Rule 497(e)
Registration No. 33-84842
THE BEAR STEARNS FUNDS
THE INSIDERS SELECT FUND
SUPPLEMENT DATED DECEMBER 24, 1997
TO PROSPECTUS DATED DECEMBER 24, 1997
A Special Meeting of shareholders has been scheduled for January 9,
1998. At that meeting, shareholders will be asked to approve certain changes to
the Investment Advisory Agreement. Pending approval by shareholders at the
Special Meeting, the following language is substituted for the language under
"Management Policies" on pages 6-7 of the Prospectus:
MANAGEMENT POLICIES
Under normal market conditions, the Adviser invests substantially all of the
Portfolio's assets in the equity securities of U.S. issuers. The Adviser selects
equity securities believed by it to provide opportunities for capital
appreciation or gains through short selling. Issuers are selected without regard
to market capitalization, although the Adviser anticipates that the issuers
principally will be mid- to large capitalization companies; that is, those with
market capitalizations exceeding $1 billion.
The Adviser selects from the universe of U.S. equity securities those securities
it believes, in the aggregate, will approximate or exceed the total return
performance of the Standard & Poor's 500 Stock Index* (the "S&P 500 Index"). 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. Because of this weighting, as of
March 31, 1997, approximately 48% of the S&P 500 Index was composed of the 50
largest companies. The Portfolio will not invest in all or substantially all of
the common stocks included in the S&P 500 Index and may invest in stocks that
are not included in the S&P 500 index. The Portfolio expects ordinarily to
invest in approximately 60 to 150 stocks.
By investing in this manner-that is purchasing other equity securities in a
manner intended to approximate or exceed the performance of the S&P 500
Index-the Adviser seeks to exceed the total return of the S&P 500 Index.
Equity securities consist of common stocks, convertible securities and preferred
stocks. The convertible securities and preferred stocks in which the Portfolio
may invest will be rated at least investment grade by a nationally recognized
statistical rating organization at the time of purchase. Convertible securities
rated in the lowest investment grade rating may be considered to have
speculative characteristics. Preferred stock generally receives dividends before
distributions are paid on common stock and ordinarily has a priority claim over
common stockholders if the issuer of the stock is liquidated. The Portfolio may
invest, in anticipation of investing cash positions, in money market instruments
consisting of U.S. Government securities, certificates of deposit, time
deposits, bankers' acceptances, short-term investment grade corporate bonds and
other short-term debt instruments, and repurchase agreements, as set forth in
the Appendix. Under normal market conditions, the Portfolio expects to have less
than 15% of its assets invested in money market instruments. However, when the
Adviser determines that adverse market conditions exist, the Portfolio may adopt
a temporary defensive posture and invest all of its assets in money market
instruments.
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* "Standard & Poor's," "S&P(R)", and "S&P 500(R)" are trademarks of The
McGraw-Hill Companies, Inc. The Portfolio is not sponsored, endorsed, sold
or promoted by Standard & Poor's or The McGraw-Hill Companies, Inc.
<PAGE>
Pending approval by shareholders at the Special Meeting, the following language
is substituted for the language in the third paragraph under "Investment Adviser
and Administrator" on page 11 of the Prospectus:
Under the terms of the Investment Advisory Agreement, the Portfolio has agreed
to pay BSAM a monthly fee at the annual rate of 1% of the Portfolio's average
daily net assets (the "Basic Fee") which will be adjusted monthly (the "Monthly
Performance Adjustment") depending on the extent to which the investment
performance of the class of shares (currently, Class C) expected to bear the
highest total Portfolio operating expenses, after 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 decrease the total advisory
fee payable to BSAM (the "Total Advisory Fee") by up to 0.50% per year of the
value of the Portfolio's average daily net assets.
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 BASIS TOTAL FEE
S&P 500 INDEX FEE (%) RATE (%) (%)
- --------------------------------------------------------------------------------------------------------------------
<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 1% 0.40% 1.40%
percentage points.................................................
+2.50 percentage points or more but less than +2.75 1% 0.30% 1.30%
percentage points.................................................
+2.25 percentage points or more but less than +2.50 1% 0.20% 1.20%
percentage points.................................................
+2.00 percentage points or more but less than +2.25 1% 0.10% 1.10%
percentage points.................................................
Less than +2.00 percentage points but more than -2.00 1% 0.00% 1.00%
percentage points.................................................
- -2.00 percentage points or less but more than -2.25 1% -0.10% 0.90%
percentage points.................................................
- -2.25 percentage points or less but more than -2.50 1% -0.20% 0.80%
percentage points.................................................
- -2.50 percentage points or less but more than -2.75 1% -0.30% 0.70%
percentage points.................................................
- -2.75 percentage points or less but more than -3.00 1% -0.40% 0.60%
percentage points.................................................
- -3.00 percentage points or less .................................. 1% -0.50% 0.50%
</TABLE>
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. For the fiscal year ended March 31, 1997, no fees were paid by
the Portfolio pursuant to a voluntary undertaking by BSAM.
