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 For the fiscal year ended June 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 8, 1999.
100 shares of Common Stock, par value $.01 per share
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(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 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.
<PAGE>
PART I (CONTINUED)
ITEM 3 - LEGAL PROCEEDINGS
No legal proceedings are pending.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Pursuant to General Instruction I of Form 10-K, the information required by Item
4 is omitted.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S SECURITIES 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 I 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
The Company incurred a net loss for the fiscal years ended June 30, 1999, 1998
and 1997 of $70,086, $379,125 and $63,588, respectively. Net losses for each of
the three years in the period ended June 30, 1999 are the result of the Company
incurring operating expenses with no earned revenue. The Company did not issue
any CMO's in each of the three years in the period ended June 30, 1999 due to
unfavorable market conditions.
Year 2000 Issue
The Year 2000 issue is the result of legacy computer programs having been
written using two digits rather than four digits to define the applicable year
and therefore without consideration of the impact of the upcoming change in the
century. Such programs, unless corrected, may not be able to accurately process
dates ending in the year 2000 and thereafter.
Over four years ago, the Parent established a task force to review and develop
an action plan to address the Year 2000 issue. The Parent's action plan
addresses both information technology and non-information technology system
compliance issues. Since then, the ongoing assessment and monitoring phase has
continued and includes assessment of the degree of compliance of its significant
vendors, facility operators, custodial banks and fiduciary agents to determine
the extent to which the Parent is vulnerable to those third parties' failure to
remediate their own Year 2000 issues. The Parent has contacted all significant
external vendors in an effort to confirm their readiness for the Year 2000 and
<PAGE>
PART II (CONTINUED)
tested compatibility with such systems. The Parent also participates actively in
various industry-wide tests.
Through June 30, 1999, the amounts incurred related to the assessment of, and
efforts in connection with, the Year 2000 and the development and execution of a
remediation plan have approximated $63.1 million of which approximately $8.9
million in hardware and software has been capitalized. The Parent's total
projected Year 2000 project cost, including the estimated costs and time
associated with the impact of third-party Year 2000 issues, are based on
currently available information. The total remaining Year 2000 project cost is
estimated at approximately $11.9 million, which will be funded through operating
cash flows and primarily expensed as incurred.
The Parent presently believes that the activities it is undertaking in the Year
2000 project should satisfactorily resolve Year 2000 compliance exposures within
its own systems worldwide. The Parent has completed the reprogramming and
replacement phase of the project. Additional testing will continue through the
end of the calendar year as deemed appropriate. There can be no assurance that
the systems of other companies on which the Parent's systems rely will be timely
converted, or that a failure to convert by another company, or a conversion that
is incompatible with the Parent's systems, would not have a material adverse
effect on the Parent. The Parent has developed an action plan and a formal
contingency plan designed to safeguard the interests of the Parent and its
customers. The Parent believes that these plans significantly reduce the risk of
a Year 2000 issue serious enough to cause a business disruption. With regard to
Year 2000 compliance of other external entities, the Parent is monitoring
developments closely. Should it appear that a major utility, such as a stock
exchange, would not be ready, the Parent will work with other firms in the
industry to plan an appropriate course of action.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
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.
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 I of Form 10-K, the information required by Item
10 is omitted.
ITEM 11 - EXECUTIVE COMPENSATION
Pursuant to General Instruction I of Form 10-K, the information required by Item
11 is omitted.
<PAGE>
PART III (CONTINUED)
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction I of Form 10-K, the information required by Item
12 is omitted.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction I 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.
The Financial Statements and Financial Statement Schedules required by this Item
and included in this report are listed in the index appearing on Page F-1.
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).
<PAGE>
PART IV (CONTINUED)
Exhibits (continued)
(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).
<PAGE>
PART IV (CONTINUED)
Exhibits (continued)
(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).
<PAGE>
PART IV (CONTINUED)
Exhibits (continued)
(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 quarter ended June 30, 1999.
<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 28th day of
September, 1999.
Bear Stearns Secured Investors Inc.
(Registrant)
By: /s/ Samuel L. Molinaro Jr.
Samuel L. Molinaro Jr.
Chief Financial 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 28th day of September, 1999.
Signatures Title
/s/ Thomas Marano President, Chief Operating
Thomas Marano Officer and Director
/s/ Samuel L. Molinaro Jr. Chief Financial Officer
Samuel L. Molinaro Jr.
_____________________ Vice President and Director
Jeffrey Mayer
/s/ Craig M. Overlander Vice President and Director
Craig M. Overlander
<PAGE>
BEAR STEARNS SECURED INVESTORS INC.
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-2
Statements of Income for the fiscal years ended
June 30, 1999, 1998 and 1997 F-3
Statements of Financial Condition as of June 30, 1999 and 1998 F-4
Statements of Changes in Stockholder's Equity for the fiscal
years ended June 30, 1999 and 1998 F-5
Statements of Cash Flows for the fiscal years ended
June 30, 1999, 1998 and 1997 F-6
Notes to Financial Statements F-7
Financial Statement Schedules are omitted because they are not applicable or the
information is included in the financial statements or notes thereto.
F-1
<PAGE>
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. (the "Company") (a wholly-owned subsidiary of The
Bear Stearns Companies Inc.) as of June 30, 1999 and 1998, 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, 1999. 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, 1999 and 1998, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 1999 in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
September 22, 1999
F-2
<PAGE>
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF INCOME
Fiscal Years Ended
June 30, June 30, June 30,
1999 1998 1997
------- ------- -------
Expenses
Other expenses 124,092 671,268 113,388
------- ------- -------
Total expenses 124,092 671,268 113,388
Loss before benefit
for income taxes (124,092) (671,268) (113,388)
Benefit for income taxes (54,006) (292,143) (49,800)
-------- --------- --------
Net loss $ (70,086) $(379,125) $ (63,588)
======== ========= ========
See Notes to Financial Statements.
F-3
<PAGE>
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF FINANCIAL CONDITION
June 30, June 30,
1999 1998
------- -------
Assets
Cash and cash equivalents $ 1,000 $ 1,000
Receivable from affiliates 16,176,822 16,176,822
Other assets 686 686
---------- ----------
Total Assets $ 16,178,508 $ 16,178,508
========== ==========
Liabilities
Payable to Parent $ 16,358,688 $ 16,288,602
Other liabilities 165,000 165,000
---------- ----------
Total Liabilities 16,523,688 16,453,602
Stockholder's Equity (Deficit)
Common Stock, $.01 par value;
1,000 shares authorized; 100 shares
issued and outstanding 1 1
Paid-in capital 999 999
Retained earnings (deficit) (346,180) (276,094)
--------- ---------
Total Stockholder's Equity (deficit) (345,180) (275,094)
Total Liabilities and Stockholder's
Equity (deficit) $ 16,178,508 $ 16,178,508
========== ==========
See Notes to Financial Statements.
F-4
<PAGE>
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
Common Stock Paid-in Retained
$.01 Par Value Capital Earnings (Deficit)
------------- ------- -----------------
Balance, June 30, 1996 $ 1 $ 999 $ 166,619
Net loss - - (63,588)
--- --- --------
Balance, June 30, 1997 1 999 103,031
Net loss - - (379,125)
--- --- ---------
Balance, June 30, 1998 1 999 (276,094)
Net loss - - (70,086)
--- --- ---------
Balance, June 30, 1999 $ 1 $ 999 $ (346,180)
=== === =========
See Notes to Financial Statements.
F-5
<PAGE>
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF CASH FLOWS
Fiscal Years Ended
June 30, June 30, June 30,
1999 1998 1997
-------- -------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (70,086) $ (379,125) $(63,588)
Decrease (increase) in:
Deferred organization costs - 611,514 100,000
Other assets - (686) -
Increase (decrease) in other liabilities - 689 (18)
Cash (used in) provided by operating -------- ------- ------
activities (70,086) 232,392 36,394
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decreases) in payable to Parent 70,086 (232,392) (36,394)
Cash provided by (used in) financing ------ --------- --------
activities 70,086 (232,392) (36,394)
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.
F-6
<PAGE>
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 consolidated 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.
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.
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.
F-7
<PAGE>
BEAR STEARNS SECURED INVESTORS INC.
NOTES TO FINANCIAL STATEMENTS
Note 3. Collateralized Mortgage Obligations
During the fiscal years ended June 30, 1999, 1998 and 1997 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. Substantially all of the Company's operating expenses, such as office
space and general and administrative expenses, are initially paid for by an
affiliate. The affiliate allocates to the Company all of the operating expenses.
F-8
<PAGE>
<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-30-1999
<PERIOD-END> Jun-30-1999
<CASH> 1,000
<SECURITIES> 0
<RECEIVABLES> 16,176,822
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,178,508
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> (345,181)
<TOTAL-LIABILITY-AND-EQUITY> 16,178,508
<SALES> 0
<TOTAL-REVENUES> 0
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<INCOME-TAX> (54,006)
<INCOME-CONTINUING> (70,086)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,086)
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</TABLE>
