Title
of Each Class of Securities Offered
|
|
Maximum
Aggregate Offering Price
|
|
Amount
of Registration Fee(1)
|
Medium-Term
Notes, Series B
|
|
$6,250,000
|
|
$668.75
|
______________
(1)
Calculated in accordance with Rule 457(r) of the Securities Act of 1933, as
amended. The filing fee of $668.75 is being paid in connection with the
registration of these Medium-Term Notes, Series B.
Filed
pursuant to Rule 424(b)(2)
Registration
No. 333-136666
PRICING
SUPPLEMENT
(To
Prospectus Dated August 16, 2006 and
Prospectus
Supplement Dated August 16, 2006)
The
Bear Stearns Companies Inc.
$6,250,000
Principal Protected Notes, Linked to the Strengthening of the Brazilian Real,
Russian Ruble, Indian Rupee and Chinese Yuan Exchange Rates against the U.S.
Dollar, Due January 29, 2009
·
|
The
Notes are 100% principal protected if held to maturity and are linked
to
an equally weighted basket (the “Basket”) consisting of
the currency exchange rates between: (1) the U.S. Dollar and the
Brazilian Real (the “BRL Exchange Rate”); (2) the U.S. Dollar and the
Russian Ruble (the “RUB Exchange Rate”); (3) the U.S. Dollar and the
Indian Rupee (the “INR Exchange Rate”); and (4) the U.S. Dollar and
the Chinese Yuan (the
“CNY Exchange Rate” and, together with the BRL Exchange Rate, the RUB
Exchange Rate and the INR Exchange Rate, each a “Component” and
collectively the “Components”),
each expressed as the number of units of the Brazilian Real, Russian
Ruble, Indian Rupee or Chinese Yuan (each a “Reference Currency” and
collectively the “Reference Currencies”), as applicable, per U.S.
Dollar.
When we refer to Notes in this pricing supplement, we mean Notes
with a
principal amount of $1,000. On the Maturity Date, you will receive
the
Cash Settlement Value, an amount in cash that is based on the Basket
Performance.
|
·
|
If,
at maturity, the Basket Performance is greater than or equal to 0%,
the
Cash Settlement Value per note will equal $1,000 plus the greater
of: (a)
$1,000 multiplied by 14.50% and (b) $1,000 multiplied by the Basket
Performance.
|
·
|
The
Basket Performance is equal to the sum of the Component Performances
divided by 4. The “Component Performance” with respect to each Component,
is the percentage resulting from the quotient of (a) the Initial
Fixing
Level minus the Final Fixing Level, divided by (b) the Initial Fixing
Level. For the avoidance of doubt, the Basket Performance is greater
when the Exchange Rates, on average, decline,
as declining Exchange Rates mean that fewer units of the respective
Reference Currency are required to purchase one U.S.
Dollar.
|
·
|
If,
at maturity, the Basket Performance is less than 0%, the Cash Settlement
Value will equal $1,000.
|
Because
the Notes are 100% principal protected if held to maturity, in no event will
the
Cash Settlement Value be less than $1,000 per Note.
·
|
The
CUSIP number for the Notes is
073928S87.
|
·
|
The
Notes will not be listed on any U.S. securities exchange or quotation
system.
|
INVESTMENT
IN THE NOTES INVOLVES CERTAIN RISKS. THERE MAY NOT BE A SECONDARY MARKET IN
THE
NOTES, AND IF THERE WERE TO BE A SECONDARY MARKET, IT MAY NOT BE LIQUID. YOU
SHOULD REFER TO “RISK FACTORS” BEGINNING ON PAGE PS-10.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of the Notes or determined that this pricing supplement,
or the accompanying prospectus supplement and prospectus, is truthful or
complete. Any representation to the contrary is a criminal
offense.
|
|
Per
Note
|
|
Total
|
|
Initial
public offering price
|
|
|
100.00%‡
|
|
$
|
6,250,000
|
|
Agent’s
discount
|
|
|
1.50
|
%
|
$
|
93,750
|
|
Proceeds,
before expenses, to us
|
|
|
98.50
|
%
|
$
|
6,156,250
|
|
‡ Any
additional reissuances will be offered at a price to be determined at the time
of pricing of each offering of Notes, which will be a function of the prevailing
market conditions and the Components at the time of the relevant
sale.
We
may
grant the agents a 13-day option from the date of the final pricing supplement,
to purchase from us up to an additional $937,500 of Notes at the public offering
price, less the agent’s discount, to cover any over-allotments.
We
expect
that the Notes will be ready for delivery in book-entry form only through the
book-entry facilities of The Depository Trust Company in New York, New
York, on or about the Settlement Date, against payment in immediately available
funds. The distribution of the Notes will conform to the requirements set forth
in Rule 2720 of the National Association of Securities Dealers, Inc. Conduct
Rules.
Bear,
Stearns & Co. Inc.
January
29,
2007
SUMMARY
This
summary highlights selected information from the accompanying prospectus and
prospectus supplement and this pricing supplement to help you understand the
Note. You should carefully read this entire pricing supplement and the
accompanying prospectus supplement and prospectus to fully understand the terms
of the Notes, as well as the principal tax and other considerations that are
important to you in making a decision about whether to invest in the Notes.
You
should carefully review the section “Risk Factors” in this pricing supplement
and “Risk Factors” in the accompanying prospectus supplement, which highlight a
number of significant risks, to determine whether an investment in the Notes
is
appropriate for you. All of the information set forth below is qualified in
its
entirety by the more detailed explanation set forth elsewhere in this pricing
supplement and the accompanying prospectus supplement and prospectus. If
information in this pricing supplement is inconsistent with the prospectus
or
prospectus supplement, this pricing supplement will supersede those documents.
In this pricing supplement, the terms “Company,” “we,” “us” and “our” refer only
to The Bear Stearns Companies Inc., excluding its consolidated
subsidiaries.
The
Bear
Stearns Companies Inc. Medium-Term Notes, Series B, Principal Protected Notes,
Linked to the Strengthening of the Brazilian Real, Russian Ruble, Indian Rupee
and Chinese Yuan Exchange Rates against the U.S. Dollar, Due January 29, 2009
(the “Notes”) are Notes whose return is tied or “linked” to an equally weighted
basket (the “Basket”) comprised of the currency exchange rates between: (i) the
U.S. Dollar and the Brazilian Real (the “BRL Exchange Rate”); (ii) the U.S.
Dollar and the Russian Ruble (the “RUB Exchange Rate”); (iii) the U.S. Dollar
and the Indian Rupee (the “INR Exchange Rate”); and (iv) the U.S. Dollar and the
Chinese Yuan (the “CNY Exchange Rate” and, together with the BRL Exchange Rate,
the RUB Exchange Rate and the INR Exchange Rate, each a “Component” and
collectively the “Components”), each expressed as the number of units of the
Brazilian Real, Russian Ruble, Indian Rupee or Chinese Yuan (each a “Reference
Currency” and collectively the “Reference Currencies”), as applicable, per U.S.
Dollar. When we refer to Notes in this pricing supplement, we mean Notes with
a
principal amount of $1,000. The Notes are principal protected if held to
maturity.
On
the
Maturity Date, you will receive the Cash Settlement Value, an amount in cash
that is based on the Basket Performance. The Basket Performance is equal to
the
sum of the Component Performances divided by 4. The “Component Performance” with
respect to each Component, is the percentage resulting from the quotient of:
(i)
the Initial Fixing Level minus the Final Fixing Level, divided by (ii) the
Initial Fixing Level. If, on the Calculation Date, the Basket Performance is
greater than or equal to 0%, then the Cash Settlement Value per note will equal
$1,000 plus the greater of: (a) $1,000 multiplied by 14.50% and (b) $1,000
multiplied by the Basket Performance. If, at maturity, the Basket Performance
is
less than 0%, the Cash Settlement Value will equal $1,000. We will not pay
any
interest during the term of the Notes.
Selected
Investment Considerations
|
·
|
Full
principal protection—If the Basket Performance is less than 0%, in all
cases the Cash Settlement Value per Note will be $1,000. Because
the Notes
are 100% principal protected, in no event will the Cash Settlement
Value
be less than $1,000 per Note. However, the Basket Performance must
be
greater than or equal to 0% to earn any positive
return.
|
|
·
|
Notes
bullish on the Reference Currencies / bearish on the U.S. Dollar—The Notes
may be an attractive investment for investors who have a bullish
view, on
average, of the Reference Currencies relative to the U.S. Dollar
(or
equivalently, a bearish view, on average, of the U.S. Dollar relative
to
the Reference Currencies). If the Basket Performance is greater than
or
equal to 0%, you will receive a minimum return of 14.50%, and if
the
Basket Performance is greater than or equal to 14.50%, the Notes
will
allow you to participate in 100% of the Basket Performance. Basket
Performance will only be positive if, on average, the value of the
U.S.
Dollar depreciates relative to the Reference Currencies. If, on average,
the U.S. Dollar appreciates in value relative to the Reference Currencies
over the term of the Notes, the payment at maturity, and therefore
the
market value of the Notes, will be adversely
affected.
|
|
·
|
No
current income—We will not pay any interest on the Notes. The yield on the
Notes may be less than the overall return you would earn if you purchased
a conventional debt security at the same time and with the same maturity.
Because the Cash Settlement Value depends upon the Basket Performance,
the
effective yield to maturity on the Notes is not known and may not
be
enough to compensate you for any opportunity cost implied by inflation
and
other factors relating to the time value of
money.
|
|
·
|
Diversification—
The Basket represents the relationship between each of the Reference
Currencies and the U.S. Dollar, and the Notes may appreciate if the
Basket
Performance increases (i.e.,
if, on average, the value of the Reference Currencies have appreciated
against the U.S. Dollar). Therefore, the Notes may allow you to diversify
an existing portfolio or
investment.
|
|
·
|
Low
minimum investment—The minimum purchase is $1,000, with increments of
$1,000 thereafter.
|
Selected
Risk Considerations
|
·
|
Possible
loss of value in the secondary market—Your principal investment in the
Notes is 100% protected only if you hold your Notes to maturity.
If you
sell your Notes prior to the Maturity Date, you may receive less,
and
possibly significantly less, than the amount you originally
invested.
|
|
·
|
Volatility
of the Components—The Components are volatile and are affected by numerous
factors specific to each country represented by a Reference Currency.
The
value of each Reference Currency relative to the U.S. Dollar, which
is
primarily affected by the supply and demand for the respective Reference
Currency and the U.S. Dollar, may be affected by political, economic,
financial, legal, accounting and tax matters specific to the country
in
which the Reference Currency is the official
currency.
|
|
·
|
No
interest, dividend or other payments—During the term of the Notes, you
will not receive any periodic interest or other distributions and
such
payments will not be included in the calculation of the cash payment
you
will receive at maturity.
|
|
·
|
The
Notes will not be listed on any securities exchange or quotation
system—You should be aware that we cannot ensure that a secondary market
in the Notes will develop; and, if such market does develop, it may
not be
liquid. Our subsidiary, Bear, Stearns & Co. Inc. (“Bear
Stearns”)
has advised us that it intends, under ordinary market conditions,
to
indicate prices for the Notes upon request. However, we cannot guarantee
that bids for outstanding Notes will be made in the future; nor can
we
predict the price at which any such bids will be made. In any event,
any
such market-making activities will cease as of the close of business
on
the Maturity Date.
|
|
·
|
The
Components may not move in tandem—At a time when the value of one or more
of the Reference Currencies increases, the value of one or more of
the
other Reference Currencies may decline. Therefore, in calculating
the
Basket Performance, increases in the value of one or more of the
Reference
Currencies against the U.S. Dollar may be moderated, or wholly offset,
by
lesser increases or declines in the value of one or more of the other
Reference Currencies against the U.S.
Dollar.
|
|
·
|
We
intend to treat the Notes as contingent payment debt instruments
that are
not subject to the special rules for nonfunctional currency contingent
payment debt instruments. We intend to treat the Notes as contingent
payment debt instruments that are subject to taxation as described
under
the heading “Certain U.S. Federal Income Tax Considerations—U.S. Federal
Income Tax Treatment of the Notes as Indebtedness for U.S. Federal
Income
Tax Purposes—Contingent Payment Debt Instruments” in the accompanying
prospectus supplement.
|
KEY
TERMS
Issuer:
|
The
Bear Stearns Companies Inc.
|
Face
Amount:
|
The
Notes will be denominated in U.S. Dollars. Each Note will be issued
in
minimum denominations of $1,000, with amounts in excess thereof
in
integral multiples of $1,000. When we refer to Notes in this pricing
supplement, we mean Notes with a principal amount of
$1,000.
|
Further
Issuances:
|
Under
certain limited circumstances, and at our sole discretion, we may
offer
further issuances of the Notes. These further issuances, if any,
will be
consolidated to form a single series with the Notes and will have
the same
CUSIP number and will trade interchangeably with the Notes immediately
upon settlement.
|
Basket:
|
The
Basket is comprised of the currency exchange rates between: (1) the
U.S. Dollar and the Brazilian Real (the “BRL Exchange Rate”); (2) the
U.S. Dollar and the Russian Ruble (the “RUB Exchange Rate”); (3) the
U.S. Dollar and the Indian Rupee (the “INR Exchange Rate”); and
(4) the U.S. Dollar and the Chinese Yuan (the “CNY Exchange Rate”
and, together with the BRL Exchange Rate, the RUB Exchange Rate
and the
INR Exchange Rate, each a “Component” and collectively the “Components”),
each expressed as the number of units of the Brazilian Real, Russian
Ruble, Indian Rupee or Chinese Yuan (each a “Reference Currency”), as
applicable, per U.S. Dollar. The weighting of each Component is
fixed at
25% and will not change, unless any Component is modified during
the term
of the Notes.
|
Basket
Performance:
|
Will
be expressed as a percentage and determined by the Calculation
Agent as
follows:
|
|
|
|
For
the avoidance of doubt, the Basket Performance is greater
when the Exchange Rates, on average, decline,
as declining Exchange Rates mean that fewer units of the respective
Reference Currency are required to purchase one U.S.
Dollar.
|
Initial
Fixing Level:
|
2.1281
with respect to the BRL Exchange Rate (“BRL Initial”); 26.5023 with
respect to the RUB Exchange Rate (“RUB Initial”); 44.24 with respect to
the INR Exchange Rate (“INR Initial”); and 7.7735 with respect to the CNY
Exchange Rate(“CNY Initial”) which, in each case, represents the Currency
Exchange Rate of such Component on the Pricing Date.
|
Final
Fixing Level:
|
With
respect to each Component, the Currency Exchange Rate on the Final
Fixing
Date (referred to as “BRL Final”, “RUB Final”, “INR Final” and “CNY
Final”, as applicable).
|
Currency
Exchange Rate:
|
With
respect to each Component, the number of units of the applicable
Reference
Currency which can be exchanged for one U.S. Dollar, as stated
on the
Fixing Page.
|
|
If
no fixing is published on any day, including the Final Fixing Date,
each
relevant fixing level shall be determined by the Calculation
Agent.
|
Fixing
Page:
|
With
respect to the BRL Exchange Rate, the PTAX offered side exchange
rate
published on Reuters page BRFR; with respect to the RUB Exchange
Rate, the
spot exchange rate published on Reuters page RUBMCMEEMTA=; with
respect to
the INR Exchange Rate, the spot exchange rate published on Reuters
page
RBIB; and with respect to the CNY Exchange Rate, the spot exchange
rate
published on Reuters page SAEC.
|
Final
Fixing Date:
|
January
27, 2009, subject to adjustment as described herein.
|
Pricing
Date:
|
January
25, 2007
|
Settlement
Date:
|
January
29, 2007
|
Maturity
Date:
|
Two
Business Days following the Final Fixing Date.
|
Cash
Settlement Value:
|
At
maturity, we will pay you an amount in cash per Note, in U.S. Dollars,
that is based upon the Basket Performance.
|
|
If,
at maturity, the Basket Performance is greater than or equal to
0%
(i.e.,
on average, the value of the Reference Currencies have appreciated
against
the U.S. Dollar), the payment per Note will equal $1,000, plus
the greater
of: (a) $1,000 multiplied by 14.50% and (b) $1,000 multiplied by
the
Basket Performance.
|
|
The
Notes are 100% principal protected if held to maturity. Therefore,
if the
Basket Performance is less than 0% (i.e.,
on average, the value of the U.S. Dollar has appreciated against
the
Reference Currencies), in all cases the payment at maturity per
Note will
equal $1,000.
|
Interest:
|
The
Notes will not bear interest.
|
Business
Day:
|
Any
day that is not a Saturday or Sunday, and in New York, New York
and
London, England is not a day on which banking institutions generally
are
authorized or required by law or executive order to
close.
|
Component
Business Day:
|
With
respect to any Component, any day that is not a Saturday or Sunday,
and in
(i) New York, New York, (ii) London, England, and (iii) the Local
Jurisdiction is not a day on which banking institutions generally
are
authorized or required by law or executive order to
close.
|
Local
Jurisdiction:
|
With
respect to the BRL Exchange Rate: São Paulo, Brazil; with respect to the
RUB Exchange Rate: Moscow, Russia; with respect to the INR Exchange
Rate:
Mumbai, India; and with respect to the CNY Exchange Rate: Beijing,
China.
|
Exchange
Listing:
|
The
Notes will not be listed on any securities exchange or quotation
system.
|
Calculation
Agent:
|
Bear,
Stearns & Co. Inc. All determinations made by the Calculation Agent
will be at the sole discretion of the Calculation Agent and will
be
conclusive for all purposes and binding on us and the beneficial
owners of
the Notes, absent manifest error and provided that the Calculation
Agent
shall be required to act in good faith in making any
determination.
|
Offers
and sales of the Notes are subject to restrictions in certain jurisdictions.
The
distribution of this pricing supplement and the accompanying prospectus
supplement and prospectus and the offer or sale of the Notes in certain other
jurisdictions may be restricted by law. Persons who come into possession of
this
pricing supplement, and the accompanying prospectus supplement and prospectus
or
any Notes must inform themselves about and observe any applicable restrictions
on the distribution of this pricing supplement, the accompanying prospectus
supplement and prospectus and the offer and sale of the Notes.
QUESTIONS
AND
ANSWERS
What
are the Notes?
The
Notes
are a series of our senior debt securities, the value of which is linked to
the
Basket Performance. The Basket Performance is intended to measure the potential
depreciation, on average, of the value of the U.S. Dollar against the Reference
Currencies. The Notes will not bear interest, and no other payments will be
made
prior to maturity. See the section “Risk Factors.”
The
Notes
will mature on the Maturity Date. The Notes do not provide for earlier
redemption. When we refer to Notes in this pricing supplement, we mean Notes
with a principal amount of $1,000. You should refer to the section “Description
of the Notes.”
Are
the Notes equity or debt securities?
The
Notes
are our unsecured debt securities. The Notes are 100% principal protected if
held to maturity. However, the Notes differ from traditional debt securities
in
that the Notes offer a minimum return of 14.50% if the Basket Performance is
greater than or equal to 0%. In addition, the Notes provide you with
participation in 100% of the Basket Performance if the Basket Performance is
greater than or equal to 14.50%.
What
will I receive
at Maturity of the Notes?
We
have
designed the Notes for investors who want to protect their investment by
receiving at least 100% of the principal amount of their Notes at maturity,
while also having an opportunity to participate in the potential depreciation,
on average, in the value of the U.S. Dollar against the Reference Currencies,
subject to a minimum return of 14.50%, which is applicable if the Basket
Performance is greater than or equal to 0%.
Upon
maturity of the Notes, for each Note you own, you will receive a payment in
cash
per Note, in U.S. Dollars, that is based upon the Basket
Performance.
If
the
Basket Performance is greater than or equal to 0% (i.e.,
the
value of the U.S. Dollar has depreciated, on average, against the Reference
Currencies), the Cash Settlement Value per Note will equal $1,000, plus the
greater of: (a) $1,000 multiplied by 14.50% and (b) $1,000 multiplied by the
Basket Performance.
The
“Basket Performance” will be determined by the Calculation Agent and will be
expressed as a percentage and determined as follows:
For
the
avoidance of doubt, the Basket Performance is greater
when the
Exchange Rates, on average, decline,
as
declining Exchange Rates mean that fewer units of the respective Reference
Currency are required to purchase one U.S. Dollar.
The
Notes
are 100% principal protected if held to maturity. If, at maturity, the Basket
Performance is less than 0% (i.e.,
the
value of the U.S. Dollar has appreciated, on average, against the Reference
Currencies), the Cash Settlement Value will equal $1,000.
The
Initial Fixing Level is 2.1281 with respect to the BRL Exchange Rate; 26.5023
with respect to RUB Exchange Rate; 44.24 with respect to INR Exchange Rate;
and
7.7735 with respect to CNY Exchange Rate.
For
more
specific information about the payment and for an illustrative example, you
should refer to the section “Description of the Notes.”
Will
there be additional offering of the Notes?
Under
certain limited circumstances, and at our sole discretion, we may offer further
issuances of the Notes. These further issuances, if any, will be consolidated
to
form a single series with the Notes and will have the same CUSIP number and
will
trade interchangeably with the Notes immediately upon settlement. Any additional
issuance will increase the aggregate principal amount of the outstanding Notes
of this series to include the aggregate principal amount of any Notes bearing
the same CUSIP number that are issued pursuant to (i) any 13-day option we
grant
to Bear Stearns, and (ii) any future issuances of Notes bearing the same CUSIP
number. The price of any additional offerings will be determined at the time
of
pricing of each offering, which will be a function of the prevailing market
conditions and the value of the Basket at the time of the relevant sale.
We
intend
to treat any additional offerings of Notes as part of the same issue as the
Notes for U.S. federal income tax purposes. Accordingly, for purposes of the
Treasury regulations governing original issue discount on debt instruments,
we
will treat any additional offerings of Notes as having the same issue date,
the
same issue price and, with respect to holders, the same adjusted issue price
as
the Notes. Consequently, the “issue price” of any additional offering of Notes
for U.S. federal income tax purposes will be the first price at which a
substantial amount of the Notes were sold to the public (excluding sales to
bond
houses, brokers, or similar persons or organizations acting in the capacity
of
underwriters, placement agents, or wholesalers). If we offer further issuances
of the Notes, we will disclose the treatment of any relevant accrued interest.
What
does “100%
principal protected” mean?
“100%
principal protected” means that your principal investment in the Notes will not
be at risk as a result of negative Basket Performance, provided the Notes are
held to maturity. If the Basket Performance is less than 0% (i.e.,
the
value of the U.S. Dollar has appreciated, on average, against the Reference
Currencies), the Cash Settlement Value will equal $1,000. Because the Notes
are
100% principal protected if held to maturity, in no event will the Cash
Settlement Value be less than $1,000.
Will
I receive interest on the Notes?
You
will
not receive any interest payments on the Notes.
How
have
the Components performed historically?
We
have
provided tables showing the historical levels of the Components beginning in
January 2001. You can find these tables in the section “Description of the
Basket—Historical Data on the Components” in this pricing supplement. We have
provided this historical information to help you evaluate the behavior of the
Components in various economic environments; however, please note that this
time
period is relatively limited and past performance is not indicative of the
manner in which the Components will perform in the future. You should refer
to
the section “Risk Factors—The historical performance of a Component is not an
indication of the future performance of such Component.”
Will
the Notes be listed on a securities exchange?
The
Notes
will not be listed on any securities exchange or quotation system; and we do
not
expect a secondary market to develop. This may affect the price that you receive
for your Notes upon any sale prior to maturity. Bear Stearns has advised us
that
they intend, under ordinary market conditions, to indicate prices for the Notes
on request. However, we cannot guarantee that bids for outstanding Notes will
be
made in the future; nor can we predict the price at which any such bids will
be
made. In any event, any market-making transactions in the Notes will cease
as of
the close of business on the Maturity Date. You should refer to the section
“Risk Factors.”
What
is
the role of Bear Stearns?
Bear
Stearns will be our agent for the offering and sale of the Notes. After the
initial offering, Bear Stearns intends, under ordinary market conditions, to
buy
and sell the Notes to create a secondary market for holders of the Notes and
may
stabilize or maintain the market price of the Notes during the initial
distribution of the Notes. However, Bear Stearns will not be obligated to engage
in any of these market activities or to continue them once they are
begun.
Who
will act as Calculation Agent?
Bear
Stearns will be our Calculation Agent for purposes of calculating the cash
payment to be paid on the Notes at maturity. Under certain circumstances, these
duties could result in a conflict of interest between Bear Stearns’ status as
our subsidiary and its responsibilities as Calculation Agent. You should refer
to “Risk Factors—The Calculation Agent is our affiliate which could result in a
conflict of interest.”
Can
you tell me more about The Bear Stearns Companies Inc.?
We
are a
holding company that, through our broker-dealer and international bank
subsidiaries, principally Bear Stearns, Bear, Stearns Securities Corp., Bear,
Stearns International Limited (“BSIL”)
and
Bear Stearns Bank plc, is a leading investment banking, securities and
derivatives trading, clearance and brokerage firm serving corporations,
governments, institutional and individual investors worldwide. For more
information about us, please refer to the section “The Bear Stearns Companies
Inc.” in the accompanying prospectus. You should also read the other documents
we have filed with the Securities and Exchange Commission, which you can find
by
referring to the section “Where You Can Find More Information” in the
accompanying prospectus.
Who
should consider purchasing the Notes?
Because
the Notes are tied to the increase, if any, in the value of the Reference
Currencies against the U.S. Dollar, they may be appropriate for investors with
specific investment horizons who seek to participate in the potential
depreciation, on average, of the value of the U.S. Dollar against the Reference
Currencies. In particular, the Notes may be an attractive investment for
investors who:
|
·
|
are
seeking an investment that offers 100% principal protection if held
to
maturity and are willing to hold the Notes to
maturity;
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want
100% exposure to the potential depreciation, on average, of the value
of
the U.S. Dollar against the Reference
Currencies;
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believe
that the value of the U.S. Dollar will decline against the Reference
Currencies, on average, or equivalently, that the value, on average,
of
the Reference Currencies will increase against the U.S. Dollar, over
the
term of the Notes;
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are
willing to forgo interest payments or any other payments in return
for
100% principal protection if held to maturity, a minimum return of
14.50%
if the U.S. Dollar depreciates, on average, or remains static relative
to
the Reference Currencies and participation of 100% in any depreciation,
on
average, in the value of the U.S. Dollar against the Reference Currencies
to the extent that the Basket Performance exceeds 14.50%;
and
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understand
that the values of the Components may not move in tandem and that
increases in one or more Components may be offset by decreases in
one or
more other Components.
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The
Notes
may not be a suitable investment for you if you:
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seek
current income or dividend payments from your
investment;
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seek
an investment with an active secondary
market;
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are
unable or unwilling to hold the Notes until maturity;
or
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have
a bullish view of the value of the U.S. Dollar against the Reference
Currencies, on average, over the term of the
Notes.
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What
are the U.S. federal income tax consequences of investing in the
Notes?
We
intend
to treat the Notes as contingent payment debt instruments that are not subject
to the special rules for nonfunctional currency contingent payment debt
instruments. We intend to treat the Notes as contingent payment debt instruments
that are subject to taxation as described under the heading “Certain U.S.
Federal Income Tax Considerations—U.S. Federal Income Tax Treatment of the Notes
as Indebtedness for U.S. Federal Income Tax Purposes—Contingent Payment Debt
Instruments” in the accompanying prospectus supplement.
Does
ERISA impose any limitations on purchases of the Notes?
An
employee benefit plan subject to the fiduciary responsibility provisions of
the
Employee Retirement Income Security Act of 1974 (“ERISA”), a plan that is
subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the
“Code”), including individual retirement accounts, individual retirement
annuities or Keogh plans, a governmental or other plan subject to any materially
similar law or any entity the assets of which are deemed to be “plan assets”
under ERISA, Section 4975 of the Code and any applicable regulations, will
be
permitted to purchase, hold and dispose of the Notes, subject to certain
conditions. Such investors should carefully review the discussion under “Certain
ERISA Considerations” herein.
Are
there any risks associated with my investment?
Yes.
The
Notes are subject to a number of risks. You should refer to the section “Risk
Factors” in this pricing supplement and “Risk Factors” in the accompanying
prospectus supplement.
RISK
FACTORS
The
Notes
are 100% principal protected if held to maturity. You will be subject to risks
not associated with conventional fixed-rate or floating-rate debt securities.
Prospective purchasers of the Notes should understand the risks of investing
in
the Notes and should reach an investment decision only after careful
consideration, with their advisers, of the suitability of the Notes in light
of
their particular financial circumstances, the following risk factors and the
other information set forth in this pricing supplement and the accompanying
prospectus supplement and prospectus. These risks include the possibility that
the value of the Basket will fluctuate, and the possibility that you will
receive an amount less than your initial invested principal if the Notes are
sold prior to maturity. We have no control over a number of matters, including
economic, financial, regulatory, geographic, judicial and political events,
that
are important in determining the existence, magnitude, and longevity of these
risks and their impact on the value of, or the payment made on, the
Notes.
You
may lose a significant amount of your principal if you sell your Notes prior
to
maturity.
The
full
principal amount of your Notes is protected against a depreciation of the value,
on average, of the Reference Currencies against the U.S. Dollar, but the payment
you will receive per Note at maturity will equal at least the minimum payment
of
100% of the principal amount of your Notes only if you hold your Notes to
maturity. If you sell your Notes in the secondary market prior to maturity,
you
will not be entitled to 100% principal protection and you may receive less
and
possibly significantly less, than the initial public offering price of $1,000
per Note. Therefore, you should be able and willing to hold your Notes until
maturity.
You
will not receive any interest payments on the Notes.
You
will
not receive any periodic payments of interest or any other periodic payments
on
the Notes. On the Maturity Date, you will receive a payment per Note. Thus,
the
overall return you earn on your Notes may be less than that you would have
earned by investing in a standard debt security of comparable maturity that
bears interest at a prevailing market rate. For more specific information about
the cash payment at maturity and for an illustrative example, you should refer
to the section “Description of the Notes.”
Your
yield,
if any, may be below market interest rates available on standard senior debt
securities.
You
may
receive a payment on your Notes at maturity that is below what we would pay
as
of the issuance date if we had issued non-callable senior debt securities with
a
maturity similar to that of the Notes.
The
Notes are subject to foreign exchange risk.
The
relationship between the U.S. Dollar and the Reference Currencies varies based
on a number of interrelated factors, including economic, financial and political
events or actions that we cannot control. There can be no assurance that the
value of the U.S. Dollar will depreciate, on average, against the Reference
Currencies over the term of the Notes.
The
Components are volatile and are affected by numerous factors specific to each
country represented by a Reference Currency.
The
value
of each Reference Currency relative to the U.S. Dollar, which is primarily
affected by the supply and demand for the respective Reference Currency and
the
U.S. Dollar, may be affected by political, economic, financial, legal,
accounting and tax matters specific to the country in which the Reference
Currency is the official currency. Relevant factors include the possibility
that
exchange controls with respect to the Reference Currency and U.S. Dollar could
be imposed or modified, the possible imposition of regulatory controls or taxes,
the overall growth and performance of the economies of the U.S. and Reference
Currency country, the trade and current account balance between the U.S. and
Reference Currency country, market interventions by the Federal Reserve Board
or
the central bank of the Reference Currency country, inflation, interest rate
levels, the performance of the stock markets in the U.S. and the Reference
Currency country, the stability of the governments and banking systems of the
U.S. and Reference Currency countries, wars in which the U.S. and the Reference
Currency country are directly or indirectly involved or that occur anywhere
in
the world, major natural disasters in the U.S. or the Reference Currency
country, and other foreseeable and unforeseeable events. Factors that may affect
the likelihood of the Reference Currency country imposing exchange control
restrictions include the extent of the country’s foreign currency reserves, the
balance of payments, the extent of governmental surpluses and deficits, the
size
of the country’s debt service burden relative to the economy as a whole,
regional hostilities, terrorist attacks or social unrest, and political
constraints to which the country may be subject. The Reference Currency
country’s government may choose to affect the exchange rate of its currency by
central bank intervention, imposition of regulatory controls, taxes, revaluation
or devaluation of the currency, the issuance of a replacement currency or by
other available means. The value of the Reference Currency may also be affected
by the operation of, and the identity of persons and entities trading on,
interbank and interdealer foreign exchange markets in the U.S. and elsewhere.
Investments
linked to foreign currencies involve risks associated with the currency markets
of those countries, including risks of volatility and governmental intervention
in those markets. There is also generally less publicly available information
about foreign currencies and foreign fiscal and economic policies than there
is
concerning the U.S. Dollar and U.S. fiscal and economic policies.
The
Federative Republic of Brazil.
According to publicly available information, Brazil employs a flexible exchange
rate system and relies on inflation-targeting to influence its monetary policy.
Brazil has defined inflation targets for the upcoming years and given their
Central Bank the responsibility of conducting economic policy in such a way
that
meets their inflationary objectives. Low and consistent inflation is the
overriding long-term objective of Brazil’s monetary policy. The Central Bank has
been given full authority to employ any necessary means by which to control
the
rate of inflation.
The
Russian Federation.
Accordingly to publicly available information, the Russian Central Bank’s goals
are to dampen inflation but maintain price competitiveness. Monetary policy
centers around controlling the nominal exchange rate. In order to even out
the
ruble exchange rate the Central Bank employs three methods: foreign exchange
interventions, deposit operations to regulate the level of ruble liquidity
in
the interbank market, and shifting interest rates on the Bank of Russia
operations in the money market. The Central Bank attempts to maintain a stable
exchange rate while allowing the ruble to gradually move against the dollar
based on market pressures.
The
Republic of India.
According to publicly available information, during the past decade, the Indian
government has pursued policies of economic liberalization and deregulation,
but
the government's role in the economy has remained significant. The Indian
government allows the exchange rate to float freely, without a fixed target
or
band, but will intervene when it deems necessary to preserve stability. It
also
has the ability to restrict the conversion of Rupees into foreign currencies,
and under certain circumstances investors that seek to convert Rupees into
foreign currency must obtain the approval of the Reserve Bank of India.
The
People's Republic of China.
According to publicly available information, since the beginning of 1994, the
Chinese government has used a managed floating exchange rate system, under
which
the People's Bank of China allows the Yuan to float within a specified band
around the central exchange rate that it published daily. In July 2005, the
Bank
revalued the Yuan by 2% and announced that in the future it would set the value
of the Yuan with reference to a basket of currencies rather than solely with
reference to the U.S. Dollar. In addition, the Bank recently announced that
the
reference basket of currencies used to set the value of the Yuan will be based
on a daily poll of market dealers and other undisclosed factors. To the extent
that management of the Yuan results in trading levels that do not fully reflect
market forces, any further changes in the government's management of its
currency could result in significant movement in the exchange rate between
the
Chinese Yuan and the U.S. Dollar.
The
Components may not move in tandem; and increases in one Component may be offset
by declines in another Component.
A
Component may not move in tandem with each of the other Components comprising
the Basket. At a time when the value of one or more of the Reference Currencies
increases relative to the U.S. Dollar, the value of one or more of the other
Reference Currencies may decline. Therefore, in calculating the Basket
Performance, increases in the value of one or more of the Components may be
moderated, or wholly offset, by lesser increases or declines in the value of
one
or more of the other Components.
Changes
in correlation among the Components may adversely affect the value of the
Notes.
Correlation
is the extent to which the levels among the Components comprising the Basket
increase or decrease to the same degree at the same time. To the extent that
correlation among the Components changes, the value of the Notes may be
adversely affected. For example, if one Component increases sharply and the
others decline slightly or remain unchanged, the value of the Basket may
appreciate, which may cause the value of the Notes to decline. Moreover, a
sharp
decrease in the value of one or more of the Reference Currencies relative to
the
others may negatively affect the Basket Performance and, therefore, limit the
cash payment you will receive at maturity to the principal amount of your Notes.
You
must rely on your own evaluation of the merits of an investment in the
Notes.
In
connection with your purchase of the Notes, we urge you to consult your own
financial, tax and legal advisors as to the risks entailed by an investment
in
Notes and to investigate the Reference Currencies, the Components and the Basket
and not rely on our views in any respect. You should make such investigation
as
you deem appropriate as to the merits of an investment in the Notes. In the
ordinary course of our business, we may from time to time express views on
expected movements in the foreign currency markets in general and in the
Components in particular. These views may vary over differing time horizons and
are subject to change without notice. Moreover, other professionals who deal
in
the currency markets may at any time have views that differ significantly from
ours.
The
liquidity, trading value and cash payment at maturity under the Notes could
be
affected by the actions of the governments of the United States and the
countries in which the Reference Currencies are the official
currency.
Governments,
from time to time, may not allow their currencies to float freely in response
to
economic forces or, as is currently the case with China, may use a managed
floating system. Moreover, governments, including those of the United States
and
the countries in which the Reference Currencies are the official currencies,
use
a variety of techniques, such as intervention by their central banks or
imposition of regulatory controls or taxes, to affect the exchange rates of
their respective currencies. Governments may also issue a new currency to
replace an existing currency or alter the exchange rate or relative exchange
characteristics by devaluation or revaluation of a currency. Thus, a special
risk in purchasing the Notes is that their liquidity, trading value and the
amount of cash payment on each Note at maturity could be affected by the actions
of sovereign governments which could change or interfere with currency valuation
and the movement of currencies across borders. There will be no adjustment
or
change in the terms of the Notes in the event that exchange rates should become
fixed, or in the event of any devaluation or revaluation or imposition of
exchange or other regulatory controls or taxes, or in the event of the issuance
of a replacement currency or in the event of any other development affecting
the
Basket or the U.S. Dollar.
The
Interdealer market in foreign currencies is an around-the-clock market; however,
if a secondary market develops, the Notes may trade only during regular trading
hours in the United States.
The
interdealer market for foreign currencies is a global, around-the-clock market.
Therefore, the hours of trading for the Notes may not conform to the hours
during which the Reference Currencies and the U.S. Dollar are traded. To the
extent that U.S. markets are closed while international markets remain open,
significant movements may take place in the underlying foreign exchange markets
that will not be reflected immediately in the price of the Notes. There is
no
systematic reporting of last-sale information for foreign currencies. Reasonable
current bid and offer information is available in certain brokers’ offices and
to others who wish to subscribe for this information, but this information
may
not necessarily reflect the spot rate relevant for determining the value of
the
Notes. The absence of last-sale information and the limited availability of
quotations to individual investors would make it difficult for many investors
to
obtain timely, accurate data about the state of the underlying foreign exchange
markets.
Tax
consequences.
We
intend
to treat the Notes as contingent payment debt instruments that are not subject
to the special rules for nonfunctional currency contingent payment debt
instruments. We intend to treat the Notes as contingent payment debt instruments
that are subject to taxation as described under the heading “Certain U.S.
Federal Income Tax Considerations—U.S. Federal Income Tax Treatment of the Notes
as Indebtedness for U.S. Federal Income Tax Purposes—Contingent Payment Debt
Instruments” in the accompanying prospectus supplement.
The
historical performance of a
Component is not an indication of the future performance of such
Component.
The
historical performances of each Component, which is included in this pricing
supplement, should not be taken as an indication of the future performances
of
such Component. It is impossible to predict whether the value of the Reference
Currencies will fall or rise relative to the U.S. Dollar. The Reference
Currencies will be influenced by the complex and interrelated economic,
financial, regulatory, geographical, judicial, political and other factors
that
can affect the capital markets generally and the currency trading markets in
particular, and by various circumstances that can affect the value of a
particular currency in relation to another currency.
The
price at which you will be able to sell your Notes prior to maturity will depend
on a number of
factors and may be substantially less than you had originally
invested.
If
you
wish to liquidate your investment in the Notes prior to maturity, your only
alternative would be to sell them. At that time, there may be an illiquid market
for Notes or no market at all. Even if you were able to sell your Notes, there
are many factors outside of our control that may affect their trading value.
We
believe that the value of your Notes will be affected by the value and
volatility of the Components regardless of the value of the Basket at any given
time, changes in interest rates in the international markets, the supply of
and
demand for the Notes and a number of other factors. Some of these factors are
interrelated in complex ways; as a result, the effect of any one factor may
be
offset or magnified by the effect of another factor. The price, if any, at
which
you will be able to sell your Notes prior to maturity may be substantially
less
than the amount you originally invested if, at such time, the value of the
Components is greater than, equal to or not sufficiently below the value, on
average, of the Components on the date you purchased the Notes. The following
paragraphs describe the manner in which we expect the trading value of the
Notes
will be affected in the event of a change in a specific factor, assuming all
other conditions remain constant.
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Performance
of the Basket.
We expect that the trading value of the Notes will depend substantially
on
the amount, if any, of depreciation, on average, in the value of
the U.S.
Dollar against the Reference Currencies. If you decide to sell your
Notes
on a date before maturity when the Basket Performance would be positive
if
calculated with such date as the Maturity Date, you may nonetheless
receive substantially less than the amount that would be payable
at
maturity based on that hypothetical Basket Performance because of
expectations that the performance of the Basket will continue to
fluctuate
until the Basket Performance is determined on the Final Fixing Date.
Economic, financial, regulatory, geographical, judicial, political
and
other developments that affect the Components may also affect the
value of
the Notes.
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Volatility
of the Components.
Volatility is the term used to describe the size and frequency of
market
fluctuations. Generally, if the volatility of the Components increases,
the trading value of the Notes will increase; and, if the volatility
of
the Components decreases, the trading value of the Notes will
decrease.
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Interest
rates.
We expect that the trading value of the Notes will be affected by
changes
in interest rates in the international markets. In general, if U.S.
interest rates increase, the value of outstanding debt securities
tends to
decrease; conversely, if U.S. interest rates decrease, the value
of
outstanding debt securities tends to increase. Interest rates also
may
affect the U.S. and international economies and, in turn, the Components
and the performance of the Basket, which would affect the value of
the
Notes.
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Our
credit ratings, financial condition and results of
operations.
Actual or anticipated changes in our current credit ratings (A1 by
Moody’s
Investor Service, Inc., A+ by Fitch Ratings, Ltd. and A+ by Standard
&
Poor’s Rating Services), as well as our financial condition or results
of
operations may significantly affect the trading value of the Notes.
However, because the return on the Notes is dependent upon factors
in
addition to our ability to pay our obligations under the Notes, such
as
the depreciation, on average, of the value of the U.S. Dollar against
the
Reference Currencies, an improvement in our credit ratings, financial
condition or results of operations is not expected to have a positive
effect on the trading value of the
Notes.
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Time
remaining to maturity.
A
“time premium” results from expectations concerning the value of the
Basket during the period prior to the maturity of the Notes. As the
time
remaining to the maturity of the Notes decreases, this time premium
will
likely decrease, potentially adversely affecting the trading value
of the
Notes.
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Size
and liquidity of the secondary market.
The Notes will not be listed on any securities exchange; and there
may not
be a secondary market in the Notes, which may affect the price that
you
receive for your Notes upon any sale prior to maturity. If a secondary
market does develop, there can be no assurance that there will be
liquidity in the secondary market. If the secondary market for the
Notes
is limited, there may be a limited number of buyers for your Notes
if you
do not wish to hold your investment until maturity. This may affect
the
price you receive upon any sale of the Notes prior to maturity. Bear
Stearns has advised us that they intend, under ordinary market conditions,
to indicate prices for the Notes on request. However, we cannot guarantee
that bids for outstanding Notes will be made in the future; nor can
we
predict the price at which any such bids will be
made.
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We
want
you to understand that the effect of one of the factors specified above may
offset some or all of any change in the value of the Notes attributable to
another factor.
You
have no rights to receive any
Component.
Investing
in the Notes will not make you a holder of any Component. The Notes will be
paid
in U.S. Dollars, and you will have no right to receive delivery of a
Component.
The
Calculation Agent is our affiliate which could result in a conflict of
interest.
Bear
Stearns will act as the Calculation Agent. The Calculation Agent will make
certain determinations and judgments in connection with calculating the Basket
Performance or deciding whether a Market Disruption Event has occurred. You
should refer to “Description of the Notes—Discontinuance of a Component” and
“—Market Disruption Events.” Because Bear Stearns is our affiliate, conflicts of
interest may arise in connection with our affiliate performing its role as
Calculation Agent.
Bear
Stearns and its affiliates may, at various times, engage in transactions
involving any of the Reference Currencies to which the Basket relates for their
proprietary accounts, and for other accounts under their management. These
transactions, if effected in substantial size, may influence the value of such
currencies, and therefore the value of the Basket. BSIL, an affiliate of Bear
Stearns, will also be the counterparty to the hedge of our obligations under
the
Notes. You should refer to “Use of Proceeds and Hedging.” Accordingly, under
certain circumstances, conflicts of interest may arise between Bear Stearns’
responsibilities as Calculation Agent with respect to the Notes and BSIL’s
obligations under our hedge.
Trading
and other transactions by us or our affiliates could affect the
values
of the Components, the value of the Basket, the trading value of the Notes
or
the amount you may receive at maturity.
We
and
our affiliates may from time to time buy or sell the Reference Currencies or
any
Components or derivative instruments related to the Reference Currencies or
any
Components for our own accounts in connection with our normal business practices
or in connection with hedging our obligations under the Notes. These trading
activities may present a conflict of interest between your interest in the
Notes
and the interests we and our affiliates may have in our proprietary accounts,
in
facilitating transactions for our other customers and in accounts under our
management. The transactions, if effected in substantial size, could affect
the
Components or the performance of the Basket in a manner that would be adverse
to
your investment in the Notes. See the section “Use of Proceeds and
Hedging.”
Hedging
activities we or our affiliates may engage in may affect the Components and,
accordingly, increase or decrease the trading value of the Notes prior to
maturity and the Cash Settlement Value you would receive at maturity. To the
extent that we or any of our affiliates has a hedge position in either of the
Reference Currencies or any Components, or derivative or synthetic instruments
related to the Reference Currencies or any Components, we or any of our
affiliates may liquidate a portion of such holdings at or about the time of
the
maturity of the Notes. Depending on, among other things, future market
conditions, the aggregate amount and the composition of such hedge positions
are
likely to vary over time. Profits or losses from any of those positions cannot
be ascertained until the position is closed out and any offsetting position
or
positions are taken into account. Although we have no reason to believe that
any
of those activities will have a material effect on the Components, we cannot
assure you that these activities will not affect such prices and the trading
value of the Notes prior to maturity or the cash amount payable at
maturity.
In
addition, we or any of our affiliates may purchase or otherwise acquire a long
or short position in the Notes. We or any of our affiliates may hold or resell
the Notes.
We
or any
of our affiliates may also issue, underwrite or assist unaffiliated entities
in
the issuance or underwriting of other securities or financial instruments with
returns indexed to the Components. By introducing competing products into the
marketplace in this manner, we or our affiliates could adversely affect the
value of the Notes.
One
or
more of our affiliates have published, and may in the future publish, research
reports regarding the currencies to which the Basket relates. This research
may
be modified from time to time without notice and may express opinions or provide
recommendations that are inconsistent with purchasing, holding or selling the
Notes. Any of these activities may affect the trading value of the Notes.
Similarly, we may in the past or may in the future issue Notes that permit
a
purchaser to take a different view with respect to the movements of the
Components than do the Notes (e.g.,
to take
a bullish rather than a bearish view of the U.S. Dollar).
The
cash
payment you receive on the Notes at maturity may be delayed or reduced upon
the
occurrence of a Market Disruption Event, or an Event of
Default.
If
the
Calculation Agent determines that, on the Final Fixing Date, a Market Disruption
Event has occurred or is continuing, the determination of the value of one
or
more Components by the Calculation Agent may be deferred. You should refer
to
the section “Description of the Notes—Market Disruption Events.”
If
the
Calculation Agent determines that an Event of Default (as defined below) has
occurred, you will only receive an amount equal to the trading value of the
Notes on the date of such Event of Default, adjusted by an amount equal to
any
losses, expenses and costs to us of unwinding any underlying hedging or funding
arrangements, all as determined by the Calculation Agent. You should refer
to
the section “Description of the Notes—Events of Default and
Acceleration.”
You
should decide to purchase the Notes only after carefully considering the
suitability of the Notes in light of your particular financial circumstances.
You should also carefully consider the tax consequences of investing in the
Notes. You should refer to the section “Certain U.S. Federal Income Tax
Considerations” and discuss the tax implications with your own tax
advisor.
DESCRIPTION
OF THE NOTES
The
following description of the Notes (referred to in the accompanying prospectus
supplement as the “Currency
Indexed Notes”)
supplements the description of the Notes in the accompanying prospectus
supplement and prospectus. This is a summary and is not complete. You should
read the indenture, dated as of May 31, 1991, as amended (the “Indenture”),
between us and The Bank of New York as successor in interest to JPMorgan Chase
Bank, N.A., as trustee (the “Trustee”).
A
copy of the Indenture is available as set forth under the section of the
prospectus entitled “Where You Can Find More Information.”
General
The
Notes
are part of a single series of debt securities under the Indenture described
in
the accompanying prospectus supplement and prospectus designated as Medium-Term
Notes, Series B. The Notes are unsecured and will rank equally with all of
our
unsecured and unsubordinated debt, including the other debt securities issued
under the Indenture. Because we are a holding company, the Notes will be
effectively subordinated to the claims of creditors of our subsidiaries.
The
aggregate principal amount of the Notes is specified on the cover. The Notes
will mature on the Maturity Date and do not provide for earlier redemption.
The
Notes will be issued only in fully registered form, and in minimum denominations
of $1,000. Initially, the Notes will be issued in the form of one or more global
securities registered in the name of DTC or its nominee, as described in the
accompanying prospectus supplement and prospectus. When we refer to Note or
Notes in this pricing supplement, we mean $1,000 principal amount of Notes.
The
Notes will not be listed on any securities exchange.
You
should refer to the section “Certain U.S. Federal Income Tax Considerations,”
for a discussion of certain federal income tax considerations to you as a holder
of the Notes.
Future
Issuances
Under
certain limited circumstances, and at our sole discretion, we may offer further
issuances of the Notes. These further issuances, if any, will be consolidated
to
form a single series with the Notes and will have the same CUSIP number and
will
trade interchangeably with the Notes immediately upon settlement. Any additional
issuance will increase the aggregate principal amount of the outstanding Notes
of this series, plus the aggregate principal amount of any Notes bearing the
same CUSIP number that are issued pursuant to (i) any 13-day option we grant
to
Bear Stearns, and (ii) any future issuances of Notes bearing the same CUSIP
number. The price of any additional offerings will be determined at the time
of
pricing of each offering, which will be a function of the prevailing market
conditions and performance of the Basket at the time of the relevant
sale.
Interest
We
will
not make any periodic payments of interest on the Notes.
Payment
at Maturity
We
have
designed the Notes for investors who want to protect their investment by
receiving at least 100% of the principal amount of their Notes at maturity,
while also having an opportunity to participate in the potential depreciation,
on average, in the value of the U.S. Dollar against the Reference Currencies,
subject to a minimum return of 14.50%, which is applicable if the Basket
Performance is greater than or equal to 0%. At maturity, we will pay you an
amount in cash per Note, in U.S. Dollars, that is based upon the Basket
Performance.
If,
at
maturity, the Basket Performance is greater than or equal to 0%, the payment
at
maturity per Note will equal $1,000, plus the greater of (a) $1,000 multiplied
by 14.50% and (b) $1,000 multiplied by the Basket Performance.
The
Notes
are 100% principal protected if held to maturity. If the Basket Performance
is
less than 0%, in all cases the payment at maturity per Note will equal
$1,000.
The
“Basket Performance” will be determined by the Calculation Agent and expressed
as a percentage, and will be determined as follows:
For
the
avoidance of doubt, the Basket Performance is greater
when the
Exchange Rates, on average, decline,
as
declining Exchange Rates mean that fewer units of the respective Reference
Currency are required to purchase one U.S. Dollar.
The
Basket is comprised of the Exchange Rates between: (1) the U.S. Dollar and
the Brazilian Real (the “BRL Exchange Rate”); (2) the U.S. Dollar and the
Russian Ruble (the “RUB Exchange Rate”); (3) the U.S. Dollar and the Indian
Rupee (the “INR Exchange Rate”); and (4) the U.S. Dollar and the Chinese
Yuan (the “CNY Exchange Rate” and, together with the BRL Exchange Rate, the RUB
Exchange Rate and the INR Exchange Rate, each a “Component” and collectively the
“Components”), each expressed as the number of units of the Brazilian Real,
Russian Ruble, Indian Rupee or Chinese Yuan (each a “Reference Currency”), as
applicable, per U.S. Dollar. The weighting of each Component is fixed at 25%
and
will not change, unless any Component is modified during the term of the
Notes.
The
“Initial Fixing Level” is 2.1281 with respect to the BRL Exchange Rate (“BRL
Initial”); 26.5023 with respect to the RUB Exchange Rate (“RUB Initial”); 44.24
with respect to the INR Exchange Rate (“INR Initial”); and 7.7735 with respect
to the CNY Exchange Rate (“CNY Initial”).
The
“Final Fixing Level” is, with respect to each Component, the Currency Exchange
Rate on the Final Fixing Date.
The
“Currency Exchange Rate” is, with respect to each Component, the number of units
of the applicable Reference Currency which can be exchanged for one U.S. Dollar,
as stated on the Fixing Page. If no fixing is published on any day, including
the Final Fixing Date, each relevant fixing level shall be determined by the
Calculation Agent (referred to as “BRL Final, “RUB Final”, “INR Final”, and “CNY
Final”, as applicable).
The
“Fixing Page” is, with respect to the BRL Exchange Rate, the PTAX offered side
exchange rate published on Reuters page BRFR; with respect to the RUB Exchange
Rate, the spot exchange rate published on Reuters page RUBMCMEEMTA=; with
respect to the INR Exchange Rate, the spot exchange rate published on Reuters
page RBIB; and with respect to the CNY Exchange Rate, the spot exchange rate
published on Reuters page SAEC.
The
“Final Fixing Date” is January 27, 2009, subject to adjustment as described in
the section “Description of the Notes—Market Disruption Events”.
The
“Pricing Date” of the Notes is January 25, 2007.
The
“Settlement Date” of the Notes is January 29, 2007.
The
“Maturity Date” of the Notes is two Business Days following the Final Fixing
Date.
Illustrative
Examples:
The
following table demonstrating the hypothetical Cash Settlement Value of a Note
is based on the assumptions outlined below. The table does not purport to be
representative of every possible scenario concerning increases or decreases
in
the Components or the Basket Performance. You should not construe this table
as
an indication or assurance of the expected performance of the Notes. Actual
returns may be different. This table demonstrating the hypothetical Cash
Settlement Value of a Note is based on the following assumptions:
|
·
|
Investor
purchases $1,000 aggregate principal amount of Notes at the initial
public
offering price of $1,000.
|
|
·
|
Investor
holds the Notes to maturity.
|
|
·
|
The
Initial Fixing Level is 2.2500 with respect to the BRL Exchange Rate;
26.2500 with respect to the RUB Exchange Rate; 44.7500 with respect
to the
INR Exchange Rate; and 7.8000 with respect to the CNY Exchange
Rate.
|
|
·
|
The
Notes allow you to participate in 100% of the potential positive
Basket
Performance (i.e.,
the potential depreciation, on average, of the value of the U.S.
Dollar
against the Reference Currencies).
|
|
·
|
All
returns are based on a 2-year term; pre-tax
basis.
|
|
·
|
No
Market Disruption Events or Events of Default occur during the term of the
Notes.
|
Hypothetical
Example 1: In this case, the Basket Performance is 20% as of the Final Fixing
Date.
Step
1: Calculate the Basket Performance.
Component
|
|
Hypothetical
Final
Fixing
Level
|
|
Performance
of Component
|
|
Weight
|
|
Weighted
Performance of Component
|
|
BRL
Exchange Rate
|
|
|
1.7000
|
|
|
24.44
|
%
|
|
25.00
|
%
|
|
6.11
|
%
|
RUB
Exchange Rate
|
|
|
20.0000
|
|
|
23.81
|
%
|
|
25.00
|
%
|
|
5.95
|
%
|
INR
Exchange Rate
|
|
|
38.0000
|
|
|
15.08
|
%
|
|
25.00
|
%
|
|
3.77
|
%
|
CNY
Exchange Rate
|
|
|
6.5000
|
|
|
16.67
|
%
|
|
25.00
|
%
|
|
4.17
|
%
|
Basket
Performance
|
|
|
|
|
|
|
|
|
|
|
|
20.00
|
%
|
Step
2: Calculate the Cash Settlement Value.
Because
the Basket Performance is greater than 0% and greater than 14.50% as of the
Final Fixing Date, the Cash Settlement Value is equal to (a) $1,000 plus (b)
$1,000 multiplied by the Basket Performance. Therefore, the Cash Settlement
Value is $1,200 per Note representing a 20.00% return on investment over the
term of the Notes.
Hypothetical
Example 2: In this case, the Basket Performance is negative as of the Final
Fixing Date.
Step
1: Calculate the Basket Performance.
Component
|
|
Hypothetical
Final
Fixing
Level
|
|
Performance
of Component
|
|
Weight
|
|
Weighted
Performance
of Component
|
|
BRL
Exchange Rate
|
|
|
2.6000
|
|
|
-15.56
|
%
|
|
25.00
|
%
|
|
-3.89
|
%
|
RUB
Exchange Rate
|
|
|
30.0000
|
|
|
-14.29
|
%
|
|
25.00
|
%
|
|
-3.57
|
%
|
INR
Exchange Rate
|
|
|
50.0000
|
|
|
-11.73
|
%
|
|
25.00
|
%
|
|
-2.93
|
%
|
CNY
Exchange Rate
|
|
|
6.5000
|
|
|
16.67
|
%
|
|
25.00
|
%
|
|
4.17
|
%
|
Basket
Perfomance
|
|
|
|
|
|
|
|
|
|
|
|
-6.22
|
%
|
Step
2: Calculate the Cash Settlement Value.
The
Basket Performance is less than 0% as of the Final Fixing Date. Therefore,
the
Cash Settlement Value is $1,000 per Note, representing the principal amount
of
the notes, and a 0.00% return on investment over the term of the
Notes.
Hypothetical
Example 3: In this case, the Basket Performance is positive as of the Final
Fixing Date, but it is less than 14.50%.
Step
1: Calculate the Basket Performance.
Component
|
|
Hypothetical
Final
Fixing
Level
|
|
Performance
of Component
|
|
Weight
|
|
Weighted
Performance
of Component
|
|
BRL
Exchange Rate
|
|
|
2.1500
|
|
|
4.44
|
%
|
|
25.00
|
%
|
|
1.11
|
%
|
RUB
Exchange Rate
|
|
|
27.0000
|
|
|
-2.86
|
%
|
|
25.00
|
%
|
|
-0.72
|
%
|
INR
Exchange Rate
|
|
|
45.0000
|
|
|
-0.56
|
%
|
|
25.00
|
%
|
|
-0.14
|
%
|
CNY
Exchange Rate
|
|
|
7.5000
|
|
|
3.85
|
%
|
|
25.00
|
%
|
|
0.96
|
%
|
Basket
Performance
|
|
|
|
|
|
|
|
|
|
|
|
1.22
|
%
|
Step
2: Calculate the Cash Settlement Value.
Because
the Basket Performance is greater than 0% but less than the minimum return
of
14.50% as of the Final Fixing Date, the Cash Settlement Value is equal to (a)
$1,000 plus (b) $1,000 multiplied by 14.50%. Therefore, the Cash Settlement
Value is $1,145.00 per Note representing a 14.50% return on investment over
the
term of the Notes.
Discontinuance
of a
Component
If
the
Calculation Agent determines that a Reference Currency has been removed from
circulation or otherwise discontinued and banks dealing in foreign exchange
and
foreign currency deposits in the Reference Currency have commenced trading
a
successor or substitute currency substantially similar to the Reference Currency
that the Calculation Agent determines to be comparable to the Reference Currency
(the “Successor Currency”) (the number of units of such Successor Currency which
can be exchanged for one U.S. Dollar on the relevant Final Fixing Date being
referred to herein as the “Successor Component”), then the Basket Performance
will be determined by reference to the Successor Component at the time
determined by the Calculation Agent on the markets for the Successor Currency
on
the Final Fixing Date.
If
the
Calculation Agent determines that any Successor Component shall be utilized
for
purposes of calculating the Basket Performance, the Calculation Agent will
make
such calculations and adjustments as may be necessary in order to arrive at
the
Basket Performance.
Upon
any
selection by the Calculation Agent of a Successor Currency, the Calculation
Agent will notify us and the Trustee, who will provide notice to you. If a
Successor Currency is selected by the Calculation Agent, the Successor Currency
will be used as a substitute for the Reference Currency for all purposes,
including for purposes of calculating the Cash Settlement Value and determining
whether a Market Disruption Event exists.
If
the
Calculation Agent determines that (i) it is unable to determine the Basket
Performance or Successor Currency for two consecutive Business Days, or (ii)
that a Reference Currency has been removed from circulation or otherwise
discontinued and that no Successor Currency is available at such time, the
Calculation Agent will determine the value of the Component relating to such
Reference Currency to be used for the Basket Performance. Notwithstanding the
foregoing, if a Reference Currency has been removed from circulation or
otherwise discontinued, and the Calculation Agent determines that no Successor
Currency is available at such time and no Successor Currency is likely to become
available, the Calculation Agent may (i) at maturity, calculate the Basket
Performance without regard to the Component relating to such Reference Currency,
or (ii) accelerate the Maturity Date for the Notes, calculate the Basket
Performance as specified above and calculate the Cash Settlement Value based
upon such Basket Performance.
Market
Disruption Events
If
there
is a Market Disruption Event with respect to a Component on the date on which
the Basket Performance is to be determined, the Final Fixing Level with respect
to that Component will be determined on the basis of the first succeeding
Component Business Day on which there is no Market Disruption Event with respect
to that Component. In no event, however, will the date with respect to which
the
Final Fixing Level with respect to that Component is determined be a date that
is more than two Component Business Days following the original date that,
but
for the Market Disruption Event, would have been utilized to determine the
Basket Performance. In that case, the second Component Business Day will be
deemed to be the Final Fixing Date, notwithstanding the Market Disruption Event,
and the Calculation Agent will determine the Basket Performance on that second
Component Business Day in accordance with the method of calculating the Basket
Performance in effect prior to the Market Disruption Event (that would have
prevailed but for such suspension or limitation) as of that second Component
Business Day.
A
“Market
Disruption Event”
means
any of the following events, as determined by the Calculation
Agent:
(a) the
occurrence or existence of any condition or event (other than an event described
in (b) below) which the Calculation Agent determines is material that, at any
time, disrupts or impairs (as determined by the Calculation Agent) the ability
of market participants in general through legal channels to (A) convert a
Reference Currency or any Successor Currency into U.S. Dollars, (B) deliver
U.S.
Dollars from accounts within the Local Jurisdiction for the any Reference
Currency or any Successor Currency, to accounts outside such jurisdiction,
or
(C) to deliver any Reference Currency or any Successor Currency between accounts
within the Local Jurisdiction to a person that is a non-resident of such
jurisdiction; or
(b)
any
other event that, in the determination of the Calculation Agent, materially
interferes with our ability or our affiliates’ ability to unwind all or a
material portion of a hedge with respect to the Notes that we or our affiliates
have effected or may effect.
Redemption;
Defeasance
The
Notes
are not subject to redemption before maturity, and are not subject to the
defeasance provisions described in the section “Description of Debt
Securities—Defeasance” in the accompanying prospectus.
Events
of Default and Acceleration
If
an
Event of Default (as defined in the accompanying prospectus) with respect to
any
Notes has occurred and is continuing, then the amount payable to you, as a
beneficial owner of a Note, upon any acceleration permitted by the Notes will
be
equal to the cash payment at maturity calculated as though the date of early
repayment were the Maturity Date of the Notes, adjusted by an amount equal
to
any losses, expenses and costs to us of unwinding any underlying or related
hedging or funding arrangements, all as determined by the Calculation Agent.
If
a bankruptcy proceeding is commenced in respect of us, the claims of the holder
of a Note may be limited under Title 11 of the United States Code.
Same-Day
Settlement and Payment
Settlement
for the Notes by Bear Stearns will be made in immediately available funds.
Payments of the Cash Settlement Value will be made by us in immediately
available funds, so long as the Notes are maintained in book-entry
form.
Calculation
Agent
The
Calculation Agent for the Notes will be Bear Stearns. All determinations made
by
the Calculation Agent will be at the sole discretion of the Calculation Agent
and will be conclusive for all purposes and binding on the Company and the
beneficial owners of the Notes, absent manifest error and provided the
Calculation Agent shall be required to act in good faith in making any
determination. Manifest error by the Calculation Agent, or any failure by it
to
act in good faith, in making a determination adversely affecting the payment
of
principal, interest or premium on principal to Holders would entitle the
Holders, or the Trustee acting on behalf of the Holders, to exercise rights
and
remedies available under the Indenture. If the Calculation Agent uses its
discretion to make any determination, the Calculation Agent will notify the
Company and the Trustee, who will provide notice to the registered holders
of
the Notes.
DESCRIPTION
OF THE BASKET
General
We
obtained all information regarding the Reference Currencies and the Components
contained in this pricing supplement from publicly available information without
independent verification. We do not assume any responsibility for the accuracy
or completeness of any information relating to the Reference Currencies or
the
Components.
The
weighting of each Component is fixed at 25% and will not change, unless any
Component is modified during the term of the Notes.
Historical
Data on the Components
The
tables below were constructed using historical data regarding the Components.
The historical data is for illustrative purposes and is not indicative of the
future performance of the Components or the future value of the Notes. While
the
value of the Components will determine the performance of the Basket, it is
impossible to predict whether the performance of the Basket will rise or fall
during the term of the Notes. Trading prices of the Components will be
influenced by both the complex and interrelated political, economic, financial
and other factors that can affect the currency markets generally and the markets
for the Components in particular. Any historical upward or downward trend in
the
value of the Components during any period set forth below is not an indication
that the Components are more or less likely to increase or decrease at any
time
during the term of the Notes. All information in the tables that follow was
obtained from Bloomberg, without independent verification.
The
tables below set forth the highest and lowest daily levels during the applicable
quarter, as well as the end-of-quarter closing levels of the Components for
each
Component for each quarter beginning with January 1, 2001 (expressed as the
number of units of the respective Component which can be exchanged for one
U.S.
Dollar.
BRL
Exchange Rate
|
Period
End
|
2001
|
|
First
Quarter
|
2.153
|
Second
Quarter
|
2.311
|
Third
Quarter
|
2.670
|
Fourth
Quarter
|
2.311
|
2002
|
|
First
Quarter
|
2.325
|
Second
Quarter
|
2.818
|
Third
Quarter
|
3.740
|
Fourth
Quarter
|
3.540
|
2003
|
|
First
Quarter
|
3.353
|
Second
Quarter
|
2.844
|
Third
Quarter
|
2.900
|
Fourth
Quarter
|
2.892
|
2004
|
|
First
Quarter
|
2.895
|
Second
Quarter
|
3.085
|
Third
Quarter
|
2.861
|
Fourth
Quarter
|
2.656
|
2005
|
|
First
Quarter
|
2.679
|
Second
Quarter
|
2.333
|
Third
Quarter
|
2.228
|
Fourth
Quarter
|
2.336
|
2006
|
|
First
Quarter
|
2.164
|
Second
Quarter
|
2.165
|
Third
Quarter
|
2.169
|
Fourth
Quarter
|
2.136
|
RUB
Exchange Rate
|
Period
End
|
2001
|
|
First
Quarter
|
28.760
|
Second
Quarter
|
29.147
|
Third
Quarter
|
29.467
|
Fourth
Quarter
|
30.505
|
2002
|
|
First
Quarter
|
31.210
|
Second
Quarter
|
31.475
|
Third
Quarter
|
31.690
|
Fourth
Quarter
|
31.955
|
2003
|
|
First
Quarter
|
31.386
|
Second
Quarter
|
30.366
|
Third
Quarter
|
30.587
|
Fourth
Quarter
|
29.243
|
2004
|
|
First
Quarter
|
28.519
|
Second
Quarter
|
29.070
|
Third
Quarter
|
29.223
|
Fourth
Quarter
|
27.720
|
2005
|
|
First
Quarter
|
27.862
|
Second
Quarter
|
28.630
|
Third
Quarter
|
28.498
|
Fourth
Quarter
|
28.741
|
2006
|
|
First
Quarter
|
27.705
|
Second
Quarter
|
26.846
|
Third
Quarter
|
26.796
|
Fourth
Quarter
|
26.326
|
INR
Exchange Rate
|
Period
End
|
2001
|
|
First
Quarter
|
46.615
|
Second
Quarter
|
47.040
|
Third
Quarter
|
47.860
|
Fourth
Quarter
|
48.245
|
2002
|
|
First
Quarter
|
48.815
|
Second
Quarter
|
48.885
|
Third
Quarter
|
48.375
|
Fourth
Quarter
|
47.975
|
2003
|
|
First
Quarter
|
47.470
|
Second
Quarter
|
46.488
|
Third
Quarter
|
45.760
|
Fourth
Quarter
|
45.625
|
2004
|
|
First
Quarter
|
43.600
|
Second
Quarter
|
46.060
|
Third
Quarter
|
45.950
|
Fourth
Quarter
|
43.460
|
2005
|
|
First
Quarter
|
43.745
|
Second
Quarter
|
43.485
|
Third
Quarter
|
44.015
|
Fourth
Quarter
|
45.050
|
2006
|
|
First
Quarter
|
44.623
|
Second
Quarter
|
46.040
|
Third
Quarter
|
45.925
|
Fourth
Quarter
|
44.260
|
CNY
Exchange Rate
|
Period
End
|
2001
|
|
First
Quarter
|
8.278
|
Second
Quarter
|
8.277
|
Third
Quarter
|
8.277
|
Fourth
Quarter
|
8.277
|
2002
|
|
First
Quarter
|
8.277
|
Second
Quarter
|
8.277
|
Third
Quarter
|
8.277
|
Fourth
Quarter
|
8.277
|
2003
|
|
First
Quarter
|
8.277
|
Second
Quarter
|
8.278
|
Third
Quarter
|
8.277
|
Fourth
Quarter
|
8.277
|
2004
|
|
First
Quarter
|
8.277
|
Second
Quarter
|
8.277
|
Third
Quarter
|
8.277
|
Fourth
Quarter
|
8.277
|
2005
|
|
First
Quarter
|
8.276
|
Second
Quarter
|
8.276
|
Third
Quarter
|
8.092
|
Fourth
Quarter
|
8.070
|
2006
|
|
First
Quarter
|
8.017
|
Second
Quarter
|
7.994
|
Third
Quarter
|
7.904
|
Fourth
Quarter
|
7.805
|
Foreign
Exchange Market
The
foreign exchange market is the largest and most liquid financial market in
the
world. The foreign exchange market is predominantly an over-the-counter market,
with no fixed location and it operates 24 hours a day, seven days a week.
London, New York City and Tokyo are the principal geographic centers of the
world-wide foreign exchange market. Other, smaller markets include Singapore,
Zurich and Frankfurt.
There
are
three major kinds of transactions in the traditional foreign exchange markets:
spot transactions, outright forwards and foreign exchange swaps. “Spot” trades
are foreign exchange transactions that settle typically within two business
days
with the counterparty to the trade. “Forward” trades are transactions that
settle on a date beyond spot, and “swap” transactions are transactions in which
two parties exchange two currencies on one or more specified dates over an
agreed period and exchange them again when the period ends. There also are
transactions in currency options, which trade both over-the-counter and, in
the
U.S., on the Philadelphia Stock Exchange. Currency futures are transactions
in
which an institution buys or sells a standardized amount of foreign currency
on
an organized exchange for delivery on one of several specified dates, but
typically closes out the contract prior to making or taking delivery. Currency
futures are traded in a number of regulated markets, including the International
Monetary Market division of the Chicago Mercantile Exchange, the Singapore
Exchange Derivatives Trading Limited (formerly the Singapore International
Monetary Exchange) and the London International Financial Futures
Exchange.
Participants
in the foreign exchange market have various reasons for participating.
Multinational corporations and importers need foreign currency to acquire
materials or goods from abroad. Banks and multinational corporations sometimes
require specific wholesale funding for their commercial loan or other foreign
investment portfolios. Some participants hedge open currency exposure through
off-balance-sheet products.
The
primary market participants in foreign exchange are banks (including
government-controlled central banks), investment banks, money managers,
multinational corporations and institutional investors. The most significant
participants are the major international commercial banks that act both as
brokers and as dealers. In their dealer role, these banks maintain long or
short
positions in a currency and seek to profit from changes in exchange rates.
In
their broker role, the banks handle buy and sell orders from commercial
customers, such as multinational corporations. The banks earn commissions when
acting as agent. They profit from the spread between the rates at which they
buy
and sell currency for customers when they act as principal.
CERTAIN
U.S.
FEDERAL INCOME TAX CONSIDERATIONS
The
following discussion (in conjunction with the discussion in the prospectus
supplement) summarizes certain of the material U.S. federal income tax
consequences of the purchase, beneficial ownership, and disposition of the
Notes. We intend to treat the Notes as contingent payment debt instruments
that
are not subject to the special rules for nonfunctional currency contingent
payment debt instruments. We intend to treat the Notes as contingent payment
debt instruments that are subject to taxation as described under the heading
“Certain U.S. Federal Income Tax Considerations—U.S. Federal Income Tax
Treatment of the Notes as Indebtedness for U.S. Federal Income Tax
Purposes—Contingent Payment Debt Instruments” in the accompanying prospectus
supplement. Pursuant to the terms of the notes, each Holder agree to treat
the
Notes consistent with our treatment for all U.S. federal income tax
purposes.
CERTAIN
ERISA CONSIDERATIONS
Section
4975 of the Code prohibits the borrowing of money, the sale of property and
certain other transactions involving the assets of plans that are qualified
under the Code (“Qualified Plans”) or individual retirement accounts (“IRAs”)
and persons who have certain specified relationships to them. Section 406 of
the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), prohibits
similar transactions involving employee benefit plans that are subject to ERISA
(“ERISA Plans”). Qualified Plans, IRAs and ERISA Plans are referred to as
“Plans.”
Persons
who have such specified relationships are referred to as “parties in interest”
under ERISA and as “disqualified persons” under the Code. “Parties in interest”
and “disqualified persons” encompass a wide range of persons, including any
fiduciary (for example, investment manager, trustee or custodian) of a Plan,
any
person providing services (for example, a broker) to a Plan, the Plan sponsor,
an employee organization any of whose members are covered by the Plan, and
certain persons related to or affiliated with any of the
foregoing.
The
purchase and/or holding of securities by a Plan with respect to which we, Bear
Stearns and/or certain of our affiliates is a fiduciary and/or a service
provider (or otherwise is a “party in interest” or “disqualified person”) would
constitute or result in a prohibited transaction under Section 406 of ERISA
or
Section 4975 of the Code, unless such securities are acquired or held pursuant
to and in accordance with an applicable statutory or administrative exemption.
Each of us, Bear Stearns is considered a "disqualified person" under the Code
or
"party in interest" under ERISA with respect to many Plans, although neither
we
nor Bear Stearns can be a "party in interest" to any IRA other than certain
employer-sponsored IRAs, as only employer-sponsored IRAs are covered by
ERISA.
Applicable
administrative exemptions may include certain prohibited transaction class
exemptions (for example, Prohibited Transaction Class Exemption (“PTCE”) 84−14
relating to qualified professional asset managers, PTCE 96−23 relating to
certain in-house asset managers, PTCE 91−38 relating to bank collective
investment funds, PTCE 90−1 relating to insurance company separate accounts and
PTCE 95−60 relating to insurance company general accounts).
It
should
also be noted that the recently enacted Pension Protection Act of 2006 contains
a new statutory exemption from the prohibited transaction provisions of Section
406 of ERISA and Section 4975 of the Code for transactions involving certain
parties in interest or disqualified persons who are such merely because they
are
a service provider to a Plan, or because they are related to a service provider.
Generally, the new exemption would be applicable if the party to the transaction
with the Plan is a party in interest or a disqualified person to the Plan but
is
not (i) an employer, (ii) a fiduciary who has or exercises any discretionary
authority or control with respect to the investment of the Plan assets involved
in the transaction, (iii) a fiduciary who renders investment advice (within
the
meaning of ERISA and Section 4975 of the Code) with respect to those assets,
or
(iv) an affiliate of (i), (ii) or (iii). Any Plan fiduciary relying on this
new
statutory exemption (Section 408(b)(17) of ERISA and Section 4975(d)(20) of
the
Code) and purchasing securities on behalf of a Plan will be deemed to represent
that (x) the fiduciary has made a good faith determination that the Plan is
paying no more than, and is receiving no less than, adequate consideration
in
connection with the transaction and (y) neither we, Bear Stearns, nor any of
our
affiliates directly or indirectly exercises any discretionary authority or
control or renders investment advice (as defined above) with respect to the
assets of the Plan which such fiduciary is using to purchase the Notes, both
of
which are necessary preconditions to utilizing this new exemption. Any purchaser
that is a Plan is encouraged to consult with counsel regarding the application
of the new exemption.
A
fiduciary that causes a Plan to engage, directly or indirectly, in a non-exempt
prohibited transaction may be subject to a penalty under ERISA, and may be
liable for any losses to the Plan resulting from such transaction. Code Section
4975 generally imposes an excise tax on disqualified persons who engage,
directly or indirectly, in non-exempt transactions with the assets of Plans
subject to such Section. If an IRA engages in a prohibited transaction, the
assets of the IRA are deemed to have been distributed to the IRA
beneficiaries.
In
accordance with ERISA’s general fiduciary requirements, a fiduciary with respect
to any ERISA Plan who is considering the purchase of securities on behalf of
such plan should consider the foregoing information and the information set
forth in the applicable prospectus supplement and any applicable pricing
supplement, and should determine whether such purchase is permitted under the
governing plan document and is prudent and appropriate for the ERISA Plan in
view of its overall investment policy and the composition and diversification
of
its portfolio. Fiduciaries of Plans established with, or for which services
are
provided by, us, Bear Stearns, and/or certain of our affiliates should consult
with counsel before making any acquisition. Each purchaser of any securities,
the assets of which constitute the assets of one or more Plans, and each
fiduciary that directs such purchaser with respect to the purchase or holding
of
such securities, will be deemed to represent that the purchase, holding and
disposition of the securities does not and will not constitute a prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code for which
an
exemption is not available.
Certain
employee benefit plans, such as governmental plans (as defined in Section 3(32)
of ERISA) and, if no election has been made under Section 410(d) of the Code,
church plans (as defined in Section 3(33) of ERISA), are not subject to Section
406 of ERISA or Section 4975 of the Code. However, such plans may be subject
to
the provisions of applicable federal, state or local law (“Similar Law”) similar
to the foregoing provisions of ERISA or the Code. Fiduciaries of such plans
(“Similar Law Plans”) should consider applicable Similar Law when investing in
the securities. Each fiduciary of a Similar Law Plan will be deemed to represent
that the Similar Law Plan’s acquisition and holding of the securities will not
result in a non-exempt violation of applicable Similar Law.
The
sale
of any security to a Plan or a Similar Law Plan is in no respect a
representation by us or any of our affiliates that such an investment meets
all
relevant legal requirements with respect to investments by Plans or Similar
Law
Plans generally or any particular Plan or Similar Law Plan, or that such an
investment is appropriate for a Plan or a Similar Law Plan generally or any
particular Plan or Similar Law Plan.
USE
OF PROCEEDS AND HEDGING
At
closing we will transfer the net proceeds from the sale of the Notes to BSIL,
for its general corporate purposes. In addition, BSIL, on or before the date
of
this pricing supplement, will enable us to hedge our anticipated exposure in
connection with the Notes by the purchase and sale of exchange-traded and
over-the-counter options on, or other derivative or synthetic instruments
related to, the Reference Currencies or any Component, cash or forward contract
positions in the Reference Currencies, futures contracts on the Components
and/or options on such futures contracts. At various times after the initial
offering and before the maturity of the Notes, depending on market conditions
(including the levels of the Components), in connection with hedging with
respect to the Notes, we expect that BSIL will increase or decrease those
initial hedging positions using dynamic hedging techniques and may take long
or
short positions in listed or over-the-counter options contracts on, or other
derivative or synthetic instruments related to, the Reference Currencies or
any
Component, cash or forward contracts in the relevant Reference Currencies,
futures contracts on the Components and/or options on such future contracts.
In
addition, BSIL may periodically purchase or otherwise acquire a long or short
position in the Notes and may, in our or its discretion, hold or resell such
Notes. BSIL may also take positions in other types of appropriate financial
instruments that may become available in the future. If BSIL has a long hedge
position in the Reference Currencies or any Component, or options contracts
in,
or other derivative or synthetic instruments related to the Reference Currencies
or any Component, then BSIL may liquidate a portion of its holdings at or about
the time of the maturity of the Notes. Depending on, among other things, future
market conditions, the total amount and the composition of such positions are
likely to vary over time. BSIL will not be able to ascertain our profits or
losses from any hedging position until such position is closed out and any
offsetting position or positions are taken into account. Although we have no
reason to believe that such hedging activity will have a material effect on
the
price of such options, currencies, futures contracts or options on futures
contracts or on the Components, we cannot guarantee that BSIL will not affect
such prices or Components as a result of its hedging activities. You should
also
refer to “Use of Proceeds” in the accompanying prospectus.
SUPPLEMENTAL
PLAN OF DISTRIBUTION
Subject
to the terms and conditions set forth in the Distribution Agreement dated as
of
June 19, 2003, as amended, we have agreed to sell to Bear Stearns, as
principal, and Bear Stearns has agreed to purchase from us, the aggregate
principal amount of Notes set forth opposite its name below.
Agents
|
|
Principal
Amount of Notes
|
|
Bear,
Stearns & Co. Inc.
|
|
$
|
6,250,000
|
|
Total
|
|
$
|
6,250,000
|
|
The
agents intend to initially offer $6,250,000 of the Notes to the public at the
offering price set forth on the cover page of this pricing supplement, and
to
subsequently resell the remaining face amount of the Notes at prices related
to
the prevailing market prices at the time of resale. In the future, the agents
may repurchase and resell the Notes in market-making transactions, with resales
being made at prices related to prevailing market prices at the time of resale
or at negotiated prices. We will offer the Notes to Bear Stearns at a discount
of 1.50% of the price at which the Notes are offered to the public. Bear Stearns
may reallow a discount to other agents not in excess of 1.50% of the public
offering price.
In
order
to facilitate the offering of the Notes, we may grant the agents a 13-day option
from the date of the final pricing supplement, to purchase from us up to an
additional $937,500 of Notes at the public offering price, less the agent’s
discount, to cover any over-allotments. The agents may over-allot or effect
transactions which stabilize or maintain the market price of the Notes at a
level higher than that which might otherwise prevail in the open market.
Specifically, the agents may over-allot or otherwise create a short position
in
the Notes for its own account by selling more Notes than have been sold to
them
by us. If this option is exercised, in whole or in part, subject to certain
conditions, the agents will become obligated to purchase from us and we will
be
obligated to sell to the agents an amount of Notes equal to the amount of the
over-allotment exercised. The Agents may elect to cover any such short position
by purchasing Notes in the open market.
Payment
of the purchase price shall be made in funds that are immediately available
in
New York City.
The
agents may be deemed to be “underwriters” within the meaning of the Securities
Act. We have agreed to indemnify the agents against or to make contributions
relating to certain civil liabilities, including liabilities under the
Securities Act. We have agreed to reimburse the agents for certain
expenses.
The
Notes
are a new issue of securities with no established secondary market. The Notes
will not be listed on any securities exchange; and we do not expect a secondary
market to develop. Bear Stearns has advised us that, following completion of
the
offering of the Notes, it intends under ordinary market conditions, to indicate
prices for the Notes on request, although it is under no obligation to do so
and
may discontinue any market-making activities at any time without notice.
Accordingly, no guarantees can be given as to whether an active secondary market
for the Notes will develop or, if such a secondary market develops, as to the
liquidity of such secondary market. We cannot guarantee that bids for
outstanding Notes will be made in the future; nor can we predict the price
at
which any such bids will be made. The Notes will cease trading as of the close
of business on the Maturity Date.
Bear
Stearns may stabilize or maintain the price of the Notes by bidding for or
purchasing Notes in the open market and may impose penalty bids, under which
selling concessions allowed to syndicate members or other broker-dealers
participating in the offering are reclaimed if Notes previously distributed
in
the offering are repurchased in connection with stabilization transactions
or
otherwise. The effect of these transactions may be to stabilize or maintain
the
market price of the Notes at a level above that which might otherwise prevail
in
the open market. The imposition of a penalty bid may also affect the price
of
the Notes to the extent that it discourages resales of Notes. No representation
is made as to the magnitude or effect of any such stabilization or other
transactions. Such stabilizing, if commenced, may be discontinued at any time
and in any event shall be discontinued within a limited period. No other party
may engage in stabilization.
Because
Bear Stearns is our wholly-owned subsidiary, each distribution of the Notes
will
conform to the requirements set forth in Rule 2720 of the NASD Conduct
Rules.
LEGAL
MATTERS
The
validity of the Notes will be passed upon for us by Cadwalader, Wickersham
&
Taft LLP, New York, New York.
|
|
|
You
should only rely on the information contained in this pricing
supplement,
the accompanying prospectus supplement and prospectus. We have
not
authorized anyone to provide you with information or to make
any
representation to you that is not contained in this pricing supplement,
the accompanying prospectus supplement and prospectus. If anyone
provides
you with different or inconsistent information, you should not
rely on it.
This pricing supplement, the accompanying prospectus supplement
and
prospectus are not an offer to sell these securities, and these
documents
are not soliciting an offer to buy these securities, in any jurisdiction
where the offer or sale is not permitted. You should not under
any
circumstances assume that the information in this pricing supplement,
the
accompanying prospectus supplement and prospectus is correct
on any date
after their respective dates.
|
|
The
Bear Stearns
Companies
Inc.
$6,250,000
Medium-Term
Notes, Series B
Linked
to the Strengthening of the Brazilian
Real,
Russian Ruble, Indian Rupee and
Chinese
Yuan Exchange Rates against the
U.S.
Dollar
$6,250,000
100% Principal Protected Notes
PRICING
SUPPLEMENT
|
TABLE
OF CONTENTS
|
|
Pricing
Supplement
|
|
|
Page
|
|
Summary
|
PS-2
|
|
Key
Terms
|
PS-4
|
|
Questions
and Answers
|
PS-6
|
|
Risk
Factors
|
PS-10
|
|
Description
of the Notes
|
PS-15
|
|
Description
of the Basket
|
PS-20
|
|
Certain
U.S. Federal Income Tax Considerations
|
PS-24
|
|
Certain
ERISA Considerations
|
PS-24
|
|
Use
of Proceeds and Hedging
|
PS-26
|
|
Supplemental
Plan of Distribution
|
PS-26
|
|
Legal
Matters
|
PS-27
|
|
Prospectus
Supplement
|
|
Risk
Factors
|
S-3
|
|
Pricing
Supplement
|
S-8
|
|
Description
of Notes
|
S-8
|
|
Certain
US Federal Income Tax Considerations
|
S-32
|
|
Supplemental
Plan of Distribution
|
S-46
|
|
Listing
|
S-47
|
|
Validity
of the Notes
|
S-47
|
|
Glossary
|
S-47
|
|
Prospectus
|
|
Where
You Can Find More Information
|
1
|
|
The
Bear Stearns Companies Inc.
|
2
|
|
Use
of Proceeds
|
4
|
|
Description
of Debt Securities
|
4
|
|
Description
of Warrants
|
16
|
|
Description
of Preferred Stock
|
21
|
|
Description
of Depositary Shares
|
25
|
|
Description
of Depository Contracts
|
28
|
|
Description
of Units
|
31
|
|
Book-Entry
Procedures and Settlement
|
33
|
|
Limitations
on Issuance of Bearer Debt Securities and Bearer Warrants
|
43
|
|
Plan
of Distribution
|
44
|
|
ERISA
Considerations
|
48
|
|
Legal
Matters
|
49
|
|
Experts
|
49
|
|