As filed, via EDGAR, with the Securities and Exchange Commission on May 29,
1998.
File No.:33-84842
ICA No.: 811-08798
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:
|_| Preliminary proxy statement |_| Confidential, for Use of the
|X| Definitive proxy statement Commission Only(as permitted by
|_| Definitive additional materials Rule 14a-6(e)(2))
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE BEAR STEARNS FUNDS
(Name of Registrant as Specified in Its Charter)
Ellen M. Leigh
--------------
(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
TOTAL RETURN BOND PORTFOLIO
245 PARK AVENUE
NEW YORK, NEW YORK 10167
1-800-766-4111
Notice of Special Meeting of Shareholders
to be held July 14, 1998
A special meeting of the shareholders (the "Meeting") of Total Return
Bond Portfolio (the "Portfolio"), a separate diversified portfolio of The Bear
Stearns Funds (the "Fund"), will be held on July 14, 1998 at 10:00 a.m. Eastern
time. The Meeting will be held at the offices of the Fund, 245 Park Avenue, New
York, New York. At the Meeting, we will ask shareholders to vote on:
1. Approving or disapproving an amendment to the Portfolio's
fundamental investment objective.
2. Ratifying or rejecting the selection of Deloitte & Touche LLP as
independent auditors of the Portfolio.
3. Any other business properly brought before the Meeting.
Any shareholder who owned shares of the Portfolio on the "record date,"
which was May 22, 1998, gets notice of the Meeting and gets to vote. Please read
the full text of the proxy statement for a complete understanding of our
proposals.
By Order of the Board of Trustees,
Ellen T. Arthur
Secretary
Dated: May 29, 1998
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
TOTAL RETURN BOND PORTFOLIO
245 PARK AVENUE
NEW YORK, NEW YORK 10167
1-800-766-4111
PROXY STATEMENT
Dated May 26, 1998
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
July 14, 1998
GENERAL INFORMATION
The Board of Trustees of The Bear Stearns Funds, a Massachusetts
business trust (the "Fund"), on behalf of one of its series, Total Return Bond
Portfolio (the "Portfolio"), has sent you this proxy statement to ask you to
vote on several proposals affecting your Portfolio. A special meeting of
shareholders (the "Meeting") will be held on July 14, 1998 at 10 a.m. Eastern
time at the offices of the Fund, 245 Park Avenue, New York, New York. At the
Meeting, we'll ask shareholders to vote on:
1. Approving or disapproving an amendment to the Portfolio's
fundamental investment objective.
2. Ratifying or rejecting the selection of Deloitte & Touche LLP as
independent auditors of the Portfolio.
3. Any other business properly brought before the Meeting.
Revocation of your proxy. You may revoke your proxy at any time up
until voting results are announced at the Meeting. You may revoke your proxy by
giving written notice to the Secretary of the Fund prior to the Meeting or by
giving a subsequently dated proxy or by attending and voting at the Meeting in
person. If you sign and return the proxy card, but do not vote on a proposal,
the proxy attorneys will vote your shares of beneficial interest "FOR" the
proposal.
<PAGE>
Proxy Solicitation. Your Portfolio will pay all costs of preparing and
mailing the notice of meeting, the proxy card, this proxy statement, and any
additional proxy solicitation material. All shareholders who are entitled to
vote will receive these proxy materials. Your Portfolio will solicit shareholder
proxies in a variety of ways. Employees of the Fund's investment adviser, Bear
Stearns Asset Management Inc., and employees of the Fund's distributor, Bear,
Stearns & Co. Inc., and their affiliates, none of whom will receive additional
compensation, will solicit shareholder proxies primarily by mail, but also by
telephone, telegraph, facsimile, or personal interview. We may also use an
outside firm to solicit shareholder votes on behalf of the Portfolio by mail,
telephone, telegraph, facsimile, or personal interview. The proxy solicitation
services are expected to cost the Portfolio approximately $5,000.
Record Date. The Board of Trustees has fixed the close of business on
May 22, 1998 as the record date to determine the shareholders who are entitled
to notice of, and to vote at, the Meeting (the "Record Date"). As of the Record
Date, there were approximately 236,396, 2,308, 113,131, and 354,257 outstanding
Class A, Class B, Class C, and Class Y shares of the Portfolio, respectively.
Shareholders are entitled to cast one vote for each full share and a fractional
vote for each fractional share.
Ownership of 5% or More. Securities and Exchange Commission rules
require the Portfolio to tell you the name and address of any person known to be
the beneficial owner of 5% or more of the Portfolio's outstanding shares. The
Portfolio must also tell you how many shares such persons own and what
percentage of the Portfolio these shares represent. As of May 22, 1998, the
Portfolio was not aware of any shareholder who beneficially owned 5% or more of
the Portfolio's outstanding shares.
Available Reports. Your Portfolio's most recent annual and semi-annual
reports to shareholders are available at no cost. To request a report, please
call the Fund, toll free, at 800-766-4111.
Required Vote. Approval of the amendment to the investment objective
(Proposal 1) for the Portfolio will require the affirmative vote of a "majority
of the outstanding voting securities" of the Portfolio, which 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
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<PAGE>
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.
Quorum. In order for the Meeting to proceed, your Portfolio must
achieve a quorum. This means that 30% of the Portfolio's shares must be
represented at the Meeting -- either in person or by proxy. All returned proxies
count towards a quorum, regardless of how they are voted ("FOR," "AGAINST" or
"ABSTAIN"). Your Portfolio will count broker non- votes towards the quorum, but
not towards the approval of any proposals. (Broker non-votes are shares for
which (1) the underlying owner has not voted and (ii) the broker holding the
shares does not have discretionary authority to vote on the particular matter.)
Under the Investment Company Act of 1940, the affirmative vote needed to approve
a proposal may be determined with reference to a percentage of votes present at
the Meeting, which would have the effect of counting 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 practicable after shareholder approval.
3
<PAGE>
PROPOSAL 1
APPROVAL OR DISAPPROVAL OF AN AMENDMENT TO
THE PORTFOLIO'S INVESTMENT OBJECTIVE
INTRODUCTION
The Portfolio's investment adviser, Bear Stearns Asset Management Inc.
("BSAM") recommended that the Board of Trustees change the Portfolio's
investment objective and certain investment policies for the reasons described
below. The Board of Trustees of the Fund approved the change and recommends that
shareholders approve the change to the Portfolio's investment objective.
The Portfolio's investment objective is "fundamental," which means it
cannot be changed without the consent of shareholders. The Portfolio's
investment policies are not fundamental, which means that the Board of Trustees
may approve changes without shareholder approval. At a meeting held on May 14,
1998, the Fund's Board of Trustees approved the proposed changes to the current
investment objective and certain investment policies of the Portfolio. Proposal
1 concerns the proposed change to the Portfolio's investment objective. You are
being asked to approve this change to the Portfolio's investment objective.
COMPARISON OF CURRENT AND PROPOSED INVESTMENT OBJECTIVE
<TABLE>
<CAPTION>
==========================================================================================================================
CURRENT PROPOSED
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT OBJECTIVE To maximize total return, To seek high current
consistent with preservation income consistent with
of capital. preservation of capital.
==========================================================================================================================
</TABLE>
Under the current investment objective, the Portfolio seeks total
return, which means a combination of growth of capital and current income. Under
the proposed investment objective, the Fund would seek primarily high current
income, with less consideration to growth of capital.
If shareholders approve the change of the investment objective, the
Portfolio plans to change certain investment policies and the name of the
Portfolio. We describe these changes below. If shareholders do not approve the
change in the Portfolio's investment objective, the Portfolio will not change
the investment policies and will keep its current name.
COMPARISON OF INVESTMENT POLICIES
The following table summarizes and compares the material changes to
certain investment policies that the Portfolio will implement if shareholders
approve the new investment objective. This table is intended to assist
shareholders in comparing the current and proposed policies.
4
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
CURRENT POLICY PROPOSED POLICY
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRINCIPAL STRATEGY Will invest at least 70% of its Will invest at least 65% of its
(measured at time of total assets in debt securities total assets in "investment
purchase) rated A or better by S&P/1/, grade" debt securities.
Moody's/2/, Fitch/3/, or Duff & Investment grade securities
Phelps/4/ (or, if unrated, of are rated Baa or higher by
comparable quality). Moody's, BBB or higher by
S&P or the equivalent by
other rating agencies (or if
unrated, of comparable quality).
- --------------------------------------------------------------------------------------------------------------------------
Secondary strategy May invest up to 30% of its May invest up to 25% of its
(measured at time of assets in debt securities rated total asses in debt securities
purchase) Baa by Moody's or BBB by rated below investment grade.
S&P, Fitch or Duff (or if These investments may
unrated, of comparable quality). include securities rated Ba or
B by Moody's, BB or B by
S&P or the equivalent by
other rating agencies (or, if
unrated, of comparable quality).
- --------------------------------------------------------------------------------------------------------------------------
Duration (measures Not less than 65% and not Not specified (but the
the sensitivity of a more than 135% of the duration Portfolio expects duration to
bond to changes in measure of the Salomon be 4-6 years).
interest rates) Brothers BIG Bond Index.
- --------------------------------------------------------------------------------------------------------------------------
Dollar-weighted 4-13 years. The Portfolio expects the dollar-weighted
average maturity average maturity to be approximately
7 years.
- --------------------------------------------------------------------------------------------------------------------------
Range of investments Bonds, debentures, notes, Unchanged.
money market instruments
(including obligations of
foreign entities, foreign
governments and supranational
entities), mortgage-related
securities (including IP, PO and
strips), zero-coupons, asset-
backed securities, municipal
obligations and convertibles.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
CURRENT POLICY PROPOSED POLICY
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options May buy options and may write Unchanged.
covered call and put options
- --------------------------------------------------------------------------------------------------------------------------
Futures contracts and May enter into interest rate Unchanged.
related options futures contracts and options.
- --------------------------------------------------------------------------------------------------------------------------
Forward currency No. Yes.
contracts, currency
swaps and cross
currency hedges
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------
1 Standard & Poor's Ratings Group
2 Moody's Investor Services, Inc.
3 Fitch Investor Services, L.P.
4 Duff & Phelps Credit Rating Co.
RISK CONSIDERATIONS
If shareholders approve the change in the Portfolio's investment
objective, the Portfolio will change certain of its investment strategies, as
described above.
To achieve its current investment objective, the Portfolio currently
invests almost exclusively in "investment grade" debt obligations. "Investment
grade" debt obligations are rated in the four highest categories by one or more
nationally recognized debt rating organizations. Currently, the Portfolio
invests at least 70% of its total assets in debt obligations rated in the three
highest categories by a rating organization, and may invest up to 30% of its
assets in debt obligations rated in the fourth highest category. (In each case,
the Portfolio may invest in unrated debt obligations of comparable quality.)
Subject to shareholder approval of the new investment objective, the
Portfolio would change its investment strategy. Under the new strategy, the
Portfolio would invest at least 65% of its assets in "investment grade" debt
obligations. The Portfolio would also be able to invest up to 25% of its assets
in high-yield, high-risk debt obligations rated Ba or B by Moody's or BB or B by
S&P. (In each case, the Portfolio may invest in unrated debt obligations of
comparable quality).
High-yield, high-risk bonds are described by the rating agencies as
speculative and involve greater risk of default or price changes due to changes
in the issuer's creditworthiness than higher rated bonds, or they may already be
in default. The market prices of these securities may fluctuate more than higher
quality securities and may decline significantly in periods of general economic
difficulty. It may be more difficult to dispose of, or to determine the value
of, high-yield, high-risk bonds.
6
<PAGE>
The Portfolio would also have the ability to enter forward currency
contracts, currency swaps and cross-currency hedges. These strategies, among
other things, would allow the Portfolio to lock in currency exchange rates when
it purchases foreign debt obligations, or hedge against changes in foreign
currencies. BSAM does not expect these strategies to result in significant
additional risks to the Portfolio.
INVESTMENT LIMITATIONS
The Portfolio will not invest in securities rated below B by a
nationally recognized securities rating agency, such as S&P or Moody's, or in
unrated securities determined by BSAM. Securities rated B are predominantly
speculative and have large uncertainties or major exposures to the adverse
conditions. Securities rated BB or Ba or lower are commonly known as "junk
bonds." These investment limitations will be measured at the time of purchase
and, to the extent a security is assigned a different rating by one or more of
the various rating agencies, BSAM will use the highest rating assigned by any
agency.
CHANGE OF NAME
If shareholders approve the proposed investment objective, the
Portfolio would change its name to the "Income Portfolio." BSAM believes that
the new name would better reflect the Portfolio's investment objective and
policies.
NO ADVERSE TAX CONQUENCES OR ADDITIONAL COSTS TO SHAREHOLDERS
The Portfolio does not expect any material adverse tax consequences or
additional costs to the shareholders with the adoption of the proposed
investment objective and related investment policies.
REASONS FOR THE PROPOSAL
Since its inception, the Portfolio has failed to achieve significant
asset growth. As of March 31, 1998, the Portfolio's total net assets were
approximately $8.7 million. BSAM believes that the reason for this lack of asset
growth is that bond fund investors are seeking high current yield rather than
total return. BSAM believes that by allowing the Portfolio to invest in
lower-rated debt securities, the Portfolio would have added flexibility to and
would be better positioned to meet investor needs. BSAM believes that these
changes will benefit shareholders over the long term, because investors would
receive a more competitive return. Accordingly, the Portfolio would be more
attractive to new investors.
BSAM believes that the proposed changes may result in increased
volatility, but that the potential returns would justify the increase in risk to
shareholders. BSAM believes that it would be able to manage this risk so that it
does not result in an unreasonable level of volatility. BSAM does not expect
that the proposals will have any material effect on the Portfolio's expense
structure.
CONSIDERATIONS BY THE BOARD OF TRUSTEES
At a meeting of the Fund's Board of Trustees held on May 14, 1998, the
Trustees considered BSAM's proposal to change the Portfolio's fundamental
investment objective, certain investment policies and the Portfolio's name. The
Trustees considered,
7
<PAGE>
among other things, the Portfolio's small asset size and its inability of the
Portfolio to attract new investors. The Trustees considered BSAM's belief that
the new investment objective and policies would enable the Portfolio to increase
the return to shareholders without a material increase in volatility. They
considered the Portfolio's expense structure, and that BSAM has subsidized the
Portfolio's operations due to the Portfolio's small asset size. They considered
the fact that in the foreseeable future, the proposed changes would not result
in any increase in fees paid by the Portfolio.
Based upon the recommendations of BSAM, the Board of Trustees
determined that the proposed investment objective and policies were in the best
interests of shareholders.
TRUSTEES' RECOMMENDATION
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE
PORTFOLIO APPROVE THE AMENDMENT TO THE PORTFOLIO'S INVESTMENT OBJECTIVE.
If shareholders do not approve the amendment to the Portfolio's
investment objective and policies, the Board of Trustees will take such further
action as it may deem to be in the best interests of the Portfolio's
shareholders.
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
Fund for the fiscal year ending March 31, 1999. 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, 1998. As the
independent auditors, Deloitte & Touche LLP audits and certifies the Fund's
financial statements. Deloitte & Touche LLP also reviews the Fund's Annual
Reports to shareholders and its filings with the U.S. Securities and Exchange
Commission. 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 attend 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.
8
<PAGE>
TRUSTEES' RECOMMENDATION
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THE RATIFICATION OF
DELOITTE & TOUCHE LLP AS THE PORTFOLIO'S INDEPENDENT AUDITORS.
OTHER INFORMATION
Voting Information and Discretion of the Persons Named as Proxies. At
the date of the proxy, we know of no other business to be brought before the
Meeting. However, if any other matters do come up, we will use our best judgment
to vote on your behalf.
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 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 adjournment. We may take a vote on one or more
of the proposals in this proxy statement prior to any adjournment if we receive
sufficient votes for its approval and the approval 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.
Annual/semiannual reports. The Fund's most recent annual and semiannual
reports to shareholders are available at no cost. To request a report, please
call us toll-free at 1-800-766-4111 or write us at 245 Park Avenue, New York,
New York 10167.
Litigation. The Fund is not involved in any litigation.
Submission of Proposals for the Next Annual Meeting of the Fund. 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. Any shareholder proposals to be included in the proxy statement
for the next meeting must be received by the Fund, at 245 Park Avenue, New York,
New York 10167, within a reasonable time period prior to that meeting. The
submission of a shareholder proposal does not guarantee that it will be included
in the proxy statement. Shareholder proposals are subject to certain regulations
under federal securities law.
9
<PAGE>
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
10
<PAGE>
THE BEAR STEARNS FUNDS
TOTAL RETURN BOND PORTFOLIO
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The Bear Stearns
Funds (the "Fund"), on behalf of Total Return Bond Portfolio (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 July 14, 1998 at 10:00 a.m.
Eastern time.
The undersigned hereby appoints Ellen T. Arthur and Vincent L. Pereira,
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 an amendment to the Portfolio's
fundamental investment objective.
FOR AGAINST ABSTAIN
|_| |_| |_|
ITEM 2. Vote on Proposal to ratify 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.
- -------------------------------------------------------------------------------
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 on this
Proxy card
--------------------------------------------
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.
