SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form l0-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal
year ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the
transition period from _____ to _____
Commission file number 33-26824
Bear Stearns Secured Investors Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3402173
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1601 Elm Street, Dallas, Texas 75201
(2l4) 754-8300
----------------------------------------
(Address, Including Zip Code, and Telephone Number,
Including Area Code of Registrant's Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None -
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of September 3, 1996.
100 shares of Common Stock, par value $.01 per share
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(a) AND
(b) OF FORM 10-K AND THEREFORE IS FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT CONTEMPLATED THEREBY.
<PAGE>
PART I
ITEM 1 - BUSINESS
--------
Bear Stearns Secured Investors Inc. (the "Company") was organized by,
and is a direct wholly-owned limited purpose finance subsidiary of The
Bear Stearns Companies Inc. (the "Parent"). The Company was
incorporated in the State of Delaware on November 26, 1986.
The Company was formed solely for the purpose of purchasing or
acquiring mortgage-backed securities, whole residential or commercial
mortgage loans or participations therein, and issuing and selling one
or more series of Collateralized Mortgage Obligations ("CMO's")
directly or through one or more trusts established by it. In
connection therewith, the Company is authorized to acquire, own, hold,
and pledge the various instruments collateralizing the CMO's.
Each series of CMO's is collateralized by "fully modified
pass-through" mortgage-backed certificates ("GNMA Certificates")
guaranteed as to the full and timely payment of principal and interest
by the Government National Mortgage Association, which guaranty is
backed by the full faith and credit of the United States Government;
by guaranteed mortgage pass-through certificates ("FNMA Certificates")
issued and guaranteed as to the full and timely payment of principal
and interest by the Federal National Mortgage Association; by mortgage
participation certificates ("FHLMC Certificates") issued and
guaranteed as to timely payment of interest and ultimate payment of
principal by the Federal Home Loan Mortgage Corporation (GNMA, FNMA
and FHLMC Certificates are hereinafter referred to collectively as the
"Certificates"); or by whole residential or commercial mortgage loans
or participations therein.
Distributions of principal of and interest on the Certificates pledged
as collateral and, in some cases, the reinvestment income, thereon,
are used to pay the debt service on the CMO's and administrative
expenses. In connection with the issuance and sale of each series, it
is the Company's intention to sell its beneficial interest in the
residual cash flow remaining after the payment of debt service and
administrative expenses, with the objective of ultimately divesting
itself of all ownership interest in the underlying collateral.
The Certificates are acquired by the Company from Bear, Stearns & Co.
Inc. ("Bear Stearns"), an affiliate of the Company, simultaneously
with the issuance and sale of the CMO's. The Company issues each
series of CMO's through Bear Stearns acting as the principal
underwriter in underwritten public offerings. The net proceeds from
the offering of each series of CMO's are used to purchase the
Certificates collateralizing the CMO's.
In connection with the Company's activities in the origination and
issuance of CMO's, the Company derives revenue in its capacity as
administrator of various CMO issues during the outstanding life of the
CMO transactions which it originated, pursuant to subservicing
agreements with Bear Stearns.
ITEM 2 - PROPERTIES
----------
The Company owns no physical properties.
ITEM 3 - LEGAL PROCEEDINGS
-----------------
The Company has been served with a lawsuit filed in the United States
District Court for the Southern District of New York. Plaintiff
alleges that two Mortgage Pass-Through Certificates it purchased in
1993 were unsuitable for their account and that the risks associated
with their purchase were not adequately disclosed. The lawsuit was
settled and voluntarily dismissed with prejudice, pursuant to an Order
of the Court, dated May 30, 1995.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Pursuant to General Instruction J of Form 10-K, the information
required by Item 4 is omitted.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------
There is no established public trading market for the common equity
of the Company. All of the issued and outstanding shares of such
common equity are owned by the Parent.
ITEM 6 - SELECTED FINANCIAL DATA
-----------------------
Pursuant to General Instruction J of Form 10-K, the information
required by Item 6 is omitted.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Net loss for the fiscal year ended June 30, 1996 was $1,504, as
compared with net income of $30,916 for the fiscal year ended June
30, 1995. Net loss for the fiscal year ended June 30, 1996 is the
result of operating expenses, while net income for the prior year
reflects other income. The Company did not issue any CMO's during the
fiscal year ended June 30, 1996 and 1995 due to unfavorable market
conditions.
On March 16, 1995 the Board of Directors declared an $8,500,000 cash
dividend on the Company's Common Stock which was paid to its sole
shareholder, The Bear Stearns Companies Inc., on March 27, 1995.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements required by this Item and included in this
Report are listed in the index appearing on page F-1.
<PAGE>
PART II
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Pursuant to General Instruction J of Form 10-K, the information
required by Item 10 is omitted.
ITEM 11 - EXECUTIVE COMPENSATION
----------------------
Pursuant to General Instruction J of Form 10-K, the information
required by Item 11 is omitted.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Pursuant to General Instruction J of Form 10-K, the information
required by Item 12 is omitted.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction J of Form 10-K, the information
required by Item 13 is omitted.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) List of Financial Statements, Financial Statement Schedules and
Exhibits.
Financial Statements
--------------------
The financial statements required to be filed hereunder are
listed on Page F-1 hereof.
Financial Statement Schedules
-----------------------------
The Financial Statement Schedules required to be filed hereunder
are listed on Page F-1 hereof.
Exhibits
--------
3. Articles of Incorporation and by-laws, incorporated by
reference to Exhibits 3.1 and 3.2, respectively, to Registration
Statement on Form S-11 (No. 33-17021).
4. Instruments defining the rights of security holders, including
indentures:
(a) Indenture dated as of November 30, 1987 between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(a)
to Post-Effective Amendment No. 4 to Registration Statement
on Form S-11 (No. 33-10524).
(b) Series 1987-4 Supplement dated as of December 30, 1987
to the Indenture dated as of November 30, 1987 between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(c)
to Post-Effective Amendment No. 5 to Registration Statement
on Form S-11 (No. 33-10524).
(c) Series 1987-5 Supplement dated as of January 27, 1988 to
the Indenture dated as of November 30, 1987 between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(d)
to Post-Effective Amendment No. 6 to Registration Statement
on Form S-11 (No. 33-10524).
(d) Series 1988-1 Supplement dated as of February 23, 1988
to the Indenture dated as of November 30, 1987 between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(e)
to Post-Effective Amendment No. 4 to Registration Statement
on Form S-11 (No. 33-17021).
(e) Series 1988-2 Supplement dated as of March 29, 1988 to
the Indenture dated as of November 30, 1987 between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(f)
to Post-Effective Amendment No. 5 to Registration Statement
on Form S-11 (No. 33-17021).
(f) Series 1988-2 Supplement dated as of March 29, 1988, as
amended and restated as of April 5, 1988, to the Indenture
dated as of November 30, 1987 between Bear Stearns Secured
Investors Inc. and State Street Bank and Trust Company,
incorporated by reference to Exhibit 4.3(g) to
Post-Effective Amendment No. 6 to Registration Statement on
Form S-11 (No. 33-17021).
(g) Series 1988-3 Supplement dated as of April 27, 1988 to
the Indenture dated as of November 30, 1987 between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(h)
to Post-Effective Amendment No. 7 to Registration Statement
on Form S-11 (No. 33-17021).
(h) Series 1988-4 Supplement dated as of October 27, 1988 to
the Indenture dated as of November 30, 1987 between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(i)
to Post-Effective Amendment No. 8 to Registration Statement
on Form S-11 (No. 33-17021).
(i) Series 1988-6 Supplement dated as of November 22, 1988
to the Indenture dated as of November 30, 1987 between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(1)
to Post-Effective Amendment No. 11 to Registration Statement
on Form S-11 (No. 33-17021).
(j) Series 1988-7 Supplement dated as of November 29, 1988
to the Indenture dated as of November 30, 1987 between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(m)
to Post-Effective Amendment No. 12 to Registration Statement
on Form S-11 (No. 33-17021).
(k) Series 1988-8 Supplement dated as of November 21, 1988
to the Indenture dated as of November 30, 1987 between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(k)
to Post-Effective Amendment No. 10 to Registration Statement
on Form S-11 (No. 33-17021).
(l) Series 1989-3 Supplement dated as of February 16, 1989,
to the Indenture dated as of November 30, 1987, between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(b)
to Post-Effective Amendment No. 2 to Registration Statement
on Form S-11 (No. 33-25464).
(m) Series 1991-1 Series Supplement dated as of July 29,
1991, between Bear Stearns Secured Investors Inc. and Texas
Commerce Bank National Association, to the Indenture dated
as of November 30, 1987, between Bear Stearns Secured
Investors Inc. and State Street Bank and Trust Company,
incorporated by reference to Exhibit 4.3(k) to
Post-Effective Amendment No. 3 to Registration Statement on
Form S-11 (No. 33-26824).
(n) Series 1991-2 Series Supplement dated as of December 30,
1991, between Bear Stearns Secured Investors Inc. and Texas
Commerce Bank National Association, to the Indenture dated
as of November 30, 1987, between Bear Stearns Secured
Investors Inc. and State Street Bank and Trust Company,
incorporated by reference to Exhibit 4.3(k) to
Post-Effective Amendment No. 4 to Registration Statement on
Form S-11 (No 33-26824)
(o) Series 1992-1 Series Supplement dated as of January 30,
1992, between Bear Stearns Secured Investors Inc. and Texas
Commerce Bank National Association, to the Indenture dated
as of November 30, 1987, between Bear Stearns Secured
Investors Inc. and State Street Bank and Trust Company,
incorporated by reference to Exhibit 4.3(k) to
Post-Effective Amendment No. 5 to Registration Statement on
Form S-11 (No 33-26824)
(p) Series 1992-2 Supplement dated as of July 30, 1992, to
the Indenture dated as of November 30, 1987, between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3 (a)
to Post-Effective Amendment No. 6 to Registration Statement
on Form S-11 (No. 33 -26824).
(q) Series 1993-1 Supplement dated as of June 18, 1993, to
the Indenture dated as of November 30, 1987, between Bear
Stearns Secured Investors Inc. and State Street Bank and
Trust Company, incorporated by reference to Exhibit 4.3(a)
to Post-Effective Amendment No. 7 to Registration Statement
on Form S-11 (No. 33-26824).
(r) Series 1993-2 Supplement dated as of June 30, 1993, to
the Indenture dated as of November 30, 1987, between Bear
Stearns Secured Investors Trust 1993-2 and State Street Bank
and Trust Company, incorporated by reference to Exhibit 4.3
(a) to Post-Effective Amendment No. 2 to Registration
Statement on Form S-11 (No. 33-48313).
(s) Series 1993-3 Supplement dated as of July 30, 1993, to
the Indenture dated as of November 30, 1987, between Bear
Stearns Secured Investors Trust 1993-3 and State Street Bank
and Trust Company, incorporated by reference to Exhibit
4.3(a) to Post-Effective Amendment No. 3 to Registration
Statement on Form S-11 (No. 33-48313).
(t) Series 1993-4 Supplement dated as of August 31, 1993, to
the Indenture dated as of November 30, 1987, between Bear
Stearns Secured Investors Trust 1993-4 and State Street Bank
and Trust Company, incorporated by reference to Exhibit
4.3(a) to Post-Effective Amendment No. 4 to Registration
Statement on Form S-11 (No. 33-48313).
(u) Series 1993-5 Supplement dated as of September 3, 1993,
to the Indenture dated as of November 30, 1987, between Bear
Stearns Secured Investors Trust 1993-5 and State Street Bank
and Trust Company, incorporated by reference to Exhibit
4.3(a) to Post-Effective Amendment No. 5 to Registration
Statement on Form S-11 (No. 33-48313).
(v) Series 1993-6 Supplement dated as of November 1, 1993,
to the Indenture dated as of November 30, 1987, between Bear
Stearns Secured Investors Trust 1993-6 and State Street Bank
and Trust Company, incorporated by reference to Exhibit
4.3(a) to Post-Effective Amendment No. 6 to Registration
Statement on Form S-11 (No. 33-48313).
(w) Series 1993-6 Supplement dated as of November 1, 1993,
to the Indenture dated as of November 30, 1987, between Bear
Stearns Secured Investors Trust 1993-6 and State Street Bank
and Trust Company, incorporated by reference to Exhibit
4.3(a) to Post-Effective Amendment No. 7 to Registration
Statement on Form S-11 (No. 33-48313).
(x) Series 1993-8 Supplement dated as of December 1, 1993,
to the Indenture dated as of November 30, 1987, between Bear
Stearns Secured Investors Trust 1993-8 and State Street Bank
and Trust Company, incorporated by reference to Exhibit
4.3(a) to Post-Effective Amendment No. 8 to Registration
Statement on Form S-11 (No. 33-48313).
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the fiscal
year ended June 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the
25th day of September, 1996.
Bear Stearns Secured Investors Inc.
(Registrant)
By: /s/ William J. Montgoris
Secretary and Treasury and Principal
Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 25th day of September,
1996.
Signatures Title
/s/ Warren J. Spector President and Chief Operating
Warren J. Spector Officer; Director
/s/ William J. Montgoris Secretary and Treasurer
William J. Montgoris (Principal Financial and
Accounting Officer)
<PAGE>
Page F-1
BEAR STEARNS SECURED INVESTORS INC.
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-2
Statements of Financial Condition as of June 30, 1996 and 1995 F-3
Statements of Operation the fiscal years ended
June 30, 1996, 1995 and 1994 F-4
Statements of Changes in Stockholder's Equity for the fiscal
years ended June 30, 1996, 1995 and 1994 F-5
Statements of Cash Flows for the fiscal years ended
June 30, 1996, 1995 and 1994 F-6
Notes to Financial Statements F-7
Financial Statement Schedules are omitted because they are inapplicable or
the information is included in the financial statements or notes thereto.
<PAGE>
Page F-2
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder,
Bear Stearns Secured Investors Inc.:
We have audited the accompanying statements of financial condition of Bear
Stearns Secured Investors Inc. (a wholly owned subsidiary of The Bear Stearns
Companies Inc.) as of June 30, 1996 and 1995, and the related statements of
income, cash flows, and changes in stockholder's equity for each of the three
years in the period ended June 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Bear Stearns Secured Investors Inc. at June
30, 1996 and 1995, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 1996 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
September 20, 1996
<PAGE>
<TABLE>
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF FINANCIAL CONDITION
Page F-3
<CAPTION>
June 30, June 30,
1996 1995
ASSETS
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,000 $ 1,000
Receivable from affiliates 16,176,822 16,176,822
Deferred organization costs 711,514 711,514
----------- -----------
Total Assets $16,889,336 $16,889,336
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Payable to Parent $16,557,387 $16,555,897
Other liabilities 164,330 164,316
----------- -----------
Total Liabilities 16,721,717 16,720,213
----------- -----------
Stockholder's Equity
Common stock, $.01 par value;
1,000 shares authorized;
100 shares outstanding 1 1
Paid-in capital 999 999
Retained earnings 166,619 168,123
----------- -----------
Total Stockholder's Equity 167,619 169,123
----------- -----------
Total Liabilities and
Stockholder's Equity $16,889,336 $16,889,336
=========== ===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Page F-4
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF OPERATIONS
<CAPTION>
Fiscal Year Ended
June 30, June 30, June 30,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues
Principal Transactions $ -- $ 56,588 $13,713,920
Management fees -- 6,057 12,779
------- --------- -----------
Total revenues -- 62,645 13,726,699
------- --------- -----------
Expenses
Other expenses 2,734 7,533 17,978
-------- --------- -----------
Total expenses 2,734 7,533 17,978
-------- --------- -----------
(Loss) income (benefit) before
provision for income taxes (2,734) 55,112 13,707,721
(Benefit) provision for income taxes (1,230) 24,196 6,045,172
-------- -------- -----------
Net (loss) income $(1,504) $ 30,916 $ 7,663,549
======= ======== ===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Page F-5
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<CAPTION>
Common Stock Paid-in Retained
$.01 Par Capital Earnings
Value
<S> <C> <C> <C>
Balance, June 30, 1994 $ 1 $999 $ 8,637,207
Net income 30,916
Dividend declared (8,500,000)
------ ----- ------------
Balance, June 30, 1995 1 999 168,123
Net loss (1,504)
------ ----- ------------
Balance, June 30, 1996 $ 1 $999 $ 166,619
====== ===== ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Page F-6
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Fiscal Year Ended
-----------------------------
June 30, June 30, June 30,
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)/income $ (1,504) $ 30,916 $ 7,663,549
(Increases) decrease in:
Receivable from Parent 348,834
Receivable from affiliates (168,500) 14,846,805)
Deferred organization costs (395,242)
(Decreases) increases in:
Income taxes payable (318,520) 169,015
Payable to Parent 1,490 8,851,303 7,704,594
Other liabilities 14 104,801 (643,945)
------- ------------ ------------
Cash provided by operating activities - 8,500,000 -
------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid - (8,500,000) -
------- ------------ ------------
Cash used in financing activities - (8,500,000) -
------- ------------ ------------
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 1,000 1,000 1,000
------- ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,000 $ 1,000 $ 1,000
======= ============ ============
See notes to financial statements.
</TABLE>
<PAGE>
Page F-7
BEAR STEARNS SECURED INVESTORS INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization
Bear Stearns Secured Investors Inc. (the "Company") a direct
wholly-owned limited purpose finance subsidiary of The Bear Stearns
Companies Inc. (the "Parent") was organized on November 26, 1986 as a
Delaware corporation. The Company's sole purpose is to issue and sell
one or more series of collateralized mortgage obligations ("CMO's")
directly or through one or more trusts established by it. In
connection therewith, the Company provides management and
administrative services after the issuance of each CMO issued.
The Company's activities are limited to issuing CMO's that will be
collateralized by mortgage-backed certificates, whole residential or
commercial mortgage loans or participations therein, and, in
connection therewith, acquiring, owning, holding and pledging
mortgage-backed certificates, whole loans or commercial mortgage
loans.
Note 2. Summary of Significant Accounting Policies
The financial statements are prepared in conformity with
generally accepted accounting principles which require management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual
results could differ from those estimates.
The Company's policy is to record the securitization and issuance of
CMO's and the related sale of all of its remaining beneficial
ownership interest in the residual cash flow attributable to each
series of CMO's as a sale of assets. The resultant gain or loss
reflects the net proceeds from the CMO issuance and the sale of the
beneficial ownership interest less the cost of the underlying
collateral and is reflected as principal transaction revenues.
Deferred organization costs associated with the issuance of the CMO's
are prepaid issue expenses which are included as a component of the
gain or loss upon the sale of the CMO's.
The Company's policy is to sell all of its beneficial ownership
interest in each CMO series issued directly or through one or more
trusts established by it. Accordingly, as the Company no longer
retains an economic interest in the underlying collateral, the assets
and liabilities related to each CMO series are not reflected on the
Company's Statement of Financial Condition.
Management fee income received for the management and administration
of the various CMO issues is recognized into income when earned.
The Company is included in the consolidated federal income tax return
of the Parent. Income tax expense is computed on a separate company
basis. The Company accounts for income taxes under the provision of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"). Under SFAS 109,
<PAGE>
Page F-8
BEAR STEARNS SECURED INVESTORS INC.
NOTES TO FINANCIAL STATEMENTS
Note 2. Summary of Significant Accounting Policies (continued)
deferred income taxes are provided based upon the net tax effects of
temporary differences between the financial reporting and tax bases of
assets and liabilities. In addition, deferred income taxes are
determined using the enacted tax rates and laws which will be in
effect when the related temporary differences are expected to be
reversed.
For purposes of reporting cash flows, the Company has defined cash
equivalents as liquid investments not held for sale in the ordinary
course of business.
Note 3. Collateralized Mortgage Obligations
During the fiscal year ended June 30, 1996 and 1995 the Company did
not issue any CMO's.
Note 4. Income Taxes
The difference between the Company's effective tax rate and the
statutory federal income tax rate is the effect of state and local
income taxes.
Note 5. Related Party Transactions
The Company clears all of its securities transactions relating to the
purchase of the underlying collateral and issuance of CMO's through an
affiliate. An affiliate also acts as the principal underwriter for the
Company's CMO issuances.
In connection with the Company's CMO issuances and pursuant to
subservicing agreements with an affiliate, the Company earns
management fee income in its capacity as administrator of certain CMO
issues during the outstanding life of the CMO transactions which it
originated.
The Company clears all of its securities transactions relating to the
purchase of the underlying collateral and issuance of CMO's through an
affiliate. An affiliate also acts as the principal underwriter for the
Company's CMO issuances. In connection with such issuances for the
year ended June 30, 1994, the affiliate received underwriting
discounts of approximately $3,950,300. Substantially all of the
Company's operating expenses, such as office space and general and
administrative expenses, are borne by an affiliate.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the financial
statements contained in the body of the accompanying Form 10-K and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-END> Jun-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 16,176,822
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,889,336
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
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<INCOME-TAX> (1,230)
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</TABLE>
