-----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, I8ht4h97RGYeJjb3/h4AJkKJ6RrZPhN9qzcOqtnIPNVUIbzzsFhDQf9eM4XJPViX ZTmFKdo2LCRCCSjFSegqXA== 0000912057-99-007971.txt : 19991203 0000912057-99-007971.hdr.sgml : 19991203 ACCESSION NUMBER: 0000912057-99-007971 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEAR STEARNS FUNDS CENTRAL INDEX KEY: 0000931145 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08798 FILM NUMBER: 99767641 BUSINESS ADDRESS: STREET 1: 245 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10167 MAIL ADDRESS: STREET 2: 245 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10167 N-30D 1 N-30D THE BEAR STEARNS FUNDS FIXED INCOME FUNDS - - Income Portfolio - - - - - - - - High Yield Total Return Portfolio - - - - - - - - Emerging Markets Debt Portfolio Semi-Annual Report September 30, 1999 [LOGO] The Bear Stearns Funds 575 Lexington Avenue New York, NY 10022 1.800.766.4111 Michael Minikes Chairman of the Board Doni L. Fordyce President Barry Sommers Executive Vice President Peter M. Bren Trustee Alan J. Dixon Trustee John R. McKernan, Jr. Trustee M.B. Oglesby, Jr. Trustee Stephen A. Bornstein Vice President and Secretary Frank J. Maresca Vice President and Treasurer Vincent L. Pereira Assistant Treasurer INVESTMENT ADVISER TRANSFER AND DIVIDEND Bear Stearns Asset DISBURSEMENT AGENT Management Inc. PFPC Inc. 575 Lexington Avenue Bellevue Corporate Center New York, NY 10022 400 Bellevue Parkway Wilmington, DE 19809 ADMINISTRATOR Bear Stearns Funds INDEPENDENT AUDITORS Management Inc. Deloitte & Touche LLP 575 Lexington Avenue Two World Financial Center New York, NY 10022 New York, NY 10281 DISTRIBUTOR COUNSEL Bear, Stearns & Co. Inc. Kramer Levin Naftalis & 245 Park Avenue Frankel LLP New York, NY 10167 919 Third Avenue New York, NY 10022 INCOME PORTFOLIO AND EMERGING MARKETS DEBT HIGH YIELD TOTAL RETURN PORTFOLIO: PORTFOLIO: CUSTODIAN CUSTODIAN Custodial Trust Company Brown Brothers Harriman & Co. 101 Carnegie Center 40 Water Street Princeton, NJ 08540 Boston, MA 02109 The financial information included herein is taken from the records of each Portfolio without examination by independent auditors who do not express an opinion thereof. This report is submitted for the general information of the shareholders of each Portfolio. It is not authorized for distribution to prospective investors in each Portfolio unless it is preceded or accompanied by a current prospectus which includes details regarding each Portfolio's objectives, policies, sales commissions and other information. Total investment return is based on historical results and is not intended to indicate future performance. The investment return and principal value of an investment in each Portfolio will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. BSF-R-016-05 THE BEAR STEARNS FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO EMERGING MARKETS DEBT PORTFOLIO LETTER TO SHAREHOLDERS October 30, 1999 Dear Shareholders: We are pleased to present the semi-annual report to shareholders for the Income Portfolio, High Yield Total Return Portfolio ("High Yield Portfolio") and Emerging Markets Debt Portfolio ("Debt Portfolio"), for the six months ended September 30, 1999. Detailed performance data for each class of shares of each Portfolio can be found in the "Financial Highlights" of this report. INCOME PORTFOLIO For the six months ended September 30, 1999, the Income Portfolio's Class A shares had a total return of (0.75)% (without giving effect to the sales charge) and Class B and C shares had a total return of (1.07)% and (1.06)%, respectively, (without giving effect to the contingent deferred sales charges)(1). The Income Portfolio's benchmark index, the Salomon Smith Barney Broad Investment Grade Bond Index, returned (0.21)% for the same period. As interest rates rose during the six-month period, prices in most sectors and maturities of the fixed income market suffered, making 1999 one of the bond market's worst years in recent history. This downturn was a reflection of a number of factors. Corporate bond issuance surged during the summer, putting pressure on prices, and the Federal Reserve Board raised short-term interest rates in June and August, resulting in a half-percentage point increase. Both times, the market was ahead of the Fed, which has acted largely in response to perceived inflationary pressures stemming from the increase in commodity and energy prices and a tight labor market. Consequently, we regard the rise in interest rates as a reaction to strong economic growth, not as a harbinger of a long-term bear market. Ongoing Y2K concerns heightened the skittishness that characterized both the stock and bond markets during the six-month period. With the increase in corporate issuance and increasing uncertainty -- always anathema to the financial markets -- spreads widened in July and August to the levels of last year's liquidity crunch. (The spread is the difference in yield between a specific security and a Treasury bond with the same maturity.) This meant that bond prices in most fixed income sectors fell more significantly than they did in the Treasury market, where investors found greater comfort. The high yield sector, which does best when corporate earnings growth is robust, was particularly hard hit since rising interest rates can increase the cost of borrowing and reduce earnings. However, it is important to remember that the Fed has, so far this year, taken back only two-thirds of the easing it engineered last fall -- an insurance policy the financial markets no longer need. A FOCUS ON INCREASING YIELDS WHILE MAINTAINING QUALITY Toward the end of the period, we increased the Income Portfolio's exposure to agency bonds for their yield advantage over Treasury bonds and their comparable credit quality. In the corporate sector, we are targeting those industries that 1 are benefiting from the increase in commodity and energy prices such as oil drillers, as well as multinationals, which stand to benefit from increased economic growth abroad. We reduced our position in financial services as these companies took the brunt of the increase in interest rates. In the past six months, financial markets have reacted more strongly to interest rate increases than earnings growth, which remains strong. This indicates that volatility is likely to continue, especially until Y2K issues are behind us. We will continue to invest in selected technology and technology-related issues that we expect to do well in a world economy driven by rapid technological advances. HIGH YIELD TOTAL RETURN PORTFOLIO* For the six months ended September 30, 1999, the High Yield Portfolio's Class A shares had a total return of (2.44)% (without giving effect to the sales charge) and both Class B and C shares had a total return of (2.76)% (without giving effect to the contingent deferred sales charges)(2). Its broad-based securities market index, the Credit Suisse First Boston Global High Yield Index, returned (0.47)% for the same period. The High Yield Portfolio's index, the Lipper High Yield Bond Fund Index, returned (1.13)% for the same period. Rising interest rates have made 1999 a very difficult year for all sectors of the fixed income markets. Given the ongoing strength in the U.S. economy and renewed vigor abroad, the High Yield Portfolio suffered less than other fixed income sectors in the first two calendar quarters of the year and spreads narrowed. However, the Federal Reserve Board's two interest rate increases during the summer changed all this. INCREASED SUPPLY AND WEAK DEMAND CAUSED SPREADS TO WIDEN Spreads widened considerably due to the rate hikes, rising default rates and decreasing liquidity. By the end of the third quarter, default rates were exceeding the long-term average of 3%. Moreover, new issue supply was heavy as companies attempted to secure financing before the fourth calendar quarter began in an effort to avoid Y2K complications. This increased supply as demand was falling. As a result, inflows to high yield mutual funds were down significantly over the first three quarters of the year compared to the same period in 1998. All of these factors combined to erode the market for high yield securities. CREATING ATTRACTIVE VALUATIONS While this weakness may persist over the immediate future, we are optimistic about the high yield market's prospects as we move into the new year. Default rates, we believe, are lagging indicators of economic and market conditions and still reflect last year's global economic problems. Currently, the U.S. economy remains on solid footing and foreign economies are rebounding. Stronger corporate earnings combined with a solid equity market and a healthy degree of bank lending should help stem the rise in default rates. We also expect market liquidity to improve as Y2K constraints on Wall Street traders are lifted. Valuations in the high yield market are now very attractive as the market's spread to Treasurys is well above recent averages. These above-average yields should drive greater demand -- particularly among high yield portfolio managers with large cash positions. Given this backdrop, we have been increasing our exposure in industries likely to benefit from a stronger global economy, such as chemicals and energy. We have also increased our positions in the telecommunications sector, which should benefit from ongoing merger-and-acquisition activity. Conversely, we have reduced our exposure to many of the more defensive, domestically oriented industries that are now fully priced. We are also repositioning the High Yield Portfolio in an effort to overweight large benchmark issues that have sold off significantly due to poor technical conditions in the market, since these securities are likely to be the first to benefit in any broad market rally. 2 EMERGING MARKETS DEBT PORTFOLIO** For the six months ended September 30, 1999, the Debt Portfolio's Class A shares had a total return of 1.93% (without giving effect to the sales charge) and Class B and C shares had a total return of 1.68% and 1.69%, respectively, (without giving effect to the contingent deferred sales charges)(3). The Debt Portfolio's benchmark index, the Salomon Smith Barney Emerging Markets Debt Mutual Fund Index, returned 3.95% for the same period. Overall, the market for emerging market debt continued to strengthen during the six months ended September 30, 1999, as many developing countries continued to show signs of recovery from last year's problems. The Debt Portfolio benefited from rising prices for oil and other commodities, and from stronger economic growth in Europe and Japan. These developments contributed to upward revisions in the outlook for economic and export growth in the emerging markets, which tend to improve sovereign creditworthiness. Positive surprises on Brazilian economic growth and fiscal adjustment continued, suggesting that the economic slowdown in both Brazil and neighboring countries would be smaller and shorter than originally feared. This positive news was tempered by continued investor concerns over the U.S. interest rate outlook. Uncertainty on this front contributed to selling of risk assets, including corporate and high yield bonds, ahead of possible tightenings by the Federal Reserve Board. Emerging market mutual funds experienced net outflows, and broker-dealers reduced inventories of emerging market bonds, adding to the selling. Doubts about the sustainability of the Argentine peso and Chinese renminbi pegs raised perceptions of risk, as did Ecuador's lack of progress on fiscal reform. Debt returns by country varied considerably. While the debt of most countries in the Debt Portfolio generated positive returns, significant declines in Russia and Ecuador held back the Debt Portfolio as a whole. In the third calendar quarter, for example, Russian debt fell 26% due to concerns that financial assistance from multilateral organizations such as the International Monetary Fund might be delayed due to investigations into the role of its banks in questionable transactions; however, the market is still up nearly 70% year to date. STRAINS IN ECUADOR REMAIN CONTAINED Ecuador debt fell 34% during the third calendar quarter, reflecting concerns about the country's ability to service its debt and an eventual default on one of its Brady bonds, which occurred at the end of September. This bond represents 0.97% of the Debt Portfolio's net assets. Also, with respect to the Debt Portfolio's other holdings in Ecuador, which total 2.88% of net assets, the market is treating them as being technically in default as well. We are currently working with the bonds' fiscal agent and with others to evaluate our options with respect to the Debt Portfolio's holdings in Ecuador as restructuring negotiations get underway. In some parts of Latin America, economies are holding up better than expected earlier in the year, although weakness in domestic policies has led to currency devaluations in Brazil, Ecuador and Chile, with spillover effects in Argentina and Uruguay. Colombia's debt has been downgraded to below investment grade, reflecting strains caused by the guerilla war and persistent weakness in the banking system. Economies in Eastern Europe are generally stronger than in Latin America, with Poland the star of the lot. However, despite strong investment inflows and significant local entrepreneurial activity, it still faces the hurdles of reducing its budget and current account deficits. Asia, as a region, appears to have the best near-term prospects, but positive economic growth numbers obscure mixed results on much-needed structural reforms. A FOCUS ON SECURITIES WITH LOW CORRELATION TO THE MARKET We will continue to look for unusual opportunities, particularly those that are cheap and less dependent on general market trends. We owned and took profit on a bond issued by the government of El Salvador, which came to the market offering a substantial yield premium to overcome investor concerns about the U.S. Federal Reserve Board's 3 actions. We currently own a dollar-denominated Chinese corporate bond issued by a municipal government to raise funds for bridge and highway construction. Our most recent purchase is a dollar-denominated bond issued by the government of Kazakhstan, which is essentially an energy play and which we believe to be undervalued. It should be noted that the variety of policy responses to current challenges is reducing correlations among sovereigns. Even with Ecuador, although this was the first default on a Brady bond, the effect on other emerging markets was negligible -- further evidence that the market is maturing and that problems in one country are more contained. YEAR 2000 As shareholders, you should be aware that The Bear Stearns Funds (the "Fund"), like most computer-reliant businesses, could be negatively impacted if the computer systems it uses do not properly process date-related information after January 1, 2000. Consequently, we implemented a comprehensive Y2K program, including system remediation and testing as well as other prudent measures, to avoid such problems. As part of this program, we have contacted other system providers and vendors that service the Fund to determine the Y2K status of their systems. While there can be no guarantee that every system will work properly on or after January 1, 2000, we believe that the Fund has taken the proper steps to reduce the risk of a system interruption. The Fund is also aware that Y2K problems may hurt the issuers whose securities the Fund holds, as well as the securities markets in general. 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, [SIGNATURE] Doni L. Fordyce President The Bear Stearns Funds - ------- * Investing in high yield debt securities generally involves greater risks than investing in more highly rated debt securities such as the risk of greater price fluctuation and the possible loss of principal and income. ** International investing involves risks such as currency exchange-rate volatility, possible political, social, or economic instability and differences in taxation and other financial standards. (1) For the six months ended September 30, 1999, the Income Portfolio's Class A shares had a total return of (5.19)%, including the initial 4.50% maximum sales charge, Class B shares returned (6.04)%, including the 5.00% CDSC and Class C shares returned (2.07)%, including the 1.00% CDSC. (2) For the six months ended September 30, 1999, the High Yield Portfolio's Class A shares had a total return of (6.87)%, including the initial 4.50% maximum sales charge, Class B shares returned (7.40)%, including the 5.00% CDSC and Class C shares returned (3.68)%, including the 1.00% CDSC. (3) For the six months ended September 30, 1999, the Debt Portfolio's Class A shares had a total return of (2.69)%, including the initial 4.50% maximum sales charge, Class B shares returned (3.16)%, including the 5.00% CDSC and Class C shares returned 0.72%, including the 1.00% CDSC. CDSC Contingent deferred sales charge.
Bear Stearns Asset Management Inc. has waived a portion of its advisory fee and agreed voluntarily to reimburse a portion of each Portfolio's operating expenses, as necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. 4 THE BEAR STEARNS FUNDS INCOME PORTFOLIO SEPTEMBER 30, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- TOP INDUSTRY/SECTOR WEIGHTINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY/SECTOR NET ASSETS - --------------------- ------------------------------------------------------------ ---------- 1. U.S. Government Agency Obligations.......................... 24.49 2. Asset-Backed................................................ 16.82 3. U.S. Government Obligations................................. 14.30 4. Industrial.................................................. 14.02 5. Finance..................................................... 13.32 6. Utilities................................................... 6.93 7. Telecommunications.......................................... 4.96
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY/SECTOR NET ASSETS - --------------------- ----------------------------------------------- ---------------------------------- ---------- 1. Government National Mortgage Association....... U.S. Government Agency Obligations 17.32 2. U.S. Treasury Notes............................ U.S. Government Obligations 8.52 3. Fannie Mae..................................... U.S. Government Agency Obligations 7.17 4. U.S. Treasury Bonds............................ U.S. Government Obligations 5.78 5. Morgan Stanley Capital I Inc................... Asset-Backed 4.16 6. Lehman Brothers Holdings....................... Finance 4.15 7. Conti-Mortgage Home Equity Loan Trust.......... Asset-Backed 3.86 8. Western Resources Inc.......................... Utilities 2.93 9. Residential Asset Securities Corp.............. Asset-Backed 2.63 10. Green Tree Home Improvement Loan Trust......... Asset-Backed 2.23
- ------- * The Portfolio's composition will change over time.
5 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO SEPTEMBER 30, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - --------------------- ------------------------------------------------------------ ---------- 1. Competitive Local Exchange Companies........................ 7.58 2. Enhanced Service Mobile Radios & Personal Communication Services.................................................... 5.98 3. Long Distance Telephone Services............................ 5.79 4. Steel - Metals - Mining..................................... 4.91 5. Chemicals................................................... 4.75 6. Gaming...................................................... 4.31 7. Retailers................................................... 4.07 8. Forest - Paper Products..................................... 3.64 9. Industrial Products......................................... 3.57 10. International Cable......................................... 3.41
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - --------------------- --------------------------------------------- ------------------------------------ ---------- 1. TeleCorp PCS, Inc............................ Enhanced Service Mobile Radios & 1.34 Personal Communication Services 2. Sterling Chemicals Holdings, Inc............. Chemicals 1.32 3. Isle of Capri Casinos, Inc................... Gaming 1.27 4. Packaging Corp. of America................... Forest - Paper Products 1.16 5. Oxford Health Plans Inc...................... Healthcare 1.12 6. Crown Castle International Corp.............. Cellular Communications 1.11 7. Lyondell Chemical Company.................... Chemicals 1.09 8. The AES Corporation.......................... Utilities 1.09 9. Triad Hospitals Holdings Inc................. Healthcare 1.08 10. Charter Communications Holdings LLC and Charter Communications Holdings Capital Corp....................................... North American Cable Services 1.07
- ------- * The Portfolio's composition will change over time.
6 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO SEPTEMBER 30, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN COUNTRY WEIGHTINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK COUNTRY NET ASSETS - --------------------- ------------------------------------------------------------ ---------- 1. Brazil...................................................... 19.04 2. Argentina................................................... 15.47 3. Mexico...................................................... 14.95 4. Venezuela................................................... 5.08 5. Morocco..................................................... 4.94 6. Peru........................................................ 4.89 7. Bulgaria.................................................... 4.73 8. Panama...................................................... 4.72 9. Nigeria..................................................... 4.71 10. Philippines................................................. 4.41
- -------------------------------------------------------------------------------- TOP TEN ISSUERS* - --------------------------------------------------------------------------------
SECURITY PERCENT OF RANK ISSUER CURRENCIES TYPE NET ASSETS - --------------------- ------------------------------ ------------------------ ---------------------- ---------- 1. Federal Republic of Brazil.... U.S. dollar Brady bond 19.04 2. Republic of Argentina......... U.S. dollar Brady bond 15.47 3. United Mexican States......... U.S. dollar Brady bond 14.95 4. Republic of Venezuela......... U.S. dollar/Deutschemark Brady bond 5.08 5. The Kingdom of Morocco........ U.S. dollar Loan Participation 4.94 6. The Republic of Peru.......... U.S. dollar Brady/Government bonds 4.89 7. Republic of Bulgaria.......... U.S. dollar Brady bond 4.73 8. The Republic of Panama........ U.S. dollar Brady bond 4.72 9. Central Bank of Nigeria....... U.S. dollar Brady bond 4.71 10. Republic of the Philippines... U.S. dollar Brady bond 4.41
- ------- * The Portfolio's composition will change over time.
7 THE BEAR STEARNS FUNDS INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS -- 94.84% CORPORATE OBLIGATIONS - 56.05% ASSET-BACKED - 16.82% $ 200 Aames Mortgage Trust, Series 1997-B, Class A4.............. 6.950% 11/15/25 $ 199,537 200 Conti-Mortgage Home Equity Loan Trust...................... 6.080 09/15/27 190,905 100 Conti-Mortgage Home Equity Loan Trust, Series 1998-1, Class A4................................................. 6.280 01/15/13 99,579 225 Conti-Mortgage Home Equity Loan Trust, Series 1998-1, Class A5................................................. 6.430 04/15/16 221,667 200 Delta Funding Home Equity Loan Trust, Series 1999-1, Class A4F................................................ 6.390 02/15/28 194,627 100 Green Tree Home Improvement Loan Trust, Series 1997-A, Class HEA6............................................... 7.160 03/15/28 103,342 200 Green Tree Home Improvement Loan Trust, Series 1998-D, Class HEA3............................................... 6.130 08/15/29 191,841 540 Morgan Stanley Capital I Inc., Series 1997-C1, Class A-1B, Commercial Mortgage Pass-Thru Certificates............... 7.460 03/01/04 551,580 150 Residential Asset Securities Corp., Series 1998-KS2, Class A13................................................ 6.240 01/25/01 148,790 200 Residential Asset Securities Corp., Series 1999-RS2, Class A13................................................ 7.525 01/25/01 200,469 125 UCFC Home Equity Loan, Series 1997-A1, Class A7............ 7.660 06/15/28 127,929 ----------- 2,230,266 ----------- FINANCE - 13.32% 150 Associates Corp. North America, Subordinated Debentures.... 6.875 11/15/08 148,125 150 CIT Group Holdings, Inc., Notes............................ 7.250 08/15/05 150,750 150 Honda Auto Lease Trust, Series 1999-A, Class A4............ 6.450 09/16/02 149,940 550 Lehman Brothers Holdings, Notes............................ 7.250 10/15/03 550,687 175 Norwest Financial, Inc., Senior Notes...................... 6.750 06/01/05 173,031 150 Sawgrass Finance L.L.C., Series 1993-1, Class A............ 6.450 01/20/06 150,128 150 Transamerica Finance Corp., Notes.......................... 7.250 08/15/02 150,937 300 Washington Mutual Capital I, Subordinated Capital Income Securities, Washington Mutual Inc. Guaranteed............ 8.375 06/01/27 293,625 ----------- 1,767,223 ----------- INDUSTRIAL - 14.02% 150 Boyd Gaming Corporation, Senior Subordinated Notes......... 9.500 07/15/07 147,000 200 Isle of Capri Casinos, Inc., Senior Subordinated Notes, Series B, Company Guaranteed............................. 8.750 04/15/09 184,000 250 LG-Caltex Oil Corporation, Unsecured Notes*................ 7.500 07/15/07 230,312 200 MedPartners, Inc., Senior Subordinated Notes............... 6.875 09/01/00 190,000 150 News America Inc., Senior Notes............................ 7.300 04/30/28 134,063 250 Panamerican Beverages, Inc., Senior Notes*................. 7.250 07/01/09 215,313 200 Safeway Inc., Notes........................................ 6.050 11/15/03 192,500 225 Smith International Inc., Senior Unsecured Notes........... 7.000 09/15/07 217,969 150 Textron Inc., Notes........................................ 6.750 09/15/02 150,000 200 Time Warner Inc., Pass-Thru Certificates, Asset Trust Securities*.............................................. 6.100 12/30/01 198,000 ----------- 1,859,157 -----------
The accompanying notes are an integral part of the financial statements. 8 THE BEAR STEARNS FUNDS INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) TELECOMMUNICATIONS - 4.96% $ 150 AT&T Corporation, Notes.................................... 6.500% 09/15/02 $ 149,812 150 Cox Communications Inc., Notes............................. 6.400 08/01/08 140,437 150 TCI Communications Inc., Senior Notes...................... 7.385 08/27/01 152,437 250 US West Communications, Debentures......................... 6.875 09/15/33 215,313 ----------- 657,999 ----------- UTILITIES - 6.93% 250 Cleveland Electric Illuminating Co., Senior Notes, Series D................................................. 7.880 11/01/17 246,563 150 Consolidated Natural Gas Co., Notes........................ 7.250 10/01/04 150,187 250 Empressa Electrica del Norte Grande S.A., Senior Loan Participation Certificates*.............................. 7.750 03/15/06 133,116 400 Western Resources Inc., Senior Unsecured Notes............. 6.250 08/15/03 389,000 ----------- 918,866 ----------- Total Corporate Obligations (cost - $7,751,901)............ 7,433,511 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 24.49% FANNIE MAE - 7.17% 225 Benchmark Notes............................................ 5.250 01/15/03 218,316 375 Pass-Thru Pools............................................ 6.000 06/01/06 364,013 375 TBA........................................................ 7.000 10/01/25 368,672 ----------- 951,001 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 17.32% 2,380 Pass-Thru Pools............................................ 6.000-7.000 12/06/05-02/15/29 2,296,564 ----------- Total U.S. Government Agency Obligations (cost - $3,342,391).............................................. 3,247,565 ----------- U.S. GOVERNMENT OBLIGATIONS - 14.30% U.S. TREASURYS - 14.30% 830 Bonds...................................................... 5.250-7.250 05/15/16-11/15/28 766,629 1,100 Notes...................................................... 6.500-7.000 05/15/05-10/15/06 1,129,250 ----------- Total U.S. Government Obligations (cost - $1,975,146)...... 1,895,879 ----------- Total Long-Term Debt Investments (cost - $13,069,438)...... 12,576,955 -----------
The accompanying notes are an integral part of the financial statements. 9 THE BEAR STEARNS FUNDS INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 6.22% DISCOUNT COMMERCIAL PAPER - 2.82% $ 375 Ford Motor Credit Corp..................................... 5.290% 10/14/99 $ 374,284 ----------- U.S. GOVERNMENT AGENCY DISCOUNT NOTE - 3.02% 400 Freddie Mac, Discount Note(1).............................. 5.130 10/04/99 399,829 ----------- SHARES ------ INVESTMENT COMPANIES - 0.38% 42 Federated Automated Government Money Trust**............... -- -- 42 50,685 Federated Investors, Trust for Short-Term U.S. Government Securities**............................................. -- -- 50,685 ----------- 50,727 ----------- Total Short-Term Investments (cost - $824,840)............. 824,840 ----------- Total Investments -- 101.06% (cost - $13,894,278)..................................... 13,401,795 Liabilities in excess of other assets -- (1.06)%........... (140,186) ----------- Net Assets -- 100.00%...................................... $13,261,609 ===========
- --------- * SEC Rule 144A security. Such securities are traded only among qualified institutional buyers. ** Money market fund. (1) 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. 10 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS -- 90.71% UNITED STATES - 76.96% AEROSPACE - DEFENSE - 1.02% $ 750 Compass Aerospace Corp., Senior Subordinated Notes*......... 10.125% 04/15/05 $ 705,000 500 Telecommunications Techniques Co., LLC, Senior Subordinated Notes, Company Guaranteed................................. 9.750 05/15/08 475,000 ------------ 1,180,000 ------------ AIRLINES - 0.84% 1,000 Amtran, Inc., Senior Notes, Company Guaranteed.............. 9.625 12/15/05 971,250 ------------ ALTERNATIVE VIDEO PROVIDERS - 0.94% 250 21st Century Telecom Group, Inc., Senior Discount Notes(2).................................................. 12.250 02/15/08 100,000 1,000 EchoStar DBS Corporation, Senior Notes...................... 9.375 02/01/09 988,750 ------------ 1,088,750 ------------ AUTOMOBILE MANUFACTURING RELATED - 2.17% 495 Cambridge Industries, Inc., Senior Subordinated Notes, Series B, Company Guaranteed.............................. 10.250 07/15/07 321,750 1,000 Dura Operating Corp., Senior Subordinated Notes*............ 9.000 05/01/09 950,000 1,250 Motors and Gears, Inc., Senior Notes, Series D.............. 10.750 11/15/06 1,234,375 ------------ 2,506,125 ------------ BUILDING MATERIALS - 1.65% 1,000 Formica Corporation, Senior Subordinated Notes*............. 10.875 03/01/09 960,000 1,000 Nortek, Inc., Senior Notes, Series B........................ 8.875 08/01/08 950,000 ------------ 1,910,000 ------------ CELLULAR COMMUNICATIONS - 1.11% 1,000 Crown Castle International Corp., Senior Discount Notes(2).................................................. 10.625 11/15/07 705,000 1,000 Crown Castle International Corp., Senior Discount Notes(2).................................................. 10.375 05/15/11 575,000 ------------ 1,280,000 ------------ CHEMICALS - 4.75% 1,000 General Chemical Industrial Products Inc., Senior Subordinated Notes*....................................... 10.625 05/01/09 980,000 1,000 Huntsman ICI Chemicals LLC, Senior Subordinated Notes*...... 10.125 07/01/09 977,500 1,200 LaRoche Industries Inc., Senior Subordinated Notes, Series B.................................................. 9.500 09/15/07 744,000 1,250 Lyondell Chemical Company, Senior Subordinated Notes........ 10.875 05/01/09 1,262,500 750 Sterling Chemicals Holdings, Inc., Secured Notes*........... 12.375 07/15/06 708,750 2,400 Sterling Chemicals Holdings, Inc., Senior Secured Discount Notes(2).................................................. 13.500 08/15/08 816,000 ------------ 5,488,750 ------------
The accompanying notes are an integral part of the financial statements. 11 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) COMPETITIVE LOCAL EXCHANGE COMPANIES - 6.56% $ 500 e.spire Communications, Inc., Senior Discount Notes(2)...... 12.750% 04/01/06 $ 275,625 500 GST USA, Inc., Senior Discount Notes, Company Guaranteed(2)............................................. 13.875 12/15/05 400,000 1,000 Hyperion Telecommunications, Inc., Senior Subordinated Notes..................................................... 12.000 11/01/07 1,010,000 1,500 Intermedia Communications of Florida, Inc., Senior Discount Notes(2).................................................. 12.500 05/15/06 1,226,250 1,750 KMC Telecom Holdings, Inc., Senior Discount Notes(2)........ 12.500 02/15/08 936,250 500 Logix Communications Enterprises, Inc., Senior Notes........ 12.250 06/15/08 431,250 1,000 McLeodUSA Incorporated, Senior Notes........................ 8.125 02/15/09 935,000 1,500 NEXTLINK Communications, Inc., Senior Discount Notes(2)..... 12.250 06/01/09 866,250 1,070 Time Warner Telecom LLC and Time Warner Telecom Inc., Senior Notes..................................................... 9.750 07/15/08 1,079,362 500 WinStar Communications, Inc., Senior Subordinated Cash-Pay Exchange Notes(1)(8)...................................... 11.000 03/15/08 417,583 ------------ 7,577,570 ------------ CONVENIENCE & DRUG RETAILERS - 0.87% 500 Duane Reade Inc., Senior Subordinated Notes, Company Guaranteed................................................ 9.250 02/15/08 487,500 500 Phar-Mor, Inc., Senior Notes................................ 11.720 09/11/02 515,625 ------------ 1,003,125 ------------ DATA & INTERNET SERVICES - 1.65% 1,000 Covad Communications Group, Inc., Senior Notes.............. 12.500 02/15/09 947,500 1,000 PSINet Inc., Senior Notes, Series B......................... 10.000 02/15/05 960,000 ------------ 1,907,500 ------------ ENHANCED SERVICE MOBILE RADIOS & PERSONAL COMMUNICATION SERVICES - 2.90% 1,300 Nextel Communications, Inc., Senior Serial Redeemable Discount Notes(2)......................................... 9.950 02/15/08 910,000 2,650 TeleCorp PCS, Inc., Senior Discount Notes*(2)............... 11.625 04/15/09 1,553,562 1,300 Triton PCS, Inc., Senior Subordinated Discount Notes, Company Guaranteed(2)..................................... 11.000 05/01/08 880,750 ------------ 3,344,312 ------------ EQUIPMENT RENTAL - 0.58% 750 Anthony Crane Rental, L.P. and Anthony Crane Capital Corporation, Senior Notes, Series B, Company Guaranteed... 10.375 08/01/08 667,500 ------------ EXPLORATION & PRODUCTION - 0.87% 1,000 Ocean Energy, Inc., Senior Subordinated Notes, Series B, Company Guaranteed........................................ 8.875 07/15/07 1,007,500 ------------ FABRICATED GLASS, PLASTICS & FIBERS - 0.55% 1,000 Globe Holdings, Inc., Senior Discount Notes, Series B(2)(10)........................................... 14.000 08/01/09 320,010 500 Graham Packaging Company and GPC Capital Corp. I, Senior Discount Notes, Series B(2)............................... 10.750 01/15/09 318,750 ------------ 638,760 ------------
The accompanying notes are an integral part of the financial statements. 12 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) FOOD, BEVERAGE & TOBACCO - 1.16% $ 500 Packaged Ice, Inc., Senior Notes, Series B, Company Guaranteed................................................ 9.750% 02/01/05 $ 441,250 1,475 Purina Mills, Inc., Senior Subordinated Notes(9)............ 9.000 03/15/10 295,000 750 Richmont Marketing Specialists, Inc., Senior Subordinated Notes, Company Guaranteed................................. 10.125 12/15/07 609,375 ------------ 1,345,625 ------------ FOREST - PAPER PRODUCTS - 2.61% 500 Bear Island Paper Company, L.L.C. and Bear Island Finance Company II, Senior Secured Notes, Series B................ 10.000 12/01/07 490,000 500 MAXXAM Group Holdings Inc., Senior Secured Notes, Series B, Company Guaranteed........................................ 12.000 08/01/03 508,750 1,000 Packaging Corp. of America, Senior Subordinated Notes*...... 9.625 04/01/09 1,012,500 1,000 Riverwood International Corporation, Senior Notes, Company Guaranteed................................................ 10.625 08/01/07 1,003,750 ------------ 3,015,000 ------------ GAMING - 4.31% 1,000 Boyd Gaming Corporation, Senior Subordinated Notes.......... 9.500 07/15/07 980,000 1,000 Hollywood Park, Inc., Senior Subordinated Notes, Series B, Company Guaranteed........................................ 9.250 02/15/07 967,500 1,600 Isle of Capri Casinos, Inc., Senior Subordinated Notes, Series B, Company Guaranteed.............................. 8.750 04/15/09 1,472,000 750 Las Vegas Sands, Inc. and Venetian Casino Resort, LLC, Senior Subordinated Notes, Company Guaranteed(5).......... 10.000 11/15/05 577,500 1,000 Mohegan Tribal Gaming Authority, Senior Subordinated Notes..................................................... 8.750 01/01/09 982,500 ------------ 4,979,500 ------------ HEALTHCARE - 3.13% 1,250 Oxford Health Plans Inc., Senior Notes*..................... 11.000 05/15/05 1,293,750 1,050 Team Health Inc., Senior Subordinated Notes*................ 12.000 03/15/09 1,067,062 1,250 Triad Hospitals Holdings Inc., Senior Subordinated Notes*... 11.000 05/15/09 1,250,000 ------------ 3,610,812 ------------ INDUSTRIAL PRODUCTS - 3.57% 1,000 Allied Waste North America, Inc., Senior Notes, Series B, Company Guaranteed........................................ 7.875 01/01/09 885,000 750 AMTROL Inc., Senior Subordinated Notes...................... 10.625 12/31/06 740,625 750 Aqua-Chem, Inc., Senior Subordinated Notes.................. 11.250 07/01/08 495,000 250 Grove Holdings LLC and Grove Holdings Capital, Inc., Senior Discount Debentures(2).................................... 11.625 05/01/09 75,000 500 Grove Worldwide LLC and Grove Holdings Capital, Inc., Senior Subordinated Notes........................................ 9.250 05/01/08 310,000 1,000 Roller Bearing Company of America, Inc., Senior Subordinated Notes, Series B, Company Guaranteed....................... 9.625 06/15/07 895,000 500 Steel Heddle Mfg. Co., Senior Subordinated Notes, Series B, Company Guaranteed........................................ 10.625 06/01/08 275,000 500 Thermadyne Holdings Corporation, Senior Discount Debentures(2)............................................. 12.500 06/01/08 242,500 250 Thermadyne Mfg. LLC and Thermadyne Capital Corp., Senior Subordinated Notes, Company Guaranteed.................... 9.875 06/01/08 205,000 ------------ 4,123,125 ------------
The accompanying notes are an integral part of the financial statements. 13 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) INTERNATIONAL CABLE - 0.98% $ 1,700 NTL Communications Corp., Senior Deferred Coupon Notes, Series B(2)............................................... 12.375% 10/01/08 $ 1,134,750 ------------ LONG DISTANCE TELEPHONE SERVICES - 3.74% 1,250 FaciliCom International, Inc., Senior Notes, Series B....... 10.500 01/15/08 1,031,250 1,050 Global Crossing Holdings Ltd., Senior Notes, Company Guaranteed................................................ 9.625 05/15/08 1,081,500 500 Global TeleSystems Group, Inc., Senior Notes................ 9.875 02/15/05 480,000 750 Primus Telecommunications Group, Incorporated, Senior Notes, Series B.................................................. 9.875 05/15/08 675,000 1,100 Viatel, Inc., Senior Notes.................................. 11.250 04/15/08 1,047,750 ------------ 4,315,500 ------------ MOTION PICTURE EXHIBITION - 1.09% 1,250 Loews Cineplex Entertainment Corporation, Senior Subordinated Notes........................................ 8.875 08/01/08 1,125,000 500 United Artists Theatre Company, Senior Subordinated Notes, Series B.................................................. 9.750 04/15/08 135,000 ------------ 1,260,000 ------------ NORTH AMERICAN CABLE SERVICES - 2.39% 500 Adelphia Communications Corporation, Senior Notes, Series B.................................................. 9.875 03/01/07 507,500 500 Charter Communications Holdings LLC and Charter Communications Holdings Capital Corp., Senior Discount Notes*(2)................................................. 9.920 04/01/11 297,500 1,000 Charter Communications Holdings LLC and Charter Communications Holdings Capital Corp., Senior Notes*...... 8.625 04/01/09 942,500 1,000 Insight Midwest LP and Insight Capital Inc., Senior Notes*.................................................... 9.750 10/01/09 1,010,000 ------------ 2,757,500 ------------ OIL SERVICES - 1.81% 500 EOTT Energy Partners, L.P., Senior Notes, Company Guaranteed................................................ 11.000 10/01/09 510,000 1,000 R&B Falcon Corporation, Senior Notes........................ 12.250 03/15/06 1,052,500 500 RBF Finance Co., Senior Secured Notes, Company Guaranteed... 11.000 03/15/06 527,500 ------------ 2,090,000 ------------ OTHER CONSUMER CYCLICALS - 1.35% 448 Boyds Collection, Ltd. (The), Senior Subordinated Notes, Series B.................................................. 9.000 05/15/08 442,400 500 COMFORCE Operating Inc., Senior Notes, Series B............. 12.000 12/01/07 473,125 750 Hedstrom Corporation and Hedstrom Holdings, Inc., Senior Subordinated Notes, Company Guaranteed.................... 10.000 06/01/07 645,000 ------------ 1,560,525 ------------
The accompanying notes are an integral part of the financial statements. 14 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) OTHER CONSUMER NON-CYCLICALS - 2.69% $ 750 AKI, Inc., Senior Notes..................................... 10.500% 07/01/08 $ 724,688 750 AP Holdings, Inc., Senior Discount Notes(2)................. 11.250 03/15/08 417,188 750 Bell Sports, Inc., Senior Subordinated Notes, Series B, Company Guaranteed........................................ 11.000 08/15/08 757,500 500 Evenflo Company, Inc., Senior Notes, Series B............... 11.750 08/15/06 490,000 750 Styling Technology Corporation, Senior Subordinated Notes, Company Guaranteed........................................ 10.875 07/01/08 721,875 ------------ 3,111,251 ------------ OTHER FINANCE - 1.00% 1,250 Metris Companies Inc., Senior Notes, Company Guaranteed..... 10.000 11/01/04 1,150,000 ------------ OTHER MEDIA - 1.38% 500 Production Resource Group, L.L.C. and PRG Finance Corporation, Senior Subordinated Notes.................... 11.500 01/15/08 475,000 750 Px Escrow Corp., Senior Subordinated Discount Exchange Notes(2).................................................. 9.625 02/01/06 427,500 750 SFX Entertainment, Inc., Senior Subordinated Notes, Series B, Company Guaranteed.............................. 9.125 02/01/08 690,000 ------------ 1,592,500 ------------ PUBLISHING - 1.59% 1,000 Big Flower Press Holdings, Inc., Senior Subordinated Notes..................................................... 8.625 12/01/08 960,000 500 Liberty Group Operating, Inc., Senior Subordinated Notes, Company Guaranteed........................................ 9.375 02/01/08 477,500 250 Liberty Group Publishing, Inc., Senior Discount Debentures(2)............................................. 11.625 02/01/09 142,188 250 Sullivan Graphics Inc., Senior Subordinated Notes........... 12.750 08/01/05 260,000 ------------ 1,839,688 ------------ RADIO BROADCASTING - 2.15% 1,000 Citadel Broadcasting Company, Senior Subordinated Notes, Company Guaranteed........................................ 9.250 11/15/08 987,500 250 Cumulus Media Inc., Senior Subordinated Notes, Company Guaranteed................................................ 10.375 07/01/08 258,125 1,300 Emmis Communications Corporation, Senior Subordinated Notes, Series B, Company Guaranteed.............................. 8.125 03/15/09 1,235,000 ------------ 2,480,625 ------------ RECREATIONAL SERVICES - 0.80% 750 Premier Parks Inc., Senior Discount Notes(2)................ 10.000 04/01/08 489,375 450 Premier Parks Inc., Senior Notes............................ 9.750 06/15/07 436,500 ------------ 925,875 ------------ RESTAURANTS - 0.53% 900 AmeriServ Food Distribution, Inc., Senior Subordinated Notes, Company Guaranteed................................. 10.125 07/15/07 612,000 ------------
The accompanying notes are an integral part of the financial statements. 15 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) RETAILERS - 4.07% $ 500 Advance Holding Corporation, Senior Discount Debentures, Series B(2)............................................... 12.875% 04/15/09 $ 280,000 1,000 Advance Stores Company, Incorporated, Senior Subordinated Notes, Series B, Company Guaranteed....................... 10.250 04/15/08 935,000 750 Big 5 Corp., Senior Notes, Series B......................... 10.875 11/15/07 735,000 750 CEX Holdings, Inc., Senior Subordinated Notes, Series B, Company Guaranteed........................................ 9.625 06/01/08 795,000 1,000 Hollywood Entertainment Corporation, Senior Subordinated Notes, Series B........................................... 10.625 08/15/04 945,000 1,000 Rent-A-Center, Inc, Senior Subordinated Notes, Company Guaranteed................................................ 11.000 08/15/08 1,007,500 ------------ 4,697,500 ------------ STEEL - METALS - MINING - 2.83% 500 Anker Coal Group, Inc., Senior Notes, Series B.............. 9.750 10/01/07 220,000 1,250 Metal Management, Inc., Senior Subordinated Notes, Company Guaranteed................................................ 10.000 05/15/08 943,750 500 P&L Coal Holdings Corporation, Senior Subordinated Notes, Series B.................................................. 9.625 05/15/08 480,000 750 Renco Steel Holdings, Inc., Senior Secured Notes, Series B.................................................. 10.875 02/01/05 679,688 1,000 WHX Corporation, Senior Exchange Notes...................... 10.500 04/15/05 940,000 ------------ 3,263,438 ------------ TECHNOLOGY - 3.24% 500 Anacomp, Inc., Senior Subordinated Notes, Series D.......... 10.875 04/01/04 507,500 750 Details Capital Corp., Senior Subordinated Discount Notes, Series B.................................................. 10.000 11/15/05 711,563 1,050 Fairchild Semiconductor Corp., Senior Subordinated Notes*... 10.375 10/01/07 1,039,500 750 IPC Information Systems, Inc., Senior Discount Notes(2)..... 10.875 05/01/08 580,313 1,050 Viasystems, Inc., Senior Subordinated Notes................. 9.750 06/01/07 903,000 ------------ 3,741,876 ------------ TELEVISION BROADCASTING - 2.20% 710 ACME Television, LLC and ACME Finance Corporation, Senior Discount Notes, Series B, Company Guaranteed(2)........... 10.875 09/30/04 623,025 1,000 Sinclair Broadcast Group, Inc., Senior Subordinated Notes, Company Guaranteed........................................ 8.750 12/15/07 942,500 1,000 Young Broadcasting Inc., Senior Subordinated Notes, Series B, Company Guaranteed.............................. 8.750 06/15/07 980,000 ------------ 2,545,525 ------------ TEXTILE - APPAREL - 0.79% 450 Consoltex Group Inc., Senior Subordinated Notes, Series B.................................................. 11.000 10/01/03 454,500 750 Pillowtex Corporation, Senior Subordinated Notes, Series B, Company Guaranteed........................................ 9.000 12/15/07 463,125 ------------ 917,625 ------------ UTILITIES - 1.09% 1,250 AES Corporation (The), Senior Notes......................... 9.500 06/01/09 1,256,250 ------------ Total United States (cost - $97,528,860).................... 88,897,632 ------------
The accompanying notes are an integral part of the financial statements. 16 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) ARGENTINA - 0.41% SOVEREIGN - 0.41% $ 650 Republic of Argentina, Discount Bonds, Series L-GL(6)(7) (cost - $492,543)....................... 6.063% 03/31/23 $ 468,812 ------------ AUSTRALIA - 1.34% STEEL - METALS - MINING - 1.34% 1,000 Great Central Mines Limited, Senior Notes................... 8.875 04/01/08 885,000 750 Murrin Murrin Holdings PTY, Senior Yankee Notes(1).......... 9.375 08/31/07 665,625 ------------ Total Australia (cost - $1,728,045)......................... 1,550,625 ------------ BRAZIL - 0.39% SOVEREIGN - 0.39% 717 Federal Republic of Brazil, Capitalization Bonds(1)(3)(7) (cost - $497,145).......................... 8.000 04/15/14 448,678 ------------ CANADA - 4.35% ENHANCED SERVICE MOBILE RADIOS & PERSONAL COMMUNICATION SERVICES - 2.01% 2,050 Clearnet Communications Inc., Senior Discount Yankee Notes(2).................................................. 10.125 05/01/09 1,230,000 1,300 Microcell Telecommunications Inc., Senior Discount Yankee Notes, Series B(2)........................................ 14.000 06/01/06 1,088,750 ------------ 2,318,750 ------------ FOREST - PAPER PRODUCTS - 0.75% 1,000 Repap New Brunswick Inc., Senior Yankee Notes............... 10.625 04/15/05 870,000 ------------ LONG DISTANCE TELEPHONE SERVICES - 0.85% 1,000 Worldwide Fiber Inc., Senior Notes*......................... 12.000 08/01/09 980,000 ------------ STEEL - METALS - MINING - 0.74% 1,000 Algoma Steel Inc., 1st Mortgage Yankee Notes................ 12.375 07/15/05 850,000 ------------ Total Canada (cost - $5,231,307)............................ 5,018,750 ------------ ISRAEL - 0.49% LONG DISTANCE TELEPHONE SERVICES - 0.49% 1,000 Barak I.T.C., Senior Discount Yankee Notes, Series B(2) (cost - $703,049)............................. 12.500 11/15/07 567,500 ------------ MEXICO - 0.38% SOVEREIGN - 0.38% 600 United Mexican States, Secured Par Bonds, Series W-A(7) (cost - $474,869)........................... 6.250 12/31/19 441,750 ------------ NETHERLANDS - 1.69% COMPETITIVE LOCAL EXCHANGE COMPANIES - 0.82% 1,000 Versatel Telecom International NV, Senior Yankee Notes...... 11.875 07/15/09 947,500 ------------ INTERNATIONAL CABLE - 0.87% 1,000 United Pan-Europe Communications N.V., Senior Notes*........ 10.875 08/01/09 1,010,000 ------------ Total Netherlands (cost - $1,992,843)....................... 1,957,500 ------------
The accompanying notes are an integral part of the financial statements. 17 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) SWEDEN - 0.76% FREIGHT - CONTAINERS - SHIPPING - 0.76% $ 1,250 Stena Line AB, Senior Yankee Notes (cost - $1,136,627)...... 10.625% 06/01/08 $ 875,000 ------------ UNITED KINGDOM - 3.94% ENHANCED SERVICE MOBILE RADIOS & PERSONAL COMMUNICATION SERVICES - 1.07% 3,000 Dolphin Telecom plc, Senior Discount Notes*(2).............. 14.000 05/15/09 1,237,500 ------------ INTERNATIONAL CABLE - 1.56% 1,000 Ono Finance plc, Units*..................................... 13.000 05/01/09 1,046,250 1,250 Telewest Communications plc, Senior Discount Notes*(2)...... 9.250 04/15/09 759,375 ------------ 1,805,625 ------------ LONG DISTANCE TELEPHONE SERVICES - 0.66% 750 Esprit Telecom Group plc, Senior Yankee Notes............... 10.875 06/15/08 763,125 ------------ PUBLISHING - 0.65% 750 Regional Independent Media Group plc, Senior Yankee Notes... 10.500 07/01/08 750,000 ------------ Total United Kingdom (cost - $4,969,228).................... 4,556,250 ------------ Total Long-Term Debt Investments (cost - $114,754,516)...... 104,782,497 ------------ SHARES ------ LONG-TERM EQUITY INVESTMENTS -- 2.68% PREFERRED STOCKS -- UNITED STATES - 2.63% ALTERNATIVE VIDEO PROVIDERS - 0.13% 309 21st Century Telecom Group, Inc., Senior Cumulative Exchangeable Preferred Stock(3)........................... 13.750 -- 149,021 ------------ CELLULAR COMMUNICATIONS - 0.64% 515 Dobson Communications Corporation, Senior Exchangeable Preferred Stock(3)........................................ 13.000 -- 485,373 296 Dobson Communications Corporation, Senior Exchangeable Preferred Stock(3)........................................ 12.250 -- 249,358 ------------ 734,731 ------------ COMPETITIVE LOCAL EXCHANGE COMPANIES - 0.19% 250 WinStar Communications, Inc., Senior Cumulative Exchangeable Preferred Stock, Series C................................. 14.250 -- 217,927 ------------ FOREST - PAPER PRODUCTS - 0.28% 300 Packaging Corp. of America, Senior Exchangeable Preferred Stock*(3)................................................. 12.375 -- 328,802 ------------
The accompanying notes are an integral part of the financial statements. 18 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- INTEREST MATURITY SHARES RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------- LONG-TERM EQUITY INVESTMENTS (CONTINUED) NORTH AMERICAN CABLE SERVICES - 0.24% 2,500 Adelphia Communications Corporation, Cumulative Exchangeable Preferred Stock, Series B(3).............................. 13.000% -- $ 278,125 ------------ RADIO BROADCASTING - 0.55% 589 Cumulus Media Inc., Cumulative Exchangeable Redeemable Preferred Stock, Series A(3).............................. 13.750 -- 639,726 ------------ SUPERMARKETS & DISTRIBUTORS - 0.27% 883 Nebco Evans Holding Company, Senior Redeemable Exchangeable Preferred Stock(3)........................................ 11.250 -- 309,602 ------------ TELEVISION BROADCASTING - 0.00% 0 Paxson Communications Corporation(3)........................ 12.500 -- 283 ------------ TEXTILES - APPAREL - 0.33% 8,428 Cluett American Corp., Senior Exchangeable Preferred Stock, Series B(3)............................................... 12.500 -- 380,948 ------------ Total Preferred Stocks -- United States (cost - $4,295,875)............................................... 3,039,165 ------------ COMMON STOCKS -- UNITED STATES - 0.05% LONG DISTANCE TELEPHONE SERVICES - 0.05% 2,015 Viatel, Inc.(4)............................................. -- -- 59,568 ------------ Total Long-Term Equity Investments (cost - $4,295,875)...... 3,098,733 ------------ WARRANTS+ -- 0.01% UNITED STATES - 0.01% ALTERNATIVE VIDEO PROVIDERS - 0.00% 250 21st Century Telecom Group, Inc.*(4)........................ -- 02/15/10 500 ------------ COMPETITIVE LOCAL EXCHANGE COMPANIES - 0.01% 750 KMC Telecom Holdings, Inc.*(4).............................. -- 04/15/08 3,758 250 MGC Communications, Inc.*(4)................................ -- 10/01/04 2,625 ------------ 6,383 ------------ Total Warrants (cost - $10,000)............................. 6,883 ------------
The accompanying notes are an integral part of the financial statements. 19 THE BEAR STEARNS FUNDS HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 4.76% DISCOUNT COMMERCIAL PAPER - 4.72% $ 5,450 Koch Industries, Inc........................................ 5.550% 10/01/99 $ 5,450,000 ------------ SHARES ------ INVESTMENT COMPANIES - 0.04% 53,050 Federated Investors, Trust for Short-Term U.S. Government Securities**.............................................. -- -- 53,050 ------------ Total Short-Term Investments (cost - $5,503,050)............ 5,503,050 ------------ Total Investments -- 98.16% (cost - $124,563,441)..................................... 113,391,163 Other assets in excess of liabilities -- 1.84%.............. 2,123,078 ------------ Net Assets -- 100.00%....................................... $115,514,241 ============
- --------- * SEC Rule 144A security. Such securities are traded only among qualified institutional buyers. ** Money market fund. + Included in the High Yield Portfolio are 750 warrants for American Banknote Corporation, expiring 12/01/02, with no market value. (1) Pro-rata sinking fund has been established. (2) Coupon rate is zero until step-up date. Step-up rate is provided. (3) Payment-in-kind; of which all or a portion of the coupon is being capitalized at periodic intervals. (4) Non-income producing security. (5) Coupon rate is 10.00% until 11/99; thereafter 14.25% to maturity. (6) Adjustable rate; rate based on London Interbank Offered Rate (LIBOR) plus 0.8125%. (7) Brady bond. (8) Coupon payment is deferred until 09/15/03. (9) Coupon payment is in default. Company filed Chapter 11 on 10/28/99. (10) With an additional 1,000 warrants, expiring 08/01/09, with no market value.
The accompanying notes are an integral part of the financial statements. 20 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S)+ RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS -- 96.41% ARGENTINA - 15.47% SOVEREIGN 1,760 Republic of Argentina, Discount Bond, Series L-GL (a)(b).... 6.000% 03/31/23 $ 1,271,600 2,441 Republic of Argentina, FRB Bearer (a)(b).................... 6.813 03/31/05 2,145,248 205 Republic of Argentina, FRB Registered, Series L (a)(b)...... 6.813 03/31/05 179,792 2,710 Republic of Argentina, Par Bond, Series L-GP (b)(c)......... 6.000 03/31/23 1,754,725 ----------- Total Argentina (cost - $5,575,935)......................... 5,351,365 ----------- BRAZIL - 19.04% SOVEREIGN 1,769 Federal Republic of Brazil, Capitalization Bond (b)(c)(d)... 8.000 04/15/14 1,126,636 1,275 Federal Republic of Brazil, DCB (a)(b)...................... 5.938 04/15/12 783,328 875 Federal Republic of Brazil, DCB, Series RG (a)(b)........... 5.938 04/15/12 537,578 1,340 Federal Republic of Brazil, Discount Bond (a)(b)............ 5.875 04/15/24 853,412 1,230 Federal Republic of Brazil, EI Bearer Bond, Series EI-L (a)(b).................................................... 5.875 04/15/06 978,049 400 Federal Republic of Brazil, FLIRB Bearer (a)(b)............. 5.000 04/15/09 238,000 332 Federal Republic of Brazil, IDU Bond, Series A (a)(b)....... 6.500 01/01/01 322,967 540 Federal Republic of Brazil, NMB(a)(b)....................... 5.938 04/15/09 381,712 2,400 Federal Republic of Brazil, Par Bond (a)(b)(c).............. 5.750 04/15/24 1,366,500 ----------- Total Brazil (cost - $6,847,352)............................ 6,588,182 ----------- BULGARIA - 4.73% SOVEREIGN 675 Republic of Bulgaria, Discount Bond, Series A (a)(b)........ 6.500 07/28/24 465,750 1,020 Republic of Bulgaria, FLIRB, Series A (a)(b)................ 2.750 07/28/12 642,600 40 Republic of Bulgaria, IAB Bearer (a)(b)..................... 6.500 07/28/11 28,525 700 Republic of Bulgaria, IAB Registered (a)(b)................. 6.500 07/28/11 499,187 ----------- Total Bulgaria (cost - $1,490,452).......................... 1,636,062 ----------- CHINA - 1.19% CORPORATE 690 Zhuhai Highway Co. Ltd...................................... 11.500 07/01/08 358,800 100 Zhuhai Highway Co. Ltd.*.................................... 11.500 07/01/08 52,000 ----------- Total China (cost - $421,522)............................... 410,800 -----------
The accompanying notes are an integral part of the financial statements. 21 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S)+ RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) ECUADOR - 3.85% SOVEREIGN 1,075 The Republic of Ecuador, Discount Bond (a)(b)(f)............ - 02/28/25 $ 335,937 1,700 The Republic of Ecuador, Par Bond, Registered (b)(c)(g)..... - 02/28/25 510,000 1,387 The Republic of Ecuador, PDI Bearer Bond (a)(b)(g).......... - 02/27/15 228,886 1,554 The Republic of Ecuador, PDI Bond, Registered (a)(b)(g)..... - 02/27/15 256,379 ----------- Total Ecuador (cost - $2,114,722)........................... 1,331,202 ----------- KAZAKHSTAN - 1.80% SOVEREIGN 630 Republic of Kazakhstan* (cost - $622,881)................... 13.625% 10/18/04 622,881 ----------- MEXICO - 14.95% SOVEREIGN 645 United Mexican States, Secured Par Bond, Series W-A (b)..... 6.250 12/31/19 475,284 6,375 United Mexican States, Secured Par Bond, Series W-B (b)..... 6.250 12/31/19 4,697,578 ----------- Total Mexico (cost - $5,444,479)............................ 5,172,862 ----------- MOROCCO - 4.94% SOVEREIGN 2,008 The Kingdom of Morocco, Tranche A, Loan Participation (a) (cost - $1,609,305)................................... 5.906 01/01/09 1,709,219 ----------- NIGERIA - 4.71% SOVEREIGN 2,750 Central Bank of Nigeria, Par Bond (b)(c)(e) (cost - $1,906,899)............................................... 6.250 11/15/20 1,629,375 ----------- PANAMA - 4.72% SOVEREIGN 1,255 The Republic of Panama, IRB (a)(b).......................... 4.250 07/17/14 911,444 1,004 The Republic of Panama, PDI Bond (a)(b)..................... 6.500 07/17/16 723,608 ----------- Total Panama (cost - $1,781,870)............................ 1,635,052 -----------
The accompanying notes are an integral part of the financial statements. 22 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S)+ RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) PERU - 4.89% SOVEREIGN 312 The Republic of Peru, Discount Bond (a)(b).................. 6.813% 03/08/27 $ 189,540 830 The Republic of Peru, FLIRB (b)(c).......................... 3.750 03/07/17 449,238 250 The Republic of Peru, FLIRB* (c)............................ 3.750 03/07/17 135,313 1,056 The Republic of Peru, PDI Bearer Bond (a)(b)................ 4.500 03/07/17 653,400 425 The Republic of Peru, PDI Bond* (a)......................... 4.500 03/07/17 262,969 ----------- Total Peru (cost - $1,731,115).............................. 1,690,460 ----------- PHILIPPINES - 4.41% SOVEREIGN 1,150 Republic of the Philippines, FLIRB, Series B (a)(b)......... 6.000 06/01/08 1,068,063 540 Republic of the Philippines, Par Bond, Series B (b)(c)...... 6.500 12/01/17 456,300 ----------- Total Philippines (cost - $1,562,081)....................... 1,524,363 ----------- POLAND - 2.50% SOVEREIGN 650 The Polish People's Republic, PDI Bearer Bond (b)(c)........ 5.000 10/27/14 573,625 450 The Polish People's Republic, RSTA Bond, Registered (b)(c).................................................... 4.000 10/27/24 291,938 ----------- Total Poland (cost - $895,533).............................. 865,563 ----------- RUSSIA - 4.13% SOVEREIGN 602 Chase Russian Ruble-linked Note (f)......................... - 01/21/04 17,738 3,430 Vneshconombank, IAN Series (f).............................. - 12/15/15 368,780 11,575 Vneshconombank, Principal Loan (f).......................... - 12/15/20 1,041,750 ----------- Total Russia (cost - $2,117,704)............................ 1,428,268 ----------- VENEZUELA - 5.08% SOVEREIGN 607 Republic of Venezuela, DCB, Series DL (a)(b)................ 6.313 12/18/07 472,815 DEM 2,400 Republic of Venezuela, Discount Bond (a)(b)................. 3.438 03/31/20 784,106 571 Republic of Venezuela, FLIRB, Series B (a)(b)............... 6.875 03/31/07 433,926 100 Republic of Venezuela, Par Bond, Series W-A (b)............. 6.750 03/31/20 66,313 ----------- Total Venezuela (cost - $1,753,535)......................... 1,757,160 ----------- Total Long-Term Debt Investments (cost - $35,875,385)....... 33,352,814 -----------
The accompanying notes are an integral part of the financial statements. 23 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S)+ RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENT -- 0.82% GRAND CAYMAN - 0.82% 282 Brown Brothers Harriman & Co. (h) (cost - $282,000)......... 4.563% ** $ 282,000 ----------- Total Investments -- 97.23% (cost - $36,157,385)...................................... 33,634,814 Other assets in excess of liabilities -- 2.77%.............. 959,036 ----------- Net Assets -- 100.00%....................................... $34,593,850 ===========
- --------- + Denominated in United States dollars unless otherwise indicated. * SEC Rule 144A security. Such securities are traded only among qualified institutional buyers. ** Variable rate call account. Rate resets on a daily basis, amounts available generally on the same business day. (a) Adjustable rate; rate based on London Interbank Offered Rate (LIBOR). (b) Brady bond. (c) Step-up coupon; coupon increases at periodic intervals. (d) Payment-in-kind; of which all or a portion of the coupon is being capitalized at periodic intervals. (e) With additional 2,500 warrants attached, with no market value. (f) Instrument is in default. (g) Instrument is in technical default as evidenced by current market practice which dictates such instrument be traded flat (i.e., without interest). (h) A portion of which was segregated as collateral for open forward foreign currency exchange contracts. DCB Debt Conversion Bond. DEM Deutschemarks. EI Eligible Interest. FLIRB Front Loaded Interest Reduction Bond. FRB Floating Rate Bond. IAB Interest Arrears Bond. IAN Interest Arrears Note. IDU Interest Due and Unpaid. IRB Interest Reduction Bond. NMB New Money Bond. PDI Past Due Interest. RSTA Revolving Trade Facility.
The accompanying notes are an integral part of the financial statements. 24 THE BEAR STEARNS FUNDS STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 1999 (UNAUDITED)
INCOME HIGH YIELD TOTAL EMERGING MARKETS PORTFOLIO RETURN PORTFOLIO DEBT PORTFOLIO ----------- ---------------- ----------------- ASSETS Investments, at value (cost - $13,894,278, $124,563,441 and $36,157,385, respectively).......................... $13,401,795 $113,391,163 $33,634,814 Interest and dividends receivable, if any................. 174,981 2,954,319 1,395,692 Receivable for investments sold........................... 250,769 1,277,722 322,465 Receivable for Portfolio shares sold...................... 44,398 318,088 62,067 Receivable from investment adviser........................ 29,169 -- 90,910 Deferred organization expenses and other assets........... 37,266 74,680 53,873 ----------- ------------ ----------- Total assets........................................ 13,938,378 118,015,972 35,559,821 ----------- ------------ ----------- LIABILITIES Payable for investments purchased......................... 563,784 1,500,000 622,881 Dividends payable......................................... 20,858 351,279 105,704 Payable for Portfolio shares repurchased.................. -- 334,043 13,916 Distribution and service fees payable (Class A, B and C shares)................................................. 14,161 191,557 37,575 Payable for open forward foreign currency exchange contracts............................................... -- -- 17,752 Custodian fee payable..................................... 1,761 4,862 10,020 Administration fee payable................................ 1,624 14,235 4,227 Advisory fee payable...................................... -- 6,746 -- Accrued expenses.......................................... 74,581 99,009 153,896 ----------- ------------ ----------- Total liabilities................................... 676,769 2,501,731 965,971 ----------- ------------ ----------- NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized)......................... 1,133 10,945 3,858 Paid-in capital........................................... 13,842,691 131,188,942 42,426,819 Undistributed net investment income....................... -- 18,250 5,673 Accumulated net realized loss from investments and foreign currency related transactions, if any................... (89,732) (4,531,618) (5,290,676) Net unrealized depreciation on investments and foreign currency related transactions, if any................... (492,483) (11,172,278) (2,551,824) ----------- ------------ ----------- Net assets.......................................... $13,261,609 $115,514,241 $34,593,850 =========== ============ =========== CLASS A Net assets................................................ $ 4,857,187 $ 61,730,816 $30,442,590 ----------- ------------ ----------- Shares of beneficial interest outstanding................. 414,883 5,848,766 3,391,960 ----------- ------------ ----------- Net asset value per share................................. $11.71 $10.55 $8.97 =========== ============ =========== Maximum offering price per share (net asset value plus sales charge of 4.50%* of the offering price)........... $12.26 $11.05 $9.39 =========== ============ =========== CLASS B Net assets................................................ $ 2,186,022 $ 26,778,864 $ 1,891,169 ----------- ------------ ----------- Shares of beneficial interest outstanding................. 186,720 2,537,191 212,427 ----------- ------------ ----------- Net asset value and offering price per share**............ $11.71 $10.55 $8.90 =========== ============ =========== CLASS C Net assets................................................ $ 2,100,267 $ 27,004,561 $ 2,260,091 ----------- ------------ ----------- Shares of beneficial interest outstanding................. 179,395 2,558,597 253,662 ----------- ------------ ----------- Net asset value and offering price per share**............ $11.71 $10.55 $8.91 =========== ============ =========== CLASS Y Net assets................................................ $ 4,118,133 -- -- ----------- ------------ ----------- Shares of beneficial interest outstanding................. 351,752 -- -- ----------- ------------ ----------- Net asset value, offering and redemption price per share................................................... $11.71 -- -- =========== ============ ===========
- ---------- * 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. 25 THE BEAR STEARNS FUNDS STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
INCOME HIGH YIELD TOTAL EMERGING MARKETS PORTFOLIO RETURN PORTFOLIO DEBT PORTFOLIO --------- ---------------- ---------------- INVESTMENT INCOME Interest.................................................. $ 416,240 $ 5,965,641 $ 2,048,791 Dividends................................................. -- 252,879 -- --------- ----------- ----------- 416,240 6,218,520 2,048,791 --------- ----------- ----------- EXPENSES Advisory fees............................................. 28,082 345,167 178,231 Transfer agent fees and expenses.......................... 69,332 60,390 49,906 Distribution and service fees - Class A................... 8,089 107,112 54,031 Distribution and service fees - Class B................... 8,454 129,431 8,693 Distribution and service fees - Class C................... 10,223 137,830 11,245 Accounting fees........................................... 48,047 67,950 47,264 Legal and auditing fees................................... 23,777 34,000 104,000 Administration fees....................................... 9,361 86,292 22,228 Federal and state registration fees....................... 26,665 32,650 25,618 Reports and notices to shareholders....................... 1,500 25,499 25,499 Custodian fees and expenses............................... 4,810 14,298 10,000 Amortization of organization expenses..................... 6,498 6,154 -- Trustees' fees and expenses............................... 1,610 2,399 7,499 Insurance expenses........................................ 2,910 3,192 3,080 Other..................................................... 676 4,550 2,739 --------- ----------- ----------- Total expenses before waivers and related reimbursements...................................... 250,034 1,056,914 550,033 Less: waivers and related reimbursements.............. (195,195) (309,348) (231,287) --------- ----------- ----------- Total expenses after waivers and related reimbursements...................................... 54,839 747,566 318,746 --------- ----------- ----------- Net investment income..................................... 361,401 5,470,954 1,730,045 --------- ----------- ----------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized gain/(loss) from: Investments............................................. (82,746) (2,962,688) (1,212,309) Foreign currency related transactions................... -- -- 31,324 Net change in unrealized depreciation on: Investments............................................. (377,074) (5,652,406) 83,335 Foreign currency related transactions................... -- -- (49,352) --------- ----------- ----------- Net realized and unrealized loss on investments........... (459,820) (8,615,094) (1,147,002) --------- ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................. $ (98,419) $(3,144,140) $ 583,043 ========= =========== ===========
The accompanying notes are an integral part of the financial statements. 26 THE BEAR STEARNS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
INCOME HIGH YIELD PORTFOLIO TOTAL RETURN PORTFOLIO ------------------------------------- ------------------------------------- FOR THE SIX FOR THE FOR THE SIX FOR THE MONTHS ENDED FISCAL YEAR MONTHS ENDED FISCAL YEAR SEPTEMBER 30, 1999 ENDED SEPTEMBER 30, 1999 ENDED (UNAUDITED) MARCH 31, 1999 (UNAUDITED) MARCH 31, 1999 ------------------- --------------- ------------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income......... $ 361,401 $ 664,607 $ 5,470,954 $ 6,662,512 Net realized gain/(loss) from investments and foreign currency related transactions, if any........ (82,746) 13,596 (2,962,688) (1,568,005) Net change in unrealized appreciation/(depreciation) on investments and foreign currency related transactions, if any........ (377,074) (96,146) (5,652,406) (6,079,729) ----------- ----------- ------------ ------------ Net increase/(decrease) in net assets resulting from operations.................. (98,419) 582,057 (3,144,140) (985,222) ----------- ----------- ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares.............. (136,060) (266,618) (3,011,758) (3,726,455) Class B shares.............. (44,227) (24,193) (1,190,269) (1,313,414) Class C shares.............. (53,511) (91,424) (1,265,677) (1,607,643) Class Y shares.............. (127,603) (282,372) -- -- ----------- ----------- ------------ ------------ (361,401) (664,607) (5,467,704) (6,647,512) ----------- ----------- ------------ ------------ Net realized capital gains Class A shares.............. -- (80,365) -- (192,941) Class B shares.............. -- (13,288) -- (86,843) Class C shares.............. -- (29,333) -- (103,478) Class Y shares.............. -- (69,012) -- -- ----------- ----------- ------------ ------------ -- (191,998) -- (383,262) ----------- ----------- ------------ ------------ SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares...................... 3,222,282 11,220,359 29,031,315 100,285,539 Cost of shares repurchased.... (2,106,070) (7,794,237) (12,578,002) (26,732,714) Shares issued in reinvestment of dividends................ 235,891 531,644 2,846,500 3,677,043 ----------- ----------- ------------ ------------ Net increase in net assets derived from shares of beneficial interest transactions................ 1,352,103 3,957,766 19,299,813 77,229,868 ----------- ----------- ------------ ------------ Total increase/(decrease) in net assets.................. 892,283 3,683,218 10,687,969 69,213,872 NET ASSETS Beginning of period........... 12,369,326 8,686,108 104,826,272 35,612,400 ----------- ----------- ------------ ------------ End of period*................ $13,261,609 $12,369,326 $115,514,241 $104,826,272 =========== =========== ============ ============ EMERGING MARKETS DEBT PORTFOLIO ------------------------------------- FOR THE SIX FOR THE MONTHS ENDED FISCAL YEAR SEPTEMBER 30, 1999 ENDED (UNAUDITED) MARCH 31, 1999 ------------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income......... $ 1,730,045 $ 3,820,573 Net realized gain/(loss) from investments and foreign currency related transactions, if any........ (1,180,985) (4,064,351) Net change in unrealized appreciation/(depreciation) on investments and foreign currency related transactions, if any........ 33,983 (5,363,799) ----------- ------------ Net increase/(decrease) in net assets resulting from operations.................. 583,043 (5,607,577) ----------- ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares.............. (1,608,542) (3,336,429) Class B shares.............. (84,295) (137,132) Class C shares.............. (109,843) (321,807) Class Y shares.............. -- -- ----------- ------------ (1,802,680) (3,795,368) ----------- ------------ Net realized capital gains Class A shares.............. -- (555,419) Class B shares.............. -- (27,661) Class C shares.............. -- (57,010) Class Y shares.............. -- -- ----------- ------------ -- (640,090) ----------- ------------ SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares...................... 5,137,492 16,138,678 Cost of shares repurchased.... (3,523,709) (14,152,454) Shares issued in reinvestment of dividends................ 1,049,379 2,875,768 ----------- ------------ Net increase in net assets derived from shares of beneficial interest transactions................ 2,663,162 4,861,992 ----------- ------------ Total increase/(decrease) in net assets.................. 1,443,525 (5,181,043) NET ASSETS Beginning of period........... 33,150,325 38,331,368 ----------- ------------ End of period*................ $34,593,850 $ 33,150,325 =========== ============
- --------- * High Yield Total Return Portfolio, includes undistributed net investment income of $18,250 and $15,000, respectively, for each period presented. Emerging Markets Debt Portfolio, includes undistributed net investment income of $5,673 and $78,308, respectively, for each period presented.
The accompanying notes are an integral part of the financial statements. 27 THE BEAR STEARNS FUNDS FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total invesment 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 DISTRIBUTIONS ASSET REALIZED AND DIVIDENDS FROM NET VALUE, NET UNREALIZED FROM NET REALIZED BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT CAPITAL OF PERIOD INCOME*(1) INVESTMENTS*(2) INCOME GAINS --------- ---------- --------------- ---------- ------------- INCOME PORTFOLIO CLASS A For the six months ended September 30, 1999 (unaudited)..... $12.15 $0.35 $(0.44) $(0.35) -- For the fiscal year ended March 31, 1999................. 12.37 0.74 (0.03) (0.74) $(0.19) For the fiscal year ended March 31, 1998................. 12.03 0.76 0.36 (0.76) (0.02) For the fiscal year ended March 31, 1997................. 12.26 0.73 (0.20) (0.73) (0.03) For the period April 5, 1995** through March 31, 1996................. 12.00 0.71 0.30 (0.71) (0.04) CLASS B For the six months ended September 30, 1999 (unaudited)..... 12.15 0.31 (0.44) (0.31) -- 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 six months ended September 30, 1999 (unaudited)..... 12.15 0.31 (0.44) (0.31) -- For the fiscal year ended March 31, 1999................. 12.37 0.65 (0.03) (0.65) (0.19) For the fiscal year ended March 31, 1998................. 12.03 0.70 0.36 (0.70) (0.02) For the fiscal year ended March 31, 1997................. 12.26 0.68 (0.20) (0.68) (0.03) For the period April 5, 1995** through March 31, 1996................. 12.00 0.67 0.30 (0.67) (0.04) CLASS Y For the six months ended September 30, 1999 (unaudited)..... 12.15 0.37 (0.44) (0.37) -- For the fiscal year ended March 31, 1999................. 12.37 0.78 (0.03) (0.78) (0.19) For the fiscal year ended March 31, 1998................. 12.03 0.80 0.36 (0.80) (0.02) For the fiscal year ended March 31, 1997................. 12.26 0.77 (0.20) (0.77) (0.03) For the period September 8, 1995*** through March 31, 1996................. 12.35 0.41 (0.05) (0.41) (0.04) HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A For the six months ended September 30, 1999 (unaudited)..... 11.36 0.54 (0.81) (0.54) -- 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 six months ended September 30, 1999 (unaudited)..... 11.36 0.51 (0.81) (0.51) -- 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 six months ended September 30, 1999 (unaudited)..... 11.36 0.51 (0.81) (0.51) -- 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) -- EMERGING MARKETS DEBT PORTFOLIO CLASS A For the six months ended September 30, 1999 (unaudited)..... 9.27 0.48 (0.30) (0.48) -- For the fiscal year ended March 31, 1999................. 12.00 1.05 (2.60) (1.01) (0.17) For the fiscal year ended March 31, 1998................. 11.14 0.91 1.17 (0.92) (0.30) For the fiscal year ended March 31, 1997................. 9.02 0.85 2.10 (0.83) -- For the fiscal year ended March 31, 1996................. 6.90 0.91 2.13 (0.92) -- For the fiscal year ended March 31, 1995................. 8.98 0.79 (1.85) (0.77) (0.25) For the period May 3, 1993** through March 31, 1994....... 9.55 0.66 (0.55) (0.65) (0.03) CLASS B For the six months ended September 30, 1999 (unaudited)..... 9.19 0.44 (0.29) (0.44) -- 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 six months ended September 30, 1999 (unaudited)..... 9.20 0.44 (0.29) (0.44) -- For the fiscal year ended March 31, 1999................. 11.95 0.98 (2.59) (0.97) (0.17) For the fiscal year ended March 31, 1998................. 11.14 0.97 1.04 (0.90) (0.30) For the fiscal year ended March 31, 1997................. 9.04 0.84 2.07 (0.81) -- For the period July 26, 1995*** through March 31, 1996................. 7.81 0.59 1.32 (0.68) --
- ---------- * Calculated based on shares outstanding on the first and last day of the respective periods, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. ** Commencement of investment operations. *** Commencement of initial public offering. (1) Reflects waivers and related reimbursments. The accompanying notes are an integral part of the financial statements. 28
NET NET RATIO OF RATIO OF NET INCREASE/(DECREASE) ASSET ASSETS, EXPENSES TO INVESTMENT REFLECTED IN EXPENSE RATIOS VALUE, TOTAL END OF AVERAGE INCOME TO AND NET INVESTMENT INCOME PORTFOLIO END OF INVESTMENT PERIOD NET AVERAGE DUE TO WAIVERS AND TURNOVER PERIOD RETURN(3) (000'S OMITTED) ASSETS (1) NET ASSETS (1) RELATED REIMBURSEMENTS RATE ------ ---------- --------------- ----------- -------------- --------------------------- --------- INCOME PORTFOLIO CLASS A For the six months ended September 30, 1999 (unaudited)..... $11.71 (0.75)% $ 4,857 0.80%(5) 5.88%(5) 3.13%(5) 47.75% 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 For the fiscal year ended March 31, 1997................. 12.03 4.40 3,367 0.80 5.99 1.73 262.95 For the period April 5, 1995** through March 31, 1996................. 12.26 8.54 4,467 0.80(5) 5.76(5) 2.87(5) 107.35 CLASS B For the six months ended September 30, 1999 (unaudited)..... 11.71 (1.07) 2,186 1.45(5) 5.20(5) 3.12(5) 47.75 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 six months ended September 30, 1999 (unaudited)..... 11.71 (1.06) 2,101 1.45(5) 5.22(5) 3.12(5) 47.75 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 For the fiscal year ended March 31, 1997................. 12.03 3.99 1,018 1.20 5.57 1.74 262.95 For the period April 5, 1995** through March 31, 1996................. 12.26 8.13 1,775 1.25(5) 5.38(5) 2.95(5) 107.35 CLASS Y For the six months ended September 30, 1999 (unaudited)..... 11.71 (0.57) 4,118 0.45(5) 6.25(5) 3.13(5) 47.75 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 For the fiscal year ended March 31, 1997................. 12.03 4.77 13,486 0.45 6.34 1.73 262.95 For the period September 8, 1995*** through March 31, 1996................. 12.26 2.92(4) 12,199 0.45(5) 5.93(4)(5) 2.89(4)(5) 107.35 HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A For the six months ended September 30, 1999 (unaudited)..... 10.55 (2.44) 61,731 1.00(5) 9.83(5) 0.54(5) 30.14 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 six months ended September 30, 1999 (unaudited)..... 10.55 (2.76) 26,779 1.65(5) 9.17(5) 0.54(5) 30.14 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 six months ended September 30, 1999 (unaudited)..... 10.55 (2.76) 27,004 1.65(5) 9.18(5) 0.54(5) 30.14 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 EMERGING MARKETS DEBT PORTFOLIO CLASS A For the six months ended September 30, 1999 (unaudited)..... 8.97 1.93 30,443 1.75(5) 10.00(5) 1.33(5) 35.14 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 For the fiscal year ended March 31, 1997................. 11.14 33.48 33,185 2.00 7.95 0.80 223.41 For the fiscal year ended March 31, 1996................. 9.02 46.13 28,860 2.00 10.64 1.18 266.46 For the fiscal year ended March 31, 1995................. 6.90 (13.07) 28,049 2.00 8.86 0.53 35.01 For the period May 3, 1993** through March 31, 1994....... 8.98 0.36 45,691 2.00(5) 7.24(5) 0.33(5) 100.85 CLASS B For the six months ended September 30, 1999 (unaudited)..... 8.90 1.68 1,891 2.40(5) 9.37(5) 1.38(5) 35.14 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 six months ended September 30, 1999 (unaudited)..... 8.91 1.69 2,260 2.40(5) 9.36(5) 1.33(5) 35.14 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 For the fiscal year ended March 31, 1997................. 11.14 32.97 2,583 2.40 7.59 0.64 223.41 For the period July 26, 1995*** through March 31, 1996................. 9.04 25.45(4) 202 2.40(5) 8.72(4)(5) 3.42(4)(5) 266.46
- ---------- (2) The amounts shown for a share outstanding throughout the respective periods are not in accord with the changes in the aggregate gains and losses on investments during the respective periods because of the timing of sales and repurchases of Portfolio shares in relation to fluctuating net assets values during the respective periods. For Emerging Markets Debt Portfolio net realized and unrealized gain/(loss) on investments include forward foreign currency exchange contracts and translation of foreign currency related transactions. (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 on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total investment return is not annualized. (4) The total investment return and ratios for a class of shares are not necessarily comparable to those of any other outstanding class of shares, due to timing differences in the commencement of the intial public offerings. (5) Annualized. 29 THE BEAR STEARNS FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO EMERGING MARKETS DEBT PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business trust on September 29, 1994 and is registered with the Securities and Exchange Commission (the "Commission") under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as an open-end management investment company. The Fund currently consists of eleven separate portfolios: seven diversified portfolios, Prime Money Market Portfolio, Large Cap Value Portfolio, Small Cap Value Portfolio, International Equity Portfolio, Balanced Portfolio, High Yield Total Return Portfolio ("High Yield Portfolio") and Income Portfolio, and four non-diversified portfolios, Emerging Markets Debt Portfolio ("Debt Portfolio"), The Insiders Select Fund, Focus List Portfolio and S&P STARS Portfolio. As of the date hereof, the Income Portfolio, High Yield Portfolio and Debt Portfolio (each a "Portfolio" and collectively, the "Portfolios") offer four classes of shares, which have been designated as Class A, B, C and Y shares. Class Y shares of the High Yield Portfolio and Debt Portfolio have yet to commence 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. At a Special Meeting of Shareholders held on April 29, 1999, the shareholders of the Bear Stearns Investment Trust (the "Trust") approved the reorganization and liquidation of the Trust on behalf of the Emerging Markets Debt Portfolio pursuant to the Agreement and Plan of Reorganization and Liquidation previously approved by the Board of Trustees. It provided for the transfer of the assets and liabilities of the Emerging Markets Debt Portfolio to a newly created separate series of the Fund with the same name and materially the same investment objective and policies as the Emerging Markets Debt Portfolio. Such transaction was effected on July 29, 1999. ORGANIZATIONAL MATTERS -- Prior to commencing investment operations on April 5, 1995 and January 2, 1998, the Income Portfolio and High Yield Portfolio, respectively, did not have any transactions other than those relating to organizational matters and the sale of shares of beneficial interest of the Income Portfolio and High Yield Portfolio to Bear, Stearns & Co. Inc. ("Bear Stearns" or the "Distributor") as follows:
PORTFOLIOS CLASS A CLASS B CLASS C - ---------------------------------------- ------------ ------------ ------------ Income Portfolio........................ 1,041 -- 1,041 High Yield Portfolio.................... 1 1 1
Costs of $76,571 and $56,234 which were incurred by the Income Portfolio and High Yield Portfolio, respectively, in connection with the organization of its shares, have been deferred and are being amortized using the straight-line method over the period of benefit not exceeding sixty months, beginning with the commencement of investment operations of each Portfolio. In the event that Bear Stearns or any transferee thereof redeems any of its original shares prior to the end of the sixty-month period, the proceeds of the redemption payable in respect of such shares shall be reduced by the pro rata share (based on the proportionate share of the original shares redeemed to the total number of original shares outstanding at the time of the redemption) of the unamortized deferred organization expenses as of the date of such redemption. In the event that any of the Portfolios are liquidated prior to the end of the sixty-month period, Bear Stearns or any transferee thereof shall bear the unamortized deferred organization expenses. 30 MANAGEMENT ESTIMATES -- The preparation of financial statements in accordance with generally accepted accounting principles 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 on each business day, with the exception of those days on which the New York Stock Exchange is closed. For the Income Portfolio and High Yield Portfolio, substantially all of the investments (including short-term investments) are valued at each business day by one or more independent pricing services (the "Service") approved by the Fund's Board of Trustees. Securities valued by the Service for which quoted bid prices in the judgment of the Service are readily available and are representative of the bid side of the market are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). The assets of the Debt Portfolio are generally not listed on security exchanges or traded on other regulated markets. Therefore, in the absence of reported sales prices on a valuation date, assets generally will be valued at the mean of the last bid and offer quotations. In the absence of reported bid and offer quotations on such valuation date, such assets will be valued from the broker bids of at least one market maker. Any assets which are denominated in a foreign currency are converted into U.S. dollars at the prevailing market rates for purposes of calculating net asset value. In the absence of current broker bids or if such broker bids are not indicative of the fair value for such assets by reason of the illiquidity of a particular security or investment, or other factors, the value of such assets will be recorded at their fair value determined in good faith by the Valuation Committee. In making this determination the Valuation Committee will follow procedures adopted by the Board of Trustees, such procedures are among other things, publicly available information regarding the issuer, market conditions and values ascribed to comparable companies. The amortized cost method of valuation is used with respect to debt obligations with 60 days or less remaining to maturity, unless this method does not represent fair value. Expenses and fees, including the respective investment advisory, administration and distribution fees, are accrued daily and taken into account for the purpose of determining the net asset value of each Portfolio's shares. Because of the differences in operating expenses incurred by each class, the per share net asset value of each class may differ. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME -- Investment transactions are recorded on the trade date (the date on which the order to buy or sell is executed). Realized gains and losses from security and foreign currency transactions are calculated on the identified cost basis. Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date. Discounts are treated as adjustments to interest income and identified costs of investments over the lives of the respective investments. The Portfolios' net investment income (other than distribution 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. 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 Statement 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 -- The Portfolios are permitted to enter into forward foreign currency exchange contracts solely for the purpose of protecting against adverse changes in foreign currency exchange rates. 31 The Portfolios may enter into contracts to purchase foreign currencies to protect against a rise in the U.S. dollar price of securities it has purchased pending final settlement, or it may enter into contracts to sell foreign currencies to protect against the decline in value of its non-dollar denominated securities due to a decline in the value of foreign currencies against the U.S. dollar. When a Portfolio enters into a forward foreign currency exchange contract to buy a foreign currency, it will place cash or readily marketable securities in a segregated account in an amount equal to the value of its total assets committed to the consummation of the forward contract. If the value of the securities placed in the segregated account declines, additional cash or securities will be placed in the account so that the value of the account will equal the amount of the Portfolio's commitment with respect to the contract. Investors should be aware that the forward currency market for the purchase of U.S. dollars in many emerging countries is not highly developed and that in certain emerging countries no forward market for foreign currencies currently exists or that such market may be closed to investment by each Portfolio. The Portfolios had no open forward foreign currency exchange contracts at September 30, 1999, except for the Debt Portfolio, which had the following open contract:
DELIVERY VALUE SETTLEMENT CURRENCY (LOCAL CURRENCY) DATE COMMITMENT - -------------------------------------------------------------------- -------------------- ------------- --------------- SALE: European Euro....................................................... 786,000 10/15/99 $ 819,326 UNREALIZED CURRENCY VALUE LOSS - -------------------------------------------------------------------- ------------- ------------- SALE: European Euro....................................................... $ 837,078 $ (17,752) ===========
U.S. FEDERAL TAX STATUS -- Each Portfolio intends to distribute substantially all of its taxable income and to comply with the other requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required. In addition, by distributing during each calendar year substantially all of its ordinary income and capital gains, if any, each Portfolio intends not to be subject to a U.S. federal excise tax. At March 31, 1999, the High Yield Portfolio and Debt Portfolio had capital loss carryforwards of $175,885 and $780,615, respectively, available as a reduction to the extent provided in regulations of any future net capital gains realized before the end of fiscal year 2007. 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. For U.S. federal income tax purposes, net realized capital losses incurred after October 31, 1998, within the prior fiscal year are deemed to arise on the first day of the current fiscal year. The Income Portfolio, High Yield Portfolio and Debt Portfolio incurred and elected to defer net realized losses of $8,565, $1,393,045 and $2,952,624, respectively. DIVIDENDS AND DISTRIBUTIONS -- The Portfolios declare dividends from net investment income on each day the New York Stock Exchange is open for business. These dividends are paid usually on or about the twentieth day of each month. Distribution of net realized gains, if any, will be declared and paid at least annually by each Portfolio. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within capital accounts based on their U.S. federal tax-basis treatment; temporary differences do not require reclassification. FOREIGN WITHHOLDING TAXES -- Income received from sources outside of the United States may be subject to withholding and other taxes imposed by countries other than the United States. OTHER -- Securities denominated in currencies other than U.S. dollars are subject to changes in value due to fluctuations in exchange rates. Some countries in which the Portfolios invest require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if there is a deterioration in a country's balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad. The securities exchanges of certain foreign markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. 32 TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES For the six months ended September 30, 1999, Bear Stearns Asset Management Inc. ("BSAM" or the "Adviser"), a wholly-owned subsidiary of The Bear Stearns Companies Inc., served as investment adviser pursuant to an Investment Advisory Agreement with respect to each Portfolio. Under the terms of the Investment Advisory Agreement, the Income Portfolio and High Yield Portfolio has 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 Debt 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 six months ended September 30, 1999, 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. Under the terms of an Administrative Services Agreement with the Portfolios, PFPC provides certain accounting and administrative services to each Portfolio. For providing these services, PFPC is entitled to receive from the Portfolios a monthly fee equal to an annual rate of 0.10% of each Portfolio's average daily net assets up to $200 million, 0.075% of the next $200 million, 0.05% of the next $200 million and 0.03% of the net assets above $600 million, subject to a minimum annual fee of $138,000 for each Portfolio. For the six months ended September 30, 1999, BSAM voluntarily undertook to limit each Portfolio's total operating expenses 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 - ----------------------------------------------------------------------------- ------------------- ------------------- Income Portfolio............................................................. 0.80% 1.45% High Yield Portfolio......................................................... 1.00 1.65 Debt Portfolio............................................................... 1.75 2.40 PORTFOLIO CLASS C SHARES CLASS Y SHARES - ----------------------------------------------------------------------------- ------------------- ------------------- Income Portfolio............................................................. 1.45% 0.45% High Yield Portfolio......................................................... 1.65 0.65 Debt Portfolio............................................................... 2.40 1.40
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 six months ended September 30, 1999, the advisory fee waivers and reimbursements of expenses (in order to maintain the voluntary expense limitation) were as follows:
PORTFOLIO ADVISORY WAIVERS - -------------------------------------------------------------------------------------------------------- -------------------- Income Portfolio........................................................................................ $ 28,082 High Yield Portfolio.................................................................................... 309,348 Debt Portfolio.......................................................................................... 126,930 PORTFOLIO EXPENSE REIMBURSEMENTS - -------------------------------------------------------------------------------------------------------- -------------------------- Income Portfolio........................................................................................ $ 167,113 High Yield Portfolio.................................................................................... -- Debt Portfolio.......................................................................................... 104,357
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 and BSFM, serves as custodian to the Income Portfolio and High Yield Portfolio. DISTRIBUTION PLAN AND SHAREHOLDER SERVICING PLAN The Fund, on behalf of the Portfolios, has entered into a Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act. Under the Distribution Plan, the Portfolios 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 the Portfolios paid 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 six months ended September 30, 1999, Bear Stearns earned $16,318, $231,050 and $30,389 for the Income Portfolio, High Yield Portfolio and Debt Portfolio, respectively, in distribution fees. The fees paid to Bear Stearns under the Distribution Plan are payable without regard to actual expenses 33 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 $10,448, $143,323 and $43,580 for the Income Portfolio, High Yield Portfolio and Debt Portfolio, respectively, in shareholder servicing fees. Bear Stearns pays broker/ dealers and other financial institutions whose clients hold Portfolio shares primarily for shareholder liaison and other account maintenance services. 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. Effective December 24, 1997, the Distributor has increased the reallowance to all authorized dealers on net asset value transfers from 1.00% to 1.25%. 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 six months ended September 30, 1999, Bear Stearns has advised each Portfolio that it received approximately $12,400, $143,600 and $34,100 in front-end sales charges resulting from sales of Class A shares of the Income Portfolio, High Yield Portfolio and Debt 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 Debt Portfolio that during the six months ended September 30, 1999, it received approximately $300 from the High Yield Portfolio in contingent deferred sales charges ("CDSC") upon certain redemptions by Class A shareholders, approximately $3,400, $52,400 and $3,300 from each Portfolio, respectively, in CDSC upon certain redemptions by Class B shareholders and approximately $200, $9,000 and $40 from each Portfolio, respectively, in CDSC upon certain redemptions by Class C shareholders. INVESTMENTS IN SECURITIES For U.S. federal income tax purposes, the cost of securities owned at September 30, 1999, were $13,894,278, $124,563,441 and $36,495,762 for the Income Portfolio, High Yield Portfolio and Debt Portfolio, respectively. Accordingly, the net unrealized depreciation on investments for each Portfolio were as follows:
GROSS GROSS NET PORTFOLIO APPRECIATION DEPRECIATION DEPRECIATION - ------------------------------ ------------ ------------ ------------------ Income Portfolio.............. $ 18,252 $(510,735) $ (492,483) High Yield Portfolio.......... 512,550 (11,684,828) (11,172,278) Debt Portfolio................ 737,411 (3,598,359) (2,860,948)
For the six months ended September 30, 1999, aggregate purchases and sales of investment securities (excluding short-term investments) for each Portfolio were as follows:
PORTFOLIO PURCHASES SALES - ------------------------------ ----------- ----------- Income Portfolio.............. $ 7,145,964 $ 5,837,832 High Yield Portfolio.......... 49,420,344 32,182,830 Debt Portfolio................ 14,676,844 11,430,206
SHARES OF BENEFICIAL INTEREST Each Portfolio offers Class A, B, C and Y shares. Class A shares are sold with a front-end sales charge of up to 4.50% for each Portfolio. Class B shares are sold with a CDSC of up to 5.00% within six years of purchase. Class C shares are sold with a CDSC of 1.00% within the first year of purchase. There is no sales charge or CDSC on Class Y shares, which are offered primarily to institutional investors. At September 30, 1999, there was an unlimited amount of $0.001 par value shares of beneficial interest authorized for each Portfolio, of which Bear Stearns owned 1,168 of Class A shares and 1,156 Class C shares of the Income Portfolio and 1 each 34 of Class A, B and C shares of the High Yield Portfolio. The Income Portfolio's shares owned by Bear Stearns include 127 Class A shares and 115 Class C shares which were acquired through dividend reinvestment. Transactions in shares of beneficial interest for each Portfolio were as follows:
INCOME PORTFOLIO HIGH YIELD PORTFOLIO DEBT PORTFOLIO -------------------------------- --------------------------------------- ------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ---------- ---------- -------- ------------ ------------ ----------- ----------- ----------- ----------- CLASS A FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 Shares....... 103,118 87,292 6,000 1,372,996 542,141 143,068 450,582 344,437 99,572 Value........ $1,216,872 $1,028,197 $71,289 $ 15,361,093 $ 5,982,524 $1,580,463 $ 4,198,016 $ 3,112,659 $ 909,559 FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares....... 652,813 512,338 16,075 4,591,690 1,328,105 173,523 1,353,990 1,217,322 262,381 Value........ $8,140,024 $6,375,966 $199,578 $ 55,352,368 $ 15,720,812 $2,039,096 $13,884,104 $11,562,827 $ 2,415,066 CLASS B FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 Shares....... 101,726 10,174 2,851 654,673 230,183 53,594 57,953 9,669 5,455 Value........ $1,204,796 $ 120,392 $33,728 $ 7,289,672 $ 2,515,343 $ 591,977 $ 533,213 $ 86,322 $ 49,421 FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares....... 95,133 6,176 1,917 1,698,449 172,814 61,079 134,300 36,459 13,490 Value........ $1,180,901 $ 75,940 $23,739 $ 20,280,591 $ 2,036,035 $ 709,943 $ 1,458,377 $ 329,735 $ 119,962 CLASS C FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 Shares....... 39,133 33,262 3,363 573,565 371,257 60,949 44,412 35,960 9,966 Value........ $ 465,604 $ 395,527 $39,909 $ 6,380,550 $ 4,080,135 $ 674,060 $ 406,263 $ 324,728 $ 90,399 FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares....... 125,661 76,187 7,293 2,098,034 769,764 79,488 77,215 240,138 37,052 Value........ $1,564,198 $ 942,593 $90,493 $ 24,652,580 $ 8,975,867 $ 928,004 $ 796,197 $ 2,259,892 $ 340,740 CLASS Y* FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 Shares....... 28,532 47,172 7,661 -- -- -- -- -- -- Value........ $ 335,010 $ 561,954 $90,965 -- -- -- -- -- -- FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares....... 27,127 32,617 17,555 -- -- -- -- -- -- Value........ $ 335,236 $ 399,738 $217,834 -- -- -- -- -- --
- ---------- * Class Y shares have yet to commence its initial public offering for the High Yield Portfolio and Debt Portfolio. CREDIT AGREEMENT The Fund, on behalf of each Portfolio, had entered into a credit agreement with BankBoston, N.A. Small Cap Value Portfolio, Large Cap Value Portfolio, The Insiders Select Fund, S&P STARS Portfolio, Prime Money Market Portfolio, Balanced Portfolio, International Equity Portfolio and Focus List Portfolio were also parties to the credit agreement. This agreement provided that each party to the credit agreement was permitted to borrow in an amount equal to the lesser of $25 million or 25% of the net assets of a Portfolio. At no time did the aggregate outstanding principal amount of all loans to any of the Portfolios exceed $25 million. Each Portfolio as a fundamental policy was permitted to borrow in an amount up to 33 1/3% of the value of such Portfolio's assets. However, each Portfolio intended to borrow money only for temporary or emergency (not leveraging) purposes in an amount up to 15% of its net assets. The line of credit bore interest at the greater of: (i) the annual rate of interest announced from time to time from the bank at its head office as its Base Rate, or (ii) the Federal Funds Effective Rate plus 0.50%, or at the borrower's option, the rate quoted by BankBoston, N.A. Such agreement terminated on September 30, 1999. Effective October 1, 1999, the Fund entered into a demand promissory note arrangement with The Chase Manhattan Bank (the "Bank") to provide an uncommitted credit facility to the Fund (on behalf of the Portfolios). 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. 35 Each loan is payable on demand or upon termination of this credit agreement or, for money market loans, on the last day of the interest period and, in any event, not later than 14 days from the date the loan was advanced. Amounts outstanding under the line of credit agreement during the six months ended September 30, 1999, were as follows:
MAXIMUM AVERAGE LOAN AVERAGE LOAN AMOUNTS INTEREST PORTFOLIO BALANCE OUTSTANDING RATE - ------------------------------ -------- ----------- -------- Income Portfolio.............. $ 1,672 $ 50,000 7.73% High Yield Portfolio.......... 14,797 616,000 7.31
The Portfolios had no amounts outstanding under the line of credit agreement at September 30, 1999. The Debt Portfolio had no amounts outstanding under the line of credit agreement during the six months ended September 30, 1999. 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 -- DEBT PORTFOLIO Investments in emerging markets debt involve special risks. The issuer of the debt of the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and the Debt 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 Debt 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 Debt 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 United States. Securities denominated in currencies other than U.S. dollars are subject to changes in value due to fluctuations in exchange rates. In addition, forward contracts are subject to the risk that the counterparty to the contract will default on its obligations. A default on the contract would deprive the Debt Portfolio of unrealized profits, the benefits of a currency hedge, increase transaction costs or force the Debt Portfolio to cover its purchase or sale commitments, if any, at the current market price. The Debt Portfolio will not enter into such transactions unless the credit quality of the unsecured senior debt or the claims-paying ability of the counterparty is considered to be investment grade by BSAM. 36 THE BEAR STEARNS FUNDS EMERGING MARKETS DEBT PORTFOLIO RESULTS OF SPECIAL MEETING OF SHAREHOLDERS -- (UNAUDITED) On April 29, 1999, a special meeting of the shareholders of the Emerging Markets Debt Portfolio (the "Debt Portfolio"), a separate non-diversified portfolio of Bear Stearns Investment Trust (the "Trust"), was held and the following matter was voted upon: (1) Vote on a proposal approving or disapproving an Agreement and Plan of Reorganization and Liquidation (the "Plan") and the transactions contemplated in the Plan to reorganize the Debt Portfolio into Emerging Markets Debt Portfolio ("New Portfolio"), a newly created series of The Bear Stearns Funds ("BSF") and to subsequently dissolve the Trust. A vote to approve the Plan would also authorize the Debt Portfolio to approve an Investment Advisory Agreement between Bear Stearns Asset Management Inc. and BSF on behalf of the New Portfolio.
FOR AGAINST ABSTAIN NON-VOTES --------- -------- -------- --------- 2,003,045 24,694 31,494 1,747,561
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