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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(4) Date Filed:
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THE BEAR STEARNS FUNDS
S&P STARS PORTFOLIO
245 PARK AVENUE
NEW YORK, NEW YORK 10167
1-800-766-4111
-------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JUNE 18, 1997
-------------------
Notice is hereby given that a Special Meeting of the Shareholders of the S&P
STARS Portfolio (the "STARS Portfolio"), a separate non-diversified portfolio of
The Bears Stearns Funds (the "Fund"), will be held on June 18, 1997 at 10 a.m.
Eastern time at the offices of the Fund, 245 Park Avenue, New York, New York,
for the following purposes:
I. To approve or disapprove a new investment advisory agreement between the
Fund, on behalf of the STARS Portfolio, and Bear Stearns Funds
Management Inc. to take effect as soon as practicable after approval by
shareholders. No fee increase is proposed.
II. To transact such other business as may be properly brought before the
meeting.
Shareholders of record at the close of business on May 8, 1997 are entitled
to notice of, and to vote at, this meeting or any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE FILL IN,
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE PAID
RETURN ENVELOPE ENCLOSED, SO THAT A QUORUM WILL BE PRESENT AND A MAXIMUM NUMBER
OF SHARES MAY BE VOTED. IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO
SIGN YOUR PROXY CARD AND RETURN IT. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO
ITS USE.
By Order of the Board of Trustees,
ELLEN T. ARTHUR
SECRETARY
Dated: May 15, 1997
<PAGE>
THE BEAR STEARNS FUNDS
S&P STARS PORTFOLIO
245 PARK AVENUE
NEW YORK, NEW YORK 10167
1-800-766-4111
-------------------
PROXY STATEMENT
DATED MAY 15, 1997
-------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
JUNE 18, 1997
-------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of The Bear Stearns Funds (the "Fund"), a
Massachusetts business trust, on behalf of one of its series, the S&P STARS
Portfolio (the "STARS Portfolio"), for use at a Special Meeting of Shareholders
(the "Meeting") to be held on June 18, 1997 at 10 a.m. Eastern time at the
offices of the Fund, 245 Park Avenue, New York, New York, and at any adjournment
thereof, and was first mailed to shareholders on or about May 15, 1997. 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. Management expects to solicit proxies principally by mail,
but Management or agents appointed by Management may also solicit proxies by
telephone, telegraph or personal interview. The costs of solicitation will be
borne by the Fund.
The following are the Proposals for the Meeting:
I. Shareholders will be asked to approve or disapprove a new investment
advisory agreement (the "Investment Advisory Agreement") between the
Fund, on behalf of the STARS Portfolio, and Bear Stearns Funds
Management Inc. to take effect as soon as practicable after approval by
shareholders; and
II. Shareholders will be asked to transact such other business as may be
properly brought before the meeting.
The Board of Trustees has fixed the close of business on May 8, 1997 as the
record date for the determination of the shareholders entitled to notice of and
to vote at the Meeting or any adjournment thereof. As of that date, there were
approximately 4,193,286, 2,376,836 and 1,185,135 outstanding Class A, Class C
and Class Y shares of the STARS Portfolio, respectively, each share being
entitled to one vote on
<PAGE>
each matter to come before the Meeting. As of May 8, 1997, the following
shareholders owned, directly or indirectly, 5% or more of the indicated Class of
the STARS Portfolio's outstanding shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES
TITLE OF NAME AND ADDRESS BENEFICIALLY PERCENT
CLASS OF BENEFICIAL OWNER OWNED OF CLASS
- ------------ ---------------------------- ----------------- -----------
<S> <C> <C> <C>
Class Y Custodial Trust Company 755,684 63.8
101 Carnegie Center
Princeton, NJ 08540
</TABLE>
A shareholder who beneficially owns, directly or indirectly, more than 25% of
the STARS Portfolio's voting securities may be deemed a "control person" (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")).
Members of the Board of Trustees and officers of the Fund, as a group owned less
than 1% of the STARS Portfolio shares outstanding on May 8, 1997.
The Fund's Annual Report for the fiscal year ended March 31, 1997, including
financial statements, will be sent to all shareholders of record on or about May
23, 1997. The Annual Report does not, however, form any part of the proxy
soliciting material. A COPY OF THE FUND'S ANNUAL REPORT MAY BE RECEIVED, FREE OF
CHARGE, BY CALLING THE FUND, TOLL FREE, AT 1-800-766-4111 OR BY WRITING TO THE
FUND AT THE ABOVE ADDRESS.
Approval of the proposed Investment Advisory Agreement for the STARS
Portfolio will require the affirmative vote of a "majority of the outstanding
voting securities" of the STARS Portfolio, which for this purpose means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the STARS Portfolio or (2) 67% or more of the shares present at the Meeting if
more than 50% of the outstanding shares are present at the Meeting in person or
by proxy (see Proposal I, below).
At the Meeting, the presence in person or by proxy of shareholders entitled
to cast 30% of the votes thereat 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 cast, at the Meeting. Under 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.
In addition to the solicitation of proxies by mail, the Fund may utilize the
services of officers and employees of the Fund, Bear Stearns Funds Management
Inc. ("BSFM"), 245 Park Avenue, New York, New York, and Bear, Stearns & Co. Inc.
("Bear Stearns"), 245 Park Avenue, New York, New York, none of whom receive any
compensation therefor, to solicit proxies by telephone, telegraph and personal
interview, and may also provide shareholders with a procedure for recording
their votes by telegraph, facsimile, telephone or other electronic means. The
estimated costs of solicitation of proxies are expected to be approximately
$5,000 in the aggregate for the Fund and will be borne by the Fund. The Fund may
request brokers, custodians, nominees and fiduciaries to forward proxy material
to the beneficial owners of shares of record. Persons holding shares as nominees
will, upon request, be reimbursed for their reasonable expenses incurred in
sending soliciting material to their principals.
THE PERSONS NAMED IN THE ACCOMPANYING PROXY WILL VOTE THE NUMBER OF SHARES
REPRESENTED THEREBY AS DIRECTED BY THE PROXY OR, IN THE ABSENCE OF SUCH
DIRECTION, FOR APPROVAL OF EACH OF THE ABOVE PROPOSALS.
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BEAR STEARNS MASTER FUND/FEEDER FUND STRUCTURE
The STARS Portfolio invests all of its assets in the S&P Master Series (the
"Master Series") of the S&P STARS Fund (the "Master Fund"), an open-end
management investment company, rather than in a portfolio of securities. This
arrangement is typically known as a "master-feeder" structure. The STARS
Portfolio is the sole shareholder of the Master Series (other than a nominal
amount of shares of the Master Series owned by Bear Stearns). BSFM, a
wholly-owned subsidiary of The Bear Stearns Companies, Inc., serves as the
Master Series' investment adviser.
Shareholder approval of the proposed Investment Advisory Agreement is being
sought contemporaneously with certain structural changes proposed by BSFM to
consolidate the operations of the Master Fund and the Master Fund's one series
portfolio, the Master Series. BSFM has informed the Fund that it believes this
change, will improve the long-term viability of the STARS Portfolio.
The Master Fund, Master Series and STARS Portfolio were originally organized
as components of a "master fund/feeder fund" structure. Under this structure,
the STARS Portfolio was a "feeder fund" because it sold its shares to the public
and invested all of its assets in a "master fund," the Master Series. Because
the STARS Portfolio invested exclusively in the Master Series, the STARS
Portfolio did not need to enter into an investment advisory agreement. Instead,
the STARS Portfolio benefited from the Master Series' investment advisory
agreement with BSFM and indirectly bore the advisory fee expenses of the Master
Series. The STARS Portfolio did, however, enter into an Administration Agreement
with BSFM pursuant to which it pays BSFM an administration fee at the annual
rate of 0.15 of 1% of its average daily net assets for services relating to the
overall administration of the STAR Portfolio's business. For the fiscal year
ended March 31, 1997, the administration fee earned amounted to $149,100. In
addition, the STARS Portfolio has adopted a distribution plan pursuant to Rule
12b-1 under the 1940 Act (a "Rule 12b-1 Plan") pursuant to which it pays Bear
Stearns at an annual rate of 0.50% of the average daily net assets of Class A
shares of the STARS Portfolio and 1.00% of the average daily net assets of Class
C shares of the STARS Portfolio. For the fiscal year ended March 31, 1997, the
STARS Portfolio paid Bear Stearns $186,162 with respect to Class A shares and
$225,290 with respect to Class C shares under the Rule 12b-1 Plan. All such
amounts were paid to brokers or dealers.
By contrast, the Master Series invests directly in securities and sells its
shares only to the STARS Portfolio and may sell its shares to certain
institutional investors. Consequently, the Master Series entered into an
investment advisory agreement with BSFM, dated February 23, 1995, but did not
adopt a Rule 12b-1 Plan or pay separately for administrative services (which
were provided by BSFM under the investment advisory agreement of the Master
Series).
BSFM assumes general supervision over placing orders on behalf of the Master
Series for the purchase or sale of investment securities. Allocation of
brokerage transactions, including their frequency, is made in BSFM's best
judgment and in a manner deemed fair and reasonable to shareholders. The primary
consideration is prompt execution of orders at the most favorable net price.
Subject to this consideration, the brokers selected include those that
supplement BSFM's research facilities with statistical data, investment
information, economic facts and opinions. Information so received is in addition
to and not in lieu of services required to be performed by BSFM and BSFM's fees
are not reduced as a consequence of the receipt of such supplemental
information. Such information may be useful to BSFM in serving both the Master
Series and other funds which it advises and, conversely, supplemental
information obtained by the placement of business of other clients may be useful
to BSFM in carrying out their
3
<PAGE>
obligations to the Master Series. Sales of STARS Portfolio shares by a broker
are sometimes taken into consideration, and brokers may be selected because of
their ability to handle special executions such as are involved in large block
trades or broad distributions, provided the primary consideration is met. Large
block trades may, in certain cases, result from two or more funds advised or
administered by BSFM being engaged simultaneously in the purchase or sale of the
same security. When transactions are executed in the over-the-counter market,
the Master Series deals with primary market makers unless a more favorable price
or execution otherwise is obtainable.
To the extent consistent with applicable provisions of the 1940 Act and the
rules and exemptions adopted by the Securities and Exchange Commission
thereunder, the Board of Trustees of the Master Fund has determined that
transactions for the Master Series may be executed through Bear Stearns if, in
the judgment of BSFM, the use of Bear Stearns is likely to result in price and
execution at least as favorable as those of other qualified broker-dealers, and
if, in the transaction, Bear Stearns charges the Master Series a rate consistent
with that charged to comparable unaffiliated customers in similar transactions.
In addition, Bear Stearns may directly execute such transactions for the Master
Series on the floor of any national securities exchange, provided (i) the Board
of Trustees has expressly authorized Bear Stearns to effect such transactions,
and (ii) Bear Stearns annually advises the Board of Trustees of the aggregate
compensation it earned on such transactions. Over-the-counter purchases and
sales are transacted directly with principal market makers except in those cases
in which better prices and executions may be obtained elsewhere.
If the proposed Investment Advisory Agreement is approved, BSFM will assume
general supervision over placing orders on behalf of the STARS Portfolio for the
purchase and sale of investment securities. It is anticipated that the Board of
Trustees of the Fund will adopt identical procedures for the STARS Portfolio
with regard to the execution of securities transactions for the STARS Portfolio
through Bear Stearns, an affiliate of the STARS Portfolio and BSFM. For the
fiscal year ended March 31, 1997, the Master Series paid total brokerage
commissions of $474,679 of which $368,764 was paid to Bear Stearns. The Master
Series paid 77.7% of its commissions to Bear Stearns.
One of the original purposes of establishing the master-feeder structure was
to enable the Master Series to sell its shares to other mutual funds or
institutional investors. The practical effect of this arrangement would be to
allow different investors to participate in the portfolio of the Master Series
through different structures that may not be available to other investors, such
as off-shore limited partnerships, high minimum-investment private accounts and
institutional investors. Allowing these diverse investors to become shareholders
in a single portfolio could result in economies of scale and lower expense
ratios for shareholders. For example, fixed expenses that otherwise would have
been borne solely by the STARS Portfolio would be spread among a larger asset
base provided by more than one fund investing in the Master Series.
The Master Series, however, has not realized its goal of achieving multiple
institutional shareholders. Therefore, it has not realized the economies of
scale for which it had hoped.
On March 25, 1997, BSFM advised the Trustees of the Master Fund that it
believed the continuation of a master fund/feeder fund structure in the case of
the STARS Portfolio and the Master Series would no longer be in the best
long-term interests of either fund or their respective shareholders and
indicated that it would present a proposal for the simplification of this
structure. On March 25, 1997, BSFM recommended to the Board of Trustees of the
Master Fund that the Master Fund, which had net assets of
4
<PAGE>
$120,140,093 at March 31, 1997, be liquidated, subject to the approval of the
Trustees of the Fund and subject to the approval of the shareholders of the
STARS Portfolio of a new investment advisory agreement. The Trustees of the
Master Fund, after careful consideration in accordance with the Declaration of
Trust of the Master Fund, found that continuation of the Master Fund would no
longer be in the best interests of the Master Fund or its shareholders and
unanimously approved such liquidation. On April 29, 1997, the Trustees of the
Fund approved the liquidation of the STARS Portfolio's investment in the Master
Series and approved a new investment advisory agreement between the Fund, on
behalf of the STARS Portfolio, and BSFM. As a result, if shareholders of the
STARS Portfolio approve the Investment Advisory Agreement, the Master Series
will distribute all of its assets, consisting of its portfolio investments and
cash, to the STARS Portfolio and to Bear Stearns.
The liquidation is intended to qualify as a tax-free liquidation. This means
that the transaction will not be taxable to either the Master Series or the
STARS Portfolio and that the STARS Portfolio will acquire a carryover basis in
the assets of the Master Series distributed to it in liquidation. As a
consequence of this liquidating distribution, shareholders of the STARS
Portfolio will become direct rather than indirect investors in a mutual fund
investing in a portfolio of investments.
To accomplish this goal, the STARS Portfolio will request a complete
liquidation of its shares of the Master Series, such liquidation to be effected
by a resolution of the Board of Trustees of the Fund. In turn, the Master Series
will redeem "in kind." That is, rather than liquidate its assets and pay cash to
its redeeming shareholder, it will satisfy its obligation to the STARS Portfolio
by delivering its portfolio securities to the STARS Portfolio. The STARS
Portfolio will then directly own essentially all of the portfolio securities in
the Master Series, except for a nominal amount owned by Bear Stearns, and
shareholders of the STARS Portfolio will be in the same position as they were
before the transaction was consummated.
Shareholders of the STARS Portfolio are being asked to approve the proposed
Investment Advisory Agreement with BSFM because one does not currently exist.
PROPOSAL I
APPROVAL OR DISAPPROVAL OF INVESTMENT
ADVISORY AGREEMENT FOR STARS PORTFOLIO
The Board of Trustees of the Fund recommends that shareholders of the STARS
Portfolio approve the adoption of the proposed Investment Advisory Agreement
with BSFM. The proposed Investment Advisory Agreement is summarized below, and a
complete copy is attached as Exhibit A.
PROPOSED INVESTMENT ADVISORY AGREEMENT WITH BSFM
THE INVESTMENT ADVISORY AGREEMENT. The proposed Investment Advisory
Agreement is substantially identical to the existing investment advisory
agreement for the Master Series with BSFM (the "Master Advisory Agreement") and
does not provide for any increase in investment advisory fees. The Master
Series' investment adviser is BSFM, 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
5
<PAGE>
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 at April 30, 1997 of
approximately $2.8 billion.
The Master Series' principal portfolio manager is Robert S. Reitzes. Mr.
Reitzes joined Bear Stearns Asset Management in 1994 as Director of Mutual
Funds-Bear Stearns Asset Management and Senior Managing Director of Bear
Stearns. From 1991 until 1994, he was Co-Director of Research and Senior
Chemical Analyst at C.J. Lawrence/Deutsche Bank Securities Corp. For six years
prior thereto, Mr. Reitzes was employed by Mabon, Nugent & Co. as Chief
Investment Officer and Chemical Analyst. Mr. Reitzes will continue to manage the
STARS Portfolio if the proposed Investment Advisory Agreement is approved.
THE ADVISORY FEES. Under the terms of the Master Advisory Agreement, the
Master Fund has agreed to pay BSFM a monthly fee at the annual rate of 0.75 of
1% of the Master Series' average daily net assets. For the fiscal year ended
March 31, 1997, the investment advisory fees payable amounted to $747,970. BSFM
waived $699,997 of its advisory fee pursuant to an undertaking by BSFM,
resulting in net advisory fees of $47,973 paid by the Master Fund. The advisory
fee under the proposed Investment Advisory Agreement will be paid monthly at an
annual rate of 0.75 of 1% of the STARS Portfolio's average daily net assets.
BSFM has undertaken until such time as it gives investor 60 days' notice to
the contrary to waive its investment advisory fee and assume certain expenses of
the Master Series and the STARS Portfolio, other than brokerage commissions,
extraordinary items, interest and taxes to the extent that total operating
expenses exceed 1.5% of Class A's average daily net assets, 2% of Class C's
average daily net assets and 1% of Class Y's average daily net assets for the
fiscal year. BSFM will make the same undertaking with regard to the STARS
Portfolio if the proposed Investment Advisory Agreement is approved. Thus,
shareholders will be subject to the same expense ratio under the new arrangement
in which BSFM provides investment advisory services directly to the STARS
Portfolio. Pursuant to BSFM's undertaking to waive its investment advisory fee
and assume certain expenses of the STARS Portfolio, total operating expenses of
the STARS Portfolio will not exceed 1.50% for Class A, 2.00% for Class C and
1.00% for Class Y.
DIFFERENCES BETWEEN THE MASTER AND PROPOSED ADVISORY AGREEMENTS:
There are no material differences between the proposed Investment Advisory
Agreement and the Master Advisory Agreement, except that:
1. 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 STARS Portfolio need no longer comply with State
blue sky laws involving expense limitations. Therefore, the language
referring to such limitations is not in the proposed Investment Advisory
Agreement.
2. Under the Master Advisory Agreement, BSFM provided administrative
services to the Master Series. Under the terms of an Administration
Agreement with the Fund, BSFM currently provides administrative services
to the STARS Portfolio. Therefore, the language referring to the
provision of administrative services is not in the proposed Investment
Advisory Agreement.
3. References to a Sub-Investment Adviser have been deleted from the
proposed Investment Advisory Agreement.
6
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4. A provision has been added to the proposed Investment Advisory Agreement
in which the STARS Portfolio agrees not to use "Bear Stearns" in its name
if BSFM ceases to act as its investment adviser.
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 and Secretary; Michael
Minikes, Warren J. Spector and Robert M. Steinberg, Directors. The business
address of each of the directors and officers is 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, their position with the Fund, and the nature of their
affiliation with BSFM: Alan J. Dixon, Interested Trustee; Robert S. Reitzes,
Chairman of the Board of Trustees, Director of Mutual Funds-Bear Stearns Asset
Management and Senior Managing Director of Bear Stearns; Donalda L. Fordyce,
Vice President, Senior Managing Director of Bear Stearns; Peter B. Fox, Senior
Managing Director Emeritus--Bear Stearns, Public Finance; 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; Eileen M. Coyle, Assistant
Secretary, Vice President of Bear Stearns.
BOARD CONSIDERATIONS
In considering whether to recommend that the proposed Investment Advisory
Agreement be approved by shareholders, the Board of Trustees considered the
nature and quality of services provided by BSFM to date, comparative data as to
advisory fees and expenses. The Board also requested and evaluated such other
information from BSFM which the Board deemed to be relevant, including, but not
limited to, that the rate at which advisory fees will be paid to BSFM would be
identical to the rate at which fees are now paid.
In approving the proposed Investment Advisory Agreement, the Board also
considered that the new arrangement does not require any change in BSFM's
investment management or operation of the STARS Portfolio, the investment
personnel managing the STARS Portfolio, the shareholder services or other
business activities of the STARS Portfolio, or the investment objective of the
STARS Portfolio. BSFM has advised that, at present, it neither plans nor
proposes to make any material changes in the business, corporate structure or
composition of senior management or personnel of BSFM, or in the manner in which
BSFM renders investment advisory services to the STARS Portfolio. If, after the
approval of the proposed Investment Advisory Agreement, changes in BSFM are
proposed that might materially affect its services to the STARS Portfolio, the
Board will consider the effect of those changes and take such action as it deems
advisable under the circumstances.
The Board, including a majority of the Trustees who are not interested
persons of the STARS Portfolio or BSFM ("Disinterested Trustees"), unanimously
approved the proposed Investment Advisory Agreement at the meeting held on April
29, 1997.
REQUIRED VOTE AND BOARD OF DIRECTORS' RECOMMENDATION
Approval of the proposed Investment Advisory Agreement will require the
affirmative vote of a "majority of the outstanding voting securities" of the
STARS Portfolio, which, for this purpose, means the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of the STARS Portfolio or
7
<PAGE>
(2) 67% or more of the shares of the STARS Portfolio present at the meeting if
more than 50% of the outstanding shares of the STARS Portfolio are represented
at the meeting in person or by proxy. If the shareholders of the STARS Portfolio
do not approve the proposed Investment Advisory Agreement, the Board will take
such further action as it may deem to be in the best interests of the STARS
Portfolio's shareholders.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL.
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.
8
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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
May 15, 1997
9
<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.
In this connection it is understood that from time to time you will employ
or associate with yourself such person or persons as you may believe to be
particularly fitted to assist you in the performance of this Agreement. Such
person or persons may be officers or employees who are employed by both you and
the Fund. 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
each Series' investments and conduct a continuous program of investment,
evaluation and, if appropriate, sale and 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 any 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 you shall not 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 against any liability to the Fund or a
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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") 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
opposite each Series' name 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 pro-rated 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. All other expenses to be incurred in the
operation of the Fund 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
stockholders, costs of stockholders' reports and meetings, and any extraordinary
expenses.
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.
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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.
The Fund will indemnify you, 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. 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
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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:
----------------------------------
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SCHEDULE 1
<TABLE>
<CAPTION>
ANNUAL FEE AS A
PERCENTAGE OF
AVERAGE DAILY REAPPROVAL REAPPROVAL
NAME OF SERIES NET ASSETS DATE DAY
- ------------------------------------------------------------ --------------- ---------------------- -----------
<S> <C> <C> <C>
S&P STARS Portfolio......................................... .75 of 1% , 1999
</TABLE>
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<PAGE>
THE BEAR STEARNS FUNDS
S&P STARS PORTFOLIO
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The Bear Stearns
Funds (the "Fund"), on behalf of the S&P STARS Portfolio (the "STARS
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 June 18, 1997 at
10 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 I. Vote on Proposal to approve or disapprove a new investment advisory
agreement between the Fund, on behalf of the STARS Portfolio, and Bear
Stearns Funds Management Inc.
FOR AGAINST ABSTAIN
/ / / / / /
ITEM II. The transaction of such other business as may be properly brought
before the meeting.
FOR AGAINST ABSTAIN
/ / / / / /
<PAGE>
- -------------------------------------------------------------------------------
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.
PLEASE SIGN, DATE AND RETURN PROMPTLY.
------------------------------------------------
Sign here exactly as name(s) appears hereon
-----------------------------------------------
Dated: , 1997
----------------------------------
IMPORTANT: Joint owners must EACH sign. When
signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please
give your full title as such.
