<PAGE>
[LOGO]
The
Bear Stearns
Funds
575 LEXINGTON AVENUE
NEW YORK, NY 10022
1.800.766.4111
<TABLE>
<S> <C>
INVESTMENT MANAGER/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
ADMINISTRATOR Wilmington, DE 19809
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 EMERGING MARKETS DEBT
Bear, Stearns & Co. Inc. PORTFOLIO:
245 Park Avenue CUSTODIAN
New York, NY 10167 Brown Brothers Harriman &
INCOME PORTFOLIO AND Co.
HIGH YIELD TOTAL RETURN 40 Water Street
PORTFOLIO: Boston, MA 02109
CUSTODIAN COUNSEL
Custodial Trust Company Mayer, Brown & Platt
101 Carnegie Center 1675 Broadway
Princeton, NJ 08540 New York, NY 10019
COUNSEL
Kramer Levin Naftalis & Frankel
LLP
919 Third Avenue
New York, NY 10022
</TABLE>
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-016-04
Emerging
Markets Debt
Portfolio
Income
Portfolio
High Yield
Total Return
Portfolio
Annual Report
March 31, 1999
<PAGE>
THE BEAR STEARNS FUNDS
EMERGING MARKETS DEBT PORTFOLIO
INCOME PORTFOLIO
HIGH YIELD TOTAL RETURN PORTFOLIO
LETTER TO SHAREHOLDERS
April 30, 1999
Dear Shareholders:
We are pleased to present the annual report to shareholders for the Emerging
Markets Debt Portfolio ("Debt Portfolio"), Income Portfolio and High Yield Total
Return Portfolio ("High Yield Portfolio") for the fiscal year ended March 31,
1999. Detailed performance data for each class of shares of each Portfolio can
be found in the "Financial Highlights" and line graph sections of this report.
The fiscal year ended March 31, 1999, marked a period of extreme volatility in
the fixed income markets. The watershed event was Russia's currency devaluation
and debt default in August 1998, which precipitated an investor flight to the
quality of U.S. Treasury bonds -- to the exclusion of virtually all other asset
classes. Liquidity disappeared. With demand up, the yield on the 30-year
Treasury bond hit an all-time low of just under 5% at the end of September, as
spreads widened dramatically between Treasurys and all other fixed income
sectors.
Thanks to a series of interest rate reductions by the Federal Reserve Board and
other major central banks, both the equity and fixed income markets recovered in
the fourth quarter of last year. However, the recovery in non-Treasury bonds has
been comparatively slow, and for calendar year 1998, Treasury bonds were the
best-performing sector.
It was only in the first three months of this year that non-Treasury securities
began to turn around. With liquidity restored to the financial markets and the
Federal Reserve's neutral stance on interest rates, these sectors staged a
recovery, outperforming Treasury bonds in the quarter. While the total return
for the 30-year Treasury bond declined, asset- and mortgage-backed securities
had positive returns. Corporate bonds, while posting negative returns due to
their longer maturities, outperformed Treasurys with comparable maturities by
more than 100 basis points. The high yield market improved as well.
As long as the economy stays on track and there are no surprises from abroad, we
expect spreads to continue to narrow, although not as dramatically as they have
in the first quarter of 1999. With the major stock indices hitting new highs, we
do not expect to see a significant bond rally as credit fears abate and
economies worldwide are beginning to show early signs of recovery.
1
<PAGE>
EMERGING MARKETS DEBT PORTFOLIO*
For the fiscal year ended March 31, 1999, the Debt Portfolio's Class A shares
had a total return of (12.40)% (without giving effect to the sales charge) and
Class B and C shares had a total return of (13.08)% and (12.99)%, respectively,
(without giving effect to the contingent deferred sales charges)(1). The Debt
Portfolio's benchmark index, the Salomon Smith Barney Emerging Markets Debt
Mutual Fund Index, returned (9.73)% for the same period.
For the fiscal year ended March 31, 1999, the Debt Portfolio ranked third of 43
emerging markets bond funds surveyed by Morningstar, Inc.** The Debt Portfolio
ranked second of 28 such funds and first of 13 such funds for the three- and
five-year periods, respectively, ending March 31, 1999. Morningstar's rankings
are based on annualized total return and do not take into account sales charges.
Of course, past performance is no guarantee of future results. The investment
manager has voluntarily waived a portion of its investment management fee,
without which the Debt Portfolio's performance, and possibly its ranking, would
have been lower.
Emerging markets debt was hit especially hard in the wake of the Russian default
last August. However, the markets began to rebound in the fourth quarter of last
year as central banks reduced interest rates, the International Monetary Fund
("IMF") was recapitalized and Brazil received a larger-than-expected assistance
package. In addition, the yen strengthened, which took pressure off other Asian
currencies and bonds.
In this year's first quarter, investors became more optimistic about the outlook
for emerging markets, and bond prices continued to rise. Sentiment has improved
as the IMF continues to supply liquidity to key countries like Brazil, and the
price of oil, a major export for many emerging countries, has increased.
However, progress varies greatly from country to country, and the impact of
economic contractions on banking systems and the credit supply may not yet be
fully felt.
RECOVERY BEGINS IN ASIA
As a region, Asia is the farthest along in economic adjustment, led by Korea and
the Philippines. The collapse of consumption and consumer spending has created
current account surpluses in much of the region, building foreign reserves,
supporting local currencies and allowing local interest rates to fall, which are
a necessary prelude to a resumption of growth. But additional steps are
required, including further dismantling of barriers to competition and reform of
weak banking systems.
In Latin America, the IMF has reiterated its commitment to aid Brazil, but
serious problems remain. Argentina has suffered as Brazil's largest trading
partner but has been more adept in adjusting its budget to reflect falling
revenues, as has Mexico. Firming oil prices have been good news for many
emerging countries, including Mexico, Russia, Ecuador, Nigeria and Indonesia.
Higher oil prices have also helped Venezuela, but it is unclear whether the new
president will tackle much-needed reforms. Political uncertainty in Ecuador
threatens the implementation of changes that address its budget deficit. In
Russia, modest signs of economic recovery, coupled with ongoing negotiations
with potential lenders and higher oil prices, have supported its bond prices.
We remain cautiously optimistic about the medium-term outlook for U.S.
dollar-denominated emerging markets debt for several reasons. With signs of
stability in certain regions, particularly Asia, we may see additional
improvements in credit ratings for selected countries. In addition, multilateral
institutions such as the IMF continue to provide financial incentives to deal
with difficult issues, and most emerging nations continue to introduce
market-oriented reforms to attract foreign direct investment.
2
<PAGE>
As investors increasingly focus on the prospects for individual countries and
companies, rather than on the market as a whole, the negative effects of
problems in any one country or region should be more contained, and the
potential to profit from meaningful reforms in individual countries will
continue to rise.
INCOME PORTFOLIO
For the fiscal year ended March 31, 1999, the Income Portfolio's Class A shares
had a total return of 5.77% (without giving effect to the sales charge) and
Class B and C shares had a total return of 5.09% and 5.08%, respectively,
(without giving effect to the contingent deferred sales charges)(2). The Income
Portfolio's benchmark index, the Salomon Smith Barney Broad Investment Grade
Bond Index, returned 6.50% for the same period.
Effective October 16, 1998, the Total Return Bond Portfolio changed its name to
the Income Portfolio and the portfolio adopted a new investment objective: to
seek high current income consistent with preservation of capital. Prior to that
date, its stated objective was to maximize total return consistent with
preservation of capital.
The Income Portfolio's new investment strategy allows us to purchase securities
that are rated B or BB/Ba by Standard & Poor's and Moody's. However, we intend
to manage the Income Portfolio so that the average investment quality remains
investment grade. As a result of the strategy change, we began purchasing high
yield securities last fall and continued to do so in the first quarter of 1999.
As of March 31, 1999, our allocation to high yield issues was roughly 10%. We
are focusing on issues rated BB/Ba, where we believe we will continue to find
attractive values in a strong economy.
AN EMPHASIS ON CORPORATE SECURITIES
With liquidity restored to the financial markets and the Federal Reserve's
neutral stance on interest rates, the most significant event in the bond markets
has been the recovery in non-Treasury sectors, or "spread products," which
dramatically outperformed Treasurys in the most recent calendar quarter. This
benefited the Income Portfolio as we have been underweighted in Treasury and
agency issues and found value elsewhere. For example, investment-grade corporate
issues now represent more than 30% of the Income Portfolio, as U.S. companies
have experienced unexpectedly strong earnings growth. In fact, corporate issues
have been the best-performing sector so far in 1999 on a duration-adjusted
basis. Given the recovery in spread products, mortgage- and asset-backed
securities now represent roughly 44% of our investments.
As the yield curve flattened, we reduced exposure to long-term corporate issues
and shifted our concentration to the intermediate part of the yield curve, where
we can get roughly the same yield with less volatility. As economies abroad have
firmed, we have begun to add issues of commodity-based companies that do
business globally in industries such as paper, forest products, steel and
chemicals.
As long as the economy stays on track and there are no surprises from abroad, we
expect spreads to continue to narrow, although not as dramatically as they have
recently. However, narrowing spreads generally mean enhanced returns, so we will
continue to focus on corporate issues and mortgage- and asset-backed securities.
We expect to maintain selective exposure in the below-investment grade area.
3
<PAGE>
HIGH YIELD TOTAL RETURN PORTFOLIO***
For the fiscal year ended March 31, 1999, the High Yield Portfolio's Class A
shares had a total return of (1.57)% (without giving effect to the sales charge)
and both Class B and C shares had a total return of (2.21)% (without giving
effect to the contingent deferred sales charges)(3). The High Yield Portfolio's
benchmark index, the Lipper High Yield Bond Fund Index, returned (1.23)% for the
same period. Its broad-based securities market index, the Credit Suisse First
Boston Global High Yield Index, returned (0.75)% for the same period.
During this turbulent period in the fixed income markets, the High Yield
Portfolio benefited from our strict emphasis on strong credit fundamentals. In
addition, our broad diversification helped the High Yield Portfolio generate
competitive returns as we focused on individual securities, not sectors or
industries.
Nevertheless, our choice of securities was affected by economic conditions. As
concerns about a worldwide economic slowdown grew in the first half of 1998, we
reduced our positions in companies with international exposure and emphasized
those with a domestic focus. Positions were added or increased in industries
likely to do well in an uncertain environment or slowing economy, such as food,
food processing and consumer nondurables.
By the end of 1998, sentiment had improved significantly in response to interest
rate cuts by central banks to bolster sluggish economies. In particular, the
first signs of recovery were appearing in Asia. The U.S. economy, rather than
slowing, was perking along at a faster rate than had been anticipated while
inflation remained benign. In short, the financial markets' worst fears had
failed to materialize. Having reached a high of 700 basis points over comparable
Treasury bonds in October, high yield spreads narrowed to 600 basis points,
where they have remained so far this year.
A SHIFT TO COMPANIES WITH A GLOBAL ORIENTATION
As global markets strengthened, we began looking at companies with international
exposure. This group included companies in forest-paper products, technology,
steel, chemicals and other commodities that are traded globally. We have reduced
positions in some of the more defensive domestic sectors and increased exposure
in previously battered sectors that appear to have greater relative strength and
return potential. For example, media and telecommunications issues are now very
attractively priced, and their outlook is positive given their growth prospects
and the powerful wave of consolidation that is occurring.
Given the improving environment, we will continue the transitioning process,
increasing exposure to companies that derive revenues abroad and moving into
issues with the greatest relative strength at home. As markets stabilize and the
climate grows more positive, spreads are expected to narrow, which should
enhance returns. Given the strength of the U.S. economy and more positive
sentiment in markets overseas, we expect the number of high yield issues to
increase and credit quality in general to improve -- all of which indicate a
strengthening in the high yield market in the year ahead.
4
<PAGE>
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS
At a Special Meeting of Shareholders held on April 27, 1999, the shareholders of
the Bear Stearns Investment Trust (the "Trust") approved the reorganization and
liquidation of the Trust on behalf of the 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 Debt Portfolio to the Emerging Markets Debt Portfolio, a newly created
separate series of The Bear Stearns Funds, with materially the same investment
objective and policies as the Debt Portfolio. The proposal to reorganize and
liquidate the Trust received the favorable vote of approximately 53% of the Debt
Portfolio's outstanding shares. Approximately 1% of the outstanding shares were
cast against reorganizing and liquidating the Trust.
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
Bear Stearns Investment Trust and
The Bear Stearns Funds
- -------
* International investing involves risks such as currency
exchange-rate volatility, possible political, social, or
economic instability and differences in taxation and other
financial standards.
** Morningstar, Inc. is an independent fund performance monitor
and its rankings may change monthly.
*** 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.
(1) For the fiscal year ended March 31, 1999, the Debt
Portfolio's Class A shares had a total return of (16.37)%,
including the initial 4.50% maximum sales charge, Class B
shares returned (16.92)% including the 5.00% CDSC and Class
C shares returned (13.76)%, including the 1.00% CDSC.
(2) For the fiscal year ended March 31, 1999, the Income
Portfolio's Class A shares had a total return of 1.03%,
including the initial 4.50% maximum sales charge, Class B
shares returned 0.17%, including the 5.00% CDSC and Class C
shares returned 4.10%, including the 1.00% CDSC.
(3) For the fiscal year ended March 31, 1999, the High Yield
Portfolio's Class A shares had a total return of (6.00)%,
including the initial 4.50% maximum sales charge, Class B
shares returned (6.67)%, including the 5.00% CDSC and Class
C shares returned (3.10)%, including the 1.00% CDSC.
CDSC Contingent deferred sales charge.
Bear Stearns Asset Management Inc. has waived a portion of its investment
management/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.
5
<PAGE>
THE BEAR STEARNS FUNDS
EMERGING MARKETS DEBT PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A SHARES(1)(2)(3)(6) VS. ITS BROAD-BASED INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING MARKETS DEBT PORTFOLIO SALOMON SMITH BARNEY EMERGING
CLASS A SHARES MARKETS DEBT MUTUAL FUND INDEX
4-MAY-95 $9,625.00 $10,000.00
<S> <C> <C>
$10,203.47 $10,740.31
Sep. 30, 1995 $10,805.20 $11,486.47
$11,876.53 $12,633.24
Mar. 31, 1996 $12,666.70 $13,313.81
$14,107.20 $14,898.68
Sep. 30, 1996 $15,590.00 $16,331.26
$16,718.60 $17,798.99
Mar. 31, 1997 $16,907.10 $18,013.35
$18,650.60 $19,987.11
Sept. 30, 1997 $19,966.20 $21,399.79
$19,160.90 $20,846.90
Mar. 31, 1998 $20,172.00 $21,659.70
$19,108.94 $20,906.64
Sept. 30, 1998 $15,541.30 $17,039.94
$17,098.54 $18,851.00
Mar. 31, 1999 $17,671.34 $19,823.00
Past performance is not predictive
of future performance.
EMERGING MARKETS DEBT PORTFOLIO
Class A Shares $17,671
Salomon Smith Barney Emerging
Markets Debt Mutual Fund Index
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS
ONE YEAR ENDED AVERAGE
MARCH 31, 1999 ANNUAL(4)
------------------- -------------------
<S> <C> <C>
Emerging Markets Debt Portfolio(2)
Class A shares(5)............................. (16.37)% 9.52%
Class B shares(6)............................. (16.92) (8.04)
Class C shares(3)............................. (13.76) 15.87
Salomon Smith Barney Emerging Markets Debt
Mutual Fund Index(1)............................ (9.73) 19.11
</TABLE>
- ----------
(1) The chart assumes a hypothetical $10,000 initial investment
in the Debt Portfolio and reflects all portfolio expenses.
Investors should note that the Debt Portfolio is a
professionally managed mutual fund while the index is
unmanaged, does not incur sales charges or expenses and is
not available for investment. Performance of the index
corresponds to the performance of Class A shares only.
(2) Bear Stearns Asset Management Inc. waived a portion of its
investment management fee and agreed to voluntarily
reimburse a portion of the Debt Portfolio's operating
expenses, as necessary, to maintain the expense limitation,
as set forth in the notes to the financial statements. Total
returns shown include fee waivers and expense
reimbursements; total returns would have been lower had
there been no assumption of fees and expenses in excess of
the expense limitations.
(3) Assuming no redemption of shares at the end of the period,
the return of Class C shares (for which July 26, 1995 was
the initial public offering date) would have been higher
than Class A shares if operations were commenced on the same
day. The higher return is due to the fact that there is no
initial sales charge on Class C shares. Reflects the
applicable contingent deferred sales charge. Without the
applicable sales charge, the total return for the one year
ended March 31, 1999 would have been (12.99)%.
(4) Commencing May 4, 1995, Bear Stearns Asset Management Inc.
assumed the daily portfolio management responsibility for
the Debt Portfolio. Total returns for Class A shares are
shown for the period May 4, 1995 through March 31, 1999 for
Class A shares. For the period May 3, 1993 (commencement of
investment operations) through May 3, 1995 the Debt
Portfolio's investment adviser was BEA Associates and those
results are not shown.
(5) Reflects the initial maximum sales charge in effect, 4.50%
and 3.75%, respectively, for each period shown. Without the
applicable sales charge, the total returns would have been
(12.40)% and 10.22%, respectively, for each period shown.
(6) Assuming no redemption of shares at the end of the period,
the return of Class B shares (for which January 12, 1998 was
the initial public offering date) would have been higher
than Class A shares if operations were commenced on the same
day. The higher return is due to the fact that there is no
initial sales charge on Class B shares. Reflects the
applicable contingent deferred sales charge. Without the
applicable sales charge, the total returns would have been
(13.08)% and (5.58)%, respectively, for each period shown.
6
<PAGE>
THE BEAR STEARNS FUNDS
INCOME PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A AND C SHARES(1)(2)(3)(6) VS. VARIOUS INDICES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INCOME PORTFOLIO LIPPER A - RATED SALOMON SMITH BARNEY BROAD
CLASS A SHARES CLASS C SHARES BOND FUND INDEX INVESTMENT GRADE BOND INDEX
APR. 5, 1995 $9,625.00 $10,000.00 $10,000.00 $10,000.00
<S> <C> <C> <C> <C>
$10,027.00 $10,412.00 $10,672.00 $10,568.00
Sept. 30, 1995 $10,260.00 $10,587.00 $10,883.31 $10,767.00
$10,679.00 $11,064.00 $11,408.97 $11,234.00
Mar. 31, 1996 $10,430.00 $10,797.00 $11,112.34 $11,038.00
$10,467.00 $10,824.00 $11,140.12 $11,092.00
Sept. 30, 1996 $10,644.00 $10,996.00 $11,343.98 $11,300.00
$10,972.00 $11,332.00 $11,726.27 $11,641.00
Mar. 31, 1997 $10,908.00 $11,245.00 $11,623.08 $11,581.00
$11,308.00 $11,648.00 $12,057.79 $11,998.00
Sept. 30, 1997 $11,659.00 $11,998.00 $12,497.89 $12,397.00
$11,799.60 $12,130.40 $12,852.83 $12,762.65
Mar. 31, 1998 $11,932.00 $12,247.00 $13,032.77 $12,968.31
$12,201.66 $12,501.96 $13,352.08 $13,268.16
Sept. 30, 1998 $12,600.65 $12,890.55 $13,774.00 $13,818.34
$12,659.87 $12,930.51 $13,791.91 $13,874.78
Mar. 31, 1999 $12,620.63 $12,869.77 $13,689.85 $13,810.83
Past performance is not predictive
of future performance.
INCOME PORTFOLIO
Class A shares $12,621
Class C shares 12,870
Lipper A - Rated Bond Fund Index
Corp. Debt Fund Index 13,690
Salomon Smith Barney Broad
Investment Grade Bond Index 13,811
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS
ONE YEAR ENDED AVERAGE
MARCH 31, 1999 ANNUAL(4)
------------------- -------------------
<S> <C> <C>
Income Portfolio(2)
Class A shares(5)................................... 1.03% 6.00%
Class B shares(6)................................... 0.17 0.99
Class C shares(7)................................... 4.10 6.52
Class Y shares(3)................................... 6.13 6.62
Lipper A Rated Bond Fund Index(1)....................... 5.04 9.35
Salomon Smith Barney Broad Investment Grade Bond
Index(1)............................................ 6.50 8.42
</TABLE>
- ----------
(1) The chart assumes a hypothetical $10,000 initial investment
in the Income Portfolio and reflects all portfolio expenses.
Investors should note that the Income Portfolio is a
professionally managed mutual fund while the indices are
unmanaged, do not incur sales charges or expenses and are
not available for investment. Performance of the indices
corresponds to the performance of Class A and C shares.
(2) Bear Stearns Asset Management Inc. waived its advisory fee
and agreed to voluntarily reimburse a portion of the Income
Portfolio's operating expenses, as necessary, to maintain
the expense limitation, as set forth in the notes to the
financial statements. Total returns shown include fee
waivers and expense reimbursements; total returns would have
been lower had there been no assumption of fees and expenses
in excess of expense limitations.
(3) The return of Class Y shares (for which September 8, 1995
was the initial public offering date) would have been higher
than Class A and C shares if operations were commenced on
the same day. The higher return is due to the fact that
there is no sales load, contingent deferred sales charge or
12b-1 fee charged to Class Y shares.
(4) For the period of April 5, 1995 (commencement of investment
operations) through March 31, 1999, for Class A and C
shares.
(5) Reflects the initial maximum sales charge in effect, 4.50%
and 3.75%, respectively, for each period shown. Without the
applicable sales charge, the total returns would have been
5.77% and 7.03%, respectively, for each period shown.
(6) Assuming no redemption of shares at the end of the period,
the return of Class B shares (for which February 2, 1998 was
the initial public offering date) would have been higher
than Class A shares and substantially the same as Class C
shares if operations were commenced on the same day. The
higher return is due to the fact that there is no initial
sales charge on Class B shares. Reflects the applicable
contingent deferred sales charge. Without the applicable
sales charge, the total returns would have been 5.09% and
4.35%, respectively, for each period shown.
(7) Reflects the applicable contingent deferred sales charge.
Without the applicable sales charge, the total return for
the one year ended March 31, 1999 would have been 5.08%.
7
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A, B AND C SHARES(1)(2)(3) VS. VARIOUS INDICES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD TOTAL RETURN PORTFOLIO
CLASS A SHARES CLASS B SHARES CLASS C SHARES
<S> <C> <C> <C>
Jan. 2, 1998 $9,550 $10,000 $10,000
Mar. 31, 1998 $10,339 $10,813 $10,813
Sept. 30, 1998 $9,778 $10,193 $10,193
Mar. 31, 1999 $10,176 $10,195 $10,574
Past performance is not predictive
of future performance.
HIGH YIELD TOTAL RETURN PORTFOLIO
Class A shares $10,176
Class B shares $10,195
Class C shares $10,574
Lipper High
Yield Bond Fund Index $10,311
Credit Suisse First Boston
Global High Yield Index $10,223
<CAPTION>
CREDIT SUISSE
LIPPER HIGH FIRST BOSTON GLOBAL
YIELD BOND FUND INDEX HIGH YIELD INDEX
<S> <C> <C>
Jan. 2, 1998 $10,000 $10,000
Mar. 31, 1998 $10,440 $10,301
Sept. 30, 1998 $9,688 $9,790
Mar. 31, 1999 $10,311 $10,223
Past performance is not predictive
of future performance.
HIGH YIELD TOTAL RETURN PORTFOLIO
Class A shares
Class B shares
Class C shares
Lipper High
Yield Bond Fund Index
Credit Suisse First Boston
Global High Yield Index
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS
ONE YEAR ENDED AVERAGE
MARCH 31, 1999 ANNUAL(3)
------------------- -------------------
<S> <C> <C>
High Yield Total Return Portfolio(2)
Class A shares(4)................................... (6.00)% 1.40%
Class B shares(5)................................... (6.67 ) 1.55
Class C shares(6)................................... (3.10 ) 4.55
Lipper High Yield Bond Fund Index(1).................... (1.23 ) 2.50
Credit Suisse First Boston Global High Yield Index(1)... (0.75 ) 1.79
</TABLE>
- ----------
(1) The chart assumes a hypothetical $10,000 initial investment
in the High Yield Portfolio and reflects all portfolio
expenses. Investors should note that the High Yield
Portfolio is a professionally managed mutual fund while the
indices are either unmanaged, do not incur sales charges or
expenses and are not available for investment. The Credit
Suisse First Boston Global High Yield Index began in 1986
and is based on monthly returns.
(2) Bear Stearns Asset Management Inc. waived a portion of its
advisory fee and agreed to voluntarily reimburse a portion
of the High Yield Portfolio's operating expenses, as
necessary, to maintain the expense limitation, as set forth
in the notes to the financial statements. Total returns
shown include fee waivers and expense reimbursements; total
returns would have been lower had there been no assumption
of fees and expenses in excess of expense limitations.
(3) For the period January 2, 1998 (commencement of investment
operations) through March 31, 1999.
(4) Reflects the initial maximum sales charge (4.50%). Without
the applicable sales charge, the total returns would have
been (1.57)% and 5.22%, respectively, for each period shown.
(5) Reflects the applicable contingent deferred sales charge.
Without the applicable sales charge, the total returns would
have been (2.21)% and 4.55%, respectively, for each period
shown.
(6) Reflects the applicable contingent deferred sales charge.
Without the applicable sales charge, the total return for
the one year ended March 31, 1999 would have been (2.21)%.
8
<PAGE>
THE BEAR STEARNS FUNDS
EMERGING MARKETS DEBT PORTFOLIO
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
TOP TEN COUNTRY WEIGHTINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK COUNTRY NET ASSETS
- ------------------------------------------------------ ---------------
<C> <S> <C>
1. Brazil............................................ 20.54
2. Argentina......................................... 15.33
3. Mexico............................................ 14.27
4. Bulgaria.......................................... 4.85
5. Nigeria........................................... 4.84
6. Panama............................................ 4.75
7. Peru.............................................. 4.75
8. Venezuela......................................... 4.70
9. Morocco........................................... 4.62
10. Philippines....................................... 4.50
</TABLE>
- --------------------------------------------------------------------------------
TOP TEN ISSUERS*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY PERCENT OF
RANK ISSUER CURRENCY TYPE NET ASSETS
- ------------------------------------------------------ ------------ ------------------ ----------
<C> <S> <C> <C> <C>
1. Federal Republic of Brazil........................ U.S. dollar Brady bonds 20.54
2. Republic of Argentina............................. U.S. dollar Brady bonds 15.33
3. United Mexican States............................. U.S. dollar Brady bonds 14.27
4. Republic of Bulgaria.............................. U.S. dollar Brady bonds 4.85
5. Central Bank of Nigeria........................... U.S. dollar Brady bond 4.84
6. The Republic of Panama............................ U.S. dollar Brady bonds 4.75
7. The Republic of Peru.............................. U.S. dollar Brady bonds 4.75
8. Republic of Venezuela............................. U.S. dollar Brady bonds 4.70
9. The Kingdom of Morocco............................ U.S. dollar Loan Participation 4.62
10. Republic of the Philippines....................... U.S. dollar Brady bonds 4.50
</TABLE>
- -------
* The Portfolio's holdings will change over time.
9
<PAGE>
THE BEAR STEARNS FUNDS
INCOME PORTFOLIO
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
TOP INDUSTRY WEIGHTINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF NET
RANK INDUSTRY ASSETS
- ------------------------------------------------------ ---------------
<C> <S> <C>
1. U.S. Government Agency Obligations................ 26.37
2. Finance........................................... 21.38
3. Asset-Backed...................................... 17.76
4. Industrial........................................ 13.16
5. Utilities......................................... 8.65
6. U.S. Government Obligations....................... 6.64
7. Telecommunications................................ 2.95
</TABLE>
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS INDUSTRY NET ASSETS
- ------------------------------------------------------ ------------------------- ----------
<C> <S> <C> <C>
1. Government National Mortgage Association.......... U.S. Government Agency 18.92
Obligations
2. Fannie Mae........................................ U.S. Government Agency 5.40
Obligations
3. Lehman Brothers Holdings.......................... Finance 4.56
4. Morgan Stanley Capital I Inc...................... Asset-Backed 4.51
5. U.S. Treasury Notes............................... U.S. Government 4.31
Obligations
6. IRT Property Company.............................. Finance 4.17
7. Western Resources, Inc............................ Utilities 3.25
8. Aetna Services Inc................................ Finance 2.90
9. Washington Mutual Capital I....................... Finance 2.65
10. U.S. Treasury Bonds............................... U.S. Government 2.33
Obligations
</TABLE>
- -------
* The Portfolio's holdings will change over time.
10
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
TOP TEN INDUSTRY WEIGHTINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF NET
RANK INDUSTRY ASSETS
- ------------------------------------------------------ ---------------
<C> <S> <C>
1. Competitive Local Exchange Companies.............. 6.44
2. Steel - Metals - Mining........................... 6.17
3. Other Consumer Non-Cyclicals...................... 5.51
4. Long Distance Telephone Services.................. 5.27
5. Retailers......................................... 5.13
6. Industrial Products............................... 4.73
7. Gaming............................................ 4.54
8. Radio Broadcasting................................ 3.84
9. Technology........................................ 3.07
10. Television Broadcasting........................... 3.04
</TABLE>
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RANK HOLDINGS INDUSTRY
- --------- ---------------------------------------------------------------- ---------------------------------------------
<C> <S> <C>
1. Charter Communications Holdings LLC and Charter Communications
Holdings Capital Corp......................................... North American Cable Services
2. Emmis Communications Corp....................................... Radio Broadcasting
3. Global Crossing Holdings Ltd.................................... Long Distance Telephone Services
4. Citadel Broadcasting Company.................................... Radio Broadcasting
5. Fairchild Semiconductor Corp.................................... Technology
6. PSINet Inc...................................................... Data & Internet Services
7. Team Health Inc................................................. Healthcare
8. Intermedia Communications Inc................................... Competitive Local Exchange Companies
9. Rent-A-Center, Inc.............................................. Retailers
10. R&B Falcon Corporation.......................................... Oil Services
<CAPTION>
PERCENT OF
RANK NET ASSETS
- --------- -------------
<C> <C>
1.
1.29
2. 1.26
3. 1.12
4. 1.02
5. 1.02
6. 1.02
7. 1.01
8. 1.00
9. 1.00
10. 1.00
</TABLE>
- -------
* The Portfolio's holdings will change over time.
11
<PAGE>
THE BEAR STEARNS FUNDS
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS -- 93.06%
ARGENTINA - 15.33%
SOVEREIGN
1,970 Republic of Argentina, Discount Bond, Series L
(a)(b).......................................... 6.063% 03/31/23 $ 1,455,337
2,021 Republic of Argentina, FRB Bearer (a)(b).......... 6.188 03/31/05 1,734,271
207 Republic of Argentina, FRB Registered (a)(b)...... 6.188 03/31/05 177,460
2,460 Republic of Argentina, Par Bond (b)(c)............ 5.750 03/31/23 1,715,850
-----------
Total Argentina (cost - $5,182,647)............... 5,082,918
-----------
BRAZIL - 20.54%
SOVEREIGN
2,149 Federal Republic of Brazil, Capitalization Bond
(b)(c)(d)....................................... 8.000 04/15/14 1,368,739
2,025 Federal Republic of Brazil, DCB (a)(b)............ 6.188 04/15/12 1,183,359
3,790 Federal Republic of Brazil, Discount Bond, Series
Z-L (a)(b)...................................... 6.125 04/15/24 2,375,856
1,243 Federal Republic of Brazil, EI Bond (a)(b)........ 6.125 04/15/06 905,982
400 Federal Republic of Brazil, FLIRB Bearer (a)(b)... 5.000 04/15/09 223,000
443 Federal Republic of Brazil, IDU Bond (a)(b)....... 6.063 01/01/01 407,652
540 Federal Republic of Brazil, NMB, Series L
(a)(b).......................................... 6.188 04/15/09 343,237
-----------
Total Brazil (cost - $7,404,194).................. 6,807,825
-----------
BULGARIA - 4.85%
SOVEREIGN
950 Republic of Bulgaria, Discount Bond, Series A
(a)(b).......................................... 5.875 07/28/24 646,000
810 Republic of Bulgaria, FLIRB, Series A (a)(b)...... 2.500 07/28/12 463,725
40 Republic of Bulgaria, IAB Bearer (a)(b)........... 5.875 07/28/11 26,925
700 Republic of Bulgaria, IAB Registered (a)(b)....... 5.875 07/28/11 471,188
-----------
Total Bulgaria (cost - $1,470,403)................ 1,607,838
-----------
COLOMBIA - 1.51%
SOVEREIGN
560 Republic of Colombia, Global Bond (b) (cost -
$488,010)....................................... 8.625 04/01/08 501,200
-----------
ECUADOR - 0.96%
SOVEREIGN
978 The Republic of Ecuador, PDI Bond, Registered
(a)(b) (cost - $307,063)........................ 6.000 02/27/15 317,955
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
THE BEAR STEARNS FUNDS
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
MEXICO - 14.27%
SOVEREIGN
395 United Mexican States, Par Bond, Series A (b)..... 6.250% 12/31/19 $ 310,322
5,625 United Mexican States, Par Bond, Series B (b)..... 6.250 12/31/19 4,419,141
-----------
Total Mexico (cost - $4,641,523).................. 4,729,463
-----------
MOROCCO - 4.62%
SOVEREIGN
1,879 The Kingdom of Morocco, Tranche A, Loan
Participation (a) (cost - $1,473,711)........... 6.063 01/01/09 1,531,036
-----------
NETHERLANDS - 0.57%
CORPORATE
260 Tjiwi Kimia International Financial Company (cost
- $183,863)..................................... 13.250 08/01/01 189,800
-----------
NIGERIA - 4.84%
SOVEREIGN
2,500 Central Bank of Nigeria, Par Bond (b)(c)(e) (cost
- $1,729,981)................................... 6.250 11/15/20 1,604,688
-----------
PANAMA - 4.75%
SOVEREIGN
880 The Republic of Panama, IRB (a)(b)................ 4.000 07/17/14 695,750
1,101 The Republic of Panama, PDI Bond (a)(b)........... 5.938 07/17/16 878,354
-----------
Total Panama (cost - $1,566,330).................. 1,574,104
-----------
PERU - 4.75%
SOVEREIGN
437 The Republic of Peru, Discount Bond (a)(b)........ 6.000 03/08/27 266,570
880 The Republic of Peru, FLIRB (b)(c)................ 3.750 09/07/17 521,950
1,231 The Republic of Peru, PDI Bond (a)(b)............. 4.500 03/07/17 785,532
-----------
Total Peru (cost - $1,523,264).................... 1,574,052
-----------
PHILIPPINES - 4.50%
SOVEREIGN
1,150 Republic of the Philippines, FLIRB, Series B
(a)(b).......................................... 6.000 06/01/08 1,017,750
540 Republic of the Philippines, Par Bond, Series B
(b)(c).......................................... 6.500 12/01/17 472,500
-----------
Total Philippines (cost - $1,556,472)............. 1,490,250
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
THE BEAR STEARNS FUNDS
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
POLAND - 2.75%
SOVEREIGN
650 The Polish People's Republic, PDI Bearer Bond
(b)(c).......................................... 5.000% 10/27/14 $ 600,844
450 The Polish People's Republic, RSTA Bond,
Registered (b)(c)............................... 4.000 10/27/24 311,625
-----------
Total Poland (cost - $890,497).................... 912,469
-----------
RUSSIA - 4.12%
SOVEREIGN
4,089 Chase Manhattan Securities (C.I.) Limited, Master
Russian Securities Linked (S Account) Note*..... -- -- --
3,706 Russia, IAN Series (a)............................ 5.969 12/15/15 282,546
16,075 Russia, Principal Loan (a)........................ 5.969 12/15/20 1,085,065
-----------
Total Russia (cost - $3,816,504).................. 1,367,611
-----------
VENEZUELA - 4.70%
SOVEREIGN
1,286 Republic of Venezuela, DCB (a)(b)................. 5.938 12/18/07 904,821
607 Republic of Venezuela, FLIRB (a)(b)............... 6.125 03/31/07 409,440
350 Republic of Venezuela, Par Bond, Series W-A (b)... 6.750 03/31/20 243,031
-----------
Total Venezuela (cost - $1,220,277)............... 1,557,292
-----------
Total Long-Term Debt Investments (cost -
$33,454,739).................................... 30,848,501
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
THE BEAR STEARNS FUNDS
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 2.06%
TURKEY - 0.76%
SOVEREIGN
TRl
168,000,000 Turkish Treasury Bill (cost - $252,003)........... 108.800%** 02/09/00 $ 252,335
-----------
GRAND CAYMAN - 1.30%
431 Brown Brothers Harriman & Co. (cost - $431,000)... 4.000 *** 431,000
-----------
Total Short-Term Investments (cost - $683,003).... 683,335
-----------
Total Investments -- 95.12%
(cost - $34,137,742)............................ 31,531,836
Other assets in excess of liabilities -- 4.88%.... 1,618,489
-----------
Net Assets -- 100.00%............................. $33,150,325
-----------
-----------
</TABLE>
- ---------
+ Denominated in United States dollars unless otherwise
indicated.
* Instrument is currently in default and is being carried as
worthless pending restructuring by the Russian government.
** Compounded effective yield on the date of purchase in
Turkish lire.
*** 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.
DCB Debt Conversion Bond.
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.
TRl Turkish lire.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
THE BEAR STEARNS FUNDS
INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS -- 96.91%
CORPORATE OBLIGATIONS - 63.90%
ASSET-BACKED - 17.76%
$ 200 Aames Mortgage Trust, Series 1997-B, Class A4..... 6.950% 11/15/25 $ 204,073
100 Chemical Master Credit Card Trust 1, Series
1996-2, Class A................................. 5.980 09/15/08 100,826
100 Conti-Mortgage Home Equity Loan Trust, Series
1998-1, Class A4................................ 6.280 01/15/13 101,323
200 Delta Funding Home Equity Loan Trust, Series
1999-1, Class A4F............................... 6.390 02/15/28 199,956
95 Ford Credit Grantor Trust, Asset-Backed
Certificates, Series 1995-B, Class A............ 5.900 10/15/00 94,858
100 Green Tree Home Improvement Loan Trust, Series
1997-A, Class HEA6.............................. 7.160 03/15/28 106,033
200 Green Tree Home Improvement Loan Trust, Series
1998-D, Class HEA3.............................. 6.130 08/15/29 195,328
200 Key Auto Finance Trust, Series 1999-1, Class A3... 5.630 07/15/03 200,938
540 Morgan Stanley Capital I Inc., Series 1997-C1,
Class A-1B,
Commercial Mortgage Pass-Thru Certificates...... 7.460 02/15/20 558,309
150 Residential Asset Securities Corp., Series
1998-KS2, Class A13............................. 6.240 02/25/17 149,940
150 Sawgrass Finance L.L.C., Series 1993-1, Class A... 6.450 01/20/06 151,925
125 UCFC Home Equity Loan, Series 1997-A1, Class A7... 7.660 06/15/28 133,398
-----------
2,196,907
-----------
FINANCE - 21.38%
350 Aetna Services Inc., Aetna Inc. Guaranteed........ 6.970 08/15/36 358,312
100 Capital One Financial Corporation, Notes.......... 7.125 08/01/08 96,875
500 IRT Property Company, Senior Notes................ 7.250 08/15/07 515,625
550 Lehman Brothers Holdings.......................... 7.250 10/15/03 564,437
200 Mack-Cali Realty, L.P., Notes..................... 7.000 03/15/04 200,000
200 Markel Capital Trust I, Series B, Capital
Securities, Markel Corporation Guaranteed*...... 8.710 01/01/46 191,250
200 NationsBank Credit Card Master Trust, Series
1995-1, Class A................................. 6.450 04/15/03 204,293
300 Washington Mutual Capital I, Subordinated Capital
Income Securities, Washington Mutual Inc.
Guaranteed...................................... 8.375 06/01/27 327,750
200 W.R. Berkley, Capital Trust, W.R. Berkley, Inc.
Guaranteed...................................... 8.197 12/15/45 186,250
-----------
2,644,792
-----------
INDUSTRIAL - 13.16%
150 Boyd Gaming Corporation, Senior Subordinated
Notes........................................... 9.500 07/15/07 154,500
150 Lady Luck Gaming Corp., 1st Mortgage.............. 11.875 03/01/01 152,625
250 LG-Caltex Oil Corporation, Unsecured Notes*....... 7.500 07/15/07 230,312
200 MedPartners, Inc., Senior Subordinated Notes...... 6.875 09/01/00 186,250
250 Panamerican Beverages, Inc., Senior Notes*........ 7.250 07/01/09 226,250
250 Safeway Inc., Notes............................... 5.875 11/15/01 250,937
225 Smith International Inc., Senior Notes............ 7.000 09/15/07 224,438
200 Time Warner Inc., Pass-Thru Certificates, Asset
Trust Securities*............................... 6.100 12/30/01 201,750
-----------
1,627,062
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
THE BEAR STEARNS FUNDS
INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE(S) DATE(S) VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
TELECOMMUNICATIONS - 2.95%
$ 125 Sprint Capital Corp., Sprint Capital Corp.
Guaranteed...................................... 5.700% 11/15/03 $ 123,750
250 US West Communications, Debentures................ 6.875 09/15/33 241,563
-----------
365,313
-----------
UTILITIES - 8.65%
250 Cleveland Electric Illuminating Co., Senior Notes,
Series D........................................ 7.880 11/01/17 266,875
250 Commonwealth Edison, 1st Mortgage................. 8.375 09/15/22 263,750
250 Empresa Electrica del Norte Grande S.A., Senior
Loan Participation Certificates*................ 7.750 03/15/06 137,500
400 Western Resources, Inc., Senior Notes............. 6.250 08/15/03 402,000
-----------
1,070,125
-----------
Total Corporate Obligations
(cost - $7,992,180)............................. 7,904,199
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 26.37%
FANNIE MAE - 5.40%
673 Fannie Mae........................................ 5.250-6.500 01/15/03-02/01/29 668,130
-----------
FREDDIE MAC - 2.05%
250 Freddie Mac....................................... 6.500 11/15/10 252,954
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 18.92%
2,336 Government National Mortgage Association.......... 6.000-7.000 12/06/05-06/15/28 2,340,939
-----------
Total U.S. Government Agency Obligations
(cost - $3,271,835)............................. 3,262,023
-----------
U.S. GOVERNMENT OBLIGATIONS - 6.64%
U.S. TREASURY BONDS - 2.33%
300 U.S. Treasury Bonds............................... 5.500 08/15/28 287,354
-----------
U.S. TREASURY NOTES - 4.31%
500 U.S. Treasury Notes............................... 6.500 10/15/06 533,041
-----------
Total U.S. Government Obligations
(cost - $838,011)............................... 820,395
-----------
Total Long-Term Debt Investments
(cost - $12,102,026)............................ 11,986,617
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
THE BEAR STEARNS FUNDS
INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 0.79%
INVESTMENT COMPANIES - 0.79%
21 Federated Automated Government Money Trust **..... $ 21
98,079 Federated Investors, Trust for Short-Term U.S.
Government Securities**......................... 98,079
-----------
Total Short-Term Investments
(cost - $98,100)................................ 98,100
-----------
Total Investments -- 97.70%
(cost - $12,200,126)............................ 12,084,717
Other assets in excess of liabilities -- 2.30%.... 284,609
-----------
Net Assets -- 100.00%............................. $12,369,326
-----------
-----------
</TABLE>
- ---------
* SEC Rule 144A security. Such securities are traded only
among qualified institutional buyers.
** Money market fund.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS -- 90.41%
UNITED STATES - 83.29%
AEROSPACE - DEFENSE - 1.68%
$ 500 BE Aerospace, Inc., Senior Subordinated Notes..... 9.500% 11/01/08 $ 535,000
750 Compass Aerospace Corp., Senior Subordinated
Notes*.......................................... 10.125 04/15/05 730,312
500 Telecommunications Techniques Co., LLC, Senior
Subordinated Notes, Company Guaranteed.......... 9.750 05/15/08 498,750
------------
1,764,062
------------
AIRLINES - 0.95%
1,000 Amtran, Inc., Senior Notes, Company Guaranteed.... 9.625 12/15/05 1,000,000
------------
ALTERNATIVE VIDEO PROVIDERS - 1.08%
250 21st Century Telecom Group, Inc., Senior Discount
Notes (2)....................................... 12.250 02/15/08 93,125
1,000 EchoStar DBS Corporation, Senior Notes*........... 9.375 02/01/09 1,040,000
------------
1,133,125
------------
AUTOMOBILE MANUFACTURING RELATED - 2.12%
750 Motors and Gears, Inc., Senior Notes, Series D.... 10.750 11/15/06 771,562
500 Prestolite Electric Incorporated, Senior Notes,
Company Guaranteed.............................. 9.625 02/01/08 492,500
1,000 Stanadyne Automotive Corp., Senior Subordinated
Notes, Series B, Company Guaranteed............. 10.250 12/15/07 955,000
------------
2,219,062
------------
BUILDING MATERIALS - 0.95%
1,000 Formica Corporation, Senior Subordinated Notes*... 10.875 03/01/09 997,500
------------
BUSINESS SERVICES - 0.49%
500 Mail-Well Corp., Senior Subordinated Notes*....... 8.750 12/15/08 517,500
------------
CELLULAR COMMUNICATIONS - 0.68%
1,000 Crown Castle International Corp., Senior Discount
Notes (2)....................................... 10.625 11/15/07 707,500
------------
CHEMICALS - 0.49%
500 Great Lakes Carbon Corporation, Senior
Subordinated Notes, Series B, Company Guaranteed
(3)............................................. 10.250 05/15/08 518,125
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
COMPETITIVE LOCAL EXCHANGE COMPANIES - 6.25%
$ 500 e.spire Communications, Inc., Senior Discount
Notes (2)....................................... 12.750% 04/01/06 $ 325,000
500 e.spire Communications, Inc., Senior Discount
Notes (2)....................................... 10.625 07/01/08 241,250
500 GST USA, Inc., Senior Discount Exchange Notes,
Company Guaranteed (2).......................... 13.875 12/15/05 367,500
1,000 Hyperion Telecommunications, Inc., Senior
Subordinated Notes*............................. 12.000 11/01/07 1,045,000
1,000 Intermedia Communications Inc., Senior Notes*..... 9.500 03/01/09 1,052,500
1,750 KMC Telecom Holdings, Inc., Senior Discount Notes
(2)............................................. 12.250 02/15/08 953,750
500 Logix Communications Enterprises, Inc., Senior
Notes........................................... 12.250 06/15/08 461,250
1,000 McLeodUSA Incorporated, Senior Notes*............. 8.125 02/15/09 1,000,000
750 Time Warner Telecom LLC and Time Warner Telecom
Inc., Senior Notes.............................. 9.750 07/15/08 802,500
500 WinStar Communications, Inc., Senior Subordinated
Cash-Pay Exchange Notes......................... 11.000 03/15/08 302,403
------------
6,551,153
------------
CONVENIENCE & DRUG RETAILERS - 1.00%
500 Duane Reade Inc., Senior Subordinated Notes,
Company Guaranteed.............................. 9.250 02/15/08 520,000
500 Phar-Mor, Inc., Senior Notes...................... 11.720 09/11/02 522,500
------------
1,042,500
------------
DATA & INTERNET SERVICES - 1.97%
1,000 Covad Communications Group, Inc., Senior Notes*... 12.500 02/15/09 1,002,500
1,000 PSINet Inc., Senior Notes, Series B............... 10.000 02/15/05 1,065,000
------------
2,067,500
------------
ENHANCED SERVICE MOBILE RADIOS & PERSONAL
COMMUNICATION SERVICES - 1.60%
1,300 Nextel Communications, Inc., Senior Serial
Redeemable Discount Notes (2)................... 9.950 02/15/08 919,750
1,300 Triton PCS, Inc., Senior Subordinated Discount
Notes, Company Guaranteed (2)................... 11.000 05/01/08 760,500
------------
1,680,250
------------
EQUIPMENT RENTAL - 0.71%
750 Anthony Crane Rental, L.P. and Anthony Crane
Capital Corporation, Senior Notes, Series B,
Company Guaranteed.............................. 10.375 08/01/08 746,250
------------
EXPLORATION & PRODUCTION - 1.23%
500 Abraxas Petroleum Corporation and Canadian Abraxas
Petroleum Limited, Senior Notes, Series D,
Company Guaranteed.............................. 11.500 11/01/04 300,000
1,000 Ocean Energy, Inc., Senior Subordinated Notes,
Series B, Company Guaranteed.................... 8.875 07/15/07 992,500
------------
1,292,500
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
FABRICATED GLASS, PLASTICS & FIBERS - 1.40%
$ 1,000 Globe Holdings, Inc., Senior Discount Notes,
Series B (2).................................... 14.000% 08/01/09 $ 350,000
500 Graham Packaging Company and GPC Capital Corp. I,
Senior Discount Notes, Series B (2)............. 10.750 01/15/09 341,875
750 Moll Industries, Inc., Senior Subordinated
Notes........................................... 10.500 07/01/08 652,500
500 SF Holdings Group, Inc., Senior Secured Discount
Notes, Series B (2)(5).......................... 12.750 03/15/08 123,750
------------
1,468,125
------------
FOOD, BEVERAGE & TOBACCO - 2.33%
500 North Atlantic Trading Company, Inc., Senior
Notes, Series B, Company Guaranteed............. 11.000 06/15/04 511,250
500 Packaged Ice, Inc., Senior Notes, Series B,
Company Guaranteed.............................. 9.750 02/01/05 512,500
1,050 Purina Mills, Inc., Senior Subordinated Notes..... 9.000 03/15/10 871,500
750 Richmont Marketing Specialists, Senior
Subordinated Notes*............................. 10.125 12/15/07 547,500
------------
2,442,750
------------
FOREST - PAPER PRODUCTS - 2.12%
500 Bear Island Paper Company, L.L.C. and Bear Island
Finance Company II, Senior Secured Notes, Series
B............................................... 10.000 12/01/07 499,375
500 MAXXAM Group Holdings Inc., Senior Secured Notes,
Series B, Company Guaranteed.................... 12.000 08/01/03 536,250
425 Packaging Corp. of America, Senior Subordinated
Notes*.......................................... 9.625 04/01/09 425,000
750 Republic Group Incorporated, Senior Subordinated
Notes........................................... 9.500 07/15/08 760,312
------------
2,220,937
------------
GAMING - 4.54%
1,000 Boyd Gaming Corporation, Senior Subordinated
Notes........................................... 9.500 07/15/07 1,030,000
1,000 Hollywood Park, Inc., Senior Subordinated
Notes*.......................................... 9.250 02/15/07 1,027,500
750 Lady Luck Gaming Corp., 1st Mortgage.............. 11.875 03/01/01 763,125
1,000 Mohegan Tribal Gaming Authority, Senior
Subordinated Notes*............................. 8.750 01/01/09 1,043,750
1,000 Trump Atlantic City Associates and Trump Atlantic
City Funding, Inc., 1st Mortgage Notes, Company
Guaranteed...................................... 11.250 05/01/06 895,000
------------
4,759,375
------------
HEALTHCARE - 1.01%
1,050 Team Health Inc., Senior Subordinated Notes*...... 12.000 03/15/09 1,060,500
------------
HOME BUILDERS - 1.18%
500 Del Webb Corporation, Senior Subordinated
Debentures...................................... 9.375 05/01/09 485,000
750 Toll Corp., Senior Subordinated Notes, Company
Guaranteed...................................... 8.125 02/01/09 753,750
------------
1,238,750
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
INDUSTRIAL PRODUCTS - 4.73%
$ 1,000 Allied Waste North America, Inc., Senior Notes,
Series B, Company Guaranteed.................... 7.875% 01/01/09 $ 977,500
750 AMTROL Inc., Senior Subordinated Notes............ 10.625 12/31/06 730,312
750 Aqua-Chem, Inc., Senior Subordinated Notes........ 11.250 07/01/08 660,000
250 Grove Holdings LLC and Grove Holdings Capital,
Inc., Senior Discount Debentures (2)............ 11.625 05/01/09 91,250
500 Grove Worldwide LLC and Grove Holdings Capital,
Inc., Senior Subordinated Notes................. 9.250 05/01/08 416,250
750 Roller Bearing Company of America, Inc., Senior
Subordinated Notes, Series B, Company
Guaranteed...................................... 9.625 06/15/07 718,125
500 Steel Heddle Mfg. Co., Senior Subordinated Notes,
Series B, Company Guaranteed.................... 10.625 06/01/08 350,000
500 Thermadyne Holdings Corporation, Senior Discount
Debentures (2).................................. 12.500 06/01/08 245,000
250 Thermadyne Mfg. LLC and Thermadyne Capital Corp.,
Senior Subordinated Notes, Company Guaranteed... 9.875 06/01/08 235,000
500 Tokheim Corporation, Senior Subordinated Notes*... 11.375 08/01/08 531,250
------------
4,954,687
------------
INTERNATIONAL CABLE - 0.65%
1,000 NTL Incorporated, Senior Notes* (2)............... 12.375 10/01/08 685,000
------------
LONG DISTANCE TELEPHONE SERVICES - 3.94%
750 FaciliCom International, Inc., Senior Notes,
Series B........................................ 10.500 01/15/08 581,250
1,050 Global Crossing Holdings Ltd., Senior Notes,
Company Guaranteed.............................. 9.625 05/15/08 1,173,375
500 Global TeleSystems Group, Inc., Senior Notes...... 9.875 02/15/05 485,000
1,050 Level 3 Communications, Inc., Senior Discount
Notes* (2)...................................... 10.500 12/01/08 661,500
750 Primus Telecommunications Group, Incorporated,
Senior Notes, Series B.......................... 9.875 05/15/08 716,250
500 Viatel, Inc., Senior Notes........................ 11.250 04/15/08 517,500
------------
4,134,875
------------
MOTION PICTURE EXHIBITION - 1.86%
1,000 Loews Cineplex Entertainment Corporation, Senior
Subordinated Notes.............................. 8.875 08/01/08 998,750
500 Regal Cinemas, Inc., Senior Subordinated Notes.... 9.500 06/01/08 511,250
500 United Artists Theatre Company, Senior
Subordinated Notes, Series B.................... 9.750 04/15/08 435,000
------------
1,945,000
------------
NORTH AMERICAN CABLE SERVICES - 1.82%
500 Adelphia Communications Corporation, Senior Notes,
Series B........................................ 9.875 03/01/07 552,500
500 Charter Communications Holdings LLC and Charter
Communications Holdings Capital Corp., Senior
Discount Notes* (2)............................. 9.920 04/01/11 323,125
1,000 Charter Communications Holdings LLC and Charter
Communications Holdings Capital Corp., Senior
Notes*.......................................... 8.625 04/01/09 1,028,750
------------
1,904,375
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
OIL SERVICES - 2.30%
$ 1,000 Parker Drilling Company, Senior Notes, Series D,
Company Guaranteed.............................. 9.750% 11/15/06 $ 832,500
1,000 R&B Falcon Corporation, Senior Notes*............. 12.250 03/15/06 1,050,000
500 RBF Finance Co., Company Guaranteed*.............. 11.000 03/15/06 528,750
------------
2,411,250
------------
OTHER CONSUMER CYCLICALS - 1.85%
750 Boyds Collection Ltd., Senior Subordinated
Notes*.......................................... 9.000 05/15/08 801,562
500 Comforce Operating Inc., Senior Notes, Series B... 12.000 12/01/07 497,500
750 Hedstrom Corporation and Hedstrom Holdings, Inc.,
Senior Subordinated Notes, Company Guaranteed... 10.000 06/01/07 637,500
------------
1,936,562
------------
OTHER CONSUMER NON-CYCLICALS - 5.51%
750 AKI, Inc., Senior Notes........................... 10.500 07/01/08 714,375
750 AP Holdings, Inc., Senior Discount Notes (2)...... 11.250 03/15/08 420,938
750 Bell Sports, Inc., Senior Subordinated Notes,
Series B, Company Guaranteed.................... 11.000 08/15/08 772,500
500 Evenflo Company, Inc., Senior Notes*.............. 11.750 08/15/06 510,000
750 French Fragrances, Inc., Senior Notes, Series B... 10.375 05/15/07 757,500
250 French Fragrances, Inc., Senior Notes, Series D,
Company Guaranteed.............................. 10.375 05/15/07 252,500
750 Styling Technology Corporation, Senior
Subordinated Notes, Company Guaranteed.......... 10.875 07/01/08 730,313
1,000 True Temper Sports Inc., Senior Subordinated
Notes*.......................................... 10.875 12/01/08 930,000
750 Windmere-Durable Holdings, Inc., Senior
Subordinated Notes.............................. 10.000 07/31/08 683,438
------------
5,771,564
------------
OTHER FINANCE - 2.79%
1,000 Capital One Financial Corporation, Notes.......... 7.125 08/01/08 968,750
750 Delta Financial Corporation, Senior Notes, Company
Guaranteed...................................... 9.500 08/01/04 547,500
1,000 Metris Companies Inc., Senior Notes, Company
Guaranteed...................................... 10.000 11/01/04 1,012,500
500 Ocwen Asset Investment Corp., Senior Redeemable
Notes........................................... 11.500 07/01/05 395,000
------------
2,923,750
------------
OTHER MEDIA - 1.63%
500 Production Resource Group, L.L.C. and PRG Finance
Corporation, Senior Subordinated Notes.......... 11.500 01/15/08 500,000
750 Px Escrow Corp., Senior Discount Notes (2)........ 9.625 02/01/06 444,375
750 SFX Entertainment, Inc., Senior Subordinated
Notes, Series B, Company Guaranteed............. 9.125 02/01/08 766,875
------------
1,711,250
------------
OUTDOOR ADVERTISING - 0.77%
750 Outdoor Systems, Inc., Senior Subordinated Notes,
Company Guaranteed.............................. 8.875 06/15/07 804,375
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
PAGING SERVICES - 0.27%
$ 750 PageMart Wireless, Inc., Senior Subordinated
Discount Exchange Notes* (2).................... 11.250% 02/01/08 $ 285,000
------------
PUBLISHING - 1.82%
1,000 Big Flower Press Holdings, Senior Subordinated
Notes*.......................................... 8.625 12/01/08 1,010,000
500 Liberty Group Operating, Inc., Senior Subordinated
Notes, Company Guaranteed....................... 9.375 02/01/08 506,250
250 Liberty Group Publishing, Inc., Senior Discount
Debentures (2).................................. 11.625 02/01/09 134,688
250 Sullivan Graphics Inc., Senior Subordinated
Notes........................................... 12.750 08/01/05 257,500
------------
1,908,438
------------
RADIO BROADCASTING - 3.28%
750 Chancellor Media Corp., Senior Notes*............. 8.000 11/01/08 783,750
1,000 Citadel Broadcasting Company, Senior Subordinated
Notes, Company Guaranteed....................... 9.250 11/15/08 1,072,500
250 Cumulus Media Inc., Senior Subordinated Notes,
Company Guaranteed.............................. 10.375 07/01/08 270,000
1,300 Emmis Communications Corp., Senior Subordinated
Notes*.......................................... 8.125 03/15/09 1,316,250
------------
3,442,500
------------
RECREATIONAL SERVICES - 0.50%
750 Premier Parks Inc., Senior Discount Notes (2)..... 10.000 04/01/08 522,187
------------
RETAILERS - 4.14%
500 Advance Holding Corporation, Senior Discount
Debentures, Series B (2)........................ 12.875 04/15/09 307,500
500 Advance Store Company, Incorporated, Senior
Subordinated Notes, Series B, Company
Guaranteed...................................... 10.250 04/15/08 510,000
750 Big 5 Corp., Senior Notes, Series B............... 10.875 11/15/07 761,250
750 CEX Holdings, Inc., Senior Subordinated Notes,
Series B, Company Guaranteed.................... 9.625 06/01/08 705,000
1,000 Hollywood Entertainment Corporation, Senior
Subordinated Notes, Series B.................... 10.625 08/15/04 1,002,500
1,000 Rent-A-Center, Inc., Senior Subordinated Notes,
Company Guaranteed.............................. 11.000 08/15/08 1,050,000
------------
4,336,250
------------
SATELLITES - 0.24%
500 AMSC Acquisition Company, Inc., Senior Notes,
Series B, Company Guaranteed.................... 12.250 04/01/08 250,000
------------
STEEL - METALS - MINING - 3.66%
500 Anker Coal Group Inc., Senior Notes, Series B..... 9.750 10/01/07 265,000
900 California Steel Industries, Senior Notes*........ 8.500 04/01/09 913,500
750 Metal Management Inc., Senior Subordinated Notes,
Company Guaranteed.............................. 10.000 05/15/08 487,500
500 P&L Coal Holdings Corporation, Senior Subordinated
Notes, Series B................................. 9.625 05/15/08 524,375
750 Renco Steel Holdings, Inc., Senior Secured Notes,
Series B........................................ 10.875 02/01/05 677,813
1,000 WHX Corporation, Senior Exchange Notes............ 10.500 04/15/05 970,000
------------
3,838,188
------------
SUPERMARKETS & DISTRIBUTORS - 0.97%
1,000 Jitney-Jungle Stores of America, Inc., Senior
Subordinated Notes, Company Guaranteed.......... 10.375 09/15/07 1,020,000
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
TECHNOLOGY - 3.07%
$ 750 American Banknote Corporation, Senior Subordinated
Notes, Series B, Company Guaranteed............. 11.250% 12/01/07 $ 435,000
500 Anacomp, Inc., Senior Subordinated Notes, Series
D............................................... 10.875 04/01/04 522,500
1,050 Fairchild Semiconductor Corp., Senior Subordinated
Notes*.......................................... 10.375 10/01/07 1,065,750
750 IPC Information Systems, Inc., Senior Discount
Notes (2)....................................... 10.875 05/01/08 472,500
750 Viasystems, Inc., Senior Subordinated Notes....... 9.750 06/01/07 718,125
------------
3,213,875
------------
TELEVISION BROADCASTING - 2.54%
710 ACME Television, LLC and ACME Finance Corporation,
Senior Discount Notes, Series B, Company
Guaranteed (2).................................. 10.875 09/30/04 605,275
1,000 Sinclair Broadcast Group, Inc., Senior
Subordinated Notes, Company Guaranteed.......... 8.750 12/15/07 1,020,000
1,000 Young Broadcasting Inc., Senior Subordinated
Notes, Series B, Company Guaranteed............. 8.750 06/15/07 1,032,500
------------
2,657,775
------------
TEXTILES - APPAREL - 1.17%
450 Consoltex Group Inc., Senior Subordinated Notes,
Series B........................................ 11.000 10/01/03 464,063
750 Pillowtex Corporation, Senior Subordinated Notes,
Series B, Company Guaranteed.................... 9.000 12/15/07 759,375
------------
1,223,438
------------
Total United States (cost - $91,420,681).......... 87,307,803
------------
AUSTRALIA - 1.58%
STEEL - METALS - MINING - 1.58%
1,000 Great Central Mines Ltd., Senior Notes............ 8.875 04/01/08 980,000
750 Murrin Murrin Holdings PTY, Senior Yankee Notes
(1)............................................. 9.375 08/31/07 677,812
------------
Total Australia (cost - $1,726,369)............... 1,657,812
------------
CANADA - 1.97%
AEROSPACE - DEFENSE - 0.64%
750 Derlan Manufacturing, Senior Yankee Notes......... 10.000 01/15/07 675,000
------------
FOREST - PAPER PRODUCTS - 0.40%
500 Repap New Brunswick, Senior Yankee Notes.......... 10.625 04/15/05 417,500
------------
STEEL - METALS - MINING - 0.93%
1,000 Algoma Steel Inc., 1st Mortgage Yankee Notes...... 12.375 07/15/05 975,000
------------
Total Canada (cost - $2,149,148).................. 2,067,500
------------
ISRAEL - 0.54%
LONG DISTANCE TELEPHONE SERVICES - 0.54%
1,000 Barak I.T.C., Senior Discount Yankee Notes, Series
B (2) (cost - $662,977)......................... 12.500 11/15/07 561,250
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S) RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
SWEDEN - 0.55%
FREIGHT - CONTAINERS - SHIPPING - 0.55%
$ 750 Stena Line AB, Senior Yankee Notes (cost -
$752,688)....................................... 10.625% 06/01/08 $ 578,437
------------
UNITED KINGDOM - 2.48%
LONG DISTANCE TELEPHONE SERVICES - 0.75%
750 Esprit Telecom Group plc, Senior Yankee Notes..... 10.875 06/15/08 791,250
------------
PUBLISHING - 0.74%
750 Regional Independent Media Group plc, Senior
Yankee Notes.................................... 10.500 07/01/08 778,125
------------
RETAILERS - 0.99%
1,000 HMV Media Group plc, Senior Subordinated Yankee
Notes, Series B................................. 10.250 05/15/08 1,035,000
------------
Total United Kingdom (cost - $2,504,200).......... 2,604,375
------------
Total Long-Term Debt Investments (cost -
$99,216,063).................................... 94,777,177
------------
<CAPTION>
SHARES
- ----------
<C> <S> <C> <C> <C>
LONG-TERM EQUITY INVESTMENTS -- 3.12%
PREFERRED STOCKS - UNITED STATES - 3.12%
ALTERNATIVE VIDEO PROVIDERS - 0.12%
287 21st Century Telecom Group, Inc., Senior
Cumulative Exchangeable Preferred Stock (3)..... 13.750 -- 124,490
------------
CELLULAR COMMUNICATIONS - 0.25%
280 Dobson Communications Corporation, Senior
Exchangeable Preferred Stock (3)................ 12.250 -- 258,650
------------
COMPETITIVE LOCAL EXCHANGE COMPANIES - 0.18%
250 WinStar Communications, Inc., Senior Cumulative
Exchangeable Preferred Stock,
Series C........................................ 14.250 -- 188,026
------------
FOREST - PAPER PRODUCTS - 0.29%
300 Packaging Corp. of America* (3)................... 12.375 -- 300,000
------------
LONG DISTANCE TELEPHONE SERVICES - 0.04%
260 Viatel, Inc., Series A (3)........................ 10.000 -- 41,600
------------
NORTH AMERICAN CABLE SERVICES - 0.27%
2,500 Adelphia Communications Corporation, Cumulative
Exchangeable Preferred Stock, Series B (3)...... 13.000 -- 281,964
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
INTEREST MATURITY
SHARES RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM EQUITY INVESTMENTS (CONTINUED)
RADIO BROADCASTING - 0.56%
534 Cumulus Media Inc., Cumulative Exchangeable
Redeemable Preferred Stock, Series A............ 13.750% -- $ 584,217
------------
SUPERMARKETS & DISTRIBUTORS - 0.27%
836 Nebco Evans Holding Company, Senior Redeemable
Exchangeable Preferred Stock (3)................ 11.250 -- 284,621
------------
TELEVISION BROADCASTING - 0.50%
750 Benedek Communications Corporation, Senior
Exchangeable Preferred Stock (3)................ 11.500 -- 530,625
0 Paxson Communications Corporation (3)............. 12.500 -- 227
------------
530,852
------------
TEXTILES - APPAREL - 0.64%
7,960 Cluett American Corp., Senior Exchangeable
Preferred Stock, Series B....................... 12.500 -- 672,298
------------
Total Long-Term Equity Investments (cost -
$4,344,795)..................................... 3,266,718
------------
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 3,750
250 MGC Communications Inc.* (4)...................... -- 10/01/04 188
------------
3,938
------------
FABRICATED GLASS, PLASTICS & FIBERS - 0.00%
1,000 Globe Holdings, Inc.* (4)......................... -- 08/01/09 1,000
------------
SATELLITES - 0.00%
500 American Mobile Satellite Corporation* (4)........ -- 04/01/08 1,645
------------
TECHNOLOGY - 0.00%
750 American Banknote Corporation* (4)................ -- 12/01/02 8
------------
Total Warrants (cost - $10,000)................... 7,091
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
THE BEAR STEARNS FUNDS
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 1.89%
INVESTMENT COMPANIES - 1.89%
255 Federated Automated Government Money Trust **..... $ 255
1,986,773 Federated Investors, Trust for Short-Term U.S.
Government Securities**......................... 1,986,773
------------
Total Short-Term Investments (cost -
$1,987,028)..................................... 1,987,028
------------
Total Investments -- 95.43%
(cost - $105,557,886)........................... 100,038,014
Other assets in excess of liabilities -- 4.57%.... 4,788,258
------------
Net Assets -- 100.00%............................. $104,826,272
------------
------------
</TABLE>
- ---------
* SEC Rule 144A security. Such securities are traded only
among qualified institutional buyers.
** Money market fund.
(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) The Portfolio owns 1,000 Class C shares of common stock with
no market value.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
THE BEAR STEARNS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1999
<TABLE>
<CAPTION>
EMERGING MARKETS INCOME HIGH YIELD TOTAL
DEBT PORTFOLIO PORTFOLIO RETURN PORTFOLIO
---------------- -------------- ----------------
<S> <C> <C> <C>
ASSETS
Investments, at value (cost - $34,137,742,
$12,200,126 and $105,557,886, respectively)... $ 31,531,836 $ 12,084,717 $100,038,014
Receivable for investments sold................. 525,028 282,839 5,866,102
Interest and dividends receivable............... 1,222,118 141,002 2,376,155
Receivable for Portfolio shares sold............ 17,575 46,438 993,324
Receivable from investment manager/adviser...... 152,398 29,477 15,212
Receivable for open forward foreign currency
exchange contracts............................ 20,093 -- --
Deferred organization expenses and other
assets........................................ 24,025 44,276 79,448
---------------- -------------- ----------------
Total assets.............................. 33,493,073 12,628,749 109,368,255
---------------- -------------- ----------------
LIABILITIES
Payable for investments purchased............... 22,000 151,645 3,668,625
Dividends payable............................... 102,035 14,114 312,512
Payable for Portfolio shares repurchased........ 60,135 17,965 285,231
Distribution and service fee payable (Class A, B
and C shares)................................. 35,500 11,918 157,292
Custodian fee payable........................... 19,732 726 3,232
Administration fee payable...................... -- 1,712 13,028
Accrued expenses................................ 103,346 61,343 102,063
---------------- -------------- ----------------
Total liabilities......................... 342,748 259,423 4,541,983
---------------- -------------- ----------------
NET ASSETS
Capital stock, $0.001 par value (unlimited
shares of beneficial interest authorized)..... 3,580 1,018 9,229
Paid-in capital................................. 39,763,935 12,490,703 111,890,845
Undistributed net investment income............. 78,308 -- 15,000
Accumulated net realized loss from investments
and foreign currency related transactions, if
any........................................... (4,109,691) (6,986) (1,568,930)
Net unrealized depreciation on investments and
foreign currency related transactions, if
any........................................... (2,585,807) (115,409) (5,519,872)
---------------- -------------- ----------------
Net assets................................ $ 33,150,325 $ 12,369,326 $104,826,272
---------------- -------------- ----------------
---------------- -------------- ----------------
CLASS A
Net assets...................................... $ 29,526,404 $ 4,774,503 $ 55,367,316
---------------- -------------- ----------------
Shares of beneficial interest outstanding....... 3,186,243 393,057 4,874,843
---------------- -------------- ----------------
Net asset value per share....................... $9.27 $12.15 $11.36
---------------- -------------- ----------------
---------------- -------------- ----------------
Maximum offering price per share (net asset
value plus sales charge of 4.50%* of the
offering price)............................... $9.71 $12.72 $11.90
---------------- -------------- ----------------
---------------- -------------- ----------------
CLASS B
Net assets...................................... $ 1,458,986 $ 1,121,450 $ 23,394,950
---------------- -------------- ----------------
Shares of beneficial interest outstanding....... 158,688 92,317 2,059,107
---------------- -------------- ----------------
Net asset value and offering price per
share**....................................... $9.19 $12.15 $11.36
---------------- -------------- ----------------
---------------- -------------- ----------------
CLASS C
Net assets...................................... $ 2,164,935 $ 2,067,054 $ 26,064,006
---------------- -------------- ----------------
Shares of beneficial interest outstanding....... 235,244 170,161 2,295,340
---------------- -------------- ----------------
Net asset value and offering price per
share**....................................... $9.20 $12.15 $11.36
---------------- -------------- ----------------
---------------- -------------- ----------------
CLASS Y
Net assets...................................... -- $ 4,406,319 --
---------------- -------------- ----------------
Shares of beneficial interest outstanding....... -- 362,731 --
---------------- -------------- ----------------
Net asset value, offering and redemption price
per share..................................... -- $12.15 --
---------------- -------------- ----------------
---------------- -------------- ----------------
</TABLE>
- ----------
* 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.
29
<PAGE>
THE BEAR STEARNS FUNDS
STATEMENTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
EMERGING MARKETS INCOME HIGH YIELD TOTAL
DEBT PORTFOLIO PORTFOLIO RETURN PORTFOLIO
---------------- -------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest........................................ $ 4,499,978 $ 753,344 $ 7,131,016
Dividends....................................... -- -- 480,183
---------------- -------------- ----------------
4,499,978 753,344 7,611,199
---------------- -------------- ----------------
EXPENSES
Investment management/advisory fees............. 423,832 50,882 441,823
Legal and auditing fees......................... 239,174 46,497 59,550
Accounting fees................................. 92,305 103,612 105,728
Distribution and service fees - Class A......... 113,931 15,836 138,476
Distribution and service fees - Class B......... 12,295 4,599 148,999
Distribution and service fees - Class C......... 33,433 17,360 183,211
Transfer agent fees and expenses................ 66,759 103,461 86,700
Federal and state registration fees............. 72,004 41,504 101,514
Administration fees............................. -- 16,960 110,456
Reports and notices to shareholders............. 31,208 3,834 49,331
Custodian fees and expenses..................... 36,801 9,501 26,985
Amortization of organization expenses........... 4,887 12,961 12,515
Trustees' fees and expenses..................... 15,700 3,809 4,475
Insurance expenses.............................. 6,319 6,798 6,298
Other........................................... 3,100 1,066 10,704
---------------- -------------- ----------------
Total expenses before waivers and related
reimbursements............................ 1,151,748 438,680 1,486,765
Less: waivers and related reimbursements.... (472,343) (349,943) (538,078)
---------------- -------------- ----------------
Total expenses after waivers and related
reimbursements............................ 679,405 88,737 948,687
---------------- -------------- ----------------
Net investment income........................... 3,820,573 664,607 6,662,512
---------------- -------------- ----------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized gain/(loss) from:
Investments................................... (4,070,025) 13,596 (1,568,005)
Foreign currency related transactions......... 5,674 -- --
Net change in unrealized
appreciation/(depreciation) on:
Investments................................... (5,260,760) (96,146) (6,079,729)
Foreign currency related transactions......... (103,039) -- --
---------------- -------------- ----------------
Net realized and unrealized loss on
investments................................... (9,428,150) (82,550) (7,647,734)
---------------- -------------- ----------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................. $ (5,607,577) $ 582,057 $ (985,222)
---------------- -------------- ----------------
---------------- -------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
THE BEAR STEARNS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
EMERGING MARKETS INCOME
DEBT PORTFOLIO PORTFOLIO HIGH YIELD
--------------------------- --------------------------- TOTAL RETURN PORTFOLIO
-----------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
FISCAL YEARS FISCAL YEARS FISCAL YEAR JANUARY 2,
ENDED MARCH 31, ENDED MARCH 31, ENDED 1998*
--------------------------- --------------------------- MARCH 31, THROUGH
1999 1998 1999 1998 1999 MARCH 31, 1998
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income............ $ 3,820,573 $ 2,901,116 $ 664,607 $ 1,288,539 $ 6,662,512 $ 380,947
Net realized gain/(loss) from
investments and foreign
currency related transactions,
if any......................... (4,064,351) 3,624,769 13,596 268,245 (1,568,005) 382,337
Net change in unrealized
appreciation/ (depreciation) on
investments and foreign
currency related transactions,
if any......................... (5,363,799) 140,932 (96,146) 281,692 (6,079,729) 559,857
------------ ------------ ------------ ------------ ------------ --------------
Net increase/(decrease) in net
assets resulting from
operations..................... (5,607,577) 6,666,817 582,057 1,838,476 (985,222) 1,323,141
------------ ------------ ------------ ------------ ------------ --------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A shares................. (3,336,429) (2,590,726) (266,618) (194,516) (3,726,455) (213,477)
Class B shares................. (137,132) (9,337) (24,193) (111) (1,313,414) (58,135)
Class C shares................. (321,807) (281,260) (91,424) (70,620) (1,607,643) (109,335)
Class Y shares................. -- -- (282,372) (1,023,292) -- --
------------ ------------ ------------ ------------ ------------ --------------
(3,795,368) (2,881,323) (664,607) (1,288,539) (6,647,512) (380,947)
------------ ------------ ------------ ------------ ------------ --------------
Net realized capital gains
Class A shares................. (555,419) (833,408) (80,365) (4,235) (192,941) --
Class B shares................. (27,661) -- (13,288) -- (86,843) --
Class C shares................. (57,010) (96,366) (29,333) (2,042) (103,478) --
Class Y shares................. -- -- (69,012) (25,301) -- --
------------ ------------ ------------ ------------ ------------ --------------
(640,090) (929,774) (191,998) (31,578) (383,262) --
------------ ------------ ------------ ------------ ------------ --------------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of
shares......................... 16,138,678 10,697,786 11,220,359 6,734,676 100,285,539 35,248,122
Cost of shares repurchased....... (14,152,454) (13,467,125) (7,794,237) (17,586,264) (26,732,714) (754,186)
Shares issued in reinvestment of
dividends...................... 2,875,768 2,477,379 531,644 1,148,623 3,677,043 176,234
------------ ------------ ------------ ------------ ------------ --------------
Net increase/(decrease) in net
assets derived from shares of
beneficial interest
transactions................... 4,861,992 (291,960) 3,957,766 (9,702,965) 77,229,868 34,670,170
------------ ------------ ------------ ------------ ------------ --------------
Total increase/(decrease) in net
assets......................... (5,181,043) 2,563,760 3,683,218 (9,184,606) 69,213,872 35,612,364
NET ASSETS
Beginning of period.............. 38,331,368 35,767,608 8,686,108 17,870,714 35,612,400 36
------------ ------------ ------------ ------------ ------------ --------------
End of period**.................. $ 33,150,325 $ 38,331,368 $ 12,369,326 $ 8,686,108 $104,826,272 $35,612,400
------------ ------------ ------------ ------------ ------------ --------------
------------ ------------ ------------ ------------ ------------ --------------
</TABLE>
- ---------
* Commencement of investment operations.
** Emerging Markets Debt Portfolio, includes undistributed net
investment income of $78,308 and $37,723, respectively. High
Yield Total Return Portfolio, includes undistributed net
investment income of $15,000 for the fiscal year ended March
31, 1999.
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------
Contained below is per share operating performance data for each class of shares
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each period indicated. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET NET
ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED
OF PERIOD INCOME *(1) INVESTMENTS *(2) INCOME CAPITAL GAINS
----------------------- ----------- ----------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
EMERGING MARKETS DEBT
PORTFOLIO
CLASS A
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 fiscal year
ended March 31,
1999................. 11.95 0.98 (2.60) (0.97) (0.17)
For the period January
12, 1998*** through
March 31, 1998....... 11.33 0.21 0.61 (0.20) --
CLASS C
For the fiscal year
ended March 31,
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) --
INCOME PORTFOLIO
CLASS A
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 fiscal year
ended March 31,
1999................. 12.37 0.65 (0.03) (0.65) (0.19)
For the period February
2, 1998*** through
March 31, 1998....... 12.47 0.10 (0.10) (0.10) --
CLASS C
For the fiscal year
ended March 31,
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 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 fiscal year
ended March 31,
1999................. 12.73 1.11 (1.32) (1.11) (0.05)
For the period January
2, 1998** through
March 31, 1998....... 12.00 0.26 0.73 (0.26) --
CLASS B
For the fiscal year
ended March 31,
1999................. 12.73 1.04 (1.32) (1.04) (0.05)
For the period January
2, 1998** through
March 31, 1998....... 12.00 0.24 0.73 (0.24) --
CLASS C
For the fiscal year
ended March 31,
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) --
</TABLE>
- ----------
* 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 reimbursements.
(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 asset
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.
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
<TABLE>
<CAPTION>
NET
ASSET NET ASSETS, RATIO OF
VALUE, TOTAL END OF PERIOD RATIO OF NET INVESTMENT
END OF INVESTMENT (000'S EXPENSES TO INCOME TO
PERIOD RETURN(3) OMITTED) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1)
---------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
EMERGING MARKETS DEBT
PORTFOLIO
CLASS A
For the fiscal year
ended March 31,
1999................. $ 9.27 (12.40)% $29,526 1.75% 10.38%
For the fiscal year
ended March 31,
1998................. 12.00 19.31 33,448 1.75 7.70
For the fiscal year
ended March 31,
1997................. 11.14 33.48 33,185 2.00 7.95
For the fiscal year
ended March 31,
1996................. 9.02 46.13 28,860 2.00 10.64
For the fiscal year
ended March 31,
1995................. 6.90 (13.07) 28,049 2.00 8.86
For the period May 3,
1993** through March
31, 1994............. 8.98 0.36 45,691 2.00(5) 7.24(5)
CLASS B
For the fiscal year
ended March 31,
1999................. 9.19 (13.08) 1,459 2.40 9.73
For the period January
12, 1998*** through
March 31, 1998....... 11.95 7.29(4) 566 2.40(5) 7.13(4)(5)
CLASS C
For the fiscal year
ended March 31,
1999................. 9.20 (12.99) 2,165 2.40 9.73
For the fiscal year
ended March 31,
1998................. 11.95 18.66 4,317 2.40 7.31
For the fiscal year
ended March 31,
1997................. 11.14 32.97 2,583 2.40 7.59
For the period July 26,
1995*** through March
31, 1996............. 9.04 25.45(4) 202 2.40(5) 8.72(4)(5)
INCOME PORTFOLIO
CLASS A
For the fiscal year
ended March 31,
1999................. 12.15 5.77 4,775 0.80 5.83
For the fiscal year
ended March 31,
1998................. 12.37 9.43 2,926 0.80 6.13
For the fiscal year
ended March 31,
1997................. 12.03 4.40 3,367 0.80 5.99
For the period April 5,
1995** through March
31, 1996............. 12.26 8.54 4,467 0.80(5) 5.76(5)
CLASS B
For the fiscal year
ended March 31,
1999................. 12.15 5.09 1,121 1.45 5.16
For the period February
2, 1998*** through
March 31, 1998....... 12.37 (0.04)(4) 18 1.45(5) 5.22(4)(5)
CLASS C
For the fiscal year
ended March 31,
1999................. 12.15 5.08 2,067 1.45 5.28
For the fiscal year
ended March 31,
1998................. 12.37 8.92 1,403 1.28 5.60
For the fiscal year
ended March 31,
1997................. 12.03 3.99 1,018 1.20 5.57
For the period April 5,
1995** through March
31, 1996............. 12.26 8.13 1,775 1.25(5) 5.38(5)
CLASS Y
For the fiscal year
ended March 31,
1999................. 12.15 6.13 4,406 0.45 6.27
For the fiscal year
ended March 31,
1998................. 12.37 9.81 4,339 0.45 6.39
For the fiscal year
ended March 31,
1997................. 12.03 4.77 13,486 0.45 6.34
For the period
September 8, 1995***
through March 31,
1996................. 12.26 2.92(4) 12,199 0.45(5) 5.93(4)(5)
HIGH YIELD TOTAL RETURN
PORTFOLIO
CLASS A
For the fiscal year
ended March 31,
1999................. 11.36 (1.57) 55,367 1.00 9.37
For the period January
2, 1998** through
March 31, 1998....... 12.73 8.30 18,301 1.00(5) 9.14(5)
CLASS B
For the fiscal year
ended March 31,
1999................. 11.36 (2.21) 23,395 1.65 8.76
For the period January
2, 1998** through
March 31, 1998....... 12.73 8.13 6,013 1.65(5) 8.46(5)
CLASS C
For the fiscal year
ended March 31,
1999................. 11.36 (2.21) 26,064 1.65 8.73
For the period January
2, 1998** through
March 31, 1998....... 12.73 8.13 11,298 1.65(5) 8.46(5)
<CAPTION>
INCREASE/(DECREASE)
REFLECTED IN
EXPENSE RATIOS AND
NET INVESTMENT INCOME PORTFOLIO
DUE TO WAIVERS AND TURNOVER
RELATED REIMBURSEMENTS RATE
---------------------- ---------
<S> <C> <C>
EMERGING MARKETS DEBT
PORTFOLIO
CLASS A
For the fiscal year
ended March 31,
1999................. 1.28% 82.47%
For the fiscal year
ended March 31,
1998................. 1.01 128.91
For the fiscal year
ended March 31,
1997................. 0.80 223.41
For the fiscal year
ended March 31,
1996................. 1.18 266.46
For the fiscal year
ended March 31,
1995................. 0.53 35.01
For the period May 3,
1993** through March
31, 1994............. 0.33(5) 100.85
CLASS B
For the fiscal year
ended March 31,
1999................. 1.43 82.47
For the period January
12, 1998*** through
March 31, 1998....... 2.25(4)(5) 128.91
CLASS C
For the fiscal year
ended March 31,
1999................. 1.16 82.47
For the fiscal year
ended March 31,
1998................. 1.05 128.91
For the fiscal year
ended March 31,
1997................. 0.64 223.41
For the period July 26,
1995*** through March
31, 1996............. 3.42(4)(5) 266.46
INCOME PORTFOLIO
CLASS A
For the fiscal year
ended March 31,
1999................. 2.98 107.21
For the fiscal year
ended March 31,
1998................. 1.86 244.78
For the fiscal year
ended March 31,
1997................. 1.73 262.95
For the period April 5,
1995** through March
31, 1996............. 2.87(5) 107.35
CLASS B
For the fiscal year
ended March 31,
1999................. 2.81 107.21
For the period February
2, 1998*** through
March 31, 1998....... 0.48(4)(5) 244.78
CLASS C
For the fiscal year
ended March 31,
1999................. 3.18 107.21
For the fiscal year
ended March 31,
1998................. 1.80 244.78
For the fiscal year
ended March 31,
1997................. 1.74 262.95
For the period April 5,
1995** through March
31, 1996............. 2.95(5) 107.35
CLASS Y
For the fiscal year
ended March 31,
1999................. 3.23 107.21
For the fiscal year
ended March 31,
1998................. 1.78 244.78
For the fiscal year
ended March 31,
1997................. 1.73 262.95
For the period
September 8, 1995***
through March 31,
1996................. 2.89(4)(5) 107.35
HIGH YIELD TOTAL RETURN
PORTFOLIO
CLASS A
For the fiscal year
ended March 31,
1999................. 0.74 101.75
For the period January
2, 1998** through
March 31, 1998....... 1.67(5) 139.61
CLASS B
For the fiscal year
ended March 31,
1999................. 0.73 101.75
For the period January
2, 1998** through
March 31, 1998....... 1.68(5) 139.61
CLASS C
For the fiscal year
ended March 31,
1999................. 0.73 101.75
For the period January
2, 1998** through
March 31, 1998....... 1.67(5) 139.61
</TABLE>
- ----------
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, 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.
33
<PAGE>
THE BEAR STEARNS FUNDS
EMERGING MARKETS DEBT PORTFOLIO
INCOME PORTFOLIO
HIGH YIELD TOTAL RETURN PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Bear Stearns Investment Trust (the "Trust") and The Bear Stearns Funds (the
"Fund") were organized as Massachusetts business trusts on October 15, 1992 and
September 29, 1994, respectively, and are registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as open-end management investment
companies. The Trust currently has one fund in operation, the Emerging Markets
Debt Portfolio ("Debt Portfolio"), a non-diversified portfolio. As of the date
hereof, the Debt Portfolio offers four classes of shares, which have been
designated as Class A, B, C and Y shares. The Fund currently consists of ten
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 three non-diversified portfolios, The
Insiders Select Fund, Focus List Portfolio and S&P STARS Portfolio. As of the
date hereof, the Income Portfolio and High Yield Portfolio offer four classes of
shares, which have been designated as Class A, B, C and Y shares. Class Y shares
of the Debt Portfolio and High Yield Portfolio have yet to commence their
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.
Effective October 16, 1998, the Total Return Bond Portfolio changed its name to
the Income Portfolio and also adopted a new investment objective: to seek high
current income consistent with preservation of capital. Prior to that date its
stated objective was to maximize total return consistent with preservation of
capital.
ORGANIZATIONAL MATTERS -- Prior to commencing investment operations on May 3,
1993, April 5, 1995 and January 2, 1998, the Debt Portfolio, Income Portfolio
and High Yield Portfolio (each a "Portfolio" and collectively, the
"Portfolios"), 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:
<TABLE>
<CAPTION>
PORTFOLIOS CLASS A CLASS B CLASS C
- ---------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Income Portfolio........................ 1,041 -- 1,041
High Yield Portfolio.................... 1 1 1
</TABLE>
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.
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.
34
<PAGE>
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.
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.
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).
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
management and 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 Debt Portfolio 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 Debt Portfolio does not generally isolate the effect of fluctuations in
foreign exchange rates from the effect of fluctuations in the market prices of
investments. However, the Debt Portfolio does 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 purposes of
protecting against adverse changes in foreign currency exchange rates. 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
35
<PAGE>
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 a 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 March
31, 1999, except the Debt Portfolio which were as follows:
<TABLE>
<CAPTION>
DELIVERY VALUE SETTLEMENT
CURRENCY (LOCAL CURRENCY) DATE COST
- ---------------------------------------------------------------- -------------------- ------------- ----------------
<S> <C> <C> <C>
SALE:
European Euro................................................... 110,515 05/26/99 $ 121,080
Japanese Yen.................................................... 175,612,500 04/19/99 1,500,000
<CAPTION>
UNREALIZED
CURRENCY VALUE GAIN
- ---------------------------------------------------------------- ---------------- -------------
<S> <C> <C>
SALE:
European Euro................................................... $ 119,311 $ 1,769
Japanese Yen.................................................... 1,482,952 17,048
-------------
$ 18,817
-------------
-------------
</TABLE>
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 Debt Portfolio and High Yield Portfolio had capital loss
carryforwards of $780,615 and $175,885, 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
carryforward 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 fiscal year, are deemed to arise on the first day
of the following fiscal year. The Debt Portfolio, Income Portfolio and High
Yield Portfolio incurred and elected to defer net realized capital losses of
$2,952,624, $8,565 and $1,393,045, respectively.
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.
DIVIDENDS AND DISTRIBUTIONS -- The Income Portfolio and High Yield Portfolio
declare dividends from net investment income on each day the New York Stock
Exchange is open for business. These dividends on the Income Portfolio and High
Yield Portfolio are paid usually on or about the twentieth day of each month.
Prior to January 4, 1999, the Debt Portfolio declared and paid as quarterly
dividends to shareholders, substantially all of its net investment income. On
November 5, 1998, the Board of Trustees of the Trust approved a change in the
dividend policy of the Debt Portfolio to conform its policy to that of the
dividend policies followed by the Income Portfolio and High Yield Portfolio.
Such policy change was effective January 4, 1999.
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.
36
<PAGE>
At March 31, 1999, the Income Portfolio reclassified $2,008 within the
composition of net assets from accumulated net realized losses to paid-in
capital. In addition, the Debt Portfolio reclassified $15,380 of net realized
foreign currency gains within the composition of net assets from accumulated net
realized losses to undistributed net investment income.
TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
For the fiscal year ended March 31, 1999, Bear Stearns Asset Management Inc.
("BSAM" or the "Adviser") served as the Debt Portfolio's investment manager
pursuant to the Investment Management Agreement. For its investment management
and administrative services, BSAM receives from the Debt Portfolio a monthly fee
at an annual rate equal to 1.15% of average daily net assets up to $50 million,
1.00% of average daily net assets of more than $50 million but not in excess of
$100 million and 0.70% of average daily net assets above $100 million.
For the fiscal year ended March 31, 1999, BSAM served as the Income Portfolio's
and High Yield Portfolio's investment adviser pursuant to an Investment Advisory
Agreement. Under the terms of the Investment Advisory Agreement, BSAM is
entitled to receive from the Income Portfolio and High Yield Portfolio a monthly
fee equal to an annual rate of 0.45% and 0.60%, respectively, of each
Portfolio's average daily net assets.
For the fiscal year ended March 31, 1999, Bear Stearns Funds Management Inc.
("BSFM" or the "Administrator") served as administrator to the Income Portfolio
and High Yield Portfolio pursuant to an Administration Agreement. BSFM is
entitled to receive from the Income Portfolio and High Yield 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 Inc. provides certain accounting and administrative services to each
Portfolio. For providing these services, PFPC Inc. is entitled to receive from
each Portfolio 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 $150,000 for each Portfolio. During
the fiscal year ended March 31, 1999, PFPC Inc. has voluntarily waived a portion
of its fee.
For the fiscal year ended March 31, 1999, BSAM has voluntarily undertaken to
limit the total operating expenses to a maximum annual level of 1.75%, 0.80% and
1.00% of the average daily net assets of Class A shares, 2.40%, 1.45% and 1.65%
of the average daily net assets of both Class B and C shares of the Debt
Portfolio, Income Portfolio and High Yield Portfolio, respectively. For the
fiscal year ended March 31, 1999, BSAM has voluntarily undertaken to limit the
total operating expenses to a maximum annual level of 0.45% of the average daily
net assets of Class Y shares of the Income Portfolio. As necessary, this
limitation is effected by waivers by BSAM of its investment management/advisory
fees and reimbursements of expenses exceeding the investment management/advisory
fees. For the fiscal year ended March 31, 1999, BSAM waived advisory fees of
$335,209, $50,882 and $416,687 for the Debt Portfolio, Income Portfolio and High
Yield Portfolio, respectively. In addition, BSAM reimbursed $137,134, $299,061
and $121,391 for the Debt Portfolio, Income Portfolio and High Yield Portfolio,
respectively, in order to maintain the voluntary expense limitation. 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.
For the fiscal year ended March 31, 1999, the High Yield Portfolio paid $900 in
brokerage commissions to Bear Stearns, an affiliate of BSAM and BSFM.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICING PLAN
The Trust and the Fund, on behalf of the Portfolios, have 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 Trust
and 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.
37
<PAGE>
Prior to February 10, 1999, Class A shares of the Debt Portfolio and Income
Portfolio paid its shareholder servicing fees through its distribution plan.
Fees are based on the average daily net assets in each class of each Portfolio
and are accrued daily and paid quarterly or at such other intervals as the Board
of Trustees may determine. For the fiscal year ended March 31, 1999, Bear
Stearns earned $66,847, $20,991 and $288,723 for the Debt Portfolio, Income
Portfolio and High Yield Portfolio, respectively, in distribution fees. The fees
paid to Bear Stearns under the Distribution Plan are payable without regard to
actual expenses incurred. Bear Stearns uses these fees to pay broker/dealers
whose clients hold each Portfolio's shares and other distribution-related
activities. For the same period, Bear Stearns earned $92,812, $16,804 and
$181,963 for the Debt Portfolio, Income Portfolio and High Yield 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 fiscal year ended March 31, 1999, Bear Stearns has advised each
Portfolio that it received approximately $46,300, $35,200 and $525,500 in
front-end sales charges resulting from sales of Class A shares of the Debt
Portfolio, Income Portfolio and High Yield 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 Debt Portfolio,
Income Portfolio and High Yield Portfolio that during the fiscal year ended
March 31, 1999, it received approximately $9,000 from the High Yield Portfolio
in contingent deferred sales charges ("CDSC") upon certain redemptions by Class
A shareholders, approximately $13,000, $600 and $58,800 from each Portfolio,
respectively, in CDSC upon certain redemptions by Class B shareholders and
approximately $2,200, $2,000 and $33,700 from each Portfolio, respectively, in
CDSC upon certain redemptions by Class C shareholders.
INVESTMENTS IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at March 31,
1999, were $34,514,194, $12,200,126 and $105,557,886 for the Debt Portfolio,
Income Portfolio and High Yield Portfolio, respectively. Accordingly, the net
unrealized depreciation on investments for each Portfolio were as follows:
<TABLE>
<CAPTION>
PORTFOLIO APPRECIATION DEPRECIATION NET DEPRECIATION
- ------------------------------ ------------ ------------ ------------------
<S> <C> <C> <C>
Debt Portfolio................ $ 813,425 $(3,795,783) $(2,982,358)
Income Portfolio.............. 118,943 (234,352) (115,409)
High Yield Portfolio.......... 1,594,343 (7,114,215) (5,519,872)
</TABLE>
For the fiscal year ended March 31, 1999, aggregate purchases and sales of
portfolio securities (excluding short-term investments) for each Portfolio were
as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- ------------------------------ ----------- -----------
<S> <C> <C>
Debt Portfolio................ $33,549,045 $27,873,681
Income Portfolio.............. 15,660,555 11,329,961
High Yield Portfolio.......... 134,123,389 68,190,103
</TABLE>
38
<PAGE>
SHARES OF BENEFICIAL INTEREST
Each Portfolio offers Class A, B, C and Y shares. Class A shares are sold with a
front-end sales charge of up to 4.50% for each Portfolio. Class B shares are
sold with a CDSC of up to 5.00% within six years of purchase. Class C shares are
sold with a CDSC of 1.00% within the first year of purchase. There is no sales
charge or CDSC on Class Y shares, which are offered primarily to institutional
investors.
At March 31, 1999, there was an unlimited amount of $0.001 par value shares of
beneficial interest authorized for each Portfolio, of which Bear Stearns owned
1,135 of Class A shares and 1,126 of Class C shares of the Income Portfolio and
2 each of Class A, B and C shares of the High Yield Portfolio. The Income
Portfolio's shares owned by Bear Stearns include 94 Class A shares and 85 Class
C shares which were acquired through dividend reinvestment. Transactions in
shares of beneficial interest for each Portfolio were as follows:
<TABLE>
<CAPTION>
DEBT PORTFOLIO
--------------------------------------
SALES REPURCHASES REINVESTMENTS
---------- ----------- -------------
<S> <C> <C> <C>
FOR THE FISCAL YEARS ENDED:
CLASS A
MARCH 31, 1999
Shares...................................................... 1,353,990 1,217,322 262,381
Value....................................................... $13,884,104 $11,562,827 $2,415,066
MARCH 31, 1998
Shares...................................................... 664,133 1,036,380 180,565
Value....................................................... $7,891,033 $12,380,642 $2,128,341
CLASS B*
MARCH 31, 1999
Shares...................................................... 134,300 36,459 13,490
Value....................................................... $1,458,377 $ 329,735 $ 119,962
MARCH 31, 1998
Shares...................................................... 46,940 -- 417
Value....................................................... $ 546,764 -- $ 4,933
CLASS C
MARCH 31, 1999
Shares...................................................... 77,215 240,138 37,052
Value....................................................... $ 796,197 $ 2,259,892 $ 340,740
MARCH 31, 1998
Shares...................................................... 189,824 89,837 29,316
Value....................................................... $2,259,989 $ 1,086,483 $ 344,105
CLASS Y**
MARCH 31, 1999
Shares...................................................... -- -- --
Value....................................................... -- -- --
MARCH 31, 1998
Shares...................................................... -- -- --
Value....................................................... -- -- --
<CAPTION>
INCOME PORTFOLIO
--------------------------------------
SALES REPURCHASES REINVESTMENTS
---------- ----------- -------------
<S> <C> <C> <C>
FOR THE FISCAL YEARS ENDED:
CLASS A
MARCH 31, 1999
Shares...................................................... 652,813 512,338 16,075
Value....................................................... $8,140,024 $ 6,375,966 $199,578
MARCH 31, 1998
Shares...................................................... 55,103 110,591 12,087
Value....................................................... $ 681,376 $ 1,369,024 $149,576
CLASS B*
MARCH 31, 1999
Shares...................................................... 95,133 6,176 1,917
Value....................................................... $1,180,901 $ 75,940 $ 23,739
MARCH 31, 1998
Shares...................................................... 1,442 -- 1
Value....................................................... $ 18,014 -- $ 13
CLASS C
MARCH 31, 1999
Shares...................................................... 125,661 76,187 7,293
Value....................................................... $1,564,198 $ 942,593 $ 90,493
MARCH 31, 1998
Shares...................................................... 56,500 32,601 4,869
Value....................................................... $ 702,888 $ 406,228 $ 60,310
CLASS Y**
MARCH 31, 1999
Shares...................................................... 27,127 32,617 17,555
Value....................................................... $ 335,236 $ 399,738 $217,834
MARCH 31, 1998
Shares...................................................... 429,021 1,275,562 75,743
Value....................................................... $5,332,398 $15,811,012 $938,724
<CAPTION>
HIGH YIELD PORTFOLIO (1)
------------------------------------------
SALES REPURCHASES REINVESTMENTS
----------- ----------- ---------------
FOR THE FISCAL YEARS ENDED:
CLASS A
MARCH 31, 1999
Shares...................................................... 4,591,690 1,328,105 173,523
Value....................................................... $55,352,368 $15,720,812 $2,039,096
MARCH 31, 1998
Shares...................................................... 1,466,227 36,611 8,118
Value....................................................... $18,130,818 $ 450,922 $ 102,477
CLASS B*
MARCH 31, 1999
Shares...................................................... 1,698,449 172,814 61,079
Value....................................................... $20,280,591 $2,036,035 $ 709,943
MARCH 31, 1998
Shares...................................................... 481,123 10,726 1,995
Value....................................................... $ 6,075,621 $ 235,284 $ 25,196
CLASS C
MARCH 31, 1999
Shares...................................................... 2,098,034 769,764 79,488
Value....................................................... $24,652,580 $8,975,867 $ 928,004
MARCH 31, 1998
Shares...................................................... 897,573 13,841 3,849
Value....................................................... $11,041,683 $ 67,980 $ 48,561
CLASS Y**
MARCH 31, 1999
Shares...................................................... -- -- --
Value....................................................... -- -- --
MARCH 31, 1998
Shares...................................................... -- -- --
Value....................................................... -- -- --
</TABLE>
- ----------
* Class B shares commenced its initial public offering for the
Debt Portfolio, Income Portfolio and High Yield Portfolio on
January 12, 1998, February 2, 1998 and December 29, 1997,
respectively.
** Class Y shares has yet to commence its initial public
offering for the Debt Portfolio and High Yield Portfolio.
(1) Commencement of investment operations on January 2, 1998.
CREDIT AGREEMENT
The Trust (on behalf of the Debt Portfolio) and the Fund (on behalf of the
Income Portfolio and High Yield Portfolio) have 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 are
also parties to the credit agreement. The agreement provides that each party to
the credit agreement is 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 shall the
aggregate outstanding principal amount of all loans to any of the Portfolios
exceed $25 million. Each Portfolio as a fundamental policy is permitted to
borrow in an amount up to 33 1/3% of the value of such Portfolio's assets.
However, each
39
<PAGE>
Portfolio currently intends 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 will bear 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.
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 fiscal year
ended March 31, 1999, were as follows:
<TABLE>
<CAPTION>
MAXIMUM
AVERAGE LOAN AVERAGE
LOAN AMOUNTS INTEREST
PORTFOLIO BALANCE OUTSTANDING RATE
- ------------------------------ -------- ----------- --------
<S> <C> <C> <C>
Income Portfolio.............. $ 9,261 $ 208,400 6.10%
High Yield Portfolio.......... 68,540 4,803,800 7.14
</TABLE>
The Portfolios had no amounts outstanding under the line of credit agreement at
March 31, 1999. The Debt Portfolio had no amounts outstanding under the line of
credit agreement during the fiscal year ended March 31, 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
of 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 or 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.
40
<PAGE>
THE BEAR STEARNS FUNDS
EMERGING MARKETS DEBT PORTFOLIO
INCOME PORTFOLIO
HIGH YIELD TOTAL RETURN PORTFOLIO
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders,
Emerging Markets Debt Portfolio
(A series of the Bear Stearns Investment Trust)
Income Portfolio
High Yield Total Return Portfolio
(Series of The Bear Stearns Funds):
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Emerging Markets Debt Portfolio, Income
Portfolio (formerly Total Return Bond Portfolio) and High Yield Total Return
Portfolio (collectively, the "Portfolios") as of March 31, 1999, and the related
statements of operations, changes in net assets and the financial highlights for
the periods presented. These financial statements and financial highlights are
the responsibility of the Portfolios' management. Our responsibility is to
express an opinion on these financial statements and the financial highlights
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. Our procedures included
confirmation of securities owned as of March 31, 1999 by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Emerging Markets
Debt Portfolio, Income Portfolio and High Yield Total Return Portfolio as of
March 31, 1999, the results of their operations, the changes in their net assets
and the financial highlights for each of the periods presented in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
May 14, 1999
41
<PAGE>
THE BEAR STEARNS FUNDS
EMERGING MARKETS DEBT PORTFOLIO
INCOME PORTFOLIO
HIGH YIELD TOTAL RETURN PORTFOLIO
SHAREHOLDER TAX INFORMATION -- (UNAUDITED)
Each Portfolio is required by Subchapter M of the Internal Revenue Code of 1986,
as amended, to advise its shareholders within 60 days of each Portfolio's fiscal
year end (March 31, 1999) as to the U.S. federal tax status of distributions
received by each Portfolio's shareholders in respect of such fiscal year. During
the fiscal year ended March 31, 1999, the following dividends and distributions
per share were paid by each of the Portfolios:
EMERGING MARKETS DEBT PORTFOLIO
<TABLE>
<CAPTION>
NET INVESTMENT INCOME 20 PERCENT RATE GAINS
--------------------------- -------------------------
<S> <C> <C>
Class A $ 1.011035395 $ 0.1659
Class B 0.971741918 0.1659
Class C 0.972017106 0.1659
</TABLE>
There were no ordinary income dividends from the Emerging Markets Debt Portfolio
which would qualify for the dividends received deduction available to corporate
shareholders. All dividends and distributions were derived from income and
capital gains on foreign obligations; however they were not subject to foreign
withholding taxes.
INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
NET INVESTMENT INCOME CAPITAL GAINS CAPITAL GAINS
--------------------------- ---------------- ----------------
<S> <C> <C> <C>
Class A $ 0.733524135 $ 0.1306 $ 0.0558
Class B 0.653217415 0.1306 0.0558
Class C 0.652995105 0.1306 0.0558
Class Y 0.776879477 0.1306 0.0558
</TABLE>
There were no ordinary income dividends from the Income Portfolio which would
qualify for the dividends received deduction available to corporate
shareholders.
HIGH YIELD TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
NET INVESTMENT INCOME SHORT-TERM CAPITAL GAINS
--------------------------- -----------------------------
<S> <C> <C>
Class A $ 1.108089730 $ 0.0519
Class B 1.030808091 0.0519
Class C 1.030805163 0.0519
</TABLE>
There were no ordinary income dividends from the High Yield Total Return
Portfolio which would qualify for the dividends received deduction available to
corporate shareholders.
Because each Portfolio's fiscal year is not the calendar year, another
notification will be sent with respect to calendar year 1999. The second
notification, which will reflect the amount to be used by calendar year
taxpayers on their U.S. federal income tax returns, will be made in conjunction
with Form 1099-DIV and will be mailed in January 2000.
Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their dividend. They will generally not be entitled to a foreign tax
credit or deduction for the withholding taxes paid by the Portfolios, if any.
In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs)
need not be reported as taxable income for U.S. federal income tax purposes.
However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may
need this information for their annual information reporting.
Shareholders are advised to consult with their own tax advisers with respect to
the tax consequences of their investment in the Portfolios.
42
<PAGE>
TRUSTEES AND OFFICERS
<TABLE>
<S> <C>
Michael Minikes Chairman of the Board
Doni L. Fordyce President
Barry Sommers Executive Vice President
Peter M. Bren Trustee
Alan J. Dixon Trustee - Income Portfolio and
High Yield Total Return Portfolio
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
</TABLE>
