<PAGE>
THE
BEAR STEARNS
FUNDS
FIXED INCOME FUNDS
Income Portfolio
High Yield Total Return Portfolio
Emerging Markets Debt Portfolio
SEMI-ANNUAL REPORT
SEPTEMBER 30, 2000
BEAR
STEARNS
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 TRANSFER AND DIVIDEND
Bear Stearns Asset DISBURSEMENT AGENT
Management Inc. PFPC Worldwide Inc.
575 Lexington Avenue Bellevue Corporate Center
New York, NY 10022 400 Bellevue Parkway
Wilmington, DE 19809
ADMINISTRATOR
Bear Stearns Funds INDEPENDENT AUDITORS
Management Inc. Deloitte & Touche LLP
575 Lexington Avenue Two World Financial Center
New York, NY 10022 New York, NY 10281
DISTRIBUTOR COUNSEL
Bear, Stearns & Co. Inc. Kramer Levin
245 Park Avenue Naftalis & Frankel LLP
New York, NY 10167 919 Third Avenue
New York, NY 10022
INCOME PORTFOLIO AND
HIGH YIELD TOTAL RETURN PORTFOLIO: EMERGING MARKETS DEBT
CUSTODIAN PORTFOLIO:
Custodial Trust Company CUSTODIAN
101 Carnegie Center Brown Brothers Harriman &Co.
Princeton, NJ 08540 40 Water Street
Boston, MA 02109
The financial information included herein is taken from the records of each
Portfolio without examination by independent auditors who do not express an
opinion thereof.
This report is submitted for the general information of the shareholders of each
Portfolio. It is not authorized for distribution to prospective investors in
each Portfolio unless it is preceded or accompanied by a current prospectus
which includes details regarding each Portfolio's objectives, policies, sales
commissions and other information. Total investment return is based on
historical results and is not intended to indicate future performance. The
investment return and principal value of an investment in each Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than original cost.
BSF-R-016-07
<PAGE>
THE BEAR STEARNS FUNDS
INCOME PORTFOLIO
HIGH YIELD TOTAL RETURN PORTFOLIO
EMERGING MARKETS DEBT PORTFOLIO
LETTER TO SHAREHOLDERS
October 30, 2000
Dear Shareholders:
We are pleased to present the semi-annual report to shareholders for the
Income Portfolio, High Yield Total Return Portfolio ("High Yield Portfolio")
and Emerging Markets Debt Portfolio ("EMD Portfolio") for the six months
ended September 30, 2000. Detailed performance data for each class of shares
of each Portfolio can be found in the "Financial Highlights" of this report.
INCOME PORTFOLIO
For the six months ended September 30, 2000, the Income Portfolio's Class A
shares had a total return of 3.84% (without giving effect to the sales
charge) and both Class B and C shares had a total return of 3.50% (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 4.80% for the same period. The
Lipper A Rated Bond Fund Index returned 3.78% for the same period.
The major factors driving both the stock and bond markets during the six
months ended September 30, 2000, were concerns about the pace of economic
growth, what action the Federal Reserve would take in response and what would
happen to corporate profits as a result. Fears that the economy was
accelerating too fast and that interest rates would continue to rise shifted
during the summer to concerns about falling corporate profits in a slowing
economy.
Earlier in the year, the fixed income markets expected the Fed to continue
raising interest rates to curb possible inflation. However, as it became
increasingly clear that the U.S. economy was slowing, fears about Fed
intervention abated and the yield curve steepened. The steepening also
reflected the market's assessment that, regardless of the outcome of the
presidential election, the government's buyback of Treasury bonds would ease.
(Buybacks had artificially lowered long-term Treasury yields earlier in the
year, causing the yield curve to invert.)
In contrast to the stock market, the bond market as a whole enjoyed relative
price stability and positive total returns year to date. However, due to the
government's buyback of Treasury bonds, Treasury securities outperformed
other sectors during the period.
AVOIDING IDIOSYNCRATIC RISK
In addition to lower earnings, the specter of corporate restructuring
contributed to concerns about corporate credit risk. In this environment,
industry and individual security selection has become paramount. We continued
to overweight quality corporate bonds, concentrating on sectors and
sub-sectors most likely to do well in a slowdown, such as energy, financial
services, discount retailers and media/telecom. We shortened maturities
somewhat throughout the period, but maintained our concentration in the
intermediate part of the yield curve. We also continued to overweight
asset-backed securities, with their relatively higher returns and insulation
from the idiosyncratic risk facing corporate issues, which are immediately
vulnerable to disappointing earnings reports.
1
<PAGE>
Given a slowing economy, a battered stock market and a presidential election,
we expect the Fed to hold interest rates steady through the end of this year
and likely lower them in the first half of 2001. When it does cut rates, or
even adopts a neutral bias, both the stock and bond markets should benefit.
Going forward, we will continue to seek out value in sectors and individual
issues that we expect to perform well even as the economy slows.
HIGH YIELD TOTAL RETURN PORTFOLIO*
For the six months ended September 30, 2000, the High Yield Portfolio's Class
A shares had a total return of (0.90)% (without giving effect to the sales
charge) and both Class B and C shares had a total return of (1.22)% (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 1.14% for the same period. The
Lipper High Yield Bond Fund Index returned (1.18)% for the same period.
The six-month period ended September 30, 2000, was not a good one for high
yield bonds. Initially, returns fell on fears that the Federal Reserve would
continue to raise interest rates as it had at its meeting in May to curb
economic growth. Then, they suffered as it appeared increasingly likely that
the economy was slowing, resulting in lower corporate profits. Defaults by
issuers in slow-growth sectors of the economy had already begun to rise.
After monopolizing investors' attention throughout the spring and early
summer, new economy issues in particular fell out of favor. The wireline
telecommunications sector was especially hard hit as many issuers revised
business plans, presented more realistic views of their build-out costs and
lowered expectations. These issues fell to earth in the third quarter as
abruptly as their equity counterparts. Throughout much of the period, the
High Yield Portfolio was heavily weighted in technology and telecom in
general and media, wireline and wireless telecom in particular. Although the
fund held its own in the early summer, it suffered as sentiment shifted away
from wireline issues.
THE BUFFER OF DIVERSIFICATION
This downdraft was offset somewhat by the High Yield Portfolio's
diversification and positive events involving several of our holdings. Among
issuers that announced their intentions to be acquired was Intermedia
Communications Inc., a wireline telecom company, which agreed to be taken
over by MCI Worldcom. The High Yield Portfolio was also helped by its
positions in energy, healthcare and gaming issues, three sectors that did
well despite the difficult environment. In addition, we reduced our exposure
in the wireline telecom sector over the course of the period.
Regardless of the market's current disdain for telecom and technology, we
remain optimistic about the prospects for the high yield market. By the
middle of next year economic growth should be more moderate and stable, and
defaults from the `97-`98 underwriting cycle should have peaked. After this
point, the climate should improve considerably. In fact, should a "soft
landing" materialize and more sustainable growth follow, the resulting
environment should be ideal for high yield securities, especially for
investors who take advantage of the attractive valuations that are currently
available.
EMERGING MARKETS DEBT PORTFOLIO**
For the six months ended September 30, 2000, the EMD Portfolio's Class A
shares had a total return of 3.23% (without giving effect to the sales
charge) and Class B and C shares had a total return of 2.88% and 2.89%,
respectively, (without giving effect to the contingent deferred sales
charge).(3) The EMD Portfolio's benchmark index, the J.P. Morgan Emerging
Market Bond Index-Global Constrained, returned 5.20% for the same period.
2
<PAGE>
During the six months ended September 30, 2000, the emerging debt markets
continued to perform well due to continuing improvements in credit quality
and diminishing concerns about U.S. short-term interest rates. Initial
apprehension about rising rates abated as evidence mounted that the U.S.
economy was slowing and it appeared increasingly unlikely that the Federal
Reserve would raise short-term rates again this year. While the historical
correlation between emerging market debt and U.S. Treasuries is low, these
markets still respond to speculation regarding Fed policy.
Several positive trends discussed in previous reports remain in place.
Significant structural reform continues in many developing countries, and
rising oil prices have benefited trade balances and government revenues. As
the period progressed, however, high prices began to be viewed as a
double-edged sword. Although they benefit energy exporters, such as Nigeria,
Russia, Venezuela, Mexico and Colombia, rising prices have begun to increase
concerns about a possible slowdown in global economic growth. This would
compound the negative effects on emerging countries that are dependent on
imported oil, such as the Philippines, South Korea, Brazil and Bulgaria.
The best-performers among the EMD Portfolio's holdings were Ecuadorian bonds
(up 41%), Algerian debt (up nearly 13%) and Venezuelan and Russian bonds (up
11%). Ecuador's bonds made a strong recovery from very depressed levels
reached earlier in the year after the government missed coupon payments.
Subsequently, a restructuring plan accepted by its bondholders involved less
debt forgiveness than had been expected. Returns from Algerian debt increased
as higher oil prices produced a large current account surplus and trade
relationships improved. Venezuela and Russia also benefited from higher oil
revenues. Russia has made significant strides over the past year as foreign
exchange reserves have grown, tax collections have increased and new tax and
budget reform proposals were introduced.
A REMARKABLE ABILITY TO REBOUND
Interestingly, the worst-performers were bonds that experienced virtually no
change over the period, including Nigeria's and Peru's, both down 4%. Nigeria
suffered from growing concerns over the possibility of default, while Peru
experienced political uncertainty stemming from scandal reaching very close
to the President, as well as fears of a military coup. The fact that there
have been no significant declines in emerging markets in general reflects
perceived improvements in their credit quality as most continue to implement
structural reforms. In addition, the markets are exhibiting a remarkable
ability to rebound sharply from depressed levels on even modestly positive
news.
We believe that emerging market debt remains attractive on a medium-term
basis as the commitment to reforms among most policymakers remains
surprisingly strong. Where this commitment is wavering, investors remain
willing to make investments in exchange for relatively modest action. In
addition, credit quality is likely to continue to improve; since the
beginning of the year, fifteen countries have received rating upgrades, more
than twice the number downgraded.
Near-term the outlook is a bit more uncertain. While the threat of higher
U.S. short-term interest rates has receded, the likelihood of
confidence-inspiring rate cuts is low. High oil prices, while benefiting
certain countries, threaten global growth prospects. Public sector creditors
have become more aggressive in encouraging weaker countries to restructure
some of their debt. Finally, while the overall commitment to reform and the
momentum in credit ratings remain favorable, the outlook for further
near-term progress is becoming less clear in a number of countries.
3
<PAGE>
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,
/s/ 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.
** International investing involves risks such as currency exchange-rate
volatility, possible political, social, or economic instability and
differences in taxation and other financial standards.
(1) For the six months ended September 30, 2000, the Income Portfolio's Class
A shares had a total return of (0.81)%, including the initial 4.50% maximum
sales charge, Class B shares returned (1.50)%, including the 5.00% CDSC and
Class C shares returned 2.85%, including the 1.00% CDSC.
(2) For the six months ended September 30, 2000, the High Yield Portfolio's
Class A shares had a total return of (5.35)%, including the initial 4.50%
maximum sales charge, Class B shares returned (5.92)%, including the 5.00%
CDSC and Class C shares returned (2.16)%, including the 1.00% CDSC.
(3) For the six months ended September 30, 2000, the EMD Portfolio's Class A
shares had a total return of (1.43)%, including the initial 4.50% maximum
sales charge, Class B shares returned (2.08)%, including the 5.00% CDSC and
Class C shares returned 1.89%, including the 1.00% CDSC.
CDSC Refers to the contingent deferred sales charge.
Bear Stearns Asset Management Inc. has waived a portion of its advisory fee
and agreed 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>
T H E B E A R S T E A R N S F U N D S
INCOME PORTFOLIO
SEPTEMBER 30, 2000
(UNAUDITED)
-------------------------------------------------------------------------------
TOP TEN INDUSTRY/SECTOR WEIGHTINGS*
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK INDUSTRY/SECTOR NET ASSETS
---- ------------------------------------------------------------ ----------
<S> <C> <C>
1. U.S. Government Agency Obligations 35.45
2. U.S. Government Obligations 11.52
3. Industrial 10.82
4. Finance 10.41
5. Asset-Backed 9.62
6. Utilities 5.27
7. Telecommunications 4.78
8. Telephone - Local 2.46
9. Computer Services 1.06
10. Multimedia 1.03
</TABLE>
-------------------------------------------------------------------------------
TOP TEN HOLDINGS*
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS INDUSTRY/SECTOR NET ASSETS
---- ---------------------------------------- ---------------------------------- ----------
<S> <C> <C> <C>
1. Fannie Mae U.S. Government Agency Obligations 27.82
2. U.S. Treasuries U.S. Government Obligations 11.52
3. Government National Mortgage Association U.S. Government Agency Obligations 6.59
4. Western Resources Inc. Utilities 2.50
5. Finova Capital Corp. Finance 1.76
6. Cleveland Electric Illuminating Co. . Utilities 1.73
7. LG-Caltex Oil Corporation Industrial 1.66
8. Enron Oil & Gas Resources Inc. Industrial 1.56
9. Conti-Mortgage Home Equity Loan Trust Asset-Backed 1.55
10. US West Communications Telephone - Local 1.44
</TABLE>
----------
* The Portfolio's composition will change over time.
5
<PAGE>
T H E B E A R S T E A R N S F U N D S
HIGH YIELD TOTAL RETURN PORTFOLIO
SEPTEMBER 30, 2000
(UNAUDITED)
-------------------------------------------------------------------------------
TOP TEN INDUSTRY WEIGHTINGS*
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK INDUSTRY NET ASSETS
---- ---------------------------------------------------------------- ----------
<S> <C> <C>
1. Media - Cable 8.41
2. Enhanced Service Mobile Radios & Personal Communication Services 7.92
3. Gaming/Leisure 7.55
4. Competitive Local Exchange Companies 7.40
5. Healthcare 5.87
6. Energy 4.98
7. Forest/Paper Products 4.00
8. Long Distance Telephone Services 4.00
9. Chemicals 3.41
10. Media - Wireless Towers 2.93
</TABLE>
-------------------------------------------------------------------------------
TOP TEN HOLDINGS*
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS INDUSTRY NET ASSETS
---- ----------------------------------- ------------------------------------ ----------
<S> <C> <C> <C>
1. Adelphia Communications Corporation Media - Cable 1.77
2. Clearnet Communications Inc. Enhanced Service Mobile Radios &
Personal Communication Services 1.73
3. NTL Communications Corp. Media - Cable 1.64
4. Williams Communications Group, Inc. Long Distance Telephone Services 1.48
5. Oxford Health Plans, Inc. Healthcare 1.39
6. Triad Hospitals Holdings, Inc. Healthcare 1.36
7. Nextel Communications, Inc. Enhanced Service Mobile Radios &
Personal Communication Services 1.33
8. Microcell Telecommunications Inc. Enhanced Service Mobile Radios &
Personal Communication Services 1.32
9. Motors and Gears, Inc. Manufacturing 1.31
10. NEXTLINK Communications, Inc. Competitive Local Exchange Companies 1.24
</TABLE>
--------------------
* The Portfolio's composition will change over time.
6
<PAGE>
T H E B E A R S T E A R N S F U N D S
EMERGING MARKETS DEBT PORTFOLIO
SEPTEMBER 30, 2000
(UNAUDITED)
-------------------------------------------------------------------------------
TOP TEN COUNTRY WEIGHTINGS*
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK COUNTRY NET ASSETS
---- ------------------------------------------------------------ ----------
<S> <C> <C>
1. Mexico 13.62
2. Argentina 11.10
3. Brazil 11.01
4. Russia 9.21
5. Venezuela 6.58
6. South Korea 5.09
7. Turkey 4.45
8. Philippines 3.91
9. Malaysia 3.76
10. Bulgaria 3.40
</TABLE>
-------------------------------------------------------------------------------
TOP TEN ISSUERS*
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY PERCENT OF
RANK ISSUER CURRENCY TYPE NET ASSETS
---- ----------------------------- ----------- --------- ----------
<S> <C> <C> <C> <C>
1. United Mexican States U.S. dollar Sovereign 12.15
2. Republic of Argentina U.S. dollar Sovereign 11.10
3. Federal Republic of Brazil U.S. dollar Sovereign 11.01
4. Russian Federation U.S. dollar Sovereign 8.75
5. Republic of Venezuela U.S. dollar Sovereign 6.58
6. Republic of the Philippines U.S. dollar Sovereign 3.91
7. Republic of Korea U.S. dollar Sovereign 3.51
8. Republic of Turkey U.S. dollar Sovereign 3.43
9. Republic of Bulgaria U.S. dollar Sovereign 3.40
10. The Republic of Panama U.S. dollar Sovereign 3.02
</TABLE>
--------------------
* The Portfolio's composition will change over time.
7
<PAGE>
T H E B E A R S T E A R N S F U N D S
INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE(S) DATE(S) VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS -- 94.23%
CORPORATE OBLIGATIONS - 47.26%
ASSET-BACKED - 9.62%
200 Conseco Finance Home Equity Loan, Series B, Class AF2 7.340% 02/15/31 $ 201,298
225 Conti-Mortgage Home Equity Loan Trust, Series 1998-1, Class A5 6.430 04/15/16 222,734
200 Green Tree Home Improvement Loan Trust, Series 1998-D, Class HEA3 6.130 08/15/29 198,270
150 JP Morgan Commercial Mortgage Finance Corp., Series 2000-C9, Class A2 7.770 10/15/32 154,949
150 Paine Webber Mortgage Acceptance Corp., Series 2000-HE1, Class A2 8.270 02/25/30 152,637
125 Saxon Asset Securities Trust, Series 2000-3, Class AF4 7.630 10/25/23 125,039
175 UCFC Home Equity Loan, Series 1996-B1, Class A6 7.975 02/15/22 176,733
150 World Omni Auto Receivables Trust, Series 2000-A, Class A3 7.130 02/15/04 151,182
-----------
1,382,842
-----------
COMPUTER SERVICES - 1.06%
150 Computer Sciences Corporation, Unsecured Notes 7.500 08/08/05 151,758
-----------
FINANCE - 10.41%
140 Associates Corp. N.A., Senior Unsecured Notes 6.000 07/15/05 134,186
125 AT&T Capital Corp., Medium Term Notes, Series F, CIT Group Inc.
Guaranteed 6.600 05/15/05 122,776
150 Conseco Inc., Unsecured Notes 8.500 10/15/02 121,500
75 Finova Capital Corp., Medium Term Notes, Series E 6.824 03/09/01 65,985
225 Finova Capital Corp., Notes 6.375 - 7.125 10/15/00 - 05/17/04 186,724
150 General Electric Capital Corp., Debentures 8.850 04/01/05 162,009
200 Lehman Brothers Holdings Inc., Medium Term Notes, Series F 7.500 09/01/06 199,580
175 Norwest Financial, Inc., Senior Notes 6.750 06/01/05 173,147
150 Transamerica Finance Corp., Notes 7.250 08/15/02 150,342
200 Washington Mutual Capital I, Subordinated Capital Income Securities,
Washington Mutual Inc. Guaranteed 8.375 06/01/27 180,587
-----------
1,496,836
-----------
INDUSTRIAL - 10.82%
150 Boyd Gaming Corporation, Senior Subordinated Notes 9.500 07/15/07 141,000
150 ConAgra Foods, Inc., Unsecured Notes 7.875 09/15/10 151,644
150 Conoco Inc., Senior Unsecured Notes 6.950 04/15/29 138,847
150 Electrical Data Systems, Unsecured Notes 6.850 10/15/04 149,797
250 Enron Oil & Gas Resources Inc., Notes 6.000 12/15/08 224,798
250 LG-Caltex Oil Corporation, Unsecured Notes 7.500 07/15/07 239,242
200 Safeway Inc., Senior Unsecured Notes 6.050 11/15/03 193,348
175 Smith International Inc., Senior Unsecured Notes 7.000 09/15/07 168,172
150 Textron Inc., Unsecured Notes 6.750 09/15/02 149,219
-----------
1,556,067
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
T H E B E A R S T E A R N S F U N D S
INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE(S) DATE(S) VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
MULTIMEDIA - 1.03%
150 Time Warner Inc., Unsecured Debentures 6.850% 01/15/26 $ 148,758
-----------
RETAIL - DISCOUNT - 0.82%
125 TJX Companies Inc., Notes 7.450 12/15/09 118,136
-----------
SUPER-REGIONAL BANK - U.S. - 0.99%
150 Bank One Corp., Unsecured Subordinated Notes 6.125 02/15/06 142,009
-----------
TELECOMMUNICATIONS - 4.78%
150 Adelphia Communications Corporation, Senior Notes 9.375 11/15/09 136,688
125 CBS Corporation, Senior Notes 7.150 05/20/05 125,307
150 Cox Communications Inc., Senior Unsecured Notes 6.400 08/01/08 139,750
150 Nextel Communications, Inc., Senior Unsecured Notes 9.375 11/15/09 147,000
150 NEXTLINK Communications, Inc., Senior Notes 10.500 12/01/09 138,000
-----------
686,745
-----------
TELEPHONE - LOCAL - 2.46%
150 Southern New England Telephone Company, Notes, Series C 6.125 12/15/03 146,666
250 US West Communications, Debentures 6.875 09/15/33 206,669
-----------
353,335
-----------
UTILITIES - 5.27%
250 Cleveland Electric Illuminating Co., Senior Notes, Series D 7.880 11/01/17 248,165
150 Consolidated Natural Gas Co., Unsecured Notes 7.250 10/01/04 149,996
400 Western Resources Inc., Senior Unsecured Notes 6.250 08/15/03 359,523
-----------
757,684
-----------
Total Corporate Obligations (cost - $6,995,181) 6,794,170
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 35.45%
FANNIE MAE - 27.82%
450 Benchmark Notes 5.125 - 6.140 01/15/03 - 09/02/08 434,713
1,656 Pass-thru Pools 6.500 - 7.000 06/01/29 - 04/01/30 1,604,336
2,000 TBA, Pass-thru Pools 7.000 09/14/30 1,961,250
-----------
4,000,299
-----------
FREDDIE MAC - 1.04%
150 TBA, Pass-thru Pools 7.250 06/15/05 150,023
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
T H E B E A R S T E A R N S F U N D S
INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE(S) DATE(S) VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 6.59%
638 Pass-thru Pools 6.000 - 7.000% 12/06/05 - 10/15/13$ 617,214
325 TBA, Pass-thru Pools 8.000 08/23/30 330,891
-----------
948,105
-----------
Total U.S. Government Agency Obligations (cost - $5,077,412) 5,098,427
-----------
U.S. GOVERNMENT OBLIGATIONS - 11.52%
U.S. TREASURIES - 11.52%
1,265 Bonds 5.500 - 7.250 05/15/16 - 08/15/29 1,300,964
350 Notes 6.000 - 6.750 05/15/05 - 08/15/09 355,515
-----------
Total U.S. Government Obligations (cost - $1,654,477) 1,656,479
-----------
Total Long-Term Debt Investments (cost - $13,727,070) 13,549,076
-----------
SHORT-TERM INVESTMENTS -- 21.05%
COMMERCIAL PAPER - 1.04%
150 American Express Credit Corp., Discount Commercial Paper (1)
(cost - $149,216) 6.490 10/30/00 149,216
-----------
<CAPTION>
SHARES
---------
INVESTMENT COMPANY - 3.89%
559,056 Federated Investors, Trust for Short-Term U.S. Government Securities*
(cost - $559,056) 6.140 - 559,056
-----------
<CAPTION>
PRINCIPAL
AMOUNT
(000'S)+
---------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 16.12%
2,000 Fannie Mae, Discount Notes (1) 6.380 10/16/00 1,994,683
325 Fannie Mae, Discount Notes (1) 6.390 10/23/00 323,731
-----------
Total U.S. Government Agency Discount Notes (cost - $2,318,414) 2,318,414
-----------
Total Short-Term Investments (cost - $3,026,686) 3,026,686
-----------
Total Investments -- 115.28%
(cost - $16,753,756) 16,575,762
Liabilities in excess of other assets -- (15.28)% (2,197,433)
-----------
Net Assets -- 100.00% $14,378,329
-----------
-----------
</TABLE>
----------
+ Denominated in United States dollars unless otherwise indicated.
* Money market fund; interest rate reflects SECseven-day yield at
September 30, 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.
10
<PAGE>
T H E B E A R S T E A R N S F U N D S
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS -- 83.74%
UNITED STATES - 70.48%
BUILDING MATERIALS - 0.98%
1,000 Nortek, Inc., Senior Notes, Series B 8.875% 08/01/08 $ 925,000
-----------
CHEMICALS - 3.41%
1,000 General Chemical Industrial Products Inc., Senior Subordinated Notes 10.625 05/01/09 805,000
1,000 Huntsman ICI Chemicals LLC, Senior Subordinated Notes,
Company Guaranteed 10.125 07/01/09 986,250
1,000 Lyondell Chemical Company, Senior Subordinated Notes,
Company Guaranteed 10.875 05/01/09 971,250
1,400 Sterling Chemicals Holdings, Inc., Senior Secured Discount Notes (1) 13.500 08/15/08 469,000
-----------
3,231,500
-----------
COMPETITIVE LOCAL EXCHANGE COMPANIES - 6.47%
1,000 Adelphia Business Solutions, Inc., Senior Subordinated Notes 12.000 11/01/07 675,000
1,000 Intermedia Communications Inc., Senior Discount Notes (1) 12.500 05/15/06 960,000
1,750 KMC Telecom Holdings, Inc., Senior Discount Notes (1) 12.500 02/15/08 708,750
1,000 Metromedia Fiber Network, Inc., Senior Notes 10.000 12/15/09 940,000
1,500 NEXTLINK Communications, Inc., Senior Discount Notes (1) 12.250 06/01/09 847,500
350 NEXTLINK Communications, Inc., Senior Notes 10.500 12/01/09 322,000
1,070 Time Warner Telecom LLC and Time Warner Telecom Inc., Senior Notes 9.750 07/15/08 979,050
1,197 WinStar Communications, Inc., Senior Discount Notes* (1) 14.750 04/15/10 389,025
409 WinStar Communications, Inc., Senior Notes* 12.750 04/15/10 298,570
-----------
6,119,895
-----------
CONSUMER NON-DURABLES - 1.23%
750 Bell Sports, Inc., Senior Subordinated Notes, Series B,
Company Guaranteed 11.000 08/15/08 761,250
450 Consoltex Group Inc., Senior Subordinated Notes, Series B 11.000 10/01/03 329,625
1,000 Globe Holdings, Inc., Senior Discount Notes, Series B (1)(2) 14.000 08/01/09 5,000
750 Styling Technology Corporation, Senior Subordinated Notes,
Company Guaranteed (3) 10.875 07/01/08 63,750
-----------
1,159,625
-----------
CONTAINERS - 0.89%
1,000 Owens-Illinois, Inc., Senior Notes 7.350 05/15/08 841,010
-----------
ENERGY - 4.98%
500 Chesapeake Energy Corporation, Senior Notes, Series B,
Company Guaranteed 9.625 05/01/05 498,750
1,000 Grey Wolf, Inc., Senior Notes, Company Guaranteed 8.875 07/01/07 972,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
T H E B E A R S T E A R N S F U N D S
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
ENERGY (CONTINUED)
1,000 Leviathan Gas Pipeline Partners, L.P. and Leviathan Finance Corporation,
Senior Subordinated Notes, Series B, Company Guaranteed 10.375% 06/01/09 $ 1,060,000
1,000 Ocean Energy, Inc., Senior Subordinated Notes, Series B,
Company Guaranteed 8.875 07/15/07 1,023,750
1,000 R&B Falcon Corporation, Senior Notes 12.250 03/15/06 1,156,250
-----------
4,711,250
-----------
ENHANCED SERVICE MOBILE RADIOS & PERSONAL
COMMUNICATION SERVICES - 4.87%
1,000 AirGate PCS, Inc., Senior Subordinated Discount Notes (1) 13.500 10/01/09 607,500
1,000 Alamosa PCS Holdings, Inc., Senior Discount Notes,
Company Guaranteed (1) 12.875 02/15/10 545,000
500 Nextel Communications, Inc., Senior Notes 9.375 11/15/09 490,000
1,000 Nextel Communications, Inc., Senior Serial Redeemable Discount Notes (1) 9.950 02/15/08 767,500
1,000 Nextel Partners, Inc., Senior Notes* 11.000 03/15/10 1,010,000
1,000 TeleCorp PCS, Inc., Senior Subordinated Discount Notes,
Company Guaranteed (1) 11.625 04/15/09 682,500
500 TeleCorp PCS, Inc., Senior Subordinated Notes* 10.625 07/15/10 507,500
-----------
4,610,000
-----------
FOOD/TOBACCO - 0.40%
750 Richmont Marketing Specialists, Inc., Senior Subordinated Notes,
Company Guaranteed 10.125 12/15/07 378,750
-----------
FOREST/PAPER PRODUCTS - 2.91%
500 Bear Island Paper Company, L.L.C. and Bear Island Finance Company II,
Senior Secured Notes, Series B 10.000 12/01/07 442,500
500 Graham Packaging Company and GPC Capital Corp. II,
Senior Discount Notes, Series B (1) 10.750 01/15/09 282,500
1,000 Packaging Corporation of America, Senior Subordinated Notes,
Company Guaranteed 9.625 04/01/09 1,017,500
1,000 Riverwood International Corporation, Senior Notes, Company Guaranteed 10.625 08/01/07 1,006,250
-----------
2,748,750
-----------
GAMING/LEISURE - 7.55%
1,000 Argosy Gaming Company, Senior Subordinated Notes,
Company Guaranteed 10.750 06/01/09 1,051,250
1,000 Autotote Corporation, Senior Subordinated Notes, Company Guaranteed* 12.500 08/15/10 1,020,000
1,000 Boyd Gaming Corporation, Senior Subordinated Notes 9.500 07/15/07 940,000
1,000 Hollywood Casino Corporation, Senior Secured Notes,
Company Guaranteed 11.250 05/01/07 1,042,500
1,000 Mandalay Resort Group, Senior Subordinated Notes* 10.250 08/01/07 1,036,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
T H E B E A R S T E A R N S F U N D S
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
GAMING/LEISURE (CONTINUED)
1,000 Park Place Entertainment Corporation, Senior Subordinated Notes 9.375% 02/15/07 $ 1,020,000
1,000 Pinnacle Entertainment, Inc., Senior Subordinated Notes, Series B,
Company Guaranteed 9.250 02/15/07 1,037,500
-----------
7,147,500
-----------
HEALTHCARE - 5.87%
1,000 Fisher Scientific International Inc., Senior Subordinated Notes 9.000 02/01/08 927,500
1,250 Oxford Health Plans, Inc., Senior Notes 11.000 05/15/05 1,318,750
1,050 Team Health, Inc., Senior Subordinated Notes, Series B,
Company Guaranteed 12.000 03/15/09 971,250
1,000 Tenet Healthcare Corporation, Senior Notes* 9.250 09/01/10 1,050,000
1,250 Triad Hospitals Holdings, Inc., Senior Subordinated Notes, Series B,
Company Guaranteed 11.000 05/15/09 1,287,500
-----------
5,555,000
-----------
INFORMATION TECHNOLOGY - 2.10%
500 Amkor Technology, Inc., Senior Subordinated Notes 10.500 05/01/09 509,375
1,000 Fairchild Semiconductor Corporation, Senior Subordinated Notes (4) 10.125 03/15/07 1,005,000
500 Telecommunications Techniques Co., LLC, Senior Subordinated Notes,
Company Guaranteed 9.750 05/15/08 472,500
-----------
1,986,875
-----------
INTERNET/DATA - 2.54%
e 1,000 Exodus Communications, Inc., Senior Notes* 11.375 07/15/08 873,601
1,000 Globix Corporation, Senior Notes 12.500 02/01/10 715,000
250 PSINet Inc., Senior Notes 10.500 12/01/06 163,750
1,000 PSINet Inc., Senior Notes, Series B 10.000 02/15/05 655,000
-----------
2,407,351
-----------
LEISURE - OTHER - 0.98%
750 Six Flags, Inc., Senior Discount Notes (1) 10.000 04/01/08 504,375
450 Six Flags, Inc., Senior Notes 9.750 06/15/07 423,000
-----------
927,375
-----------
LODGING - 0.98%
1,000 HMH Properties, Inc., Senior Notes, Series B, Company Guaranteed 7.875 08/01/08 925,000
-----------
LONG DISTANCE TELEPHONE SERVICES - 2.44%
500 Williams Communications Group, Inc., Senior Notes* 11.700 08/01/08 480,000
1,000 Williams Communications Group, Inc., Senior Redeemable Notes 10.875 10/01/09 920,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
T H E B E A R S T E A R N S F U N D S
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE(S) DATE(S) VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
LONG DISTANCE TELEPHONE SERVICES (CONTINUED)
1,250 World Access, Inc., Senior Notes 13.250% 01/15/08 $ 906,250
-----------
2,306,250
-----------
MANUFACTURING - 2.48%
250 Grove Holdings LLC and Grove Holdings Capital, Inc.,
Senior Discount Debentures (1) 11.625 05/01/09 3,750
1,250 Motors and Gears, Inc., Senior Notes, Series D 10.750 11/15/06 1,243,750
1,000 Roller Bearing Company of America, Inc., Senior Subordinated Notes,
Series B, Company Guaranteed 9.625 06/15/07 920,000
500 Thermadyne Holdings Corporation, Senior Discount Debentures (1) 12.500 06/01/08 177,500
-----------
2,345,000
-----------
MEDIA - BROADCAST RADIO - 1.28%
1,000 Citadel Broadcasting Company, Senior Subordinated Notes,
Company Guaranteed 9.250 11/15/08 1,000,000
250 Cumulus Media Inc., Senior Subordinated Notes, Company Guaranteed 10.375 07/01/08 213,750
-----------
1,213,750
-----------
MEDIA - BROADCAST TELEVISION - 2.74%
710 ACME Television, LLC and ACME Finance Corporation, Senior Discount
Notes, Series B, Company Guaranteed (1) 10.875 09/30/04 678,050
1,000 Sinclair Broadcast Group, Inc., Senior Subordinated Notes,
Company Guaranteed 9.000 07/15/07 950,000
1,000 Young Broadcasting Inc., Senior Subordinated Notes, Series B,
Company Guaranteed 9.000 01/15/06 965,000
-----------
2,593,050
-----------
MEDIA - CABLE - 5.17%
1,000 Adelphia Communications Corporation, Senior Notes 9.375 - 10.875 11/15/09 - 10/01/10 948,125
500 Adelphia Communications Corporation, Senior Notes, Series B 9.875 03/01/07 472,500
1,000 Charter Communications Holdings, LLC and Charter Communications
Holdings Capital Corporation, Senior Notes 8.625 04/01/09 902,500
1,000 Insight Midwest L.P. and Insight Capital, Inc., Senior Notes 9.750 10/01/09 1,012,500
1,700 NTL Communications Corp., Senior Deferred Coupon Notes, Series B (1) 12.375 10/01/08 1,062,500
500 NTL Communications Corp., Senior Notes* 11.875 10/01/10 491,250
-----------
4,889,375
-----------
MEDIA - WIRELESS TOWERS - 2.93%
1,000 Crown Castle International Corp., Senior Notes 10.750 08/01/11 1,032,500
1,000 SBA Communications Corporation, Senior Discount Notes (1) 12.000 03/01/08 745,000
1,000 Spectrasite Holdings, Inc., Senior Discount Notes, Series B (1) 12.875 03/15/10 520,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
T H E B E A R S T E A R N S F U N D S
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
MEDIA - WIRELESS TOWERS (CONTINUED)
500 Spectrasite Holdings, Inc., Senior Notes, Series B 10.750% 03/15/10 $ 475,000
-----------
2,772,500
-----------
METALS/MINERALS - 1.67%
500 MAXXAM Group Holdings Inc., Senior Secured Notes, Series B 12.000 08/01/03 463,750
750 Renco Steel Holdings, Inc., Senior Secured Notes, Series B 10.875 02/01/05 558,750
1,000 WHX Corporation, Senior Exchange Notes 10.500 04/15/05 555,000
-----------
1,577,500
-----------
PUBLISHING - 0.16%
250 Liberty Group Publishing, Inc., Senior Discount Debentures (1) 11.625 02/01/09 151,250
-----------
RETAIL - 0.21%
500 Advance Holding Corporation, Senior Discount Debentures, Series B (1) 12.875 04/15/09 195,000
-----------
RETAIL SERVICES - 1.62%
500 Allied Waste North America, Inc., Senior Notes, Series B,
Company Guaranteed 7.625 01/01/06 450,000
750 AP Holdings, Inc., Senior Discount Notes (1) 11.250 03/15/08 78,750
1,250 Metal Management, Inc., Senior Subordinated Notes,
Company Guaranteed 10.000 05/15/08 131,250
1,000 Packaged Ice, Inc., Senior Notes, Series B, Company Guaranteed 9.750 02/01/05 875,000
-----------
1,535,000
-----------
SATELLITE/DIGITAL BROADCASTING SATELLITE - 1.57%
500 Echostar Broadband Corp., Senior Notes* 10.375 10/01/07 500,000
1,000 Echostar DBS Corporation, Senior Notes 9.375 02/01/09 985,000
-----------
1,485,000
-----------
TRANSPORTATION - 0.97%
1,000 Amtran, Inc., Senior Notes, Company Guaranteed 9.625 12/15/05 920,000
-----------
UTILITIES - 1.08%
1,000 AES Corporation (The), Senior Notes 9.500 06/01/09 1,022,500
-----------
Total United States (cost - $75,319,723) 66,681,056
-----------
ARGENTINA - 0.55%
SOVEREIGN - 0.55%
650 Republic of Argentina, Discount Bonds, Series L-GL (5)(6)
(cost - $499,258) 6.875 03/31/23 522,437
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
T H E B E A R S T E A R N S F U N D S
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE(S) DATE(S) VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
AUSTRALIA - 0.72%
METALS/MINERALS 0.72%
750 Murrin Murrin Holdings Property Ltd.,
Senior Yankee Notes (4) (cost - $711,686) 9.375% 08/31/07 $ 678,750
-----------
BERMUDA - 1.12%
LONG DISTANCE TELEPHONE SERVICES - 1.12%
1,050 Global Crossing Holdings Ltd., Senior Yankee Notes, Company Guaranteed
(cost - $1,122,601) 9.625 05/15/08 1,055,250
-----------
BRAZIL - 0.59%
SOVEREIGN - 0.59%
739 Federal Republic of Brazil, Capitalization Bonds (4)(6)(7)
(cost - $533,988) 8.000 04/15/14 562,447
-----------
CANADA - 4.14%
ENHANCED SERVICE MOBILE RADIOS & PERSONAL
COMMUNICATION SERVICES - 3.05%
2,050 Clearnet Communications Inc.,
Senior Discount Yankee Notes (1) 10.125 05/01/09 1,634,875
1,300 Microcell Telecommunications Inc., Senior Discount Yankee Notes,
Series B (1) 14.000 06/01/06 1,254,500
-----------
2,889,375
-----------
FOREST/PAPER PRODUCTS - 1.09%
1,000 Repap New Brunswick Inc., Senior Yankee Notes 10.625 04/15/05 1,035,000
-----------
Total Canada (cost - $3,548,419) 3,924,375
-----------
MEXICO - 0.57%
SOVEREIGN - 0.57%
600 United Mexican States, Secured Par Bonds, Series W-A (6)(8)
(cost - $481,061) 6.250 12/31/19 535,500
-----------
NETHERLANDS - 2.23%
COMPETITIVE LOCAL EXCHANGE COMPANIES - 0.92%
1,000 Versatel Telecom International NV, Senior Yankee Notes 11.875 07/15/09 870,000
-----------
LONG DISTANCE TELEPHONE SERVICES - 0.40%
750 Hermes Europe Railtel BV, Senior Yankee Notes 11.500 08/15/07 378,750
-----------
MEDIA - CABLE - 0.91%
1,000 United Pan-Europe Communications N.V., Senior Yankee Notes,
Series B 10.875 - 11.250 08/01/09 - 11/01/09 858,750
-----------
Total Netherlands (cost - $2,612,310) 2,107,500
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
T H E B E A R S T E A R N S F U N D S
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE(S) DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
UNITED KINGDOM - 3.34%
MEDIA - CABLE - 1.95%
1,000 ONO Finance plc, Euro-Dollar Notes, Company Guaranteed 13.000% 05/01/09 $ 905,000
1,750 Telewest Communications plc, Senior Discount Notes* (1) 11.375 02/01/10 936,250
-----------
1,841,250
-----------
PUBLISHING - 0.83%
750 Regional Independent Media Group plc, Senior Yankee Notes 10.500 07/01/08 783,750
-----------
UTILITIES - 0.56%
500 AES Drax Energy Ltd., Senior Subordinated Notes* 11.500 08/30/10 531,250
-----------
Total United Kingdom (cost - $3,336,293) 3,156,250
-----------
Total Long-Term Debt Investments (cost - $88,165,339) 79,223,565
-----------
SHARES
--------
EQUITY INVESTMENTS -- 1.58%
COMMON STOCKS UNITED STATES - 0.04%
LONG DISTANCE TELEPHONE SERVICES - 0.04%
2,015 Viatel, Inc. (9) - - 20,654
3,927 World Access, Inc. (9) - - 21,230
-----------
Total Common Stocks - United States (cost - $69,878) 41,884
-----------
PREFERRED STOCKS UNITED STATES - 1.54%
FOOD/TOBACCO - 0.00%
909 Nebco Evans Holding Company, Senior Redeemable Exchangeable
Preferred Stock (9)(10) 11.250 - 114
-----------
MEDIA - BROADCAST RADIO - 0.37%
452 Cumulus Media Inc., Cumulative Exchangeable Redeemable
Preferred Stock, Series A (7) 13.750 - 354,989
-----------
MEDIA - BROADCAST TELEVISION - 0.00%
1 Paxson Communications Corporation (7) 12.500 - 440
-----------
MEDIA - CABLE - 0.27%
2,500 Adelphia Communications Corporation, Cumulative Exchangeable
Preferred Stock, Series B 13.000 - 255,625
-----------
MEDIA - WIRELESS CELLULAR - 0.90%
918 Dobson Communications Corporation, Senior Exchangeable
Preferred Stock (7) 12.250 - 13.000 - 847,689
-----------
Total Preferred Stocks - United States (cost - $2,575,518) 1,458,857
-----------
Total Equity Investments (cost - $2,645,396) 1,500,741
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
T H E B E A R S T E A R N S F U N D S
HIGH YIELD TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
INTEREST MATURITY
UNITS RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WARRANTS++ -- 0.12%
UNITED STATES - 0.01%
COMPETITIVE LOCAL EXCHANGE COMPANIES - 0.01%
750 KMC Telecom Holdings, Inc.* (9) - 04/15/08 $ 1,547
250 Mpower Communications Corp.* (9) - 10/01/04 12,500
-----------
Total United States (cost - $10,000) 14,047
-----------
UNITED KINGDOM - 0.11%
MEDIA CABLE - 0.11%
1,000 ONO Finance plc* (9) - 05/31/09 100,500
-----------
Total Warrants (cost - $10,000) 114,547
-----------
SHARES
---------
SHORT-TERM INVESTMENTS -- 9.87%
INVESTMENT COMPANY - 0.04%
35,957 Federated Investors, Trust for Short-Term U.S. Government Securities**
(cost - $35,957) 6.140% - 35,957
-----------
PRINCIPAL
AMOUNT
(000'S)+
---------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 9.83%
9,300 Federal Home Loan Bank, Discount Notes (cost - $9,298,393) 6.220 10/02/00 9,298,393
-----------
Total Short-Term Investments (cost - $9,334,350) 9,334,350
-----------
Total Investments -- 95.31%
(cost - $100,155,085) 90,173,203
Other assets in excess of liabilities -- 4.69% 4,438,786
-----------
Net Assets -- 100.00% $94,611,989
-----------
-----------
</TABLE>
---------------------
+ Denominated in United States dollars unless otherwise indicated.
* SEC Rule 144A security. Such securities are traded only among
qualified institutional buyers.
** Money market fund; interest rate reflects SECseven-day yield at
September 30, 2000.
e Euros.
++ 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) With an additional 1,000 warrants, expiring 08/01/09, with no market
value.
(3) Coupon payment is in default. Company filed Chapter 11 on 08/31/00.
(4) Pro-rata sinking fund has been established.
(5) Adjustable rate; rate based on London Interbank Offered Rate (LIBOR)
plus 0.8125%.
(6) Brady bonds.
(7) Payment-in-kind; of which all or a portion of the coupon is being
capitalized at periodic intervals.
(8) Traded with value recovery rights based on the price of oil.
(9) Non-income producing security.
(10) Company filed Chapter 11 on 02/01/00.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
T H E B E A R S T E A R N S F U N D S
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE(S) DATE(S) VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS -- 91.10%
ALGERIA - 0.99%
SOVEREIGN - 0.99%
157 Republic of Algeria, Loan Tranche I (1) 7.688% 09/04/06 $ 134,954
190 Republic of Algeria, Loan Tranche III (1) 7.688 03/04/10 154,850
-----------
Total Algeria (cost - $275,706) 289,804
-----------
ARGENTINA - 11.10%
SOVEREIGN - 11.10%
500 Republic of Argentina (2) 10.250 - 12.125 03/15/10 - 07/21/30 449,947
131 Republic of Argentina, Bocon, Series PRE4 (3)(4)(5) 6.620 09/01/02 120,850
87 Republic of Argentina, Bocon, Series PRO2 (3)(4)(5) 6.620 04/01/07 72,818
330 Republic of Argentina, Bonos del Tesoro (3)(4) 9.960 07/21/03 317,460
330 Republic of Argentina, Bonos del Tesoro, Series BTO8 (4) 12.125 05/21/05 329,601
360 Republic of Argentina, FRD Bearer (3)(5)(6) 7.625 03/31/05 329,625
116 Republic of Argentina, FRD Registered, Series L (3)(5)(6) 7.625 03/31/05 106,212
450 Republic of Argentina, Par Bonds, Series L-GP (6) 6.000 03/31/23 304,875
70 Republic of Argentina, Secured Discount Bonds, Series L-GL (3)(6) 7.875 03/31/23 56,262
140 Republic of Argentina, Senior Unsubordinated, Series BGL0 (2) 8.375 12/20/03 130,725
90 Republic of Argentina, Series XW (2) 11.000 12/04/05 87,525
490 Republic of Argentina, Unsubordinated (2) 9.750 - 11.750 04/07/09 - 09/19/27 426,425
580 Republic of Argentina, Unsubordinated, Series BGL5 (2) 11.375 01/30/17 522,000
-----------
Total Argentina (cost - $3,316,397) 3,254,325
-----------
BRAZIL - 11.01%
SOVEREIGN - 11.01%
515 Federal Republic of Brazil (2) 11.625 - 12.750 04/15/04 - 03/06/30 497,781
530 Federal Republic of Brazil, Capitalization Bonds (5)(6)(7)(8) 8.000 04/15/14 404,741
310 Federal Republic of Brazil, Collateralized Par Bonds (6)(7) 6.000 04/15/24 208,669
40 Federal Republic of Brazil, Secured DCB (3)(5)(6) 7.438 04/15/12 30,725
475 Federal Republic of Brazil, Secured DCB, Series RG (3)(5)(6) 7.438 04/15/12 364,859
340 Federal Republic of Brazil, Secured Discount Bonds (3)(6) 7.375 04/15/24 270,512
150 Federal Republic of Brazil, Secured FLIRB Bearer (3)(5)(6) 7.375 04/15/09 124,687
525 Federal Republic of Brazil, Secured NMB (3)(5)(6) 7.438 04/15/09 460,031
980 Federal Republic of Brazil, Unsubordinated (2) 11.000 - 14.500 10/15/09 - 08/17/40 865,356
-----------
Total Brazil (cost - $3,156,688) 3,227,361
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
T H E B E A R S T E A R N S F U N D S
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE(S) DATE(S) VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
BULGARIA - 3.40%
SOVEREIGN - 3.40%
535 Republic of Bulgaria, Discount Bonds, Series A (3)(6) 7.750% 07/28/24 $ 411,281
800 Republic of Bulgaria, FLIRB, Series A (3)(6) 3.000 07/28/12 585,000
-----------
Total Bulgaria (cost - $872,169) 996,281
-----------
CHILE - 0.47%
SOVEREIGN - 0.47%
145 Republic of Chile, Notes (2) (cost - $135,986) 6.875 04/28/09 137,750
-----------
CHINA - 1.03%
CORPORATE - 0.02%
120 Zhuhai Highway Co. Ltd. (9) - 07/01/08 6,000
-----------
SOVEREIGN - 1.01%
300 People's Republic of China (2) 7.300 12/15/08 297,000
-----------
Total China (cost - $363,164) 303,000
-----------
COLOMBIA - 2.03%
SOVEREIGN - 2.03%
150 Republic of Colombia (2) 11.750 02/25/20 126,844
370 Republic of Colombia, Unsubordinated (2) 7.625 - 9.750 02/15/07 - 04/23/09 302,997
205 Republic of Colombia, Unsubordinated, Series NOV (2) 9.750 04/23/09 164,512
-----------
Total Colombia (cost - $649,353) 594,353
-----------
CROATIA - 0.64%
SOVEREIGN - 0.64%
205 Croatia, Series A (3)(6) (cost - $185,376) 7.750 07/31/10 186,648
-----------
ECUADOR - 1.72%
SOVEREIGN - 1.72%
338 Republic of Ecuador (2)* 12.000 11/15/12 237,867
454 Republic of Ecuador (2)(5)(7)* 4.000 08/15/30 179,897
4 Republic of Ecuador, Registered (2) 12.000 11/15/12 2,815
210 Republic of Ecuador, Registered (2)(7) 4.000 08/15/30 83,213
-----------
Total Ecuador (cost - $313,606) 503,792
-----------
MALAYSIA - 3.76%
CORPORATE - 2.72%
585 Petroliam Nasional Berhad, Registered (2)* 7.125 - 7.625 10/18/06 - 10/15/26 546,799
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
T H E B E A R S T E A R N S F U N D S
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE(S) DATE(S) VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
CORPORATE (CONTINUED)
250 Tenaga Nasional Berhad, Notes (10) 7.875% 06/15/04 $ 251,413
-----------
798,212
-----------
SOVEREIGN - 1.04%
290 Malaysia (2) 8.750 06/01/09 303,413
-----------
Total Malaysia (cost - $1,083,546) 1,101,625
-----------
MEXICO - 13.62%
CORPORATE - 1.47%
150 Banco Nacional de Comercio Exterier, Debentures (2) 7.250 02/02/04 145,695
300 Innova S. De R.L., Senior Notes (11) * 12.875 04/01/07 285,000
-----------
430,695
-----------
SOVEREIGN - 12.15%
715 United Mexican States (2) 9.875 - 11.500 01/15/07 - 05/15/26 808,495
580 United Mexican States, Notes (2) 9.875 02/01/10 616,975
250 United Mexican States, Notes, Series MTN (6) 8.500 02/01/06 250,625
425 United Mexican States, Secured Discount Bonds, Series C (3)(6) 7.800 12/31/19 439,875
20 United Mexican States, Secured Par Bonds, Series W-A (6) 6.250 12/31/19 17,850
1,600 United Mexican States, Secured Par Bonds, Series W-B (6) 6.250 12/31/19 1,428,000
-----------
3,561,820
-----------
Total Mexico (cost - $3,774,017) 3,992,515
-----------
MOROCCO - 1.60%
SOVEREIGN - 1.60%
517 The Kingdom of Morocco, Tranche A (1)(3) (cost - $415,213) 7.750 01/01/09 468,328
-----------
NIGERIA - 2.18%
SOVEREIGN - 2.18%
500 Central Bank of Nigeria, Par Bonds, Series W (6)(7)(12) 6.250 11/15/20 290,000
735 Nigeria Promissory Notes (2)(7) 5.092 01/05/10 349,036
-----------
Total Nigeria (cost - $751,718) 639,036
-----------
PANAMA - 3.02%
SOVEREIGN - 3.02%
385 The Republic of Panama (2) 8.875 - 9.375 09/30/27 - 04/01/29 346,872
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
T H E B E A R S T E A R N S F U N D S
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE(S) DATE(S) VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
SOVEREIGN (CONTINUED)
670 The Republic of Panama, IRD (3)(5)(6) 4.500% 07/17/14 $ 537,256
-----------
Total Panama (cost - $887,800) 884,128
-----------
PERU - 2.04%
SOVEREIGN - 2.04%
480 The Republic of Peru, Collateralized FLIRB (5)(6)(7) 3.750 03/07/17 271,200
340 The Republic of Peru, PDI Bonds (3)(6) 4.500 03/07/17 215,050
176 The Republic of Peru, PDI Bonds (3)(6)* 4.500 03/07/17 111,320
-----------
Total Peru (cost - $639,951) 597,570
-----------
PHILIPPINES - 3.91%
SOVEREIGN - 3.91%
605 Republic of the Philippines (2) 9.500 - 9.875 01/15/19 - 10/21/24 530,081
460 Republic of the Philippines, Notes (2) 9.875 - 10.625 03/16/10 - 03/16/25 407,448
230 Republic of the Philippines, Unsecured (2) 8.875 04/15/08 210,163
-----------
Total Philippines (cost - $1,182,324) 1,147,692
-----------
POLAND - 0.93%
SOVEREIGN - 0.93%
400 The Republic of Poland, Series RSTA (6)(7) (cost - $270,129) 4.000 10/27/24 273,500
-----------
RUSSIA - 9.21%
SOVEREIGN - 9.21%
602 Chase Russian Ruble-linked Notes (10) 0.800 01/21/04 134,375
325 Russian Federation, Registered (2) 11.000 07/24/18 238,875
525 Russian Federation, Senior Unsubordinated, Registered (2) 11.750 06/10/03 504,000
1,626 Russian Federation, Unsubordinated (2)(5)(7)* 2.250 03/31/30 632,264
231 Russian Federation, Unsubordinated (2)(5)* 8.250 03/31/10 154,129
260 Russian Federation, Unsubordinated, Registered (2) 8.750 - 12.750 11/27/01 - 06/24/28 764,654
700 Russian Federation, Unsubordinated, Registered (2)(5)(7) 2.250 03/31/30 272,125
-----------
Total Russia (cost - $2,639,323) 2,700,422
-----------
SOUTH AFRICA - 1.51%
SOVEREIGN - 1.51%
310 Republic of South Africa (2) 9.125 05/19/09 308,063
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
T H E B E A R S T E A R N S F U N D S
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE(S) DATE(S) VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT INVESTMENTS (CONTINUED)
SOVEREIGN (CONTINUED)
150 Republic of South Africa (11) 8.500% 06/23/17 $ 135,750
-----------
Total South Africa (cost - $443,254) 443,813
-----------
SOUTH KOREA - 5.09%
CORPORATE - 1.58%
200 Cho Hung Bank, Subordinated Notes* 11.500 04/01/10 199,500
130 Hanvit Bank, Registered (1)(7) 12.750 03/01/10 132,743
135 Korea Development Bank (2) 7.125 04/22/04 132,233
-----------
464,476
-----------
SOVEREIGN - 3.51%
980 Republic of Korea (2) 8.875 04/15/08 1,029,000
-----------
Total South Korea (cost - $1,463,223) 1,493,476
-----------
TURKEY - 4.45%
CORPORATE - 1.02%
300 Export Credit Bank of Turkey, Unsubordinated, Registered (2)* 11.500 02/25/05 298,500
-----------
SOVEREIGN - 3.43%
200 Republic of Turkey (2) 11.750 06/15/10 199,500
795 Republic of Turkey, Senior Unsubordinated (2) 11.875 - 12.375 06/15/09 - 01/15/30 806,081
-----------
1,005,581
-----------
Total Turkey (cost - $1,366,697) 1,304,081
-----------
UKRAINE - 0.81%
SOVEREIGN - 0.81%
320 Ukraine Government, Senior Notes, Registered (2) (cost - $202,124) 11.000 03/15/07 238,300
-----------
VENEZUELA - 6.58%
SOVEREIGN - 6.58%
990 Republic of Venezuela (2) 9.250 - 13.625 08/15/18 686,915
179 Republic of Venezuela, DCD, Series DL (3)(5)(6) 7.875 12/18/07 153,241
167 Republic of Venezuela, FLIRD, Series A (3)(5)(6) 7.625 03/31/07 141,353
833 Republic of Venezuela, FLIRD, Series B (3)(5)(6) 7.625 03/31/07 706,766
325 Republic of Venezuela, Par Bonds, Series W-A (6)(13) 6.750 03/31/20 241,719
-----------
Total Venezuela (cost - $1,762,785) 1,929,994
-----------
Total Long-Term Debt Investments (cost - $26,150,549) 26,707,794
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
T H E B E A R S T E A R N S F U N D S
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT INTEREST MATURITY
(000'S)+ RATE DATE VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENT -- 6.01%
GRAND CAYMAN - 6.01%
1,760 Brown Brothers Harriman & Co. (cost - $1,760,000) 5.760% ** $ 1,760,000
-----------
Total Investments -- 97.11%
(cost - $27,910,549).................................... 28,467,794
Other assets in excess of liabilities -- 2.89%............. 848,404
-----------
Net Assets -- 100.00%...................................... $29,316,198
-----------
-----------
</TABLE>
-------
+ 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.
(1) Loan Participations.
(2) Global/Eurobonds.
(3) Adjustable rate; rate based on London Interbank Offered Rate (LIBOR).
(4) Domestic bonds.
(5) Pro-rata sinking fund has been established.
(6) Brady bonds.
(7) Step-up coupon; coupon increases at periodic intervals.
(8) Payment-in-kind; of which all or a portion of the coupon is being
capitalized at periodic intervals.
(9) The coupon payment of 11.50% on the subordinated bond which was due and
payable on July 1, 2000 is currently being held in escrow by the bond
trustee as a result of various technical defaults committed by the issuer
of the bond. It is possible that the July 1, 2000 coupon may not be paid
at all if certain actions are taken by the owners of the senior bonds and
it is also possible that the escrow could be extended if additional
technical defaults occur.
(10) Quasi-government bonds.
(11) Yankee bonds.
(12) With an additional 2,250 warrants attached, with no market value.
(13) With an additional 9,635 value recovery rights attached, with no market
value.
DCB Debt Conversion Bonds.
DCD Debt Conversion Debentures.
FLIRB Front Loaded Interest Reduction Bonds.
FLIRD Front Loaded Interest Reduction Debentures.
FRD Floating Rate Debentures.
IRD Interest Reduction Debentures.
NMB New Money Bonds.
PDI Past Due Interest.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
T H E B E A R S T E A R N S F U N D S
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
INCOME HIGH YIELD TOTAL EMERGING MARKETS
PORTFOLIO RETURN PORTFOLIO DEBT PORTFOLIO
------------ ---------------- ----------------
<S> <C> <C> <C>
ASSETS
Investments, at value (cost - $16,753,756, $100,155,085
and $27,910,549, respectively) $16,575,762 $ 90,173,203 $28,467,794
Cash -- 3,647 --
Receivable for investments sold -- 2,113,250 79,812
Interest and dividends receivable 174,747 2,384,941 615,380
Receivable for Portfolio shares sold 247,100 1,177,851 372,356
Receivable for open forward foreign currency exchange contracts -- 64,664 --
Receivable from investment adviser 25,599 4,597 4,747
Deferred organization expenses and other assets 20,834 45,493 20,958
------------ --------------- --------------
Total assets 17,044,042 95,967,646 29,561,047
------------ --------------- --------------
LIABILITIES
Payable for investments purchased 2,469,678 489,360 14,427
Dividends payable 24,360 304,801 77,451
Payable for Portfolio shares repurchased 70,574 263,458 15,713
Distribution and service fees payable (Class A, B, and C
shares) 16,203 153,530 34,014
Custodian fee payable 1,727 4,241 13,511
Administration fee payable 1,792 11,606 3,689
Accrued expenses 81,379 128,661 86,044
------------ --------------- --------------
Total liabilities 2,665,713 1,355,657 244,849
------------ --------------- --------------
NET ASSETS
Capital stock, $0.001 par value (unlimited shares of beneficial
interest authorized) 1,239 10,292 2,798
Paid-in capital 15,084,725 123,461,707 31,752,683
Undistributed net investment income -- -- 7,196
Accumulated net realized loss from investments and foreign
currency related transactions, if any (529,641) (18,942,792) (3,007,376)
Net unrealized appreciation/(depreciation) on investments and
foreign currency related transactions, if any (177,994) (9,917,218) 560,897
------------ --------------- --------------
Net assets $14,378,329 $ 94,611,989 $29,316,198
============ =============== ==============
CLASS A
Net assets $ 5,742,382 $ 50,284,087 $24,475,653
------------ --------------- --------------
Shares of beneficial interest outstanding 494,929 5,470,171 2,332,938
------------ --------------- --------------
Net asset value per share $11.60 $9.19 $10.49
====== ===== ======
Maximum offering price per share (net asset value plus sales
charge of 4.50%* of the offering price) $12.15 $9.62 $10.98
====== ===== ======
CLASS B
Net assets $ 2,442,731 $ 22,777,025 $ 1,882,722
------------ --------------- --------------
Shares of beneficial interest outstanding 210,539 2,477,727 180,894
------------ --------------- --------------
Net asset value and offering price per share** $11.60 $9.19 $10.41
====== ===== ======
CLASS C
Net assets $ 2,493,480 $ 21,550,877 $ 2,957,823
------------ --------------- --------------
Shares of beneficial interest outstanding 214,915 2,344,353 283,963
------------ --------------- --------------
Net asset value and offering price per share** $11.60 $9.19 $10.42
====== ===== ======
CLASS Y
Net assets $ 3,699,736 -- --
------------ --------------- --------------
Shares of beneficial interest outstanding 318,877 -- --
------------ --------------- --------------
Net asset value, offering and redemption price per share $11.60 -- --
====== ===== ======
</TABLE>
--------------------
* 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.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
T H E B E A R S T E A R N S F U N D S
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
INCOME HIGH YIELD TOTAL EMERGING MARKETS
PORTFOLIO RETURN PORTFOLIO DEBT PORTFOLIO
------------ ---------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest* $ 489,560 $ 4,989,048 $ 1,500,616
Dividends -- 219,574 --
------------ --------------- --------------
489,560 5,208,622 1,500,616
------------ --------------- --------------
EXPENSES
Advisory fees 30,865 270,790 154,426
Transfer agent fees and expenses 78,690 85,553 51,053
Accounting fees 40,114 66,887 45,124
Distribution and service fees - Class A 9,171 80,298 45,438
Distribution and service fees - Class B 10,971 114,938 8,701
Distribution and service fees - Class C 10,685 103,229 14,459
Administration fees 10,288 67,698 22,942
Legal and auditing fees 23,579 30,583 36,300
Federal and state registration fees 19,666 28,310 27,162
Reports and notices to shareholders 3,510 24,066 10,626
Custodian fees and expenses 4,200 9,742 21,058
Insurance expenses 4,456 4,670 4,483
Trustees' fees and expenses 4,262 4,262 4,262
Amortization of organization expenses -- 6,154 --
Other 2,109 3,334 12,835
------------ --------------- --------------
Total expenses before waivers and related reimbursements 252,566 900,514 458,869
Less: waivers and related reimbursements (190,349) (311,039) (165,770)
------------ --------------- --------------
Total expenses after waivers and related reimbursements 62,217 589,475 293,099
------------ --------------- --------------
Net investment income 427,343 4,619,147 1,207,517
------------ --------------- --------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain/(loss) from:
Investments (94,330) (7,733,608) 925,140
Foreign currency related transactions -- -- (22,804)
Net change in unrealized appreciation/(depreciation) on:
Investments 174,787 1,951,827 (1,269,033)
Foreign currency related transactions 64,664 93
------------ --------------- --------------
Net realized and unrealized gain/(loss) on investments 80,457 (5,717,117) (366,604)
------------ --------------- --------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 507,800 $(1,097,970) $ 840,913
============ =============== ==============
</TABLE>
-------
* Net of foreign withholding taxes of $3,048 for the Emerging Markets Debt
Portfolio.
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
T H E B E A R S T E A R N S F U N D S
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 FOR THE FOR THE FOR THE
SIX MONTHS ENDED FISCAL SIX MONTHS ENDED FISCAL SIX MONTHS ENDED FISCAL
SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED
(UNAUDITED) MARCH 31, 2000 (UNAUDITED) MARCH 31, 2000 (UNAUDITED) MARCH 31, 2000
------------------ -------------- ------------------ -------------- ------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE/
(DECREASE) IN
NET ASSETS FROM
OPERATIONS
Net investment
income $ 427,343 $ 772,173 $ 4,619,147 $ 10,644,604 $ 1,207,517 $ 2,952,266
Net realized
gain/(loss)
from
investments
and foreign
currency
related
transactions,
if any (94,330) (426,746) (7,733,608) (9,640,254) 902,336 207,619
Net change in
unrealized
appreciation/
(depreciation)
on investments
and foreign
currency
related
transactions,
if any 174,787 (237,372) 2,016,491 (6,413,837) (1,268,940) 4,415,644
----------- ----------- ------------ ------------ ----------- ------------
Net increase/
(decrease) in
net assets
resulting from
operations 507,800 108,055 (1,097,970) (5,409,487) 840,913 7,575,529
----------- ----------- ------------ ------------ ----------- ------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment
income
Class A shares (165,784) (287,824) (2,440,151) (5,826,234) (1,041,544) (2,695,204)
Class B shares (62,309) (103,053) (1,148,653) (2,454,402) (64,514) (141,858)
Class C shares (60,667) (109,008) (1,030,343) (2,378,968) (107,133) (188,282)
Class Y shares (138,583) (272,288) -- -- -- --
----------- ----------- ------------ ------------ ----------- ------------
(427,343) (772,173) (4,619,147) (10,659,604) (1,213,191) (3,025,344)
----------- ----------- ------------ ------------ ----------- ------------
Net realized
capital gains
Class A shares -- (741) -- -- -- --
Class B shares -- (330) -- -- -- --
Class C shares -- (300) -- -- -- --
Class Y shares -- (711) -- -- -- --
----------- ----------- ------------ ------------ ----------- ------------
-- (2,082) -- -- -- --
----------- ----------- ------------ ------------ ----------- ------------
SHARES OF BENEFICIAL
INTEREST
Net proceeds from
the sale of
shares 2,523,747 5,724,901 24,902,145 43,646,464 4,452,882 7,512,688
Cost of shares
repurchased (2,328,454) (4,094,378) (14,218,601) (50,723,201) (8,645,211) (14,026,898)
Shares issued in
reinvestment
of dividends 270,201 498,729 2,427,163 5,537,955 805,348 1,889,157
----------- ----------- ------------ ------------ ----------- ------------
Net increase/
(decrease) in
net assets
derived from
shares of
beneficial
interest
transactions 465,494 2,129,252 13,110,707 (1,538,782) (3,386,981) (4,625,053)
----------- ----------- ------------ ------------ ----------- ------------
Total increase/
(decrease)
in net assets 545,951 1,463,052 7,393,590 (17,607,873) (3,759,259) (74,868)
NET ASSETS
Beginning of
period 13,832,378 12,369,326 87,218,399 104,826,272 33,075,457 33,150,325
----------- ----------- ------------ ------------ ----------- ------------
End of period* $14,378,329 $13,832,378 $ 94,611,989 $ 87,218,399 $29,316,198 $ 33,075,457
=========== =========== ============ ============ =========== ============
</TABLE>
--------------------
* Emerging Markets Debt Portfolio, includes undistributed net investment income
of $7,196 and $12,870, respectively, for each period presented.
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
T H E B E A R S T E A R N S F U N D S
FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------
Contained below is per share operating performance data for each class of
shares outstanding, total investment returns, ratios to average net assets
and other supplemental data for each period indicated. This information has
been derived from information provided in the financial statements.
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET NET
ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED
OF PERIOD INCOME*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS
--------- ---------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
INCOME PORTFOLIO
CLASS A
For the six months ended September 30, 2000
(unaudited) $11.53 $0.36 $ 0.07 $(0.36) --
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) $(0.19)
For the fiscal year ended March 31, 1998 12.03 0.76 0.36 (0.76) (0.02)
For the fiscal year ended March 31, 1997 12.26 0.73 (0.20) (0.73) (0.03)
For the period April 5, 1995** through
March 31, 1996 12.00 0.71 0.30 (0.71) (0.04)
CLASS B
For the six months ended September 30, 2000
(unaudited) 11.53 0.32 0.07 (0.32) --
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) (0.19)
For the period February 2, 1998*** through
March 31, 1998 12.47 0.10 (0.10) (0.10) --
CLASS C
For the six months ended September 30, 2000
(unaudited) 11.53 0.32 0.07 (0.32) --
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) (0.19)
For the fiscal year ended March 31, 1998 12.03 0.70 0.36 (0.70) (0.02)
For the fiscal year ended March 31, 1997 12.26 0.68 (0.20) (0.68) (0.03)
For the period April 5, 1995** through
March 31, 1996 12.00 0.67 0.30 (0.67) (0.04)
CLASS Y
For the six months ended September 30, 2000
(unaudited) 11.53 0.38 0.07 (0.38) --
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) (0.19)
For the fiscal year ended March 31, 1998 12.03 0.80 0.36 (0.80) (0.02)
For the fiscal year ended March 31, 1997 12.26 0.77 (0.20) (0.77) (0.03)
For the period September 8, 1995*** through
March 31, 1996 12.35 0.41 (0.05) (0.41) (0.04)
HIGH YIELD TOTAL RETURN PORTFOLIO
CLASS A
For the six months ended September 30, 2000
(unaudited) 9.78 0.51 (0.59) (0.51) --
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) (0.05)
For the period January 2, 1998** through
March 31, 1998 12.00 0.26 0.73 (0.26) --
CLASS B
For the six months ended September 30, 2000
(unaudited) 9.78 0.48 (0.59) (0.48) --
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) (0.05)
For the period January 2, 1998** through
March 31, 1998 12.00 0.24 0.73 (0.24) --
CLASS C
For the six months ended September 30, 2000
(unaudited) 9.78 0.48 (0.59) (0.48) --
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) (0.05)
For the period January 2, 1998** through
March 31, 1998 12.00 0.24 0.73 (0.24) --
</TABLE>
-------
* Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
** Commencement of investment operations.
*** Commencement of initial public offering.
(1) Reflects waivers and related reimbursements.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
INCREASE/
(DECREASE)
REFLECTED
IN EXPENSE
RATIOS AND
NET INVEST-
NET NET ASSETS, RATIO OF RATIO OF NET MENT INCOME
ASSET END OF EXPENSES INVESTMENT DUE TO
VALUE, TOTAL PERIOD TO AVERAGE INCOME TO WAIVERS PORTFOLIO
END OF INVESTMENT (000'S NET AVERAGE AND RELATED TURNOVER
PERIOD RETURN(3) OMITTED) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS RATE
------ ---------- ---------- ---------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME PORTFOLIO
CLASS A
For the six months ended September 30,
2000 (unaudited) $11.60 3.84% $ 5,742 0.80%(5) 6.32%(5) 2.78%(5) 160.04%
For the fiscal year ended March 31, 2000 11.53 0.77 5,071 0.80 5.99 3.13 158.47
For the fiscal year ended March 31, 1999 12.15 5.77 4,775 0.80 5.83 2.98 107.21
For the fiscal year ended March 31, 1998 12.37 9.43 2,926 0.80 6.13 1.86 244.78
For the fiscal year ended March 31, 1997 12.03 4.40 3,367 0.80 5.99 1.73 262.95
For the period April 5, 1995** through
March 31, 1996 12.26 8.54 4,467 0.80(5) 5.76(5) 2.87(5) 107.35
CLASS B
For the six months ended September 30,
2000 (unaudited) 11.60 3.50 2,443 1.45(5) 5.66(5) 2.78(5) 160.04
For the fiscal year ended March 31, 2000 11.53 0.12 2,027 1.45 5.34 3.13 158.47
For the fiscal year ended March 31, 1999 12.15 5.09 1,121 1.45 5.16 2.81 107.21
For the period February 2, 1998***
through March 31, 1998 12.37 (0.04)(4) 18 1.45(5) 5.22(4)(5) 0.48(4)(5) 244.78
CLASS C
For the six months ended September 30,
2000 (unaudited) 11.60 3.50 2,493 1.45(5) 5.68(5) 2.78(5) 160.04
For the fiscal year ended March 31, 2000 11.53 0.12 1.971 1.45 5.33 3.13 158.47
For the fiscal year ended March 31, 1999 12.15 5.08 2,067 1.45 5.28 3.18 107.21
For the fiscal year ended March 31, 1998 12.37 8.92 1,403 1.28 5.60 1.80 244.78
For the fiscal year ended March 31, 1997 12.03 3.99 1,018 1.20 5.57 1.74 262.95
For the period April 5, 1995** through
March 31, 1996 12.26 8.13 1,775 1.25(5) 5.38(5) 2.95(5) 107.35
CLASS Y
For the six months ended September 30,
2000 (unaudited) 11.60 4.02 3,700 0.45(5) 6.71(5) 2.78(5) 160.04
For the fiscal year ended March 31, 2000 11.53 1.13 4,763 0.45 6.36 3.13 158.47
For the fiscal year ended March 31, 1999 12.15 6.13 4,406 0.45 6.27 3.23 107.21
For the fiscal year ended March 31, 1998 12.37 9.81 4,339 0.45 6.39 1.78 244.78
For the fiscal year ended March 31, 1997 12.03 4.77 13,486 0.45 6.34 1.73 262.95
For the period September 8, 1995***
through March 31, 1996 12.26 2.92(4) 12,199 0.45(5) 5.93(4)(5) 2.89(4)(5) 107.35
HIGH YIELD TOTAL RETURN PORTFOLIO
CLASS A
For the six months ended September 30,
2000 (unaudited) 9.19 (0.90) 50,284 1.00(5) 10.55(5) 0.68(5) 30.94
For the fiscal year ended March 31, 2000 9.78 (4.68) 44,991 1.00 10.14 0.58 70.61
For the fiscal year ended March 31, 1999 11.36 (1.57) 55,367 1.00 9.37 0.74 101.75
For the period January 2, 1998** through
March 31, 1998 12.73 8.30 18,301 1.00(5) 9.14(5) 1.67(5) 139.61
CLASS B
For the six months ended September 30,
2000 (unaudited) 9.19 (1.22) 22,777 1.65(5) 9.93(5) 0.68(5) 30.94
For the fiscal year ended March 31, 2000 9.78 (5.29) 23,520 1.65 9.49 0.59 70.61
For the fiscal year ended March 31, 1999 11.36 (2.21) 23,395 1.65 8.76 0.73 101.75
For the period January 2, 1998** through
March 31, 1998 12.73 8.13 6,013 1.65(5) 8.46(5) 1.68(5) 139.61
CLASS C
For the six months ended September 30,
2000 (unaudited) 9.19 (1.22) 21,551 1.65(5) 9.90(5) 0.68(5) 30.94
For the fiscal year ended March 31, 2000 9.78 (5.29) 18,707 1.65 9.49 0.59 70.61
For the fiscal year ended March 31, 1999 11.36 (2.21) 26,064 1.65 8.73 0.73 101.75
For the period January 2, 1998** through
March 31, 1998 12.73 8.13 11,298 1.65(5) 8.46(5) 1.67(5) 139.61
</TABLE>
-------
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of the sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods. For High Yield Total Return 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 initial public
offerings.
(5) Annualized.
29
<PAGE>
T H E B E A R S T E A R N S F U N D S
FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------
Contained below is per share operating performance data for each class of
shares outstanding, total investment returns, ratios to average net assets
and other supplemental data for each period indicated. This information has
been derived from information provided in the financial statements.
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET NET
ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED
OF PERIOD INCOME*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS
--------- ---------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
EMERGING MARKETS DEBT PORTFOLIO
CLASS A
For the six months ended September 30,
2000 (unaudited) $10.58 $0.41 $(0.09) $(0.41) --
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) $(0.17)
For the fiscal year ended March 31, 1998 11.14 0.91 1.17 (0.92) (0.30)
For the fiscal year ended March 31, 1997 9.02 0.85 2.10 (0.83) --
For the fiscal year ended March 31, 1996 6.90 0.91 2.13 (0.92) --
CLASS B
For the six months ended September 30,
2000 (unaudited) 10.50 0.38 (0.09) (0.38) --
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) (0.17)
For the period January 12, 1998**
through March 31, 1998 11.33 0.21 0.61 (0.20) --
CLASS C
For the six months ended September 30,
2000 (unaudited) 10.51 0.38 (0.09) (0.38) --
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) (0.17)
For the fiscal year ended March 31, 1998 11.14 0.97 1.04 (0.90) (0.30)
For the fiscal year ended March 31, 1997 9.04 0.84 2.07 (0.81) --
For the period June 26, 1995** through
March 31, 1996 7.81 0.59 1.32 (0.68) --
</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 initial public offering.
(1) Reflects waivers and related reimbursements.
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
<TABLE>
<CAPTION>
INCREASE/
(DECREASE)
REFLECTED
IN EXPENSE
RATIOS AND
NET INVEST-
NET NET ASSETS, RATIO OF RATIO OF NET MENT INCOME
ASSET END OF EXPENSES INVESTMENT DUE TO
VALUE, TOTAL PERIOD TO AVERAGE INCOME TO WAIVERS PORTFOLIO
END OF INVESTMENT (000'S NET AVERAGE AND RELATED TURNOVER
PERIOD RETURN(3) OMITTED) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS RATE
------ ---------- ---------- ---------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
EMERGING MARKETS DEBT PORTFOLIO
CLASS A
For the six months ended September 30,
2000 (unaudited) $10.49 3.23% $24,476 1.75%(5) 7.97%(5) 1.08%(5) 105.44%
For the fiscal year ended March 31, 2000 10.58 24.54 28,517 1.75 8.59 1.11 91.98
For the fiscal year ended March 31, 1999 9.27 (12.40) 29,526 1.75 10.38 1.28 82.47
For the fiscal year ended March 31, 1998 12.00 19.31 33,448 1.75 7.70 1.01 128.91
For the fiscal year ended March 31, 1997 11.14 33.48 33,185 2.00 7.95 0.80 223.41
For the fiscal year ended March 31, 1996 9.02 46.13 28,860 2.00 10.64 1.18 266.46
CLASS B
For the six months ended September 30,
2000 (unaudited) 10.41 2.88 1,883 2.40(5) 7.49(5) 1.08(5) 105.44
For the fiscal year ended March 31, 2000 10.50 23.88 1,808 2.40 7.93 1.02 91.98
For the fiscal year ended March 31, 1999 9.19 (13.08) 1,459 2.40 9.73 1.43 82.47
For the period January 12, 1998**
through March 31, 1998 11.95 7.29(4) 566 2.40(5) 7.13(4)(5) 2.25(4)(5) 128.91
CLASS C
For the six months ended September 30,
2000 (unaudited) 10.42 2.89 2,958 2.40(5) 7.43(5) 1.08(5) 105.44
For the fiscal year ended March 31, 2000 10.51 23.86 2,750 2.40 7.82 1.01 91.98
For the fiscal year ended March 31, 1999 9.20 (12.99) 2,165 2.40 9.73 1.16 82.47
For the fiscal year ended March 31, 1998 11.95 18.66 4,317 2.40 7.31 1.05 128.91
For the fiscal year ended March 31, 1997 11.14 32.97 2,583 2.40 7.59 0.64 223.41
For the period June 26, 1995** through
March 31, 1996 9.04 25.45(4) 202 2.40(5) 8.72(4)(5) 3.42(4)(5) 266.46
</TABLE>
-------
(2) The amounts shown for a share outstanding throughout the respective
periods are not in accord with the changes in the aggregate gains and losses
on investments during the respective periods because of the timing of the
sales and repurchases of Portfolio shares in relation to fluctuating net
asset values during the respective periods. Net realized and unrealized
gain/(loss) on investments include forward foreign currency exchange
contracts and translation of foreign currency related transactions.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale 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 initial public
offerings.
(5) Annualized.
31
<PAGE>
T H E B E A R S T E A R N S F U N D S
INCOME PORTFOLIO
HIGH YIELD TOTAL RETURN PORTFOLIO
EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS - (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business
trust on September 29, 1994, and is registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end management
investment company. The Fund currently consists of eleven separate
portfolios: seven diversified portfolios, Prime Money Market Portfolio, Large
Cap Value Portfolio, Small Cap Value Portfolio, International Equity
Portfolio, Balanced Portfolio, High Yield Total Return Portfolio ("High Yield
Portfolio") and Income Portfolio, and four non-diversified portfolios,
Emerging Markets Debt Portfolio ("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 has 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.
ORGANIZATIONAL MATTERS--Prior to commencing investment operations on January
2, 1998, the High Yield Portfolio did not have any transactions other than
those relating to organizational matters and the sale of one share each of
Class A, B and C shares of beneficial interest to Bear, Stearns & Co. Inc.
("Bear Stearns" or the "Distributor").
Costs of $56,234 which were incurred by the High Yield Portfolio 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. In the event
that Bear Stearns or any transferee thereof redeems any of its original shares
prior to the end of the sixty month period, the proceeds of the redemption
payable in respect of such shares shall be reduced by the pro rata share (based
on the proportionate share of the original shares redeemed to the total number
of original shares outstanding at the time of the redemption) of the unamortized
deferred organization expenses as of the date of such redemption. In the
event that the High Yield Portfolio is liquidated prior to the end of the
sixty month period, Bear Stearns or any transferee thereof shall bear the
unamortized deferred organization expenses.
MANAGEMENT ESTIMATES--The preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America, requires management to make certain estimates and assumptions that
may affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
PORTFOLIO VALUATION--Each Portfolio calculates the net asset value of and
completes orders to purchase or repurchase its shares of beneficial interest
on each business day, with the exception of those days on which the New York
Stock Exchange is closed.
For the Income Portfolio and High Yield Portfolio, substantially all of the
investments (including short-term investments) are valued at each business
day by one or more independent pricing services (the "Service") approved by
the Fund's Board of Trustees. Securities valued by the Service for which
quoted bid prices in the 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 prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon
its evaluation of the market for such securities).
32
<PAGE>
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.
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
include, among other things, consideration of 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 Portfolios are
maintained in U.S. dollars as follows: (1) the foreign currency market value
of investment securities and other assets and liabilities stated in foreign
currencies are translated at the exchange rates prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the
rate of exchange prevailing on the respective dates of such transactions. The
resulting exchange gains and losses are included in the Statements 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--A Portfolio may enter into
forward foreign currency contracts ("forward currency contracts") to hedge
against adverse changes in the relationship of the U.S. dollar to foreign
currencies. The Portfolios may enter into these contracts to fix the U.S.
dollar value of a security that it has agreed to buy or sell for the period
between the date the trade was entered into and the date the security is
delivered and paid for. The Portfolios may also use these contracts to hedge
the U.S. dollar value of securities it already owns denominated in foreign
currencies. Forward currency contracts are valued at the forward rate, and
are marked-to-market daily. The change in market value is recorded by the
Portfolio as an unrealized gain or loss. When the contract is closed, the
Portfolio records a realized gain or loss equal to the difference between the
value of the current contract at the time it was opened and the value at the
time it was closed. The use of forward currency contracts does not eliminate
fluctuations in the underlying prices of the Portfolio's securities, but it
does establish a rate of exchange that can be achieved in the future.
Although forward currency contracts limit the risk of loss due to a decline
in the value of the hedged currency, they also limit any potential gain that
might result should the value of currency increase. In addition, the
Portfolio could be exposed to risks if the counterparties to the contracts
are unable to meet the terms of their contracts.
33
<PAGE>
The Portfolios had no open forward foreign currency exchange contracts at
September 30, 2000, except the High Yield Portfolio, which had the following
open contract:
<TABLE>
<CAPTION>
DELIVERY VALUE SETTLEMENT UNREALIZED
CURRENCY (LOCAL CURRENCY) DATE COMMITMENT VALUE GAIN
-------- ---------------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
SALE:
European Euro 1,000,000 10/16/00 $947,090 $882,426 $64,664
=======
</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, net realized foreign currency losses and
net realized capital losses from investments incurred after October 31, 1999,
within the prior fiscal year are deemed to arise on the first day of the
current fiscal year. The Income Portfolio and High Yield Portfolio incurred
and elected to defer net realized capital losses of $307,115 and $5,748,445,
respectively. The EMD Portfolio incurred and elected to defer net 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.
FOREIGN WITHHOLDING TAXES--Income received from sources outside of the United
States may be subject to withholding and other taxes imposed by countries
other than the United States.
OTHER--Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates. Some
countries in which the Portfolios invest require 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 six months ended September 30, 2000, Bear Stearns Assets 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.
34
<PAGE>
For the six months ended September 30, 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 Worldwide Inc. ("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, 0.03% of the next $200
million and 0.02% of the net assets above $800 million, subject to a minimum
annual fee for each Portfolio.
For the six months ended September 30, 2000, BSAM has 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 six months ended September 30, 2000, the advisory fee waivers and
reimbursements of expenses (in order to maintain the expense limitation) were
as follows:
<TABLE>
<CAPTION>
PORTFOLIO ADVISORY FEE WAIVERS EXPENSE REIMBURSEMENTS
--------- -------------------- ----------------------
<S> <C> <C>
Income Portfolio $ 30,865 $159,484
High Yield Portfolio 270,790 40,249
EMD Portfolio 154,085 11,685
</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, BSFM and Bear Stearns, 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 Bear Stearns fees of up to 0.25% of its Class A,
B and C shares.
Fees are based on the average daily net assets in each class of each
Portfolio and are accrued daily and paid quarterly or at such other intervals
as the Board of Trustees may determine. For the six months ended September
30, 2000, Bear Stearns earned $18,862, $186,568 and $30,352 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 $11,965, $111,897 and $38,246 for the Income Portfolio, High Yield
Portfolio and EMD Portfolio, respectively, in shareholder servicing fees.
Bear Stearns uses shareholder servicing fees to pay for personal service and
maintenance of shareholder accounts.
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, the Distributor advanced 1.25% in sales commission to all
authorized dealers on net asset value transfers (which was discontinued
effective October 1, 2000). In addition, Bear Stearns advanced 4.25% and
1.00% in sales commissions on the sale of Class B and C shares, respectively,
to dealers at the time of such sales.
For the six months ended September 30, 2000, Bear Stearns has advised each
Portfolio that it received $7,775, $79,109 and $7,988 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 six months ended
September 30, 2000, it received $2,239, $50,314 and $1,789 from each
Portfolio, respectively, in contingent deferred
35
<PAGE>
sales charges ("CDSC") upon certain redemptions by Class B shareholders and
$122, $5,356 and $40 from each Portfolio, respectively, in CDSC upon certain
redemptions by Class C shareholders.
INVESTMENTS IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at
September 30, 2000, were $16,756,310, $100,212,018 and $28,157,265 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 $ 119,363 $ (299,911) $ (180,548)
High Yield Portfolio 1,383,666 (11,422,481) (10,038,815)
EMD Portfolio 1,441,929 (1,131,400) 310,529
</TABLE>
For the six months ended September 30, 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 $21,635,363 $20,886,432
High Yield Portfolio 30,155,692 25,031,135
EMD Portfolio 29,967,152 32,615,442
</TABLE>
SHARES OF BENEFICIAL INTEREST
Each Portfolio offers Class A, B, C and Y shares. Class A shares are sold
with a front-end sales charge of up to 4.50% for each Portfolio. Class B
shares are sold with a CDSC of up to 5.00% within six years of purchase.
Class C shares are sold with a CDSC of 1.00% within the first year of
purchase. There is no sales charge or CDSC on Class Y shares, which are
offered primarily to institutional investors.
At September 30, 2000, there was an unlimited amount of $0.001 par value
shares of beneficial interest authorized for each Portfolio, of which Bear
Stearns owned 1,243 of Class A shares and 1,222 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 202 Class A
shares and 181 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
-------------------------------------------
SALES REPURCHASES REINVESTMENTS
----------- ----------- -------------
<S> <C> <C> <C>
CLASS A
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
Shares 104,439 56,030 6,601
Value $ 1,202,881 $ 643,823 $ 75,706
FOR THE FISCAL YEAR ENDED
MARCH 31, 2000
Shares 163,837 128,806 11,831
Value $ 1,918,988 $ 1,508,227 $ 138,514
CLASS B
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
Shares 38,048 7,336 3,955
Value $ 435,168 $ 84,010 $ 45,338
FOR THE FISCAL YEAR ENDED
MARCH 31, 2000
Shares 144,531 67,853 6,877
Value $ 1,699,578 $ 787,231 $ 80,141
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
INCOME PORTFOLIO
-------------------------------------------
SALES REPURCHASES REINVESTMENTS
----------- ----------- -------------
<S> <C> <C> <C>
CLASS C
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
Shares 72,870 33,062 4,156
Value $ 838,636 $ 380,329 $ 47,654
FOR THE FISCAL YEAR ENDED
MARCH 31, 2000
Shares 68,592 74,773 6,971
Value $ 806,590 $ 874,826 $ 81,499
CLASS Y
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
Shares 4,120 107,242 8,863
Value $ 47,062 $ 1,220,292 $ 101,503
FOR THE FISCAL YEAR ENDED
MARCH 31, 2000
Shares 111,924 78,521 17,002
Value $ 1,299,745 $ 924,094 $ 198,575
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO
-------------------------------------------
SALES REPURCHASES REINVESTMENTS
----------- ----------- -------------
<S> <C> <C> <C>
CLASS A
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
Shares 1,511,602 780,156 138,372
Value $14,446,386 $ 7,488,606 $ 1,321,144
FOR THE FISCAL YEAR ENDED
MARCH 31, 2000
Shares 2,046,001 2,607,245 286,754
Value $22,253,022 $27,209,668 $ 3,053,931
CLASS B
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
Shares 275,936 261,405 58,276
Value $ 2,631,594 $ 2,506,606 $ 556,745
FOR THE FISCAL YEAR ENDED
MARCH 31, 2000
Shares 1,036,215 803,901 113,499
Value $11,213,716 $ 8,390,332 $ 1,205,625
CLASS C
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
Shares 812,911 438,890 57,579
Value $ 7,824,165 $ 4,223,389 $ 549,274
FOR THE FISCAL YEAR ENDED
MARCH 31, 2000
Shares 944,475 1,446,955 119,893
Value $10,179,726 $15,123,201 $ 1,278,399
</TABLE>
<TABLE>
<CAPTION>
EMD PORTFOLIO
-------------------------------------------
SALES REPURCHASES REINVESTMENTS
----------- ----------- -------------
<S> <C> <C> <C>
CLASS A
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
Shares 318,195 746,038 66,239
Value $ 3,359,590 $ 7,740,724 $ 682,167
FOR THE FISCAL YEAR ENDED
MARCH 31, 2000
Shares 622,886 1,289,673 175,086
Value $ 5,891,337 $12,534,987 $ 1,646,974
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
EMD PORTFOLIO
-------------------------------------------
SALES REPURCHASES REINVESTMENTS
----------- ----------- -------------
<S> <C> <C> <C>
CLASS B
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
Shares 25,427 21,071 4,344
Value $ 262,767 $ 215,648 $ 44,467
FOR THE FISCAL YEAR ENDED
MARCH 31, 2000
Shares 80,139 76,062 9,429
Value $ 748,885 $ 718,270 $ 87,930
CLASS C
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
Shares 81,519 67,036 7,698
Value $ 830,525 $ 688,839 $ 78,714
FOR THE FISCAL YEAR ENDED
MARCH 31, 2000
Shares 91,962 81,973 16,549
Value $ 872,466 $ 773,641 $ 154,253
</TABLE>
CREDIT FACILITY
The Fund has entered into a demand promissory note arrangement with The Chase
Manhatten 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.
Each Portfolio as a fundamental policy is permitted to borrow in an amount up
to 33-1/3% of the value of each Portfolio's assets. However, each Portfolio
intends to borrow money only for temporary or emergency (not leveraging)
purposes and only in amounts not to exceed 15% of its net assets.
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 this credit facility or,
for money market loans, on the last day of the interest period and, in any
event, not later than 14 days from the date the loan was advanced.
Amounts outstanding under the credit facility during the six months ended
September 30, 2000, were as follows:
<TABLE>
<CAPTION>
AVERAGE MAXIMUM AVERAGE
LOAN LOAN AMOUNTS INTEREST
PORTFOLIO BALANCE OUTSTANDING RATE
--------- ------- ------------ --------
<S> <C> <C> <C>
Income Portfolio $14,249 $1,788,900 6.89%
High Yield Portfolio 2,093 283,000 7.00
EMD Portfolio 87,793 3,178,522 8.66
</TABLE>
The Portfolios had no amounts outstanding under the credit facility at
September 30, 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.
38
<PAGE>
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 or the benefits of a
currency hedge may 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 unsecured senior debt or the claims-paying ability of the
counterparty is considered to be investment grade by BSAM.
39
<PAGE>
T H E B E A R S T E A R N S F U N D S
INCOME PORTFOLIO
HIGH YIELD TOTAL RETURN PORTFOLIO
EMERGING MARKETS DEBT PORTFOLIO
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS - (UNAUDITED)
On April 17, 2000, a special meeting of shareholders of The Bear Stearns
Funds (the "Fund") was held and the following matters relating to the
Portfolios were voted upon:
(1) Election of seven Trustees to serve on the Board of the Fund until their
successors are duly elected and qualified.
<TABLE>
<CAPTION>
TRUSTEE FOR WITHHELD NON-VOTES
------- --- -------- ----------
<S> <C> <C> <C>
Peter M. Bren 971,355,317 887,214 20,635,571
Doni L. Fordyce 971,342,861 899,670 20,635,571
John S. Levy 971,355,432 887,099 20,635,571
Michael Minikes 971,354,519 888,012 20,635,571
M.B. Oglesby, Jr. 971,356,270 886,261 20,635,571
Robert E. Richardson 971,358,104 884,427 20,635,571
Robert M. Steinberg 971,346,988 895,543 20,635,571
</TABLE>
(2) Ratification of the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the fiscal year ending March 31, 2001.
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD NON-VOTES
--- ------- --------- ----------
<S> <C> <C> <C>
970,516,805 598,042 1,127,684 20,635,571
</TABLE>
(3) Approval, with respect to each Portfolio of the Fund, of an amended and
Restated Investment Advisory Agreement.
<TABLE>
<CAPTION>
PORTFOLIO FOR AGAINST WITHHELD NON-VOTES
--------- --- ------- --------- ----------
<S> <C> <C> <C> <C>
Income Portfolio 1,106,599 10,276 11,146 77,562
High Yield Total
Return Portfolio 7,642,090 134,985 208,919 1,201,789
Emerging Markets
Debt Portfolio 2,725,245 23,950 31,850 367,264
</TABLE>
(4) Approval with respect to the A, B and C Classes of shares of each
Portfolio, of an Amended and Restated Distribution Plan.
<TABLE>
<CAPTION>
PORTFOLIO FOR AGAINST WITHHELD NON-VOTES
--------- --- ------- --------- ----------
<S> <C> <C> <C> <C>
Income Portfolio
Class A 384,282 7,638 4,237 42,760
Class B 160,063 345 4,291 13,874
Class C 147,536 489 2,618 19,680
High Yield Total
Return Portfolio
Class A 4,018,228 84,054 115,052 606,026
Class B 1,913,169 29,543 61,637 432,678
Class C 1,706,220 17,876 40,215 163,085
Emerging Markets
Debt Portfolio
Class A 2,326,607 19,657 30,370 330,315
Class B 163,103 -- 1,711 8,033
Class C 234,851 3,553 1,193 28,916
</TABLE>
40
<PAGE>
(5) Approval, with respect to the Income Portfolio, of a modification of a
fundamental policy concerning the issuance of senior securities.
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD NON-VOTES
--- ------- --------- -----------
<S> <C> <C> <C>
586,918 7,698 42,354 568,613
</TABLE>
(6) Approval of amendments to, and a restatement of, the Fund's Declaration
of Trust:
(a) To permit the Trustees to reorganize the Fund and any future portfolio
without shareholder approval.
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD NON-VOTES
--- ------- --------- -----------
<S> <C> <C> <C>
593,890,391 3,017,845 1,519,363 394,450,503
</TABLE>
(b) To permit the Trustees to reorganize an existing portfolio
without shareholder approval.*
<TABLE>
<CAPTION>
PORTFOLIO FOR AGAINST WITHHELD NON-VOTES
--------- --- ------- --------- -----------
<S> <C> <C> <C> <C>
Income Portfolio 582,813 14,282 42,038 566,450
High Yield Total
Return Portfolio 2,494,460 342,183 239,282 6,111,858
Emerging Markets
Debt Portfolio 1,405,863 2,266 38,637 1,621,543
</TABLE>
(c) To permit electronic and telephonic voting (results reported for
the Fund).
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD NON-VOTES
--- ------- --------- -----------
<S> <C> <C> <C>
596,718,281 530,167 1,189,151 394,440,503
</TABLE>
(d) To permit the Trustees to amend the Declaration of Trust without
shareholder approval (results reported for the Fund).
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD NON-VOTES
--- ------- --------- -----------
<S> <C> <C> <C>
587,473,031 7,282,190 3,682,378 394,440,503
</TABLE>
(e) To convert from share-based to dollar-based voting rights (results
reported for the Fund).
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD NON-VOTES
--- ------- --------- -----------
<S> <C> <C> <C>
591,508,285 5,445,022 1,484,292 394,440,503
</TABLE>
--------------------
* This proposal was not passed.
41
