-----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, PFhQeIozjHtnjrT9NJUZe3RI9fn08sGJ2laWacnd6AatWhalXMNd7v9PCMnIgFiE RCljge/FFzmT6DPatQYZRg== 0000912057-02-022327.txt : 20020530 0000912057-02-022327.hdr.sgml : 20020530 20020530091618 ACCESSION NUMBER: 0000912057-02-022327 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020530 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEAR STEARNS FUNDS CENTRAL INDEX KEY: 0000931145 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-08798 FILM NUMBER: 02665525 BUSINESS ADDRESS: STREET 1: 383 MADISON AVENUE STREET 2: 23RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10179 BUSINESS PHONE: (212) 272-9027 MAIL ADDRESS: STREET 1: 383 MADISON AVENUE STREET 2: 23RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10179 N-30D 1 a2077170zn-30d.txt N-30D THE BEAR STEARNS FUNDS FIXED INCOME FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO EMERGING MARKETS DEBT PORTFOLIO ANNUAL REPORT MARCH 31, 2002 [BEAR STEARNS LOGO] BSF-R-016-10 THE BEAR STEARNS FUNDS Income Portfolio High Yield Total Return Portfolio Emerging Markets Debt Portfolio LETTER TO SHAREHOLDERS April 25, 2002 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, 2002. Detailed performance data for each class of shares of each Portfolio can be found in the "Financial Highlights" and line graph sections of this report. INCOME PORTFOLIO The fixed income markets were driven by a range of factors during the fiscal year: the economy, the Federal Reserve's changing policy on interest rates, and specific events such as the terrorist attacks of September 11th and the Enron debacle, all contributed to a shifting landscape and relatively good returns for fixed income investors. Early in the year, expectations of a recession led to an increase in yield spreads across the board. This occurred within the context of an accommodative Federal Reserve and a steeper yield curve. A record level of debt issuance--which reached $600 billion for the year 2001--also drove spreads wider. (Issuance increased when companies rushed to lock in longer-term financing as interest rates fell.) Economically sensitive sectors, which tend to underperform during times of economic contraction, were particularly hard hit. These trends were magnified by the events of September 11th, as well as by fears emanating from the Enron debacle. As the Enron scandal unfolded, investors began to focus on companies with even mildly questionable accounting practices. Anxiety surrounding accounting practices and liquidity risk spread to the broader corporate market. Volatility grew in the first quarter of 2002 as investors became riveted on companies' commercial paper programs and the lines of credit supporting them. Several high quality issuers were forced to draw on bank lines to pay down commercial paper. We focused on higher quality issues in the early part of the fiscal year, when the risk of recession was growing. Within corporates, this meant owning defensive sectors such as consumer staples, pharmaceuticals, and food and beverages. Our yield curve strategy, which was oriented toward steepening during the period of Fed easing, shifted toward a flattening bias as the Fed moved to the sidelines in the last fiscal quarter. As the prospect of a recovery began to gain weight in the second half of the fiscal year, we moved into higher yielding credits, expecting volatility to subside with signs of an economic turnaround. The accounting and liquidity issues mentioned above kept volatility high through the end of the fiscal year. The Income Portfolio's banks and brokerage issues performed well for the year due to the change back to a positively sloped yield curve, and the prospect that investment banking and brokerage revenues would pick up as the economy rebounded. The Income Portfolio's asset-backed securities outperformed as well, as did the mortgage-backed issues. Asset-backed securities, which are not tied to specific corporate risk, provided a safe haven to corporate bond investors concerned about accounting practices. Importantly, the Income Portfolio did not hold any securities issued by Enron during the year. Our underperformance for the year was primarily due to the Income Portfolio's allocation to spread products (that is, fixed income investments that typically trade at a spread over U.S. Treasury instruments), which we had overweighted in an effort to increase income for the Income Portfolio. The Income Portfolio's corporate and high yield allocations in particular hurt performance. Within corporates, oil and gas pipeline issues were particularly hard hit, as were our positions in the telecommunication sector, which was plagued with concerns about long-term growth. Our investments in several higher yielding issues within the auto sector also suffered in the second half of the fiscal year. Though auto sales remained strong, profit margins were squeezed because of rebates offered at the end of 2001. 1 In the months ahead, we expect to see the Securities and Exchange Commission, the rating agencies and investors demand better disclosure on the part of corporate issuers. Investor confidence will likely improve as management reporting and credit ratings become more reliable. For the remainder of 2002, we expect the economic recovery to continue, although at a slower pace as companies struggle to restore profitability. In our opinion, the investment grade corporate and high yield sectors have become attractive alternatives for traditional fixed income investors, as well as equity investors frustrated by slower growth. Effective April 1, 2002, the Income Portfolio's broad-based securities market index was changed to the Lehman Intermediate Government/Credit Index, which we believe more closely aligns with the investment objective of this portfolio; namely, high current income consistent with PRESERVATION OF CAPITAL. HIGH YIELD TOTAL RETURN PORTFOLIO* The fiscal year was marked by an economic slowdown, driven by a reduction in capital expenditure across many sectors. The Federal Reserve responded by reducing the federal funds rate to 1.75% by the end of 2001--its lowest level in 40 years. As the year progressed, tighter lending standards led to growing defaults in the high yield market. Declining interest rates helped cushion the blow, giving many issuers the opportunity to refinance at lower rates. The High Yield Portfolio did not experience a single default during the year. This was largely due to our shift in strategy in the first half of the fiscal year when we moved out of riskier, higher yielding credits in economically sensitive sectors of the market. We instead increased our weightings in defensive, higher quality sectors such as food services, health care, cable television, and hotels/motels/casinos. Higher quality issues were among the strongest performers of the year. The events of September 11th, fears stemming from the recession and the war in Afghanistan caused spreads between high yield bonds and Treasuries to widen more than 300 basis points. The airline, travel-related and media sectors were hard hit. Our focus on high quality issuers with strong cash flows helped performance in a very challenging environment. As 2001 drew to a close, we continued to invest most of the High Yield Portfolio's assets in "B" rated securities--an area where we believed the risk to return ratio was favorable. We were underweighted in airlines, lodging, aerospace and wireline telecommunications. Wireline telecommunications suffered throughout the year as capital spending by large corporations declined and overcapacity in the industry sent many issuers into bankruptcy. We reduced our exposure in this group from a neutral weight to zero by the end of the fiscal year. Conversely, we were overweighted in wireless telecommunications in the third fiscal quarter--one of the best performing sectors. In the first quarter of 2002, however, our exposure to this group hurt performance as higher churn rates and lower revenues fueled concern about future performance. We reduced our exposure to wireless issuers by one half in the first quarter of 2002. Within gaming, we invested in multi-jurisdictional companies, including riverboat casinos, which draw from a regional clientele. This sector initially traded lower following the events of September 11th, but recovered shortly thereafter to become one of the High Yield Portfolio's strongest performing sectors for the year. The Enron debacle magnified concerns about accounting and credit issues during the second half of the year. While the High Yield Portfolio did not hold Enron bonds at any point, performance was impacted by the market turmoil that ensued as anxiety about accounting and credit issues spread throughout the fixed income marketplace. Looking ahead, economic data such as accelerating Gross Domestic Product and strong consumer spending and confidence levels suggest that a turnaround may be underway. In addition, default rates for high yield issuers, which we believe peaked during the quarter, are likely to decrease in the months ahead. If economic growth continues, high yield issuers will likely benefit as demand from their end markets will drive revenues, creating a stronger credit environment that will allow companies to fund future growth and pursue acquisition strategies. We still remain cautious as the economy has shown mixed signs of a rebound. Unemployment numbers, which had fallen to 5.5% in March, shot back up to 5.7% (after the close of the fiscal year). In the weeks and months ahead, we will continue to focus on conservative, higher quality names until we see solid evidence of earnings improvements. EMERGING MARKETS DEBT PORTFOLIO** For the year ended December 2001, emerging markets debt generated higher returns than many of the more commonly known asset classes. Performance was driven by improving fundamentals in most emerging countries, many of which 2 aggressively pursued consistent macroeconomic policies and implemented selected structural reforms. The results have been promising: since 1993, economic growth in the emerging markets has consistently exceeded growth in the developed markets, and foreign direct investment in emerging economies has remained high, while inflation and debt as a percentage of total exports have declined. Inflation is now in the single digits in most emerging countries. These improving fundamentals enabled some emerging countries to pay down their debt ahead of schedule during the year. Many countries also refinanced debt at more favorable terms as interest rates declined in 2001. These factors translated into higher credit ratings for several countries. Since the beginning of 2000, rating agencies have upgraded more emerging countries than they have downgraded. In fact, approximately one-third of the EMD Portfolio's benchmark is now rated investment grade. For the EMD Portfolio, we underweighted lower yielding countries in Asia and Eastern Europe and overweighted higher yielding countries in other regions--a strategy that helped performance for the fiscal year. Specifically, we overweighted our allocations to Ecuador and Venezuela. As oil exporters, both countries benefited from rising oil prices in the fourth fiscal quarter, as well as from expectations that they would be aggressively pursuing policies to improve their creditworthiness. At various times during the year, the EMD Portfolio's overweighted positions in Mexico, Russia and Brazil, and its underweighted position in Lebanon, one of the worst performers during the last fiscal quarter, also contributed to performance, as did security selection in the Philippines and Peru. The EMD Portfolio's exposure to Argentina mirrored its benchmark for most of the year--a decision that hurt performance. We underestimated the difficulty the Argentine government would face in trying to legislate and implement the policies needed to stabilize the situation. The crisis came to a head in December when Argentina announced a moratorium on its debt. Political upheaval, restrictions on access to deposits, and protests followed. Looking ahead, we expect country-specific credit considerations to continue to be the dominant factor influencing the performance of emerging market debt. We will continue to look for relative value opportunities within our country allocations, expecting that security selection and yield curve structure will continue to provide opportunities for the EMD Portfolio. On a macroeconomic level, higher oil prices should improve the debt-servicing capacity of oil exporters, such as Venezuela, Ecuador, Russia and Algeria. The favorable effects of global economic growth and higher commodity prices may, however, be partially offset by concerns over U.S. monetary policy. The debate regarding the timing and magnitude of the next move by the U.S. Federal Reserve may act as a constraint on the emerging markets as investors struggle with the uncertainty of how rising interest rates might impact the emerging economies. 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. Performance results do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Figures shown in the "Recent Performance Results" and "Average Annual Total Return" tables assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. 3 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]
SALOMON SMITH BARNEY BROAD LIPPER INVESTMENT A RATED CLASS A CLASS C GRADE BOND SHARES SHARES BOND INDEX FUND INDEX ---------- ---------- ------------ ---------- Apr. 5, 1995 $ 9,550 $ 10,000 $ 10,000 $ 10,000 Mar. 31, 1996 $ 10,430 $ 10,797 $ 11,087 $ 11,048 Mar. 31, 1997 $ 10,908 $ 11,245 $ 11,631 $ 11,556 Mar. 31, 1998 $ 11,932 $ 12,247 $ 13,024 $ 12,957 Mar. 31, 1999 $ 12,621 $ 12,870 $ 13,870 $ 13,611 Mar. 31, 2000 $ 12,617 $ 12,885 $ 14,121 $ 13,730 Mar. 31, 2001 $ 13,964 $ 14,169 $ 15,896 $ 15,282 Mar. 31, 2002 $ 14,503 $ 14,621 $ 16,746 $ 15,943
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INCOME PORTFOLIO Class A shares ......................... $14,503 Class C Shares ......................... 14,621 Salomon Smith Barney Broad Investment Grade Bond Index ....................... 16,746 Lipper A Rated Bond Fund Index ........... 15,943
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2002 ------------------------------------------------ 5-YEAR SINCE INCEPTION ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7) -------- -------------- ----------------- Income Portfolio(2) Class A shares(5) ........................... (0.78)% 5.06% 5.45% Class B shares(4) ........................... (1.75) -- 3.94 Class C shares(6) ........................... 2.20 5.39 5.58 Class Y shares(3) ........................... 4.22 6.41 6.05 Salomon Smith Barney Broad Investment Grade Bond Index(1) ................................. 5.34 7.56 7.57 Lipper A Rated Bond Fund Index(1) ................ 4.32 6.65 6.98
- ---------- (1) The chart assumes a hypothetical $10,000 initial investment in the Income Portfolio and reflects all portfolio expenses. Investors should note that the Income Portfolio is a professionally managed mutual fund while the indices are unmanaged, do not incur sales charges or expenses and are not available for investment. Performance of the indices corresponds to the performance of Class A and C shares. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to reimburse a portion of the Income Portfolio's operating expenses, as necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The returns of Class Y shares (for which September 8, 1995, was the initial public offering date) are higher than Class A 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 3.19% and 4.34%, 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 3.86%, 6.04% and 6.16%, 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, 2002 would have been 3.19%. (7) Inception dates: Class A and C shares commenced on April 5, 1995, Class B shares commenced on February 2, 1998 and Class Y shares commenced on September 8, 1995. 4 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)(4) VS. VARIOUS INDICES [CHART]
CREDIT SUISSE FIRST BOSTON HIGH YIELD INDEX, CREDIT SUISSE DEVELOPED FIRST BOSTON LIPPER HIGH YIELD CLASS A SHARES CLASS B SHARES CLASS C SHARES COUNTRIES ONLY HIGH YIELD INDEX BOND FUND INDEX -------------- -------------- -------------- ---------------- ---------------- ----------------- Jan. 2, 1998 $ 9,550 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 Mar. 31, 1998 $ 10,339 $ 10,813 $ 10,813 $ 10,301 $ 10,301 $ 10,440 Mar. 31, 1999 $ 10,176 $ 10,574 $ 10,574 $ 10,216 $ 10,224 $ 10,312 Mar. 31, 2000 $ 9,699 $ 10,014 $ 10,014 $ 10,075 $ 10,254 $ 10,311 Mar. 31, 2001 $ 9,596 $ 9,843 $ 9,843 $ 10,160 $ 10,332 $ 9,776 Mar. 31, 2002 $ 9,996 $ 10,047 $ 10,187 $ 10,504 $ 10,677 $ 9,394
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. HIGH YIELD TOTAL RETURN PORTFOLIO Class A shares ............................. $ 9,996 Class B shares ............................. 10,047 Class C shares ............................. 10,187 Credit Suisse First Boston High Yield Index, Developed Countries Only .................... 10,504 Credit Suisse First Boston High Yield Index .. 10,677 Lipper High Yield Bond Fund Index ............ 9,394
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2002 ---------------------------------------------- SINCE INCEPTION ONE YEAR AVERAGE ANNUAL(3) -------- ----------------- High Yield Total Return Portfolio(2)(4) Class A shares(5) ........................... (0.50)% (0.01)% Class B shares(6) ........................... (1.29) 0.11 Class C shares(7) ........................... 2.54 0.44 Credit Suisse First Boston High Yield Index, Developed Countries Only(1) ................... 3.39 1.16 Credit Suisse First Boston High Yield Index(1) ... 3.33 1.55 Lipper High Yield Bond Fund Index(1) ............. (3.91) (1.18)
- ---------- (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, do not incur sales charges or expenses and are not available for investment. The Credit Suisse First Boston High Yield Index, Developed Countries Only (formerly, the Credit Suisse First Boston Domestic Plus High Yield Bond Index), was created on January 1, 1999. Prior to January 1, 1999, the Credit Suisse First Boston High Yield Index (formerly, the Credit Suisse First Boston Global High Yield Index) was used. The total returns and values for the Credit Suisse First Boston Index, Developed Countries Only is a blend of the two indices. (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, 2002. (4) Class Y shares commenced its initial public offering on July 11, 2001. The total return since inception through March 31, 2002 was 4.99%. (5) Reflects the initial maximum sales charge (4.50%). Without the applicable sales charge, the total returns would have been 4.16% and 1.09%, respectively, for each period shown. (6) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total returns would have been 3.49% and 0.44%, respectively, for each period shown. (7) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total return for the one year ended March 31, 2002 would have been 3.49%. 5 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. ITS BROAD-BASED INDEX [CHART]
CLASS A J.P. MORGAN EMERGING MARKET SHARES BOND INDEX - GLOBAL CONSTRAINED ---------- ------------------------------- May 4, 1995 $ 9,550 $ 10,000 Mar. 31, 1996 $ 12,572 $ 12,987 Mar. 31, 1997 $ 16,250 $ 17,093 Mar. 31, 1998 $ 20,172 $ 19,908 Mar. 31, 1999 $ 17,671 $ 18,175 Mar. 31, 2000 $ 21,150 $ 21,807 Mar. 31, 2001 $ 22,838 $ 24,143 Mar. 31, 2002 $ 25,309 $ 26,926
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. EMERGING MARKETS DEBT PORTFOLIO Class A shares ......................... $25,309 JP. Morgan Emerging Market Bond Index- Global Constrained ...................... 26,926
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2002 -------------------------------------------------- 5-YEAR SINCE INCEPTION ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(4) -------- -------------- ------------------- Emerging Markets Debt Portfolio(2) Class A shares(5) ........................... 5.83% 8.27% 10.97% Class B shares(3) ........................... 5.23 -- 7.29 Class C shares(3) ........................... 9.22 8.60 14.80 J.P. Morgan Emerging Market Bond Index - Global Constrained(1) ......................... 11.53 9.51 16.86
- ---------- (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 index is either unmanaged, does not incur sales charges or expenses and is not available for investment. Performance of the index corresponds 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 10.23% and 7.64%, respectively, for each period shown. Without the applicable sales charge for Class C shares, the total return for the one year ended March 31, 2002 would have been 10.22%. (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, 2002. 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. Class B shares commenced on January 12, 1998 and Class C shares commenced on July 26, 1995. (5) Reflects the initial maximum sales charge (4.50%). Without the applicable sales charge, the total returns would have been 10.82%, 9.27% and 11.55%, respectively, for each period shown. 6 THE BEAR STEARNS FUNDS Income Portfolio MARCH 31, 2002 (UNAUDITED) ================================================================================ TOP TEN INDUSTRY/SECTOR WEIGHTINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY/SECTOR NET ASSETS - ---- --------------------------------------------------- ---------- 1. U.S. Government Agency Obligations ................ 40.51 2. Financial ......................................... 9.35 3. U.S. Government Obligations ....................... 8.52 4. Consumer, Non-Cyclical ............................ 6.60 5. Communications .................................... 6.35 6. Asset-Backed ...................................... 4.59 7. Mortgage-Backed ................................... 4.40 8. Energy ............................................ 3.71 9. Utilities ......................................... 3.47 10. Industrial ........................................ 2.74
================================================================================ TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY/SECTOR NET ASSETS - ---- ---------------------------------------------------------- ---------------------------------- ---------- 1. Freddie Mac .............................................. U.S. Government Agency Obligations 18.76 2. Fannie Mae ............................................... U.S. Government Agency Obligations 15.83 3. U.S. Treasuries .......................................... U.S. Government Obligations 8.52 4. Government National Mortgage Association ................. U.S. Government Agency Obligations 5.92 5. Ford Motor Credit Co. .................................... Financial 1.80 6. General Electric Capital Corp. ........................... Financial 1.41 7. Lehman Large Loan ........................................ Mortgage-Backed 1.10 8. PNC Mortgage Acceptance Corp. ............................ Mortgage-Backed 1.07 9. Computer Sciences Corp. .................................. Technology 1.03 10. Transcontinental Gas Pipe Line Corp. ..................... Energy 1.03
- ---------- * The Portfolio's composition will change over time. 7 THE BEAR STEARNS FUNDS High Yield Total Return Portfolio MARCH 31, 2002 (UNAUDITED) ================================================================================ TOP TEN INDUSTRY WEIGHTINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ---- --------------------------------------------------- ---------- 1. Hotels/Motels/Casinos ............................. 12.09 2. Health Care ....................................... 8.34 3. Cable Television .................................. 7.42 4. Oil & Gas ......................................... 7.27 5. Wireless Telecommunications ....................... 6.23 6. Electronic Components ............................. 5.31 7. Building/Development .............................. 5.08 8. Food Services ..................................... 4.99 9. Radio/Television .................................. 4.32 10. Retailers ......................................... 4.14
================================================================================ TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ------------------------------------------------------------- -------------------------- ---------- 1. Fairchild Semiconductor Corporation .......................... Electronic Components 2.57 2. Vanguard Health Systems, Inc. ................................ Health Care 2.31 3. Armkel, LLC and Armkel Finance, Inc. ......................... Cosmetics/Toiletries 2.30 4. The William Carter Company ................................... Clothing/Textiles 2.30 5. Fleming Companies, Inc. ...................................... Food Services 2.26 6. Bally Total Fitness Holding Corporation ...................... Leisure 2.17 7. Adelphia Communications Corporation .......................... Cable Television 2.17 8. Meristar Hospitality Operating Partnership/Finance Corp. II .. Hotels/Motels/Casinos 2.13 9. Alaris Medical Systems, Inc. ............................... . Health Care 2.10 10. Ameristar Casinos, Inc. ...................................... Hotels/Motels/Casinos 2.01
- ---------- * The Portfolio's composition will change over time. 8 THE BEAR STEARNS FUNDS Emerging Markets Debt Portfolio MARCH 31, 2002 (UNAUDITED) ================================================================================ TOP TEN COUNTRY WEIGHTINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK COUNTRY NET ASSETS - ---- --------------------------------------------------------- ---------- 1. Mexico .................................................. 11.94 2. Brazil .................................................. 10.58 3. Russia .................................................. 9.42 4. Venezuela ............................................... 9.42 5. Turkey .................................................. 5.18 6. Philippines ............................................. 4.88 7. Colombia ................................................ 4.53 8. Malaysia ................................................ 4.17 9. South Korea ............................................. 3.64 10. Ecuador ................................................. 3.51
================================================================================ TOP TEN ISSUERS* - --------------------------------------------------------------------------------
SECURITY PERCENT OF RANK ISSUER CURRENCY TYPE NET ASSETS - ---- ------------------------------------ ----------- --------- ---------- 1. United Mexican States .............. U.S. dollar Sovereign 11.35 2. Federal Republic of Brazil ......... U.S. dollar Sovereign 10.58 3. Russian Federation ................. U.S. dollar Sovereign 9.42 4. Republic of Venezuela .............. U.S. dollar Sovereign 9.42 5. Republic of Turkey ................. U.S. dollar Sovereign 5.18 6. Republic of the Philippines ........ U.S. dollar Sovereign 4.88 7. Republic of Colombia ............... U.S. dollar Sovereign 4.53 8. Republic of Ecuador ................ U.S. dollar Sovereign 3.51 9. The Republic of Panama ............. U.S. dollar Sovereign 3.22 10. Republic of Bulgaria ............... U.S. dollar Sovereign 3.19
- ---------- * The Portfolio's composition will change over time. 9 THE BEAR STEARNS FUNDS Income Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2002
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS -- 95.68% CORPORATE OBLIGATIONS - 46.65% ASSET-BACKED - 4.59% $ 133 Household Automotive Trust, Series 2000-2, Class A3 ..................... 7.340% 11/17/04 $ 136,991 281 Onyx Acceptance Auto Trust, Series 1999-C, Class A4 ..................... 6.760 05/15/04 288,469 150 PaineWebber Mortgage Acceptance Corp., Series 2000-HE1, Class A2 ........ 8.270 02/25/30 155,839 350 Residential Funding Mortgage Securities Inc., Series 2002-HSI, Class A3 . 4.700 10/25/16 345,253 325 Saxon Asset Securities Trust, Series 2000-3, Class AF4 .................. 7.630 09/25/23 338,280 355 UCFC Home Equity Loan, Series 1996-B1, Class A6 ......................... 7.975 02/15/22 365,293 ---------- 1,630,125 ---------- BASIC MATERIALS - 0.61% 225 Dow Chemical Co., Notes ................................................. 5.750 12/15/08 216,014 ---------- COMMUNICATIONS - 6.35% 250 Adelphia Communications Corporation, Unsecured Senior Notes ............. 10.250 11/01/06 233,750 150 AOL Time Warner, Inc., Unsecured Debentures ............................. 6.850 01/15/26 153,330 250 AT&T Corp., Senior Notes* ............................................... 7.300 - 8.000 11/15/11 - 11/15/31 242,083 200 Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corporation, Unsecured Senior Notes .................. 9.625 11/15/09 191,000 100 GTE Northwest, Inc., Unsecured Debentures, Series D ..................... 5.550 10/15/08 96,311 150 Nextel Communications, Inc., Unsecured Senior Notes ..................... 9.375 11/15/09 100,125 350 Qwest Capital Funding, Unsecured Notes, Company Guaranteed .............. 6.375 - 7.900 07/15/08 - 08/15/10 292,695 150 Southern New England Telephone Co., Medium Term Notes, Series C ......... 6.125 12/15/03 154,754 135 Sprint Capital Corp., Notes* ............................................ 8.375 03/15/12 133,160 150 Sprint Capital Corp., Unsecured Notes, Company Guaranteed ............... 6.000 01/15/07 137,723 300 Verizon Pennsylvania, Notes, Series A ................................... 5.650 11/15/11 275,711 225 Viacom, Inc., Unsecured Senior Notes, Company Guaranteed ................ 7.700 07/30/10 241,186 ---------- 2,251,828 ---------- CONSUMER, CYCLICAL - 2.28% 250 Bally Total Fitness Holding Corporation, Unsecured Senior Subordinated Notes, Series D ...................................................... 9.875 10/15/07 251,875 150 Meritage Corporation, Unsecured Senior Notes, Company Guaranteed ........ 9.750 06/01/11 157,875 150 Southwest Airlines Co., Unsecured Notes ................................. 6.500 03/01/12 146,959 250 Target Corp., Unsecured Senior Debentures ............................... 7.000 07/15/31 253,224 ---------- 809,933 ---------- CONSUMER, NON-CYCLICAL - 6.60% 175 Anheuser-Busch Companies, Inc., Unsecured Senior Debentures ............. 6.800 08/20/32 177,934 250 Armkel, LLC and Armkel Finance, Inc., Senior Subordinated Notes ......... 9.500 08/15/09 267,500 200 Bristol-Myer Squibb Co., Notes .......................................... 4.750 10/01/06 195,322 150 Cendant Corp., Unsecured Notes .......................................... 6.875 08/15/06 145,725 200 Coca-Cola Enterprises, Inc., Unsecured Debentures ....................... 6.750 09/15/28 194,375 250 General Mills, Inc., Notes .............................................. 6.000 02/15/12 240,393 The accompanying notes are an integral part of the financial statements. 10 THE BEAR STEARNS FUNDS Income Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) CONSUMER, NON-CYCLICAL (CONTINUED) $ 250 Kraft Foods, Inc., Notes ................................................ 5.625% 11/01/11 $ 237,410 200 Safeway Inc., Unsecured Senior Notes .................................... 6.050 11/15/03 205,813 250 Unilever Capital Corp., Unsecured Senior Notes, Company Guaranteed ...... 6.875 11/01/05 264,064 200 United Rentals, Inc., Unsecured Senior Notes, Company Guaranteed ........ 9.500 06/01/08 207,000 200 Wyeth, Notes ............................................................ 5.875 03/15/04 206,154 ---------- 2,341,690 ---------- ENERGY - 3.71% 100 Consolidated Natural Gas Co., Unsecured Notes ........................... 7.250 10/01/04 104,766 150 Consolidated Natural Gas Co., Unsecured Unsubordinated Notes, Series B .. 5.375 11/01/06 145,523 250 LG-Caltex Oil Corp., Unsecured Notes* ................................... 7.500 07/15/07 262,842 175 Smith International Inc., Unsecured Senior Notes ........................ 7.000 09/15/07 178,292 250 Swift Energy Company, Senior Subordinated Notes ......................... 10.250 08/01/09 260,000 400 Transcontinental Gas Pipe Line Corp., Unsecured Notes, Series B ......... 7.000 08/15/11 366,137 ---------- 1,317,560 ---------- FINANCIAL - 9.35% 200 Boeing Capital Corp., Unsecured Senior Notes ............................ 5.650 05/15/06 198,800 650 Ford Motor Credit Co., Notes ............................................ 6.500 - 7.250 02/01/06 - 10/25/11 637,067 100 General Electric Capital Corp., Debentures .............................. 8.850 04/01/05 111,692 400 General Electric Capital Corp., Notes, Series MTNA ...................... 6.750 03/15/32 387,818 150 General Motors Acceptance Corp., Notes .................................. 6.125 09/15/06 148,618 200 Goldman Sachs Group, Inc., Unsecured Senior Notes ....................... 6.600 01/15/12 197,191 250 Lehman Brothers Holdings, Inc., Notes ................................... 6.625 01/18/12 245,790 350 Morgan Stanley Dean Witter, Unsubordinated Notes ........................ 6.750 04/15/11 351,527 200 National Rural Utilities Cooperative Finance Corp., Collateral Trust Bonds .......................................................... 6.000 05/15/06 198,462 150 Salomon Smith Barney Holdings, Co., Notes ............................... 6.500 02/15/08 152,530 150 Textron Financial Corp., Medium Term Notes, Series E .................... 5.950 03/15/04 150,830 150 Transamerica Finance Corp., Notes ....................................... 7.250 08/15/02 152,446 200 Washington Mutual Capital I, Subordinated Capital Income Securities, Washington Mutual Inc. Guaranteed .................................... 8.375 06/01/27 200,820 175 Wells Fargo Financial, Inc., Senior Notes ............................... 6.750 06/01/05 184,457 ---------- 3,318,048 ---------- INDUSTRIAL - 2.74% 150 Alliant Techsystems Inc., Unsecured Senior Subordinated Notes, Company Guaranteed ............................................ 8.500 05/15/11 160,500 250 Allied Waste North America, Inc., Senior Notes* ......................... 8.500 12/01/08 253,750 150 Raytheon Co., Unsecured Senior Notes .................................... 5.700 11/01/03 152,235 350 Tyco International Group SA, Unsecured Yankee Bonds, Tyco International Ltd. Guaranteed (1) .................................... 6.125 11/01/08 308,896 100 Union Pacific Corp., Unsecured Notes .................................... 6.125 01/15/12 96,366 ---------- 971,747 ---------- The accompanying notes are an integral part of the financial statements. 11 THE BEAR STEARNS FUNDS Income Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) MORTGAGE-BACKED - 4.40% $ 205 Comm 2000-C1, Commercial Mortgage Pass-Through Certificates, Class A1 ... 7.206% 09/15/08 $ 215,885 225 Countrywide Mortgage Backed Securities Inc., Series 1994-H, Class A6 .... 6.750 05/25/24 228,173 375 Lehman Large Loan, Series 1997-LLI, Class A3 ............................ 6.900 03/12/07 390,990 350 Norwest Asset Securities Corp., Series 1998-24,Class A3 ................. 6.750 10/25/28 345,751 360 PNC Mortgage Acceptance Corp., Series 2000-C1, Class A1 ................. 7.520 07/15/08 380,610 ----------- 1,561,409 ----------- TECHNOLOGY - 2.55% 350 Computer Sciences Corp., Unsecured Notes ................................ 7.375 - 7.500 08/08/05 - 06/15/11 366,160 150 Electronic Data Systems Corp., Unsecured Notes .......................... 6.850 10/15/04 157,254 250 Fairchild Semiconductor Corporation, Unsecured Senior Subordinated Notes ................................................... 10.500 02/01/09 276,875 100 Pitney Bowes Inc., Unsecured Notes ...................................... 5.950 02/01/05 103,190 ----------- 903,479 ----------- UTILITIES - 3.47% 100 American Electric Power Co., Inc. Notes, Series A ....................... 6.125 05/15/06 99,394 350 Calpine Canada Energy Finance ULC, Unsecured Senior Notes, Company Guaranteed (2) ............................................... 8.500 05/01/08 279,494 250 Cleveland Electric Illuminating Co., Secured Senior Notes, Series D ..... 7.880 11/01/17 251,143 100 CMS Energy Corporation, Unsecured Senior Notes .......................... 8.500 04/15/11 103,695 250 NISource Finance Corp., Unsecured Senior Notes .......................... 7.500 11/15/03 247,778 250 TXU Corp., Unsecured Senior Notes, Series J ............................. 6.375 06/15/06 249,362 ----------- 1,230,866 ----------- Total Corporate Obligations (cost - $16,813,623) ....................... 16,552,699 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 40.51% FANNIE MAE - 15.83% 3,200 Pass-through Pools ...................................................... 5.127 - 6.500 03/01/16 - 02/01/31 3,208,541 2,400 TBA ..................................................................... 6.000 - 6.500 04/16/17 - 04/11/32 2,409,657 ----------- 5,618,198 ----------- FREDDIE MAC - 18.76% 2,820 Notes ................................................................... 4.180 - 6.000 11/08/05 - 06/15/11 2,773,504 1,476 Pass-through Pools ...................................................... 6.000 05/01/31 - 11/01/31 1,433,437 2,525 TBA ..................................................................... 6.000 04/11/32 2,449,250 ----------- 6,656,191 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 5.92% 1,600 Pass-through Pools ...................................................... 7.000 - 8.000 11/15/29 - 10/15/30 1,667,094 425 TBA ..................................................................... 7.000 04/18/32 433,368 ----------- 2,100,462 ----------- Total U.S. Government Agency Obligations (cost - $14,345,245) .......... 14,374,851 ----------- The accompanying notes are an integral part of the financial statements. 12 THE BEAR STEARNS FUNDS Income Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) U.S. GOVERNMENT OBLIGATIONS - 8.52% U.S. TREASURIES - 8.52% $ 2,135 Bonds ................................................................... 5.250 - 7.250% 05/15/16 - 08/15/29 $ 2,018,840 1,015 Notes ................................................................... 5.000 - 5.750 11/15/05 - 08/15/11 1,003,466 ----------- Total U.S. Government Obligations (cost - $3,259,334) ................... 3,022,306 ----------- Total Long-Term Debt Investments (cost - $34,418,202) ................................................. 33,949,856 ----------- SHARES ------ SHORT-TERM INVESTMENTS -- 18.30% INVESTMENT COMPANY - 3.44% 1,219,976 Federated Investors, Trust for Short-Term U.S. Government Securities**(3) (cost - $1,219,976) ................................................. 1.570 -- 1,219,976 ----------- PRINCIPAL AMOUNT (000'S) - --------- U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 14.86% $ 5,275 Fannie Mae, Discount Notes (3) (cost - $5,271,961) ...................... 1.730 - 1.750 04/11/02 - 04/16/02 5,271,961 ----------- Total Short-Term Investments (cost - $6,491,937) ........................ 6,491,937 ----------- Total Investments -- 113.98% (cost - $40,910,139) ..................... 40,441,793 Liabilities in excess of other assets -- (13.98)% ....................... (4,961,953) ----------- Net Assets -- 100.00% ................................................... $35,479,840 ===========
- ---------- * 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, 2002. (1) Domiciled in Bermuda. (2) Domiciled in Canada. (3) All or a portion of which was segregated as collateral for TBA securities. TBA To Be Announced. The accompanying notes are an integral part of the financial statements. 13 THE BEAR STEARNS FUNDS High Yield Total Return Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2002
- -------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS - 92.24% UNITED STATES - 89.30% AEROSPACE & DEFENSE - 1.77% $2,500 Alliant Techsystems Inc., Unsecured Senior Subordinated Notes, Company Guaranteed ............................................................ 8.500% 05/15/11 $ 2,675,000 ------------- BUILDING/DEVELOPMENT - 5.08% 1,900 Integrated Electrical Services, Inc., Senior Subordinated Notes, Series B, Company Guaranteed .......................................... 9.375 02/01/09 1,757,500 1,000 K. Hovnanian Enterprises Inc., Senior Subordinated Notes* ............... 8.875 04/01/12 985,000 2,500 Meritage Corporation, Inc., Unsecured Senior Notes, Company Guaranteed .. 9.750 06/01/11 2,631,250 2,250 Schuler Homes, Inc., Unsecured Senior Notes, Company Guaranteed ......... 9.000 04/15/08 2,306,250 ------------- 7,680,000 ------------- BUSINESS EQUIPMENT/SERVICES - 1.42% 2,000 Buhrmann U.S. Inc., Unsecured Senior Subordinated Notes, Company Guaranteed ................................................... 12.250 11/01/09 2,150,000 ------------- CABLE TELEVISION - 7.42% 3,500 Adelphia Communications Corporation, Unsecured Senior Notes ............. 10.250 11/01/06 3,272,500 3,000 Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corporation, Unsecured Senior Notes ................. 9.625 11/15/09 2,865,000 2,750 EchoStar Broadband Corporation, Unsecured Senior Notes .................. 10.375 10/01/07 2,963,125 2,000 Mediacom LLC and Mediacom Capital Corp., Unsecured Senior Notes ......... 9.500 01/15/13 2,110,000 ------------- 11,210,625 ------------- CHEMICALS/PLASTICS - 3.93% 2,750 Acetex Corporation, Unsecured Senior Notes .............................. 10.875 08/01/09 2,873,750 1,500 Huntsman International LLC, Senior Notes* ............................... 9.875 03/01/09 1,530,000 1,500 Lyondell Chemical Company, Secured Notes* ............................... 9.500 12/15/08 1,530,000 ------------- 5,933,750 ------------- CLOTHING/TEXTILES - 2.30% 3,250 William Carter Company (The), Unsecured Senior Subordinated Notes, Series B, Company Guaranteed ......................................... 10.875 08/15/11 3,469,375 ------------- CONTAINERS/GLASS - 1.02% 1,500 Owens-Brockway Glass Container Corp., Secured Senior Notes* ............. 8.875 02/15/09 1,537,500 ------------- COSMETICS/TOILETRIES - 2.30% 3,250 Armkel, LLC and Armkel Finance, Inc., Senior Subordinated Notes ......... 9.500 08/15/09 3,477,500 ------------- ECOLOGICAL SERVICES/EQUIPMENT - 2.92% 2,000 Allied Waste North America, Inc., Senior Notes* ......................... 8.500 12/01/08 2,030,000 2,050 Stericycle, Inc., Unsecured Senior Subordinated Notes, Series B, Company Guarnteed ........................................... 12.375 11/15/09 2,388,250 ------------- 4,418,250 ------------- 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, 2002 - -------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) ELECTRONIC COMPONENTS - 5.31% $2,000 Amkor Technology, Inc., Unsecured Senior Notes .......................... 9.250% 05/01/06 $ 1,995,000 3,500 Fairchild Semiconductor Corporation, Unsecured Senior Subordinated Notes. 10.500 02/01/09 3,876,250 2,250 Solectron Corporation, Unsecured Senior Notes ........................... 9.625 02/15/09 2,148,750 ------------- 8,020,000 ------------- EQUIPMENT LEASING - 1.53% 2,250 United Rentals, Inc., Unsecured Senior Subordinated Notes, Series B, Company Guaranteed .................................................... 9.250 01/15/09 2,317,500 ------------- FOOD SERVICES - 4.99% 2,589 Carrols Corporation, Unsecured Senior Subordinated Notes, Company Guaranteed .................................................... 9.500 12/01/08 2,576,055 3,250 Fleming Companies, Inc., Unsecured Senior Notes, Company Guaranteed ..... 10.125 04/01/08 3,412,500 1,500 Sbarro, Inc., Unsecured Senior Notes, Company Guaranteed ................ 11.000 09/15/09 1,556,250 ------------- 7,544,805 ------------- HEALTH CARE - 6.85% 3,250 Alaris Medical Systems, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed .................................................... 9.750 12/01/06 3,168,750 2,000 Alliance Imaging, Inc., Unsecured Senior Subordinated Notes ............. 10.375 04/15/11 2,140,000 1,500 InSight Health Services Corp., Senior Subordinated Notes* ............... 9.875 11/01/11 1,539,375 3,300 Vanguard Health Systems, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed .................................................... 9.750 08/01/11 3,498,000 ------------- 10,346,125 ------------- HOME FURNISHINGS - 1.76% 2,500 Simmons Company, Unsecured Senior Subordinated Notes, Series B .......... 10.250 03/15/09 2,659,375 ------------- HOTELS/MOTELS/CASINOS - 12.09% 2,750 Ameristar Casinos, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed ................................................... 10.750 02/15/09 3,031,875 2,250 Boyd Gaming Corporation, Unsecured Senior Notes, Company Guaranteed ..... 9.250 08/01/09 2,379,375 800 Circus & Eldorado/Silver, First Mortgage Notes* ......................... 10.125 03/01/12 826,000 2,300 Felcor Lodging L.P., Unsecured Senior Notes, Company Guaranteed ......... 9.500 09/15/08 2,426,500 2,000 Mandalay Resort Group, Senior Subordinated Notes* ....................... 9.375 02/15/10 2,115,000 3,000 Meristar Hospitality Operating Partnership/Finance Corp. II, Senior Notes* ........................................................ 10.500 06/15/09 3,225,000 2,250 Park Place Entertainment Corporation, Unsecured Senior Subordinated Notes ................................................................ 8.125 05/15/11 2,272,500 2,000 Penn National Gaming, Inc., Unsecured Senior Notes, Company Guaranteed .. 8.875 03/15/10 2,000,000 ------------- 18,276,250 ------------- INDUSTRIAL EQUIPMENT - 0.68% 1,000 Dresser, Inc., Senior Subordinated Notes* ............................... 9.375 04/15/11 1,035,000 ------------- LEISURE - 2.17% 3,250 Bally Total Fitness Holding Corporation, Unsecured Senior Subordinated Notes, Series D ...................................................... 9.875 10/15/07 3,274,375 ------------- 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, 2002 - -------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) NON-FERROUS METALS - 0.98% $1,400 Compass Minerals Group Inc., Unsecured Senior Subordinated Notes* ....... 10.000% 08/15/11 $ 1,482,250 ------------ OIL & GAS - 7.27% 2,000 Comstock Resources, Inc., Senior Notes* ................................. 11.250 05/01/07 2,090,000 2,250 Denbury Resources Inc., Unsecured Senior Subordinated Notes, Series B, Company Guaranteed ................................................... 9.000 03/01/08 2,216,250 1,000 Magnum Hunter Resources, Inc., Senior Notes* ............................ 9.600 03/15/12 1,052,500 2,750 SESI, L.L.C., Unsecured Senior Notes, Company Guaranteed ................ 8.875 05/15/11 2,763,750 2,750 Swift Energy Company, Senior Subordinated Notes ......................... 10.250 08/01/09 2,860,000 ------------- 10,982,500 ------------- PUBLISHING - 1.40% 2,315 PRIMEDIA Inc., Unsecured Senior Notes, Company Guaranteed ............... 8.875 05/15/11 2,118,225 ------------- RADIO/TELEVISION - 4.32% 2,000 Entravision Communications Corporation, Senior Subordinated Notes* ...... 8.125 03/15/09 2,030,000 2,000 Lin Television Corporation, Unsecured Senior Subordinated Notes, Company Guaranteed ........................................................... 8.375 03/01/08 2,000,000 2,500 PanAmSat Corporation, Unsecured Senior Notes, Company Guaranteed* ....... 8.500 02/01/12 2,500,000 ------------- 6,530,000 ------------- RETAILERS - 4.14% 2,250 Advance Stores Company, Inc., Senior Subordinated Notes* ................ 10.250 04/15/08 2,390,625 1,200 CSK Auto Inc., Unsecured Senior Notes* .................................. 12.000 06/15/06 1,278,000 2,520 Mothers Work, Inc., Senior Notes ........................................ 12.625 08/01/05 2,583,000 ------------- 6,251,625 ------------- UTILITIES - 2.02% 1,250 AES Corporation (The), Unsecured Senior Notes ........................... 9.375 09/15/10 981,250 2,000 CMS Energy Corporation, Unsecured Senior Notes .......................... 8.500 04/15/11 2,073,908 ------------- 3,055,158 ------------- WIRELESS TELECOMMUNICATIONS - 5.63% 1,500 Alamosa Delaware Inc., Unsecured Senior Notes, Company Guaranteed ....... 12.500 02/01/11 1,237,500 1,500 American Tower Corporation, Senior Notes ................................ 9.375 02/01/09 1,117,500 1,800 Nextel Communications, Inc., Unsecured Senior Notes ..................... 9.375 11/15/09 1,201,500 2,000 SBA Communications Corporation, Unsecured Senior Notes .................. 10.250 02/01/09 1,385,000 1,500 TeleCorp PCS, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed ............................................................ 10.625 07/15/10 1,691,250 2,000 Triton PCS Inc., Unsecured Senior Subordinated Notes, Company Guaranteed ............................................................ 8.750 11/15/11 1,870,000 ------------- 8,502,750 ------------- Total United States (cost - $132,550,944) ................................................. 134,947,938 ------------- 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, 2002 - -------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) CANADA - 2.94% HEALTH CARE - 1.49% $2,250 Biovail Corporation, Senior Subordinated Yankee Notes ................. 7.875% 04/01/10 $ 2,247,188 ------------ UTILITIES - 1.45% 2,750 Calpine Canada Energy Finance ULC, Unsecured Senior Notes, Company Guaranteed ......................................................... 8.500 05/01/08 2,196,026 ------------ Total Canada (cost - $4,772,976) ...................................... 4,443,214 ------------ Total Long-Term Debt Investments (cost - $137,323,920) .............................................. 139,391,152 ------------ SHARES - --------- EQUITY INVESTMENTS -- 0.60% PREFERRED STOCKS - UNITED STATES - 0.60% WIRELESS TELECOMMUNICATIONS - 0.60% 1,107 Dobson Communications Corporation, Senior Exchangeable Preferred Stock (1) (cost - $1,105,945) ........................... 12.250 - 13.000 -- 911,833 -------------- UNITS - --------- WARRANTS -- 0.00% UNITED STATES - 0.00% COMMERCIAL BANKS - 0.00% 13 Imperial Credit Industry Corp.(2) ..................................... -- 01/31/08 -- ------------ WIRELINE TELECOMMUNICATIONS - 0.00% 250 Mpower Holding Corp.(2) ............................................... -- 10/01/04 2 ------------ Total Warrants (cost - $8,750) ........................................ 2 ------------ SHARES - --------- SHORT-TERM INVESTMENT -- 3.85% INVESTMENT COMPANY - 3.85% 5,813,359 Federated Investors, Trust for Short-Term U.S. Government Securities** (cost - $5,813,359) ........................ 1.570 -- 5,813,359 ------------ Total Investments -- 96.69% (cost - $144,251,974) ..................... 146,116,346 Other assets in excess of liabilities -- 3.31% ........................ 5,003,926 ------------ Net Assets -- 100.00% ................................................. $151,120,272 ============
- ---------- * 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, 2002. (1) Payment-in-kind; of which all or a portion of the coupon is being capitalized at periodic intervals. (2) Non-income producing security. The accompanying notes are an integral part of the financial statements. 17 THE BEAR STEARNS FUNDS Emerging Markets Debt Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2002
- ---------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS -- 95.83% ALGERIA - 0.81% SOVEREIGN - 0.81% $ 118 Republic of Algeria, Loan Tranche I(l)(2) ........................ 2.875% 09/04/06 $ 110,631 160 Republic of Algeria, Loan Tranche III(l)(2) ...................... 2.875 03/04/10 143,200 ---------- Total Algeria (cost - $231,170) ................................. 253,831 ---------- ARGENTINA - 2.41% SOVEREIGN - 2.41% 320 Republic of Argentina (3)(4) ..................................... -- 03/15/10 - 02/01/20 68,824 49 Republic of Argentina, Bocon, Series PRE4(3)(5)(6) ............... -- 09/01/02 3,147 70 Republic of Argentina, Bocon, Series PRO2(3)(5)(6) ............... -- 04/01/07 5,596 515 Republic of Argentina, Bonds, Series 2008(3)(4) .................. -- 12/19/08 130,037 200 Republic of Argentina, Bonos del Tesoro, Series BT02(3)(5) ....... -- 05/09/02 36,000 150 Republic of Argentina, Bonos del Tesoro, Series BT07(3)(5) ....... -- 05/21/03 31,521 105 Republic of Argentina, Bonos del Tesoro, Series BT08(3)(5) ....... -- 05/21/05 30,957 398 Republic of Argentina, Capitalized Bonds, Series 2018(3)(4) ...... -- 06/19/18 82,081 123 Republic of Argentina, FRD(3)(6)(7) .............................. -- 03/29/05 33,264 450 Republic of Argentina, Par Bonds, Series L-GP(3)(7) .............. -- 03/31/23 195,187 70 Republic of Argentina, Secured Discount Bonds, Series L-GL(3)(7) . -- 03/31/23 32,112 140 Republic of Argentina, Senior Unsubordinated Bonds, Series BGL0(3)(4) .............................................. -- 12/20/03 33,250 125 Republic of Argentina, Unsubordinated Bonds(3)(4) ................ -- 04/07/09 30,156 205 Republic of Argentina, Unsubordinated Bonds, Series BGL5(3)(4) ... -- 01/30/17 43,050 ---------- Total Argentina (cost - $2,327,507) .............................. 755,182 ---------- BRAZIL - 10.58% SOVEREIGN - 10.58% 670 Federal Republic of Brazil(4) .................................... 9.375 - 12.750 04/07/08 - 03/06/30 580,775 653 Federal Republic of Brazil, Capitalization Bonds(6)(7)(8)(9) ..... 8.000 04/15/14 533,539 310 Federal Republic of Brazil, Collateralized Par Bonds(7)(8) ....... 6.000 04/15/24 215,837 40 Federal Republic of Brazil, Secured DCB(2)(6)(7) ................. 3.250 04/15/12 30,600 475 Federal Republic of Brazil, Secured DCB, Series RG(2)(6)(7) ...... 3.250 04/15/12 363,375 240 Federal Republic of Brazil, Secured Discount Bonds(2)(7) ......... 3.188 04/15/24 183,000 50 Federal Republic of Brazil, Secured FLIRB Bearer(2)(6)(7) ........ 3.188 04/15/09 41,437 441 Federal Republic of Brazil, Secured NMB(2)(6)(7) ................. 3.250 04/15/09 379,411 378 Federal Republic of Brazil, Series EI-L(2)(6)(7) ................. 3.188 04/15/06 351,067 570 Federal Republic of Brazil, Unsubordinated Bonds(4) .............. 11.000 - 14.500 10/15/09 - 08/17/40 517,109 115 Federal Republic of Brazil, Unsubordinated Notes(4) .............. 11.250 07/26/07 115,863 ---------- Total Brazil (cost - $3,187,065) 3,312,013 ---------- BULGARIA - 3.19% SOVEREIGN - 3.19% 370 Republic of Bulgaria, Collateralized FLIRB, Series A (6)(7)(8) .... 2.813 07/28/12 332,538 760 Republic of Bulgaria, Debentures, Series PDI(2)(6)(7) ............ 2.813 07/28/11 666,936 ---------- Total Bulgaria (cost - $935,166) ................................. 999,474 ---------- The accompanying notes are an integral part of the financial statements. 18 THE BEAR STEARNS FUNDS Emerging Markets Debt Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2002 - ---------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) CHILE - 0.94% SOVEREIGN - 0.94% $ 285 Republic of Chile, Notes(4) (cost - $281,425) ..................... 6.875 - 7.125% 04/28/09 - 01/11/12 $ 292,438 ------------ CHINA - 0.10% CORPORATE - 0.10% 120 Zhuhai Highway Co. Ltd.(10) (cost - $68,827) ...................... -- 07/01/08 32,400 ------------ COLOMBIA - 4.53% SOVEREIGN - 4.53% 390 Republic of Colombia(4) ........................................... 10.000 - 11.750 01/23/12 - 02/25/20 383,603 271 Republic of Colombia(4)(6) ........................................ 9.750 04/09/11 277,528 625 Republic of Colombia, Unsubordinated Bonds(4) ..................... 7.625 - 9.750 02/15/07 - 04/23/09 601,375 150 Republic of Colombia, Unsubordinated Bonds, Series NOV(4) ......... 9.750 04/23/09 154,313 ------------ Total Colombia (cost - $1,394,956) ................................ 1,416,819 ------------ CROATIA - 0.55% SOVEREIGN - 0.55% 174 Croatia, Series A(2)(7) (cost - $160,052) ......................... 2.875 07/31/10 172,125 ------------ DOMINICAN REPUBLIC - 0.42% SOVEREIGN - 0.42% 125 The Dominican Republic, Unsubordinated Notes(4) (cost - $129,189) . 9.500 09/27/06 132,344 ------------ ECUADOR - 3.51% SOVEREIGN - 3.51% 338 Republic of Ecuador(4)* .......................................... 12.000 11/15/12 273,146 454 Republic of Ecuador(4)(8)* ....................................... 5.000 08/15/30 247,430 574 Republic of Ecuador, Registered(4) ............................... 12.000 11/15/12 463,864 210 Republic of Ecuador, Registered(4)(8) ............................ 5.000 08/15/30 114,450 ------------ Total Ecuador (cost - $817,442) .................................. 1,098,890 ------------ EGYPT - 1.12% SOVEREIGN - 1.12% 100 Arab Republic of Egypt(4)* ....................................... 7.625 07/11/06 102,750 250 Arab Republic of Egypt, Unsubordinated Bonds(4)* ................. 8.750 07/11/11 248,750 ------------ Total Egypt (cost - $351,093) ................................... 351,500 ------------ IVORY COAST - 0.09% SOVEREIGN - 0.09% 140 Ivory Coast, Collateralized FLIRB(6)(7)(11) (cost - $23,625) ..... -- 03/29/18 26,775 ------------ MALAYSIA - 4.17% CORPORATE - 1.89% 585 Petroliam Nasional Berhad, Unsubordinated Bonds, Registered(4)* .. 7.125 - 7.625 10/18/06 - 10/15/26 591,031 ------------ SOVEREIGN - 2.28% 650 Malaysia, Bonds(4) ............................................... 7.500 - 8.750 06/01/09 - 07/15/11 713,986 ------------ Total Malaysia (cost - $1,226,657) ............................... 1,305,017 ------------ 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, 2002 - ---------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) MEXICO - 11.94% CORPORATE - 0.59% $ 100 Conproca SA, Secured Bonds(4)(6) .................................. 12.000% 06/16/10 $ 119,000 60 Pemex Project Funding Master Trust, Company Guaranteed(4) ......... 9.125 10/13/10 65,418 ------------ 184,418 ------------ SOVEREIGN - 11.35% 775 United Mexican States(4) .......................................... 9.875 - 11.500 01/15/07 - 05/15/26 950,091 1,170 United Mexican States, Notes(4) ................................... 7.500 - 9.875 02/01/10 - 08/15/31 1,214,356 175 United Mexican States, Notes, Series MTN(4) ....................... 8.500 02/01/06 188,453 20 United Mexican States, Secured Discount Bonds, Series A(7) ........ 6.250 12/31/19 18,613 800 United Mexican States, Secured Discount Bonds, Series B(7) ........ 6.250 12/31/19 744,500 175 United Mexican States, Secured Discount Bonds, Series C(2)(7) ..... 2.998 12/31/19 179,748 220 United Mexican States, Series XW(4) ............................... 10.375 02/17/09 255,063 ------------ 3,550,824 ------------ Total Mexico (cost - $3,465,095) .................................. 3,735,242 ------------ MOROCCO - 1.27% SOVEREIGN - 1.27% 426 The Kingdom of Morocco, Tranche A(1)(2) (cost - $351,873) ......... 2.781 01/01/09 396,869 ------------ NIGERIA - 2.64% SOVEREIGN - 2.64% 500 Central Bank of Nigeria, Collateralized Par Bonds, Series WW(7)(8)(12) ............................................ 6.250 11/15/20 355,000 641 Nigeria Promissory Notes(4)(8) .................................... 5.092 01/05/10 471,911 ------------ Total Nigeria (cost - $749,647) ................................... 826,911 ------------ PANAMA - 3.22% SOVEREIGN - 3.22% 700 The Republic of Panama(4) ......................................... 8.250 - 9.625 04/22/08 - 04/01/29 708,450 218 The Republic of Panama, IRD(2)(6)(7) .............................. 4.750 07/17/14 198,009 120 The Republic of Panama, PDI Bonds(2)(6)(7)(9) ..................... 4.000 07/17/16 102,681 ------------ Total Panama (cost - $969,836) .................................... 1,009,140 ------------ PERU - 2.38% SOVEREIGN - 2.38% 470 The Republic of Peru(2)(6)(7) ..................................... 4.500 03/07/17 380,315 480 The Republic of Peru, Collateralized FLIRB(6)(7)(8) ............... 4.000 03/07/17 363,000 ------------ Total Peru (cost - $693,806) ...................................... 743,315 ------------ PHILIPPINES - 4.88% SOVEREIGN - 4.88% 680 Republic of the Philippines(4) .................................... 9.500 - 9.875 01/15/19 - 10/21/24 704,694 460 Republic of the Philippines, Notes(4) ............................. 9.875 - 10.625 03/16/10 - 03/16/25 488,647 325 Republic of the Philippines, Unsecured Bonds(4) ................... 8.875 04/15/08 333,734 ------------ Total Philippines (cost - $1,400,140) ............................. 1,527,075 ------------ 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, 2002 - ---------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) POLAND - 1.90% SOVEREIGN - 1.90% $ 594 The Republic of Poland, Series PDIB(7)(8) (cost - $581,482) ....... 6.000% 10/27/14 $ 595,114 ------------ RUSSIA - 9.42% SOVEREIGN - 9.42% 160 Russian Federation, Senior Unsubordinated Bonds, Registered(4) .... 11.750 06/10/03 172,200 231 Russian Federation, Unsubordinated Bonds(4)(6)(8) ................. 8.250 03/31/10 219,587 1,626 Russian Federation, Unsubordinated Bonds(4)(6)(8)* ................ 5.000 03/31/30 1,081,557 1,175 Russian Federation, Unsubordinated Bonds, Registered(4) ........... 10.000 - 12.750 06/26/07 - 06/24/28 1,276,397 300 Russian Federation, Unsubordinated Bonds, Registered(4)(6)(8) ..... 5.000 03/31/30 199,500 ------------ Total Russia (cost - $1,633,912) .................................. 2,949,241 ------------ SOUTH AFRICA - 1.30% SOVEREIGN - 1.30% 240 Republic of South Africa(4) ....................................... 9.125 05/19/09 258,000 150 Republic of South Africa, Notes(13) ............................... 8.500 06/23/17 148,500 ------------ Total South Africa (cost - $375,692) .............................. 406,500 ------------ SOUTH KOREA - 3.64% CORPORATE - 0.48% 130 Hanvit Bank, Registered(1)(8) ..................................... 12.750 03/01/10 150,336 ------------ SOVEREIGN - 3.16% 855 Republic of Korea, Unsecured Unsubordinated Bonds(5) .............. 8.875 04/15/08 989,128 ------------ Total South Korea (cost - $1,072,262) ............................. 1,139,464 ------------ THAILAND - 0.52% SOVEREIGN - 0.52% 150 The Kingdom of Thailand, Unsecured Notes(13) (cost - $159,603) .... 7.750 04/15/07 163,515 ------------ TURKEY - 5.18% SOVEREIGN - 5.18% 550 Republic of Turkey(4) ............................................. 11.750 - 11.875 11/05/04 - 06/15/10 577,075 195 Republic of Turkey, Notes(4) ...................................... 11.375 11/27/06 208,041 805 Republic of Turkey, Senior Unsubordinated Bonds(4) ................ 11.875 - 12.375 06/15/09 - 01/15/30 836,466 ------------ Total Turkey (cost - $1,554,548) .................................. 1,621,582 ------------ UKRAINE - 0.92% SOVEREIGN - 0.92% 285 Ukraine Government, Unsecured Senior Notes, Registered(4)(6)(cost - $204,334) .............................. 11.000 03/15/07 288,360 ------------ 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, 2002 - ---------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) UNITED STATES - 2.88% SOVEREIGN - 2.88% $ 930 U.S. Treasury Notes (cost - $914,676) ............................. 5.000% 02/15/11 - 08/15/11 $ 899,856 ------------ URUGUAY - 1.90% SOVEREIGN - 1.90% 755 Republica Orient of Uruguay, Unsecured Bonds(4) (cost - $649,142).. 7.625 - 7.875 01/20/12 - 07/15/27 595,456 ------------ VENEZUELA - 9.42% SOVEREIGN - 9.42% 855 Republic of Venezuela(4) .......................................... 13.625 08/15/18 766,294 917 Republic of Venezuela, FLIRD, Series A(2)(6)(7) ................... 3.438 03/31/07 748,220 1,286 Republic of Venezuela, Series DL(2)(6)(7) ......................... 2.875 12/18/07 1,055,877 500 Republic of Venezuela, Series W-B(7)(14) .......................... 6.750 03/31/20 376,444 ------------ Total Venezuela (cost - $2,849,711) ............................... 2,946,835 ------------ Total Long-Term Debt Investments (cost - $28,759,933) ........................................... 29,993,283 ------------ 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, 2002 - ---------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ---------------------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENT--4.97% GRAND CAYMAN - 4.97% $1,555 Brown Brothers Harriman & Co. (cost - $1,555,000) .................. 0.930% ** $ 1,555,000 ------------ Total Investments -- 100.80% (cost - $30,314,933) ................ 31,548,283 Liabilities in excess of other assets -- (0.80)% ................... (248,969) ------------ Net Assets -- 100.00% .............................................. $ 31,299,314 ============
- ---------- * 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) Instrument is in technical default. (4) Global/Eurobonds. (5) Domestic bonds. (6) Pro-rata sinking fund has been established. (7) Brady bonds. (8) Step-up coupon; coupon increases at periodic intervals. (9) Payment-in-kind; of which all or a portion of the coupon is being capitalized at periodic intervals. (10) The coupon payments on this subordinated bond were due and payable on July 1, 2000, January 2, 2001, July 3, 2001 and January 2, 2002 have not been received by bondholders. The bond is not rated by Standard & Poor's Rating Service ("S&P"). Also, senior notes of the issuer are now in payment default, and are not rated by S&P. (11) The coupon payments on this bond were due and payable on September 30, 2000, March 31, 2001, September 30, 2001 and March 31, 2002 have not been received by bondholders. The bond is not rated by S&P. (12) With an additional 2,250 warrants attached, with no market value. (13) Yankee notes. (14) 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. NMB New Money Bonds. PDI Past Due Interest. The accompanying notes are an integral part of the financial statements. 23 THE BEAR STEARNS FUNDS STATEMENTS OF ASSETS & LIABILITIES MARCH 31, 2002
HIGH YIELD EMERGING TOTAL MARKETS INCOME RETURN DEBT PORTFOLIO PORTFOLIO PORTFOLIO ----------- ------------ ----------- ASSETS Investments, at value (cost - $40,910,139, $144,251,974 and $30,314,933, respectively) ......................................... $40,441,793 $146,116,346 $31,548,283 Interest and dividends receivable .................................... 414,176 3,560,786 721,493 Receivable for investments sold ...................................... -- 3,120,972 -- Receivable for Portfolio shares sold ................................. 90,097 1,350,996 26,323 Receivable from investment adviser ................................... 32,870 -- -- Deferred organization expenses and other assets ...................... 30,416 44,459 24,661 ----------- ------------ ----------- Total assets ..................................................... 41,009,352 154,193,559 32,320,760 ----------- ------------ ----------- LIABILITIES Payable for investments purchased .................................... 5,305,375 2,091,045 757,125 Dividends payable .................................................... 49,823 402,568 59,565 Distribution and service fees payable (Class A, B and C shares) ...... 66,725 306,838 56,562 Payable for Portfolio shares repurchased ............................. 34,153 134,733 32,697 Administration fee payable ........................................... 14,479 18,817 3,881 Advisory fee payable ................................................. -- 26,362 8,350 Custodian fee payable ................................................ 1,612 2,277 11,824 Accrued expenses ..................................................... 57,345 90,647 91,442 ----------- ------------ ----------- Total liabilities ................................................ 5,529,512 3,073,287 1,021,446 ----------- ------------ ----------- NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) ............................................... 2,997 18,079 2,964 Paid-in capital ...................................................... 36,272,809 190,771,367 33,474,071 Undistributed net investment income/(loss) ........................... (20,806) 35,079 6,817 Accumulated net realized loss from investments and foreign currency related transactions, if any ....................................... (306,814) (41,568,625) (3,417,888) Net unrealized appreciation/(depreciation) on investments and foreign currency related transactions, if any ...................... (468,346) 1,864,372 1,233,350 ----------- ------------ ----------- Net assets ....................................................... $35,479,840 $151,120,272 $31,299,314 =========== ============ =========== CLASS A Net assets ........................................................... $ 9,756,827 $ 72,490,896 $25,752,125 ----------- ------------ ----------- Shares of beneficial interest outstanding ............................ 824,148 8,672,466 2,435,523 ----------- ------------ ----------- Net asset value per share ............................................ $11.84 $8.36 $10.57 ====== ===== ====== Maximum offering price per share (net asset value plus sales charge of 4.50% of the offering price)* ................................... $12.40 $8.75 $11.07 ====== ===== ====== CLASS B Net assets ........................................................... $ 6,772,671 $ 32,232,738 $ 2,344,461 ----------- ------------ ----------- Shares of beneficial interest outstanding ............................ 572,078 3,856,217 223,498 ----------- ------------ ----------- Net asset value and offering price per share** ....................... $11.84 $8.36 $10.49 ====== ===== ====== CLASS C Net assets ........................................................... $ 6,066,001 $ 29,534,976 $ 3,202,728 ----------- ------------ ----------- Shares of beneficial interest outstanding ............................ 512,390 3,533,397 305,131 ----------- ------------ ----------- Net asset value and offering price per share** ....................... $11.84 $8.36 $10.50 ====== ===== ====== CLASS Y Net assets ........................................................... $12,884,341 $ 16,861,662 -- ----------- ------------ ----------- Shares of beneficial interest outstanding ............................ 1,088,330 2,017,255 -- ----------- ------------ ----------- Net asset value, offering and redemption price per share ............. $11.84 $8.36 -- ====== ===== =====
- ---------- * On investments of $50,000 or more, the offering price is reduced. ** Redemption price per share is equal to the net asset value per share less any applicable contingent deferred sales charge. The accompanying notes are an integral part of the financial statements. 24 THE BEAR STEARNS FUNDS STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 2002
INCOME HIGH YIELD TOTAL EMERGING MARKETS PORTFOLIO RETURN PORTFOLIO DEBT PORTFOLIO ---------- ---------------- ---------------- INVESTMENT INCOME Interest ................................................................ $1,741,312 $12,029,856 $2,952,449 Dividends ............................................................... -- 175,872 -- ---------- ----------- ---------- 1,741,312 12,205,728 2,952,449 ---------- ----------- ---------- EXPENSES Advisory fees ........................................................... 138,087 772,285 283,764 Distribution and service fees - Class A ................................. 32,374 245,336 80,352 Distribution and service fees - Class B ................................. 66,198 289,616 21,754 Distribution and service fees - Class C ................................. 46,572 239,393 32,389 Transfer agent fees and expenses ........................................ 155,950 160,637 94,025 Accounting fees ......................................................... 103,729 139,860 90,002 Administration fees ..................................................... 46,029 193,073 42,565 Legal and auditing fees ................................................. 52,002 56,999 64,200 Federal and state registration fees ..................................... 44,206 49,895 37,637 Custodian fees and expenses ............................................. 11,800 21,800 58,001 Reports and notices to shareholders ..................................... 12,768 50,502 9,098 Trustees' fees and expenses ............................................. 7,892 8,650 8,377 Insurance expenses ...................................................... 6,844 8,072 7,019 Amortization of organization expenses.. ................................. -- 12,275 -- Other ................................................................... 3,221 3,001 3,000 ---------- ----------- ---------- Total expenses before waivers and related reimbursements ............ 727,672 2,251,394 832,183 Less: waivers and related reimbursements ............................ (444,792) (643,460) (300,384) ---------- ----------- ---------- Total expenses after waivers and related reimbursements ............. 282,880 1,607,934 531,799 ---------- ----------- ---------- Net investment income ................................................... 1,458,432 10,597,794 2,420,650 ---------- ----------- ---------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from: Investments ........................................................... 243,858 (6,894,426) (148,603) Foreign currency related transactions ................................. -- -- (42,328) Net change in unrealized appreciation on: Investments ........................................................... (826,015) 1,060,215 694,866 Foreign currency related transactions ................................. -- -- 13,666 ---------- ----------- ---------- Net realized and unrealized gain/(loss) on investments .................. (582,157) (5,834,211) 517,601 ---------- ----------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................... $ 876,275 $ 4,763,583 $2,938,251 ========== =========== ==========
The accompanying notes are an integral part of the financial statements. 25 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, ---------------------------- --------------------------- ------------------------------ 2002 2001 2002 2001 2002 2001 ------------- ------------ ------------ ------------ ------------- -------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income ............. $ 1,458,432 $ 944,160 $ 10,597,794 $ 9,163,680 $ 2,420,650 $ 2,678,217 Net realized gain/(loss)from investments and foreign currency related transactions, if any .......................... 243,858 (107,724) (6,894,426) (23,438,340) (190,931) 633,903 Net change in unrealized appreciation/(depreciation) on investments and foreign currency related transactions, if any .... (826,015) 710,450 1,060,215 12,737,866 708,532 (1,305,019) ------------- ------------ ------------ ------------ ------------- -------------- Net increase/(decrese) in net assets resulting from operations ...................... 876,275 1,546,886 4,763,583 (1,536,794) 2,938,251 2,007,101 ------------- ------------ ------------ ------------ ------------- -------------- DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A shares .................. (461,744) (360,915) (5,984,172) (4,999,212) (1,986,236) (2,266,869) Class B shares .................. (282,636) (160,711) (2,283,599) (2,178,629) (174,175) (159,013) Class C shares .................. (201,480) (129,207) (1,887,284) (1,953,819) (261,198) (258,009) Class Y shares .................. (541,015) (293,327) (466,355) -- -- -- ------------- ------------ ------------ ------------ ------------- -------------- (1,486,875) (944,160) (10,621,410) (9,131,660) (2,421,609) (2,683,891) ------------- ------------ ------------ ------------ ------------- -------------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares 27,437,838 21,523,945 70,670,903 67,107,610 8,365,516 8,593,909 Cost of shares repurchased ........ (17,244,182) (11,716,000) (37,702,374) (30,778,779) (6,386,126) (15,473,961) Shares issued in reinvestment of dividends ....................... 1,059,856 593,879 6,224,396 4,906,398 1,565,752 1,718,915 ------------- ------------ ------------ ------------ ------------- -------------- Net increase/(decrese) in net assets derived from shares of beneficial interest transactions. 11,253,512 10,401,824 39,192,925 41,235,229 3,545,142 (5,161,137) ------------- ------------ ------------ ------------ ------------- -------------- Total increase/(decrease) in net assets ................... 10,642,912 11,004,550 33,335,098 30,566,775 4,061,784 (5,837,927) NET ASSETS Beginning of year ................. 24,836,928 13,832,378 117,785,174 87,218,399 27,237,530 33,075,457 ------------- ------------ ------------ ------------ ------------- -------------- End of year* ...................... $ 35,479,840 $ 24,836,928 $151,120,272 $117,785,174 $ 31,299,314 $ 27,237,530 ============= ============ ============ ============ ============= ==============
- ---------- * Includes undistributed net investment income as follows:
FOR THE FISCAL YEARS ENDED MARCH 31, ---------------------------- 2002 2001 ------------- ------------ High Yield Total Return Portfolio .... $35,079 $32,020 Emerging Markets Debt Portfolio ...... 6,817 --
The accompanying notes are an integral part of the financial statements. 26 This page is intentionally left blank. 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, 2002 ................... $11.99 $0.60 $(0.15) $(0.60) -- For the fiscal year ended March 31, 2001 .................. 11.53 0.73 0.46 (0.73) -- For the fiscal year ended March 31, 2000 .................. 12.15 0.70 (0.62) (0.70) -- For the fiscal year ended March 31, 1999 .................. 12.37 0.74 (0.03) (0.74) $(0.19) For the fiscal year ended March 31, 1998 .................. 12.03 0.76 0.36 (0.76) (0.02) CLASS B For the fiscal year ended March 31, 2002 .................. 11.99 0.52 (0.15) (0.52) -- For the fiscal year ended March 31, 2001 .................. 11.53 0.65 0.46 (0.65) -- For the fiscal year ended March 31, 2000 .................. 12.15 0.63 (0.62) (0.63) -- For the fiscal year ended March 31, 1999 .................. 12.37 0.65 (0.03) (0.65) (0.19) 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, 2002 .................. 11.99 0.52 (0.15) (0.52) -- For the fiscal year ended March 31, 2001 .................. 11.53 0.65 0.46 (0.65) -- For the fiscal year ended March 31, 2000 .................. 12.15 0.63 (0.62) (0.63) -- For the fiscal year ended March 31, 1999 .................. 12.37 0.65 (0.03) (0.65) (0.19) For the fiscal year ended March 31, 1998 .................. 12.03 0.70 0.36 (0.70) (0.02) CLASS Y For the fiscal year ended March 31, 2002 .................. 11.99 0.64 (0.15) (0.64) -- For the fiscal year ended March 31, 2001 .................. 11.53 0.77 0.46 (0.77) -- For the fiscal year ended March 31, 2000 .................. 12.15 0.74 (0.62) (0.74) -- For the fiscal year ended March 31, 1999 .................. 12.37 0.78 (0.03) (0.78) (0.19) For the fiscal year ended March 31, 1998 .................. 12.03 0.80 0.36 (0.80) (0.02)
- ---------- * Calculated based on average settled shares outstanding during the respective periods, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. ** Commencement of initial public offering. (1) Reflects waivers and related reimbursements. (2) The amounts shown for a share outstanding 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. The accompanying notes are an integral part of the financial statements. 28
INCREASE/(DECREASE) RATIO OF REFLECTED IN NET NET EXPENSE AND NET ASSET RATIO OF INVESTMENT INVESTMENT VALUE, TOTAL NET ASSETS, EXPENSES TO INCOME TO INCOME RATIOS PORTFOLIO END OF INVESTMENT END OF PERIOD AVERAGE NET AVERAGE NET DUE TO WAIVERS AND TURNOVER PERIOD RETURN(3) (000'S OMITTED) ASSETS (1) ASSETS (1) RELATED REIMBURSEMENTS RATE --------- ---------- --------------- ----------- ----------- ---------------------- --------- INCOME PORTFOLIO CLASS A For the fiscal year ended March 31, 2002 ................ $11.84 3.86% $ 9,757 0.80% 4.99% 1.45% 240.84% For the fiscal year ended March 31, 2001 ................ 11.99 10.68 8,316 0.80 6.22 2.48 174.46 For the fiscal year ended March 31, 2000 ................ 11.53 0.77 5,071 0.80 5.99 3.13 158.47 For the fiscal year ended March 31, 1999 ................ 12.15 5.77 4,775 0.80 5.83 2.98 107.21 For the fiscal year ended March 31, 1998 ................ 12.37 9.43 2,926 0.80 6.13 1.86 244.78 CLASS B For the fiscal year ended March 31, 2002 ................ 11.84 3.19 6,773 1.45 4.27 1.45 240.84 For the fiscal year ended March 31, 2001 ................ 11.99 9.96 4,861 1.45 5.55 2.48 174.46 For the fiscal year ended March 31, 2000 ................ 11.53 0.12 2,027 1.45 5.34 3.13 158.47 For the fiscal year ended March 31, 1999 ................ 12.15 5.09 1,121 1.45 5.16 2.81 107.21 For the period February 2, 1998** through March 31, 1998 . 12.37 (0.04)(4) 18 1.45(5) 5.22(4)(5) 0.48(4)(5) 244.78 CLASS C For the fiscal year ended March 31, 2002 ................ 11.84 3.19 6,066 1.45 4.27 1.45 240.84 For the fiscal year ended March 31, 2001 ................ 11.99 9.96 3,339 1.45 5.55 2.48 174.46 For the fiscal year ended March 31, 2000 ................ 11.53 0.12 1,971 1.45 5.33 3.13 158.47 For the fiscal year ended March 31, 1999 ................ 12.15 5.08 2,067 1.45 5.28 3.18 107.21 For the fiscal year ended March 31, 1998 ................ 12.37 8.92 1,403 1.28 5.60 1.80 244.78 CLASS Y For the fiscal year ended March 31, 2002 ................ 11.84 4.22 12,884 0.45 5.35 1.45 240.84 For the fiscal year ended March 31, 2001 ................ 11.99 11.07 8,321 0.45 6.52 2.48 174.46 For the fiscal year ended March 31, 2000 ................ 11.53 1.13 4,763 0.45 6.36 3.13 158.47 For the fiscal year ended March 31, 1999 ................ 12.15 6.13 4,406 0.45 6.27 3.23 107.21 For the fiscal year ended March 31, 1998 ................ 12.37 9.81 4,339 0.45 6.39 1.78 244.78
- ---------- (3) Total investment return does not consider the effects of sales charges or contingent deferred sales charges. Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestment of dividends and distributions. Total investment return is not annualized. (4) The total investment return and ratios for a class of shares are not necessarily comparible to those of any other outstanding class of shares, due to the timing differences in the commencement of intial 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 --------- ----------- --------------- ---------- --------------- HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A For the fiscal year ended March 31, 2002 ............ $ 8.74 $0.72 $(0.38) $(0.72) -- For the fiscal year ended March 31, 2001 ............ 9.78 0.94 (1.04) (0.94) -- For the fiscal year ended March 31, 2000 ............ 11.36 1.08 (1.58) (1.08) -- For the fiscal year ended March 31, 1999 ............ 12.73 1.11 (1.32) (1.11) $(0.05) 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, 2002 ............ 8.74 0.67 (0.38) (0.67) -- For the fiscal year ended March 31, 2001 ............ 9.78 0.88 (1.04) (0.88) -- For the fiscal year ended March 31, 2000 ............ 11.36 1.01 (1.58) (1.01) -- For the fiscal year ended March 31, 1999 ............ 12.73 1.04 (1.32) (1.04) (0.05) 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, 2002 ............ 8.74 0.67 (0.38) (0.67) -- For the fiscal year ended March 31, 2001 ............ 9.78 0.88 (1.04) (0.88) -- For the fiscal year ended March 31, 2000 ............ 11.36 1.01 (1.58) (1.01) -- For the fiscal year ended March 31, 1999 ............ 12.73 1.04 (1.32) (1.04) (0.05) For the period January 2, 1998** through March 31, 1998 .......... 12.00 0.24 0.73 (0.24) -- CLASS Y For the period July 11, 2001*** through March 31, 2002 .......... 8.46 0.53 (0.10) (0.53) --
- ---------- * 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 investment operations. *** Commencement of initial public offering. (1) Reflects waivers and related reimbursements. (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, if any. The accompanying notes are an integral part of the financial statements. 30
INCREASE/(DECREASE) RATIO OF REFLECTED IN NET NET EXPENSE AND NET ASSET RATIO OF INVESTMENT INVESTMENT VALUE, TOTAL NET ASSETS, EXPENSES TO INCOME TO INCOME RATIOS PORTFOLIO END OF INVESTMENT END OF PERIOD AVERAGE NET AVERAGE NET DUE TO WAIVERS AND TURNOVER PERIOD RETURN(3) (000'S OMITTED) ASSETS (1) ASSETS (1) RELATED REIMBURSEMENTS RATE -------- ---------- --------------- ----------- ----------- ---------------------- ---------- HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A For the fiscal year ended March 31, 2002 ......... $ 8.36 4.16% $72,491 1.00% 8.51% 0.49% 212.94% For the fiscal year ended March 31, 2001 ......... 8.74 (1.07) 69,132 1.00 10.03 0.64 122.83 For the fiscal year ended March 31, 2000 ......... 9.78 (4.68) 44,991 1.00 10.14 0.58 70.61 For the fiscal year ended March 31, 1999 ......... 11.36 (1.57) 55,367 1.00 9.37 0.74 101.75 For the period January 2, 1998** through March 31, 1998 ....... 12.73 8.30 18,301 1.00(5) 9.14(5) 1.67(5) 139.61 CLASS B For the fiscal year ended March 31, 2002 ......... 8.36 3.49 32,233 1.65 7.86 0.49 212.94 For the fiscal year ended March 31, 2001 ......... 8.74 (1.71) 26,336 1.65 9.45 0.64 122.83 For the fiscal year ended March 31, 2000 ......... 9.78 (5.29) 23,520 1.65 9.49 0.59 70.61 For the fiscal year ended March 31, 1999 ......... 11.36 (2.21) 23,395 1.65 8.76 0.73 101.75 For the period January 2, 1998** through March 31, 1998 ...... 12.73 8.13 6,013 1.65(5) 8.46(5) 1.68(5) 139.61 CLASS C For the fiscal year ended March 31, 2002 ......... 8.36 3.49 29,535 1.65 7.84 0.49 212.94 For the fiscal year ended March 31, 2001 ......... 8.74 (1.71) 22,317 1.65 9.45 0.64 122.83 For the fiscal year ended March 31, 2000 ......... 9.78 (5.29) 18,707 1.65 9.49 0.59 70.61 For the fiscal year ended March 31, 1999 ......... 11.36 (2.21) 26,064 1.65 8.73 0.73 101.75 For the period January 2, 1998** through March 31, 1998 ....... 12.73 8.13 11,298 1.65(5) 8.46(5) 1.67(5) 139.61 CLASS Y For the period July 11, 2001*** through March 31, 2002 ....... 8.36 4.99(4) 16,862 0.65(5) 8.67(4)(5) 0.49(4)(5) 212.94
- ---------- (3) Total investment return does not consider the effects of sales charges or contingent deferred sales charges. Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestment of dividends and distributions. Total investment return is not annualized. (4) The total investment return and ratios for a class of shares are not necessarily 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 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, 2002 .................. $10.40 $0.90 $ 0.17 $(0.90) -- 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) CLASS B For the fiscal year ended March 31, 2002 .................. 10.31 0.83 0.18 (0.83) -- 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, 2002 .................. 10.32 0.83 0.18 (0.83) -- 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)
- ---------- * Calculated based on average settled shares outstanding during the respective periods, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. ** Commencement of initial public offering. (1) Reflects waivers and related reimbursements. (2) The amounts shown for a share outstanding 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, if any. The accompanying notes are an integral part of the financial statements. 32
INCREASE/(DECREASE) RATIO OF REFLECTED IN NET NET EXPENSE AND NET ASSET RATIO OF INVESTMENT INVESTMENT VALUE TOTAL NET ASSETS, EXPENSES TO INCOME TO INCOME RATIOS PORTFOLIO END OF INVESTMENT END OF PERIOD AVERAGE NET AVERAGE NET DUE TO WAIVERS AND TURNOVER PERIOD RETURN(3) (000'S OMITTED) ASSETS(1) ASSETS(1) RELATED REIMBURSEMENTS RATE ------- ---------- --------------- ----------- ----------- ---------------------- --------- EMERGING MARKETS DEBT PORTFOLIO CLASS A For the fiscal year ended March 31, 2002 ................. $10.57 10.82% $25,752 1.75% 8.65% 1.21% 88.16% For the fiscal year ended March 31, 2001 ................. 10.40 7.98 22,051 1.75 9.27 1.06 156.45 For the fiscal year ended March 31, 2000 ................. 10.58 24.54 28,517 1.75 8.59 1.11 91.98 For the fiscal year ended March 31, 1999 ................. 9.27 (12.40) 29,526 1.75 10.38 1.28 82.47 For the fiscal year ended March 31, 1998 ................. 12.00 19.31 33,448 1.75 7.70 1.01 128.91 CLASS B For the fiscal year ended March 31, 2002 ................. 10.49 10.23 2,344 2.40 8.00 1.21 88.16 For the fiscal year ended March 31, 2001 ................. 10.31 7.16 1,947 2.40 8.76 1.06 156.45 For the fiscal year ended March 31, 2000 ................. 10.50 23.88 1,808 2.40 7.93 1.02 91.98 For the fiscal year ended March 31, 1999 ................. 9.19 (13.08) 1,459 2.40 9.73 1.43 82.47 For the period January 12, 1998** through March 31, 1998 ......... 11.95 7.29(4) 566 2.40(5) 7.13(4)(5) 2.25(4)(5) 128.91 CLASS C For the fiscal year ended March 31, 2002 ................. 10.50 10.22 3,203 2.40 8.08 1.21 88.16 For the fiscal year ended March 31, 2001 ................. 10.32 7.16 3,240 2.40 8.75 1.06 156.45 For the fiscal year ended March 31, 2000 ................. 10.51 23.86 2,750 2.40 7.82 1.01 91.98 For the fiscal year ended March 31, 1999 ................. 9.20 (12.99) 2,165 2.40 9.73 1.16 82.47 For the fiscal year ended March 31, 1998 ................. 11.95 18.66 4,317 2.40 7.31 1.05 128.91
(3) Total investment return does not consider the effects of sales charges or contingent deferred sales charges. Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestment of dividends and distributions. Total investment return is not annualized. (4) The total investment return and ratios for a class of shares are not necessarily comparible to those of any other outstanding class of shares, due to the timing differences in the commencement of initial public offerings. (5) Annualized. 33 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 twelve 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 five non-diversified portfolios, Emerging Markets Debt Portfolio ("EMD Portfolio"), The Insiders Select Fund, Focus List Portfolio, S&P STARS Portfolio and S&P STARS Opportunities 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 EMD Portfolio has not commenced its initial public offering. Each Portfolio is treated as a separate entity for certain matters under the Investment Company Act, and for other purposes, and a shareholder of one Portfolio is not deemed to be a shareholder of any other Portfolio. MANAGEMENT ESTIMATES--The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, requires management to make certain estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. PORTFOLIO VALUATION--Each Portfolio calculates the net asset value of and completes orders to purchase or repurchase its shares of beneficial interest as of the close of regular trading on the New York Stock Exchange (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 are 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 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. 34 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 and premiums are treated as adjustments to interest income and identified costs of investments over the lives of the respective investments. The Portfolios' net investment income (other than distribution and service fees) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of the settled shares value of each class at the beginning of the day. Effective April 1, 2001, the Portfolios modified the manner of accounting for paydown gains and losses on mortgage- and asset-backed securities and has recorded such amounts as an adjustment to interest income. In addition, the Portfolios amortized premiums and discounts on debt securities effective April 1, 2001. The cumulative effect of these accounting changes were immaterial. 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. The Portfolios had no open forward currency contracts at March 31, 2002. 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. 35 At March 31, 2002, 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 2010. 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, 2002:
GROSS CAPITAL LOSS AMOUNT EXPIRING AMOUNT EXPIRING AMOUNT EXPIRING AMOUNT EXPIRING PORTFOLIO CARRYFORWARD IN 2007 IN 2008 IN 2009 IN 2010 - --------- ------------------ --------------- --------------- --------------- --------------- Income Portfolio............. $ 299,200 -- -- $ 299,200 -- High Yield Portfolio......... 39,553,260 $175,885 $5,403,558 13,786,496 $20,187,321 EMD Portfolio................ 2,946,218 -- 2,857,775 -- 88,443
For U.S. federal income tax purposes, net realized capital losses from investments incurred after October 31, 2001, within the current fiscal year are deemed to arise on the first day of the following fiscal year. The High Yield Portfolio and EMD Portfolio incurred and elected to defer such losses of $1,811,857 and $316,027, 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. Distributions of net realized gains, if any, will be declared and paid at least annually by each Portfolio. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from 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, 2002, the Income Portfolio, High Yield Portfolio and EMD Portfolio reclassified $7,637, $26,675 and $7,776, respectively, within the composition of net assets from undistributed net investment income/(loss) to accumulated net realized loss from investments and foreign currency related transactions. In addition, the EMD Portfolio reclassified $42,328 from accumulated net realized loss from investments and foreign currency related transactions 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, 2002, 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 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, 2002, 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. 36 For the fiscal year ended March 31, 2002, 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 SHARES CLASS B SHARES CLASS C SHARES CLASS Y SHARES - --------- -------------- -------------- -------------- -------------- Income Portfolio....................................... 0.80% 1.45% 1.45% 0.45% High Yield Portfolio................................... 1.00 1.65 1.65 0.65 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, 2002, 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........................................................ $138,087 $306,705 High Yield Portfolio.................................................... 643,460 -- EMD Portfolio........................................................... 283,764 16,620
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 & Co. Inc., serves as custodian to the Income Portfolio and High Yield Portfolio. Effective April 1, 2002, Custodial Trust Company also serves as custodian to the EMD 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, 2002, Bear Stearns earned $93,828, $466,854 and $63,566 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 $51,316, $307,491 and $70,929 for the Income Portfolio, High Yield Portfolio and EMD Portfolio, respectively, in shareholder servicing fees. Bear Stearns uses shareholder servicing fees to pay broker-dealers and other financial institutions that provide for personal service in connection with the 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. 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, 2002, Bear Stearns has advised each Portfolio that it received $47,470, $202,128 and $10,566 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, 2002, it received $5,089 from the High Yield Portfolio in contingent deferred sales charges ("CDSC") upon certain redemptions by Class A shareholders and $37,739, $82,528 and $3,713 from each Portfolio, respectively, in CDSC upon certain redemptions by Class B shareholders and $2,307, $2,743 and $615 from each Portfolio, respectively, in CDSC upon certain redemptions by Class C shareholders. 37 INVESTMENTS IN SECURITIES For U.S. federal income tax purposes, the cost of securities owned at March 31, 2002, were $40,917,753, $144,455,482 and $30,470,576 for the Income Portfolio, High Yield Portfolio and EMD Portfolio, respectively. Accordingly, the net unrealized appreciation/(depreciation) on investments for each Portfolio were as follows:
NET GROSS GROSS APPRECIATION/ PORTFOLIO APPRECIATION DEPRECIATION (DEPRECIATION) - --------- ------------ ------------ -------------- Income Portfolio....................................................... $ 310,867 $ (786,827) $ (475,960) High Yield Portfolio................................................... 4,844,911 (3,184,047) 1,660,864 EMD Portfolio.......................................................... 2,834,785 (1,757,078) 1,077,707
For the fiscal year ended March 31, 2002, aggregate purchases and sales of portfolio securities (excluding short-term investments) for each Portfolio were as follows:
PORTFOLIO PURCHASES SALES - --------- ------------ ------------ Income Portfolio....................................................... $ 82,106,890 $ 69,514,597 High Yield Portfolio................................................... 291,565,243 251,447,351 EMD Portfolio.......................................................... 26,163,653 23,187,423
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. Transactions in shares of beneficial interest for each Portfolio were as follows:
INCOME PORTFOLIO ---------------------------------------- SALES REPURCHASES REINVESTMENTS ---------- ----------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares................................................................ 794,472 688,148 24,544 Value................................................................. $9,532,988 $8,218,320 $295,102 FOR THE FISCAL YEAR ENDED MARCH 31, 2001 Shares................................................................ 809,598 571,310 15,073 Value................................................................. $9,677,061 $6,839,617 $176,005 CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares................................................................ 603,678 450,445 13,598 Value................................................................. $7,318,268 $5,427,360 $163,506 FOR THE FISCAL YEAR ENDED MARCH 31, 2001 Shares................................................................ 275,463 55,113 9,045 Value................................................................. $3,244,108 $ 651,691 $105,666 CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares................................................................ 429,355 209,437 14,073 Value................................................................. $5,167,296 $2,510,222 $169,147 FOR THE FISCAL YEAR ENDED MARCH 31, 2001 Shares................................................................ 341,033 242,107 8,522 Value................................................................. $4,030,013 $2,845,724 $ 99,278 CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares................................................................ 449,139 90,492 35,969 Value................................................................. $5,419,286 $1,088,280 $432,101 FOR THE FISCAL YEAR ENDED MARCH 31, 2001 Shares................................................................ 382,870 120,553 18,261 Value................................................................. $4,572,763 $1,378,968 $212,930
38
HIGH YIELD PORTFOLIO ----------------------------------------- SALES REPURCHASES REINVESTMENTS ----------- ----------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares............................................................... 3,756,865 3,398,078 407,597 Value................................................................ $32,035,477 $28,817,466 $3,446,664 FOR THE FISCAL YEAR ENDED MARCH 31, 2001 Shares............................................................... 4,812,964 1,812,714 305,479 Value................................................................ $43,581,437 $16,469,672 $2,785,806 CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares............................................................... 1,370,939 669,402 142,929 Value................................................................ $11,652,781 $ 5,655,996 $1,207,816 FOR THE FISCAL YEAR ENDED MARCH 31, 2001 Shares............................................................... 1,176,384 684,610 115,057 Value................................................................ $10,484,107 $ 6,180,060 $1,054,218 CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares............................................................... 1,174,111 328,871 135,936 Value................................................................ $ 9,955,418 $ 2,780,854 $1,148,557 FOR THE FISCAL YEAR ENDED MARCH 31, 2001 Shares............................................................... 1,414,173 891,343 116,638 Value................................................................ $13,042,066 $ 8,129,047 $1,066,374 CLASS Y FOR THE PERIOD JULY 11, 2001* THROUGH MARCH 31, 2002 Shares............................................................... 2,020,342 53,273 50,186 Value................................................................ $17,027,227 $ 448,058 $ 421,359
- ------------- * Commencement of initial public offering.
EMD PORTFOLIO ---------------------------------------- SALES REPURCHASES REINVESTMENTS ---------- ----------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares................................................................ 736,954 543,454 121,170 Value................................................................. $7,675,363 $ 5,663,699 $1,259,366 FOR THE FISCAL YEAR ENDED MARCH 31, 2001 Shares................................................................ 643,599 1,353,929 136,641 Value................................................................. $6,780,969 $14,062,273 $1,414,333 CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares................................................................ 40,439 17,259 11,607 Value................................................................. $ 420,210 $ 178,032 $ 119,651 FOR THE FISCAL YEAR ENDED MARCH 31, 2001 Shares................................................................ 45,195 39,859 11,181 Value................................................................. $ 466,666 $ 407,231 $ 115,042 CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares................................................................ 26,002 52,882 18,115 Value................................................................. $ 269,943 $ 544,395 $ 186,735 FOR THE FISCAL YEAR ENDED MARCH 31, 2001 Shares................................................................ 131,299 97,613 18,428 Value................................................................. $1,346,274 $ 1,004,457 $ 189,540
39 CREDIT FACILITY The Fund has entered into a demand promissory note arrangement with JPMorgan Chase Bank (the "Bank") to provide an uncommitted credit facility to the Fund (on behalf of each Portfolio). The credit facility bears interest at the greater of: (i) the rate otherwise in effect for such loan plus 2%, or (ii) that rate of interest from time to time announced by the bank at its principal office as its prime commercial lending rate plus 2%, with such interest to be payable on demand and upon payment in full of such principal. High Yield Portfolio as a fundamental policy is permitted to borrow in an amount up to 331/3% 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, EMD Portfolio was able to borrow, for temporary purposes, from its custodian, Brown Brothers Harriman & Co., to cover periodic overdrafts. There were no such borrowings either at or during the fiscal year ended March 31, 2002. Amounts outstanding under the credit facility during the fiscal year ended March 31, 2002, were as follows:.
MAXIMUM LOAN AMOUNT PORTFOLIO AVERAGE LOAN BALANCE OUTSTANDING AVERAGE INTEREST RATE - --------- -------------------- ------------------- --------------------- Income Portfolio............................ $295 $107,600 3.06%
The High Yield Portfolio and EMD Portfolio had no amounts outstanding under the credit facility either at or during the fiscal year ended March 31, 2002. The Income Portfolio had no amounts outstanding under the credit facility at March 31, 2002. CONCENTRATION OF RISK--HIGH YIELD PORTFOLIO Lower-rated debt securities (commonly known as "junk bonds") possess speculative characteristics and are subject to greater market fluctuations and risk of lost income and principal than higher-rated debt securities for a variety of reasons. Also, during an economic downturn or substantial period of rising interest rates, highly leveraged issuers may experience financial stress which would adversely affect their ability to service their principal and interest payment obligations, to meet projected business goals and to obtain additional financing. In addition, periods of economic uncertainty and changes can be expected to result in increased volatility of market prices of lower-rated debt securities and the High Yield Portfolio's net asset value. CONCENTRATION OF RISK--EMD PORTFOLIO Investments in emerging markets debt involve special risks. The issuer of the debt and 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. SUBSEQUENT EVENTS On May 6, 2002, the Board of Trustees of the Fund approved a plan to terminate and liquidate the EMD Portfolio. At such meeting, the Board of Trustees determined that based on the diminished net asset levels and economics in supporting and operating the EMD Portfolio, it was in the best interests of shareholders to adopt such plan of liquidation. On or about June 30, 2002 (the "Liquidation Date"), the EMD Portfolio will liquidate its assets and distribute cash PRO RATA to all remaining shareholders who have not previously redeemed or exchanged all of their shares. Sales of shares of the EMD Portfolio have been suspended. As an accommodation to shareholders, the EMD Portfolio will automatically exchange shareholders' shares on the Liquidation Date into the Bear Stearns Money Market Fund, unless otherwise instructed. 40 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, 2002, and the related statements of operations for the year then ended, and changes in net assets for each of the years for the two year period then ended, and the financial highlights for each of 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, 2002 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, 2002, 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 10, 2002 41 THE BEAR STEARNS FUNDS Income Portfolio High Yield Total Return Portfolio Emerging Markets Debt Portfolio SHAREHOLDER TAX INFORMATION 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, 2002) 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, 2002, 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 $0.611309061 $0.726522446 $0.914361538 Class B 0.533073266 0.671283665 0.839977495 Class C 0.533051693 0.671284431 0.837944380 Class Y 0.653450525 0.509273925 --
Approximately 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. Because each Portfolio's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2002. 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 2003. 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. 42 THE BEAR STEARNS FUNDS TRUSTEES AND OFFICERS The following information is provided for each Trustee and Officer of The Bear Stearns Funds (the "Trust") as of December 31, 2001. Each Trustee oversees all 12 portfolios of The Bear Stearns Funds. The Statement of Additional Information includes additional information about the Trustees and is available without charge, upon request, by calling PFPC Inc. at 1-800-447-1139 or 1-800-766-4111. The mailing address of the Trustees and Officers is 383 Madison Avenue, New York, New York 10179.
- ---------------------------------------------------------------------------------------------------------------------------------- POSITION WITH THE TRUST AND NAME AND AGE OF LENGTH OF TIME OTHER DIRECTORSHIPS TRUSTEE SERVED(1) PRINCIPAL OCCUPATION(S) IN THE PAST 5 YEARS HELD BY TRUSTEE - ---------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------------------------- Peter M. Bren - 69 Trustee, since 1995 Chairman and President, Koll Bren Schreiber None Realty Advisers (realty) - ------------------------------------------------------------------------------------------------------------------------------- John S. Levy - 67 Trustee, since 2000 Managing Partner, Fayerwearther Capital Director, SL Green Partners (private investment partnership) - ---------------------------------------------------------------------------------------------------------------------------------- M.B. Oglesby, Jr. - 59 Trustee, since 1995 Consultant; Formerly, Chief of Staff to None United States Trade Representative, Executive Office of the President (2001-2002); Consultant, Chairman, Oglesby Properties, Inc.; President and Chief Executive Officer, Association of American Railroads; Vice Chairman, Cassidy & Associates; Senior Vice President, RJR Nabisco (1989-1996) - ---------------------------------------------------------------------------------------------------------------------------------- Robert E. Trustee, since 2000 Retired; Formerly, Vice President, Broker/Dealer None Richardson - 61 Department, Mellon Bank (financial services) (1990-1999) - ---------------------------------------------------------------------------------------------------------------------------------- "INTERESTED" TRUSTEES(2) - ---------------------------------------------------------------------------------------------------------------------------------- Michael Minikes - 59 Chairman of the Treasurer, The Bear Stearns Companies Inc. Director, Custodial Trust Board and Trustee, and Bear, Stearns & Co. Inc.; Senior Managing Company; Director, since 1999 Director, Bear, Stearns & Co. Inc.; Bear Stearns Bank plc Co-President, Bear, Stearns Securities Corporation (1999-present) - ---------------------------------------------------------------------------------------------------------------------------------- Doni L. Fordyce - 43 President and Chief Executive Officer, Chief Operating Officer, Director and President, Trustee, since Bear Stearns Asset Management Inc. BSAM Capital Corp.; 2000 (2000-present); Senior Managing Director, Director and Chairman of the Bear Stearns FOF Asset Management LLC Board, Bear Stearns (1998-present), Bear Stearns Private Realty Partners Corporation; Opportunity Ventures Management LLC Director, Bear Stearns Asset (2000-present); Senior Managing Director and Management (Ireland) Investment Committee Member, Bear Stearns Limited, Bear Stearns Asset FOF II Asset Management LLC (1998-present), Management (Luxembourg) Bear Stearns Ventures Management LLC S.A., Bear Stearns Funds plc, (2000-present); Senior Managing Director and Bear Stearns Multi-Strategy President's Advisory Council Committee Offshore Fund, Ltd.; Member, Bear, Stearns & Co. Inc. (1996-present) Director and Executive Investment Committee Member, Vice President, Priton Lynx New Media Ventures LP (2000-present) Holding, Inc. - ---------------------------------------------------------------------------------------------------------------------------------- Robert M. Trustee, since 2001 Senior Managing Director, Bear, Stearns & Co. None Steinberg - 56 Inc. - ----------------------------------------------------------------------------------------------------------------------------------
(1) The term of office for a Trustee is indefinite, until he or she resigns, is removed or a successor is elected and qualified. (2) The Interested Trustees are considered to be interested persons as defined by the Investment Company Act of 1940, as amended, because of their employment with The Bear Stearns Funds' adviser or principal underwriter. 43
- ---------------------------------------------------------------------------------------------------------------------------------- POSITION WITH THE TRUST AND NAME AND AGE OF LENGTH OF TIME DIRECTORSHIPS OFFICER SERVED(1) PRINCIPAL OCCUPATION(S) IN THE PAST 5 YEARS HELD BY OFFICER - ---------------------------------------------------------------------------------------------------------------------------------- OFFICERS WHO ARE NOT TRUSTEES - ---------------------------------------------------------------------------------------------------------------------------------- Barry Sommers - 33 Executive Vice Senior Managing Director, Bear, Stearns & Co. None President, since Inc. (2000-present); Managing Director and 1998 Head of Marketing and Sales for the Trust (1997-present) - ---------------------------------------------------------------------------------------------------------------------------------- Stephen A. Vice President General Counsel, Bear Stearns Asset Director, Bear Stearns Asset Bornstein - 59 and Secretary, Management Inc. (1997-present); Managing Management (Ireland) since 1995 Director, Executive Vice President, Ethics Limited, Bear Stearns Asset Committee Member and Best Execution Management (Luxembourg) Committee Member, Bear Stearns Asset S.A, Bear Stearns Funds plc, Management Inc. (1997-present); Managing Bear Stearns Multi-Strategy Director and Principal 401(k) Committee Offshore Fund, Ltd., Bear Member, Bear, Stearns & Co. Inc. Stearns Mutli-Strategy (1985-present); Vice President and Secretary, Protected Limited, Bear Stearns FLLC Corp. (1996-present); Bear Stearns Mutli-Strategy General Counsel and Secretary, Bear Stearns Protected SPV Limited; Funds Management Inc. (1997-present); Director, Executive Assistant Secretary, Gregory Madison Avenue Vice President and Secretary, Inc. (corporation) (1998-present); Co-Secretary, BSAM Capital Corp.; New Castle Holding, Inc. (holding company) Director and President, (1998-present), New Castle Holding Partners MBS Cayman Funding LLC (investment company) (1999-present); Limited. General Counsel, Executive Vice President and Secretary, Priton Holding, Inc. (holding company)(1998-present) - ---------------------------------------------------------------------------------------------------------------------------------- Frank J. Maresca - 43 Vice President President and Chief Executive Officer, Bear None and Treasurer, Stearns Fund Management Inc. (1997-present); since 1995 Senior Managing Director, Bear, Stearns & Co. Inc. (2001-present); Managing Director, Bear, Stearns & Co. Inc. (1997-2001); Assistant Treasurer, The Cornerstone Strategic Return Fund, Inc. (2001-present), Cornerstone Strategic Value Fund, Inc. (2001-present), EIS Fund, Inc. (2002-present) and Progressive Return Fund, Inc. (2001-present) - ---------------------------------------------------------------------------------------------------------------------------------- Vincent L. Assistant Executive Vice President, Bear Stearns Funds None Pereira - 36 Treasurer, since Management Inc. (1997-present); Managing 1995 Director, Bear, Stearns & Co. Inc. (1999-present), Associate Director, Bear, Stearns & Co. Inc. (1997-1999) - ----------------------------------------------------------------------------------------------------------------------------------
(1) The term of office for an Officer is indefinite, until he or she resigns, is removed or a successor has been duly elected and qualified. 44 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 2002 45 THE BEAR STEARNS FUNDS 383 MADISON AVENUE, NEW YORK, NY 10179 1.800.766.4111 Michael Minikes Chairman of the Board and Trustee Doni L. Fordyce President and Trustee Peter M. Bren Trustee John S. Levy Trustee M. B. Oglesby, Jr. Trustee Robert E. Richardson Trustee Robert M. Steinberg Trustee Barry Sommers Executive Vice President Stephen A. Bornstein Vice President and Secretary Frank J. Maresca Vice President and Treasurer Vincent L. Pereira Assistant Treasurer INVESTMENT ADVISER TRANSFER AND DIVIDEND Bear Stearns Asset DISBURSEMENT AGENT Management Inc. PFPC Inc. 383 Madison Avenue Bellevue Corporate Center New York, NY 10179 400 Bellevue Parkway Wilmington, DE 19809 ADMINISTRATOR INDEPENDENT AUDITORS Bear Stearns Funds Deloitte & Touche LLP Management Inc. Two World Financial Center 383 Madison Avenue New York, NY 10281 New York, NY 10179 DISTRIBUTOR COUNSEL Bear, Stearns & Co. Inc. Kramer Levin 383 Madison Avenue Naftalis & Frankel LLP New York, NY 10179 919 Third Avenue New York, NY 10022 INCOME PORTFOLIO AND EMERGING MARKETS DEBT HIGH YIELD TOTAL RETURN PORTFOLIO: PORTFOLIO: CUSTODIAN CUSTODIAN Brown Brothers Harriman & Co. Custodial Trust Company 40 Water Street 101 Carnegie Center Boston, MA 02109 Princeton, NJ 08540 This report is submitted for the general information of the shareholders of each Portfolio. It is not authorized for distribution to prospective investors in each Portfolio unless it is preceded or accompanied by a current prospectus which includes details regarding each Portfolio's objectives, policies, sales commissions and other information. Total investment return is based on historical results and is not intended to indicate future performance. The investment return and principal value of an investment in each Portfolio will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. -----END PRIVACY-ENHANCED MESSAGE-----