 0.00% 2,015 Viatel, Inc. (2) ................................................... - - $ 1,133 3,927 World Access, Inc. (2) ............................................. - - 982 ----------- Total Common Stocks - United States (cost - $69,878) ............... 2,115 ----------- PREFERRED STOCKS - UNITED STATES - 1.31% CABLE TELEVISION - 0.21% 2,500 Adelphia Communications Corporation, Cumulative Exchangeable Preferred Stock, Series B ..................................... 13.000% - 240,625 1 Paxson Communications Corporation (3) .............................. 12.500 - 748 ----------- 241,373 ----------- WIRELESS TELECOMMUNICATIONS - 1.10% 977 Dobson Communications Corporation, Senior Exchangeable Preferred Stock (3) ........................................... 12.250 - 13.000 - 880,888 543 Nextel Communications, Inc., Exchangeable Preferred Stock, Series E (3) .................................................. 11.125 - 415,822 ----------- 1,296,710 ----------- Total Preferred Stocks - United States (cost - $1,739,178) ......... 1,538,083 ----------- Total Equity Investments (cost - $1,809,056) ....................... 1,540,198 ----------- UNITS - -------- WARRANTS - 0.00% UNITED STATES - 0.00% WIRELINE TELECOMMUNICATIONS - 0.00% 250 Mpower Communications Corp.*(2) (cost - $8,750) .................... - 10/01/04 3,750 ----------- SHARES - -------- SHORT-TERM INVESTMENTS - 8.67% INVESTMENT COMPANY - 0.18% 210,864 Federated Investors, Trust for Short-Term U.S. Government Securities** (cost - $210,864) ................ 4.870 - 210,864 -----------
The accompanying notes are an integral part of the financial statements. 18 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS (CONTINUED) U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 8.49% $10,000 Federal Home Loan Bank, Discount Notes (cost - $9,998,611) ......... 5.000% 04/02/01 $ 9,998,611 ------------ Total Short-Term Investments (cost - $10,209,475) .................. 10,209,475 ------------ Total Investments - 98.08% (cost - $114,716,281) ........................................ 115,520,438 Other assets in excess of liabilities - 1.92% ...................... 2,264,736 ------------ Net Assets - 100.00% ............................................... $117,785,174 ============
- ------------ * SEC Rule 144A security. Such securities are traded only among qualified institutional buyers. ** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2001. (1) Coupon rate is zero until step-up date. Step-up rate is provided. (2) Non-income producing security. (3) 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. 19 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT INTEREST MATURITY (000's)+ RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM DEBT INVESTMENTS -- 95.86% ALGERIA - 0.99% SOVEREIGN - 0.99% 144 Republic of Algeria, Loan Tranche I (1)(2) .......................... 5.813% 09/04/06 $ 122,988 180 Republic of Algeria, Loan Tranche III (1)(2) ........................ 5.813 03/04/10 145,350 ----------- Total Algeria (cost - $261,475) ..................................... 268,338 ----------- ARGENTINA - 10.75% SOVEREIGN - 10.75% 660 Republic of Argentina (3) ........................................... 10.250 - 12.125 03/15/10 - 07/21/30 549,965 98 Republic of Argentina, Bocon, Series PRE4 (2)(4)(5) ................. 5.374 09/01/02 91,030 80 Republic of Argentina, Bocon, Series PRO2 (2)(4)(5) ................. 5.374 04/01/07 54,915 200 Republic of Argentina, Bonos del Tesoro, Series BTO2 (4) ............ 8.750 05/09/02 186,687 150 Republic of Argentina, Bonos del Tesoro, Series BTO7 (4) ............ 11.750 05/21/03 139,992 330 Republic of Argentina, Bonos del Tesoro, Series BTO8 (4) ............ 12.125 05/21/05 304,874 378 Republic of Argentina, FRD (2)(5)(6) ................................ 5.563 03/31/05 318,465 450 Republic of Argentina, Par Bonds, Series L-GP (6)(7) ................ 6.000 03/31/23 297,000 70 Republic of Argentina, Secured Discount Bonds, Series L-GL (2)(6) ... 7.563 03/31/23 50,312 140 Republic of Argentina, Senior Unsubordinated Bonds, Series BGL0 (3) . 8.375 12/20/03 121,625 90 Republic of Argentina, Series XW (3) ................................ 11.000 12/04/05 79,785 365 Republic of Argentina, Unsubordinated Bonds (3) ..................... 9.750 - 11.750 04/07/09 - 09/19/27 285,153 125 Republic of Argentina, Unsubordinated Bonds, Series BGL4 (3) ........ 11.000 10/09/06 108,125 405 Republic of Argentina, Unsubordinated Bonds, Series BGL5 (3) ........ 11.375 01/30/17 338,681 ----------- Total Argentina (cost - $3,211,285) ................................. 2,926,609 ----------- BRAZIL - 11.10% SOVEREIGN - 11.10% 455 Federal Republic of Brazil (3) ...................................... 11.625 - 12.750 04/15/04 - 03/06/30 449,109 530 Federal Republic of Brazil, Capitalization Bonds (5)(6)(7)(8) ....... 8.000 04/15/14 406,396 310 Federal Republic of Brazil, Collateralized Par Bonds (6)(7) ......... 6.000 04/15/24 214,869 40 Federal Republic of Brazil, Secured DCB (2)(5)(6) ................... 7.688 04/15/12 28,425 475 Federal Republic of Brazil, Secured DCB, Series RG (2)(5)(6) ........ 7.688 04/15/12 337,547 240 Federal Republic of Brazil, Secured Discount Bonds (2)(6) ........... 7.625 04/15/24 180,750 50 Federal Republic of Brazil, Secured FLIRB Bearer (2)(5)(6) .......... 7.625 04/15/09 40,062 150 Federal Republic of Brazil, Secured NMB (2)(5)(6) ................... 7.688 04/15/09 127,125 264 Federal Republic of Brazil, Series EI-L (2)(5)(6) ................... 7.625 04/15/06 239,580 1,130 Federal Republic of Brazil, Unsubordinated Bonds (3) ................ 11.000 - 14.500 10/15/09 - 08/17/40 998,590 ----------- Total Brazil (cost - $3,067,940) .................................... 3,022,453 ----------- BULGARIA - 3.29% SOVEREIGN - 3.29% 385 Republic of Bulgaria, Collateralized Discount Bonds, Series A (2)(6)................................................. 6.313 07/28/24 290,916 800 Republic of Bulgaria, Collateralized FLIRB, Series A (5)(6)(7) ...... 3.000 07/28/12 605,500 ----------- Total Bulgaria (cost - $782,214) .................................... 896,416 -----------
The accompanying notes are an integral part of the financial statements. 20 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT INTEREST MATURITY (000's)+ RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM DEBT INVESTMENTS (CONTINUED) CHILE - 0.53% SOVEREIGN - 0.53% 145 Republic of Chile, Notes (3) (cost - $136,510) ...................... 6.875% 04/28/09 $ 145,362 ----------- CHINA - 0.03% CORPORATE - 0.03% 120 Zhuhai Highway Co. Ltd. (9) (cost - $68,827) ........................ - 07/01/08 9,000 ----------- COLOMBIA - 2.43% SOVEREIGN - 2.43% 150 Republic of Colombia (3) ............................................ 11.750 02/25/20 138,656 425 Republic of Colombia, Unsubordinated Bonds (3) ...................... 7.625 - 9.750 02/15/07 - 04/23/09 375,587 150 Republic of Colombia, Unsubordinated Bonds, Series NOV (3) .......... 9.750 04/23/09 147,187 ----------- Total Colombia (cost - $654,405) .................................... 661,430 ----------- CROATIA - 0.69% SOVEREIGN - 0.69% 194 Croatia, Series A (2)(6) (cost - $177,030) .......................... 6.250 07/31/10 187,760 ----------- ECUADOR - 1.87% SOVEREIGN - 1.87% 338 Republic of Ecuador (3)* ............................................ 12.000 11/15/12 232,586 454 Republic of Ecuador (3)(7)* ......................................... 4.000 08/15/30 187,842 4 Republic of Ecuador, Registered (3) ................................. 12.000 11/15/12 2,752 210 Republic of Ecuador, Registered (3)(7) .............................. 4.000 08/15/30 86,887 ----------- Total Ecuador (cost - $329,801) ..................................... 510,067 ----------- MALAYSIA - 4.48% CORPORATE - 3.00% 585 Petroliam Nasional Berhad, Unsubordinated Bonds, Registered (3)* .... 7.125 - 7.625 10/18/06 - 10/15/26 555,061 250 Tenaga Nasional Berhad, Notes, Registered (10) ...................... 7.875 06/15/04 262,083 ----------- 817,144 ----------- SOVEREIGN - 1.48% 365 Malaysia (3) ........................................................ 8.750 06/01/09 402,869 ----------- Total Malaysia (cost - $1,167,611) .................................. 1,220,013 ----------- MEXICO - 19.37% CORPORATE - 1.76% 150 Banco Nacional de Comercio Exterier, Unsecured Debentures (3) ....... 7.250 02/02/04 151,208 300 Innova S. De R.L., Senior Notes (11)* ............................... 12.875 04/01/07 267,000 60 Pemex Project Funding Master Trust, Company Guaranteed (3) .......... 9.125 10/13/10 60,900 ----------- 479,108 -----------
The accompanying notes are an integral part of the financial statements. 21 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT INTEREST MATURITY (000's)+ RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM DEBT INVESTMENTS (CONTINUED) SOVEREIGN - 17.61% 500 Bancomext Trust Division, Bank Guaranteed, Registered (3) ........... 11.250% 05/30/06 $ 557,350 MXP 9,903 Mex Bonos de Desarrollo (3) ......................................... 13.500 03/02/06 1,025,899 500 United Mexican States (3) ........................................... 11.375 - 11.500 09/15/16 - 05/15/26 590,201 400 United Mexican States, Notes (3) .................................... 8.375 - 9.875 02/01/10 - 01/14/11 425,556 250 United Mexican States, Secured Discount Bonds, Series A (2)(6) ...... 7.533 12/31/19 242,500 175 United Mexican States, Secured Discount Bonds, Series C (2)(6) ...... 7.533 12/31/19 169,750 20 United Mexican States, Secured Par Bonds, Series W-A (6) ............ 6.250 12/31/19 17,875 1,300 United Mexican States, Secured Par Bonds, Series W-B (6) ............ 6.250 12/31/19 1,161,875 550 United Mexican States, Series XW (3) ................................ 10.375 02/17/09 605,688 ----------- 4,796,694 ----------- Total Mexico (cost - $5,110,814) .................................... 5,275,802 ----------- MOROCCO - 1.59% SOVEREIGN - 1.59% 487 The Kingdom of Morocco, Tranche A (1)(2) (cost - $393,293) .......... 7.563 01/01/09 432,865 ----------- NIGERIA - 2.60% SOVEREIGN - 2.60% 500 Central Bank of Nigeria, Collateralized Par Bonds, Series WW (6)(7)(11) ........................................... 6.250 11/15/20 314,375 704 Nigeria Promissory Notes (3)(7) ..................................... 5.092 01/05/10 393,255 ----------- Total Nigeria (cost - $752,807) ..................................... 707,630 ----------- PANAMA - 3.95% SOVEREIGN - 3.95% 535 The Republic of Panama (3) .......................................... 8.875 - 9.625 02/08/11 - 04/01/29 512,044 670 The Republic of Panama, IRD (2)(5)(6) ............................... 4.500 07/17/14 562,800 ----------- Total Panama (cost - $1,042,196) .................................... 1,074,844 ----------- PERU - 2.14% SOVEREIGN - 2.14% 480 The Republic of Peru, Collateralized FLIRB (5)(6)(7) ................ 4.000 03/07/17 299,400 240 The Republic of Peru, PDI Bonds (2)(6) .............................. 4.500 03/07/17 164,100 176 The Republic of Peru, PDI Bonds (2)(6)* ............................. 4.500 03/07/17 120,340 ----------- Total Peru (cost - $583,843) ........................................ 583,840 ----------- PHILIPPINES - 3.85% SOVEREIGN - 3.85% 505 Republic of the Philippines (3) ..................................... 9.500 - 9.875 01/15/19 - 10/21/24 458,729 460 Republic of the Philippines, Notes (3) .............................. 9.875 - 10.625 03/16/10 - 03/16/25 419,316 180 Republic of the Philippines, Unsecured Bonds (3) .................... 8.875 04/15/08 169,650 ----------- Total Philippines (cost - $1,043,700) ............................... 1,047,695 -----------
The accompanying notes are an integral part of the financial statements. 22 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT INTEREST MATURITY (000's)+ RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM DEBT INVESTMENTS (CONTINUED) POLAND - 3.67% SOVEREIGN - 3.67% 175 The Republic of Poland, Collateralized, Series RSTA (6)(7) ......... 4.250% 10/27/24 $ 139,781 175 The Republic of Poland, Collateralized Par Bonds (6)(7) ............ 3.750 10/27/24 127,313 750 The Republic of Poland, Series PDIB (6)(7) ......................... 6.000 10/27/14 731,719 ----------- Total Poland (cost - $933,361) ..................................... 998,813 ----------- RUSSIA - 7.51% SOVEREIGN - 7.51% 160 Russian Federation, Senior Unsubordinated Bonds, Registered (3) .... 11.750 06/10/03 156,800 231 Russian Federation, Unsubordinated Bonds (3)(5)* ................... 8.250 03/31/10 156,003 1,626 Russian Federation, Unsubordinated Bonds (3)(5)(7)* ................ 2.500 03/31/30 655,643 1,130 Russian Federation, Unsubordinated Bonds, Registered (3) ........... 8.750 - 12.750 07/24/05 - 06/24/28 906,073 425 Russian Federation, Unsubordinated Bonds, Registered (3)(5)(7) ..... 2.500 03/31/30 171,328 ----------- Total Russia (cost - $1,522,239) ................................... 2,045,847 ----------- SOUTH AFRICA - 1.46% SOVEREIGN - 1.46% 240 Republic of South Africa (3) ....................................... 9.125 05/19/09 253,200 150 Republic of South Africa, Notes (12) ............................... 8.500 06/23/17 145,125 ----------- Total South Africa (cost - $374,231) ............................... 398,325 ----------- SOUTH KOREA - 4.02% CORPORATE - 2.38% 520 Cho Hung Bank, Subordinated Notes .................................. 11.500 04/01/10 517,400 130 Hanvit Bank, Registered (1)(7) ..................................... 12.750 03/01/10 131,300 ----------- 648,700 ----------- SOVEREIGN - 1.64% 400 Republic of Korea, Unsecured Unsubordinated Bonds (3) .............. 8.875 04/15/08 445,750 ----------- Total South Korea (cost - $1,071,959) .............................. 1,094,450 ----------- TURKEY - 4.18% CORPORATE - 0.75% 270 Export Credit Bank of Turkey, Unsubordinated Bonds, Registered (3).. 11.500 02/25/05 205,200 ----------- SOVEREIGN - 3.43% 375 Republic of Turkey (3) ............................................. 11.750 06/15/10 297,188 795 Republic of Turkey, Senior Unsubordinated Bonds (3) ................ 11.875 - 12.375 06/15/09 - 01/15/30 637,697 ----------- 934,885 ----------- Total Turkey (cost - $1,493,771) ................................... 1,140,085 ----------- UKRAINE - 0.79% SOVEREIGN - 0.79% 310 Ukraine Government, Unsecured Senior Notes, Registered (3)(5) (cost - $204,921) ............................................. 11.000 03/15/07 215,883 -----------
The accompanying notes are an integral part of the financial statements. 23 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT INTEREST MATURITY (000's)+ RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM DEBT INVESTMENTS (CONTINUED) VENEZUELA - 4.57% SOVEREIGN - 4.57% 990 Republic of Venezuela (3) ........................................... 9.250 - 13.625% 08/15/18 - 09/15/27 $ 699,394 310 Republic of Venezuela, FLIRD, Series A (2)(5)(6) .................... 5.688 03/31/07 256,515 48 Republic of Venezuela, FLIRD, Series B (2)(5)(6) .................... 5.688 03/31/07 39,468 325 Republic of Venezuela, Par Bonds, Series W-A (6)(13) ................ 6.750 03/31/20 250,250 ----------- Total Venezuela (cost - $1,186,437) ................................. 1,245,627 ----------- Total Long-Term Debt Investments (cost - $25,570,670) ............... 26,109,154 ----------- SHORT-TERM INVESTMENT-- 0.42% GRAND CAYMAN - 0.42% 116 Brown Brothers Harriman & Co. (cost - $116,000) ..................... 4.270 ** 116,000 ----------- Total Investments -- 96.28% (cost - $25,686,670) ........................................... 26,225,154 Other assets in excess of liabilities -- 3.72% ...................... 1,012,376 ----------- Net Assets-- 100.00% ................................................ $27,237,530 ===========
- --------------- + Denominated in United States dollars unless otherwise indicated. * SEC Rule 144A security. Such securities are traded only among qualified institutional buyers. ** Variable rate call account. Rate resets on a daily basis, amounts available generally on the same business day. (1) Loan Participations. (2) Adjustable rate; rate based on London Interbank Offered Rate (LIBOR). (3) Global/Eurobonds. (4) Domestic bonds. (5) Pro-rata sinking fund has been established. (6) Brady bonds. (7) Step-up coupon; coupon increases at periodic intervals. (8) Payment-in-kind; of which all or a portion of the coupon is being capitalized at periodic intervals. (9) The coupon payments on this subordinated bond which were due and payable on July 1, 2000 and January 2, 2001 have not been received by bondholders. The bond is rated D by Standard & Poor's Rating Service ("S&P") and C by Moody's Investors Service, Inc. ("Moody's"). Also, senior notes of the issuer are now in payment default, and are now rated D by S&P and Caa2 by Moody's. (10) Quasi-government bonds. (11) With an additional 2,250 warrants attached, with no market value. (12) Yankee bonds. (13) With an additional 9,635 value recovery rights attached, with no market value. DCB Debt Conversion Bonds. FLIRB Front Loaded Interest Reduction Bonds. FLIRD Front Loaded Interest Reduction Debentures. FRD Floating Rate Debentures. IRD Interest Reduction Debentures. MXP Mexican Peso. NMB New Money Bonds. PDI Past Due Interest. The accompanying notes are an integral part of the financial statements. 24 THE BEAR STEARNS FUNDS STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 2001
INCOME HIGH YIELD TOTAL EMERGING MARKETS PORTFOLIO RETURN PORTFOLIO DEBT PORTFOLIO --------- ---------------- ---------------- ASSETS Investments, at value (cost - $24,924,521, $114,716,281 and $25,686,670, respectively) ..................................... $ 25,282,190 $ 115,520,438 $ 26,225,154 Interest and dividends receivable .................................... 274,441 2,540,332 661,090 Receivable for Portfolio shares sold ................................. 219,471 571,172 91,056 Receivable for investments sold ...................................... 126,634 -- 507,341 Receivable from investment adviser ................................... 27,556 -- -- Deferred organization expenses and other assets ...................... 48,920 63,701 28,585 ------------- ------------- ------------- Total assets ..................................................... 25,979,212 118,695,643 27,513,226 ------------- ------------- ------------- LIABILITIES Payable for investments purchased .................................... 1,006,979 -- 10,962 Dividends payable .................................................... 38,532 342,955 85,355 Payable for Portfolio shares repurchased ............................. 4,643 274,440 23,231 Distribution and service fees payable (Class A, B and C shares) ...... 23,409 167,794 32,669 Custodian fee payable ................................................ 1,169 2,268 23,231 Administration fee payable ........................................... 2,914 14,942 3,514 Advisory fee payable ................................................. -- 5,863 9,118 Unrealized loss on open forward foreign currency exchange contracts .. -- -- 13,761 Accrued expenses ..................................................... 64,638 102,207 73,855 ------------- ------------- ------------- Total liabilities ................................................ 1,142,284 910,469 275,696 ------------- ------------- ------------- NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) .................................... 2,070 13,470 2,623 Paid-in capital ...................................................... 25,020,224 151,583,051 29,971,598 Undistributed net investment income .................................. -- 32,020 -- Accumulated net realized loss from investments and foreign currency related transactions, if any .............................. (543,035) (34,647,524) (3,261,509) Net unrealized appreciation on investments and foreign currency related transactions, if any .............................. 357,669 804,157 524,818 ------------- ------------- ------------- Net assets ....................................................... $ 24,836,928 $ 117,785,174 $ 27,237,530 ============= ============= ============= CLASS A Net assets ........................................................... $ 8,315,710 $ 69,132,521 $ 22,050,856 ------------- ------------- ------------- Shares of beneficial interest outstanding ............................ 693,280 7,906,082 2,120,853 ------------- ------------- ------------- Net asset value per share ............................................ $11.99 $8.74 $10.40 ====== ===== ====== Maximum offering price per share (net asset value plus sales charge of 4.50%* of the offering price) ...................... $12.55 $9.15 $10.89 ====== ===== ====== CLASS B Net assets ........................................................... $ 4,860,832 $ 26,335,641 $ 1,946,476 ------------- ------------- ------------- Shares of beneficial interest outstanding ............................ 405,247 3,011,751 188,711 ------------- ------------- ------------- Net asset value and offering price per share** ....................... $11.99 $8.74 $10.31 ====== ===== ====== CLASS C Net assets ........................................................... $ 3,339,327 $ 22,317,012 $ 3,240,198 ------------- ------------- ------------- Shares of beneficial interest outstanding ............................ 278,399 2,552,221 313,896 ------------- ------------- ------------- Net asset value and offering price per share** ....................... $11.99 $8.74 $10.32 ====== ===== ====== CLASS Y Net assets ........................................................... $ 8,321,059 -- -- ------------- ------------- ------------- Shares of beneficial interest outstanding ............................ 693,714 -- -- ------------- ------------- ------------- Net asset value, offering and redemption price per share ............. $11.99 -- -- ====== ===== ======
- -------------- * On investments of $500,000 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. 25 THE BEAR STEARNS FUNDS STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 2001
INCOME HIGH YIELD TOTAL EMERGING MARKETS PORTFOLIO RETURN PORTFOLIO DEBT PORTFOLIO --------- ---------------- ---------------- INVESTMENT INCOME Interest* ............................................................ $ 1,088,102 $ 10,000,804 $ 3,226,004 Dividends ............................................................ -- 379,763 -- ------------- ------------ ------------ 1,088,102 10,380,567 3,226,004 ------------- ------------ ------------ EXPENSES Advisory fees ........................................................ 70,036 564,471 292,875 Transfer agent fees and expenses ..................................... 158,450 166,638 102,217 Accounting fees ...................................................... 73,037 134,135 90,002 Distribution and service fees - Class A .............................. 20,288 173,926 85,456 Distribution and service fees - Class B .............................. 28,948 230,032 18,083 Distribution and service fees - Class C .............................. 23,162 206,156 29,437 Administration fees .................................................. 23,345 141,113 43,709 Legal and auditing fees .............................................. 50,002 50,499 60,301 Federal and state registration fees .................................. 39,793 52,437 43,196 Reports and notices to shareholders .................................. 9,501 50,901 20,199 Custodian fees and expenses .......................................... 10,183 19,142 42,000 Insurance expenses ................................................... 8,814 9,240 9,112 Trustees' fees and expenses .......................................... 8,501 7,701 8,501 Amortization of organization expenses ................................ -- 12,275 -- Other ................................................................ 5,105 6,747 11,555 ------------- ------------ ------------ Total expenses before waivers and related reimbursements ......... 529,165 1,825,413 856,643 Less: waivers and related reimbursements ......................... (385,223) (608,526) (308,856) ------------- ------------ ------------ Total expenses after waivers and related reimbursements .......... 143,942 1,216,887 547,787 ------------- ------------ ------------ Net investment income ................................................ 944,160 9,163,680 2,678,217 ------------- ------------ ------------ NETREALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from: Investments ...................................................... (107,724) (23,442,118) 639,539 Foreign currency related transactions ............................ -- 3,778 (5,636) Net change in unrealized appreciation/(depreciation) on: Investments ...................................................... 710,450 12,737,866 (1,287,794) Foreign currency related transactions ............................ -- -- (17,225) ------------- ------------ ------------ Net realized and unrealized gain/(loss) on investments ............... 602,726 (10,700,474) (671,116) ------------- ------------ ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $ 1,546,886 $ (1,536,794) $ 2,007,101 ============= ============ ============
- ------------ * Net of foreign withholding taxes of $3,048 for the Emerging Markets Debt Portfolio. The accompanying notes are an integral part of the financial statements. 26 THE BEAR STEARNS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
INCOME HIGH YIELD TOTAL EMERGING MARKETS PORTFOLIO RETURN PORTFOLIO DEBT PORTFOLIO ---------------------------- ---------------------------- ---------------------------- FOR THE FOR THE FOR THE FISCAL YEARS FISCAL YEARS FISCAL YEARS ENDED MARCH 31, ENDED MARCH 31, ENDED MARCH 31, ---------------------------- ---------------------------- ---------------------------- 2001 2000 2001 2000 2001 2000 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income ............ $ 944,160 $ 772,173 $ 9,163,680 $ 10,644,604 $ 2,678,217 $ 2,952,266 Net realized gain/(loss) from investments and foreign currency related transactions, if any .......................... (107,724) (426,746) (23,438,340) (9,640,254) 633,903 207,619 Net change in unrealized appreciation/(depreciation) on investments and foreign currency related transactions, if any .......................... 710,450 (237,372) 12,737,866 (6,413,837) (1,305,019) 4,415,644 ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations ...................... 1,546,886 108,055 (1,536,794) (5,409,487) 2,007,101 7,575,529 ------------ ------------ ------------ ------------ ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares .................. (360,915) (287,824) (4,999,212) (5,826,234) (2,266,869) (2,695,204) Class B shares .................. (160,711) (103,053) (2,178,629) (2,454,402) (159,013) (141,858) Class C shares .................. (129,207) (109,008) (1,953,819) (2,378,968) (258,009) (188,282) Class Y shares .................. (293,327) (272,288) -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ (944,160) (772,173) (9,131,660) (10,659,604) (2,683,891) (3,025,344) ------------ ------------ ------------ ------------ ------------ ------------ Net realized capital gains Class A shares .................. -- (741) -- -- -- -- Class B shares .................. -- (330) -- -- -- -- Class C shares .................. -- (300) -- -- -- -- Class Y shares .................. -- (711) -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ -- (2,082) -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares .................. 21,523,945 5,724,901 67,107,610 43,646,464 8,593,909 7,512,688 Cost of shares repurchased ....... (11,716,000) (4,094,378) (30,778,779) (50,723,201) (15,473,961) (14,026,898) Shares issued in reinvestment of dividends .................... 593,879 498,729 4,906,398 5,537,955 1,718,915 1,889,157 ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets derived from shares of beneficial interest transactions .................... 10,401,824 2,129,252 41,235,229 (1,538,782) (5,161,137) (4,625,053) ------------ ------------ ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets ................... 11,004,550 1,463,052 30,566,775 (17,607,873) (5,837,927) (74,868) NET ASSETS Beginning of year ................ 13,832,378 12,369,326 87,218,399 104,826,272 33,075,457 33,150,325 ------------ ------------ ------------ ------------ ------------ ------------ End of year* ..................... $ 24,836,928 $ 13,832,378 $117,785,174 $ 87,218,399 $ 27,237,530 $ 33,075,457 ============ ============ ============ ============ ============ ============
- ------------- * Includes undistributed net investment income as follows:
FOR THE FISCAL YEARS ENDED MARCH 31, ---------------------------- 2001 2000 ------------ ------------ High Yield Total Return Portfolio .. $32,020 -- Emerging Markets Debt Portfolio .... -- $12,870
The accompanying notes are an integral part of the financial statements. 27 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. - --------------------------------------------------------------------------------
NET NET ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS VALUE, NET UNREALIZED FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED OF PERIOD INCOME*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS --------- ---------- --------------- ------ ------------- INCOME PORTFOLIO CLASS A 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) For the fiscal year ended March 31, 1998 .................. 12.03 0.76 0.36 (0.76) (0.02) For the fiscal year ended March 31, 1997 .................. 12.26 0.73 (0.20) (0.73) (0.03) CLASS B 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) For the period February 2, 1998** through March 31, 1998 .. 12.47 0.10 (0.10) (0.10) -- CLASS C 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) For the fiscal year ended March 31, 1998 .................. 12.03 0.70 0.36 (0.70) (0.02) For the fiscal year ended March 31, 1997 .................. 12.26 0.68 (0.20) (0.68) (0.03) CLASS Y 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) For the fiscal year ended March 31, 1998 .................. 12.03 0.80 0.36 (0.80) (0.02) For the fiscal year ended March 31, 1997 .................. 12.26 0.77 (0.20) (0.77) (0.03) HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A 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) For the period January 2, 1998*** through March 31, 1998 .. 12.00 0.26 0.73 (0.26) -- CLASS B 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) For the period January 2, 1998*** through March 31, 1998 .. 12.00 0.24 0.73 (0.24) -- CLASS C 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) For the period January 2, 1998*** through March 31, 1998 .. 12.00 0.24 0.73 (0.24) --
- ---------------- * 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 intial public offering. *** Commencement of investment operations. (1) Reflects waivers and related reimbursments. (2) The amounts shown for a share outstanding thoughout 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. For High Yield Total Return Portfolio, net realized and unrealized gain/(loss) on investments include forward foreign currency exchange contracts and translation of foreign currency related transactions, if any. The accompanying notes are an integral part of the financial statements. 28
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF END OF INVESTMENT END OF PERIOD EXPENSES TO PERIOD RETURN(3) (000's OMITTED) AVERAGE NET ASSETS(1) ------ --------- --------------- --------------------- INCOME PORTFOLIO CLASS A 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 For the fiscal year ended March 31, 1998 .................. 12.37 9.43 2,926 0.80 For the fiscal year ended March 31, 1997 .................. 12.03 4.40 3,367 0.80 CLASS B 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 For the period February 2, 1998** through March 31, 1998 .. 12.37 (0.04)(4) 18 1.45(5) CLASS C 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 For the fiscal year ended March 31, 1998 .................. 12.37 8.92 1,403 1.28 For the fiscal year ended March 31, 1997 .................. 12.03 3.99 1,018 1.20 CLASS Y 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 For the fiscal year ended March 31, 1998 .................. 12.37 9.81 4,339 0.45 For the fiscal year ended March 31, 1997 .................. 12.03 4.77 13,486 0.45 HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A 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 For the period January 2, 1998*** through March 31, 1998 .. 12.73 8.30 18,301 1.00(5) CLASS B 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 For the period January 2, 1998*** through March 31, 1998 .. 12.73 8.13 6,013 1.65(5) CLASS C 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 For the period January 2, 1998*** through March 31, 1998 .. 12.73 8.13 11,298 1.65(5) 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, 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 For the fiscal year ended March 31, 1998 .................. 6.13 1.86 244.78 For the fiscal year ended March 31, 1997 .................. 5.99 1.73 262.95 CLASS B 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 For the period February 2, 1998** through March 31, 1998 .. 5.22(4)(5) 0.48(4)(5) 244.78 CLASS C 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 For the fiscal year ended March 31, 1998 .................. 5.60 1.80 244.78 For the fiscal year ended March 31, 1997 .................. 5.57 1.74 262.95 CLASS Y 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 For the fiscal year ended March 31, 1998 .................. 6.39 1.78 244.78 For the fiscal year ended March 31, 1997 .................. 6.34 1.73 262.95 HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A 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 For the period January 2, 1998*** through March 31, 1998 .. 9.14(5) 1.67(5) 139.61 CLASS B 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 For the period January 2, 1998*** through March 31, 1998 .. 8.46(5) 1.68(5) 139.61 CLASS C 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 For the period January 2, 1998*** through March 31, 1998 .. 8.46(5) 1.67(5) 139.61
- ----------------- (3) Total investment return does not consider the effects of sales charges or contigingent 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 comparible to those of any other outstanding class of shares, due to the timing differences in the commencement of initial public offerings. (5) Annualized. 29 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. - --------------------------------------------------------------------------------
NET NET ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS VALUE, NET UNREALIZED FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED OF PERIOD INCOME*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS --------- ---------- --------------- ------ ------------- EMERGING MARKETS DEBT PORTFOLIO CLASS A For the fiscal year ended March 31, 2001 .................. $ 10.58 $ 0.97 $ (0.18) $ (0.97) -- For the fiscal year ended March 31, 2000 .................. 9.27 0.83 1.31 (0.83) -- For the fiscal year ended March 31, 1999 .................. 12.00 1.05 (2.60) (1.01) $ (0.17) For the fiscal year ended March 31, 1998 .................. 11.14 0.91 1.17 (0.92) (0.30) For the fiscal year ended March 31, 1997 .................. 9.02 0.85 2.10 (0.83) -- CLASS B For the fiscal year ended March 31, 2001 .................. 10.50 0.90 (0.19) (0.90) -- For the fiscal year ended March 31, 2000 .................. 9.19 0.76 1.31 (0.76) -- For the fiscal year ended March 31, 1999 .................. 11.95 0.98 (2.60) (0.97) (0.17) For the period January 12, 1998** through March 31, 1998 .. 11.33 0.21 0.61 (0.20) -- CLASS C For the fiscal year ended March 31, 2001 .................. 10.51 0.90 (0.19) (0.90) -- For the fiscal year ended March 31, 2000 .................. 9.20 0.76 1.31 (0.76) -- For the fiscal year ended March 31, 1999 .................. 11.95 0.98 (2.59) (0.97) (0.17) For the fiscal year ended March 31, 1998 .................. 11.14 0.97 1.04 (0.90) (0.30) For the fiscal year ended March 31, 1997 .................. 9.04 0.84 2.07 (0.81) --
- ------------- * 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. For fiscal years ended prior to March 31, 2000, shares were calculated based on shares outstanding on the first and last day of the respective periods. ** Commencement of intial public offering. (1) Reflects waivers and related reimbursments. (2) The amounts shown for a share outstanding thoughout 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 forward foreign currency exchange contracts and translation of foreign currency related transactions. The accompanying notes are an integral part of the financial statements. 30
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF END OF INVESTMENT END OF PERIOD EXPENSES TO PERIOD RETURN(3) (000's OMITTED) AVERAGE NET ASSETS(1) ------ --------- --------------- --------------------- EMERGING MARKETS DEBT PORTFOLIO CLASS A For the fiscal year ended March 31, 2001 .................. $ 10.40 7.98% $22,051 1.75% For the fiscal year ended March 31, 2000 .................. 10.58 24.54 28,517 1.75 For the fiscal year ended March 31, 1999 .................. 9.27 (12.40) 29,526 1.75 For the fiscal year ended March 31, 1998 .................. 12.00 19.31 33,448 1.75 For the fiscal year ended March 31, 1997 .................. 11.14 33.48 33,185 2.00 CLASS B For the fiscal year ended March 31, 2001 .................. 10.31 7.16 1,947 2.40 For the fiscal year ended March 31, 2000 .................. 10.50 23.88 1,808 2.40 For the fiscal year ended March 31, 1999 .................. 9.19 (13.08) 1,459 2.40 For the period January 12, 1998** through March 31, 1998 .. 11.95 7.29(4) 566 2.40(5) CLASS C For the fiscal year ended March 31, 2001 .................. 10.32 7.16 3,240 2.40 For the fiscal year ended March 31, 2000 .................. 10.51 23.86 2,750 2.40 For the fiscal year ended March 31, 1999 .................. 9.20 (12.99) 2,165 2.40 For the fiscal year ended March 31, 1998 .................. 11.95 18.66 4,317 2.40 For the fiscal year ended March 31, 1997 .................. 11.14 32.97 2,583 2.40 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 --------------------- ------------------------ --------- EMERGING MARKETS DEBT PORTFOLIO CLASS A For the fiscal year ended March 31, 2001 .................. 9.27% 1.06% 156.45% For the fiscal year ended March 31, 2000 .................. 8.59 1.11 91.98 For the fiscal year ended March 31, 1999 .................. 10.38 1.28 82.47 For the fiscal year ended March 31, 1998 .................. 7.70 1.01 128.91 For the fiscal year ended March 31, 1997 .................. 7.95 0.80 223.41 CLASS B For the fiscal year ended March 31, 2001 .................. 8.76 1.06 156.45 For the fiscal year ended March 31, 2000 .................. 7.93 1.02 91.98 For the fiscal year ended March 31, 1999 .................. 9.73 1.43 82.47 For the period January 12, 1998** through March 31, 1998 .. 7.13(4)(5) 2.25(4)(5) 128.91 CLASS C For the fiscal year ended March 31, 2001 .................. 8.75 1.06 156.45 For the fiscal year ended March 31, 2000 .................. 7.82 1.01 91.98 For the fiscal year ended March 31, 1999 .................. 9.73 1.16 82.47 For the fiscal year ended March 31, 1998 .................. 7.31 1.05 128.91 For the fiscal year ended March 31, 1997 .................. 7.59 0.64 223.41
- --------------- (3) Total investment return does not consider the effects of sales charges or contigingent 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 comparible to those of any other outstanding class of shares, due to the timing differences in the commencement of initial public offerings. (5) Annualized. 31 THE BEAR STEARNS FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO EMERGING MARKETS DEBT 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 "Commission") 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 eleven separate portfolios: seven diversified portfolios, Prime Money Market Portfolio, Large Cap Value Portfolio, Small Cap Value Portfolio, International Equity Portfolio, Balanced Portfolio, High Yield Total Return Portfolio ("High Yield Portfolio") and Income Portfolio, and four non-diversified portfolios, Emerging Markets Debt Portfolio ("EMD Portfolio"), The Insiders Select Fund, Focus List Portfolio and S&P STARS Portfolio. As of the date hereof, the Income Portfolio, High Yield Portfolio and EMD 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. Class Y shares of the High Yield Portfolio and EMD Portfolio has yet to commence its initial public offering. Each Portfolio is treated as a separate entity for certain matters under the Investment Company Act. In addition, a shareholder of one Portfolio is not deemed to be a shareholder of any other Portfolio. ORGANIZATIONAL MATTERS -- Prior to commencing investment operations on January 2, 1998, the High Yield Portfolio did not have any transactions other than those relating to organizational matters and the sale of one share each of Class A, B and C shares of beneficial interest to Bear, Stearns & Co. Inc. ("Bear Stearns" or the "Distributor"). Costs of $56,234 which were incurred by the High Yield Portfolio in connection with the organization of its shares, have been deferred and are being amortized using the straight-line method over the period of benefit not exceeding sixty months, beginning with the commencement of investment operations. MANAGEMENT ESTIMATES -- The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, requires management to make certain estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. PORTFOLIO VALUATION -- 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 the New York Stock Exchange (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. 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 is used. 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 of Trustees 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 32 by the Fund's Board of Trustees, 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 of Trustees. 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. 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 security and foreign currency 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 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 beginning of the day. The Portfolios will adopt the provisions of the AICPA Audit and Accounting Guide, Audits of Investment Companies, as revised, effective for fiscal years beginning after December 15, 2000. Effective April 1,2001, as required, the Portfolios will modify the manner of accounting for paydown gains and losses on mortgage- and asset-backed securities and will record such amounts as an adjustment to interest income. In addition, the Portfolios will amortize premiums and discounts on debt securities effective April 1, 2001. The cumulative effect of this accounting change will have no impact on the total net assets of the Portfolios, but will result in a decrease to the cost of securities and a corresponding increase in net unrealized appreciation, based on securities held as of March 31, 2001. The results for each Portfolio, except the EMD Portfolio which had no such securities requiring adjustment, are as follows:
DECREASE TO COST INCREASE IN NET PORTFOLIO OF SECURITIES UNREALIZED APPPRECIATION - --------- ---------------- ------------------------ Income Portfolio ................. $12,106 $12,106 High Yield Portfolio ............. 23,617 23,617
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 is categorized as foreign exchange gain or loss for both financial reporting and income tax reporting purposes. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- A Portfolio 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 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. 33 The Portfolios had no open forward currency contracts at March 31, 2001, except the EMD Portfolio, which had the following open contract:
DELIVERY VALUE SETTLEMENT UNREALIZED CURRENCY (LOCAL CURRENCY) DATE COMMITMENT VALUE LOSS - -------- ---------------- ----------- ---------- -------- ---------- SALE: Mexican Peso ......... 9,599,993 06/18/01 $972,151 $985,912 $13,761 ------- -------
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. At March 31, 2001, the Portfolios 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 carryforwards are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders. The Portfolios had the following capital loss carryforwards at March 31, 2001:
AMOUNT AMOUNT AMOUNT GROSS CAPITAL LOSS EXPIRING EXPIRING EXPIRING PORTFOLIO CARRYFORWARDS IN 2007 IN 2008 IN 2009 - --------- ------------------ --------- ---------- ----------- Income Portfolio .............. $ 509,191 -- $ 128,196 $ 380,995 High Yield Portfolio .......... 19,365,939 $175,885 5,403,558 13,786,496 EMD Portfolio ................. 2,857,775 -- 2,857,775 --
For U.S federal income tax purposes, net realized capital losses from investments incurred after October 31, 2000, within the current fiscal year are deemed to arise on the first day of the following fiscal year. The Income Portfolio, High Yield Portfolio and EMD Portfolio incurred and elected to defer such losses of $33,193, $15,285,363 and $294,869, respectively. DIVIDENDS AND DISTRIBUTIONS -- Each Portfolio declares dividends from net investment income on each day the New York Stock Exchange is open for business. These dividends are paid usually on or about the twentieth day of each month. Distribution 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 generally accepted accounting principles. 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, 2001, the EMD Portfolio reclassified $14,300 within the composition of net assets from accumulated net realized loss from investments and foreign currency related transactions to undistributed net investment income. In addition, the EMD Portfolio reclassified $7,104 within the composition of net assets from undistributed net investment income to paid-in capital. 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 government 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, 2001, 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. The EMD Portfolio has agreed to pay BSAM a monthly 34 fee at an annual rate of 1.00% of average daily net assets up to $50 million, 0.85% of average daily net assets of more than $50 million but not in excess of $100 million and 0.55% of average daily net assets above $100 million. For the fiscal year ended March 31, 2001, 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. Under the terms of an Administrative Services Agreement with the Portfolios, PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PFPC Worldwide, Inc. and an indirect majority-owned subsidiary of The PNC Financial Services Group, provides certain accounting and administrative services to each Portfolio. For providing these services, PFPC is entitled to receive from the Portfolios a monthly fee equal to an annual rate of 0.10% of each Portfolio's average daily net assets up to $200 million, 0.075% of the next $200 million, 0.05% of the next $200 million, 0.03% of the next $200 million and 0.02% of the net assets above $800 million, subject to a minimum annual fee for each Portfolio. For the fiscal year ended March 31, 2001, BSAM has undertaken to limit the 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:
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 -- EMD Portfolio .................... 1.75 2.40 2.40 --
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, 2001, the advisory fee waivers and reimbursements of expenses (in order to maintain the expense limitation) were as follows:
PORTFOLIO ADVISORY FEE WAIVERS EXPENSE REIMBURSEMENTS - --------- -------------------- ---------------------- Income Portfolio ................. $ 70,036 $315,187 High Yield Portfolio ............. 545,577 62,949 EMD Portfolio .................... 283,416 25,440
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. Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies Inc. and an affiliate of BSAM, BSFM and Bear Stearns, serves as custodian to the Income Portfolio and High Yield 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. Fees are based on the average daily net assets in each class of each Portfolio and are accrued daily and paid quarterly or at such other intervals as the Board of Trustees may determine. For the fiscal year ended March 31, 2001, Bear Stearns earned $44,881, $376,835 and $60,055 for the Income Portfolio, High Yield Portfolio and EMD Portfolio, respectively, in distribution fees. The fees paid to Bear Stearns under the Distribution Plan are payable without regard to actual expenses incurred. Bear Stearns uses these fees to pay broker/dealers whose clients hold each Portfolio's shares and other distribution-related activities. For the same period, Bear Stearns earned $27,517, $233,279 and $72,921 for the Income Portfolio, High Yield Portfolio and EMD Portfolio, respectively, in shareholder servicing fees. Bear Stearns uses shareholder servicing fees to pay for personal service and maintenance of shareholder accounts. 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. Furthermore, the Distributor 35 advanced 1.25% in sales commission to all authorized dealers on net asset value transfers (which was discontinued effective October 1, 2000). 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, 2001, Bear Stearns has advised each Portfolio that it received $38,522, $235,468 and $11,158 in front-end sales charges resulting from sales of Class A shares of the Income Portfolio, High Yield Portfolio and EMD Portfolio, respectively. From these fees, Bear Stearns paid sales charges to dealers which in turn paid commissions to salespersons. In addition, Bear Stearns has advised the Income Portfolio, High Yield Portfolio and EMD Portfolio that during the fiscal year ended March 31, 2001, it received $5,761, $95,435 and $3,096 from each Portfolio, respectively, in contingent deferred sales charges ("CDSC") upon certain redemptions by Class B shareholders and $5,281, $6,998 and $2,090 from each Portfolio, respectively, in CDSC upon certain redemptions by Class C shareholders. INVESTMENTS IN SECURITIES For U.S. federal income tax purposes, the cost of securities owned at March 31, 2001, were $24,925,172, $114,716,281 and $25,795,535 for the Income Portfolio, High Yield Portfolio and EMD Portfolio, respectively. Accordingly, the net unrealized appreciation on investments for each Portfolio were as follows:
GROSS GROSS NET PORTFOLIO APPRECIATION DEPRECIATION APPRECIATION - --------- ------------ ------------ ------------ Income Portfolio ................. $ 515,367 $ (158,349) $ 357,018 High Yield Portfolio ............. 3,016,707 (2,212,550) 804,157 EMD Portfolio .................... 1,337,821 (908,202) 429,619
For the fiscal year ended March 31, 2001, aggregate purchases and sales of investment securities (excluding short-term investments) for each Portfolio were as follows:
PORTFOLIO PURCHASES SALES - --------- ------------ ------------ Income Portfolio ........................ $ 35,363,926 $ 25,592,467 High Yield Portfolio .................... 137,088,210 103,366,153 EMD Portfolio ........................... 43,206,592 46,104,429
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. At March 31, 2001, there was an unlimited amount of $0.001 par value shares of beneficial interest authorized for each Portfolio, of which Bear Stearns owned 1,282 of Class A shares and 1,256 Class C shares of the Income Portfolio and 1 each of Class A, B and C shares of the High Yield Portfolio. Shares of the Income Portfolio owned by Bear Stearns include 241 Class A shares and 215 Class C shares which were acquired through dividend reinvestment. Transactions in shares of beneficial interest for each Portfolio were as follows:
INCOME PORTFOLIO ------------------------------------------ SALES REPURCHASES REINVESTMENTS ---------- ----------- ------------- FOR THE FISCAL YEARS ENDED: CLASS A MARCH 31, 2001 Shares ............................. 809,598 571,310 15,073 Value .............................. $9,676,558 $6,839,617 $176,005 MARCH 31, 2000 Shares ............................. 163,837 128,806 11,831 Value .............................. $1,918,988 $1,508,227 $138,514
36
INCOME PORTFOLIO (CONTINUED) ------------------------------------------ SALES REPURCHASES REINVESTMENTS ----------- ----------- ------------- FOR THE FISCAL YEARS ENDED: CLASS B MARCH 31, 2001 Shares ............................. 275,463 55,133 9,045 Value .............................. $ 3,244,108 $ 651,691 $ 105,666 MARCH 31, 2000 Shares ............................. 144,531 67,853 6,877 Value .............................. $ 1,699,578 $ 787,231 $ 80,141 CLASS C MARCH 31, 2001 Shares ............................. 341,033 242,107 8,522 Value .............................. $ 4,030,013 $ 2,845,724 $ 99,278 MARCH 31, 2000 Shares ............................. 68,592 74,773 6,971 Value .............................. $ 806,590 $ 874,826 $ 81,499 CLASS Y MARCH 31, 2001 Shares ............................. 382,870 120,553 18,261 Value .............................. $ 4,572,763 $ 1,378,968 $ 212,930 MARCH 31, 2000 Shares ............................. 111,923 78,521 17,002 Value .............................. $ 1,299,745 $ 924,094 $ 198,575
HIGH YIELD PORTFOLIO ------------------------------------------ SALES REPURCHASES REINVESTMENTS ----------- ----------- ------------- CLASS A MARCH 31, 2001 Shares ............................. 4,812,964 1,812,714 305,479 Value .............................. $43,581,437 $16,469,672 $2,785,806 MARCH 31, 2000 Shares ............................. 2,046,001 2,607,245 286,754 Value .............................. $22,253,022 $27,209,668 $3,053,931 CLASS B MARCH 31, 2001 Shares ............................. 1,176,384 684,610 115,057 Value .............................. $10,484,107 $ 6,180,060 $1,054,218 MARCH 31, 2000 Shares ............................. 1,036,215 803,901 113,499 Value .............................. $11,213,716 $ 8,390,332 $1,205,625 CLASS C MARCH 31, 2001 Shares ............................. 1,414,173 891,343 116,638 Value .............................. $13,042,066 $ 8,129,047 $1,066,374 MARCH 31, 2000 Shares ............................. 944,475 1,446,955 119,893 Value .............................. $10,179,726 $15,123,201 $1,278,399
37
EMD PORTFOLIO ------------------------------------------ SALES REPURCHASES REINVESTMENTS ----------- ----------- ------------- FOR THE FISCAL YEARS ENDED: CLASS A MARCH 31, 2001 Shares ............................. 643,599 1,353,929 136,641 Value .............................. $6,780,969 $14,062,273 $1,414,333 MARCH 31, 2000 Shares ............................. 622,886 1,289,673 175,086 Value .............................. $5,891,337 $12,534,987 $1,646,974 CLASS B MARCH 31, 2001 Shares ............................. 45,195 39,859 11,181 Value .............................. $ 466,666 $ 407,231 $ 115,042 MARCH 31, 2000 Shares ............................. 80,139 76,062 9,429 Value .............................. $ 748,885 $ 718,270 $ 87,930 CLASS C MARCH 31, 2001 Shares ............................. 131,299 97,613 18,428 Value .............................. $1,346,274 $ 1,004,457 $ 189,540 MARCH 31, 2000 Shares ............................. 91,962 81,973 16,549 Value .............................. $ 872,466 $ 773,641 $ 154,253
CREDIT FACILITY The Fund has entered into a demand promissory note arrangement with The Chase Manhattan Bank (the "Bank") to provide an uncommitted credit facility to the Fund (on behalf of 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 the value of its assets. Income Portfolio and EMD Portfolio, each intend 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. In addition, throughout the year, the EMD Portfolio borrowed, for temporary purposes, from its custodian, Brown Brothers Harriman & Co., to cover periodic overdrafts. Such borrowings were at a rate of interest based on the London Interbank Offered Rate (LIBOR) plus 2%. Amounts outstanding under the credit facility and periodic overdrafts during the fiscal year ended March 31, 2001, were as follows:
AVERAGE MAXIMUM AVERAGE LOAN LOAN AMOUNT INTEREST PORTFOLIO BALANCE OUTSTANDING RATE - --------- ------- ----------- -------- Income Portfolio .................... $26,836 $1,788,900 6.96% High Yield Portfolio ................ 3,546 635,100 6.84 EMD Portfolio ........................ 68,214 3,178,522 8.21
The Portfolios had no amounts outstanding under the credit facility at March 31, 2001. 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 38 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. CONCENTRATION OF RISK -- EMD PORTFOLIO Investments in emerging markets debt involve special risks. The issuer of the debt of the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and the EMD Portfolio may have limited legal recourse in the event of a default. Certain emerging countries may require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if a deterioration occurs in an emerging country's balance of payments or for other reasons, a country could impose temporary restrictions on foreign capital remittances. The EMD Portfolio could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation of capital, as well as by the application to the EMD Portfolio of any restrictions on investments. Most securities markets in emerging market countries may have substantially less volume and are subject to less government supervision than U.S. securities markets. Securities of many issuers in emerging market countries may be less liquid and more volatile than securities of comparable domestic issuers. In addition, there is less regulation of securities exchanges, securities dealers, and listed and unlisted companies in emerging market countries than in the U.S. 39 THE BEAR STEARNS FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO EMERGING MARKETS DEBT PORTFOLIO INDEPENDENT AUDITORS' REPORT The Board of Trustees and Shareholders, Income Portfolio High Yield Total Return Portfolio Emerging Markets Debt 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, High Yield Total Return Portfolio and Emerging Markets Debt Portfolio (collectively, the "Portfolios") as of March 31, 2001, and the related statements of operations for the year then ended, 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 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, 2001 by correspondence with custodians 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 present fairly, in all material respects, the financial position of Income Portfolio, High Yield Total Return Portfolio and Emerging Markets Debt Portfolio as of March 31, 2001, the results of their operations, 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. Deloitte & Touche LLP New York, New York May 17, 2001 40 THE BEAR STEARNS FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO EMERGING MARKETS DEBT 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, 2001) 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, 2001, the following dividends per share were paid by each of the Portfolios:
HIGH YIELD EMERGING INCOME TOTAL RETURN MARKETS DEBT PORTFOLIO PORTFOLIO PORTFOLIO ------------ ------------ ------------ Net Investment Income: Class A $0.727519612 $0.938998020 $0.961292007 Class B 0.652007728 0.879296020 0.886706813 Class C 0.651995316 0.879294638 0.887367310 Class Y 0.768213745 -- --
All dividends from the Emerging Markets Debt Portfolio were derived from income on foreign obligations; however they were not subject to foreign withholding taxes. With respect to each Portfolio, none of its ordinary income dividends qualify for the corporate dividends received deduction. INCOME PERCENTAGES BY SECURITY TYPE FOR FISCAL YEAR ENDED MARCH 31, 2001 The extent to which dividends were derived from various security types are presented below. This information relates only to net investment income referenced above and is not applicable to the Emerging Markets Debt Portfolio.
HIGH YIELD INCOME TOTAL RETURN PORTFOLIO (%) PORTFOLIO (%) ------------- ------------- Corporate Obligations 49.64 93.51 Fannie Mae 27.01 0.45 Federal Farm Credit Bank 0.19 0.03 Federal Home Loan Bank 3.06 3.69 Freddie Mac 5.13 1.05 Government National Mortgage Association 4.99 -- U.S. Treasury Obligations 9.98 -- Other -- 1.27 ------ ------ Total 100.00 100.00 ====== ======
Because each Portfolio's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2001. 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 2002. 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. 41 THE BEAR STEARNS FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO EMERGING MARKETS DEBT 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. May 2001 42 -----END PRIVACY-ENHANCED MESSAGE-----