<PAGE>
The
Bear Stearns
Funds
575 Lexington Avenue
New York, NY 10022
1.800.766.4111
Michael Minikes Chairman of the Board
and Trustee
Doni L. Fordyce President and Trustee
Peter M. Bren Trustee
John S. Levy Trustee
M.B. Oglesby, Jr. Trustee
Robert E. Richardson Trustee
Robert M. Steinberg Trustee
Barry Sommers Executive Vice President
Stephen A. Bornstein Vice President and Secretary
Frank J. Maresca Vice President and Treasurer
Vincent L. Pereira Assistant Treasurer
INVESTMENT ADVISER
Bear Stearns Asset
Management Inc.
575 Lexington Avenue
New York, NY 10022
ADMINISTRATOR
Bear Stearns Funds
Management Inc.
575 Lexington Avenue
New York, NY 10022
DISTRIBUTOR
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167
INCOME PORTFOLIO AND
HIGH YIELD TOTAL RETURN PORTFOLIO:
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
TRANSFER AND DIVIDEND
DISBURSEMENT AGENT
PFPC Inc.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
COUNSEL
Kramer Levin Naftalis &
Frankel LLP
919 Third Avenue
New York, NY 10022
EMERGING MARKETS DEBT
PORTFOLIO:
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
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-016-06
THE BEAR STEARNS FUNDS
FIXED INCOME FUNDS
-Income Portfolio
-High Yield Total Return Portfolio
-Emerging Markets Debt Portfolio
ANNUAL REPORT
MARCH 31, 2000
[LOGO]
<PAGE>
THE BEAR STEARNS FUNDS
Income Portfolio
High Yield Total Return Portfolio
Emerging Markets Debt Portfolio
LETTER TO SHAREHOLDERS
April 30, 2000
Dear Shareholders:
We are pleased to present the annual report to shareholders for the Income
Portfolio, High Yield Total Return Portfolio ("High Yield Portfolio") and
Emerging Markets Debt Portfolio ("EMD Portfolio") for the fiscal year ended
March 31, 2000. Detailed performance data for each class of shares of each
Portfolio can be found in the "Financial Highlights" and line graph sections of
this report.
INCOME PORTFOLIO
For the fiscal year ended March 31, 2000, the Income Portfolio's Class A shares
had a total return of 0.77% (without giving effect to the sales charge) and both
Class B and C shares had a total return of 0.12% (without giving effect to the
contingent deferred sales charge)(1). The Income Portfolio's broad-based
securities market index, the Salomon Smith Barney Broad Investment Grade Bond
Index, returned 1.81% for the same period. The Lipper A Rated Bond Fund Index
returned 0.87% for the same period.
Interest rates rose sharply during the past twelve months as economic growth
continued to accelerate worldwide. Faced with strong economic growth in the
U.S., record low unemployment and rising commodity prices, the Federal Reserve
Board raised interest rates three times in 1999 and twice more so far this year
to keep the threat of inflation at bay. In response to the rate hikes last fall,
the yield curve flattened (i.e., long-term interest rates were roughly the same
as intermediate-term interest rates), indicating that the market believed the
Fed would be successful in its efforts.
However, long-term rates fell dramatically in the early part of 2000 as nervous
stock investors switched to the relative safety and greater liquidity of
long-term Treasury bonds. In addition, the U.S. Government began buying back its
outstanding bonds and announced that it would hold fewer 30-year auctions,
thereby reducing supply as demand was increasing. This imbalance drove up
Treasury bond prices, causing long-term yields to fall -- and the yield curve to
"invert." By quarter-end, the 2-year Treasury yield was 64 basis points higher
than the 30-year yield.
As Treasury bond prices rose, investors would normally have turned to agency
issues as a substitute, since they carry the real or implied guarantee of the
government. However, during the quarter, the Treasury voiced increasing concern
about its ability to guarantee an expected surge in agency debt. This caused the
yield differential ("spread") between Treasuries and agency issues to widen,
beginning a domino effect that rippled through other sectors of the market. As a
result, the spread between Treasuries and other issues -- which had narrowed in
1999 -- widened dramatically by the
1
<PAGE>
end of March; high yield issues were particularly hard hit.
Corporate bond yields also widened due to the "event risk" created by the
volatility in the stock market and the pace of corporate refinancing. With many
stocks trading at depressed levels, an increasing number of companies have
turned to leveraged buyouts to enhance shareholder value -- to the detriment of
their bondholders. As companies re-leverage their balance sheets, they increase
the risk of a sudden credit downgrade.
Looking ahead, we expect yield differentials to narrow, supported by the
strength in the U.S. and global economies. In this environment, we will continue
to emphasize corporate and mortgage-backed issues, which have become very cheap.
To maintain quality, we are focusing on issues of large companies in sectors of
the economy that are less likely to succumb to restructuring, such as financial
services, energy producers and retail sales. Although we believe there are good
values to be found in the high yield market, we are not aggressively looking for
issues in this sector due to particularly unfavorable technical factors. With
the yield curve inverted, we will continue to focus on 2-7 year maturities,
where we are finding the best value.
HIGH YIELD TOTAL RETURN PORTFOLIO*
For the fiscal year ended March 31, 2000, the High Yield Portfolio's Class A
shares had a total return of (4.68)% (without giving effect to the sales charge)
and both Class B and C shares had a total return of (5.29)% (without giving
effect to the contingent deferred sales charge)(2). The High Yield Portfolio's
broad-based securities market index, the Credit Suisse First Boston Global High
Yield Index, returned 0.30% for the same period. The Lipper High Yield Bond Fund
Index returned (0.02)% for the same period.
STRONG FUNDAMENTALS IN A WEAK MARKET
During the fiscal year, the high yield market was battered by technical
conditions in the market and changes in government policy, rather than any
fundamental weakness in the sector. In a period of strong economic growth, both
in the U.S. and abroad, the high yield market typically performs well, since
corporate earnings growth enhances the credit quality of issuers, but so far
that has not happened.
During the twelve-month period just ended, the Federal Reserve Board raised
interest rates five times to stem inflationary pressures -- actions perceived as
detrimental to corporate profits, since rising rates can increase the cost of
borrowing. In addition, 1999 was a year in which investors were drawn primarily
to technology and Internet stocks to the exclusion of almost everything else.
What few "new economy" high yield opportunities there were tended to be only
tangentially related to these sectors. The situation was only made worse as high
yield issuance increased and net redemptions from high yield bond funds
continued. This combination of lack of interest, heavy supply and weak demand
added up to a poor technical environment and a disappointing year for high yield
investors.
Looking ahead, we believe that there are reasons for optimism. As value
opportunities reached bargain levels earlier this year in bonds as well as
stocks, investors started paying attention to non-technology sectors, and the
fundamentals of many areas of the high yield market are excellent. Credit
quality is improving along with robust corporate earnings in the U.S. and
abroad. After peaking in 1999, the default rate on high yield issues has
moderated, a trend we expect to continue. In addition, valuations are very
attractive. Recently, the price for the average high yield bond was as low as 85
cents on the dollar, well below the long-term average of 95 cents on the dollar.
2
<PAGE>
With strong fundamentals and attractive valuations as the backdrop, we believe
the stage is set for modest spread narrowing over the remainder of the year.
Given the strength of the U.S. economy, credit quality is solid and improving.
Because periods of strong economic growth tend to benefit lower-rated bonds, we
have maintained an overweighting in our B-rated holdings. In addition, we have
maintained an overweighting in economically sensitive areas such as chemicals,
metals and general industrial bonds, where values are still cheap. The High
Yield Portfolio also remains overweighted in media and telecommunications
issues, which should continue to benefit from the industries' fast growth rate
and continuing positive events stemming from heavy merger and acquisition
activity.
EMERGING MARKETS DEBT PORTFOLIO**
For the fiscal year ended March 31, 2000, the EMD Portfolio's Class A shares had
a total return of 24.54% (without giving effect to the sales charge) and Class B
and C shares had a total return of 23.88% and 23.86%, respectively, (without
giving effect to the contingent deferred sales charge)(3). The EMD Portfolio's
benchmark index, the Salomon Smith Barney Emerging Markets Debt Mutual Fund
Index ("EMMF Index"), returned 29.25% for the same period.
Effective April 1, 2000, the EMD Portfolio's benchmark index was changed to the
J.P. Morgan Emerging Market Bond Index-Global Constrained, which we believe
better represents the evolving universe of emerging market debt. It is a broader
index that includes more countries and a wider variety of bonds than the EMMF
Index and is updated more frequently.
When seen in the wake of the financial crisis that gripped the emerging markets
in late-1998 and early 1999, the extent of the economic recovery and general
stability that prevails in most of the larger emerging market economies is
remarkable. Although progress has been uneven, many of these countries have
begun implementing economic reforms to keep attracting capital, and net private
capital flows have resumed. In addition, ongoing involvement by the
International Monetary Fund, strong import demand created by worldwide economic
growth, higher commodity prices and some belt-tightening by the largest
borrowers have reduced default risk significantly. The results of important
elections in Indonesia, Mexico and Russia bode well for continued reform.
UNEXPECTED RECOVERY IN RUSSIAN DEBT
Russian and Brazilian debt were the EMD Portfolio's best performers during the
fiscal year. Russian assets returned an astounding 249% as the country's
national accounts swung from deficit to surplus resulting from high oil prices,
economic growth, unexpected success in improving tax collections, and an
agreement on terms to restructure the country's commercial debt. The election of
a new legislature and president also raised hopes for more aggressive economic
reforms. Brazil's debt returned more than 30% as the government passed a series
of fiscal responsibility laws aimed at reducing the country's large fiscal
deficits. Russia and Brazil are particularly important since developments in
these countries greatly affect their neighbors as well as investors' perceptions
of emerging markets in general. The worst performing markets were in the Ivory
Coast (-26%) and Ecuador (-13%), both of which fell due to high debt levels,
political disarray and missed coupon payments.
Our outlook for emerging market debt over the medium-term remains positive.
Strong economic growth in the industrialized nations, a high level of foreign
direct investment and progress toward implementing structural changes continue
to support the ability of many emerging countries to service debt. A number of
the larger emerging countries, including Brazil and Argentina, have enacted
significant fiscal reforms. Improving credit ratings in others are evidence of
progress,
3
<PAGE>
which confirms our view that the credit cycle is resuming its longer-term
uptrend. During the first quarter of 2000, rating upgrades exceeded downgrades
by a considerable margin.
Although country-specific risks remain, we believe that the most significant
risks are external, specifically, commodity price developments, the impact of
further increases in U.S. short-term interest rates, and efforts to include
private-sector creditors in sovereign debt restructurings. With respect to
commodity prices, however, a country's bond prices are more closely correlated
with its response to changes in these prices rather than their absolute level.
Similarly, we believe that emerging market bond prices are becoming less
sensitive to changes in U.S. interest rates as their financing needs decrease.
Structural reforms over the past five years have generally reduced government
deficits, and big current account deficits are increasingly covered by private
inflows rather than by government borrowing. In addition, governments have taken
meaningful steps to increase the average maturity of their debt. As a result,
total interest costs should rise less than in the past if the U.S. raises
short-term rates.
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,
[Doni L. Fordyce]
Doni L. Fordyce
President and Trustee
The Bear Stearns Funds
----------
* Investing in high yield debt securities generally involves greater risks than
investing in more highly rated debt securities such as the risk of greater
price fluctuation and the possible loss of principal and income.
** Investing in emerging markets debt involves special risks such as currency
exchange-rate volatility, possible political, social, or economic instability
and differences in taxation and other financial standards.
(1)For the fiscal year ended March 31, 2000, the Income Portfolio's Class A
shares had a total return of (3.74)%, including the initial 4.50% maximum
sales charge, Class B shares returned (4.62)% including the 5.00% CDSC and
Class C shares returned (0.83)%, including the 1.00% CDSC.
(2)For the fiscal year ended March 31, 2000, the High Yield Portfolio's Class A
shares had a total return of (9.00)%, including the initial 4.50% maximum
sales charge, Class B shares returned (9.60)% including the 5.00% CDSC and
Class C shares returned (6.16)%, including the 1.00% CDSC.
(3)For the fiscal year ended March 31, 2000, the EMD Portfolio's Class A shares
had a total return of 18.90%, including the initial 4.50% maximum sales
charge, Class B shares returned 18.87% including the 5.00% CDSC and Class C
shares returned 22.86%, including the 1.00% CDSC.
CDSC Contingent deferred sales charge.
Bear Stearns Asset Management Inc. has waived a portion of its advisory fee and
agreed voluntarily to reimburse a portion of each Portfolio's operating
expenses, as necessary, to maintain the expense limitation as set forth in the
notes to the financial statements. Total returns shown include fee waivers and
expense reimbursements, if any; total returns would have been lower had there
been no assumption of fees and expenses in excess of expense limitations.
4
<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)(4) VS. VARIOUS INDICES
[EDGAR REPRESENTATION OF PLOT POINTS USED IN PRINTED GRAPHIC]
TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR ENDED AVERAGE
MARCH 31, 2000 ANNUAL(7)
<S> <C> <C>
Income Portfolio(2)
Class A shares(5) (3.74)% 4.76%
Class B shares(4) (4.62) 1.10
Class C shares(6) (0.83) 5.21
Class Y shares(3) 1.13 5.38
Salomon Smith Barney Broad Investment Grade Bond Index(1) 1.81 7.06
Lipper A Rated Bond Fund Index(1) 0.87 6.57
</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 correspond 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 returns of Class Y shares (for which September 8, 1995 was the
initial public offering date) is higher than Class A and C shares due to the
fact that there is no sales load, contingent deferred sales charge or 12b-1
fee charged to Class Y shares.
(4) Assuming no redemption of shares at the end of the period, the returns of
Class B shares (for which February 2, 1998 was the initial public offering
date) would have been higher than Class A shares and would have been
substantially the same as Class C shares if operations were commenced on the
same day. The higher return is due to the fact that there is no initial sales
charge on Class B shares. Total returns reflect the applicable contingent
deferred sales charge. Without the applicable sales charge, the total returns
would have been 0.12% and 2.36%, respectively, for each period shown.
(5) Reflects the initial maximum sales charge (4.50%). Without the applicable
sales charge, the total returns would have been 0.77% and 5.74%,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,
2000 would have been 0.12%.
(7) For the period of April 5, 1995 (commencement of investment operations)
through March 31, 2000, unless otherwise indicated.
5
<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 PLOT POINTS USED IN PRINTED GRAPHIC]
TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR ENDED AVERAGE
MARCH 31, 2000 ANNUAL(3)
<S> <C> <C>
High Yield Total Return Portfolio(2)
Class A shares(4) (9.00)% (1.35)%
Class B shares(5) (9.60) (1.03)
Class C shares(6) (6.16) 0.06
Credit Suisse First Boston Global High Yield Index(1) 0.30 1.12
Lipper High Yield Bond Fund Index(1) (0.02) 1.37
</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, 2000.
(4) Reflects the initial maximum sales charge (4.50%). Without the applicable
sales charge, the total returns would have been (4.68)% and 0.71%,
respectively, for each period shown.
(5) Reflects the applicable contingent deferred sales charge. Without the
applicable sales charge, the total returns would have been (5.29)% and 0.06%,
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,
2000 would have been (5.29)%.
6
<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) VS. ITS BROAD-BASED INDEX
[EDGAR REPRESENTATION OF PLOT POINTS USED IN PRINTED GRAPHIC]
TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR ENDED AVERAGE
MARCH 31, 2000 ANNUAL(4)
<S> <C> <C>
Emerging Markets Debt Portfolio(2)
Class A shares(5) 18.90% 17.22%
Class B shares(3) 18.87 5.54
Class C shares(3) 22.86 17.52
Salomon Smith Barney Emerging Markets Debt Mutual
Fund Index(1) 29.25 21.08
</TABLE>
----------
(1) The chart assumes a hypothetical $10,000 initial investment in the EMD
Portfolio and reflects all portfolio expenses. Investors should note that the
EMD Portfolio is a professionally managed mutual fund while the index is
unmanaged, does not incur sales charges or expenses and is not available for
investment. Performance of the index corresponds to the performance of Class
A shares only.
(2) Bear Stearns Asset Management Inc. waived a portion of its advisory fee
and agreed to voluntarily reimburse a portion of the EMD Portfolio's
operating expenses, as necessary, to maintain the expense limitation, as set
forth in the notes to the financial statements. Total returns shown include
fee waivers and expense reimbursements; total returns would have been lower
had there been no assumption of fees and expenses in excess of the expense
limitations.
(3) Assuming no redemption of shares at the end of the period, the returns of
Class B and C shares (for which January 12, 1998 and July 26, 1995,
respectively, were the initial public offering dates) would have been higher
than Class A shares if operations were commenced on the same day. The higher
return is due to the fact that there is no initial sales charge on Class B
and C shares. Total returns reflect the applicable contingent deferred sales
charges. Without the applicable sales charges for Class B shares, the total
returns would have been 23.88% and 6.71%, respectively, for each period
shown. Without the applicable sales charge for Class C shares, the total
return for the one year ended March 31, 2000 would have been 23.86%.
(4) Commencing May 4, 1995, Bear Stearns Asset Management Inc. assumed the
daily portfolio management responsibility for the EMD Portfolio. Total
returns for Class A shares are shown for the period May 4, 1995 through March
31, 2000. For the period May 3, 1993 (commencement of investment operations)
through May 3, 1995 the EMD Portfolio's investment adviser was BEA Associates
and those results are not shown.
(5) Reflects the initial maximum sales charge (4.50%). Without the applicable
sales charge, the total returns would have been 24.54% and 18.33%,
respectively, for each period shown.
7
<PAGE>
THE BEAR STEARNS FUNDS
Income Portfolio
MARCH 31, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
TOP TEN INDUSTRY/SECTOR WEIGHTINGS*
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK INDUSTRY/SECTOR NET ASSETS
<C> <S> <C>
1. U.S. Government Agency Obligations ............................................................ 36.63
2. Industrial .................................................................................... 11.20
3. Finance ....................................................................................... 10.19
4. Asset-Backed .................................................................................. 9.72
5. U.S. Government Obligations ................................................................... 7.52
6. Utilities ..................................................................................... 5.22
7. Telecommunications ............................................................................ 4.06
8. Telephone - Local ............................................................................. 3.35
9. Multimedia .................................................................................... 2.00
10. Super-Regional Bank - U.S. .................................................................... 0.99
</TABLE>
--------------------------------------------------------------------------------
TOP TEN HOLDINGS*
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS INDUSTRY/SECTOR NET ASSETS
<C> <S> <C> <C>
1. Government National Mortgage Association ................. U.S. Government Agency Obligations 26.98
2. Fannie Mae ............................................... U.S. Government Agency Obligations 9.65
3. U.S. Treasuries .......................................... U.S. Government Obligations 7.52
4. Western Resources Inc. ................................... Utilities 2.41
5. Conti-Mortgage Home Equity Loan Trust .................... Asset-Backed 2.27
6. Washington Mutual Capital I .............................. Finance 2.13
7. Time Warner Inc. ......................................... Multimedia 2.00
8. Cleveland Electric Illuminating Co. ...................... Utilities 1.74
9. LG-Caltex Oil Corporation ................................ Industrial 1.69
10. Lehman Brothers Holdings ................................. Finance 1.63
</TABLE>
-----------
* The Portfolio's composition will change over time.
8
<PAGE>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
MARCH 31, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
TOP TEN INDUSTRY WEIGHTINGS*
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK INDUSTRY NET ASSETS
<C> <S> <C>
1. Competitive Local Exchange Companies .......................................................... 12.78
2. Enhanced Service Mobile Radios & Personal Communication Services .............................. 9.00
3. Long Distance Telephone Services .............................................................. 5.78
4. International Cable ........................................................................... 5.43
5. Data & Internet Services ...................................................................... 5.15
6. Forest - Paper Products ....................................................................... 4.35
7. Healthcare .................................................................................... 3.96
8. North American Cable Services ................................................................. 3.88
9. Steel - Metals - Mining ....................................................................... 3.88
10. Chemicals ..................................................................................... 3.86
</TABLE>
--------------------------------------------------------------------------------
TOP TEN HOLDINGS*
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS INDUSTRY NET ASSETS
<C> <S> <C> <C>
1. Sterling Chemicals Holdings, Inc. ........................ Chemicals 1.74
2. Verio Inc. ............................................... Data & Internet Services 1.68
3. United Pan-Europe Communications N.V. .................... International Cable 1.65
4. Nextel Communications, Inc. .............................. Enhanced Service Mobile Radios &
Personal Communication Services 1.56
5. Triad Hospitals Holdings, Inc. ........................... Healthcare 1.44
6. Motors and Gears, Inc. ................................... Industrial Products 1.42
7. TeleCorp PCS, Inc. ....................................... Enhanced Service Mobile Radios &
Personal Communication Services 1.42
8. Oxford Health Plans, Inc. ................................ Healthcare 1.42
9. Adelphia Communications Corporation ...................... North American Cable Services 1.40
10. Metris Companies Inc. .................................... Other Finance 1.36
</TABLE>
----------
* The Portfolio's composition will change over time.
9
<PAGE>
THE BEAR STEARNS FUNDS
Emerging Markets Debt Portfolio
MARCH 31, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
TOP TEN COUNTRY WEIGHTINGS*
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK COUNTRY NET ASSETS
<C> <S> <C>
1. Brazil ........................................................................................ 19.29
2. Argentina ..................................................................................... 14.57
3. Mexico ........................................................................................ 9.95
4. Russia ........................................................................................ 7.36
5. Peru .......................................................................................... 4.84
6. Ecuador ....................................................................................... 4.72
7. Panama ........................................................................................ 4.68
8. Bulgaria ...................................................................................... 4.63
9. Morocco ....................................................................................... 4.61
10. Nigeria ....................................................................................... 4.58
</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/Global bond 19.29
2. Republic of Argentina .................................... U.S. dollar Brady bond 14.57
3. United Mexican States .................................... U.S. dollar Brady/Global bond 9.95
4. Vnesheconombank .......................................... U.S. dollar Loan Participation 6.11
5. The Republic of Peru ..................................... U.S. dollar Brady/Sovereign bond 4.84
6. The Republic of Ecuador .................................. U.S. dollar Brady bond 4.72
7. The Republic of Panama ................................... U.S. dollar Brady bond 4.68
8. Republic of Bulgaria ..................................... U.S. dollar Brady bond 4.63
9. The Kingdom of Morocco ................................... U.S. dollar Loan Participation 4.61
10. Central Bank of Nigeria .................................. U.S. dollar Brady bond 4.58
</TABLE>
----------
* The Portfolio's composition will change over time.
10
<PAGE>
THE BEAR STEARNS FUNDS
Income Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS 92.58%
CORPORATE OBLIGATIONS - 48.43%
ASSET-BACKED - 9.72%
$ 200 Conseco Finance Home Equity Loan, Series-B, Class AF2 ................ 7.340% 02/15/31 $ 200,031
100 Conti-Mortgage Home Equity Loan Trust, Series 1998-1, Class A4 ....... 6.280 01/15/13 97,319
225 Conti-Mortgage Home Equity Loan Trust, Series 1998-1, Class A5 ....... 6.430 04/15/16 216,406
200 Green Tree Home Improvement Loan Trust, Series 1998-D, Class HEA3 .... 6.130 08/15/29 197,554
150 Honda Auto Lease Trust, Series 1999-A, Class A4 ...................... 6.450 09/16/02 148,373
150 JP Morgan Commercial Mortgage Finance Corp., Series 2000-C9, Class A2 7.770 10/15/32 153,311
150 Sawgrass Finance L.L.C., Series 1993-1, Class A ...................... 6.450 01/20/06 149,053
175 UCFC Home Equity Loan, Series 1996-B1, Class A6 ...................... 7.975 02/15/22 182,106
------------
1,344,153
------------
FINANCE - 10.19%
125 Associates Corp. N.A., Senior Unsecured Notes ........................ 6.000 07/15/05 117,031
150 Conseco Inc., Unsecured Notes ........................................ 8.500 10/15/02 148,875
150 Finova Capital Corp., Notes .......................................... 7.250 11/08/04 144,000
150 General Electric Capital Corp., Debentures ........................... 8.850 04/01/05 160,687
225 Lehman Brothers Holdings, Unsecured Notes ............................ 7.875 11/01/09 225,562
175 Norwest Financial, Inc., Senior Notes ................................ 6.750 06/01/05 170,187
150 Transamerica Finance Corp., Notes .................................... 7.250 08/15/02 149,437
300 Washington Mutual Capital I, Subordinated Capital Income Securities,
Washington Mutual Inc. Guaranteed .................................. 8.375 06/01/27 294,000
------------
1,409,779
------------
INDUSTRIAL - 11.20%
150 Boyd Gaming Corporation, Senior Subordinated Notes ................... 9.500 07/15/07 141,187
150 Electrical Data Systems, Unsecured Notes ............................. 6.850 10/15/04 147,938
150 Enron Oil & Gas Resources Inc., Notes ................................ 6.000 12/15/08 136,688
150 Georgia-Pacific Corp., Unsecured Notes ............................... 7.750 11/15/29 144,563
250 LG-Caltex Oil Corporation, Unsecured Notes ........................... 7.500 07/15/07 234,063
200 MedPartners, Inc., Senior Unsecured Subordinated Notes ............... 6.875 09/01/00 190,500
200 Safeway Inc., Senior Unsecured Notes ................................. 6.050 11/15/03 192,000
225 Smith International Inc., Senior Unsecured Notes ..................... 7.000 09/15/07 214,594
150 Textron Inc., Unsecured Notes ........................................ 6.750 09/15/02 147,375
------------
1,548,908
------------
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
THE BEAR STEARNS FUNDS
Income Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE(S) DATE(S) VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (continued)
MULTIMEDIA - 2.00%
$ 150 Time Warner Inc., Company Guaranteed .............................. 6.625% 05/15/29 $ 128,438
150 Time Warner Inc., Debentures ...................................... 6.850 01/15/26 147,750
------------
276,188
------------
RETAIL - DISCOUNT - 0.90%
125 TJX Companies Inc., Notes ......................................... 7.450 12/15/09 123,906
------------
SUPER-REGIONAL BANK - U.S. - 0.99%
150 PNC Funding Corp., Company Guaranteed ............................. 6.125 02/15/09 137,250
------------
TELECOMMUNICATIONS - 4.06%
150 Adelphia Communications Corporation, Senior Unsecured Notes ....... 9.375 11/15/09 140,625
150 Cox Communications, Senior Unsecured Notes ........................ 6.400 08/01/08 138,563
150 Nextel Communications, Inc., Senior Notes ......................... 9.375 11/15/09 138,375
150 NEXTLINK Communications, Inc., Senior Notes * ..................... 10.500 12/01/09 144,000
------------
561,563
------------
TELEPHONE - LOCAL - 3.35%
100 BellSouth Capital Funding, Debentures ............................. 7.875 02/15/30 102,500
150 Southern New England Telephone Company, Notes, Series C ........... 6.125 12/15/03 144,750
250 US West Communications, Debentures ................................ 6.875 09/15/33 216,250
------------
463,500
------------
TRANSPORT - 0.80%
125 Burlington North Santa Fe, Unsecured Debentures ................... 6.750 03/15/29 110,938
------------
UTILITIES - 5.22%
250 Cleveland Electric Illuminating Co., Senior Notes, Series D ....... 7.880 11/01/17 240,625
150 Consolidated Natural Gas Co., Unsecured Notes ..................... 7.250 10/01/04 148,500
400 Western Resources Inc., Senior Unsecured Notes .................... 6.250 08/15/03 333,000
------------
722,125
------------
Total Corporate Obligations (cost - $6,927,207) ................... 6,698,310
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 36.63%
FANNIE MAE - 9.65%
225 Benchmark Notes ................................................... 5.250 01/15/03 215,032
724 Pass-thru Pools ................................................... 7.000 - 8.000 12/01/29 - 01/01/30 710,494
425 TBA ............................................................... 7.000 10/01/30 408,531
------------
1,334,057
------------
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
THE BEAR STEARNS FUNDS
Income Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE(S) DATE(S) VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (continued)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 26.98%
$2,283 Pass-thru Pools .................................................... 6.000 - 7.000% 05/15/13 - 02/15/29 $2,171,367
1,575 TBA ................................................................ 7.500 03/15/25 1,561,219
------------
3,732,586
------------
Total U.S. Government Agency Obligations (cost - $5,178,683) ....... 5,066,643
------------
U.S. GOVERNMENT OBLIGATIONS - 7.52%
U.S. TREASURIES - 7.52%
700 Bonds .............................................................. 5.500 - 7.2500 5/15/16 - 08/15/28 719,629
325 Notes .............................................................. 6.000 08/15/09 321,084
------------
Total U.S. Government Obligations (cost - $1,052,557) .............. 1,040,713
------------
Total Long-Term Debt Investments (cost - $13,158,447) ............. 12,805,666
------------
SHARES
----------
SHORT-TERM INVESTMENTS 20.34%
INVESTMENT COMPANY - 0.18%
24,580 Federated Investors, Trust for Short-Term U.S. Government Securities ** 5.620 -- 24,580
------------
PRINCIPAL
AMOUNT
(000's)
-----------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 20.16%
$ 400 Fannie Mae, Discount Notes ........................................... 5.830 04/13/00 399,223
1,550 Fannie Mae, Discount Notes (1) ....................................... 5.830 04/19/00 1,545,482
845 Freddie Mac, Discount Notes (1) ...................................... 6.050 04/03/00 844,716
------------
2,789,421
------------
Total Short-Term Investments (cost - $2,814,001) .................... 2,814,001
------------
Total Investments 112.92%
(cost - $15,972,448) ............................................... 15,619,667
Liabilities in excess of other assets-- (12.92)% ..................... (1,787,289)
------------
Net Assets 100.00% .................................................. $13,832,378
------------
------------
----------
* SEC Rule 144A security. Such securities are traded only among qualified institutional buyers.
** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2000.
(1) All or a portion of which was segregated as collateral for TBA securities.
TBA To Be Announced.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE DATE VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS 88.72%
UNITED STATES - 74.55%
AEROSPACE - DEFENSE - 0.38%
$ 750 Compass Aerospace Corp., Senior Subordinated Notes * ............ 10.125% 04/15/05 $ 330,000
------------
AIRLINES - 1.02%
1,000 Amtran, Inc., Senior Notes, Company Guaranteed .................. 9.625 12/15/05 890,000
------------
ALTERNATIVE VIDEO PROVIDERS - 1.31%
250 21st Century Telecom Group, Inc., Senior Discount Notes (1) ..... 12.250 02/15/08 172,187
1,000 EchoStar DBS Corporation, Senior Notes .......................... 9.375 02/01/09 967,500
------------
1,139,687
------------
BUILDING MATERIALS - 2.04%
1,000 Formica Corporation, Senior Subordinated Notes, Series B ........ 10.875 03/01/09 880,000
1,000 Nortek, Inc., Senior Notes, Series B ............................ 8.875 08/01/08 902,500
------------
1,782,500
------------
CELLULAR COMMUNICATIONS - 2.67%
1,000 Crown Castle International Corp., Senior Discount Notes (1) ..... 10.625 11/15/07 695,000
1,000 SBA Communications Corporation, Senior Discount Notes (1) ....... 12.000 03/01/08 665,000
1,000 Spectrasite Holdings, Inc., Senior Discount Notes *(1) .......... 12.875 03/15/10 493,750
500 Spectrasite Holdings, Inc., Senior Notes * ...................... 10.750 03/15/10 476,875
------------
2,330,625
------------
CHEMICALS - 3.86%
1,000 General Chemical Industrial Products Inc., Senior Subordinated
Notes ........................................................ 10.625 05/01/09 890,000
1,000 Huntsman ICI Chemicals LLC, Senior Subordinated Notes * ........ 10.125 07/01/09 965,000
2,400 Sterling Chemicals Holdings, Inc., Senior Secured Discount
Notes (1)..................................................... 13.500 08/15/08 750,000
750 Sterling Chemicals, Inc., Senior Secured Notes, Series B,
Company Guaranteed ........................................... 12.375 07/15/06 765,000
------------
3,370,000
------------
COMPETITIVE LOCAL EXCHANGE COMPANIES - 11.22%
1,000 Adelphia Business Solutions, Inc., Senior Subordinated Notes ... 12.000 11/01/07 1,015,000
500 GST USA, Inc., Senior Discount Exchange Notes,
Company Guaranteed (1) ....................................... 13.875 12/15/05 250,000
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE DATE VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
COMPETITIVE LOCAL EXCHANGE COMPANIES (CONTINUED)
$1,250 ICG Holdings Inc., Senior Secured Discount Notes,
Company Guaranteed (1) ............................................. 12.500% 05/01/06 $ 1,034,375
1,000 Intermedia Communications of Florida, Inc., Senior Discount Notes (1) 12.500 05/15/06 947,500
1,750 KMC Telecom Holdings, Inc., Senior Discount Notes (1) ................ 12.500 02/15/08 940,625
1,000 McLeodUSA Incorporated, Senior Notes ................................. 8.125 02/15/09 887,500
1,000 Metromedia Fiber Network, Inc., Senior Notes ......................... 10.000 12/15/09 955,000
1,500 NEXTLINK Communications, Inc., Senior Discount Notes (1) ............. 12.250 06/01/09 847,500
350 NEXTLINK Communications, Inc., Senior Notes * ........................ 10.500 12/01/09 336,000
1,000 Teligent, Inc., Senior Notes ......................................... 11.500 12/01/07 905,000
1,070 Time Warner Telecom LLC and Time Warner Telecom Inc., Senior Notes ... 9.750 07/15/08 1,061,975
500 WinStar Communications, Inc., Senior Subordinated Deferred
Interest Exchange Notes (2)(3) ..................................... 11.000 03/15/08 602,125
------------
9,782,600
------------
DATA & INTERNET SERVICES - 5.15%
1,000 Covad Communications Group, Inc., Senior Notes ....................... 12.500 02/15/09 930,000
1,000 Globix Corporation, Senior Notes * ................................... 12.500 02/01/10 915,000
250 PSINet Inc., Senior Notes * .......................................... 10.500 12/01/06 240,625
1,000 PSINet Inc., Senior Notes, Series B .................................. 10.000 02/15/05 945,000
1,500 Verio Inc., Senior Notes * ........................................... 10.625 11/15/09 1,462,500
------------
4,493,125
------------
ENHANCED SERVICE MOBILE RADIOS & PERSONAL COMMUNICATION SERVICES - 6.33%
2,000 Alamosa PCS Holdings, Inc., Senior Discount Notes,
Company Guaranteed (1) ............................................. 12.875 02/15/10 970,000
500 Nextel Communications, Inc., Senior Notes ............................ 9.375 11/15/09 461,250
1,300 Nextel Communications, Inc., Senior Serial Redeemable
Discount Notes (1) ................................................. 9.950 02/15/08 897,000
2,000 TeleCorp PCS, Inc., Senior Subordinated Discount Notes,
Company Guaranteed (1) ............................................. 11.625 04/15/09 1,235,000
1,300 Triton PCS, Inc., Senior Subordinated Discount Notes,
Company Guaranteed (1) ............................................. 11.000 05/01/08 887,250
2,000 US Unwired Inc., Senior Discount Notes *(1) .......................... 13.375 11/01/09 1,072,500
------------
5,523,000
------------
EXPLORATION & PRODUCTION - 1.64%
500 Chesapeake Energy Corporation, Senior Notes, Series B,
Company Guaranteed ................................................. 9.625 05/01/05 468,750
1,000 Ocean Energy, Inc., Senior Subordinated Notes, Series B,
Company Guaranteed ................................................. 8.875 07/15/07 965,000
------------
1,433,750
------------
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
FABRICATED GLASS, PLASTICS & FIBERS - 0.33%
$ 500 Graham Packaging Company and GPC Capital Corp. II, Senior
Discount Notes, Series B (1) ....................................... 10.750% 01/15/09 $ 287,500
------------
FOOD, BEVERAGE & TOBACCO - 1.88%
1,000 Packaged Ice, Inc., Senior Notes, Series B, Company Guaranteed.... ... 9.750 02/01/05 832,500
1,475 Purina Mills, Inc., Senior Subordinated Notes (4) .................... 9.000 03/15/10 390,875
750 Richmont Marketing Specialists Inc., Senior Subordinated Notes,
Company Guaranteed ................................................. 10.125 12/15/07 419,063
------------
1,642,438
------------
FOREST - PAPER PRODUCTS - 3.32%
500 Bear Island Paper Company, L.L.C. and Bear Island Finance Company II,
Senior Secured Notes, Series B ..................................... 10.000 12/01/07 476,875
500 MAXXAM Group Holdings Inc., Senior Secured Notes, Series B ........... 12.000 08/01/03 461,875
1,000 Packaging Corporation of America, Senior Subordinated Notes,
Company Guaranteed ................................................. 9.625 04/01/09 975,000
1,000 Riverwood International Corporation, Senior Notes, Company Guaranteed 10.625 08/01/07 985,000
------------
2,898,750
------------
GAMING - 2.21%
1,000 Boyd Gaming Corporation, Senior Subordinated Notes ................... 9.500 07/15/07 941,250
1,000 Pinnacle Entertainment, Inc., Senior Subordinated Notes, Series B,
Company Guaranteed ................................................. 9.250 02/15/07 985,000
------------
1,926,250
------------
HEALTHCARE - 3.96%
1,250 Oxford Health Plans, Inc., Senior Notes .............................. 11.000 05/15/05 1,234,375
1,050 Team Health, Inc., Senior Subordinated Notes, Series B,
Company Guaranteed ................................................. 12.000 03/15/09 960,750
1,250 Triad Hospitals Holdings, Inc., Senior Subordinated Notes, Series B,
Company Guaranteed ................................................. 11.000 05/15/09 1,259,375
------------
3,454,500
------------
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE DATE VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
INDUSTRIAL PRODUCTS - 3.48%
$ 750 Aqua-Chem, Inc., Senior Subordinated Notes ........................... 11.250% 07/01/08 $ 427,500
250 Grove Holdings LLC and Grove Holdings Capital, Inc., Senior
Discount Debentures (1) ............................................ 11.625 05/01/09 21,250
1,250 Motors and Gears, Inc., Senior Notes, Series D ....................... 10.750 11/15/06 1,239,062
1,000 Roller Bearing Company of America, Inc., Senior Subordinated Notes,
Series B, Company Guaranteed ....................................... 9.625 06/15/07 910,000
500 Thermadyne Holdings Corporation, Senior Discount Debentures (1) ...... 12.500 06/01/08 229,375
250 Thermadyne Mfg. LLC and Thermadyne Capital Corp., Senior
Subordinated Notes, Company Guaranteed ............................. 9.875 06/01/08 210,313
------------
3,037,500
------------
INTERNATIONAL CABLE - 1.31%
1,700 NTL Communications Corp., Senior Deferred Coupon Notes,
Series B (1) ....................................................... 12.375 10/01/08 1,139,000
------------
LONG DISTANCE TELEPHONE SERVICES - 3.63%
500 Global TeleSystems Group, Inc., Senior Notes ......................... 9.875 02/15/05 417,500
750 Primus Telecommunications Group, Incorporated, Senior Notes, Series B 9.875 05/15/08 660,000
1,100 Viatel, Inc., Senior Notes ........................................... 11.250 04/15/08 1,001,000
1,250 World Access, Inc., Senior Notes, Series B ........................... 13.250 01/15/08 1,087,500
------------
3,166,000
------------
NORTH AMERICAN CABLE SERVICES - 3.58%
500 Adelphia Communications Corporation, Senior Notes .................... 9.375 11/15/09 468,750
500 Adelphia Communications Corporation, Senior Notes, Series B .......... 9.875 03/01/07 495,000
500 Charter Communications Holdings, LLC and Charter Communications
Holdings Capital Corporation, Senior Discount Notes (1) ............ 9.920 04/01/11 278,750
1,000 Charter Communications Holdings, LLC and Charter Communications
Holdings Capital Corporation, Senior Notes ......................... 8.625 04/01/09 882,500
1,000 Insight Midwest LP and Insight Capital Inc., Senior Notes * .......... 9.750 10/01/09 997,500
------------
3,122,500
------------
OIL SERVICES - 2.28%
1,000 Grey Wolf, Inc., Senior Notes, Company Guaranteed .................... 8.875 07/01/07 910,000
1,000 R&B Falcon Corporation, Senior Notes ................................. 12.250 03/15/06 1,073,750
------------
1,983,750
------------
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
THE BEAR STEARNS FUNDS
High Yield Total Return Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE DATE VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
OTHER CONSUMER CYCLICALS - 0.38%
$ 500 COMFORCE Operating Inc., Senior Notes, Series B ...................... 12.000% 12/01/07 $ 299,375
750 Hedstrom Corporation and Hedstrom Holdings, Inc., Senior Subordinated
Notes, Company Guaranteed (5) ...................................... 10.000 06/01/07 33,750
------------
333,125
------------
OTHER CONSUMER NON-CYCLICALS - 1.30%
750 AP Holdings, Inc., Senior Discount Notes (1) ......................... 11.250 03/15/08 168,750
750 Bell Sports, Inc., Senior Subordinated Notes, Series B,
Company Guaranteed ................................................. 11.000 08/15/08 735,000
750 Styling Technology Corporation, Senior Subordinated Notes,
Company Guaranteed ................................................. 10.875 07/01/08 225,000
------------
1,128,750
------------
OTHER FINANCE - 1.36%
1,250 Metris Companies Inc., Senior Notes, Company Guaranteed .............. 10.000 11/01/04 1,187,500
------------
PUBLISHING - 0.44%
250 American Color Graphics, Inc., Senior Subordinated Exchange Notes,
Company Guaranteed ................................................. 12.750 08/01/05 256,875
250 Liberty Group Publishing, Inc., Senior Discount Debentures (1) ....... 11.625 02/01/09 125,000
------------
381,875
------------
RADIO BROADCASTING - 1.33%
1,000 Citadel Broadcasting Company, Senior Subordinated Notes,
Company Guaranteed ................................................. 9.250 11/15/08 935,000
250 Cumulus Media Inc., Senior Subordinated Notes, Company Guaranteed .... 10.375 07/01/08 223,125
------------
1,158,125
------------
RECREATIONAL SERVICES - 1.03%
750 Premier Parks Inc., Senior Discount Notes (1) ........................ 10.000 04/01/08 480,000
450 Premier Parks Inc., Senior Notes ..................................... 9.750 06/15/07 420,188
------------
900,188
------------
RETAILERS - 2.21%
500 Advance Holding Corporation, Senior Discount Debentures, Series B (1) 12.875 04/15/09 235,000
1,000 Advance Stores Company, Incorporated, Senior Subordinated Notes,
Series B, Company Guaranteed ....................................... 10.250 04/15/08 800,000
1,000 Hollywood Entertainment Corporation, Senior Subordinated
Notes, Series B .................................................... 10.625 08/15/04 890,000
------------
1,925,000
------------
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, 2000
----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE DATE VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
STEEL - METALS - MINING - 3.12%
$ 372 Anker Coal Group, Inc., Second Priority Senior Secured Notes, Series B,
Company Guaranteed (6) ............................................. 14.250% 09/01/07 $ 167,175
1,250 Metal Management, Inc., Senior Subordinated Notes,
Company Guaranteed ................................................. 10.000 05/15/08 948,438
750 Renco Steel Holdings, Inc., Senior Secured Notes, Series B ........... 10.875 02/01/05 675,000
1,000 WHX Corporation, Senior Exchange Notes ............................... 10.500 04/15/05 930,000
------------
2,720,613
------------
TECHNOLOGY - 0.52%
500 Telecommunications Techniques Co., LLC, Senior Subordinated Notes,
Company Guaranteed ................................................. 9.750 05/15/08 454,375
------------
TELEVISION BROADCASTING - 0.73%
710 ACME Television, LLC and ACME Finance Corporation,
Senior Discount Notes, Series B, Company Guaranteed (1) ............ 10.875 09/30/04 639,000
------------
TEXTILE - APPAREL - 0.53%
450 Consoltex Group Inc., Senior Subordinated Notes, Series B ............ 11.000 10/01/03 409,500
1,000 Globe Holdings, Inc., Senior Discount Notes, Series B (1)(7) ......... 14.000 08/01/09 50,000
------------
459,500
------------
Total United States (cost - $75,205,696) ............................. 65,021,526
------------
ARGENTINA - 0.63%
SOVEREIGN - 0.63%
650 Republic of Argentina, Discount Bonds, Series L-GL (8)(9)
(cost - $495,900) .................................................. 6.875 03/31/23 550,875
------------
AUSTRALIA - 0.76%
STEEL - METALS - MINING - 0.76%
750 Murrin Murrin Holdings Pty. Ltd., Senior Yankee Notes (cost - $709,826) 9.375 08/31/07 666,562
------------
BERMUDA - 1.17%
LONG DISTANCE TELEPHONE SERVICES - 1.17%
1,050 Global Crossing Holdings Ltd., Senior Notes, Company Guaranteed
(cost - $1,122,601) ................................................ 9.625 05/15/08 1,018,500
------------
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, 2000
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
BRAZIL - 0.62%
SOVEREIGN - 0.62%
$ 728 Federal Republic of Brazil, Capitalization Bonds (2)(6)(9)
(cost - $515,486)................................................... 8.000% 04/15/14 $ 545,944
------------
CANADA - 3.70%
ENHANCED SERVICE MOBILE RADIOS & PERSONAL COMMUNICATION SERVICES - 2.67%
2,050 Clearnet Communications Inc., Senior Discount Yankee Notes (1) ....... 10.125 05/01/09 1,173,625
1,300 Microcell Telecommunications Inc., Senior Discount Yankee
Notes, Series B (1) ................................................ 14.000 06/01/06 1,157,000
------------
2,330,625
------------
FOREST - PAPER PRODUCTS - 1.03%
1,000 Repap New Brunswick Inc., Senior Yankee Notes ........................ 10.625 04/15/05 897,500
------------
Total Canada (cost - $3,401,440) ..................................... 3,228,125
------------
MEXICO - 0.59%
SOVEREIGN - 0.59%
600 United Mexican States, Secured Par Bonds, Series W-A (9)(10)
(cost - $477,965) .................................................. 6.250 12/31/19 511,125
------------
NETHERLANDS - 2.78%
COMPETITIVE LOCAL EXCHANGE COMPANIES - 1.13%
1,000 Versatel Telecom International N.V., Senior Yankee Notes ............. 11.875 07/15/09 982,500
------------
INTERNATIONAL CABLE - 1.65%
500 United Pan-Europe Communications N.V., Senior Notes * ................ 11.250 11/01/09 480,000
1,000 United Pan-Europe Communications N.V., Senior Yankee Notes, Series B.. 10.875 08/01/09 960,000
------------
1,440,000
------------
Total Netherlands (cost - $2,489,520) ................................ 2,422,500
------------
UNITED KINGDOM - 3.92%
INTERNATIONAL CABLE - 2.30%
1,000 Ono Finance plc, Senior Subordinated Notes, Company Guaranteed ....... 13.000 05/01/09 1,023,750
1,750 Telewest Communications plc, Senior Discount Notes *(1) .............. 11.375 02/01/10 984,375
------------
2,008,125
------------
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, 2000
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
LONG DISTANCE TELEPHONE SERVICES - 0.78%
$ 750 Esprit Telecom Group plc, Senior Yankee Notes ........................ 10.875% 06/15/08 $ 676,875
------------
PUBLISHING - 0.84%
750 Regional Independent Media Group plc, Senior Yankee Notes ............ 10.500 07/01/08 734,062
------------
Total United Kingdom (cost - $3,536,726) ............................. 3,419,062
------------
Total Long-Term Debt Investments (cost - $87,955,160) ................ 77,384,219
------------
SHARES
----------------------------------------------------------------------------------------------------------------------------------
EQUITY INVESTMENTS 2.91%
COMMON STOCKS - UNITED STATES - 0.20%
LONG DISTANCE TELEPHONE SERVICES - 0.20%
2,015 Viatel, Inc. (11) .................................................... -- -- 101,128
3,927 World Access, Inc. (11) .............................................. -- -- 75,104
------------
Total Common Stocks - United States (cost - $69,878) ................. -- -- 176,232
------------
PREFERRED STOCKS - UNITED STATES - 2.71%
ALTERNATIVE VIDEO PROVIDERS - 0.34%
329 21st Century Telecom Group, Inc., Senior Cumulative Exchangeable
Preferred Stock (6) ................................................ 13.750 -- 290,287
------------
CELLULAR COMMUNICATIONS - 0.98%
549 Dobson Communications Corporation, Senior Exchangeable
Preferred Stock (6) ................................................ 13.000 -- 551,121
314 Dobson Communications Corporation, Senior Exchangeable
Preferred Stock (6) ................................................ 12.250 -- 305,863
------------
856,984
------------
COMPETITIVE LOCAL EXCHANGE COMPANIES - 0.41%
250 WinStar Communications, Inc., Senior Cumulative Exchangeable
Preferred Stock, Series C .......................................... 14.250 -- 359,313
------------
NORTH AMERICAN CABLE SERVICES - 0.30%
2,500 Adelphia Communications Corporation, Cumulative Exchangeable
Preferred Stock, Series B .......................................... 13.000 -- 260,625
------------
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, 2000
---------------------------------------------------------------------------------------------------------------------------------
INTEREST MATURITY
SHARES RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
EQUITY INVESTMENTS (CONTINUED)
RADIO BROADCASTING - 0.45%
423 Cumulus Media Inc., Cumulative Exchangeable Redeemable
Preferred Stock, Series A (6) ...................................... 13.750% -- $ 392,818
------------
SUPERMARKETS & DISTRIBUTORS - 0.00%
909 Nebco Evans Holding Company, Senior Redeemable
Exchangeable Preferred Stock (6) ................................... 11.250 -- 114
------------
TELEVISION BROADCASTING - 0.00%
1 Paxson Communications Corporation (6) ................................ 12.500 -- 292
------------
TEXTILE - APPAREL - 0.23%
8,983 Cluett American Corp., Senior Exchangeable Preferred Stock, Series B (6) 12.500 -- 199,908
------------
Total Preferred Stocks - United States (cost - $3,982,385) ........... 2,360,341
------------
Total Equity Investments (cost - $4,052,263) ......................... 2,536,573
------------
UNITS
----------------------------------------------------------------------------------------------------------------------------------
WARRANTS+ 0.19%
UNITED STATES - 0.02%
ALTERNATIVE VIDEO PROVIDERS - 0.00%
250 21st Century Telecom Group, Inc. *(11) ............................... -- 02/15/10 625
------------
COMPETITIVE LOCAL EXCHANGE COMPANIES - 0.02%
750 KMC Telecom Holdings, Inc. *(11) ..................................... -- 04/15/08 2,297
250 MGC Communications, Inc. *(11) ....................................... -- 10/01/04 9,500
------------
11,797
------------
Total United States (cost - $10,000) ................................. 12,422
------------
UNITED KINGDOM - 0.17%
INTERNATIONAL CABLE - 0.17%
1,000 Ono Finance plc *(11) ................................................ -- 05/31/09 150,500
------------
Total Warrants (cost - $10,000) 162,922
------------
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, 2000
----------------------------------------------------------------------------------------------------------------------------------
INTEREST MATURITY
SHARES RATE DATE VALUE
----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 6.44%
INVESTMENT COMPANY - 0.02%
17,719 Federated Investors, Trust for Short-Term U.S. Government Securities ** 5.620% -- $ 17,719
------------
PRINCIPAL
AMOUNT
(000's)
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 6.42%
$5,600 Federal Home Loan Bank, Discount Notes ............................... 6.050 04/03/00 5,598,118
------------
Total Short-Term Investments (cost - $5,615,837) ..................... 5,615,837
------------
Total Investments 98.26%
(cost - $97,633,260) ............................................... 85,699,551
Other assets in excess of liabilities 1.74% ......................... 1,518,848
------------
Net Assets 100.00% .................................................. $87,218,399
------------
------------
----------
* SEC Rule 144A security. Such securities are traded only among qualified institutional buyers.
** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2000.
+ With an additional 750 warrants of American Banknote Corporation, expiring 12/01/02, with no market value.
(1) Coupon rate is zero until step-up date. Step-up rate is provided.
(2) Pro-rata sinking fund has been established. (3) Coupon payment is deferred
until 09/15/03.
(4) Coupon payment is in default. Company filed Chapter 11 on 10/28/99. Court
approved reorganization plan in 04/00. (5) Coupon payment is in default. Company
filed Chapter 11 on 04/11/00. (6) Payment-in-kind; of which all or a portion of
the coupon is being capitalized at periodic intervals.
(7) With an additional 1,000 warrants, expiring 08/01/09, with no market value.
(8) Adjustable rate; rate based on London Interbank Offered Rate (LIBOR) plus
0.8125%.
(9) Brady bond.
(10) Traded with value recovery rights based on the price of oil. (11)
Non-income producing security. The accompanying notes are an integral part of
the financial statements.
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
THE BEAR STEARNS FUNDS
Emerging Markets Debt Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's) RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS -- 90.45%
ARGENTINA - 14.57%
SOVEREIGN
850 Republic of Argentina, Discount Bonds, Series L-GL (a)(b) ............ 6.875% 03/31/23 $ 719,312
2,376 Republic of Argentina, FRB Bearer (a)(b) ............................. 7.375 03/31/05 2,226,015
194 Republic of Argentina, FRB Registered, Series L (a)(b) ............... 7.375 03/31/05 181,379
2,410 Republic of Argentina, Par Bonds, Series L-GP (b)(c) ................. 6.000 03/31/23 1,691,519
------------
Total Argentina (cost - $4,600,022) .................................. 4,818,225
------------
BRAZIL - 19.29%
SOVEREIGN
825 Federal Republic of Brazil, Capitalization Bonds (b)(c)(d) ........... 8.000 04/15/14 617,706
1,300 Federal Republic of Brazil, DCB (a)(b) ............................... 7.000 04/15/12 989,625
625 Federal Republic of Brazil, DCB, Series RG (a)(b) .................... 7.000 04/15/12 475,781
840 Federal Republic of Brazil, Discount Bonds (a)(b) .................... 6.938 04/15/24 668,850
865 Federal Republic of Brazil, EI Bearer Bonds, Series EI-L (a)(b) ...... 6.938 04/15/06 785,887
350 Federal Republic of Brazil, FLIRB Bearer (a)(b) ...................... 5.000 04/15/09 271,250
1,265 Federal Republic of Brazil, Global Bonds ............................. 14.500 10/15/09 1,380,115
590 Federal Republic of Brazil, NMB (a)(b) ............................... 7.000 04/15/09 500,762
1,050 Federal Republic of Brazil, Par Bonds (a)(b)(c) ...................... 5.750 04/15/24 689,719
------------
Total Brazil (cost - $6,136,323) ..................................... 6,379,695
------------
BULGARIA - 4.63%
SOVEREIGN
600 Republic of Bulgaria, Discount Bonds, Series A (a)(b) ................ 7.063 07/28/24 487,125
900 Republic of Bulgaria, FLIRB, Series A (a)(b) ......................... 2.750 07/28/12 650,250
170 Republic of Bulgaria, IAB Bearer (a)(b) .............................. 7.063 07/28/11 135,575
325 Republic of Bulgaria, IAB Registered (a)(b) .......................... 7.063 07/28/11 259,187
------------
Total Bulgaria (cost - $1,292,234) ................................... 1,532,137
------------
CHINA - 0.41%
CORPORATE
290 Zhuhai Highway Co. Ltd. .............................................. 11.500 07/01/08 101,500
100 Zhuhai Highway Co. Ltd.* ............................................. 11.500 07/01/08 35,000
------------
Total China (cost - $218,509) ........................................ 136,500
------------
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
THE BEAR STEARNS FUNDS
Emerging Markets Debt Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's)+ RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
ECUADOR - 4.72%
SOVEREIGN
875 The Republic of Ecuador, Discount Bonds (a)(b)(f) .................... -- 02/28/25 $ 365,312
1,375 The Republic of Ecuador, Par Bonds, Registered (b)(c)(g) ............. -- 02/28/25 502,734
1,269 The Republic of Ecuador, PDI Bearer Bonds (a)(b)(g) .................. -- 02/27/15 356,854
1,193 The Republic of Ecuador, PDI Bonds, Registered (a)(b)(g) ............. -- 02/27/15 335,660
------------
Total Ecuador (cost - $1,631,782) .................................... 1,560,560
------------
MEXICO - 9.95%
SOVEREIGN
75 United Mexican States, Global Bonds (h) .............................. 9.875 01/15/07 78,581
345 United Mexican States, Secured Par Bonds, Series W-A (b) ............. 6.250 12/31/19 293,897
3,425 United Mexican States, Secured Par Bonds, Series W-B (b) ............. 6.250 12/31/19 2,917,672
------------
Total Mexico (cost - $3,015,196) ..................................... 3,290,150
------------
MOROCCO - 4.61%
SOVEREIGN
1,688 The Kingdom of Morocco, Tranche A, Loan
Participation (a) (cost - $1,360,935) .............................. 6.844 01/01/09 1,524,411
------------
NIGERIA - 4.58%
SOVEREIGN
2,500 Central Bank of Nigeria, Par Bonds (b)(c)(e) (cost - $1,747,873) ..... 6.250 11/15/20 1,515,625
------------
PANAMA - 4.68%
SOVEREIGN
1,100 The Republic of Panama, IRB (a)(b) ................................... 4.250 07/17/14 886,188
776 The Republic of Panama, PDI Bonds (a)(b) ............................. 7.063 07/17/16 660,868
------------
Total Panama (cost - $1,491,067) ..................................... 1,547,056
------------
PERU - 4.84%
SOVEREIGN
737 The Republic of Peru, Discount Bonds (a)(b) .......................... 7.188 03/08/27 567,490
680 The Republic of Peru, FLIRB (b)(c) ................................... 3.750 03/07/17 422,875
125 The Republic of Peru, FLIRB *(c) ..................................... 3.750 03/07/17 77,734
240 The Republic of Peru, PDI Bearer Bonds (a)(b) ........................ 4.500 03/07/17 160,800
556 The Republic of Peru, PDI Bonds *(a) ................................. 4.500 03/07/17 372,520
------------
Total Peru (cost - $1,541,257) ....................................... 1,601,419
------------
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
THE BEAR STEARNS FUNDS
Emerging Markets Debt Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's)+ RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED)
PHILIPPINES - 4.38%
SOVEREIGN
276 Republic of the Philippines, DCB, Series 92-B (a)(b) ................. 6.875% 12/01/09 $ 263,580
453 Republic of the Philippines, FLIRB, Series B (a)(b) .................. 6.875 06/01/08 436,334
75 Republic of the Philippines, Global Bonds ............................ 8.875 04/15/08 70,266
780 Republic of the Philippines, Par Bonds, Series B (b)(c) .............. 6.500 12/01/17 678,113
------------
Total Philippines (cost - $1,431,806) ................................ 1,448,293
------------
RUSSIA - 7.36%
MUNICIPAL
DEM 750 City of Moscow ....................................................... 9.125 04/09/01 337,577
------------
SOVEREIGN
602 Chase Russian Ruble-linked Notes ..................................... 25.000 01/21/04 77,096
1,647 Vnesheconombank, IAN Series (f) ...................................... -- 12/15/15 486,911
5,280 Vnesheconombank, Principal Loan (f) .................................. -- 12/15/20 1,534,500
------------
2,098,507
------------
Total Russia (cost - $1,608,481) ..................................... 2,436,084
------------
SLOVAKIA - 1.11%
CORPORATE
E 380 Slovak Wireless Financial Co., Notes * (cost - $375,344) ............. 11.250 03/30/07 368,157
------------
SOUTH KOREA - 0.75%
CORPORATE
250 Cho Hung Bank, Subordinated Notes * (cost - $250,000) ................ 11.500 04/01/10 248,125
------------
VENEZUELA - 4.57%
SOVEREIGN
571 Republic of Venezuela, DCB, Series DL (a)(b) ......................... 7.000 12/18/07 460,716
350 Republic of Venezuela, Discount Bonds, Series W-A (a)(b)(i) .......... 7.000 03/31/20 264,906
536 Republic of Venezuela, FLIRB, Series B (a)(b) ........................ 7.438 03/31/07 425,891
500 Republic of Venezuela, Par Bonds, Series W-A (b) ..................... 6.750 03/31/20 359,063
------------
Total Venezuela (cost - $1,389,906) .................................. 1,510,576
------------
Total Long-Term Debt Investments (cost - $28,090,735) ................ 29,917,013
------------
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
THE BEAR STEARNS FUNDS
Emerging Markets Debt Portfolio
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000's)+ RATE DATE VALUE
----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 0.20%
GRAND CAYMAN - 0.20%
65 Brown Brothers Harriman & Co. (cost - $65,000) ....................... 5.200% ** $ 65,000
------------
Total Investments 90.65%
(cost - $28,155,735) ............................................... 29,982,013
Other assets in excess of liabilities 9.35% ......................... 3,093,444
------------
Net Assets 100.00% .................................................. $33,075,457
------------
------------
----------
+ Denominated in United States dollars unless otherwise indicated.
* SEC Rule 144A security. Such securities are traded only among qualified institutional buyers.
** Variable rate call account. Rate resets on a daily basis, amounts available generally on the same business day.
k Euros.
(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 252,000 warrants attached, with no market value.
(f) Instrument is in default.
(g) Instrument is in technical default as evidenced by current market practice
which dictates such instrument be traded flat (i.e., without interest).
(h) With additional 2,923,000 value recovery rights attached, with no market
value.
(i) With additional 8,010 value recovery rights attached, with no market value.
DCB Debt Conversion Bond.
DEM Deutschemarks.
EI Eligible Interest.
FLIRB Front Loaded Interest Reduction Bond.
FRB Floating Rate Bond.
IAB Interest Arrears Bond.
IAN Interest Arrears Note.
IRB Interest Reduction Bond.
NMB New Money Bond.
PDI Past Due Interest.
The accompanying notes are an integral part of the financial statements.
27
</TABLE>
<PAGE>
THE BEAR STEARNS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 2000
<TABLE>
<CAPTION>
INCOME HIGH YIELD TOTAL EMERGING MARKETS
PORTFOLIO RETURN PORTFOLIO DEBT PORTFOLIO
<S> <C> <C> <C>
ASSETS
Investments, at value (cost - $15,972,448, $97,633,260 and $28,155,735,
respectively) ......................................................... $15,619,667 $ 85,699,551 $29,982,013
Interest and dividends receivable, if any ................................ 169,763 2,278,535 730,828
Receivable for investments sold .......................................... -- 253,715 2,485,437
Receivable for Portfolio shares sold ..................................... 34,176 379,262 70,320
Receivable from investment adviser ....................................... 44,724 1,176 --
Receivable for open forward foreign currency exchange contracts .......... -- -- 10,709
Deferred organization expenses and other assets .......................... 30,497 73,866 176,187
----------- ----------- -----------
Total assets ...................................................... 15,898,827 88,686,105 33,455,494
----------- ----------- -----------
LIABILITIES
Payable for investments purchased ........................................ 1,950,549 -- 89,375
Payable for Portfolio shares repurchased ................................. 21,555 909,735 58,618
Dividends payable ........................................................ 24,790 309,181 62,215
Distribution and service fees payable (Class A, B and C shares) .......... 14,518 155,914 36,016
Advisory fee payable ..................................................... -- -- 56,156
Administration fee payable ............................................... 1,825 11,459 4,200
Custodian fee payable .................................................... 1,862 1,376 9,892
Accrued expenses ......................................................... 51,350 80,041 63,565
----------- ----------- -----------
Total liabilities ................................................. 2,066,449 1,467,706 380,037
----------- ----------- -----------
NET ASSETS
Capital stock, $0.001 par value (unlimited shares of beneficial interest
authorized) ............................................................ 1,200 8,918 3,128
Paid-in capital .......................................................... 14,619,270 110,352,374 35,139,334
Undistributed net investment income ...................................... -- -- 12,870
Accumulated net realized loss from investments and foreign currency
related transactions, if any .......................................... (435,311) (11,209,184) (3,909,712)
Net unrealized appreciation/(depreciation) on investments and foreign
currency related transactions, if any ................................. (352,781) (11,933,709) 1,829,837
----------- ----------- -----------
Net assets ....................................................... $13,832,378 $ 87,218,399 $33,075,457
----------- ----------- -----------
----------- ----------- -----------
CLASS A
Net assets ............................................................... $ 5,071,445 $ 44,991,442 $28,517,422
----------- ----------- -----------
Shares of beneficial interest outstanding ................................ 439,919 4,600,353 2,694,542
----------- ----------- -----------
Net asset value per share ................................................ $11.53 $9.78 $10.58
----------- ----------- -----------
----------- ----------- -----------
Maximum offering price per share (net asset value plus sales charge
of 4.50%* of the offering price) ...................................... $12.07 $10.24 $11.08
----------- ----------- -----------
----------- ----------- -----------
CLASS B
Net assets ............................................................... $ 2,027,482 $ 23,520,317 $ 1,807,696
----------- ----------- -----------
Shares of beneficial interest outstanding ................................ 175,872 2,404,920 172,194
----------- ----------- -----------
Net asset value and offering price per share** ........................... $11.53 $9.78 $10.50
----------- ----------- -----------
----------- ----------- -----------
CLASS C
Net assets ............................................................... $ 1,970,749 $ 18,706,640 $ 2,750,339
----------- ----------- -----------
Shares of beneficial interest outstanding ................................ 170,951 1,912,753 261,782
----------- ----------- -----------
Net asset value and offering price per share** ........................... $11.53 $9.78 $10.51
----------- ----------- -----------
----------- ----------- -----------
CLASS Y
Net assets ............................................................... $ 4,762,702 -- --
----------- ----------- -----------
Shares of beneficial interest outstanding ................................ 413,136 -- --
----------- ----------- -----------
Net asset value, offering and redemption price per share ................. $11.53 -- --
----------- ----------- -----------
----------- ----------- -----------
----------
* On investments of $500,000 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.
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
THE BEAR STEARNS FUNDS
STATEMENTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
INCOME HIGH YIELD TOTAL EMERGING MARKETS
PORTFOLIO RETURN PORTFOLIO DEBT PORTFOLIO
<S> <C> <C> <C>
INVESTMENT INCOME
Interest .................................................................. $ 887,639 $ 11,558,117 $3,592,372
Dividends ................................................................. -- 504,225 --
----------- ----------- -----------
887,639 12,062,342 3,592,372
----------- ----------- -----------
EXPENSES
Advisory fees ............................................................. 58,835 649,418 392,171
Transfer agent fees and expenses .......................................... 147,262 153,218 96,936
Accounting fees ........................................................... 98,573 137,872 92,010
Distribution and service fees - Class A ................................... 16,785 200,757 107,258
Distribution and service fees - Class B ................................... 19,239 257,571 17,496
Distribution and service fees - Class C ................................... 20,394 250,616 23,447
Administration fees ....................................................... 19,612 162,354 52,054
Legal and auditing fees ................................................... 57,353 49,999 103,999
Federal and state registration fees ....................................... 49,110 49,659 59,489
Reports and notices to shareholders ....................................... 3,660 78,987 23,998
Custodian fees and expenses ............................................... 9,010 21,596 33,000
Amortization of organization expenses ..................................... 13,030 12,309
Insurance expenses ........................................................ 5,919 6,483 6,260
Trustees' fees and expenses ............................................... 4,289 4,514 2,933
Other ..................................................................... 1,573 11,138 9,785
----------- ----------- -----------
Total expenses before waivers and related reimbursements ............. 524,644 2,046,491 1,020,836
Less: waivers and related reimbursements ............................. (409,178) (628,753) (380,730)
----------- ----------- -----------
Total expenses after waivers and related reimbursements .............. 115,466 1,417,738 640,106
----------- ----------- -----------
Net investment income ..................................................... 772,173 10,644,604 2,952,266
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain/(loss)from:
Investments ............................................................ (426,746) (9,640,254) 208,643
Foreign currency related transactions .................................. -- -- (1,024)
Net change in unrealized appreciation/(depreciation) on:
Investments ............................................................ (237,372) (6,413,837) 4,432,184
Foreign currency related transactions .................................. -- -- (16,540)
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS .................... (664,118) (16,054,091) 4,623,263
----------- ----------- -----------
Net increase/(decrease) in net assets resulting from operations .............. $ 108,055 $ (5,409,487) $7,575,529
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
THE BEAR STEARNS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCOME HIGH YIELD TOTAL EMERGING MARKETS
PORTFOLIO RETURN PORTFOLIO DEBT PORTFOLIO
----------------------- ---------------------------- ---------------------------
FOR THE FOR THE FOR THE
FISCAL YEARS FISCAL YEARS FISCAL YEARS
ENDED MARCH 31, ENDED MARCH 31, ENDED MARCH 31,
----------------------- ---------------------------- ---------------------------
2000 1999 2000 1999 2000 1999
---------- ---------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income ................... $ 772,173 $ 664,607 $ 10,644,604 $ 6,662,512 $ 2,952,266 $ 3,820,573
Net realized gain/(loss) from investments
and foreign currency related
transactions, if any ................. (426,746) 13,596 (9,640,254) (1,568,005) 207,619 (4,064,351)
Net change in unrealized appreciation/
(depreciation) on investments and
foreign currency related transactions,
if any ............................... (237,372) (96,146) (6,413,837) (6,079,729) 4,415,644 (5,363,799)
----------- ----------- ------------ ----------- ----------- -----------
Net increase/(decrease) in net assets
resulting from operations ............ 108,055 582,057 (5,409,487) (985,222) 7,575,529 (5,607,577)
----------- ----------- ------------ ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A shares .................. (287,824) (266,618) (5,826,234) (3,726,455) (2,695,204) (3,336,429)
Class B shares .................. (103,053) (24,193) (2,454,402) (1,313,414) (141,858) (137,132)
Class C shares .................. (109,008) (91,424) (2,378,968) (1,607,643) (188,282) (321,807)
Class Y shares .................. (272,288) (282,372) -- -- -- --
----------- ----------- ------------ ----------- ----------- -----------
(772,173) (664,607) (10,659,604) (6,647,512) (3,025,344) (3,795,368)
----------- ----------- ------------ ----------- ----------- -----------
Net realized capital gains
Class A shares .................. (741) (80,365) -- (192,941) -- (555,419)
Class B shares .................. (330) (13,288) -- (86,843) -- (27,661)
Class C shares .................. (300) (29,333) -- (103,478) -- (57,010)
Class Y shares .................. (711) (69,012) -- -- -- --
----------- ----------- ------------ ----------- ----------- -----------
(2,082) (191,998) -- (383,262) -- (640,090)
----------- ----------- ------------ ----------- ----------- -----------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares .... 5,724,901 11,220,359 43,646,464 100,285,539 7,512,688 16,138,678
Cost of shares repurchased .............. (4,094,378) (7,794,237) (50,723,201) (26,732,714) (14,026,898) (14,152,454)
Shares issued in reinvestment of
dividends ............................. 498,729 531,644 5,537,955 3,677,043 1,889,157 2,875,768
----------- ----------- ------------ ----------- ----------- -----------
Net increase/(decrease) in net assets
derived from shares of beneficial
interest transactions ................ 2,129,252 3,957,766 (1,538,782) 77,229,868 (4,625,053) 4,861,992
----------- ----------- ------------ ----------- ----------- -----------
Total increase/(decrease) in net assets . 1,463,052 3,683,218 (17,607,873) 69,213,872 (74,868) (5,181,043)
NET ASSETS
Beginning of year ....................... 12,369,326 8,686,108 104,826,272 35,612,400 33,150,325 38,331,368
----------- ----------- ------------ ----------- ----------- -----------
End of year* ............................ $13,832,378 $12,369,326 $ 87,218,399 $104,826,272 $33,075,457 $33,150,325
----------- ----------- ------------ ----------- ----------- -----------
----------- ----------- ------------ ----------- ----------- -----------
</TABLE>
----------
* Emerging Markets Debt Portfolio, includes undistributed net investment
income of $12,870 and $78,308, respectively, for each year presented.
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
(This page has been left blank intentionally.)
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
VALUE, NET UNREALIZED FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT
OF PERIOD INCOME*(1) INVESTMENTS*(2) INCOME
<S> <C> <C> <C> <C>
INCOME PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 .......................... $12.15 $ 0.70 $ (0.62) $(0.70)
For the fiscal year ended March 31, 1999 .......................... 12.37 0.74 (0.03) (0.74)
For the fiscal year ended March 31, 1998 .......................... 12.03 0.76 0.36 (0.76)
For the fiscal year ended March 31, 1997 .......................... 12.26 0.73 (0.20) (0.73)
For the period April 5, 1995** through March 31,1996 .............. 12.00 0.71 0.30 (0.71)
CLASS B
For the fiscal year ended March 31, 2000 .......................... 12.15 0.63 (0.62) (0.63)
For the fiscal year ended March 31, 1999 .......................... 12.37 0.65 (0.03) (0.65)
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, 2000 .......................... 12.15 0.63 (0.62) (0.63)
For the fiscal year ended March 31, 1999 .......................... 12.37 0.65 (0.03) (0.65)
For the fiscal year ended March 31, 1998 .......................... 12.03 0.70 0.36 (0.70)
For the fiscal year ended March 31, 1997 .......................... 12.26 0.68 (0.20) (0.68)
For the period April 5, 1995** through March 31,1996 .............. 12.00 0.67 0.30 (0.67)
CLASS Y
For the fiscal year ended March 31, 2000 .......................... 12.15 0.74 (0.62) (0.74)
For the fiscal year ended March 31, 1999 .......................... 12.37 0.78 (0.03) (0.78)
For the fiscal year ended March 31, 1998 .......................... 12.03 0.80 0.36 (0.80)
For the fiscal year ended March 31, 1997 .......................... 12.26 0.77 (0.20) (0.77)
For the period September 8, 1995*** through March 31, 1996 ........ 12.35 0.41 (0.05) (0.41)
HIGH YIELD TOTAL RETURN PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 .......................... 11.36 1.08 (1.58) (1.08)
For the fiscal year ended March 31, 1999 .......................... 12.73 1.11 (1.32) (1.11)
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, 2000 .......................... 11.36 1.01 (1.58) (1.01)
For the fiscal year ended March 31, 1999 .......................... 12.73 1.04 (1.32) (1.04)
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, 2000 .......................... 11.36 1.01 (1.58) (1.01)
For the fiscal year ended March 31, 1999 .......................... 12.73 1.04 (1.32) (1.04)
For the period January 2, 1998** through March 31, 1998 ........... 12.00 0.24 0.73 (0.24)
EMERGING MARKETS DEBT PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 .......................... 9.27 0.83 1.31 (0.83)
For the fiscal year ended March 31, 1999 .......................... 12.00 1.05 (2.60) (1.01)
For the fiscal year ended March 31, 1998 .......................... 11.14 0.91 1.17 (0.92)
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)
CLASS B
For the fiscal year ended March 31, 2000 .......................... 9.19 0.76 1.31 (0.76)
For the fiscal year ended March 31, 1999 .......................... 11.95 0.98 (2.60) (0.97)
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, 2000 .......................... 9.20 0.76 1.31 (0.76)
For the fiscal year ended March 31, 1999 .......................... 11.95 0.98 (2.59) (0.97)
For the fiscal year ended March 31, 1998 .......................... 11.14 0.97 1.04 (0.90)
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)
<CAPTION>
DISTRIBUTIONS
FROM NET
REALIZED
CAPITAL GAINS
<S> <C>
INCOME PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 .......................... $ --
For the fiscal year ended March 31, 1999 .......................... (0.19)
For the fiscal year ended March 31, 1998 .......................... (0.02)
For the fiscal year ended March 31, 1997 .......................... (0.03)
For the period April 5, 1995** through March 31,1996 .............. (0.04)
CLASS B
For the fiscal year ended March 31, 2000 .......................... --
For the fiscal year ended March 31, 1999 .......................... (0.19)
For the period February 2, 1998*** through March 31,1998 .......... --
CLASS C
For the fiscal year ended March 31, 2000 .......................... --
For the fiscal year ended March 31, 1999 .......................... (0.19)
For the fiscal year ended March 31, 1998 .......................... (0.02)
For the fiscal year ended March 31, 1997 .......................... (0.03)
For the period April 5, 1995** through March 31,1996 .............. (0.04)
CLASS Y
For the fiscal year ended March 31, 2000 .......................... --
For the fiscal year ended March 31, 1999 .......................... (0.19)
For the fiscal year ended March 31, 1998 .......................... (0.02)
For the fiscal year ended March 31, 1997 .......................... (0.03)
For the period September 8, 1995*** through March 31, 1996 ........ (0.04)
HIGH YIELD TOTAL RETURN PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 .......................... --
For the fiscal year ended March 31, 1999 .......................... (0.05)
For the period January 2, 1998** through March 31, 1998 ........... --
CLASS B
For the fiscal year ended March 31, 2000 .......................... --
For the fiscal year ended March 31, 1999 .......................... (0.05)
For the period January 2, 1998** through March 31, 1998 ........... --
CLASS C
For the fiscal year ended March 31, 2000 .......................... --
For the fiscal year ended March 31, 1999 .......................... (0.05)
For the period January 2, 1998** through March 31, 1998 ........... --
EMERGING MARKETS DEBT PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 .......................... --
For the fiscal year ended March 31, 1999 .......................... (0.17)
For the fiscal year ended March 31, 1998 .......................... (0.30)
For the fiscal year ended March 31, 1997 .......................... --
For the fiscal year ended March 31, 1996 .......................... --
CLASS B
For the fiscal year ended March 31, 2000 .......................... --
For the fiscal year ended March 31, 1999 .......................... (0.17)
For the period January 12, 1998*** through March 31, 1998 ......... --
CLASS C
For the fiscal year ended March 31, 2000 .......................... --
For the fiscal year ended March 31, 1999 .......................... (0.17)
For the fiscal year ended March 31, 1998 .......................... (0.30)
For the fiscal year ended March 31, 1997 .......................... --
For the period July 26, 1995*** through March 31, 1996 ............ --
</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 intial public offering.
(1) Reflects waivers and related reimbursements.
32
<PAGE>
<TABLE>
<CAPTION>
NET
ASSET
VALUE, TOTAL NET ASSETS,
END OF INVESTMENT END OF PERIOD
PERIOD RETURN(3) (000's OMITTED)
<S> <C> <C> <C>
INCOME PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 ..................... $ 11.53 0.77% $5,071
For the fiscal year ended March 31, 1999 ..................... 12.15 5.77 4,775
For the fiscal year ended March 31, 1998 ..................... 12.37 9.43 2,926
For the fiscal year ended March 31, 1997 ..................... 12.03 4.40 3,367
For the period April 5, 1995** through March 31,1996 ......... 12.26 8.54 4,467
CLASS B
For the fiscal year ended March 31, 2000 ..................... 11.53 0.12 2,027
For the fiscal year ended March 31, 1999 ..................... 12.15 5.09 1,121
For the period February 2, 1998*** through March 31,1998 ..... 12.37 (0.04)(4) 18
CLASS C
For the fiscal year ended March 31, 2000 ..................... 11.53 0.12 1,971
For the fiscal year ended March 31, 1999 ..................... 12.15 5.08 2,067
For the fiscal year ended March 31, 1998 ..................... 12.37 8.92 1,403
For the fiscal year ended March 31, 1997 ..................... 12.03 3.99 1,018
For the period April 5, 1995** through March 31,1996 ......... 12.26 8.13 1,775
CLASS Y
For the fiscal year ended March 31, 2000 ..................... 11.53 1.13 4,763
For the fiscal year ended March 31, 1999 ..................... 12.15 6.13 4,406
For the fiscal year ended March 31, 1998 ..................... 12.37 9.81 4,339
For the fiscal year ended March 31, 1997 ..................... 12.03 4.77 13,486
For the period September 8, 1995*** through March 31, 1996 ... 12.26 2.92(4) 12,199
HIGH YIELD TOTAL RETURN PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 ..................... 9.78 (4.68) 44,991
For the fiscal year ended March 31, 1999 ..................... 11.36 (1.57) 55,367
For the period January 2, 1998** through March 31, 1998 ...... 12.73 8.30 18,301
CLASS B
For the fiscal year ended March 31, 2000 ..................... 9.78 (5.29) 23,520
For the fiscal year ended March 31, 1999 ..................... 11.36 (2.21) 23,395
For the period January 2, 1998** through March 31, 1998 ...... 12.73 8.13 6,013
CLASS C
For the fiscal year ended March 31, 2000 ..................... 9.78 (5.29) 18,707
For the fiscal year ended March 31, 1999 ..................... 11.36 (2.21) 26,064
For the period January 2, 1998** through March 31, 1998 ...... 12.73 8.13 11,298
EMERGING MARKETS DEBT PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 ..................... 10.58 24.54 28,517
For the fiscal year ended March 31, 1999 ..................... 9.27 (12.40) 29,526
For the fiscal year ended March 31, 1998 ..................... 12.00 19.31 33,448
For the fiscal year ended March 31, 1997 ..................... 11.14 33.48 33,185
For the fiscal year ended March 31, 1996 ..................... 9.02 46.13 28,860
CLASS B
For the fiscal year ended March 31, 2000 ..................... 10.50 23.88 1,808
For the fiscal year ended March 31, 1999 ..................... 9.19 (13.08) 1,459
For the period January 12, 1998*** through March 31, 1998 .... 11.95 7.29(4) 566
CLASS C
For the fiscal year ended March 31, 2000 ..................... 10.51 23.86 2,750
For the fiscal year ended March 31, 1999 ..................... 9.20 (12.99) 2,165
For the fiscal year ended March 31, 1998 ..................... 11.95 18.66 4,317
For the fiscal year ended March 31, 1997 ..................... 11.14 32.97 2,583
For the period July 26, 1995*** through March 31, 1996 ....... 9.04 25.45(4) 202
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
EXPENSES TO INCOME TO
AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1)
<S> <C> <C>
INCOME PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 .......................... 0.80% 5.99%
For the fiscal year ended March 31, 1999 .......................... 0.80 5.83
For the fiscal year ended March 31, 1998 .......................... 0.80 6.13
For the fiscal year ended March 31, 1997 .......................... 0.80 5.99
For the period April 5, 1995** through March 31,1996 .............. 0.80(5) 5.76(5)
CLASS B
For the fiscal year ended March 31, 2000 .......................... 1.45 5.34
For the fiscal year ended March 31, 1999 .......................... 1.45 5.16
For the period February 2, 1998*** through March 31,1998 .......... 1.45(5) 5.22(4)(5)
CLASS C
For the fiscal year ended March 31, 2000 .......................... 1.45 5.33
For the fiscal year ended March 31, 1999 .......................... 1.45 5.28
For the fiscal year ended March 31, 1998 .......................... 1.28 5.60
For the fiscal year ended March 31, 1997 .......................... 1.20 5.57
For the period April 5, 1995** through March 31,1996 .............. 1.25(5) 5.38(5)
CLASS Y
For the fiscal year ended March 31, 2000 .......................... 0.45 6.36
For the fiscal year ended March 31, 1999 .......................... 0.45 6.27
For the fiscal year ended March 31, 1998 .......................... 0.45 6.39
For the fiscal year ended March 31, 1997 .......................... 0.45 6.34
For the period September 8, 1995*** through March 31, 1996 ........ 0.45(5) 5.93(4)(5)
HIGH YIELD TOTAL RETURN PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 .......................... 1.00 10.14
For the fiscal year ended March 31, 1999 .......................... 1.00 9.37
For the period January 2, 1998** through March 31, 1998 ........... 1.00(5) 9.14(5)
CLASS B
For the fiscal year ended March 31, 2000 .......................... 1.65 9.49
For the fiscal year ended March 31, 1999 .......................... 1.65 8.76
For the period January 2, 1998** through March 31, 1998 ........... 1.65(5) 8.46(5)
CLASS C
For the fiscal year ended March 31, 2000 .......................... 1.65 9.49
For the fiscal year ended March 31, 1999 .......................... 1.65 8.73
For the period January 2, 1998** through March 31, 1998 ........... 1.65(5) 8.46(5)
EMERGING MARKETS DEBT PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 .......................... 1.75 8.59
For the fiscal year ended March 31, 1999 .......................... 1.75 10.38
For the fiscal year ended March 31, 1998 .......................... 1.75 7.70
For the fiscal year ended March 31, 1997 .......................... 2.00 7.95
For the fiscal year ended March 31, 1996 .......................... 2.00 10.64
CLASS B
For the fiscal year ended March 31, 2000 .......................... 2.40 7.93
For the fiscal year ended March 31, 1999 .......................... 2.40 9.73
For the period January 12, 1998*** through March 31, 1998 ......... 2.40(5) 7.13(4)(5)
CLASS C
For the fiscal year ended March 31, 2000 .......................... 2.40 7.82
For the fiscal year ended March 31, 1999 .......................... 2.40 9.73
For the fiscal year ended March 31, 1998 .......................... 2.40 7.31
For the fiscal year ended March 31, 1997 .......................... 2.40 7.59
For the period July 26, 1995*** through March 31, 1996 ............ 2.40(5) 8.72(4)(5)
<CAPTION>
INCREASE/(DECREASE)
REFLECTED IN
EXPENSE RATIOS AND
NET INVESTMENT INCOME PORTFOLIO
DUE TO WAIVERS AND TURNOVER
RELATED REIMBURSEMENTS RATE
<S> <C> <C>
INCOME PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 .......................... 3.13% 158.47%
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, 2000 .......................... 3.13 158.47
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, 2000 .......................... 3.13 158.47
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, 2000 .......................... 3.13 158.47
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, 2000 .......................... 0.58 70.61
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, 2000 .......................... 0.59 70.61
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, 2000 .......................... 0.59 70.61
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
EMERGING MARKETS DEBT PORTFOLIO
CLASS A
For the fiscal year ended March 31, 2000 .......................... 1.11 91.98
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
CLASS B
For the fiscal year ended March 31, 2000 .......................... 1.02 91.98
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, 2000 .......................... 1.01 91.98
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
</TABLE>
----------
(2) The amounts shown for a share outstanding thoughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of the sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods. For Emerging Markets Debt Portfolio
net realized and unrealized gain/(loss) on investments include forward
foreign currency exchange contracts and translation of foreign currency
related transactions.
(3) Total investment return does not consider the effects of sales charges or
contigingent 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 comparible to those of any other outstanding class of shares,
due to the timing differences in the commencement of intial public
offerings.
(5) Annualized.
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
THE BEAR STEARNS FUNDS
Income Portfolio
High Yield Total Return Portfolio
Emerging Markets Debt Portfolio
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business
trust on September 29, 1994 and is registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as an open-end management investment
company. The Fund currently consists of eleven separate portfolios: seven
diversified portfolios, Prime Money Market Portfolio, Large Cap Value Portfolio,
Small Cap Value Portfolio, International Equity Portfolio, Balanced Portfolio,
High Yield Total Return Portfolio ("High Yield Portfolio") and Income Portfolio,
and four non-diversified portfolios, Emerging Markets Debt Portfolio ("EMD
Portfolio"), The Insiders Select Fund, Focus List Portfolio and S&P STARS
Portfolio. As of the date hereof, the Income Portfolio, High Yield Portfolio and
EMD Portfolio (each a "Portfolio" and collectively, the "Portfolios") offer four
classes of shares, which have been designated as Class A, B, C and Y shares.
Class Y shares of the High Yield Portfolio and EMD Portfolio have yet to
commence its initial public offering. Each Portfolio is treated as a separate
entity for certain matters under the Investment Company Act, and for other
purposes, and a shareholder of one Portfolio is not deemed to be a shareholder
of any other Portfolio.
At a Special Meeting of Shareholders held on April 29, 1999, the shareholders of
the Bear Stearns Investment Trust (the "Trust") approved the reorganization and
liquidation of the Trust on behalf of the Emerging Markets Debt Portfolio
pursuant to the Agreement and Plan of Reorganization and Liquidation previously
approved by the Board of Trustees. It provided for the transfer of the assets
and liabilities of the Emerging Markets Debt Portfolio to a newly created
separate series of the Fund with the same name and materially the same
investment objective and policies as the Emerging Markets Debt Portfolio. Such
transaction was effected on July 29, 1999.
ORGANIZATIONAL MATTERS--Prior to commencing investment operations on April 5,
1995 and January 2, 1998, Income Portfolio and High Yield Portfolio,
respectively, did not have any transactions other than those relating to
organizational matters and the sale of shares of beneficial interest of the
Income Portfolio and High Yield Portfolio to Bear, Stearns & Co. Inc. ("Bear
Stearns" or the "Distributor") as follows:
<TABLE>
<CAPTION>
PORTFOLIO 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 with respect to 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.
34
<PAGE>
MANAGEMENT ESTIMATES--The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make certain
estimates and assumptions that may affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
PORTFOLIO VALUATION--Each Portfolio calculates the net asset value of and
completes orders to purchase or repurchase its shares of beneficial interest on
each business day, with the exception of those days on which the New York Stock
Exchange is closed.
For the Income Portfolio and High Yield Portfolio, substantially all of the
investments (including short-term investments) are valued 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 judgement 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 (as
obtained by the Service from dealers in such securities) and asked prices (as
calculated by the Service based upon its evaluation of the market for such
securities).
The assets of the EMD Portfolio are generally not listed on security exchanges
or traded on other regulated markets. Therefore, in the absence of reported
sales prices on a valuation date, assets generally will be valued at the mean of
the last bid and offer quotations. In the absence of reported bid and offer
quotations on such valuation date, such assets will be valued from the broker
bids of at least one market maker. Any assets which are denominated in a foreign
currency are converted into U.S. dollars at the prevailing market rates for
purposes of calculating net asset value.
In the absence of current broker bids or if such broker bids are not indicative
of the fair value for such assets by reason of the illiquidity of a particular
security or investment, or other factors, the value of such assets will be
recorded at their fair value determined in good faith by the Valuation
Committee. In making this determination the Valuation Committee will follow
procedures adopted by the Board of Trustees, such procedures are among other
things, publicly available information regarding the issuer, market conditions
and values ascribed to comparable companies.
The amortized cost method of valuation is used with respect to debt obligations
with 60 days or less remaining to maturity, unless this method does not
represent fair value. Expenses and fees, including the respective investment
advisory, administration and distribution fees, are accrued daily and taken into
account for the purpose of determining the net asset value of each Portfolio's
shares. Because of the differences in operating expenses incurred by each class,
the per share net asset value of each class may differ.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date (the date on which the order to buy or sell is
executed). Realized gains and losses from security and foreign currency
transactions are calculated on the identified cost basis. Interest income is
recorded on an accrual basis. Dividend income is recorded on the ex-dividend
date. Discounts are treated as adjustments to interest income and identified
costs of investments over the lives of the respective investments. The
Portfolios' net investment income (other than distribution and service fees) and
unrealized and realized gains or losses are allocated daily to each class of
shares based upon the relative proportion of the settled shares value of each
class at the beginning of the day.
FOREIGN CURRENCY TRANSLATION--The books and records of the EMD 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 Portfolios do not generally isolate the effect of fluctuations in foreign
exchange rates from the effect of fluctuations in the market prices of
investments. However, the Portfolios do isolate the effect of fluctuations in
foreign exchange rates when determining the gain or loss upon the sale or
maturity of foreign currency-denominated debt obligations pursuant to U.S.
federal income tax regulations; such amount is categorized as foreign exchange
gain or loss for both financial reporting and income tax reporting purposes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS--The Portfolios are permitted
to enter into forward foreign currency exchange contracts solely for the
purpose of protecting against adverse changes in foreign currency exchange
rates. The Portfolios
35
<PAGE>
may enter into contracts to purchase foreign currencies to protect against a
rise in the U.S. dollar price of securities it has purchased pending final
settlement, or it may enter into contracts to sell foreign currencies to protect
against the decline in value of its non-dollar denominated securities due to a
decline in the value of foreign currencies against the U.S. dollar. When a
Portfolio enters into a forward foreign currency exchange contract to buy a
foreign currency, it will place cash or readily marketable securities in a
segregated account in an amount equal to the value of its total assets committed
to the consummation of the forward contract. If the value of the securities
placed in the segregated account declines, additional cash or securities will be
placed in the account so that the value of the account will equal the amount of
the Portfolio's commitment with respect to the contract. Investors should be
aware that the forward currency market for the purchase of U.S. dollars in many
emerging countries is not highly developed and that in certain emerging
countries no forward market for foreign currencies currently exists or that such
market may be closed to investment by each Portfolio.
The Portfolios had no open forward foreign currency exchange contracts at March
31, 2000, except for the EMD Portfolio, which had the following open contracts:
<TABLE>
<CAPTION>
DELIVERY VALUE SETTLEMENT UNREALIZED
CURRENCY (LOCAL CURRENCY) DATE COMMITMENT VALUE GAIN
-------- ---------------- ---------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C>
SALE:
European Euro........................ 739,209 06/02/00 $718,040 $707,331 $10,709
=======
</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, 2000, the Portfolios had capital loss carryforwards available as a
reduction to the extent provided in regulations of any future net capital gains
realized before the end of fiscal year 2008. To the extent that the capital loss
carryforwards are used to offset future capital gains, it is probable that the
gains so offset will not be distributed to shareholders.
The Portfolios had the following capital loss carryforwards at March 31, 2000:
<TABLE>
<CAPTION>
AMOUNT AMOUNT
GROSS CAPITAL LOSS EXPIRING EXPIRING
PORTFOLIO CARRYFORWARDS IN 2007 IN 2008
--------- ------------------ -------- ----------
<S> <C> <C> <C>
Income Portfolio..................................................... $ 127,545 -- $ 127,545
High Yield Portfolio................................................. 5,460,739 $175,885 5,284,854
EMD Portfolio........................................................ 3,636,607 780,615 2,855,992
</TABLE>
For U.S. federal income tax purposes, realized foreign currency losses
and net realized capital losses from investments incurred after October
31, 1999, within the current fiscal year are deemed to arise on the first
day of the following fiscal year. The Income Portfolio and High Yield
Portfolio incurred and elected to defer net realized losses of $307,115 and
$5,748,445, respectively. The EMD Portfolio incurred and elected to defer
realized foreign currency losses of $8,664.
DIVIDENDS AND DISTRIBUTIONS--The Portfolios declare dividends from net
investment income on each day the New York Stock Exchange is open for
business. These dividends are paid usually on or about the twentieth day of
each month. Distribution of net realized gains, if any, will be declared and
paid at least annually by each Portfolio. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are
reclassified within capital accounts based on their U.S. federal tax-basis
treatment; temporary differences do not require reclassification.
At March 31, 2000, the Income Portfolio reclassified $503 within the
composition of net assets from accumulated net realized losses to paid-in
capital. The EMD Portfolio reclassified $7,640 within the composition of net
assets from accumulated net realized foreign currency gains to undistributed
net investment income.
FOREIGN WITHHOLDING TAXES--Income received from sources outside of the United
States may be subject to withholding and other taxes imposed by countries
other than the United States.
OTHER--Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in
36
<PAGE>
exchange rates. Some countries in which the Portfolios invest require government
approval for the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors. In addition, if there is a
deterioration in a country's balance of payments or for other reasons, a country
may impose temporary restrictions on foreign capital remittances abroad. The
securities exchanges of certain foreign markets are substantially smaller, less
liquid and more volatile than the major securities markets in the United States.
TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
For the fiscal year ended March 31, 2000, Bear Stearns Asset Management Inc.
("BSAM" or the "Adviser"), a wholly-owned subsidiary of The Bear Stearns
Companies Inc., served as investment adviser pursuant to an Investment Advisory
Agreement. Under the terms of the Investment Advisory Agreement, the Income
Portfolio and High Yield Portfolio has agreed to pay BSAM a monthly fee at an
annual rate of 0.45% and 0.60%, respectively, of each Portfolio's average daily
net assets. The EMD Portfolio has agreed to pay BSAM a monthly fee at an annual
rate of 1.00% of average daily net assets up to $50 million, 0.85% of average
daily net assets of more than $50 million but not in excess of $100 million and
0.55% of average daily net assets above $100 million.
For the fiscal year ended March 31, 2000, Bear Stearns Funds Management Inc.
("BSFM" or the "Administrator") served as administrator to each Portfolio
pursuant to an Administration Agreement. BSFM is entitled to receive from each
Portfolio a monthly fee equal to an annual rate of 0.15% of each Portfolio's
average daily net assets.
Under the terms of an Administrative Services Agreement with the Portfolios,
PFPC provides certain accounting and administrative services to each Portfolio.
For providing these services, PFPC is entitled to receive from the Portfolios a
monthly fee equal to an annual rate of 0.10% of each Portfolio's average daily
net assets up to $200 million, 0.075% of the next $200 million, 0.05% of the
next $200 million and 0.03% of the net assets above $600 million, subject to a
minimum annual fee for each Portfolio.
For the fiscal year ended March 31, 2000, BSAM has voluntarily undertaken to
limit the total operating expenses to a maximum annual level as a percent of
each Portfolio's average daily net assets as follows:
<TABLE>
<CAPTION>
PORTFOLIO CLASS A CLASS B CLASS C CLASS Y
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Income Portfolio.................................. 0.80% 1.45% 1.45% 0.45%
High Yield Portfolio.............................. 1.00 1.65 1.65 --
EMD Portfolio..................................... 1.75 2.40 2.40 --
</TABLE>
As necessary, this limitation is effected by waivers by the Adviser of its
advisory fees and reimbursements of expenses exceeding the advisory fee. For
the fiscal year ended March 31, 2000, the advisory fee waivers and
reimbursements of expenses (in order to maintain the voluntary expense
limitation) were as follows:
<TABLE>
<CAPTION>
PORTFOLIO ADVISORY FEE WAIVERS EXPENSE REIMBURSEMENTS
-------- -------------------- ----------------------
<S> <C> <C>
Income Portfolio.................................. $ 58,835 $350,343
High Yield Portfolio.............................. 601,201 27,552
EMD Portfolio..................................... 297,720 83,010
</TABLE>
The Portfolios will not pay BSAM at a later time for any amounts BSAM may
waive, nor will the Portfolios reimburse BSAM for any amounts BSAM may
assume.
Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns
Companies Inc. and an affiliate of BSAM and BSFM, serves as custodian to the
Income Portfolio and High Yield Portfolio.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICING PLAN
The Fund, on behalf of the Portfolios, has entered into a Distribution Plan
pursuant to Rule 12b-1 under the Investment Company Act. Under the Distribution
Plan, the Portfolios paid Bear Stearns a fee at an annual rate of 0.10% for
Class A shares and 0.75% for both Class B and C shares. The Fund, on behalf of
the Portfolios, has adopted a Shareholder Servicing Plan whereby the Portfolios
paid fees of up to 0.25% of its Class A, B and C shares.
Fees are based on the average daily net assets in each class of each Portfolio
and are accrued daily and paid quarterly or at such
37
<PAGE>
other intervals as the Board of Trustees may determine. For the fiscal year
ended March 31, 2000, Bear Stearns earned $34,520, $438,499, and $61,352 for the
Income Portfolio, High Yield Portfolio and EMD Portfolio,respectively, in
distribution fees. The fees paid to Bear Stearns under the Distribution Plan are
payable without regard to actual expenses incurred. Bear Stearns uses these fees
to pay broker/dealers whose clients hold each Portfolio's shares and other
distribution-related activities. For the same period, Bear Stearns earned
$21,898, $270,445, and $86,849 for the Income Portfolio, High Yield Portfolio
and EMD 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.
Furthermore, 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, 2000, Bear Stearns has advised each
Portfolio that it received $26,759, $235,696 and $49,829 in front-end sales
charges resulting from sales of Class A shares of the Income Portfolio, High
Yield Portfolio and EMD Portfolio, respectively. From these fees, Bear Stearns
paid sales charges to dealers which in turn paid commissions to salespersons. In
addition, Bear Stearns has advised the Income Portfolio, High Yield Portfolio
and EMD Portfolio that during the fiscal year ended March 31, 2000, it received
$20,942 from the High Yield Portfolio in contingent deferred sales charges
("CDSC") upon certain redemptions by Class A shareholders, $14,385, $173,140 and
$16,989 from each Portfolio, respectively, in CDSC upon certain redemptions by
Class B shareholders and $223, $20,369 and $53 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,
2000, were $15,973,099, $97,633,260 and $28,420,176 for the Income Portfolio,
High Yield Portfolio and EMD Portfolio, respectively. Accordingly, the net
unrealized appreciation/(depreciation) on investments for each Portfolio were as
follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS APPRECIATION/
PORTFOLIO APPRECIATION DEPRECIATION (DEPRECIATION)
-------- ------------ ------------ --------------
<S> <C> <C> <C>
Income Portfolio.................................................... $ 60,737 $ (414,169) $ (353,432)
High Yield Portfolio................................................ 862,205 (12,795,914) (11,933,709)
EMD Portfolio....................................................... 2,589,769 (1,027,932) 1,561,837
</TABLE>
For the fiscal year ended March 31, 2000, aggregate purchases and sales of
investment securities (excluding short-term investments) for each
Portfolio were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- --------- -----
<S> <C> <C>
Income Portfolio.................................................... $21,505,847 $19,749,051
High Yield Portfolio................................................ 71,585,007 76,249,841
EMD Portfolio....................................................... 30,054,862 36,687,517
</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, 2000, there was an unlimited amount of $0.001 par value shares of
beneficial interest authorized for each Portfolio, of which Bear Stearns owned
1,205 of Class A shares and 1,188 Class C shares of the Income Portfolio and 1
each of Class A, B and C shares of the High Yield Portfolio. Shares of the
Income Portfolio owned by Bear Stearns include 164 Class A shares and 147 Class
C shares which were acquired through dividend reinvestment. Transactions in
shares of beneficial interest for each Portfolio were as follows:
<TABLE>
<CAPTION>
INCOME PORTFOLIO HIGH YIELD PORTFOLIO EMD PORTFOLIO
---------------------------------- --------------------------------- ---------------------------------
SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS
----- ----------- ------------- ----- ----------- ------------- ----- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE FISCAL YEARS ENDED:
CLASS A
MARCH 31, 2000
Shares........... 163,837 128,806 11,831 2,046,001 2,607,245 286,754 622,886 1,289,673 175,086
Value............ $1,918,988 $1,508,227 $138,514 $22,253,022 $27,209,668 $3,053,931 $ 5,891,337 $12,534,987 $1,646,974
MARCH 31, 1999
Shares........... 652,813 512,338 16,075 4,591,690 1,328,105 173,523 1,353,990 1,217,322 262,381
Value............ $8,140,024 $6,375,966 $199,578 $55,352,368 $15,720,812 $2,039,096 $13,884,104 $11,562,827 $2,415,066
CLASS B
MARCH 31, 2000
Shares........... 144,531 67,853 6,877 1,036,215 803,901 113,499 80,139 76,062 9,429
Value............ $1,699,578 $ 787,231 $ 80,141 $11,213,716 $ 8,390,332 $1,205,625 $ 748,885 $ 718,270 $ 87,930
MARCH 31, 1999
Shares........... 95,133 6,176 1,917 1,698,449 172,814 61,079 134,300 36,459 13,490
Value............ $1,180,901 $ 75,940 $ 23,739 $20,280,591 $ 2,036,035 $ 709,943 $ 1,458,377 $ 329,735 $ 119,962
CLASS C
MARCH 31, 2000
Shares........... 68,592 74,773 6,971 944,475 1,446,955 119,893 91,962 81,973 16,549
Value............ $ 806,590 $ 874,826 $ 81,499 $10,179,726 $15,123,201 $1,278,399 $ 872,466 $ 773,641 $ 154,253
MARCH 31, 1999
Shares........... 125,661 76,187 7,293 2,098,034 769,764 79,488 77,215 240,138 37,052
Value............ $1,564,198 $ 942,593 $ 90,493 $24,652,580 $ 8,975,867 $ 928,004 $ 796,197 $ 2,259,892 $ 340,740
CLASS Y*
MARCH 31, 2000
Shares........... 111,924 78,521 17,002 -- -- -- -- -- --
Value............ $1,299,745 $ 924,094 $198,575 -- -- -- -- -- --
MARCH 31, 1999
Shares........... 27,127 32,617 17,555 -- -- -- -- -- --
Value............ $ 335,236 $ 399,738 $217,834 -- -- -- -- -- --
</TABLE>
----------
* Class Y shares have yet to commence its initial public offering for the High
Yield Portfolio and EMD Portfolio.
CREDIT AGREEMENT
Effective October 1, 1999, the Fund entered into a demand promissory note
arrangement with The Chase Manhattan Bank (the "Bank") to provide an uncommitted
credit facility to the Fund (on behalf of each Portfolio). The credit facility
bears interest at the greater of: (i) the rate otherwise in effect for such loan
plus 2%, or (ii) that rate of interest from time to time announced by the Bank
at its principal office as its prime commercial lending rate plus 2%, with such
interest to be payable on demand and upon payment in full of such principal.
Prior thereto, the Fund on behalf of each Portfolio, had a credit agreement with
BankBoston, N.A. which Small Cap Value Portfolio, Large Cap Value Portfolio, The
Insiders Select Fund, S&P STARS Portfolio, Prime Money Market Portfolio,
Balanced Portfolio, International Equity Portfolio and Focus List Portfolio were
also parties to. This agreement provided that each party to the credit agreement
was permitted to borrow in an amount equal to the lesser of $25 million or 25%
of the net assets of a Portfolio. At no time was the aggregate outstanding
principal amount of all loans to any of the Portfolios to exceed $25 million.
Each Portfolio as a fundamental policy was permitted to borrow in an amount up
to 331U3% of the value of such Portfolio's assets. However, each Portfolio
intended to borrow money only for temporary or emergency (not leveraging)
purposes in an amount up to 15% of its net assets. The line of credit bore
interest at the greater of: (i) the annual
39
<PAGE>
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.
In addition, the EMD Portfolio borrowed, for temporary purposes, from its
custodian, Brown Brothers Harriman & Co., to cover periodic overdrafts. Such
borrowings were at a rate of interest based on the London Interbank Offered Rate
(LIBOR) plus 2%.
Each loan is payable on demand or upon termination of these credit arrangements
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 these credit arrangements during the fiscal year ended
March 31, 2000, were as follows:
<TABLE>
<CAPTION>
MAXIMUM LOAN
PORTFOLIO AVERAGE LOAN BALANCE AMOUNTS OUTSTANDING AVERAGE INTEREST RATE
--------- -------------------- ------------------- ---------------------
<S> <C> <C> <C>
Income Portfolio................................... $ 5,402 $1,243,700 6.42%
High Yield Portfolio............................... 90,824 4,165,400 6.11
EMD Portfolio...................................... 105,136 4,783,647 7.49
</TABLE>
The Portfolios had no amounts outstanding under the line of credit agreement
at March 31, 2000.
CONCENTRATION OF RISK--HIGH YIELD PORTFOLIO
Lower-rated debt securities (commonly known as "junk bonds") possess speculative
characteristics and are subject to greater market fluctuations and risk of lost
income and principal than higher-rated debt securities for a variety of reasons.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service their principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. In addition, periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of lower-rated debt
securities and the High Yield Portfolio's net asset value.
CONCENTRATION OF RISK--EMD PORTFOLIO
Investments in emerging markets debt involve special risks. The issuer of the
debt of the governmental authorities that control the repayment of the debt may
be unable or unwilling to repay principal or interest when due in accordance
with the terms of such debt, and the EMD Portfolio may have limited legal
recourse in the event of a default.
Certain emerging countries may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging country's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The EMD Portfolio
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the EMD Portfolio of any restrictions on investments.
Most securities markets in emerging market countries may have substantially less
volume and are subject to less government supervision than U.S. securities
markets. Securities of many issuers in emerging market countries may be less
liquid and more volatile than securities of comparable domestic issuers. In
addition, there is less regulation of securities exchanges, securities dealers,
and listed and unlisted companies in emerging market countries than in the U. S.
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 EMD Portfolio of unrealized profits, the benefits of a currency
hedge, increase transaction costs or force the EMD Portfolio to cover its
purchase or sale commitments, if any, at the current market price. The EMD
Portfolio will not enter into such transactions unless the credit quality of the
claims-paying ability of the counterparty is considered to be investment grade
by BSAM.
40
<PAGE>
THE BEAR STEARNS FUNDS
Income Portfolio
High Yield Total Return Portfolio
Emerging Markets Debt Portfolio
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Income Portfolio
High Yield Total Return Portfolio
Emerging Markets Debt Portfolio
(Series of The Bear Stearns Funds):
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Income Portfolio, High Yield Total Return
Portfolio and Emerging Markets Debt Portfolio (collectively, the "Portfolios")as
of March 31, 2000, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2000 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 Income Portfolio,
High Yield Total Return Portfolio and Emerging Markets Debt Portfolio as of
March 31, 2000, the results of their operations, the changes in their net assets
and the financial highlights for each of the periods presented in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
May 17, 2000
41
<PAGE>
THE BEAR STEARNS FUNDS
Income Portfolio
High Yield Total Return Portfolio
Emerging Markets Debt 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, 2000) 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, 2000, the following dividends and distributions
per share were paid by each of the Portfolios:
<TABLE>
<CAPTION>
INCOME PORTFOLIO
LONG-TERM
NET INVESTMENT INCOME CAPITAL GAINS
--------------------- -------------
<S> <C> <C>
Class A $0.699960961 $0.0018
Class B 0.624002419 0.0018
Class C 0.624034724 0.0018
Class Y 0.740848341 0.0018
<CAPTION>
HIGH YIELD TOTAL RETURN PORTFOLIO
NET INVESTMENT INCOME
---------------------
Class A $1.083727152
Class B 1.014313408
Class C 1.014325087
<CAPTION>
EMERGING MARKETS DEBT PORTFOLIO
NET INVESTMENT INCOME
---------------------
Class A $0.833397012
Class B 0.765870318
Class C 0.766720108
</TABLE>
All dividends and distributions from the Emerging Markets Debt Portfolio were
derived from income and capital gains on foreign obligations; however they
were not subject to foreign withholding taxes.
With respect to each Portfolio, none of its ordinary income dividends qualify
for the corporate dividends received deduction.
Because each Portfolio's fiscal year is not the calendar year, another
notification will be sent with respect to calendar year 2000. 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 2001.
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>
(This page has been left blank intentionally.)
<PAGE>
(This page has been left blank intentionally.)
