SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|X| Preliminary proxy statement |_| Confidential, for Use of the
|_| Definitive proxy statement Commission Only
|_| Definitive additional materials (as permitted by
|_| Soliciting material pursuant to Rule 14a-6(e)(2))
Rule 14a-11(c) or Rule 14a-12
THE BEAR STEARNS FUNDS
----------------------
(Name of Registrant as Specified in Its Charter)
William Langston
----------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE>
THE BEAR STEARNS FUNDS
THE INSIDERS SELECT FUND
245 PARK AVENUE
NEW YORK, NEW YORK 10167
1-800-766-4111
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 20, 1998
A special meeting of the shareholders (the "Meeting") of The Insiders
Select Fund (the "Portfolio"), a separate non-diversified portfolio of The Bears
Stearns Funds (the "Fund"), will be held on January 20, 1998, at 11:00 a.m.
Eastern time at the offices of the Fund, 245 Park Avenue, New York, New York,
for the purposes indicated below:
1. To approve or disapprove amendments to the investment advisory
agreement between the Fund, on behalf of the Portfolio, and Bear
Stearns Funds Management Inc.
2. To ratify or reject the selection of Deloitte & Touche, LLP as
independent auditors of the Portfolio.
3. To transact such other business as may properly come before the
Meeting or any adjournment(s) thereof.
Shareholders of record as of the close of business on November 18, 1997
are entitled to receive notice of, and to vote at, the Meeting and any and all
adjournment(s) thereof. Your attention is called to the accompanying proxy
statement.
By Order of the Board of Trustees,
Ellen T. Arthur
Secretary
Dated: November 25, 1997
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE
UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE MEETING. THE
ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
THE BEAR STEARNS FUNDS
THE INSIDERS SELECT FUND
245 PARK AVENUE
NEW YORK, NEW YORK 10167
1-800-766-4111
PROXY STATEMENT
DATED NOVEMBER 25, 1997
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
JANUARY 20, 1998
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Trustees of The Bear Stearns Funds, a Massachusetts
business trust (the "Fund"), on behalf of one of its series, The Insiders Select
Fund (the "Portfolio"), in connection with a special meeting of shareholders
(the "Meeting") to be held on January 20, 1998 at 11:00 a.m. Eastern time at the
offices of the Fund, 245 Park Avenue, New York, New York, and at any
adjournment(s) thereof, at which shareholders of the Portfolio will be asked to
consider the following:
1. Shareholders will be asked to approve or disapprove amendments to
the investment advisory agreement (the "Investment Advisory
Agreement") between the Fund, on behalf of the Portfolio, and
Bear Stearns Funds Management Inc. ("BSFM");
2. Shareholders will be asked to ratify or reject the selection of
Deloitte & Touche, LLP as independent auditors of the Portfolio;
and
3 Shareholders will be asked to transact such other business as may
properly come before the Meeting or any adjournment(s) thereof.
Even if you sign and return the accompanying proxy, you may revoke it
by giving written notice of such revocation to the Secretary of the Fund prior
to the Meeting or by delivering a subsequently dated proxy or by attending and
voting at the Meeting in person. In the event that a shareholder signs and
returns the proxy ballot, but does not indicate a choice as to any of the items
on the proxy ballot, the proxy attorneys will vote those shares of beneficial
interest ("shares") in favor of such proposal(s).
The cost of the solicitation of proxies is expected to be approximately
$4,000 in the aggregate. The cost of preparing and mailing the notice of
meeting, the proxy card, this proxy statement, and any additional proxy
solicitation material has been or is to be borne by the Portfolio. Proxy
solicitations will be made primarily by mail, but may also be made by telephone,
telegraph, facsimile, or personal interview conducted by certain officers or
employees of the Fund, BSFM, 245 Park Avenue, New York, New York, Bear, Stearns
& Co. Inc. ("Bear Stearns"), 245 Park Avenue, New York, New York, and their
affiliates, none of whom will receive compensation therefor. The Fund has
retained Shareholder Communications Corporation, a professional proxy
solicitation firm, to assist in the solicitation of proxies.
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<PAGE>
The Board of Trustees has fixed the close of business on November 18,
1997 as the record date for the determination of the shareholders entitled to
notice of and to vote at the Meeting or any adjournment(s) thereof (the "Record
Date"). As of the Record Date, there were approximately _______, _________, and
_________ outstanding Class A, Class C, and Class Y shares of the Portfolio,
respectively. The holders of each share of the Portfolio shall be entitled to
one vote for each full share and a fractional vote for each fractional share. As
of __________, 1997, the following shareholders owned, directly or indirectly,
5% or more of the indicated class of the Portfolio's outstanding shares:
<TABLE>
<CAPTION>
Name and Address Number of Shares Number of Shares Percent
Class of Beneficial Owner Beneficially Owned Owned of Record of Class
------- ------------------- ------------------ --------------- --------
<S> <C> <C> <C> <C>
</TABLE>
A copy of the Portfolio's annual report for the fiscal year ended March
31, 1997 and semi-annual report for the period ended September 30, 1997 may be
received, free of charge, by calling the Fund, toll free, at 800-766-4111.
Approval of the amended Investment Advisory Agreement (Proposal 1) for
the Portfolio will require the affirmative vote of a "majority of the
outstanding voting securities" of the Portfolio, which for this purpose means
the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Portfolio, or (2) 67% or more of the shares of the Portfolio
present at the Meeting, if the holders of more than 50% of the outstanding
shares of the Portfolio are present or represented by proxy at the Meeting. The
ratification of the selection of Deloitte & Touche, LLP as independent auditors
(Proposal 2) will require the affirmative vote of a majority of the votes cast
at the Meeting, provided that a quorum is present in person or by proxy at the
Meeting.
Shareholders entitled to cast thirty percent of the votes, either in
person or by proxy, shall constitute a quorum. For purposes of determining the
presence of a quorum and counting votes on the matters presented, shares
represented by abstentions and "broker non-votes" will be counted as present,
but not as votes cast, at the Meeting. Under the Investment Company Act of 1940,
as amended (the "1940 Act"), the affirmative vote necessary to approve a matter
under consideration may be determined with reference to a percentage of votes
present at the Meeting, which would have the effect of treating abstentions and
non-votes as if they were votes against the proposal.
If the proposals are approved, it is anticipated that they will become
effective as soon as practical after shareholder approval.
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<PAGE>
PROPOSAL 1
APPROVAL OR DISAPPROVAL OF AMENDED
INVESTMENT ADVISORY AGREEMENT
INTRODUCTION
BSFM provides investment advisory services to the Portfolio pursuant to
the Investment Advisory Agreement dated February 22, 1995, as revised May 4,
1995, with the Fund.
The Portfolio pays BSFM an advisory fee at an annual rate equal to 1%
of the Portfolio's average daily net assets which is adjusted monthly depending
on the extent to which the investment performance of shares of the Portfolio
exceeded or was exceeded by the percentage change in the investment record of
the Standard & Poor's Stock Index (the "S&P 500 Index"). On November 5, 1997,
the Board of Trustees of the Fund determined that it was in the best interest of
the Portfolio and its shareholders that the Portfolio's advisory fee adjustment
be amended to reflect relative performance against the S&P MidCap 400 Index as
opposed to the S&P 500 Index. Accordingly, the Board approved an amendment to
the Investment Advisory Agreement which changes the performance benchmark to the
S&P MidCap 400 Index from the S&P 500 Index. The Board of Trustees also
considered and approved certain other amendments to the Investment Advisory
Agreement which are designed to clarify and supplement the rights and
obligations of the parties to the agreement. Each such amendment is subject to
shareholder approval. Shareholders of the Portfolio are being asked to approve
the amendments to the Investment Advisory Agreement, including the change of the
advisory fee paid by the Portfolio to an annual rate equal to 1% of the
Portfolio's average daily net assets which will be adjusted monthly depending on
the extent to which the investment performance of shares of the Portfolio exceed
or are exceeded by the percentage change in the S&P MidCap 400 Index.
AMENDMENTS TO THE INVESTMENT ADVISORY AGREEMENT
The following paragraphs summarize the material amendments to the
Investment Advisory Agreement, which shareholders of the Portfolio are being
asked to approve. A copy of the proposed Investment Advisory Agreement, as
amended, is attached hereto as Exhibit A. This discussion is qualified by the
provisions of the complete Investment Advisory Agreement which should be read in
conjunction with the following.
A. CHANGE OF PERFORMANCE BENCHMARK
The amended Investment Advisory Agreement changes the Portfolio's
performance benchmark to the S&P MidCap 400 Index from the S&P 500 Index.
Under the terms of the current Investment Advisory Agreement, the
Portfolio pays BSFM a monthly fee at the annual rate of 1% of the Portfolio's
average daily net assets (the "Basic Fee") which is adjusted monthly (the
"Monthly Performance Adjustment") depending on the extent to which the
investment performance of the class of shares expected to bear the highest total
Portfolio operating expenses (currently, Class C), net of such expenses,
exceeded or was exceeded by the percentage change in the investment record of
the S&P 500 Index. The Monthly Performance Adjustment may increase or
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<PAGE>
decrease the total advisory fee payable to BSFM (the "Total Advisory Fee") by up
to 0.50% per year of the value of the Portfolio's average daily net assets.
The S&P 500 Index is composed of 500 selected common stocks, most of
which are listed on the New York Stock Exchange. The composition of the S&P 500
Index is determined by Standard & Poor's based on such factors as the market
capitalization and trading activity of each stock and its adequacy as a
representative of stocks in a particular industry group, and may be changed from
time to time. The weightings of stocks in the S&P 500 Index are based on each
stock's relative total market capitalization; that is, its market price per
share times the number of shares outstanding.
The monthly Total Advisory Fee is calculated as follows: (a)
one-twelfth of the 1.0% annual Basic Fee rate (0.083%) is applied to the
Portfolio's average daily net assets over the most recent calendar month, giving
a dollar amount which is the Basic Fee for that month; (b) one-twelfth of the
applicable performance adjustment rate from the table below is applied to the
Portfolio's average daily net assets over the most recent calendar month, giving
a dollar amount which is the Monthly Performance Adjustment (for the first
twelve-month period, no performance adjustment will be made); and (c) the
Monthly Performance Adjustment is then added to or subtracted from the Basic Fee
and the result is the amount payable by the Portfolio to BSFM as the Total
Advisory Fee for that month.
The full range of Total Advisory Fees on an annualized basis is as
follows:
<TABLE>
<CAPTION>
PERCENTAGE POINT DIFFERENCE
BETWEEN DESIGNATED CLASS'
PERFORMANCE (NET OF
EXPENSES INCLUDING ADVISORY FEES) PERFORMANCE
AND PERCENTAGE CHANGE IN THE ADJUSTMENT
S&P 500 INDEX BASIC FEE (%) RATE (%) TOTAL FEE (%)
==================================================================================================
<S> <C> <C> <C>
+3.00 percentage points or more.................... 1% 0.50% 1.50%
+2.75 percentage points or more
but less than +3.00 percentage points.............. 1% 0.40% 1.40%
+2.50 percentage points or more
but less than +2.75 percentage points.............. 1% 0.30% 1.30%
+2.25 percentage points or more
but less than +2.50 percentage points.............. 1% 0.20% 1.20%
+2.00 percentage points or more
but less than +2.25 percentage points.............. 1% 0.10% 1.10%
Less than +2.00 percentage points
but more than -2.00 percentage points.............. 1% 0.00% 1.00%
- -2.00 percentage points or less
but more than -2.25 percentage points.............. 1% -0.10% 0.90%
- -2.25 percentage points or less
but more than -2.50 Percentage points.............. 1% -0.20% 0.80%
- -2.50 percentage points or less
but more than -2.75 percentage points.............. 1% -0.30% 0.70%
- -2.75 percentage points or less
but more than -3.00 percentage points.............. 1% -0.40% 0.60%
- -3.00 percentage points or less.................... 1% -0.50% 0.50%
</TABLE>
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<PAGE>
The period over which performance is measured is a rolling twelve-month
period and the performance of the S&P 500 Index is calculated as the sum of the
change in the level of the S&P 500 Index during the period, plus the value of
any dividends or distributions made by the companies whose securities comprise
the S&P 500 Index.
The Board of Trustees approved a change of the Portfolio's performance
benchmark from the S&P 500 Index to the S&P MidCap 400 Index because the Board
and BSFM believe that the S&P MidCap 400 Index is more reflective of the
management of the Portfolio than the S&P 500 Index. In order to be consistent
and fair in the application of the investment advisory fee, the Board believes
that it is in the best interest of the Portfolio and its shareholders to link
the advisory fee calculation to the new benchmark, the S&P MidCap 400 Index, as
the market capitalization of the companies which comprise the index are more
similar to the issuers in which the Portfolio invests. The S&P MidCap 400 Index
consists of 400 domestic stocks chosen for market size (median market
capitalization of about $_____ million as of _________ 199_), liquidity, and
industry group representation. It is a market-weighted index, with each stock
affecting the Index in proportion to its market value. The S&P MidCap 400 Index
will become the benchmark for the Portfolio upon the approval of the amended
Investment Advisory Agreement by the holders of a majority (as defined in the
1940 Act) of the Portfolio's outstanding voting shares.
If shareholders approve the amendment to the Investment Advisory
Agreement, the Portfolio will pay BSFM a monthly fee at the annual rate of 1% of
the Portfolio's average daily net assets which will be adjusted monthly
depending on the extent to which the net investment performance of the class of
shares expected to bear the highest total Portfolio operating expenses, exceeds
or is exceeded by the percentage change in the investment record of the S&P
MidCap 400 Index. The Monthly Performance Adjustment may increase or decrease
the Total Advisory Fee by up to 0.50% per year of the value of the Portfolio's
average daily net assets. The Total Advisory Fee will be calculated precisely as
it is described above and illustrated in the table except that the S&P MidCap
400 will replace the S&P 500 Index as the performance benchmark.
The Investment Adviser. BSFM is a wholly-owned subsidiary of The Bear
Stearns Companies Inc., which is located at 245 Park Avenue, New York, New York
10167. The Bear Stearns Companies Inc. is a holding company which, through its
subsidiaries including its principal subsidiary, Bear Stearns, is a leading
United States investment banking, securities trading and brokerage firm serving
United States and foreign corporations, governments, institutional and
individual investors. BSFM is a registered investment adviser and offers, either
directly or through affiliates, investment advisory and administrative services
to open-end and closed-end investment funds and other managed pooled investment
vehicles with net assets on October 31, 1997 of approximately $8 billion.
BSFM supervises and assists in the overall management of the
Portfolio's affairs under the Investment Advisory Agreement subject to the
overall authority of the Fund's Board of Trustees in accordance with
Massachusetts law. BSFM uses a team approach to money management consisting of
portfolio managers, assistant portfolio managers and analysts performing as a
dynamic unit to manage the assets of the Portfolio. The team consists of Mark
Kurland, Senior Portfolio Manager; Robert Reitzes, Senior Portfolio Manager; Jim
McCluskey, Senior Portfolio Manager; Gail Sprute, Portfolio Manager/Analyst and
Harris Cohen, Portfolio Manager/Analyst. Jim McCluskey leads the portfolio
manager team for the Portfolio. Mr. McCluskey, a Chartered Financial Analyst,
joined BSFM in May
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<PAGE>
1997 as a Senior Managing Director and Senior Portfolio Manager. From 1989
through 1997, he was a Senior Portfolio Manager at Spare, Kaplan, Bischel &
Associates, an institutional asset management firm where he co-managed over $2
billion in assets.
The following persons are directors and/or senior officers of BSFM:
Mark A. Kurland, Chief Executive Officer, President, Chairman of the Board and
Director; Robert S. Reitzes, Executive Vice President and Director; Frank J.
Maresca, Executive Vice President; Vincent L. Pereira, Treasurer; Ellen T.
Arthur, Secretary; Michael Minikes, Warren J. Spector and Robert M. Steinberg,
Directors. The business address of each of the directors and officers in 245
Park Avenue, New York, New York 10167.
The following are the directors and/or senior officers of the Fund who
are affiliated with BSFM: Alan J. Dixon, Interested Trustee; Michael Minikes,
Chairman of the Board of Trustees; Robert S. Reitzes, President; Donalda L.
Fordyce, Vice President, Senior Managing Director of Bear Stearns; Frank J.
Maresca, Vice President and Treasurer, Managing Director--Bear Stearns; Ellen T.
Arthur, Secretary, Associate Director of Bear Stearns; Vincent L. Pereira,
Assistant Treasurer, Associate Director of Bear Stearns; Christina LaMastro,
Assistant Secretary. As of _________, 1997, members of the Board of Trustees and
officers of the Fund, as a group, owned less than 1% of the Portfolio's
outstanding shares.
The Advisory Fees. For the period from June 16, 1995 (commencement of
investment operations) through March 31, 1996, the investment advisory fees
payable amounted to $116,606. For the fiscal year ended March 31, 1997, the
investment advisory fees payable amounted to $182,313. These amounts were waived
pursuant to a voluntary undertaking by BSFM, resulting in no investment advisory
fees being paid by the Portfolio in the previous fiscal periods. In addition,
BSFM reimbursed $243,945 during the previous two fiscal periods, in order to
maintain the voluntary expense limitation.
If the S&P MidCap 400 Index had been the performance benchmark for the
fiscal year ended March 31, 1997 the investment advisory fees payable would have
been $288,037. Thus the Portfolio would have had advisory fees which were 20%
higher for the fiscal year ended March 31, 1997. The performance benchmark was
not used to adjust the advisory fees paid by the Portfolio for the period of
June 16, 1995 through March 31, 1996. Therefore, the change of the performance
benchmark would have had no effect on the advisory fees paid by the Portfolio
for that period. The advisory fees for these periods, however, would have been
waived by BSFM resulting in the Portfolio having paid no advisory fees after the
period since commencement of the Portfolio's operations. There can be no
assurance that the correlation in the differences between the two indices will
continue in the future. Actual advisory fees after the adjustment for the
investment performance fee may be greater or lower in the future if the S&P
MidCap Index is used.
Affiliated Brokerage. For the period June 16, 1995 (commencement of
operations) through March 31, 1996, the Portfolio paid total brokerage
commissions of $38,019, of which $26,339 was paid to Bear Stearns. The Portfolio
paid 69.28% of its commissions to Bear Stearns, and, with respect to all the
securities transactions for the Portfolio, 39.40% of the transactions involved
commissions being paid to Bear Stearns. For the fiscal year ended March 31,
1997, the Portfolio paid total brokerage commissions of $39,790, of which $8,925
was paid to Bear Stearns. The Portfolio paid 22.43% of its commissions to Bear
Stearns, and, with respect to all the securities transactions for the Portfolio,
22.18% of the transactions involved commissions being paid to Bear Stearns.
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<PAGE>
B. MODERNIZATION OF THE INVESTMENT ADVISORY AGREEMENT
The Board of Trustees made several other changes to the Investment
Advisory Agreement to update the Investment Advisory Agreement in light of
recent changes to the law and relevant regulations and clarify and supplement
the rights and obligations of the parties.
Use of Affiliated Entities. The amended Investment Advisory Agreement
provides that BSFM may render services through its own employees or the
employees of one or more affiliated companies that are qualified to act as
investment adviser to the Portfolio and are under the common control of BSFM as
long as all such persons are functioning as part of an organized group of
persons that is managed by authorized officers of BSFM. In addition, the amended
Investment Advisory Agreement provides that BSFM will be as fully responsible to
the Portfolio for the acts and omissions of such persons as BSFM is for its own
acts and omissions. BSFM has the power to employ or associate itself with other
persons in connection with its provision of investment advisory services to the
Portfolio under the current Investment Advisory Agreement. The new provision,
however, clarifies and expands BSFM's ability to provide services to the
Portfolio through its affiliates. In addition, the amended Investment Advisory
Agreement removes a provision which both limits the liability of investment
subadvisers to the Portfolio and gives such investment subadvisers the status of
a third-party beneficiary of the Investment Advisory Agreement.
Expense Limitations. Pursuant to the National Securities Markets
Improvement Act of 1996, which created a national system of regulating mutual
funds by pre-empting State blue sky laws, the Portfolio is no longer subject to
State blue sky laws including those involving expense limitations. Therefore,
the language referring to such limitations is not in the amended Investment
Advisory Agreement.
"Soft Dollars." The amended Investment Advisory Agreement provides that
BSFM must seek broker-dealers, which may include affiliated broker-dealers, who
provide the best execution of the Portfolio's transactions. The factors that are
to be considered in determining best execution, which do not solely include
lowest commission or best net price, are described in the amended Investment
Advisory Agreement. In addition, the amended Investment Advisory Agreement
permits BSFM to select brokers or dealers who also provide brokerage and
research services and pay such brokers or dealers a commission which is in
excess of the amount of commission another broker or dealer would have charged
if BSFM makes a good faith determination that the commission is reasonable in
relation to the services provided. The amended Investment Advisory Agreement
provides that such transactions shall be reported to the Board of Trustees of
the Fund. The amended Investment Advisory Agreement provides that transactions
of affiliated brokers and dealers must comply with applicable regulations and
authorizes affiliated brokers and dealers to retain commissions earned from
effecting Portfolio transactions and to pay out of such commissions any
compensation due to others in connection with effecting the transaction.
Aggregation of Orders. The amended Investment Advisory Agreement will
also permit BSFM to aggregate transactions on behalf of the Portfolio with
transactions on behalf of BSFM's other clients if it is in the best interests of
the Portfolio and is otherwise consistent with the Portfolio's policies.
The Board of Trustees of the Fund recommends that shareholders of the
Portfolio approve the amendments to the Investment Advisory Agreement. A
complete copy of the Investment Advisory Agreement, as amended, is attached as
Exhibit A.
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<PAGE>
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Approval of the Investment Advisory Agreement will require the
affirmative vote of a "majority of the outstanding voting securities" of the
Portfolio, which, for this purpose, means the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of the Portfolio or (2) 67% or more
of the shares of the Portfolio present at the meeting if more than 50% of the
outstanding shares of the Portfolio are represented at the meeting in person or
by proxy. If the shareholders of the Portfolio do not approve the amended
Investment Advisory Agreement, the Board will take such further action as it may
deem to be in the best interests of the Portfolio's shareholders.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL.
PROPOSAL 2
RATIFICATION OR REJECTION OF
INDEPENDENT AUDITORS
The Board of Trustees, including a majority of the trustees who are not
interested persons of the Fund, unanimously appointed Deloitte & Touche, LLP, as
independent auditors to examine and to report on the financial statements of the
Portfolio for the fiscal year ending March 31, 1998. Such appointment was
expressly conditioned upon the right of the Portfolio by a vote of the majority
of the outstanding voting securities at any meeting called for the purpose to
terminate such employment. The Board's selection of Deloitte & Touche, LLP is
hereby submitted to shareholders for ratification.
Deloitte & Touche, LLP has served as the independent auditors for the
Portfolio during its most recent fiscal period ended March 31, 1997. Services
performed by Deloitte & Touche, LLP during such time have included the audit of
the financial statements of the Fund and services related to filings of the Fund
with the Securities and Exchange Commission. Deloitte & Touche, LLP has informed
the Fund that neither Deloitte & Touche, LLP nor any of its partners has any
direct or material indirect financial interest in the Fund. Representatives of
Deloitte & Touche, LLP are not expected to be present at the Meeting but have
been given the opportunity to make a statement if they so desire, and will be
available should any matter arise requiring their participation.
Representatives of Deloitte & Touche, LLP are not expected to be
present at the Meeting.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Approval of the selection of Deloitte & Touche, LLP as independent
auditors to examine and report on the financial statements of the Portfolio for
the fiscal year ending March 31, 1998 will require the affirmative vote of a
majority of the shareholders present or represented by proxy at the Meeting.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL.
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<PAGE>
OTHER INFORMATION
Voting Information and Discretion of the Persons Named as Proxies.
While the Meeting is called to act upon any other business that may properly
come before it, at the date of this proxy statement the only business which the
management intends to present or knows that others will present is the business
mentioned in the Notice of Meeting. If any other matters lawfully come before
the Meeting, and in all procedural matters at the Meeting, it is the intention
that the enclosed proxy shall be voted in accordance with the best judgment of
the attorneys named therein, or their substitutes, present and acting at the
Meeting.
If at the time any session of the Meeting is called to order a quorum
is not present, in person or by proxy, the persons named as proxies may vote
those proxies which have been received to adjourn the Meeting to a later date.
In the event that a quorum is present but sufficient votes in favor of one or
more of the proposals have not been received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies with respect to any such proposal. All such adjournments will require
the affirmative vote of a majority of the shares present in person or by proxy
at the session of the Meeting to be adjourned. The persons named as proxies will
vote those proxies which they are entitled to vote in favor of the proposal, in
favor of such an adjournment, and will vote those proxies required to be voted
against the proposal, against any such adjournment. A vote may be taken on one
or more of the proposals in this proxy statement prior to any such adjournment
if sufficient votes for its approval have been received and it is otherwise
appropriate. Any adjourned session or sessions may be held within 90 days after
the date set for the original Meeting without the necessity of further notice.
Submission of Proposals for the Next Annual Meeting of the Company.
Under the Fund's Agreement and Declaration of Trust and By-Laws, annual meetings
of shareholders are not required to be held unless necessary under the 1940 Act
(for example, when fewer than a majority of the Trustees have been elected by
shareholders). Therefore, the Fund does not hold shareholder meetings on an
annual basis. A shareholder proposal intended to be presented at any meeting
hereafter called should be sent to the Fund at 245 Park Avenue, New York, New
York 10167, and must be received by the Fund within a reasonable time before the
solicitation relating thereto is made in order to be included in the notice or
proxy statement related to such meeting. The submission by a shareholder of a
proposal for inclusion in a proxy statement does not guarantee that it will be
included. Shareholder proposals are subject to certain regulations under federal
securities law.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO NOT EXPECT TO
ATTEND THE MEETING, PLEASE SIGN YOUR PROXY CARD PROMPTLY AND RETURN IT IN THE
ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND DELAY. NO POSTAGE IS
NECESSARY.
By Order of the Board of Trustees,
ELLEN T. ARTHUR
Secretary
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<PAGE>
EXHIBIT A
FORM OF
INVESTMENT ADVISORY AGREEMENT
THE BEAR STEARNS FUNDS
245 Park Avenue
New York, New York 10167
_______________, 1997
Bear Stearns Funds Management Inc.
245 Park Avenue
New York, New York 10167
Dear Sirs:
The above-named investment company (the "Fund"), with respect to the
series named on Schedule 1 hereto, as such Schedule may be revised from time to
time (each, a "Series"), herewith confirms its agreement with you as follows:
The Fund desires to employ its capital by investing and reinvesting the
same in investments of the type and in accordance with the limitations specified
in its charter documents and in its offering documents (Part A and Part B) as
from time to time in effect, copies of which have been or will be submitted to
you, and in such manner and to such extent as from time to time may be approved
by the Fund's Board. The Fund desires to employ you to act as its investment
adviser.
You may render services through your own employees or the employees of
one or more affiliated companies that are qualified to act as an investment
adviser to the Fund under applicable laws and are under your common control as
long as all such persons are functioning as part of an organized group of
persons, and such organized group of persons, with respect to the services used
by the Fund, is managed at all times by your authorized officers. It is also
understood that you may from time to time, subject to the approval by the Fund's
Board and shareholders of the Series, as necessary, employ or associate yourself
with such person or persons as you may believe to be particularly fitted to
assist you in the performance of this Agreement. You will be as fully
responsible to the Fund for the acts and omissions of such persons as you are
for your own acts and omissions. The compensation of such person or persons
shall be paid by you and no obligation may be incurred on the Fund's behalf in
any such respect.
Subject to the supervision and approval of the Fund's Board, you will
provide investment management of each Series' portfolio in accordance with such
Series' investment objectives and policies as stated in the Fund's offering
documents (Part A and Part B) as from time to time in effect. In connection,
therewith, you will obtain and provide investment research and will supervise
the Series investments and conduct a continuous program of investment,
evaluation and, if appropriate, sale and
- i -
<PAGE>
reinvestment of such Series assets. You will furnish to the Fund such
statistical information, with respect to the investments which a Series may hold
or contemplate purchasing, as the Fund may reasonably request. The Fund wishes
to be informed of important developments materially affecting the Series
portfolio and shall expect you, on your own initiative, to furnish to the Fund
from time to time such information as you may believe appropriate for this
purpose.
You shall exercise your best judgment in rendering the services to be
provided to the Fund hereunder, and the Fund agrees as an inducement to your
undertaking the same that neither you nor any Sub-Investment Adviser shall be
liable hereunder for any error of judgment or mistake of law or for any loss
suffered by one or more Series, provided that nothing herein shall be deemed to
protect or purport to protect you or any Sub-Investment Adviser against any
liability to the Fund or the Series or to its security holders to which you
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of your duties hereunder or by reason of your
reckless disregard of your obligations or duties hereunder (hereinafter
"Disabling Conduct") or to which any Sub- Investment Adviser would otherwise be
subject by reason of Disabling Conduct.
In consideration of services rendered pursuant to this Agreement, the
Fund will pay you on the first business day of each month a fee at the rate set
forth on Schedule 1 hereto or will pay you in accordance with the methodology
described on additional Schedules hereto. Net asset value shall be computed on
such days and at such time or times as described in the Fund's then-current Part
A and Part B. The fee for the period from the date of the commencement of sales
of a Series' shares (after any sales are made to you) to the end of the month
during which such sales shall have been commenced shall be pro-rated according
to the proportion which such period bears to the full monthly period, and upon
any termination of this Agreement before the end of any month, the fee for such
part of a month shall be prorated according to the proportion which such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
For the purpose of determining fees payable to you, the value of each
Series' net assets shall be computed in the manner specified in the Fund's
charter documents for the computation of the value of each Series' net assets.
You will bear all expenses in connection with the performance of your
services under this Agreement and will pay all fees of any Sub-Investment
Adviser in connection with its duties in respect of the Series. All other
expenses to be incurred in the operation of the Fund (other than those to be
borne by a Sub-Investment Adviser, if any) will be borne by the Fund, except to
the extent specifically assumed by you. The expenses to be borne by the Fund
include, without limitation, the following: organizational costs, taxes,
interest, loan commitment fees, interest and distributions paid on securities
sold short, brokerage fees and commissions, if any, fees of Board members,
Securities and Exchange Commission fees, state Blue Sky qualification fees,
advisory, administration and fund accounting fees, charges of custodians,
transfer and dividend disbursing agents fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses, costs of
independent pricing services, costs of maintaining the Series' existence, costs
attributable to investor services (including, without limitation, telephone and
personnel expenses), costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders, costs of shareholders' reports and meetings, and any
extraordinary expenses.
- ii -
<PAGE>
The Fund understands that you now act, and that from time to time
hereafter you may act, as investment adviser to one or more other investment
companies and fiduciary or other managed accounts, and the Fund has no objection
to your so acting, provided that when the purchase or sale of securities of the
same issuer is suitable for the investment objectives of two or more companies
or accounts managed by you which have available funds for investment, the
available securities will be allocated in a manner believed by you to be
equitable to each company or account. It is recognized that in some cases this
procedure may adversely affect the price paid or received by one or more Series
or the size of the position obtainable for or disposed of by one or more Series.
In addition, it is understood that the persons employed by you to
assist in the performance of your duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict your right or the right of any of your affiliates to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.
Any person, even though also your officer, director, partner, employee
or agent, who may be or become an officer, Board member, employee or agent of
the Fund, shall be deemed, when rendering services to the Fund or acting on any
business of the Fund, to be rendering such services to or acting solely for the
Fund and not as your officer, director, partner, employee, or agent or one under
your control or direction even though paid by you.
You shall place all orders for the purchase and sale of portfolio
securities for the Series with brokers or dealers selected by you, which may
include brokers or dealers affiliated with you to the extent permitted by the
1940 Act and the Fund's policies and procedures applicable to the Series. You
shall use your best efforts to seek to execute portfolio transactions at prices
which, under the circumstances, result in total costs or proceeds being the most
favorable to the Series. In assessing the best overall terms available for any
transaction, you shall consider all factors it deems relevant, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, research services
provided to you, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In no event shall you be under
any duty to obtain the lowest commission or the best net price for any Series on
any particular transaction, nor shall you be under any duty to execute any order
in a fashion either preferential to any Series relative to other accounts
managed by you or otherwise materially adverse to such other accounts.
In selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) to you and/or the other accounts over which you exercise
investment discretion. You are authorized to pay a broker or dealer who provides
such brokerage and research services a commission for executing a portfolio
transaction for the Series which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
you determine in good faith that the total commission is reasonable in relation
to the value of the brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or your overall
responsibilities with respect to accounts over which you exercise investment
discretion. You shall report to the Board of Trustees of the Fund regarding
overall commissions paid by the Series and their reasonableness in relation to
their benefits to the Series. Any transactions for the Series that are effected
through an affiliated broker-dealer on a national securities exchange of which
such broker-dealer is a member will be effected in accordance with Section 11(a)
of the Securities Exchange Act of 1934, as amended, and the regulations
promulgated thereunder. The
- iii -
<PAGE>
Series hereby authorizes any such broker or dealer to retain commissions for
effecting such transactions and to pay out of such retained commissions any
compensation due to others in connection with effectuating those transactions.
In executing portfolio transactions for the Series, you may, to the
extent permitted by applicable laws and regulations, but shall not be obligated
to, aggregate the securities to be sold or purchased with those of other
portfolios or its other clients if, in your reasonable judgment, such
aggregation (i) will result in an overall economic benefit to the Series, taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses, and trading requirements, and (ii) is not
inconsistent with the policies set forth in the Fund's registration statement
and the Series's Prospectus and Statement of Additional Information. In such
event, you will allocate the securities so purchased or sold, and the expenses
incurred in the transaction, in an equitable manner, consistent with your
fiduciary obligations to the Series and such other clients.
The Fund will indemnify you and each Sub-Investment Adviser, your
officers, directors, employees and agents (each, an "indemnitee") against, and
hold each indemnitee harmless from, any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses) not
resulting from Disabling Conduct by the indemnitee. Indemnification shall be
made only following: (i) a final decision on the merits by a court or other body
before whom the proceeding was brought that the indemnitee was not liable by
reason of Disabling Conduct or (ii) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the indemnitee
was not liable by reason of Disabling Conduct by (a) the vote of a majority of a
quorum of Board members who are neither "interested persons" of the Fund nor
parties to the proceeding ("disinterested non-party Board members") or (b) an
independent legal counsel in a written opinion. Each indemnitee shall be
entitled to advances from the Fund for payment of the reasonable expenses
incurred by it in connection with the matter as to which it is seeking
indemnification in the manner and to the fullest extent permissible under the
New York Business Corporation Law. Each indemnitee shall provide to the Fund a
written affirmation of its good faith belief that the standard of conduct
necessary for indemnification by the Fund has been met and a written undertaking
to repay any such advance if it should ultimately be determined that the
standard of conduct has not been met. In addition, at least one of the following
additional conditions shall be met: (a) the indemnitee shall provide security in
form and amount acceptable to the Fund for its undertaking; (b) the Fund is
insured against losses arising by reason of the advance; or (c) a majority of a
quorum of disinterested non-party Board members, or independent legal counsel,
in a written opinion, shall have determined, based on a review of facts readily
available to the Fund at the time the advance is proposed to be made, that there
is reason to believe that the indemnitee will ultimately be found to be entitled
to indemnification. No provision of this Agreement shall be construed to protect
any Board member or officer of the Fund, or any indemnitee, from liability in
violation of Sections 17(h) and (i) of the Investment Company Act of 1940, as
amended (the "1940 Act").
As to each Series, this Agreement shall continue until the date set
forth opposite such Series' name on Schedule 1 hereto (the "Reapproval Date")
and thereafter shall continue automatically for successive annual periods ending
on the day of each year set forth opposite the Series' name on Schedule 1 hereto
(the "Reapproval Day"), provided such continuance is specifically approved at
least annually by (i) the Fund's Board; or (ii) vote of a majority (as defined
in the 1940 Act) of such Series' outstanding voting securities, provided that in
either event its continuance also is approved by a majority of the Fund's Board
members who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval.
- iv -
<PAGE>
As to each Series, this Agreement is terminable without penalty, on 60 days'
notice, by the Fund's Board or by vote of holders of a majority of such Series'
shares or, upon not less than 90 days' notice, by you. This Agreement also will
terminate automatically, as to the relevant Series, in the event of its
assignment (as defined in the 1940 Act).
The Fund recognizes that from time to time your directors, officers and
employees may serve as trustees, directors, partners, officers and employees of
other business trusts, corporations, partnerships or other entities (including
other investment companies), and that such other entities may include the name
"Bear Stearns" as part of their name, and that your corporation or its
affiliates may enter into investment advisory or other agreements with such
other entities. If you cease to act as the Fund's investment adviser, the Fund
agrees that, at your request, the Fund will take all necessary action to change
the name of the Fund to a name not including "Bear Stearns" in any form or
combination of words.
This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall only be binding upon the assets and property
of the relevant Series and shall not be binding upon any Board member, officer
or shareholder of the Fund individually.
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE BEAR STEARNS FUNDS
By:_______________________
Accepted:
BEAR STEARNS FUNDS MANAGEMENT INC.
By:_______________________________
- v -
<PAGE>
SCHEDULE 1
INSIDERS SELECT FUND
For the period beginning with the day on which the Fund commences
investment operations and ending with the last day of the twelfth full calendar
month thereafter, the Fund will pay you, at the end of each month, a monthly
advisory fee calculated at an annual rate of 1.0% of the Series' average daily
net assets during such month (the "Basic Fee"). Beginning with the thirteenth
month, the Basic Fee will be adjusted each month (the "Monthly Performance
Adjustment") depending on the extent to which the investment performance of the
Class of shares expected to bear the highest total Series operating expenses (as
such Class from time to time may be designated by the Fund's Board, the
"Designated Class"), reflecting the deduction of expenses, exceeds or is
exceeded by the percentage change in the investment record of the Standard &
Poor's MidCap 400 Index (the "MidCap 400") for the immediately preceding twelve
calendar months on a rolling basis. The rate of the Monthly Performance
Adjustment may increase or decrease the fee payable to you by up to .50% per
annum of the Series' average daily net assets.
The performance of the Designated Class during a performance period
will be calculated by first determining the change in the Class' net asset value
per share during the period, assuming the reinvestment of distributions during
that period, and then expressing this amount as a percentage of the net asset
value per share at the beginning of the period. The performance of the MidCap
400 during a performance period is calculated as the sum of the change in the
level of the index during the period, plus the value of any dividends or
distributions made by the companies whose securities comprise the index
accumulated to the end of the period.
After the Monthly Performance Adjustment is effective, the total
advisory fee, payable by the Fund to you at the end of each calendar month, will
be equal to the Basic Fee for the month adjusted upward or downward for the
month by the Monthly Performance Adjustment for the month. The monthly advisory
fee will be calculated as follows: (1) one-twelfth of the 1% annual basic fee
rate will be applied to the Series' average daily net assets over the most
recent calendar month, giving a dollar amount which will be the Basic Fee for
that month; (2) one-twelfth of the applicable performance adjustment fee rate
from the table below will be applied to the Series' average daily net assets
over the most recent month, giving a dollar amount which will be the Monthly
Performance Adjustment; and (3) the Monthly Performance Adjustment will then be
added to or subtracted from the Basic Fee and the result will be the amount
payable by the Fund to you as the total advisory fee for that month.
<PAGE>
The full range of permitted fees on an annualized basis is as follows:
<TABLE>
<CAPTION>
Percentage Point Difference Between Designated
Class' Performance (Net of Expenses Including Performance
Advisory Fees) and Percentage Change in the Adjustment
MidCap 400 Investment Record Basic Fee (%) Rate (%) Total Fee (%)
---------------------------- ------------- -------- -------------
<S> <C> <C> <C>
+3.00 percentage points or more................................. 1% .50% 1.50%
+2.75 percentage points or more but less
less than + 3.00 percentage points........................... 1% .40% 1.40%
+2.50 percentage points or more but less
than + 2.75 percentage points................................ 1% .30% 1.30%
+2.25 percentage points or more but less
than + 2.50 percentage points................................ 1% .20% 1.20%
+2.00 percentage points or more but less
than + 2.25 percentage points................................ 1% .10% 1.10%
Less than + 2.00 percentage points but more
than -2.00 percentage points................................. 1% 0.0% 1.00%
- -2.00 percentage points or less but more
than -2.25 percentage points................................. 1% -.10% .90%
- -2.25 percentage points or less but more
than -2.50 percentage points................................. 1% -.20% .80%
- -2.50 percentage points or less but more 1%
than -2.75 percentage points.................................. -.30% .70%
- -2.75 percentage points or less but more 1%
than -3.00 percentage points................................. -.40% .60%
- -3.00 percentage points or less................................. 1% -.50% .50%
</TABLE>
The period over which performance will be measured is a rolling 12-month period.
<PAGE>
THE BEAR STEARNS FUNDS
THE INSIDERS SELECT FUND
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The Bear Stearns
Funds (the "Fund"), on behalf of The Insiders Select Fund (the "Portfolio"), for
use at a Special Meeting of Shareholders to be held at the offices of the Fund,
245 Park Avenue, New York, New York, on January 20, 1998 at 11:00 a.m. Eastern
time.
The undersigned hereby appoints Ellen T. Arthur and Frank J. Maresca,
and each of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Special Meeting, and at all adjournments thereof,
all shares of beneficial interest of the Fund that are held of record by the
undersigned on the record date for the Special Meeting, upon the following
matters:
Please mark box in blue or black ink
ITEM 1. Vote on Proposal to approve or disapprove amendments to the
investment advisory agreement between the Fund, on behalf of the
Portfolio, and Bear Stearns Funds Management Inc.
FOR AGAINST ABSTAIN
|_| |_| |_|
ITEM 2. Vote on Proposal to ratify or reject the selection of Deloitte &
Touche, LLP as independent auditors of the Portfolio.
FOR AGAINST ABSTAIN
|_| |_| |_|
ITEM 3. The transaction of such other business as may be properly brought
before the meeting.
FOR AGAINST ABSTAIN
|_| |_| |_|
- --------------------------------------------------------------------------------
Every properly signed proxy will be voted in the manner specified
thereon and, in the absence of specification, will be treated as
GRANTING authority to vote FOR all of the above items.
Receipt of Notice of Special Meeting is hereby acknowledged.
<PAGE>
PLEASE SIGN, DATE AND RETURN PROMPTLY.
-------------------------------------------
Sign here exactly as name(s) appears hereon
-------------------------------------------
Dated:________________________________, 1998
IMPORTANT: Joint owners must EACH sign. When
signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please
give your full title as such.
