|
|
|
|
|
Title
of Each Class of Securities Offered
|
|
Maximum
Aggregate Offering Price
|
|
Amount
of
Registration
Fee(1)
|
Medium-Term
Notes, Series B
|
|
$10,400,000
|
|
$1,112.80
|
(1)
Calculated in accordance with Rule 457(r) of the Securities Act of 1933, as
amended. The filing fee of $1,112.80 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.
$10,400,000
Medium-Term Notes, Linked to a Portfolio of Indices and Index
Funds
Due
May
11, 2012
|
·
|
The
Notes are fully principal protected if held to maturity and are
linked to
the potential positive performance of a portfolio comprised of
eight
indices and two index funds. The following are the eight indices
and their
respective weightings in the portfolio: (1) 25% the Dow Jones EURO
STOXX
50® Index; (2) 20% the Nikkei 225™ Stock Index; (3) 10% the
FTSE/Xinhua China 25 Index; (4) 10% the CECEEUR Index; (5) 10%
the FTSE
100 Index; (6) 5% the KOSPI 200 Index; (7) 5% the Swiss Market
Index and
(8) 5% the S&P/ASX 200 Index (each such index an “Index” and together
the “Indices”). The following are the two index funds and their respective
weightings in the portfolio: (1) 5% the iShares MSCI South Africa
Index
Fund and (2) 5% the iShares MSCI Taiwan Index Fund (each such index
fund
an “Index Fund” and together the “Index Funds”). Each such Index or Index
Fund will be a “Component” and the ten Components together will constitute
the “Portfolio”. When we refer to “Note” or “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,
which is
based on the appreciation, if any, in the Portfolio over the term
of the
Notes as measured by the Portfolio Return. The “Portfolio Return” is
calculated as the weighted average of the ten Component Performances,
where the “Component Performance” with respect to a Component measures the
average level of such Component as of six Observation Dates relative
to
its Initial Component Level on the Pricing
Date.
|
|
·
|
If,
at maturity, the Portfolio Return is greater than zero, then the
Cash
Settlement Value for each Note will be equal to the principal amount
of
the Note, plus:
|
$1,000
x Portfolio Return x Participation
Rate
|
·
|
If,
at maturity, the Portfolio Return is equal to or less than zero,
then the
Cash Settlement Value for each Note will be $1,000. Because the
Notes are
principal protected if held to maturity, in no event will the Cash
Settlement Value for each Note be less than $1,000.
|
|
·
|
The
CUSIP number for the Notes is 073928V59.
|
|
·
|
The
Issuer will not pay interest on the
Notes.
|
|
·
|
The
Notes will not be listed on any securities exchange or quotation
system.
|
|
·
|
The
Maturity Date for the Notes is expected to be May 11, 2012, however,
if
the Final Observation Date is postponed, the Maturity Date will
be three
Business Days following the postponed Final Observation
Date.
|
|
·
|
The
Observation Dates for each Component are expected to be December
8, 2011,
January 8, 2012, February 8, 2012, March 8, 2012, April 8, 2012,
and May
8, 2012 (the “Final Observation Date”). Each Observation Date, including
the Final Observation Date, is subject to adjustment as described
herein.
|
|
·
|
The
Participation Rate is 101.00%
|
INVESTMENT
IN THE NOTES INVOLVES CERTAIN RISKS. THERE MAY NOT BE AN ACTIVE SECONDARY MARKET
IN THE NOTES, AND IF THERE WERE TO BE AN ACTIVE SECONDARY MARKET, IT MAY NOT
BE
LIQUID, AND THEREFORE THE NOTES THEMSELVES ARE NOT, AND WOULD NOT BE, LIQUID.
YOU SHOULD REFER TO “RISK FACTORS” BEGINNING ON PAGE
PS-13.
Each
Component is a service mark or trademark of the sponsor of that Component and
has been, or will be, licensed for use by The Bear Stearns Companies Inc. The
Notes, which are linked to the performance of the Components, are not sponsored,
endorsed, sold or promoted by the sponsor of any Component; and the sponsors
of
such Components make no representations regarding the advisability of investing
in the Notes.
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%
|
|
$10,400,000
|
Agent’s
discount
|
3.00%
|
|
$312,000
|
Proceeds,
before expenses, to us
|
97.00%
|
|
$10,088,000
|
Any
additional reissuance will be offered at a price to be determined at the time
of
pricing of each offering of Notes, which price will be a function of the
prevailing market conditions and the levels of the Components at the time of
the
relevant sale.
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 May 9, 2007, against payment in immediately available
funds.
We
may
grant Fifth Third Securities Inc. a 13-day option from the date of the final
pricing supplement to purchase from us up to an additional $1,560,000 of Notes
at the public offering price to cover any over-allotments.
_______________
Fifth
Third Securities Inc.
May
9,
2007
This
summary highlights selected information from the accompanying prospectus,
prospectus supplement and this pricing supplement to help you understand the
Notes linked to the Portfolio. 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 certain 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. When we refer to “Note” or “Notes” in
this pricing supplement, we mean Notes each with a principal amount of
$1,000.
The
Bear
Stearns Companies Inc. Medium-Term Notes, Series B, Linked to a Portfolio of
Indices and Index Funds, Due May 11, 2012 (the “Notes”) are Notes whose return
is tied or “linked” to the potential positive performance of a portfolio
comprised of eight indices and two index funds. The following are the eight
indices and their respective weightings in the portfolio: (1) 25% the Dow Jones
EURO STOXX 50®
Index
(“SX5E”); (2) 20% the Nikkei 225™ Stock Index (“NKY”); (3) 10% the FTSE/Xinhua
China 25 Index (“XIN0I”); (4) 10% the CECEEUR Index (“CECEEUR”); (5) 10% the
FTSE 100 Index (“UKX”); (6) 5% the KOSPI 200 Index (“KOSPI2”); (7) 5% the Swiss
Market Index (“SMI”) and (8) 5% the S&P/ASX 200 Index (“AS51”) (each such
index an “Index” and together the “Indices”). The following are the two index
funds and their respective weightings in the portfolio: (1) 5% the iShares
MSCI
South Africa Index Fund (“EZA US”) and (2) 5% the iShares MSCI Taiwan Index Fund
(“EWT US”) (each such index fund an “Index Fund” and together the “Index
Funds”). Each such Index or Index Fund will be a “Component” and the ten
Components together will constitute the “Portfolio”. When we refer to Note or
Notes in this pricing supplement, we mean $1,000 principal amount Notes, either
singularly or collectively. The Notes are principal protected. On the Maturity
Date, you will receive the Cash Settlement Value, an amount in cash that depends
on whether the average of the observation levels of each Component over six
Observation Dates is greater than or less than that respective Component’s
Initial Component Level. The difference between the average of the levels for
a
Component on each Observation Date and the Initial Component Level, expressed
as
a percentage of that Initial Component Level, is referred to as the “Component
Performance” for that Component, and the weighted average of the Component
Performances is referred to as the “Portfolio Return.” If the Portfolio Return
is greater than zero, we will pay you, at maturity, the principal amount of
the
Notes, plus $1,000 x Portfolio Return x Participation Rate. If the Portfolio
Return is equal to or less than zero, then the Cash Settlement Value for each
Note, at maturity, will be $1,000.
Selected
Investment Considerations
|
·
|
Principal
protection—Because the Notes are principal protected if held to maturity,
in no event will you receive a Cash Settlement Value less than $1,000
per
Note, at maturity. If, at maturity, the Portfolio Return is less
than or
equal to zero, you will receive the principal amount of the
Notes.
|
|
·
|
Diversification—The
Notes are linked to the following eight Indices and two Index Funds
and
their respective weightings in the Portfolio: (1) 25% the SX5E (Europe);
(2) 20% the NKY (Japan); (3) 10% the XIN0I (China); (4) 10% the CECEEUR
(Eastern Europe); (5) 10% the UKX (Great Britain); (6) 5% the KOSPI2
(Korea); (7) 5% the SMI (Switzerland); (8) 5% the AS51 (Australia);
(9) 5%
the EZA US (South Africa); and (10) 5% the EWT US (Taiwan).
|
|
·
|
Taxes—For
U.S. federal income tax purposes, we intend to treat the Notes as
contingent payment debt instruments. As a result, you will be required
to
include original issue discount (“OID”) in income during your ownership of
the Notes even though no cash payments will be made with respect
to the
Notes until maturity. Additionally, you will generally be required
to
recognize ordinary income on the gain, if any, realized on a sale,
upon
maturity, or other disposition of the Notes. You should review the
discussion under the section entitled “Certain U.S. Federal Income Tax
Considerations” in this pricing
supplement.
|
Selected
Risk Considerations
|
·
|
No
current income—We will not pay any interest on the Notes.
|
|
·
|
Non-conventional
return—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.
|
|
·
|
No
ownership of underlying instruments—You will not receive any interest,
dividend payments or other distributions on the stocks underlying
the
Components; nor will such payments be included in the calculation
of the
Cash Settlement Value you will receive at
maturity.
|
|
·
|
Not
exchange-listed—The Notes will not be listed on any securities exchange or
quotation system, and we do not expect a trading market to develop,
which
may affect the price that you receive for your Notes upon any sale
prior
to maturity. If you sell the Notes prior to maturity, you may receive
less, and possibly significantly less, than your initial investment
in the
Notes.
|
|
·
|
Liquidity—Because
the Notes will not be listed on any securities exchange, or quotation
system, we do not expect a trading market to develop, and, if such
a
market were to develop, it may not be liquid. Fifth Third Securities,
Inc.
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 those bids will be made. In any event,
Notes
will cease trading as of the close of business on the Maturity Date.
|
|
·
|
The
Components may not move in tandem—At a time when the level or price of one
or more of the Components increases, the level or price of one or
more of
the other Components may decline. Therefore, in calculating the Portfolio
Return, increases in the level or price of one or more of the Components
may be moderated, or wholly offset, by lesser increases or declines
in the
level or price of one or more of the other
Components.
|
KEY
TERMS
Issuer:
|
The
Bear Stearns Companies Inc.
|
Components:
|
The
Notes are linked to the potential positive performance of a portfolio
comprised of eight indices and two index funds. The following are
the
eight indices and their respective weightings in the portfolio: (1)
25%
the Dow Jones EURO STOXX 50® Index (“SX5E”); (2) 20% the Nikkei 225™ Stock
Index (“NKY”); (3) 10% the FTSE/Xinhua China 25 Index (“XIN0I”); (4) 10%
the CECEEUR Index (“CECEEUR”); (5) 10% the FTSE 100 Index (“UKX”); (6) 5%
the KOSPI 200 Index (“KOSPI2”); (7) 5% the Swiss Market Index (“SMI”) and
(8) 5% the S&P/ASX 200 Index (“AS51”) (each such index an “Index” and
together the “Indices”). The following are the two index funds and their
respective weightings in the portfolio: (1) 5% the iShares MSCI South
Africa Index Fund (“EZA US”) and (2) 5% the iShares MSCI Taiwan Index Fund
(“EWT US”) (each such index fund an “Index Fund” and together the “Index
Funds”). Each such Index or Index Fund will be a “Component” and the ten
Components together will constitute the “Portfolio”. The weighting of each
Component is fixed at the respective weighting mentioned above and
will
not change during the term of the Notes unless one or more Components
are
modified during the term of the
Notes.
|
Index
Sponsors:
|
STOXX
Limited, a partnership of Deutsche Börse AG, Dow Jones & Company and
the SWX Group as the sponsor of the Dow Jones EURO STOXX 50®
Index; Nihon Keizai Shimbun, Inc. as the sponsor of the Nikkei 225™ Stock
Index; FTSE/Xinhua Index Limited, a joint venture of FTSE International
Limited and Xinhua Financial Network Limited, as the sponsor of the
FTSE/Xinhua China 25 Index; Wiener Börse as the sponsor of the CECEEUR
Index; FTSE International Limited as the sponsor of the FTSE 100
Index;
Korea Exchange as the sponsor of the KOSPI 200 Index; Standard &
Poor’s, a division of The McGraw-Hill Companies, Inc., and the Australian
Stock Exchange as sponsor of the S&P/ASX 200 Index; and the SWX Group
as sponsor of the Swiss Market Index are hereinafter referred to
as “Index
Sponsors.” See “Description of the Portfolio”
herein.
|
Index
Fund Issuer:
|
iShares,
Inc., as the issuer of iShares MSCI South Africa Index Fund and iShares
MSCI Taiwan Index Fund, is hereinafter referred to as the “Index Fund
Issuer.” See “Description of the Portfolio”
herein.
|
Principal
Amount:
|
The
Notes will be denominated in U.S. dollars. Each Note will be issued
in
minimum denominations of $50,000 and $1,000 multiples thereafter;
provided, however, that the minimum purchase for any purchaser domiciled
in a Member state of the European Economic Area shall be $100,000.
The
aggregate principal amount of the Notes being offered is $10,400,000.
When
we refer to “Note” or “Notes” in this pricing supplement, we mean Notes
each 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.
|
Interest:
|
The
Notes will not bear interest.
|
Cash
Settlement Value:
|
On
the Maturity Date, you will receive the Cash Settlement Value, an amount
in cash that depends upon the Portfolio Return. If, at maturity,
the
Portfolio Return is greater than zero, then the Cash Settlement Value
for
each Note will be equal to the principal amount of the Note, plus:
|
$1,000
x
Portfolio Return x Participation Rate
If,
at
maturity, the Portfolio Return is equal to or less than zero, then the Cash
Settlement Value for each Note will be the principal amount of $1,000. Because
the Notes are principal protected if held to maturity, in no event will the
Cash
Settlement Value for each Note be less than $1,000.
Participation
Rate: |
101.00%
|
Portfolio
Return:
|
An
amount determined by the Calculation Agent and equal to the sum of
the
Component Performance for each Component multiplied by its respective
Weight in the Portfolio.
|
For
purposes of determining the Portfolio Return:
“Component
Performance”
means,
as of the Final Observation Date and with respect to a Component, the quotient,
expressed as a percentage, of (i) the arithmetic average of the Observation
Levels for that Component as of each Observation Date minus the Initial
Component Level of that Component divided by (ii) the Initial Component Level
of
that Component.
“Final
Observation Date” means
May
8, 2012.
“Observation
Level”
means,
as of any Observation Date and with respect to each Index, the closing index
level as reported by the relevant Index Sponsor and displayed on Bloomberg
Page
SX5E <Index> <Go> with respect to the SX5E; Bloomberg Page NKY
<Index> <Go> with respect to the NKY; Bloomberg Page XIN0I
<Index> <Go> with respect to the XIN0I; Bloomberg Page CECEEUR
<Index> <Go> with respect to the CECEEUR; Bloomberg Page UKX
<Index> <Go> with respect to the UKX; Bloomberg Page KOSPI2
<Index> <Go> with respect to the KOSPI2; Bloomberg Page SMI
<Index> <Go> with respect to the SMI; and Bloomberg Page AS51
<Index> <Go> with respect to the AS51; and with respect to each
Index Fund, as of any Observation Date, the closing price as reported by the
Relevant Exchange and as displayed on Bloomberg Page EZA US <Equity>
<Go> with respect to the EZA US; and Bloomberg Page EWT US <Equity>
<Go> with respect to the EWT US.
“Observation
Date”
means
December 8, 2011, January 8, 2012, February 8, 2012, March 8, 2012, April 8,
2012, and May 8, 2012; provided that, with respect to a Component, (i) if such
date is not a Component Business Day (as defined herein) for that Component,
then the Observation Date for that Component will be the next succeeding day
that is a Component Business Day for that Component and (ii) if a Market
Disruption Event (as defined herein) exists for that Component on the
Observation Date, the Observation Date for that Component will be the next
Component Business Day for that Component on which a Market Disruption Event
does not exist for that Component. If the Observation Date for any Component
is
postponed for three consecutive Component Business Days due to the existence
of
a Market Disruption Event, then, notwithstanding the existence of a Market
Disruption Event on that third Component Business Day, that third Component
Business Day will be the Observation Date for that Component. If no Market
Disruption Event exists with respect to a Component on the Observation Date,
the
determination of that Component’s Observation Level will be made on the
Observation Date, irrespective of the existence of a Market Disruption Event
with respect to one or more of the other Components.
“Initial
Component Level”
means:
|
·
|
4411.32
with respect to the SX5E;
|
|
·
|
17,656.84
with respect to the NKY;
|
|
·
|
16,596.81
with respect to the XIN0I;
|
|
·
|
2,753.54
with respect to the CECEEUR;
|
|
·
|
6,550.40
with respect to the UKX;
|
|
·
|
203.51
with respect to the KOSPI2;
|
|
·
|
9,377.08
with respect to the SMI;
|
|
·
|
6,304.40
with respect to the AS51;
|
|
·
|
134.07
with respect to the EZA US; and
|
|
·
|
14.39
with respect to the EWT US.
|
“Weight”
means:
|
·
|
25%
with respect to the SX5E;
|
|
·
|
20%
with respect to the NKY;
|
|
·
|
10%
with respect to the XIN0I;
|
|
·
|
10%
with respect to the CECEEUR;
|
|
·
|
10%
with respect to the UKX;
|
|
·
|
5%
with respect to the KOSPI2;
|
|
·
|
5%
with respect to the SMI;
|
|
·
|
5%
with respect to the AS51;
|
|
·
|
5%
with respect to the EZA US; and
|
|
·
|
5%
with respect to the EWT US.
|
Pricing
Date:
|
The
“Summary of the Components” below details the Pricing Date for each
Component.
|
Maturity
Date:
|
The
Notes are expected to mature on May 11, 2012 unless such date is
not a
Component Business Day, in which case the Maturity Date shall be
the next
Business Day. If the Final Observation Date is postponed, the Maturity
Date will be three Business Days following the postponed Final Observation
Date.
|
Exchange
listing:
|
The
Notes will not be listed on any securities exchange or quotation
system.
|
Component
Business Day:
|
Means
with respect to a Component any day on which each Relevant Exchange
and
each Related Exchange for such Component are scheduled to be open
for
trading.
|
Business
Day:
|
Means
any day other than a Saturday or Sunday, on which banking institutions
in
the cities of New York, New York and London, England are not authorized
or
obligated by law or executive order to be
closed.
|
Calculation
Agent:
|
Bear,
Stearns & Co. Inc.
|
Underlying
Index:
|
Means
with respect to the iShares MSCI South Africa Index Fund, the MSCI
South
Africa Index or any successors thereto and with respect to the iShares
MSCI Taiwan Index Fund, the MSCI Taiwan Index or any successors thereto.
|
Relevant
Exchanges:
|
Means
(i) with respect to an Index, the primary exchanges or markets of
trading
for any security then included in such Index; and (ii) with respect
to an
Index Fund, the primary exchanges or markets of trading for such
Index
Fund and the primary exchanges or markets of trading of any security
then
included in the Underlying Index for such Index Fund. The “Summary of the
Components” below details the Relevant Exchanges for each
Component
|
Related
Exchange:
|
Means,
with respect to a Component, each exchange or quotation system where
trading has a material effect (as determined by the Calculation Agent)
on
the overall market for futures or options contracts relating to the
Component, or the Underlying Index, if
any.
|
Summary
of the Components
Component
|
Index
Sponsor or Index Fund Issuer
|
Bloomberg
Ticker Symbol
|
Pricing
Date
(the date below represents the date in the time zone of the applicable
Relevant Exchanges)
|
Initial
Component Level
|
Relevant
Exchanges
|
Dow
Jones EURO STOXX 50®
Index
|
STOXX
Limited (“STOXX”)
|
SX5E
<Index>
|
May
8, 2007
|
4411.32
|
Major
stock exchanges, respectively located in one of 17 European countries,
including London Stock Exchange, Frankfurt Stock Exchange and
others.
|
Nikkei
225TM
Stock Index
|
Nihon
Keizai Shimbun, Inc. or its successor (“NKS”)
|
NKY
<Index>
|
May
8, 2007
|
17,656.84
|
The
Tokyo Stock Exchange or its successor (the “TSE”)
|
FTSE/Xinhua
China 25 Index
|
FTSE/Xinhua
Index Limited
|
XIN0I
<Index>
|
May
8, 2007
|
16,596.81
|
The
Stock Exchange of Hong Kong
|
CECEEUR
Index
|
Wiener
Börse
|
CECEEUR
<Index>
|
May
8, 2007
|
2,753.54
|
The
Czech Traded Index, the Hungarian Traded Index and the Polish Traded
Index.
|
FTSE
100 Index
|
FTSE
International Limited
|
UKX
<Index>
|
May
8, 2007
|
6,550.40
|
The
London Stock Exchange
|
KOSPI
200 Index
|
Korea
Exchange
|
KOSPI2
<Index>
|
May
8, 2007
|
203.51
|
The
Korea Exchange
|
Swiss
Market Index
|
SWX
Group
|
SMI
<Index>
|
May
8, 2007
|
9,377.08
|
The
SWX Swiss Exchange
|
S&P/ASX
200 Index
|
Standard
& Poor’s and Australian Stock Exchange
|
AS51
<Index>
|
May
8, 2007
|
6,304.40
|
The
Australian Stock Exchange
|
iShares
MSCI South Africa Index Fund
|
iShares,
Inc.
|
EZA
US <Equity>
|
May
8, 2007
|
134.07
|
The
New York Stock Exchange and the Johannesburg Stock
Exchange.
|
iShares
MSCI Taiwan Index Fund
|
iShares,
Inc.
|
EWT
US <Equity>
|
May
8, 2007
|
14.39
|
The
New York Stock Exchange and the Taiwan Stock
Exchange.
|
Offers
and sales of the Notes are subject to restrictions in certain jurisdictions.
The
distribution of this pricing supplement, 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. Notwithstanding
the minimum denomination of $50,000, the minimum purchase for any purchaser
domiciled in a member state of the European Economic Area shall be $100,000.
QUESTIONS
AND ANSWERS
What
are the Notes?
The
Notes
are a series of our senior, unsecured, unsubordinated debt securities, the
value
of which is linked to the performance of the Portfolio. The Notes will not
bear
interest, and no other payments will be made prior to maturity. The Notes are
principal protected if held to maturity. The Notes differ from conventional
debt
securities in that the Notes offer the opportunity to participate in 101.00%
of
the positive performance of the Portfolio, if any. See the section “Risk
Factors” for selected risk considerations prior to making an investment in the
Notes.
The
Notes
are expected to mature on May 11, 2012. The Notes do not provide for earlier
redemption. When we refer to “Note” or “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,” for a detailed description of the Notes prior to
making an investment in the Notes.
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 the section “Risk Factors” in the
accompanying prospectus supplement.
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.
On
the Maturity Date, you will receive the Cash Settlement Value, which is based
on
the appreciation, if any, in the Portfolio over the term of the Notes as
measured by the Portfolio Return. The “Portfolio Return” is an amount determined
by the Calculation Agent and equal to the sum of the Component Performance
for
each Component multiplied by its respective Weight in the Portfolio. The
“Component Performance” with respect to a Component measures the average level
of such Component as of six Observation Dates relative to its Initial Component
Level on the Pricing Date.
If
the
Portfolio Return is less than or equal to zero on the Final Observation Date,
the Cash Settlement Value will equal the principal amount of the Notes because
the Notes are principal protected if held to maturity.
If
the
Portfolio Return is greater than zero on the Final Observation Date, the Cash
Settlement Value is equal to the principal amount of the Notes, plus for each
Note, the following:
$1,000
x
Portfolio Return x Participation Rate
For
more
specific information about the Cash Settlement Value and for illustrative
examples, you should refer to the section “Description of the
Notes.”
What
does “principal protected” mean?
“Principal
protected” means that at maturity your principal investment in the Notes will
not be at risk as a result of a decrease in the Portfolio Return. If the
Portfolio Return is equal to or less than zero on the Final Observation Date,
the Cash Settlement Value at maturity will be $1,000. You may receive less
than
the principal amount of the Notes if you sell your Notes prior to
maturity.
Will
I receive interest on the Notes?
You
will
not receive any periodic interest payments on the Notes. The only return on
invested dollars you will receive, if any, will be reflected in the Cash
Settlement Value upon the maturity of the Notes.
Will
there be an 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 any 13-day option we grant
to
Fifth Third Securities Inc. 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 levels of the Components at the time of
the
relevant sale.
What
is the Portfolio?
The
Portfolio is comprised of eight Indices and two Index Funds. The following
are
the eight Indices and their respective weightings in the portfolio: (1) 25%
the
SX5E; (2) 20% the NKY; (3) 10% the XIN0I; (4) 10% the CECEEUR; (5) 10% the
UKX;
(6) 5% the KOSPI2; (7) 5% the SMI and (8) 5% the AS51. The following are the
two
Index Funds and their respective weightings in the portfolio: (1) 5% the EWT
US
and (2) 5% the EZA US. Each such Index or Index Fund will be a “Component” and
the ten Components together will constitute the “Portfolio”. The weighting of
each Component is fixed at the respective weighting mentioned above, and will
not change during the term of the Notes unless one or more of the Components
is
modified during the term of the Notes. For more specific information about
the
Portfolio, please see the section “Description of the Portfolio.” Unless
otherwise stated, all information regarding the Components that is provided
in
this pricing supplement is derived from the Index Sponsors, Index Fund Issuer
or
other publicly available sources.
Who
publishes information regarding the Components and where can I obtain further
information?
Dow
Jones EURO STOXX 50®
Index.
The
SX5E is a free-float weighted index of 50 European blue-chip companies and
is
calculated, published and disseminated by STOXX Limited, a partnership of
Deutsche Börse AG, Dow Jones & Company, Euronext Paris SA and SWX Swiss
Exchange. The SX5E is currently comprised of 50 stocks that respectively trade
on major stock exchanges located in one of 17 European countries, including
the
London Stock Exchange, Frankfurt Stock Exchange and others. The SX5E is quoted
in Euros. You can obtain the level of the SX5E from the Bloomberg service under
the symbol SX5E <Index> or from the Dow Jones website at
http://www.djindexes.com. Other information on the Dow Jones website is not
incorporated into this document.
Nikkei
225™
Stock Index.
The NKY
is a modified, price-weighted stock index calculated, published and disseminated
by Nihon Keizai Shimbun, Inc. that measures the composite price performance
of
selected Japanese stocks. The NKY is currently comprised of 225 stocks that
trade on the Tokyo Stock Exchange and represents a broad cross-section of
Japanese industry. All 225 of the stocks underlying the NKY are stocks listed
in
the First Section of the Tokyo Stock Exchange. The NKY is quoted in Japanese
yen. You can obtain the level of the NKY from the Bloomberg service under the
symbol NKY <Index> or from the Tokyo Stock Exchange website at
http://www.tse.or.jp/english/index.shtml. Other information on the Tokyo Stock
Exchange website is not incorporated into this document.
FTSE/Xinhua
China 25 Index.
The
XIN0I is a stock index calculated and published by FTSE/Xinhua Index Limited,
and is designed to represent the performance of the mainland Chinese market
that
is available to international investors. The XIN0I consists of 25 of the largest
and most liquid Chinese companies. The index is free float-adjusted and modified
market cap-weighted, with individual component weightings capped on a declining
basis and the top position capped at 10 percent. The index’s base value was set
at 5000 on March 16, 2001. The XIN0I is quoted in Hong Kong dollars. You can
obtain the level of the XIN0I from the Bloomberg service under the symbol XIN0I
<Index> or from the FTSE Xinhua Index website at
http://www.ftse.com/xinhua/english/index.jsp. Other information on the FTSE
Xinhua Index website is not incorporated into this document.
CECEEUR
Index.
The
CECEEUR is calculated, published and disseminated by Wiener Börse. The CECEEUR
currently consists of 27 stocks included in three sub-indices that Wiener Börse
also manages: the Czech Traded Index, the Hungarian Traded Index and the Polish
Traded Index. The CECEEUR is a capitalized weighted price index, and is not
adjusted for dividend payments on the constituent stocks. You can obtain the
level of the CECEEUR from the Bloomberg service under the symbol CECEEUR
<Index> or from the Wiener Börse website at
http://en.wienerborse.at/indices/. Other information on the Wiener Börse website
is not incorporated into this document.
FTSE
100 Index.
The UKX
is an index calculated, published and disseminated by FTSE International
Limited, a company owned equally by the London Stock Exchange (the “LSE”) and
the Financial Times, in association with the Institute and the Faculty of
Actuaries. The UKX measures the composite price performance of stocks of the
largest 100 companies (determined on the basis of market capitalization) traded
on the London Stock Exchange. Publication of the UKX began in February 1984.
You
can obtain the level of the UKX from the Bloomberg service under the symbol
UKX
<Index> or from the FTSE website at
http://www.ftse.com/Indices/UK_Indices/index.jsp. Other information on the
FTSE
website is not incorporated into this document.
KOSPI
200 Index.
The
KOSPI2 is an index calculated, published and disseminated by the Korea Exchange.
The KOSPI2 is a capitalization-weighted index of 200 Korean stocks which make
up
93% of the total market value of the Korea Stock Exchange. The KOSPI2 has been
calculated and published since June 15, 1994 with a base value of 100 set to
January 3, 1990. You can obtain the level of the KOSPI2 from the Bloomberg
service under the symbol KOSPI2 <Index> or from the Korea Exchange website
at http://eng.krx.co.kr/index.html. Other information on the Korea Exchange
website is not incorporated into this document.
Swiss
Market Index.
The
SMI, published by the SWX Swiss Exchange, is Switzerland's blue-chip index.
It
is made up of a maximum of 30 of the largest and most liquid Swiss Performance
Index large and mid-cap stocks. Because the SMI is considered to be a mirror
of
the overall Swiss stock market, it is used as the underlying index for numerous
derivative financial instruments such as options, futures and index funds.
The
SMI was introduced on June 30, 1988 at a base value of 1500 points. You can
obtain the level of the SMI from the Bloomberg service under the symbol SMI
<Index> or from the SWX Swiss Exchange website at
http://www.swx.com/trading/products/indices/stock_indices/smi/smi_en.html.
Other
information on the SWX Swiss Exchange website is not incorporated into this
document.
S&P/ASX
200 Index.
The
AS51 is published, calculated and disseminated by Standard & Poor’s and the
Australian Stock Exchange. The AS51 was established in 2001 to represent the
top
200 companies for the Australian market. The index is made up of 200 stocks
selected by the S&P/ASX Australian Index Committee, based on liquidity and
size. The index was converted from a capitalization-weighted index to a free
float (liquidity)-based index on October 1, 2002. You can obtain the level
of
the AS51 from the Bloomberg service under the symbol AS51 <Index> or from
the Standard & Poor’s website at
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_asx200/.
Other information on the Standard & Poor’s website is not incorporated into
this document.
iShares
MSCI South Africa Index Fund.
The EZA
US is an index fund which seeks to provide investment results that correspond
generally to the price and yield performance of publicly traded securities
in
the aggregate in the South African market, as measured by the MSCI South Africa
Index. The MSCI South Africa Index is a capitalization-weighted index that
aims
to measure the performance of the South African equity market by capturing
85%
of the (publicly available) total market capitalization of the South African
equity market. Issued by iShares, Inc., the iShares MSCI South Africa Index
Fund’s inception date is February 3, 2003. You can obtain the level of the EZA
US from the Bloomberg service under the symbol EZA US <Index> or from the
iShares website at http://www.ishares.com/fund_info/. Other information on
the
iShares website is not incorporated into this document.
iShares
MSCI Taiwan Index Fund.
The EWT
US is an index fund issued by iShares, Inc. The EWT US seeks to provide
investment results that correspond generally to the price and yield performance
of publicly traded securities in the aggregate in the Taiwanese market, as
measured by the MSCI Taiwan Index. The MSCI Taiwan Index is a
capitalization-weighted index that aims to measure the performance of the Taiwan
equity market by capturing 85% of the (publicly available) total market
capitalization of the Taiwan equity market. The inception date for the EWT
US is
June 20, 2000. You can obtain the level of the EWT US from the Bloomberg service
under the symbol EWT US <Index> or from the iShares website at
http://www.ishares.com/fund_info/. Other information on the iShares website
is
not incorporated into this document.
How
has the Portfolio performed historically?
We
have
provided tables depicting the month-end closing levels for each of the
Components, as well as graphs depicting the month-end closing levels for each
of
the Components. You can find these tables and graphs in the section “Description
of the Portfolio—Historical Performance of the Components.” We have provided
this historical information to help you evaluate the behavior of the Portfolio
in various economic environments; however, the time period depicted is
relatively limited and past performance is not indicative of the manner in
which
the Portfolio will perform in the future. You should refer to the section “Risk
Factors—The historical performance of the Components is not an indication of the
future performance of the Components.”
What
is Fifth Third Securities, Inc.'s role?
We
have
entered into a Distribution Agreement and Terms Agreement with Fifth Third
Securities, Inc. (“Fifth Third”). These agreements will provide for the offer
and sale of Notes by Fifth Third on a best efforts basis. Fifth Third has agreed
to use its best efforts to identify potential purchasers of the Notes and will
purchase such Notes from us for resale to such purchasers.
Although
it is under no obligation to do so, Fifth Third 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, Notes will cease trading as of the close of business on the Maturity
Date.
What
is the role of Bear, Stearns & Co. Inc.?
Bear,
Stearns & Co. Inc. (“Bear Stearns”) will be our Calculation Agent for
purposes of calculating the Cash Settlement Value. 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. Bear Stearns
is
obligated to carry out its duties and functions as Calculation Agent in good
faith, and using its reasonable judgment. 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 the Cash Settlement Value or interest on
principal to the holders of the Notes would entitle the holders, or the Trustee
(as defined herein) acting on behalf of the holders, to exercise rights and
remedies available under the Indenture (as defined herein). If the Calculation
Agent uses its discretion to make a determination, the Calculation Agent will
notify us and the Trustee, who will provide notice to the holders. You should
refer to “Risk Factors - The Calculation Agent is one of our affiliates, 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 price performance of the Components, they may be
appropriate for investors with specific investment horizons who seek to
participate in the potential price appreciation of the Components. In
particular, the Notes may be an attractive investment for you if
you:
|
·
|
want
potential upside exposure to the Components underlying the
Portfolio;
|
|
·
|
believe
that the value of the Portfolio will increase over the term of the
Notes;
|
|
·
|
understand
that 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;
|
|
·
|
do
not want to place your principal at risk and are willing to hold
the Notes
until maturity; and
|
|
·
|
are
willing to forgo interest payments or dividend payments on the stocks
underlying the Components of
Portfolio.
|
The
Notes
may not be a suitable investment for you if:
|
·
|
you
seek current income or dividend payments from your
investment;
|
|
·
|
you
are unable or unwilling to hold the Notes until maturity;
|
|
·
|
you
seek an investment with an active secondary market;
or
|
|
·
|
you
do not believe that the value of the Portfolio will increase over
the term
of the Notes.
|
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 for federal income
tax
purposes. Therefore, a U.S. Holder of a Note will be required to include OID
in
gross income over the term of the Note even though no cash payments will be
made
with respect to the Notes until maturity. The amount of OID includible in each
year is based on the “comparable yield.” In addition, we will compute a
“projected payment schedule” that reflects a single payment at maturity that
produces the comparable yield. The comparable yield and the projected payment
schedule are neither predictions nor guarantees of the actual yield on the
Notes
or the actual payment at maturity. If the amount we actually pay at maturity
is,
in fact, less than the amount reflected on the projected payment schedule,
then
a U.S. Holder would have recognized taxable income in periods prior to maturity
that exceeds the U.S. Holder’s economic income from holding the Note during such
periods (with an offsetting ordinary loss). If a U.S. Holder disposes of the
Note prior to maturity, the U.S. Holder will be required to treat any gain
recognized upon the disposition of the Note as ordinary income (rather than
capital gain). You should review the discussion under the section entitled
“Certain U.S. Federal Income Tax Considerations” in this pricing
supplement.
Does
ERISA impose any limitations on purchases of the Notes?
An
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended (“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 church plan subject to any similar law or any entity the
assets of which are deemed to be “plan assets” under ERISA, Section 4975 of the
Code, any applicable regulations or otherwise, 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” in
this pricing supplement before investing in the Notes.
RISK
FACTORS
Your
investment in the Notes involves a degree of risk similar to investing in the
Components underlying the Portfolio. Your investment in the Notes will be
subject to risks not associated with conventional fixed-rate or floating-rate
debt securities. Prospective purchasers should recognize the possibility of
a
loss with respect to their investment in the Notes if they sell the Notes prior
to maturity. 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. We have no control over
a
number of matters that may affect the value of the Notes, including economic,
financial, regulatory, geographic, judicial and political events, that are
important in determining the existence, magnitude, and longevity of these risks
and their influence on the value of, or the payment made on, the
Notes.
Your
Notes are principal protected only if you hold the Notes until
maturity.
If
you
sell your Notes prior to maturity, you may receive less than the amount you
originally invested.
You
will not receive any interest payments on the Notes. Your yield may be lower
than the yield on a conventional debt security of comparable
maturity.
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 equal
to
the Cash Settlement Value. Thus, the overall return you earn on your Notes
may
be less than that you would have earned by investing in a non-indexed debt
security of comparable maturity that bears interest at a prevailing market
rate
and is principal protected. For more specific information about the Cash
Settlement Value and for illustrative examples, you should refer to the section
“Description of the Notes.”
Increases
in the levels or prices of the Components may not correspond to increases in
the
trading value of the Notes.
Even
if
the Components increase above the initial levels during the term of the Notes,
the trading value of the Notes may not increase by the same amount. It is also
possible for the Portfolio Return to increase while the trading value of the
Notes declines.
You
must rely on your own evaluation of the merits of an investment linked to the
Portfolio.
In
the
ordinary course of our business, we may from time to time express views on
expected movements in the Portfolio and the securities underlying the
Components. These views may vary over differing time horizons and are subject
to
change without notice. Moreover, other professionals who deal in the equity
markets may at any time have views that differ significantly from ours. In
connection with your purchase of the Notes, you should investigate the Portfolio
and the securities underlying the Components and not rely on our views with
respect to future movements in these industries and stocks. You should make
such
investigation as you deem appropriate as to the merits of an investment linked
to the Portfolio.
Your
yield will not reflect dividends on the underlying stocks that comprise the
Components.
The
Portfolio does not reflect the payment of dividends or other distributions
on
the securities underlying the Components. Therefore, the yield you will receive
by holding the Notes to maturity will not be the same as if you had purchased
the Components and held them for a similar period. You should refer to the
section “Description of the Notes” for a detailed description of the notes prior
to making an investment in the Notes.
Tax
Consequences.
For
U.S.
federal income tax purposes, we intend to treat the Notes as contingent payment
debt instruments. As a result, U.S. Holders will be required to include OID
in
income during their ownership of the Notes even though no cash payments will
be
made with respect to the Notes until maturity. The amount of OID includible
in
each year is based on the “comparable yield.” In addition, we have computed a
“projected payment schedule” that reflects a single payment at maturity that
produces the comparable yield. The comparable yield and the projected payment
schedule are neither predictions nor guarantees of the actual yield on the
Notes
or the actual payment at maturity. If the amount we actually pay at maturity
is,
in fact, less than the amount reflected on the projected payment schedule,
then
a U.S. Holder would have recognized taxable income in periods prior to maturity
that exceeds the U.S. Holder’s economic income from holding the Note during such
periods (with an offsetting ordinary loss). Additionally, U.S. Holders will
generally be required to recognize ordinary income on the gain, if any, realized
on a sale, upon maturity, or other disposition of the Notes. You should review
the discussion under the section entitled “Certain U.S. Federal Income Tax
Considerations” in this pricing supplement.
Equity
market risks may affect the trading value of the Notes and the amount you will
receive at maturity.
We
expect
that the level of the Portfolio will fluctuate in accordance with changes in
the
financial condition of the companies issuing the securities comprising the
Components, the level of the underlying securities comprising the Components
generally and other factors. The financial condition of the companies issuing
the securities underlying the Components may become impaired or the general
condition of the global equity market may deteriorate, either of which may
cause
a decrease in the level of the Portfolio and thus in the value of the Notes.
Common stocks are susceptible to general equity market fluctuations and to
volatile increases and decreases in value, as market confidence in and
perceptions regarding the underlying securities comprising the Components
change. Investor perceptions regarding the companies issuing the securities
comprising the Components are based on various and unpredictable factors,
including expectations regarding government, economic, monetary and fiscal
policies, inflation and interest rates, economic expansion or contraction,
and
global or regional political, economic, and banking crises. The level of the
Portfolio is expected to fluctuate until the Maturity Date.
The
historical performance of the Components is not an indication of the future
performance of the Components.
The
historical performance of the Components that is included in this pricing
supplement should not be taken as an indication of the future performance of
the
Components. While the trading prices of the underlying securities comprising
the
Components will determine the level of the Portfolio, it is impossible to
predict whether the level of the Portfolio will fall or rise. Trading prices
of
the underlying securities comprising the Components will be influenced by the
complex, unpredictable, and interrelated economic, financial, regulatory,
geographic, judicial, political and other factors that can affect the capital
markets generally and the equity trading markets on which the underlying
securities are traded, in particular, and by various circumstances that can
influence the levels of the underlying securities in a specific market segment
or the value of a particular underlying stock.
The
securities underlying certain Components trade at different times; however,
if
an active secondary market develops, the Notes may trade only during regular
trading hours in the United States.
The
hours
of trading for the Notes may not conform to the hours during which the
securities underlying certain of the Components are traded. To the extent that
U.S. markets are closed while other markets remain open, significant price
and
rate movements may take place in the markets for the securities comprising
certain of the Components that will not be reflected immediately in the price
of
the Notes.
As
a
result of the time difference among the cities where the securities underlying
certain of the Components trade and New York City (where the Notes may trade),
there may be discrepancies between the levels of the Components and the trading
prices of the Notes. In addition, there may be periods when the international
securities markets are closed for trading (for example during holidays in an
applicable country), causing the level of a particular Component to remain
unchanged for multiple New York City trading days.
Your
return may be affected by factors affecting international securities markets.
The
securities underlying certain of the Components are issued by international
companies. Investors should be aware that investments linked to the value of
international equity securities might involve particular risks. The
international securities markets may have less liquidity and could be more
volatile than U.S. or other longer-established international securities markets.
Direct or indirect government intervention to stabilize the international
securities markets, as well as cross-shareholdings in international companies,
may affect trading prices and volumes in those markets. Also, there is generally
less publicly available information about international companies than about
those U.S. companies that are subject to the reporting requirements of the
Securities and Exchange Commission (the “SEC”); and international companies are
often subject to accounting, auditing and financial reporting standards and
requirements that differ from those applicable to U.S. reporting companies.
The
other special risks associated with investments linked to the value of
international equity securities may include, but are not necessarily limited
to:
the imposition of taxes; higher transaction and custody costs; settlement delays
and risk of loss; difficulties in enforcing contracts; less liquidity and
smaller market capitalizations; less rigorous regulation of securities markets;
governmental interference; higher inflation; and social, economic and political
uncertainties. These factors may adversely affect the performance of certain
of
the Components and, as a result, the Cash Settlement Value may be adversely
affected.
The
prices and performance of securities underlying the Components also may be
affected by political, economic, financial and social factors. In addition,
recent or future changes in the government, economic and fiscal policies, the
possible imposition of, or changes in, currency exchange laws or other laws
or
restrictions, and possible fluctuations in the rate of exchange between
currencies, are factors that could negatively affect the international
securities markets. Moreover, the applicable international economies may differ
favorably or unfavorably from that of the United States.
The
positive performance of a Component on one more Observation Dates may be offset
by the negative performance of that same Component on other Observation Dates.
The
Component Performance of each Component is based on the arithmetic average
of
the Observation Levels for that Component on each of six Observation Dates.
Even
if a Component exhibits a positive performance on one or more of the Observation
Dates, the negative performance of that Component on one or more of the other
Observation Dates may offset the positive performance of that Component, or
cause the Component Performance of that Component to be negative, and therefore
adversely affect the Portfolio Return.
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 the amount 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 level and
volatility of the Portfolio, whether the closing level of the Portfolio is
greater than or equal to its initial level, changes in U.S. interest rates,
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
closing level of the Portfolio is less than, equal to or not sufficiently above
its initial level. If you sell the Notes prior to maturity, you may receive
less, and possibly significantly less, than your initial investment in 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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Value
of the Portfolio.
We expect that the trading value of the Notes will depend substantially
on
the amount, if any, by which the Portfolio at any given time is greater
than zero. If you decide to sell your Notes when the Portfolio Return
is
greater than zero, you may nonetheless receive substantially less
than the
amount that would be payable at maturity based on that Portfolio
Return
because of expectations that the Portfolio Return will continue to
fluctuate until the Cash Settlement Value is
determined.
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Volatility
of the Portfolio.
Volatility is the term used to describe the size and frequency of
market
fluctuations. If the volatility of the Portfolio increases or decreases,
the trading value of the Notes may be adversely affected. This volatility
may increase the risk that the Portfolio Return will decline, which
could
negatively affect the trading value of Notes. The effect of the volatility
of the Portfolio on the trading value of the Notes may not necessarily
decrease over time during the term of the
Notes.
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Correlation
among the level of the Components.
Correlation is the extent to which the levels of the Components increase
or decrease to the same degree at the same time. To the extent that
correlation among the Components changes, the volatility of the Components
may change and the value of the Notes may be adversely
affected.
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Interest
rates.
We expect that the trading value of the Notes will be affected by
changes
in U.S. interest rates. In general, if U.S.
interest
rates increase, the value of outstanding debt securities tends to
decrease; conversely, if interest rates decrease, the value of outstanding
debt securities tends to increase. Interest rates may also affect
the
economy and, in turn, the level of the Portfolio, which may affect
the
value of the Notes. Rising interest rates may lower the level of
the
Portfolio and, thus, 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. 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 level of the Portfolio,
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. As
the time remaining to maturity of the Notes decreases, the “time premium”
associated with the Notes will decrease. A “time premium” results from
expectations concerning the levels of the Components 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. As
the
time remaining to maturity decreases, the trading value of the Notes
and
the supplemental return may be less sensitive to the volatility of
the
Components.
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Dividend
yield.
The value of the Notes may also be affected by the dividend yields
on the
stocks in the Components. In general, because the Components do not
incorporate the value of dividend payments, higher dividend yields
will
likely reduce the value of the Notes and, conversely, lower dividend
yields are expected to increase the value of the
Notes.
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Volatility
of currency exchange rates.
The exchange rates between the U.S. dollar and the foreign currencies
in
which the securities underlying certain of the Components are denominated
are foreign exchange spot rates that measure the relative values
of two
currencies: the particular currency in which the securities underlying
a
particular Component are denominated and the U.S. dollar. The spot
rate is
expressed as a rate that reflects the amount of the particular currency
that can be purchased for one U.S. dollar. If the volatility of the
exchange rate between the U.S. dollar and any of the foreign currencies
in
which the securities underlying certain of the Components are denominated
changes, the trading value of the Notes may be adversely
affected.
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Correlation
between currency exchange rates and the Components.
Correlation is the term used to describe the relationship between
the
percentage changes in the exchange rate between the U.S. dollar and
each
of the foreign currencies in which the securities underlying certain
of
the Components are denominated and the percentage changes between
each
Component. If the correlation between the relevant exchange rates
and the
particular Component changes, the trading value of the Notes may
be
adversely affected.
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Events
involving the companies issuing the securities comprising the
Components.
General economic conditions and earnings results of the companies
whose
securities comprise the Components, and real or anticipated changes
in
those conditions or results, may affect the trading value of the
Notes.
For example, some of the securities underlying the Components may
be
affected by mergers and acquisitions, which can contribute to volatility
of the Portfolio. As a result of a merger or acquisition, one or
more
securities in the Components may be replaced with a surviving or
acquiring
entity’s securities. The surviving or acquiring entity’s securities may
not have the same characteristics as the stock originally included
in the
Portfolio.
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Size
and liquidity of the trading market.
The Notes will not be traded on any securities exchange or quotation
system, therefore there may not be an active secondary market in
the
Notes, which may affect the price that you receive for your Notes
upon any
sale prior to maturity. If an active 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. Fifth Third 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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Inclusion
of commission.
The inclusion of commissions and projected profit from hedging in
the
initial public offering price of the Notes is likely to adversely
affect
secondary market prices. Assuming no change in the market conditions
or
any other relevant factors, the price, if any, at which Fifth Third
may be
willing to purchase the Notes in secondary market transactions may
be
lower than the original price of the Notes, because the original
price
included, and secondary market prices are likely to exclude, commissions
paid with respect to the Notes, as well as the projected profit included
in the cost of hedging our obligations under the Notes. In addition,
any
such prices may differ from values determined by pricing models used
by
Fifth Third as a result of dealer discounts, mark-ups or other transaction
costs.
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We
want
you to understand that the effect of one of the factors specified above, such
as
an increase in interest rates, may offset some or all of any change in the
value
of the Notes attributable to another factor, such as an increase in the level
of
the Portfolio.
You
have no shareholder rights or rights to receive any stock.
Investing
in the Notes will not make you a holder of any of the stocks underlying an
Index
or Underlying Index. Neither you nor any other holder or owner of the Notes
will
have any voting rights, any right to receive dividends or other distributions
or
any other rights with respect to the underlying stocks. The Cash Settlement
Value, if any, will be paid in cash, and you will have no right to receive
delivery of any stocks underlying an Index or Underlying Index.
Reported
Component levels may be based on non-current information.
If
trading is interrupted in the securities underlying certain of the Components,
publicly available information regarding the Portfolio Return may be based
on
the last reported prices or levels. As a result, publicly available information
regarding reported Component levels may at times be based on non-current
information.
Risks
associated with the Components may adversely affect the market value of the
Notes.
Because
the Notes are linked to changes in the levels or prices of equity indices and
index funds representing a range of geographic sectors, the Portfolio will
be
less diversified than funds or investment portfolios investing in a broader
range of international securities and, therefore, could experience greater
volatility. The equity securities markets are subject to temporary distortions
or other disruptions due to various factors, including a lack of liquidity
in
the markets, the participation of speculators and potential government
regulation and intervention. Suspension or other disruptions of market trading
in the securities underlying certain of the Components could adversely affect
the levels of those Components and, therefore, the Cash Settlement Value and/or
the trading value of the Notes.
The
Components may not move in tandem; and gains in one Component may be offset
by
declines in another Component.
Movements
in the price or level of the Components comprising the Portfolio may not move
in
tandem with each other. At a time when the price or level of one or more of
the
Components increases, the price or level of one or more of the other Components
may decline. Therefore, increases in the price or level of one or more of the
Components comprising the Portfolio may be moderated, or wholly offset, by
lesser increases or declines in the price or level of one or more of the other
Components comprising the Portfolio.
The
Components comprising the Portfolio are weighted differently; therefore the
positive performance of a less heavily weighted Component may be offset by
the
negative performance of a more heavily weighted Component.
The
Portfolio Return is an amount determined by the Calculation Agent and equal
to
the sum of the Component Performance for each Component multiplied by its
respective Weight in the Portfolio. Because the Components are weighted
differently in the Portfolio, the positive performance of a less heavily
weighted Component may be moderated, or wholly offset, by the negative
performance of a more heavily weighted Component in the Portfolio.
Adjustments
to the Indices could adversely affect the value of the
Notes.
The
policies of an Index Sponsor concerning additions, deletions and substitutions
of the securities underlying the applicable Index and the manner in which that
Index Sponsor takes account of certain changes affecting those underlying
securities may affect the level of the Index and thus the Portfolio. You should
realize that changes in the companies included in an Index may affect the Index,
as a newly-added company may perform significantly better or worse than the
company or companies it replaces. The Index Sponsor also may discontinue or
suspend calculation or dissemination of that Index or materially alter the
methodology by which it calculates that Index. Any such actions could affect
the
value of the Notes.
The
Calculation Agent is one of our affiliates, which could result in a conflict
of
interest.
Bear
Stearns will act as the Calculation Agent. Because Bear Stearns is our
affiliate, conflicts of interest may arise in connection with Bear Stearns
performing its role as Calculation Agent. Our affiliates, including Bear
Stearns, may, at various times, engage in transactions involving the securities
underlying the Portfolio for their proprietary accounts, and for other accounts
under their management. These transactions may influence the value of such
securities, and therefore the level of the Portfolio. Bear Stearns International
Limited (“BSIL”), an affiliate of Bear Stearns, or one of its subsidiaries 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.
Changes
that affect the calculation of a Component Level will affect the trading value
of the Notes and the amount you will receive at maturity.
The
Index
Sponsor is responsible for calculating and maintaining the Indices. The policies
of an Index Sponsor concerning the calculation of an Index will affect the
level
of the Index and, therefore, the trading value of the Notes and the Cash
Settlement Value.
If
an
Index Sponsor discontinues or suspends calculation or publication of an Index,
it may become difficult to determine the trading value of the Notes or the
Cash
Settlement Value. If an Index Sponsor discontinues or suspends calculation
of an
Index at any time prior to the Maturity Date and a Successor Index (as defined
below) is not available or is not acceptable to the Calculation Agent, then
the
Calculation Agent will determine the amount payable on the Maturity Date by
reference to a group of stocks and a computation methodology that the
Calculation Agent determines will as closely as reasonably possible replicate
the Index. In addition, if the method of calculating an Index (or a Successor
Index) is changed in a material respect, or if an Index (or a Successor Index)
is in any other way modified so that such Index (or Successor Index) does not,
in the opinion of the Calculation Agent, fairly represent the level of the
Index
(or Successor Index) had such changes or modifications not been made, the
Calculation Agent will make such calculations and adjustments as may be
necessary to arrive at a level of a security index comparable to the Index
(or
Successor Index) as if such changes or modifications had not been made. In
each
such event, the Calculation Agent’s determination of the value of the Notes will
affect the amount you may receive at maturity. See “Description of the Notes”
and “Description of the Portfolio.”
If
a
Merger Event, Tender Offer, Nationalization, Delisting, Insolvency, or Potential
Adjustment Event (each as defined below in Description of the Notes -
Antidilution Adjustments with respect to the Index Funds) with respect to an
Index Fund occurs, it may become difficult to determine the trading value of
the
Notes or the Cash Settlement Value. If one of those corporate events occur
with
respect to an Index Fund, the Calculation Agent will determine whether such
corporate event will have a material effect on that Index Fund or the Notes,
or
in the case of a Potential Adjustment Event, whether that Potential Adjustment
Event has a diluting or concentrative effect on the theoretical value of one
share of that Index Fund. To the extent the Calculation Agent makes such a
determination, the Calculation Agent will make the adjustments and computations
described below in Description of the Notes - Antidilution Adjustments. The
Calculation Agent will make such adjustments and computations to the relevant
Initial Component Level, the relevant Observation Level, the Cash Settlement
Value or any other variable for the event. See “Description of the Notes -
Antidilution Adjustments with respect to the Index Funds.” In each such event,
the Calculation Agent’s determination of the value of the Notes will affect the
amount you may receive at maturity. See “Description of the Notes” and
“Description of the Portfolio.”
We
cannot control actions by any of the companies whose securities are included
in
any Component.
We
are
not affiliated with any of the companies whose securities underlie the
Components. However, we may currently, or in the future, engage in business
with
these companies. Actions by any company whose security is part of a Component
may have an adverse effect on the price of the company’s securities, the trading
price of and the closing level of the Component and the Portfolio, and the
trading value of the Notes. None of those companies are involved in this
offering or has any obligations with respect to the Notes, including any
obligation to take our or your interests into consideration for any reason.
These other companies will not receive any of the proceeds of this offering
and
are not responsible for, and have not participated in, the determination of
the
timing of, prices for, or quantities of, the Notes to be issued. These companies
are not involved with the administration, marketing or trading of the Notes
and
have no obligations with respect to the amount to be paid to you under the
Notes
on the Maturity Date.
Neither
we nor any of our affiliates, including Bear Stearns, assumes any responsibility
for the adequacy or accuracy of any publicly available information about the
securities underlying the Components or the Components. You should make your
own
investigation into the companies underlying each Component.
We
and our affiliates have no affiliation with any Index Sponsor or the Index
Fund
Issuer and are not responsible for any Index Sponsor or the Index Fund Issuer’s
public disclosure of information.
We
and
our affiliates are not affiliated in any way with any Index Sponsor or the
Index
Fund Issuer (except for the licensing arrangements discussed in the section
“Description of the Portfolio”) and have no ability to control or predict any
Index Sponsor or the Index Fund Issuer actions, including any errors in or
discontinuation of disclosure regarding its methods or policies relating to
the
calculation of the applicable Component. Neither we nor any of our affiliates
assumes any responsibility for the adequacy or accuracy of the information
about
the Components, the Index Sponsors, or the Index Fund Issuer contained in this
pricing supplement. You, as an investor in the Notes, should make your own
investigation into the Components, the Index Sponsors and the Index Fund Issuer.
The Index Sponsors and the Index Fund Issuer are not involved in any way in
the
offering of the Notes and have no obligation to consider your interests as
an
owner of Notes when they take any actions that might affect the value of the
Notes.
Trading
and other transactions by us or our affiliates could affect the prices of the
stocks underlying the Portfolio, the level of the Portfolio, 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 shares of the securities
underlying the Portfolio or derivative instruments the value of which depend,
directly or indirectly upon, those securities for our own accounts in connection
with our normal business practices or in connection with hedging our obligations
under the Notes and other instruments. 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, including block trades, for our other customers and in accounts
under our management. The transactions could affect the prices of those
securities or the level of the Portfolio in a manner that would be adverse
to
your investment in the Notes. See the section “Use of Proceeds and
Hedging.”
The
original issue price of the Notes includes the cost of hedging our obligations
under the Notes. Such cost includes BSIL’s expected cost of providing such hedge
and the profit BSIL expects to realize in consideration for assuming the risks
inherent in providing such hedge. As a result, assuming no change in market
conditions or any other relevant factors, the price, if any, at which Fifth
Third will be willing to purchase Notes from you in secondary market
transactions, if at all, will likely be lower than the original issue price.
In
addition, any such prices may differ from values determined by pricing models
used by Fifth Third as a result of transaction costs. If you sell the Notes
prior to maturity, you may receive less, and possibly significantly less, than
your initial investment in the Notes.
Hedging
activities we or our affiliates may engage in may affect the level of the
Portfolio 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 any
of
the securities that underlie the Portfolio, or derivative or synthetic
instruments related to those securities or the Portfolio, we or any of our
affiliates may liquidate a portion of such holdings at or about the time of
the
maturity of the Notes or at or about the time of a change in the securities
that
underlie the Portfolio. 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 level of the Portfolio,
we cannot assure you that these activities will not affect such level and the
trading value of the Notes prior to maturity or the Cash Settlement Value
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 take positions in other types
of
appropriate financial instruments that may become available in the future.
Research
reports and other transactions may create conflicts of interest between you
and
us.
We
or one
or more of our affiliates have published, and may in the future publish,
research reports relating to the Portfolio, the Indices or Index Funds included
in the Portfolio or the companies issuing the securities underlying the
Components in the Portfolio. This research may be modified from time to time
without notice and may express opinions or provide recommendations that are
inconsistent with purchasing or holding the Notes. Any of these activities
may
affect the market prices of the securities included in the Portfolio and,
therefore, the value of 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 Portfolio, a Component of the Portfolio or securities
underlying the Components included in the Portfolio. By introducing competing
products into the marketplace in this manner, we or our affiliates could
adversely affect the value of the Notes.
We
and
our affiliates, at present or in the future, may engage in business with the
companies issuing the securities underlying the Components in the Portfolio,
including making loans to, equity investments in, or providing investment
banking, asset management or other advisory services to those companies.
In
connection with these activities, we may receive information about those
companies that we will not divulge to you or other third parties.
The
Cash Settlement Value you receive on the Notes 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 Observation Date, a Market
Disruption Event has occurred or is continuing, the determination of the Cash
Settlement Value 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, a holder of the Notes 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—Event 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 “Other 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 “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
structurally subordinated to the claims of creditors of our subsidiaries.
The
aggregate principal amount of the Notes will be $10,400,000. The Notes are
expected to mature on May 11, 2012 and do not provide for earlier redemption.
The Notes will be issued only in fully registered form, and in minimum
denominations of $50,000; provided, however, that the minimum purchase for
any
purchaser domiciled in a member state of the European Economic Area shall be
$100,000. 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 or quotation system.
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
issuances 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 any 13-day option we grant to
Fifth Third. The prices 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 level of the Portfolio at the time of the relevant
sale.
Interest
We
will
not make any periodic payments of interest on the Notes. The only payment you
will receive, if any, will be the Cash Settlement Value upon the maturity of
the
Notes.
Payment
at Maturity
Your
investment is principal protected only if you hold the Notes until maturity.
On
the Maturity Date, you will receive the Cash Settlement Value, an amount in
cash
that depends on upon the performance of the Portfolio Return.
If,
at
maturity, the Portfolio Return is greater than zero, then the Cash Settlement
Value will be equal to the principal amount of the Notes, plus:
$1,000
x
Portfolio Return x Participation Rate
If,
at
maturity, the Portfolio Return is equal to or less than zero, then the Cash
Settlement Value for each Note will be $1,000. Because the Notes are principal
protected if held to maturity, in no event will the Cash Settlement Value for
each Note be less than $1,000.
The
Notes
are linked to the potential positive performance of a portfolio comprised of
eight indices and two index funds. The following are the eight Indices and
their
respective weightings in the portfolio: (1) 25% the SX5E; (2) 20% the NKY;
(3)
10% the XIN0I; (4) 10% the CECEEUR; (5) 10% the UKX; (6) 5% the KOSPI2; (7)
5%
the SMI and (8) 5% the AS51. The following are the two Index Funds and their
respective weightings in the portfolio: (1) 5% the EWT US and (2) 5% the EZA
US.
Each such Index or Index Fund will be a “Component” and the ten Components
together will constitute the “Portfolio”. The weighting of each Component is
fixed at the respective weighting mentioned above and will not change during
the
term of the Notes unless one or more Components are modified during the term
of
the Notes.
Portfolio
Return:
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An
amount determined by the Calculation Agent and equal to the sum of
the
Component Performance for each Component multiplied by its respective
Weight in the Portfolio.
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For
purposes of determining the Portfolio Return:
“Component
Performance” means, as of the Final Observation Date and with respect to a
Component, the quotient, expressed as a percentage, of (i) the arithmetic
average, expressed as a percentage, of the Observation Levels for that Component
as of each Observation Date minus the Initial Component Level of that Component
divided by (ii) the Initial Component Level of that Component.
“Final
Observation Date” means May 8, 2012.
“Observation
Level” means, as of any Observation Date and with respect to each Index, the
closing index level as reported by the relevant Index Sponsor and displayed
on
Bloomberg Page SX5E <Index> <Go> with respect to the SX5E; Bloomberg
Page NKY <Index> <Go> with respect to the NKY; Bloomberg Page XIN0I
<Index> <Go> with respect to the XIN0I; Bloomberg Page CECEEUR
<Index> <Go> with respect to the CECEEUR; Bloomberg Page UKX
<Index> <Go> with respect to the UKX; Bloomberg Page KOSPI2
<Index> <Go> with respect to the KOSPI2; Bloomberg Page SMI
<Index> <Go> with respect to the SMI; and Bloomberg Page AS51
<Index> <Go> with respect to the AS51; and with respect to each
Index Fund, as of any Observation Date, the closing price as reported by the
Relevant Exchange and as displayed on Bloomberg Page EZA US <Equity>
<Go> with respect to the EZA US; and Bloomberg Page EWT US <Equity>
<Go> with respect to the EWT US.
“Observation
Date” means December 8, 2011, January 8, 2012, February 8, 2012, March 8, 2012,
April 8, 2012, and May 8, 2012; provided that, with respect to a Component,
(i)
if such date is not a Component Business Day (as defined herein) for that
Component, then the Observation Date for that Component will be the next
succeeding day that is a Component Business Day for that Component and (ii)
if a
Market Disruption Event (as defined herein) exists for that Component on the
Observation Date, the Observation Date for that Component will be the next
Component Business Day for that Component on which a Market Disruption Event
does not exist for that Component. If the Observation Date for any Component
is
postponed for three consecutive Component Business Days due to the existence
of
a Market Disruption Event, then, notwithstanding the existence of a Market
Disruption Event on that third Component Business Day, such third Component
Business Day will be the Observation Date for that Component. If no Market
Disruption Event exists with respect to a Component on the Observation Date,
the
determination of that Component’s Observation Level will be made on the
Observation Date, irrespective of the existence of a Market Disruption Event
with respect to one or more of the other Components.
“Initial
Component Level” means:
|
·
|
4411.32
with respect to the SX5E;
|
|
·
|
17,656.84
with respect to the NKY;
|
|
·
|
16,596.81
with respect to the XIN0I;
|
|
·
|
2,753.54
with respect to the CECEEUR;
|
|
·
|
6,550.40
with respect to the UKX;
|
|
·
|
203.51
with respect to the KOSPI2;
|
|
·
|
9,377.08
with respect to the SMI;
|
|
·
|
6,304.40
with respect to the AS51;
|
|
·
|
134.07
with respect to the EZA US; and
|
|
·
|
14.39
with respect to the EWT US.
|
“Weight”
means:
|
·
|
25%
with respect to the SX5E;
|
|
·
|
20%
with respect to the NKY;
|
|
·
|
10%
with respect to the XIN0I;
|
|
·
|
10%
with respect to the CECEEUR;
|
|
·
|
10%
with respect to the UKX;
|
|
·
|
5%
with respect to the KOSPI2;
|
|
·
|
5%
with respect to the SMI;
|
|
·
|
5%
with respect to the AS51;
|
|
·
|
5%
with respect to the EZA US; and
|
|
·
|
5%
with respect to the EWT US.
|
The
“Participation Rate” is 101.00%.
The
“Pricing Date” for each Component is detailed in the below “Summary of the
Components.”
The
“Issue Date” is May 9, 2007.
A
“Component Business Day” means with respect to a Component any day on which each
Relevant Exchange and each Related Exchange for such Component are scheduled
to
be open for trading.
A
“Business Day” is any day other than a Saturday or Sunday, on which banking
institutions in the cities of New York, New York and London, England are not
authorized or obligated by law or executive order to be closed.
The
“Maturity Date” is May 11, 2012. The Notes are expected to mature on May 11,
2012 unless such date is not a Component Business Day, in which case the
Maturity Date shall be the next Business Day. If the Final Observation Date
is
postponed, the Maturity Date will be three Business Days following the Final
Observation Date.
The
“Calculation Agent” is Bear, Stearns & Co. Inc.
An
“Underlying Index” means with respect to the iShares MSCI South Africa Index
Fund, the MSCI South Africa Index or any successors thereto and with respect
to
the iShares MSCI Taiwan Index Fund, the MSCI Taiwan Index or any successors
thereto.
The
“Relevant Exchanges” means (i) with respect to an Index, the primary exchanges
or markets of trading for any security then included in such Index; and (ii)
with respect to an Index Fund, the primary exchanges or markets of trading
for
such Index Fund and the primary exchanges or markets of trading of any security
then included in the Underlying Index for such Index Fund. The “Summary of the
Components” below details the Relevant Exchanges for each Component
A
“Related Exchange” means, with respect to a Component, each exchange or
quotation system where trading has a material effect (as determined by the
Calculation Agent) on the overall market for futures or options contracts
relating to the Component, or the Underlying Index, if any.
Summary
of the Components
Component
|
Index
Sponsor or Index Fund Issuer
|
Bloomberg
Ticker Symbol
|
Pricing
Date
(the date below represents the date in the time zone of the applicable
Relevant Exchanges)
|
Initial
Component Level
|
Relevant
Exchanges
|
Dow
Jones EURO STOXX 50®
Index
|
STOXX
Limited (“STOXX”)
|
SX5E
<Index>
|
May
8, 2007
|
4411.32
|
Major
stock exchanges, respectively located in one of 17 European countries,
including London Stock Exchange, Frankfurt Stock Exchange and
others.
|
Nikkei
225TM
Stock Index
|
Nihon
Keizai Shimbun, Inc. or its successor (“NKS”)
|
NKY
<Index>
|
May
8, 2007
|
17,656.84
|
Tokyo
Stock Exchange or its successor (the “TSE”)
|
FTSE/Xinhua
China 25 Index
|
FTSE/Xinhua
Index Limited
|
XIN0I
<Index>
|
May
8, 2007
|
16,596.81
|
Stock
Exchange of Hong Kong
|
CECEEUR
Index
|
Wiener
Börse
|
CECEEUR
<Index>
|
May
8, 2007
|
2,753.54
|
The
Czech Traded Index, the Hungarian Traded Index and the Polish Traded
Index.
|
FTSE
100 Index
|
FTSE
International Limited
|
UKX
<Index>
|
May
8, 2007
|
6,550.40
|
The
London Stock Exchange
|
KOSPI
200 Index
|
Korea
Exchange
|
KOSPI2
<Index>
|
May
8, 2007
|
203.51
|
The
Korea Exchange
|
Swiss
Market Index
|
SWX
Group
|
SMI
<Index>
|
May
8, 2007
|
9,377.08
|
The
SWX Swiss Exchange
|
S&P/ASX
200 Index
|
Standard
& Poor’s and Australian Stock Exchange
|
AS51
<Index>
|
May
8, 2007
|
6,304.40
|
The
Australian Stock Exchange
|
iShares
MSCI South Africa Index Fund
|
iShares,
Inc.
|
EZA
US <Equity>
|
May
8, 2007
|
134.07
|
The
New York Stock Exchange and the Johannesburg Stock
Exchange.
|
iShares
MSCI Taiwan Index Fund
|
iShares,
Inc.
|
EWT
US <Equity>
|
May
8, 2007
|
14.39
|
The
New York Stock Exchange and the Taiwan Stock
Exchange.
|
Illustrative
Examples
The
following tables are for illustrative purposes and are not indicative of the
future performance of the Components or the future value of the
Notes.
The
following examples demonstrate how the hypothetical Cash Settlement Value of
a
Note is calculated based on the assumptions outlined below. The examples do
not
purport to be representative of every possible scenario concerning increases
or
decreases in the Portfolio or the Components underlying the Portfolio. You
should not construe the examples as an indication or assurance of the expected
performance of the Notes. Actual returns may be different. The examples
demonstrating the hypothetical Cash Settlement Value of a Note are 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
Participation Rate is 101.00%.
|
|
·
|
The
Initial Component Level for the SX5E is equal to 4,200.00.
|
|
·
|
The
Initial Component Level for the NKY is equal to
17,300.00.
|
|
·
|
The
Initial Component Level for the XIN0I is equal to
15,700.00.
|
|
·
|
The
Initial Component Level for the CECEEUR is equal to
2,650.00.
|
|
·
|
The
Initial Component Level for the UKX is equal to
6,400.00.
|
|
·
|
The
Initial Component Level for the KOSPI2 is equal to
190.00.
|
|
·
|
The
Initial Component Level for the SMI is equal to
9,000.00.
|
|
·
|
The
Initial Component Level for the AS51 is equal to
6,000.00.
|
|
·
|
The
Initial Component Level for the EZA US is equal to
125.00.
|
|
·
|
The
Initial Component Level for the EWT US is equal to
14.00.
|
|
·
|
All
returns are based on a 60-month term, pre-tax
basis.
|
|
·
|
No
Market Disruption Events or Events of Default occur during the term
of the
Notes.
|
Example
1: The Portfolio Return is greater than zero.
In
this
example, the levels of eight Components increase relative to their Initial
Component Levels on the related Observation Dates, and the levels of two
Components decrease relative to their Initial Component Levels on the related
Observation Dates. This example illustrates how holders of the Notes may benefit
from the increase in the Observation Level of some of the Components relative
to
their respective Initial Component Levels on each related Observation
Date.
Index
|
Initial
Component Level
|
Observation
Date 1
|
Observation
Date 2
|
Observation
Date 3
|
Observation
Date 4
|
Observation
Date 5
|
Observation
Date 6
|
Component
Performance
|
Weight
in the
Portfolio
|
SX5E
|
4,200.00
|
6,353
|
5,955
|
5,948
|
6,287
|
5,894
|
5,801
|
43.80%
|
25%
|
NKY
|
17,300.00
|
35,509
|
35,053
|
38,814
|
41,636
|
37,942
|
36,620
|
117.32%
|
20%
|
XIN0I
|
15,700.00
|
40,658
|
41,994
|
44,323
|
40,387
|
32,586
|
31,461
|
145.66%
|
10%
|
CECEEUR
|
2,650.00
|
9,868
|
10,565
|
10,676
|
10,657
|
11,493
|
12,327
|
312.49%
|
10%
|
UKX
|
6,400.00
|
6,975
|
6,877
|
7,135
|
7,540
|
7,977
|
8,175
|
16.35%
|
10%
|
KOSPI2
|
190.00
|
178
|
170
|
157
|
157
|
152
|
154
|
-15.09%
|
5%
|
SMI
|
9,000.00
|
6,176
|
6,162
|
5,751
|
6,139
|
6,001
|
5,809
|
-33.26%
|
5%
|
AS51
|
6,000.00
|
8,281
|
8,168
|
7,986
|
7,972
|
8,066
|
9,069
|
37.62%
|
5%
|
EZA
US
|
125.00
|
203
|
203
|
192
|
200
|
212
|
230
|
65.33%
|
5%
|
EWT
US
|
14.00
|
15
|
14
|
14
|
15
|
15
|
15
|
4.76%
|
5%
|
On
the
Final Observation Date, the Component Performance for SX5E would be 43.80%,
the
Component Performance for NKY would be 117.32%, the Component Performance for
XIN0I would be 145.66%, the Component Performance for CECEEUR would be 312.49%,
the Component Performance for UKX would be 16.35%, the Component Performance
for
KOSPI2 would be -15.09%, the Component Performance for SMI would be -33.26%,
the
Component Performance for AS51 would be 37.62%, the Component Performance for
EZA US would be 65.33%, and the Component Performance for EWT US would be 4.76%,
each as calculated pursuant to the below formula:
In
this
example, using the formula below, the Portfolio Return would be greater than
zero.
The
Portfolio Return is an amount equal to the sum of the Component Performance
for
each Component multiplied by its respective Weight in the Portfolio.
Portfolio
Return = (43.80% x 25%) + (117.32% x 20%) + (145.66% x 10%) + (312.49% x 10%)
+
(16.35% x 10%) + (-15.09 x 5%) + (-33.26% x 5%) + (37.62% x 5%) + (65.33% x
5%)
+ (4.76% x 5%)
Portfolio
Return = 84.83%
The
Cash
Settlement Value, using the formula below, would equal $1,856.78.
Cash
Settlement Value
Example
2: The Portfolio Return might be less than zero.
In
this
example, the Observation Levels of seven Components decrease relative to their
Initial Component Levels on the related Observation Dates and the Observation
Levels of three Components increase relative to their Initial Component Levels
on the related Observation Dates. As a result, the Portfolio Return would be
less than zero, and holders of the Notes would therefore have received only
the
principal amount of each Note at maturity.
Index
|
Initial
Component Level
|
Observation
Date 1
|
Observation
Date 2
|
Observation
Date 3
|
Observation
Date 4
|
Observation
Date 5
|
Observation
Date 6
|
Component
Performance
|
Weight
in the
Portfolio
|
SX5E
|
4,200.00
|
2,284
|
2,100
|
2,206
|
2,348
|
2,252
|
2,273
|
-46.58%
|
25%
|
NKY
|
17,300.00
|
21,054
|
21,926
|
20,641
|
18,744
|
19,111
|
17,423
|
14.55%
|
20%
|
XIN0I
|
15,700.00
|
11,821
|
12,151
|
12,294
|
12,237
|
13,057
|
13,425
|
-20.40%
|
10%
|
CECEEUR
|
2,650.00
|
2,299
|
2,404
|
2,288
|
2,260
|
2,125
|
2,322
|
-13.85%
|
10%
|
UKX
|
6,400.00
|
7,800
|
8,144
|
7,660
|
7,653
|
7,723
|
7,177
|
20.20%
|
10%
|
KOSPI2
|
190.00
|
102
|
99
|
96
|
93
|
92
|
93
|
-49.56%
|
5%
|
SMI
|
9,000.00
|
4,803
|
4,946
|
5,182
|
5,440
|
5,380
|
5,390
|
-42.33%
|
5%
|
AS51
|
6,000.00
|
3,906
|
4,097
|
4,555
|
4,517
|
4,374
|
4,404
|
-28.19%
|
5%
|
EZA
US
|
125.00
|
77
|
73
|
75
|
81
|
87
|
99
|
-34.40%
|
5%
|
EWT
US
|
14.00
|
16
|
15
|
15
|
15
|
16
|
15
|
9.52%
|
5%
|
On
the
Final Observation Date, the Component Performance for SX5E would be -46.58%,
the
Component Performance for NKY would be 14.55%, the Component Performance for
XIN0I would be -20.40%, the Component Performance for CECEEUR would be -13.85%,
the Component Performance for UKX would be 20.20%, the Component Performance
for
KOSPI2 would be -49.56%, the Component Performance for SMI would be -42.33%,
the
Component Performance for AS51 would be -28.19%, the Component Performance
for
EZA US would be -34.40%, and the Component Performance for EWT US would be
9.52%, each as calculated pursuant to the below formula:
In
this
example, using the formula below, the Portfolio Return would not be greater
than
zero.
The
Portfolio Return is an amount equal to the sum of the Component Performance
for
each Component multiplied by its respective Weight in the Portfolio.
Portfolio
Return = (-46.58% x 25%) + (14.55% x 20%) + (-20.40% x 10%) + (-13.85% x 10%)
+
(20.20% x 10%) + (-49.56x 5%) + (-42.33% x 5%) + (-28.19% x 5%) + (-34.40%
x 5%)
+ (9.52% x 5%)
Portfolio
Return = -17.39%
Since
the
Portfolio Return would be less than zero, the Cash Settlement Value for each
Note would be the principal amount of $1,000.
Example
3: Some Components move higher while others move lower.
In
this
example, the Observation Levels for four of the Components increase relative
to
the Initial Component Levels for those Components, while the Observation Levels
for the six other Components decrease relative to the Initial Component Levels
for those Components.
Index
|
Initial
Component Level
|
Observation
Date 1
|
Observation
Date 2
|
Observation
Date 3
|
Observation
Date 4
|
Observation
Date 5
|
Observation
Date 6
|
Component
Performance
|
Weight
in the
Portfolio
|
SX5E
|
4,200.00
|
3,590
|
3,991
|
4,287
|
4,498
|
4,733
|
4,422
|
1.27%
|
25%
|
NKY
|
17,300.00
|
15,705
|
15,737
|
15,498
|
15,519
|
15,699
|
15,323
|
-9.94%
|
20%
|
XIN0I
|
15,700.00
|
30,611
|
31,784
|
33,513
|
35,011
|
36,270
|
32,804
|
112.31%
|
10%
|
CECEEUR
|
2,650.00
|
1,594
|
1,525
|
1,428
|
1,387
|
1,343
|
1,299
|
-46.06%
|
10%
|
UKX
|
6,400.00
|
6,198
|
6,619
|
6,199
|
6,044
|
6,114
|
6,739
|
-1.27%
|
10%
|
KOSPI2
|
190.00
|
255
|
239
|
221
|
214
|
224
|
230
|
21.32%
|
5%
|
SMI
|
9,000.00
|
12,848
|
13,778
|
12,602
|
13,208
|
13,284
|
13,301
|
46.34%
|
5%
|
AS51
|
6,000.00
|
5,455
|
5,266
|
5,523
|
5,618
|
5,867
|
6,357
|
-5.32%
|
5%
|
EZA
US
|
125.00
|
99
|
105
|
108
|
103
|
101
|
105
|
-17.20%
|
5%
|
EWT
US
|
14.00
|
10
|
10
|
11
|
11
|
12
|
11
|
-22.62%
|
5%
|
On
the
Final Observation Date, the Component Performance for SX5E would be 1.27%,
the
Component Performance for NKY would be -9.94%, the Component Performance for
XIN0I would be 112.31%, the Component Performance for CECEEUR would be -46.06%,
the Component Performance for UKX would be -1.27%, the Component Performance
for
KOSPI2 would be 21.32%, the Component Performance for SMI would be 46.34%,
the
Component Performance for AS51 would be -5.32%, the Component Performance for
EZA US would be -17.20%, and the Component Performance for EWT US would be
-22.62%, each as calculated pursuant to the below formula:
In
this
example, using the formula below, the Portfolio Return would be greater than
zero.
The
Portfolio Return is an amount equal to the sum of the Component Performance
for
each Component multiplied by its respective Weight in the Portfolio.
Portfolio
Return = (1.27% x 25%) + (-9.94% x 20%) + (112.31% x 10%) + (-46.06% x 10%)
+
(-1.27% x 10%) + (21.32x 5%) + (46.34% x 5%) + (-5.32% x 5%) + (-17.20% x 5%)
+
(-22.62% x 5%)
Portfolio
Return = 5.95%
The
Cash
Settlement Value, using the formula below, would equal $1,060.10.
Cash
Settlement Value
Discontinuance
of one or more Indices
If
an
Index Sponsor discontinues publication of or otherwise fails to publish any
Index and such Index Sponsor or another entity publishes a successor or
substitute index that the Calculation Agent determines to be comparable to
the
discontinued Index (the new index being referred to as a “Successor Index”),
then the Observation Levels for that Index will be determined by reference
to
the level of the Successor Index at the close of trading on the Relevant
Exchanges or markets for the Successor Index all on future Observation
Dates.
For
the
avoidance of doubt, only Observation Levels for that Index determined on or
after the discontinuance for such Index will be determined by reference to
the
level of the Successor Index, any Observation Levels for that Index determined
prior to the discontinuance will remain the same.
Upon
any
selection by the Calculation Agent of a Successor Index, the Calculation Agent
will cause notice thereof to be furnished to us and the Trustee. If a Successor
Index is selected by the Calculation Agent, the Successor Index will be used
as
a substitute for the original Index for all purposes, including for purposes
of
determining whether a Market Disruption Event exists with respect to the
Index.
If
an
Index is discontinued or if an Index Sponsor fails to publish an Index prior
to,
and such discontinuance is continuing on, any Observation Date and the
Calculation Agent determines that no Successor Index is available at such time,
then the Calculation Agent will determine the level to be used for the
Observation Level for that Observation Date with respect to such Index. The
Observation Level to be used for that Observation Date will be computed by
the
Calculation Agent in accordance with the formula for and method of calculating
that Index last in effect prior to the relevant discontinuance or failure but
using only those securities that comprised that Index immediately prior to
such
discontinuance or failure. In such an event, the Calculation Agent will give
notice to the Trustee, stating the determinations made.
Notwithstanding
these alternative arrangements, discontinuance of the publication of the Index
may adversely affect the value of, and trading in, the Notes.
Adjustments
to the Indices
If
at any
time the method of calculating an Index or a Successor Index is changed in
a
material respect, or if an Index or a Successor Index is in any other way
modified so that such Index or Successor Index does not, in the opinion of
the
Calculation Agent, fairly represent the level of the Index or Successor Index
had such changes or modifications not been made, then, for purposes of
calculating the Observation Levels with respect to such Index or Successor
Index
or the Cash Settlement Value with respect to the Notes or making any other
determinations as of or after such time, the Calculation Agent will make such
calculations and adjustments, the Calculation Agent determines may be necessary
in order to arrive at a level of an index comparable to the Index or Successor
Index, as the case may be, as if such changes or modifications had not been
made, and calculate the Cash Settlement Value (including the components thereof)
with reference to the Index or the Successor Index, as adjusted. Accordingly,
if
the method of calculating an Index or Successor Index is modified so that the
level of that Index is a fraction of what it would have been if it had not
been
modified (e.g., due to a split in the Index), then the Calculation Agent will
adjust that Index in order to arrive at a level of the Index or the Successor
Index as if it had not been modified (e.g., as if such split had not occurred).
In such event, the Calculation Agent will give notice to the Trustee, stating
the calculations and adjustments made.
Antidilution
Adjustments with respect to the Index Funds
If
one of
the corporate events described below occurs with respect to an Index Fund,
the
Calculation Agent will determine whether such corporate event will have a
material effect on such Index Fund or the Notes, or in the case of a Potential
Adjustment Event, whether such Potential Adjustment Event has a diluting or
concentrative effect on the theoretical value of one share of such Index Fund.
To the extent the Calculation Agent makes such a determination, the Calculation
Agent will make the adjustments and computations described below. The
Calculation Agent will also determine the effective date of that adjustment,
and
the replacement of the relevant Index Fund, if applicable. Upon making any
such
adjustment, the Calculation Agent will give notice as soon as practicable to
the
Trustee, stating the adjustment made. The Calculation Agent will provide
information about the adjustments it makes upon your written
request.
If
more
than one corporate event requiring adjustment occurs, the Calculation Agent
will
make such an adjustment for each event in the order in which the events occur,
and on a cumulative basis. Thus, having adjusted the relevant Initial Component
Level, the relevant Observation Level, the Cash Settlement Value or any other
variable for the first corporate event, the Calculation Agent will adjust the
appropriate variables for the second event, applying the required adjustment
cumulatively.
To
the
extent the Calculation Agent makes an adjustment, it will make the adjustment
with a view to offsetting, to the extent practical, any change in your economic
position relative to the Notes that results solely from that corporate event.
The Calculation Agent may modify the antidilution adjustments as necessary
to
ensure an equitable result.
The
following corporate events are those that may require an
adjustment:
Merger
Events and Tender Offers
Merger
Events.
A
“Merger Event” shall mean, in respect of an Index Fund, any (i) reclassification
or change of such Index Fund that results in a transfer of or an irrevocable
commitment to transfer all of the outstanding shares of such Index Fund to
another person or entity, (ii) consolidation, amalgamation, merger or binding
share exchange of iShares, Inc. (the “Issuer”) with or into another entity or
person (other than a consolidation, amalgamation, merger or binding share
exchange in which the Issuer is the continuing entity and which does not result
in a reclassification or change of all of the shares of such Index Fund
outstanding), (iii) takeover offer, tender offer, exchange offer, solicitation,
proposal or other event by any entity or person to purchase or otherwise obtain
100% of the outstanding shares of such Index Fund (other than shares of such
Index Fund owned or controlled by such other entity or person), or (iv)
consolidation, amalgamation, merger or binding share exchange of the Issuer
or
its subsidiaries with or into another entity in which the Issuer is the
continuing entity and which does not result in a reclassification or change
of
the all of the shares of such Index Fund outstanding but results in the
outstanding shares of such Index Fund (other than shares of such Index Fund
owned or controlled by such other entity) immediately following such event
collectively representing less than 50% of the outstanding shares of such Index
Fund immediately prior to such event, in each case if the closing date of the
Merger Event is on or before the Final Observation Date.
Tender
Offers.
A
“Tender Offer” shall mean, in respect of the voting shares of the Issuer, any
takeover offer, tender offer, exchange offer, solicitation, proposal or other
event by any entity or person that results in such entity or person purchasing,
or otherwise obtaining or having the right to obtain, by conversion or other
means, not less than 10% of the outstanding voting shares of the Issuer as
determined by the Calculation Agent, based upon the making of filings with
governmental or self-regulatory agencies or such other information as the
Calculation Agent deems relevant.
If
a
Merger Event or a Tender Offer occurs and the consideration for the relevant
Index Fund consists solely of new shares that are publicly quoted, traded or
listed on the New York Stock Exchange, American Stock Exchange, or NASDAQ (the
“New Index Fund”), then such Index Fund will be adjusted to comprise the number
of shares of the New Index Fund to which a holder of one share of such Index
Fund immediately prior to the occurrence of the Merger Event or Tender Offer,
as
the case may be, would be entitled upon consummation of such Merger Event or
Tender Offer, and the Calculation Agent shall adjust any or all of the Initial
Component Level for such Index Fund, the Observation Levels for such Index
Fund,
the Cash Settlement Value or any other variable relevant to the terms of the
Notes to account for the economic effect of such Merger Event or Tender Offer.
The Calculation Agent will determine the effective date of any such adjustment
(as described in this paragraph), and the replacement of such Index Fund, if
applicable.
If
the
Approval Date (as defined herein) for a Merger Event or a Tender Offer occurs,
on or prior to the Final Observation Date, and the distributions of property
made in respect of the relevant Index Fund includes property other than shares
of the New Index Fund (other than cash paid in lieu of fractional shares),
in
whole or in part, then the Observation Levels for the relevant Index Fund
following the Approval Date shall be equal to the Consideration Value (as
defined herein).
“Consideration
Value” per share of an Index Fund means, with respect to an event (other than
one in which consideration consists solely of shares of the New Index Fund),
the
sum of (i) in the case of cash received in such an event, the amount of such
cash so received, and (ii) for any property other than cash received in such
an
event, the market value of such property so received as of the Final Observation
Date. Any market value determined pursuant to (ii) above shall be determined
on
the basis of market quotations from four leading dealers in the relevant market.
If that property cannot be determined on the basis of market quotations by
four
leading dealers in the relevant market, then the Calculation Agent will
determine the market value of such property.
The
“Approval Date” is the closing date of a Merger Event, or, in the case of a
Tender Offer, the date on which the person or entity making the Tender Offer
acquires or otherwise obtains the relevant percentage of the voting shares
of
the Issuer.
In
the
event of a Merger Event or Tender Offer in which a holder of shares of the
relevant Index Fund may elect the form of consideration it receives in respect
of such Merger Event or Tender Offer, the consideration shall be deemed to
consist of the types and amounts of each type of consideration distributed
to a
holder that makes no such election, as determined by the Calculation Agent.
Nationalization,
Delisting and Insolvency
Nationalization.
“Nationalization” shall mean with respect to an Index Fund, all the assets or
substantially all the assets of the Issuer are nationalized, expropriated or
are
otherwise required to be transferred to any governmental agency, authority
or
entity.
Insolvency.
“Insolvency” shall mean with respect to an Index Fund, that, by reason of the
voluntary or involuntary liquidation, bankruptcy or insolvency of, or any
analogous proceeding involving, the Issuer, (i) all of the shares of such Index
Fund are required to be transferred to a trustee, liquidator or other similar
official or (ii) holders of the shares of such Index Fund become legally
prohibited from transferring them.
If
the
Announcement Date (as defined herein) for a Nationalization or Insolvency
occurs, on or prior to the Final Observation Date, then the Observation Levels
for the relevant Index Fund following the Announcement Date shall be equal
to
the Consideration Value (as defined above), which may be zero.
The
“Announcement Date” means (i) in the case of a Nationalization, the day of the
first public announcement by the relevant government authority that all or
substantially all of the assets of the Issuer are to be nationalized,
expropriated or otherwise transferred to any governmental agency, authority
or
entity, (ii) in the case of a Delisting Event, the day of the first public
announcement by the Primary Exchange that the relevant Index Fund will cease
to
trade or be publicly quoted on such exchange, or (iii) in the case of an
Insolvency, the day of the first public announcement of the institution of
a
proceeding or presentation of a petition or passing of a resolution (or other
analogous procedure in any jurisdiction) that leads to an Insolvency with
respect to the Issuer. In the case of an acceleration of the maturity of the
Notes, interest will be paid on the Notes through and excluding the related
date
of accelerated payment.
Delisting
Event.
A
“Delisting Event” shall occur, with respect to an Index Fund, if the Relevant
Exchange for the Index Fund announces that pursuant to the rules of such
Relevant Exchange, the Index Fund ceases (or will cease) to be listed, traded
or
publicly quoted on such Relevant Exchange for any reason (other than a Merger
Event or Tender Offer) and is not immediately re-listed, re-traded or re-quoted
on an exchange or quotation system located in the same country as such Relevant
Exchange.
If
a
Delisting Event for an Index Fund occurs, then each of the Observation Levels
from, and including, the Announcement Date (as defined above) to, and including,
the Final Observation Date will be determined as follows: (i) if the Index
Fund
is not re-listed on any exchange or quotation system located in the same country
as the Relevant Exchange for the Index Fund, the Observation Levels will be
the
fair market value of the Index Fund as determined by the Calculation Agent
on
the applicable Observation Date; and (ii) if the Index Fund is re-listed on
any
exchange or quotation system located in the same country as the Relevant
Exchange for such Index Fund, the Observation Levels will be the closing price
of such Index Fund on such exchange or quotation system as determined by the
Calculation Agent on the applicable Observation Date.
Potential
Adjustment Events
Potential
Adjustment Events.
A
“Potential Adjustment Event” shall mean, with respect to an Index Fund, any of
the following (i) a subdivision, consolidation or reclassification of such
Index
Fund (other than a Merger Event or Tender Offer), or a free distribution or
distribution of shares of such Index Fund to existing holders by way of bonus,
capitalization or similar issue; (ii) a distribution to existing holders of
shares of such Index Fund of (A) such shares, (B) other capital or securities
granting the right to payment of distributions and/or proceeds of liquidation
of
the Issuer equal, proportionate or senior to such payments to holders of such
Index Fund or (C) any other type of securities, rights or warrants or other
assets, in any case for payments (cash or other) at less than the prevailing
market price, as determined by the Calculation Agent; (iii) an extraordinary
distribution paid by the Issuer; (iv) a call by the Issuer in respect of shares
of such Index Fund that are not fully paid; (v) a repurchase of shares of such
Index Fund or securities convertible into or exchangeable for such shares,
by
the Issuer whether out of profits or capital and whether the consideration
for
such repurchase is cash, securities or otherwise; or (vi) any other similar
event that may have a diluting or concentrative effect on the theoretical value
of such Index Fund other than Insolvency, Merger Event or Tender Offer, in
each
case if the Potential Adjustment Event occurs before the Final Observation
Date.
If
a
Potential Adjustment Event occurs, then the Calculation Agent will determine
whether such Potential Adjustment Event has a diluting or concentrative effect
on the theoretical value of one share of the relevant Index Fund and, if so,
will (i) make the corresponding adjustment(s), if any, to the Initial Component
Level for such Index Fund, the Observation Levels with respect to such Index
Fund, the Cash Settlement Value of the Notes and any other variable (or any
combination thereof) as the Calculation Agent determines appropriate to account
for that diluting or concentrative effect, and (ii) determine the effective
date(s) of any such adjustment(s).
Market
Disruption Events
If
there
is a Market Disruption Event on an Observation Date, the Observation Level
of
that Component will be determined on the first succeeding Component Business
Day
on which there is no Market Disruption Event. In no event, however, will the
Observation Date be a date that is postponed by more than three Component
Business Days following the original date that, but for the Market Disruption
Event, would have been the Observation Date. In that case, the third Component
Business Day will be deemed to be the Observation Date, notwithstanding the
Market Disruption Event, and the Calculation Agent will determine the level
of a
Component on that third Component Business Day in accordance with the formula
for and method of calculating the applicable underlying Component in effect
prior to the Market Disruption Event using the closing level of each security
in
the Component as described above (or, if trading in any such security has been
materially suspended or materially limited, the Calculation Agent’s estimate of
the closing level that would have prevailed but for such suspension or
limitation) as of that third Component Business Day. If no Market Disruption
Event exists with respect to a Component, the Observation Level of that
Component shall be determined on the scheduled Observation Date. In the event
of
a Market Disruption Event on the Final Observation Date, the Maturity Date
will
be three Business Days following the Final Observation Date, as postponed for
the last Component for which an Observation Level is determined.
A
“Market
Disruption Event” means, with respect to an Index, the occurrence or existence
at any time of a condition specified below that the Calculation Agent determines
to be material:
(a) any
suspension of or limitation imposed on trading by any Relevant Exchange or
Related Exchange or otherwise, and whether by reason of movements in price
exceeding limits permitted by such Relevant Exchange or Related Exchange or
otherwise, (A) relating to securities that, in the aggregate, comprise 20%
or
more of the level of the respective Index or (B) in futures or options contracts
relating to the respective Index on any Related Exchange for such
Index;
(b) any
event
(other than an event described in (c) below) that disrupts or impairs (as
determined by the Calculation Agent) the ability of market participants in
general (A) to effect transactions in, or obtain market values for, securities
that, in the aggregate, comprise 20% or more of the level of that Index on
any
Relevant Exchange(s) for the respective Index or (B) to effect transactions
in,
or obtain market values for, futures or options contracts relating to the
respective Index on any Related Exchange for such Index;
(c) the
closure on any Component Business Day of any Relevant Exchange with respect
to
that Index relating to securities that comprise, in the aggregate, 20% or more
of the level of the Index or any Related Exchange for that Index prior to its
weekday closing time, without regard to after hours or any other trading outside
of the regular trading session hours, unless such earlier closing time is
announced by such Relevant Exchange or Related Exchange at least one hour prior
to the earlier of (i) the actual closing time for the regular trading session
on
such Relevant Exchange or Related Exchange on such Component Business Day for
such Relevant Exchange or Related Exchange and (ii) the submission deadline
for
orders to be entered into the Relevant Exchange or Related Exchange system
for
execution at the close of trading on such Component Business Day for such
Relevant Exchange or Related Exchange; or
(d) any
Component Business Day on which any Relevant Exchange or Related Exchange fails
to open for trading during its regular trading session.
A
“Market
Disruption Event” means, with respect to an Index Fund, the occurrence or
existence at any time of a condition specified below that the Calculation Agent
determines to be material:
(a) any
suspension of or limitation imposed on trading by any Relevant Exchange or
Related Exchange for such Index Fund, or otherwise and whether by reason of
movements in price exceeding limits permitted by such Relevant Exchange(s)
or
Related Exchange(s) or otherwise (A) relating to such Index Fund or any
securities that in the aggregate comprise 20% or more of the level of the
related Underlying Index or (B) in futures or options contracts relating to
such
Index Fund or its respective Underlying Index on any Related Exchange for such
Index Fund;
(b) any
event
(other than in section (c) below) that disrupts or impairs (as determined by
the
Calculation Agent) the ability of market participants in general (A) to effect
transactions in, or obtain market values for such Index Fund or, any securities
that in the aggregate comprise 20% or more of the level of the related
Underlying Index on any Relevant Exchange(s) for such Index Fund or (B) to
effect transactions in, or obtain market prices for, futures or options
contracts relating to such Index Fund or its respective Underlying Index on
any
Related Exchange for such Index Fund;
(c) the
closure on any Component Business Day of any Relevant Exchange or Related
Exchange for such Index Fund prior to its Scheduled Closing Time unless such
earlier closing time is announced by such Relevant Exchange(s) or Related
Exchange(s) (as the case may be) at least one hour prior to the earlier of
(i)
the actual closing time for the regular trading session on such Relevant
Exchange(s) or Related Exchange(s) on such Component Business Day and (ii)
the
submission deadline for orders to be entered into such Relevant Exchange or
Related Exchange system for execution at the Scheduled Closing Time on such
Component Business Day; or
(d) any
Component Business Day on which any Relevant Exchange or Related Exchange for
such Index Fund fails to open for trading during its regular trading
session.
For
the
purposes of determining whether a Market Disruption Event in respect of the
Index exists at any time, if a Market Disruption Event occurs in respect of
a
security included in the Index or the Underlying Index relating to such Index
Fund at any time, then the relevant percentage contribution of that security
to
the level of that Index or Underlying Index shall be based on a comparison
of
(x) the portion of the level of such Index or Underlying Index attributable
to
that security and (y) the overall level of such Index or Underlying Index,
in
each case immediately before the occurrence of such Market Disruption
Event.
For
purposes of the above definitions of “Market Disruption Event”:
(a) a
limitation on the hours in a trading day and/or number of days of trading will
not constitute a Market Disruption Event if it results from an announced change
in the regular business hours of a Relevant Exchange or Related Exchange,
and
(b) for
purposes of clause (a) above, any limitations on trading during significant
market fluctuations, under NYSE Rule 80B, NASD Rule 4120 or any analogous rule
or regulation enacted or promulgated by the NYSE, NASD or any other self
regulatory organization or the SEC of similar scope as determined by the
Calculation Agent, will be considered “material.”
“Underlying
Index” means with respect to the iShares MSCI South Africa Index Fund, the MSCI
South Africa Index or any successors thereto and with respect to the iShares
MSCI Taiwan Index Fund, the MSCI Taiwan Index or any successors thereto.
“Relevant
Exchange” means (i) with respect to an Index, the primary exchanges or markets
of trading for any security then included in such Index; and (ii) with respect
to an Index Fund, the primary exchanges or markets of trading for such Index
Fund and the primary exchanges or markets of trading of any security then
included in the Underlying Index for such Index Fund.
“Related
Exchange” means, with respect to a Component, each exchange or quotation system
where trading has a material effect (as determined by the Calculation Agent)
on
the overall market for futures or options contracts relating to the Component,
or the Underlying Index, if any.
“Component
Business Day” means with respect to a Component any day on which each Relevant
Exchange and each Related Exchange for such Component are scheduled to be open
for trading.
“Scheduled
Closing Time” means, in respect of a Relevant Exchange or Related Exchange and a
Component Business Day, the scheduled weekday closing time of such Relevant
Exchange or Related Exchange on such Component Business Day, without regard
to
after hours or any other trading outside of the regular trading session
hours.
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
holder of a Note, upon any acceleration permitted by the Notes will be equal
to
the Cash Settlement Value 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 will be made by Fifth Third 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 us and the holders 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 us and the Trustee, who will
provide notice to the registered holders of the Notes.
DESCRIPTION
OF THE PORTFOLIO
All
disclosures contained in this Supplement regarding the Components are derived
from publicly available information. Neither we nor any of our affiliates takes
any responsibility for the accuracy or completeness of such
information.
The
Dow Jones EURO STOXX 50®
Index (“SX5E”)
The
SX5E
was created by STOXX Limited, a joint venture between Deutsche Börse AG, Dow
Jones & Company and the SWX Group. Publication of the SX5E began on February
28, 1998, based on an initial EURO STOXX 50®
Index
value of 1,000 at December 31, 1991. The SX5E is reported daily in the financial
pages of many major newspapers, on Bloomberg Page SX5E <Index> <Go>
and on the STOXX Limited website: http://www.stoxx.com.
Information contained in the STOXX Limited website is not incorporated by
reference in, and should not be considered a part of, this Pricing
Supplement.
Computation
of the SX5E
The
SX5E
is composed of 50 component stocks of market sector leaders from within the
SX5E, which includes stocks selected from the Eurozone. The component stocks
have a high degree of liquidity and represent the largest companies across
all
market sectors defined by the Dow Jones Global Classification Standard. The
composition of the SX5E is reviewed annually in September, based on the closing
stock data on the last trading day in August. The component stocks are announced
the first trading day in September. Changes to the component stocks are
implemented on the third Friday in September and are effective the following
trading day. Changes in the composition of the SX5E are made to ensure that
the
SX5E includes the 50 market sector leaders from within the SX5E.
The
SX5E
is calculated with the “Laspeyres formula”, which measures the aggregate price
changes in the component stocks against a fixed base quantity weight. The
formula for calculating the SX5E value can be expressed as follows:
![](formula4.jpg)
Each
component’s weight is capped at 10% of the SX5E Index’s total free-float market
capitalization. Weights are reviewed quarterly. Within each of the SX5E market
sector indices, the component stocks are ranked by free-float market
capitalization. The largest stocks are added to the selection list until the
coverage is close to, but still less than, 60% of the free-float market
capitalization of the corresponding SX5E market sector index. If the next-ranked
stock brings the coverage closer to 60% in absolute terms, then it is also
added
to the selection list. Any remaining stocks that are current SX5E components
are
added to the selection list. The stocks on the selection list are ranked by
free-float market capitalization. In exceptional cases, the STOXX Limited
Supervisory Board may make additions and deletions to the selection
list.
The
40
largest stocks on the selection list are chosen as components. Any remaining
current components of the SX5E ranked between 41 and 60 are added as index
components. If the component number is still below 50, then the largest stocks
on the selection list are added until the index contains 50 stocks.
The
divisor of the aforementioned formula is adjusted to maintain the continuity
of
the SX5E value across changes due to corporate actions such as the issuance
of
dividends, the occurrence of stock splits, stock repurchase by the issuer and
other reasons.
License
Agreement with SX5E
We
have
entered, or are exploring entering, into a non-exclusive license agreement
with
EURO STOXX 50®,
whereby
we and our affiliates, in exchange for a fee, will be permitted to use the
SX5E
in connection with the offer and sale of the Notes.
EURO
STOXX 50®
and Dow
Jones & Company, Inc. (“Dow
Jones”)
have
no relationship to us, other than the licensing of the SX5E and the related
trademarks for use in connection with the Notes.
EURO
STOXX 50®
and Dow Jones do not:
·
|
Sponsor,
endorse, sell or promote the Notes.
|
·
|
Recommend
that any person invest in the Notes or any other
securities.
|
·
|
Have
any responsibility or liability for or make any decisions about the
timing, amount or pricing of Notes.
|
·
|
Have
any responsibility or liability for the administration, management
or
marketing of the Notes.
|
·
|
Consider
the needs of the Notes or the owners of the Notes in determining,
composing or calculating the SX5E or have any obligation to do
so.
|
EURO
STOXX 50®
and Dow Jones will not have any liability in connection with the Notes.
Specifically,
·
|
EURO
STOXX 50®
and Dow Jones do not make any warranty, express or implied and disclaim
any and all warranty about:
|
|
·
|
The
results to be obtained by the Notes, the owner of the Notes or any
other
person in connection with the use of the SX5E and the data included
in the
SX5E;
|
|
·
|
The
accuracy or completeness of the SX5E and its
data;
|
|
·
|
The
merchantability and the fitness for a particular purpose or use of
the
SX5E and its data;
|
·
|
EURO
STOXX 50®
and Dow Jones will have no liability for any errors, omissions or
interruptions in the SX5E or its
data;
|
·
|
Under
no circumstances will EURO STOXX 50®
or
Dow Jones be liable for any lost profits or indirect, punitive, special
or
consequential damages or losses, even if EURO STOXX 50®
or
Dow Jones knows that they might
occur.
|
The
licensing agreement between us and EURO STOXX 50®
is solely for their benefit and not for the benefit of the owners of the Notes
or any other third parties.
Historical
Performance of the SX5E
The
following table sets forth the month-end closing index levels of the SX5E for
each month in the period from January 1998 through March 2007. The closing
index
level of the SX5E on March 30, 2007 was 4,199.28. The SX5E closing index levels
listed below were obtained from Bloomberg Financial Service, without independent
verification by us. The
historical values of the EURO STOXX 50®
Index should not be taken as an indication of future performance, and no
assurance can be given that the level of the SX5E will increase relative to
its
the Initial Component Level during the term of the Notes.
Month
End Closing Index Levels: January 1998-January 2007
|
|
1998
|
|
1999
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
January
|
|
2,676.03
|
|
3,547.15
|
|
4,684.48
|
|
4,779.90
|
|
3,670.26
|
|
2,248.17
|
|
2,839.13
|
|
2,984.59
|
|
3,691.41
|
|
4,178.54
|
February
|
|
2,878.04
|
|
3,484.24
|
|
5,182.62
|
|
4,318.88
|
|
3,624.74
|
|
2,140.73
|
|
2,893.18
|
|
3,058.32
|
|
3,774.51
|
|
4,087.12
|
March
|
|
3,153.32
|
|
3,559.86
|
|
5,249.55
|
|
4,185.00
|
|
3,784.05
|
|
2,036.86
|
|
2,787.49
|
|
3,055.73
|
|
3,853.74
|
|
4,199.28
|
April
|
|
3,120.94
|
|
3,757.87
|
|
5,303.95
|
|
4,525.01
|
|
3,574.23
|
|
2,324.23
|
|
2,787.48
|
|
2,930.10
|
|
3,839.90
|
|
-
|
May
|
|
3,357.77
|
|
3,629.46
|
|
5,200.89
|
|
4,426.24
|
|
3,425.79
|
|
2,330.06
|
|
2,749.62
|
|
3,076.70
|
|
3,637.17
|
|
-
|
June
|
|
3,406.82
|
|
3,788.66
|
|
5,145.35
|
|
4,243.91
|
|
3,133.39
|
|
2,419.51
|
|
2,811.08
|
|
3,181.54
|
|
3,648.92
|
|
-
|
July
|
|
3,480.63
|
|
3,638.62
|
|
5,122.80
|
|
4,091.38
|
|
2,685.79
|
|
2,519.79
|
|
2,720.05
|
|
3,326.51
|
|
3,691.87
|
|
-
|
August
|
|
2,978.12
|
|
3,769.14
|
|
5,175.12
|
|
3,743.97
|
|
2,709.29
|
|
2,556.71
|
|
2,670.79
|
|
3,263.78
|
|
3,808.70
|
|
-
|
September
|
|
2,670.97
|
|
3,669.71
|
|
4,915.18
|
|
3,296.66
|
|
2,204.39
|
|
2,395.87
|
|
2,726.30
|
|
3,428.51
|
|
3,899.41
|
|
-
|
October
|
|
2,887.11
|
|
3,922.91
|
|
5,057.46
|
|
3,478.63
|
|
2,518.99
|
|
2,575.04
|
|
2,811.72
|
|
3,320.15
|
|
4,004.80
|
|
-
|
November
|
|
3,179.09
|
|
4,314.38
|
|
4,790.08
|
|
3,658.27
|
|
2,656.85
|
|
2,630.47
|
|
2,876.39
|
|
3,447.07
|
|
3,987.23
|
|
-
|
December
|
|
3,342.32
|
|
4,904.46
|
|
4,772.39
|
|
3,806.13
|
|
2,386.41
|
|
2,760.66
|
|
2,951.01
|
|
3,578.93
|
|
4,119.94
|
|
-
|
The
following graph illustrates the historical performance of the SX5E based on
the
closing level on the last Component Business Day of each month from January
1998
to March 2007.
The
Nikkei 225 Stock Index (“NKY”)
The
NKY
is a stock index calculated, published and disseminated by Nihon Keizai Shimbun,
Inc. (“Nihon
Keizai”)
that
measures the composite price performance of selected Japanese stocks. Nihon
Keizai first calculated and published the NKY in 1970. The Nikkei 225 Stock
Index currently is based on 225 underlying stocks (the “Nikkei
Underlying Stocks”)
trading on the Tokyo Stock Exchange (the “TSE”)
representing a broad cross-section of Japanese industries. All 225 Nikkei
Underlying Stocks are stocks listed in the First Section of the TSE. Stocks
listed in the First Section of the TSE are among the most actively traded stocks
on the TSE. Nihon Keizai rules require that the 75 most liquid issues (one-third
of the component count of the NKY) be included in the NKY.
The
225
companies included in the NKY are divided into six sector categories:
Technology, Financials, Consumer Goods, Materials, Capital Goods/Others and
Transportation and Utilities. These six sector categories are further divided
into 36 industrial classifications as follows:
|
·
|
Technology
— Pharmaceuticals, Electrical Machinery, Automobiles, Precision Machinery,
Telecommunications;
|
|
·
|
Financials
— Banks, Miscellaneous Finance, Securities,
Insurance;
|
|
·
|
Consumer
Goods — Marine Products, Food, Retail,
Services;
|
|
·
|
Materials
— Mining, Textiles, Paper and Pulp, Chemicals, Oil, Rubber, Ceramics,
Steel, Nonferrous Metals, Trading
House;
|
|
·
|
Capital
Goods/Others — Construction, Machinery, Shipbuilding, Transportation
Equipment, Miscellaneous Manufacturing, Real Estate;
and
|
|
·
|
Transportation
and Utilities — Railroads and Buses, Trucking, Shipping, Airlines,
Warehousing, Electric Power,
Gas.
|
The
NKY
is a modified, price-weighted index (i.e., a Nikkei Underlying Stock’s weight in
the index is based on its price per share rather than the total market
capitalization of the issuer) that is calculated by (i) multiplying the
per-share price of each Nikkei Underlying Stock by the corresponding weighting
factor for such Nikkei Underlying Stock (a “Weight
Factor”),
(ii)
calculating the sum of all these products and (iii) dividing such sum by a
divisor (the “Divisor”).
The
Divisor was initially set at 225 for the date of May 16, 1949 using historical
numbers from May 16, 1949, the date on which the TSE was reopened. Each Weight
Factor is computed by dividing ¥50 by the par value of the relevant Nikkei
Underlying Stock, so that the share price of each Nikkei Underlying Stock,
when
multiplied by its Weight Factor, corresponds to a share price based on a uniform
par value of ¥50. The stock prices used in the calculation of the NKY are those
reported by a primary market for the Nikkei Underlying Stocks (currently the
TSE). The level of the NKY is calculated once per minute during TSE trading
hours.
In
order
to maintain continuity in the NKY in the event of certain changes due to
non-market factors affecting the Nikkei Underlying Stocks, such as the addition
or deletion of stocks, substitution of stocks, stock splits or distributions
of
assets to stockholders, the Divisor used in calculating the NKY is adjusted
in a
manner designed to prevent any instantaneous change or discontinuity in the
level of the NKY. Thereafter, the Divisor remains at the new value until a
further adjustment is necessary as the result of another change. As a result
of
such change affecting any Nikkei Underlying Stock, the Divisor is adjusted
in
such a way that the sum of all share prices immediately after such change
multiplied by the applicable Weight Factor and divided by the new Divisor (i.e.,
the level of the NKY immediately after such change) will equal the level of
the
NKY immediately prior to the change.
A
Nikkei
Underlying Stock may be deleted or added by Nihon Keizai. Any stock becoming
ineligible for listing in the First Section of the TSE due to any of the
following reasons will be deleted from the Nikkei Underlying Stocks: (i)
bankruptcy of the issuer, (ii) merger of the issuer with, or acquisition of
the
issuer by, another company, (iii) delisting of such stock, (iv) transfer of
such
stock to the “Seiri-Post” because of excess debt of the issuer or because of any
other reason or (v) transfer of such stock to the Second Section. In addition,
a
component stock transferred to the “Kanri-Post” (Posts for stocks under
supervision) is in principle a candidate for deletion. Nikkei Underlying Stocks
with relatively low liquidity, based on trading value and rate of price
fluctuation over the past five years, may be deleted by Nihon Keizai. Upon
deletion of a stock from the Nikkei Underlying Stocks, Nihon Keizai will select
a replacement for such deleted Nikkei Underlying Stock in accordance with
certain criteria. In an exceptional case, a newly listed stock in the First
Section of the TSE that is recognized by Nihon Keizai to be representative
of a
market may be added to the Nikkei Underlying Stocks. In such a case, an existing
Underlying Stock with low trading volume and deemed not to be representative
of
a market will be deleted by Nihon Keizai.
A
list of
the issuers of the Nikkei Underlying Stocks constituting the NKY is available
from the Nikkei Economic Electronic Databank System and from the Stock Market
Indices Data Book published by Nihon Keizai.
License
Agreement with Nihon Keizai
We
have
entered, or are exploring entering, into a non-exclusive license agreement
with
Nihon Keizai, whereby we and our affiliates, in exchange for a fee, will be
permitted to use the NKY in connection with the offer and sale of the
Notes.
The
copyright relating to the NKY and intellectual property rights as to “Nikkei”
(including in combination with other words) and the NKY and any other rights
will belong to Nihon Keizai.
Nihon
Keizai will be entitled to change the details of the NKY and to suspend the
announcement thereof.
All
the
businesses and implementation relating to the use of the NKY and related
intellectual property rights will be conducted exclusively at the risk of us
and
Nihon Keizei assumes no obligation or responsibility therefor.
The
Notes
are not sponsored, endorsed, sold or promoted by Nihon Keizai (including its
affiliates). Nihon Keizai has not passed on the legality or appropriateness
of,
or the accuracy or adequacy of descriptions and disclosures relating to the
Notes. Nihon Keizai makes no representation or warranty, express or implied
to
the owners of the Notes or any member of the public regarding the advisability
of investing in securities generally or in the Notes particularly, or the
ability of the NKY to track general stock market performance.
The
Tokyo Stock Exchange
The
TSE
is one of the world’s largest securities exchanges in terms of market
capitalization. Trading hours are currently from 9:00 a.m. to 11:00 a.m. and
from 12:30 p.m. to 3:00 p.m., Tokyo time, Monday through Friday.
Due
to
the time zone difference, on any normal trading day the TSE will close prior
to
the opening of business in New York City on the same calendar day. Therefore,
the closing level of the NKY on a trading day will generally be available in
the
United States by the opening of business on the same calendar day.
The
TSE
has adopted certain measures, including daily price floors and ceilings on
individual stocks, intended to prevent any extreme short-term price fluctuations
resulting from order imbalances. In general, any stock listed on the TSE cannot
be traded at a price lower than the applicable price floor or higher than the
applicable price ceiling. These price floors and ceilings are expressed in
absolute Japanese yen, rather than percentage limits based on the closing price
of the stock on the previous trading day. In addition, when there is a major
order imbalance in a listed stock, the TSE posts a “special bid quote” or a
“special asked quote” for that stock at a specified higher or lower price level
than the stock’s last sale price in order to solicit counter orders and balance
supply and demand for the stock. The TSE may suspend the trading of individual
stocks in certain limited and extraordinary circumstances, including, for
example, unusual trading activity in that stock. As a result, changes in the
NKY
may be limited by price limitations or special quotes, or by suspension of
trading, on individual stocks that make up the NKY, and these limitations,
in
turn, may adversely affect the value of the Notes.
Historical
Performance of the NKY
The
following table sets forth the month-end closing index levels of the NKY for
each month in the period from January 1998 through March 2007. The closing
index
level of the NKY on March 30, 2007 was 17,287.65. The NKY closing index levels
listed below were obtained from Bloomberg Financial Service, without independent
verification by us. The
historical values of the NKY should not be taken as an indication of future
performance, and no assurance can be given that the level of the NKY will
increase relative to its the Initial Component Level during the term of the
Notes.
Month
End Closing Index Levels: January 1998 - January 2007
|
|
1998
|
|
1999
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
January
|
|
16,628.47
|
|
14,499.25
|
|
19,539.70
|
|
13,843.55
|
|
9,997.80
|
|
8,339.94
|
|
10,783.61
|
|
11,387.59
|
|
16,649.82
|
|
17,383.42
|
February
|
|
16,831.67
|
|
14,367.54
|
|
19,959.52
|
|
12,883.54
|
|
10,587.83
|
|
8,363.04
|
|
11,041.92
|
|
11,740.60
|
|
16,205.43
|
|
17,604.12
|
March
|
|
16,527.17
|
|
15,836.59
|
|
20,337.32
|
|
12,999.70
|
|
11,024.94
|
|
7,972.71
|
|
11,715.39
|
|
11,668.95
|
|
17,059.66
|
|
17,287.65
|
April
|
|
15,641.26
|
|
16,701.53
|
|
17,973.70
|
|
13,934.32
|
|
11,492.54
|
|
7,831.42
|
|
11,761.79
|
|
11,008.90
|
|
16,906.23
|
|
-
|
May
|
|
15,670.78
|
|
16,111.65
|
|
16,332.45
|
|
13,262.14
|
|
11,763.70
|
|
8,424.51
|
|
11,236.37
|
|
11,276.59
|
|
15,467.33
|
|
-
|
June
|
|
15,830.27
|
|
17,529.74
|
|
17,411.05
|
|
12,969.05
|
|
10,621.84
|
|
9,083.11
|
|
11,858.87
|
|
11,584.01
|
|
15,505.18
|
|
-
|
July
|
|
16,378.97
|
|
17,861.86
|
|
15,727.49
|
|
11,860.77
|
|
9,877.94
|
|
9,563.21
|
|
11,325.78
|
|
11,899.60
|
|
15,456.81
|
|
-
|
August
|
|
14,107.89
|
|
17,436.56
|
|
16,861.26
|
|
10,713.51
|
|
9,619.30
|
|
10,343.55
|
|
11,081.79
|
|
12,413.60
|
|
16,140.76
|
|
-
|
September
|
|
13,406.39
|
|
17,605.46
|
|
15,747.26
|
|
9,774.68
|
|
9,383.29
|
|
10,219.05
|
|
10,823.57
|
|
13,574.30
|
|
16,127.58
|
|
-
|
October
|
|
13,564.51
|
|
17,942.08
|
|
14,539.60
|
|
10,366.34
|
|
8,640.48
|
|
10,559.59
|
|
10,771.42
|
|
13,606.50
|
|
16,399.39
|
|
-
|
November
|
|
14,883.70
|
|
18,558.23
|
|
14,648.51
|
|
10,697.44
|
|
9,215.56
|
|
10,100.57
|
|
10,899.25
|
|
14,872.15
|
|
16,274.33
|
|
-
|
December
|
|
13,842.17
|
|
18,934.34
|
|
13,785.69
|
|
10,542.62
|
|
8,578.95
|
|
10,676.64
|
|
11,488.76
|
|
16,111.43
|
|
17,225.83
|
|
-
|
The
following graph illustrates the historical performance of the NKY based on
the
closing level on the last Component Business Day of each month from January
1998
to March 2007.
The
FTSE/Xinhua China 25 Index (“XIN0I”)
The
XIN0I
is a stock index calculated, published and disseminated by FTSE/Xinhua Index
Limited (“FXI”), a joint venture of FTSE International Limited (“FTSE”) and
Xinhua Financial Network Limited (“Xinhua”), and is designed to represent the
performance of the mainland Chinese market that is available to international
investors. The XIN0I is quoted in Hong Kong dollars (“HKD”) and currently is
based on the 25 largest and most liquid Chinese stocks (called “H” shares and
“Red Chip” shares), listed and trading on the Stock Exchange of Hong Kong Ltd.
(“HKSE”). “H” shares are securities of companies incorporated in the People’s
Republic of China and nominated by the Chinese Government for listing and
trading on the HKSE. “Red Chip” shares are securities of Hong Kong-incorporated
companies, which are substantially owned directly or indirectly by the Chinese
government and have the majority of their business interests in mainland China.
Both “H” shares and “Red Chip” shares are quoted and traded in Hong Kong Dollars
and are available only to international investors, who are not citizens of
the
People’s Republic of China.
Computation:
The
XIN0I
is reported by the Bloomberg Page <XIN0I> <Index> <Go>.
Computation of the XIN0I is calculated using the free float index calculation
methodology of the FTSE Group. The index is calculated using the following
algorithm:
[Σ
p
(n)
e (n) s (n) f (n) c (n)] /d
where
p
is the latest trade price of the component security n, e is the exchange rate
required to convert the security’s home currency into the index’s base currency,
s is the number of shares of the security in issue, f is the portion of free
floating shares, adjusted in accordance with the policies of the FTSE/Xinhua
Index Limited, c is the capping factor published by the FTSE/Xinhua Index
Limited at the most recent quarterly review of the index, and d is the divisor,
a figure that represents the total issued share capital of the index at the
base
date, which may be adjusted to allow for changes in the issued share capital
of
individual securities without distorting the index.
The
XIN0I
uses actual trade prices for securities with local stock exchange quotations
and
Reuters real-time spot currency rates for its calculations. Under this
methodology, FTSE/Xinhua Index Limited excludes from free floating shares trade
investments in a XIN0I constituent company by another XIN0I constituent company,
significant long-term holdings by founders, directors and/or their families,
employee share schemes (if restricted), government holdings, foreign ownership
limits, and portfolio investments subject to lock-in clauses (for the duration
of the clause). Free float restrictions are calculated using available published
information. The initial weighting of a XIN0I constituent stock is applied
in
bands, as follows:
Free
float less than or equal to
15%..................................................... Ineligible
for inclusion in the XIN0I, unless free float is also greater than 5% and the
full market capitalization is greater than US$2.5 billion (or local currency
equivalent), in which case actual free float is used.
Free
float greater than 15% but less than or equal to 20%
|
20%
|
Free
float greater than 20% but less than or equal to 30%
|
30%
|
Free
float greater than 30% but less than or equal to 40%
|
40%
|
Free
float greater than 40% but less than or equal to 50%
|
50%
|
Free
float greater than 50% but less than or equal to 75%
|
75%
|
Free
float greater than 75%
|
100%
|
These
bands are narrow at the lower end, to ensure that there is sufficient
sensitivity in order to maintain accurate representation, and broader at the
higher end, in order to ensure that the weightings of larger companies do not
fluctuate absent a significant corporate event. Following the application of
an
initial free float restriction, a XIN0I constituent stock’s free float will only
be changed if its actual free float is more than 5 percentage points above
the
minimum or 5 percentage points below the maximum of an adjacent band. This
5
percentage point threshold does not apply if the initial free float is less
than
15%. Foreign ownership limits, if any, are applied after calculating the actual
free float restriction, but before applying the bands shown above. If the
foreign ownership limit is more restrictive than the free float restriction,
the
precise foreign ownership limit is applied. If the foreign ownership limit
is
less restrictive or equal to the free float restriction, the free float
restriction is applied, subject to the bands shown above. The XIN0I is
periodically reviewed for changes in free float. These reviews coincide with
the
quarterly reviews undertaken of the XIN0I. Implementation of any changes takes
place after the close of the index calculation on the third Friday in January,
April, July and October. A stock’s free float is also reviewed and adjusted if
necessary following certain corporate events. If the corporate event includes
a
corporate action which affects the XIN0I, any change in free float is
implemented at the same time as the corporate action. If there is no corporate
action, the change in free float is applied as soon as practicable after the
corporate event. Securities must be sufficiently liquid to be traded. The
following criteria, among others, are used to ensure that illiquid securities
are excluded: Price. FXI must be satisfied that an accurate and reliable price
exists for the purposes of determining the market value of a company. FXI may
exclude a security from the XIN0I if it considers that an “accurate and
reliable” price is not available. The XIN0I uses the last trade prices from the
relevant stock exchanges, when available.
Liquidity.
Securities
in the XIN0I will be reviewed annually for liquidity. Securities which do not
turn over at least 2% of their shares in issue, after the application of any
free float restrictions, per month for ten of the twelve months prior to the
quarterly review by FXI will not be eligible for inclusion in the XIN0I. An
existing constituent failing to trade at least 2.0% of its shares in issue,
after the application of any free float restrictions, per month for more than
four of the twelve months prior to the quarterly review will be removed after
close of the index calculation on the next trading day following the third
Friday in January, April, July and October. Any period when a share is suspended
will be excluded from the calculation.
New
Issues.
New
issues must have a minimum trading record of at least 20 trading days prior
to
the date of the review and turnover of a minimum of 2% of their shares in issue,
after the application of any free float restrictions, per month each month,
except in certain circumstances.
The
XIN0I, like other indices of FXI, is governed by an independent advisory
committee that ensures that the index is operated in accordance with its
published ground rules, and that the rules remain relevant to the
XIN0I.
License
Agreement with FTSE/Xinhua Index Limited
The
Bear
Stearns Companies Inc. has entered, or is exploring entering, into a
non-exclusive license agreement with FTSE/Xinhua Index Limited, whereby The
Bear
Stearns Companies Inc. and its affiliates and subsidiary companies, in exchange
for a fee, will be permitted to use the XIN0I, which is owned and published
by
FTSE/Xinhua Index Limited, in connection with certain products, including the
Notes.
The
Notes
are not sponsored, endorsed, sold or promoted by the FTSE/Xinhua Index Limited
(including its affiliates). FTSE/Xinhua Index Limited has not passed on the
legality or appropriateness of, or the accuracy or adequacy of descriptions
and
disclosures relating to the Notes. FTSE/Xinhua Index Limited makes no
representation or warranty, express or implied to the owners of the Notes or
any
member of the public regarding the advisability of investing in securities
generally or in the Notes particularly, or the ability of the XIN0I to track
general stock market performance. FTSE/Xinhua Index Limited has no relationship
to The Bear Stearns Companies, Inc. other than the licensing of the XIN0I and
the related trademarks for use in connection with the Notes, which index is
determined, composed and calculated by FTSE/Xinhua Index Limited without regard
to The Bear Stearns Companies, Inc. or the Notes. FTSE/Xinhua Index Limited
has
no obligation to take the needs of The Bear Stearns Companies, Inc. or the
owners of the Notes into consideration in determining, composing or calculating
the XIN0I. FTSE/Xinhua Index Limited is not responsible for and has not
participated in the determination of the timing of, prices at, or quantities
of
the Notes to be issued or in the determination or calculation of the equation
by
which the Notes are to be converted into cash. FTSE/Xinhua Index Limited has
no
liability in connection with the administration, marketing or trading of the
Notes.
FTSE/Xinhua
Index Limited is under no obligation to continue the calculation and
dissemination of the XIN0I and the method by which the XIN0I is calculated
and
the name “FTSE/Xinhua China 25 Index” may be changed at the discretion of
FTSE/Xinhua Index Limited. No inference should be drawn from the information
contained in this pricing supplement that FTSE/Xinhua Index Limited makes any
representation or warranty, implied or express, to you or any member of the
public regarding the advisability of investing in securities generally or in
the
Notes in particular or the ability of the XIN0I to track general stock market
performance. FTSE/Xinhua Index Limited has no obligation to take into account
your interest, or that of anyone else having an interest in determining,
composing or calculating the XIN0I. FTSE/Xinhua Index Limited is not responsible
for, and has not participated in the determination of the timing of, prices
for
or quantities of, the Notes or in the determination or calculation of the
equation by which the Notes are to be settled in cash. FTSE/Xinhua Index Limited
has no obligation or liability in connection with the administration, marketing
or trading of the Notes. The use of and reference to the XIN0I in connection
with the Notes have been consented to by FTSE/Xinhua Index Limited.
FTSE/Xinhua
Index Limited disclaims all responsibility for any inaccuracies in the data
on
which the XIN0I is based, or any mistakes or errors or omissions in the
calculation or dissemination of the XIN0I.
Historical
Performance of the XIN0I
The
following table sets forth the month-end closing index levels of the XIN0I
for
each month in the period from March 2001 through March 2007. The closing index
level of the XIN0I on March 30, 2007 was 15,634.92. The XIN0I closing index
levels listed below were obtained from Bloomberg Financial Service, without
independent verification by us. The
historical values of the XIN0I should not be taken as an indication of future
performance, and no assurance can be given that the level of the XIN0I will
increase relative to its the Initial Component Level during the term of the
Notes.
Month
End Closing Index Levels: March 2001 - March 2007
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
January
|
|
-
|
|
4,556.58
|
|
4,601.71
|
|
8,260.51
|
|
8,155.44
|
|
10,490.11
|
|
15,586.50
|
February
|
|
-
|
|
4,660.83
|
|
4,554.19
|
|
8,795.51
|
|
8,767.79
|
|
10,914.41
|
|
15,110.18
|
March
|
|
4,877.51
|
|
4,822.18
|
|
4,437.62
|
|
8,207.84
|
|
8,254.83
|
|
11,069.71
|
|
15,634.92
|
April
|
|
5,470.38
|
|
4,922.55
|
|
4,403.46
|
|
7,029.97
|
|
8,226.15
|
|
11,625.95
|
|
-
|
May
|
|
5,962.93
|
|
5,027.92
|
|
4,860.58
|
|
7,450.70
|
|
8,105.44
|
|
10,937.19
|
|
-
|
June
|
|
5,916.72
|
|
4,934.55
|
|
5,169.87
|
|
7,414.40
|
|
8,496.46
|
|
11,314.83
|
|
-
|
July
|
|
5,273.92
|
|
4,723.40
|
|
5,672.64
|
|
7,442.02
|
|
9,117.31
|
|
11,590.71
|
|
-
|
August
|
|
4,507.20
|
|
4,602.79
|
|
6,124.15
|
|
7,481.39
|
|
9,072.70
|
|
11,783.91
|
|
-
|
September
|
|
4,205.25
|
|
4,329.55
|
|
6,089.77
|
|
7,916.39
|
|
9,404.92
|
|
12,012.99
|
|
-
|
October
|
|
4,487.68
|
|
4,284.63
|
|
7,177.30
|
|
7,727.28
|
|
8,391.56
|
|
12,551.81
|
|
-
|
November
|
|
4,634.62
|
|
4,408.58
|
|
7,282.98
|
|
8,409.06
|
|
8,927.68
|
|
13,977.39
|
|
-
|
December
|
|
4,596.84
|
|
4,317.23
|
|
8,324.97
|
|
8,294.66
|
|
9,203.65
|
|
16,603.60
|
|
-
|
The
following graph illustrates the historical performance of the XIN0I based on
the
closing level on the last Component Business Day of each month from February
2001 to March 2007.
The
CECEEUR Index (“CECEEUR”)
The
CECEEUR is calculated, published and disseminated by Wiener Börse. The CECEEUR
currently consists of 27 stocks included in three sub-indices that Wiener Börse
also manages: the Czech Traded Index, the Hungarian Traded Index and the Polish
Traded Index. It reflects in real-time the movement of the underlying stocks,
as
well as currency updates, which occur every two minutes. The selection of stocks
for inclusion in the CECEEUR is made on a quarterly basis by the CECE Committee,
which consists of representatives of the Wiener Börse, the Austrian Futures
& Options Exchange, financial institutions issuing financial products on the
CECE indices, academic circles and market experts. The CECEEUR is calculated
on
every day that at least one of the local country stock exchanges is open for
trading.
The
CECEEUR is a capitalized weighted price index, and is not adjusted for dividend
payments on the constituent stocks. It incorporates free float factors (defined
as the percentage of the shares of the issuing company which are available
for
trading), intended to ensure that the weight of a particular stock in an index
roughly corresponds to the fraction of the registered capital that is actually
available for public trading on the stock exchange on which it trades. The
free
float factors are determined by Wiener Börse and reviewed quarterly by the CECE
Index Committee according to the disclosures regarding the ownership structure
of the listed companies provided by the domestic source exchanges, securities
registrars and the relevant notifications made by the companies themselves.
The
CECEEUR also incorporates a representation factor to ensure that a component
stock of the CECEEUR cannot exceed a maximum weighting cap of 25%. The
representation factors are reviewed quarterly by the CECE Index Committee.
Background
on sub-indices
Generally,
the selection criteria for inclusion in the three country indices comprising
the
CECEEUR are market capitalization, liquidity, price availability, sector
representativeness and market interest. Market capitalization and liquidity
are
the primary factors. Only ordinary shares of joint stock companies domiciled
in
the country covered by the relevant country index and listed and introduced
into
trading on the local official stock exchange are eligible for inclusion in
such
country index. There is no prescribed number of stocks to be included in the
country indices, but inclusion is limited to the most liquid stocks traded
on
the local country stock exchanges. The Czech Traded Index (CTX) is a member
of
the CECE Index family, a group designed to cover the emerging stock markets
of
the four Visegrad countries (Czech Republic, Hungary, Poland, Slovak Republic).
It is not intended primarily to qualify as a benchmark for the performance
of
the Czech stock market. Rather, its foremost purpose is to serve as an
underlying for derivatives trading. The main emphasis lies on ensuring the
tradability of each component stock and on preserving the replicability of
the
CTX. Therefore, the CTX comprises a sample of only 9 Czech blue chip stocks
which represent a basket of both relatively liquid and sufficiently tradable
stocks.
The
Hungarian Traded Index (HTX) is a member of the CECE Index family, a group
designed to cover the emerging stock markets of the four Visegrad countries
(Czech Republic, Hungary, Poland, Slovak Republic). It is not intended primarily
to qualify as a benchmark for the performance of the Hungarian stock market.
Rather, its foremost purpose is to serve as an underlying for derivatives
trading. The main emphasis lies on ensuring the tradability of each component
stock and on preserving the replicability of the HTX. Therefore, the HTX
comprises a sample of only 11 Hungarian blue chip stocks which represent a
basket of both relatively liquid and sufficiently tradable stocks.
The
Polish Traded Index (PTX) is a member of the CECE Index family, a group designed
to cover the emerging stock markets of the four Visegrad countries (Czech
Republic, Hungary, Poland, Slovak Republic). It is not intended primarily to
qualify as a benchmark for the performance of the Polish stock market, although
its performance is well-correlated to the local indexes. Rather, its foremost
purpose is to serve as an underlying for derivatives trading. The main emphasis
lies on ensuring the tradability of each component stock and on preserving
the
replicability of the PTX. Therefore, the PTX comprises a sample of only 16
Hungarian blue chip stocks which represent a basket of both relatively liquid
and sufficiently tradable stocks.
The
CECEEUR is Subject to Currency Exchange Risk
Because
the closing prices of the stocks composing the CECEEUR are converted into euros
for purposes of calculating the value of the CECEEUR, investors in the notes
will be exposed to currency exchange rate risk with respect to each of the
currencies in which the component stocks trade. Exposure to currency changes
will depend on the extent to which such currencies strengthen or weaken against
the euro and the relative weight of the component stocks in the CECEEUR
denominated in each such currency. The devaluation of the euro against the
currencies in which the component stocks trade will result in an increase in
the
value of the CECEEUR. Conversely, if the euro strengthens against such
currencies, the value of the CECEEUR will be adversely affected and may reduce
or eliminate the payment at maturity, if any, on the notes. Fluctuations in
currency exchange rates can have a continuing impact on the value of the
CECEEUR, and any negative currency impact on the CECEEUR may significantly
decrease the value of the notes. The return on an index composed of the
component stocks where the closing price is not converted into euros can be
significantly different from the return on the CECEEUR, which is converted
into
euros.
License
Agreement with Wiener Börse
The
Bear
Stearns Companies Inc. has entered, or is exploring entering, into a
non-exclusive license agreement with Wiener Börse, whereby The Bear Stearns
Companies Inc. and its affiliates and subsidiary companies, in exchange for
a
fee, will be permitted to use the CECEEUR, which is owned and published by
Wiener Börse, in connection with certain products, including the
Notes.
The
Notes
are not sponsored, endorsed, sold or promoted by the Wiener Börse (including its
affiliates). Wiener Börse has not passed on the legality or appropriateness of,
or the accuracy or adequacy of descriptions and disclosures relating to the
Notes. Wiener Börse makes no representation or warranty, express or implied to
the owners of the Notes or any member of the public regarding the advisability
of investing in securities generally or in the Notes particularly, or the
ability of the CECEEUR to track general stock market performance. Wiener Börse
has no relationship to The Bear Stearns Companies, Inc. other than the licensing
of the CECEEUR and the related trademarks for use in connection with the Notes,
which index is determined, composed and calculated by Wiener Börse without
regard to The Bear Stearns Companies, Inc. or the Notes. Wiener Börse has no
obligation to take the needs of The Bear Stearns Companies, Inc. or the owners
of the Notes into consideration in determining, composing or calculating the
CECEEUR. Wiener Börse is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the Notes to be
issued or in the determination or calculation of the equation by which the
Notes
are to be converted into cash. Wiener Börse has no liability in connection with
the administration, marketing or trading of the Notes.
Wiener
Börse is under no obligation to continue the calculation and dissemination of
the CECEEUR and the method by which the CECEEUR is calculated and the name
“CECEEUR Index” or “CECEEUR” may be changed at the discretion of Wiener Börse.
No inference should be drawn from the information contained in this pricing
supplement that Wiener Börse makes any representation or warranty, implied or
express, to you or any member of the public regarding the advisability of
investing in securities generally or in the Notes in particular or the ability
of the CECEEUR to track general stock market performance. Wiener Börse has no
obligation to take into account your interest, or that of anyone else having
an
interest in determining, composing or calculating the CECEEUR. Wiener Börse is
not responsible for, and has not participated in the determination of the timing
of, prices for or quantities of, the Notes or in the determination or
calculation of the equation by which the Notes are to be settled in cash. Wiener
Börse has no obligation or liability in connection with the administration,
marketing or trading of the Notes. The use of and reference to the CECEEUR
in
connection with the Notes have been consented to by Wiener Börse.
Wiener
Börse disclaims all responsibility for any inaccuracies in the data on which
the
CECEEUR is based, or any mistakes or errors or omissions in the calculation
or
dissemination of the CECEEUR.
Historical
Performance of the CECEEUR
The
following table sets forth the month-end closing index levels of the CECEEUR
for
each month in the period from January 1999 through March 2007. The closing
index
level of the CECEEUR on March 30, 2007 was 2,606.25. The CECEEUR closing index
levels listed below were obtained from Bloomberg Financial Service, without
independent verification by us. The
historical values of the CECEEUR should not be taken as an indication of future
performance, and no assurance can be given that the level of the CECEEUR will
increase relative to its the Initial Component Level during the term of the
Notes.
Month
End Closing Index Levels: January 1999- March 2007
|
|
1999
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
January
|
|
828.77
|
|
1,139.53
|
|
1,040.45
|
|
989.82
|
|
805.62
|
|
1,013.08
|
|
1,564.58
|
|
2,323.22
|
|
2,580.35
|
February
|
|
687.37
|
|
1,284.85
|
|
908.03
|
|
942.49
|
|
778.42
|
|
1,079.11
|
|
1,818.27
|
|
2,369.75
|
|
2,424.97
|
March
|
|
742.46
|
|
1,277.83
|
|
859.27
|
|
954.82
|
|
763.34
|
|
1,150.68
|
|
1,684.76
|
|
2,281.62
|
|
2,606.25
|
April
|
|
817.53
|
|
1,136.36
|
|
884.59
|
|
988.03
|
|
829.04
|
|
1,141.78
|
|
1,551.18
|
|
2,424.94
|
|
-
|
May
|
|
882.62
|
|
1,112.19
|
|
959.45
|
|
967.47
|
|
853.52
|
|
1,127.54
|
|
1,616.81
|
|
2,106.00
|
|
-
|
June
|
|
936.34
|
|
1,064.35
|
|
868.57
|
|
812.72
|
|
819.56
|
|
1,164.24
|
|
1,770.81
|
|
2,106.57
|
|
-
|
July
|
|
971.84
|
|
1,077.10
|
|
783.17
|
|
757.46
|
|
899.45
|
|
1,157.38
|
|
1,897.75
|
|
2,323.43
|
|
-
|
August
|
|
960.45
|
|
1,080.70
|
|
732.87
|
|
816.57
|
|
1,016.66
|
|
1,182.19
|
|
2,004.02
|
|
2,216.63
|
|
-
|
September
|
|
834.92
|
|
977.33
|
|
677.51
|
|
761.99
|
|
933.55
|
|
1,272.95
|
|
2,221.28
|
|
2,188.32
|
|
-
|
October
|
|
850.26
|
|
964.64
|
|
802.47
|
|
838.44
|
|
980.80
|
|
1,330.21
|
|
2,032.16
|
|
2,365.12
|
|
-
|
November
|
|
916.60
|
|
898.60
|
|
842.20
|
|
892.06
|
|
917.00
|
|
1,432.77
|
|
2,142.10
|
|
2,456.38
|
|
-
|
December
|
|
1,055.93
|
|
1,019.43
|
|
857.82
|
|
854.44
|
|
970.33
|
|
1,537.86
|
|
2,218.74
|
|
2,544.14
|
|
-
|
The
following graph illustrates the historical performance of the CECEEUR based
on
the closing level on the last Component Business Day of each month from February
2001 to March 2007.
FTSE
100
We
have
derived all information contained in this pricing supplement regarding the
FTSE™
100 Index, including, without limitation, its make-up, method of calculation
and
changes in its components, from publicly available information. Such information
reflects the policies of, and is subject to change by, FTSE International
Limited (“FTSE”). The FTSE™ 100 Index was developed by FTSE and is calculated,
maintained and published by FTSE. We make no representation or warranty as
to
the accuracy or completeness of such information. The FTSE™ 100 Index is an
index calculated, published and disseminated by FTSE, a company owned equally
by
the London Stock Exchange (the “LSE”) and The Financial Times Limited (“FT”), in
association with the Institute and the Faculty of Actuaries. The FTSE™ 100 Index
measures the composite price performance of stocks of the largest 100 companies
(determined on the basis of market capitalization) traded on the LSE.
Publication of the FTSE™ 100 Index began in February 1984.
The
FTSE™
100 Index is calculated by (i) multiplying the per share price of each stock
included in the FTSE™ 100 Index by the number of outstanding shares, (ii)
calculating the sum of all these products (such sum referred to hereinafter
as
the “FTSE Aggregate Market Value”) as of the starting date of the FTSE™ 100
Index, (iii) dividing the FTSE Aggregate Market Value by a divisor which
represents the FTSE Aggregate Market Value on the base date of the FTSE™ 100
Index and which can be adjusted to allow changes in the issued share capital
of
individual underlying stocks including the deletion and addition of stocks,
the
substitution of stocks, stock dividends and stock splits to be made without
distorting the FTSE™ 100 Index and (iv) multiplying the result by 1,000. Because
of such capitalization weighting, movements in share prices of companies with
relatively larger market capitalization will have a greater effect on the level
of the entire FTSE™ 100 than will movements in share prices of companies with
relatively smaller market capitalization.
The
100
stocks included in the FTSE™ 100 Index (the “FTSE Underlying Stocks”) were
selected from a reference group of stocks trading on the LSE which were selected
by excluding certain stocks that have low liquidity based on public float,
accuracy and reliability of prices, size and number of trading days. The FTSE
Underlying Stocks were selected from this reference group by selecting 100
stocks with the largest market value. A list of the issuers of the FTSE
Underlying Stocks is available from FTSE. The FTSE™ 100 Index is reviewed
quarterly by an Index Steering Committee of the LSE in order to maintain
continuity in the level. The FTSE Underlying Stocks may be replaced, if
necessary, in accordance with deletion/addition rules which provide generally
for the removal and replacement of a stock from the FTSE™ 100 Index if such
stock is delisted or its issuer is subject to a takeover offer that has been
declared unconditional or it has ceased, in the opinion of the Index Steering
Committee, to be a viable component of the FTSE™ 100 Index. To maintain
continuity, a stock will be added at the quarterly review if it has risen to
90th place or above and a stock will be deleted if at the quarterly review
it
has fallen to 111th place or below, in each case ranked on the basis of market
capitalization.
License
Agreement with FTSE
The
Bear
Stearns Companies Inc. has entered, or is exploring entering, into a
non-exclusive license agreement with FTSE, whereby The Bear Stearns Companies
Inc. and its affiliates and subsidiary companies and certain of its affiliates,
in exchange for a fee, will be permitted to use the FTSE 100, which is owned
and
published by FTSE, in connection with certain products, including the
Notes.
Neither
FTSE, the LSE nor FT makes any representation or warranty, express or implied,
to the owners of the Notes or any member of the public regarding the
advisability of investing in structured products generally or in the Notes
particularly, or the ability of the FTSE™ 100 Index to track general stock
market performance. FTSE, the LSE, and FT’s only relationship with us is the
licensing of certain trademarks and trade names of FTSE, respectively, without
regard to us or the Notes. FTSE, the LSE and FT have no obligation to take
the
needs of The Bear Stearns Companies Inc. or the holders of the Notes into
consideration in determining, composing or calculating the FTSE™ 100 Index.
Neither FTSE nor the LSE nor FT is responsible for and has not participated
in
the determination of the timing, price or quantity of the Notes to be issued
or
in the determination or calculation of the amount due at maturity of the Notes.
Neither FTSE nor the LSE nor FT has any obligation or liability in connection
with the administration, marketing or trading of the Notes.
The
Notes
are not in any way sponsored, endorsed, sold or promoted by FTSE, the LSE or
FT,
and neither FTSE, the LSE nor FT makes any warranty or representation
whatsoever, expressly or impliedly, either as to the results to be obtained from
the use of the FTSE™ 100 Index and/or the figure at which the said Component
stands at any particular time on any particular day or otherwise. The FTSE™ 100
Index is compiled and calculated by FTSE. However, neither FTSE, the LSE nor
FT
shall be liable (whether in negligence or otherwise) to any person for any
error
in the FTSE™ 100 Index and neither FTSE nor the LSE nor FT shall be under any
obligation to advise any person of any error therein.
“FTSE®”,
“FT-SE®” and “Footsie®” are trade marks of the London Stock Exchange Plc and The
Financial Times Limited and are used by FTSE International Limited under
license. “All-World”, “All-Share” and “All-Small” are trade marks of FTSE
International Limited.” Discontinuation of the FTSE™ 100 Index; Alteration of
Method of Calculation.
If
FTSE
discontinues publication of the FTSE™ 100 Index and FTSE or another entity
publishes a successor or substitute index that the calculation agent determines
to be comparable to the discontinued FTSE™ 100 Index (such index being referred
to herein as a “FTSE successor index”), then the FTSE™ 100 Index closing level
will be determined by reference to the level of such FTSE successor index at
the
close of trading on the relevant exchange or market for the FTSE successor
index
on the final Observation Date, applicable to the FTSE 100. Upon any selection
by
the calculation agent of a FTSE successor index, the calculation agent will
cause written notice thereof to be promptly furnished to the trustee, to us
and
to the holders of the Notes.
If
FTSE
discontinues publication of the FTSE™ 100 Index prior to, and such
discontinuation is continuing on, the final Observation Date, applicable to
the
FTSE 100, and the calculation agent determines that no FTSE successor index
is
available at such time, or the calculation agent has previously selected a
FTSE
successor index and publication of such FTSE successor index is discontinued
prior to, and such discontinuation is continuing on, the final Observation
Date,
applicable to the FTSE 100, then the calculation agent will determine the FTSE™
100 Index closing level for such date. The FTSE™ 100 Index closing level will be
computed by the calculation agent in accordance with the formula for and method
of calculating the FTSE™ 100 Index or FTSE successor index, as applicable, last
in effect prior to such discontinuation, using the closing price (or, if trading
in the relevant securities has been materially suspended or materially limited,
its good faith estimate of the closing price that would have prevailed but
for
such suspension or limitation) at the close of the principal trading session
on
such date of each security most recently composing the FTSE™ 100 Index or FTSE
successor index, as applicable. Notwithstanding these alternative arrangements,
discontinuation of the publication of the FTSE™ 100 Index or FTSE successor
index, as applicable, on the relevant exchange may adversely affect the value
of
the Notes.
If
at any
time the method of calculating the FTSE™ 100 Index or a FTSE successor index, or
the level thereof, is changed in a material respect, or if the FTSE™ 100 Index
or a FTSE successor index is in any other way modified so that the FTSE™ 100
Index or such FTSE successor index does not, in the opinion of the calculation
agent, fairly represent the level of the FTSE™ 100 Index or such FTSE successor
index had such changes or modifications not been made, then the calculation
agent will, at the close of business in New York City on each date on which
the
FTSE™ 100 Index closing level is to be determined, make such calculations and
adjustments as may be necessary in order to arrive at a level of a stock index
comparable to the FTSE™ 100 Index or such FTSE successor index, as the case may
be, as if such changes or modifications had not been made, and the calculation
agent will calculate the FTSE™ 100 Index closing level with reference to the
FTSE™ 100 Index or such FTSE successor index, as adjusted. Accordingly, if the
method of calculating the FTSE™ 100 Index or a FTSE successor index is modified
so that the level of the FTSE™ 100 Index or such FTSE successor index is a
fraction of what it would have been if there had been no such modification
(e.g., due to a split in the FTSE™ 100 Index or such FTSE successor index), then
the calculation agent will adjust the FTSE™ 100 Index or such FTSE successor
index in order to arrive at a level of the FTSE™ 100 Index or such FTSE
successor index as if there had been no such modification (e.g., as if such
split had not occurred).
Historical
Performance of the UKX
The
following table sets forth the monthly levels of the UKX for each month in
the
period from January 1, 1998 through February 28, 2007. The final level of the
UKX on February 28, 2007 was 6,171.50. We obtained the data in the following
table from Bloomberg Financial Service, without independent verification by
us.
Historical
levels of the UKX should not be taken as an indication of future performance
and
no assurance can be given that the level of the UKX will increase relative
to
its Initial Component Level during the term of the Notes.
Month-End
Closing Level of the Component
|
|
1998
|
|
1999
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
January
|
|
5,458.50
|
|
5,896.00
|
|
6,268.50
|
|
6,297.50
|
|
5,164.80
|
|
3,567.40
|
|
4,390.70
|
|
4,852.30
|
|
5,760.30
|
|
6,203.10
|
February
|
|
5,767.30
|
|
6,175.10
|
|
6,232.60
|
|
5,917.90
|
|
5,101.00
|
|
3,655.60
|
|
4,492.20
|
|
4,968.50
|
|
5,791.50
|
|
6,171.50
|
March
|
|
5,932.20
|
|
6,295.30
|
|
6,540.20
|
|
5,633.70
|
|
5,271.80
|
|
3,613.30
|
|
4,385.70
|
|
4,894.40
|
|
5,964.60
|
|
-
|
April
|
|
5,928.30
|
|
6,552.20
|
|
6,327.40
|
|
5,966.90
|
|
5,165.60
|
|
3,926.00
|
|
4,489.70
|
|
4,801.70
|
|
6,023.10
|
|
-
|
May
|
|
5,870.70
|
|
6,226.20
|
|
6,359.30
|
|
5,796.10
|
|
5,085.10
|
|
4,048.10
|
|
4,430.70
|
|
4,964.00
|
|
5,723.80
|
|
-
|
June
|
|
5,832.50
|
|
6,318.50
|
|
6,312.70
|
|
5,642.50
|
|
4,656.40
|
|
4,031.20
|
|
4,464.10
|
|
5,113.20
|
|
5,833.40
|
|
-
|
July
|
|
5,837.00
|
|
6,231.90
|
|
6,365.30
|
|
5,529.10
|
|
4,246.20
|
|
4,157.00
|
|
4,413.10
|
|
5,282.30
|
|
5,928.30
|
|
-
|
August
|
|
5,249.40
|
|
6,246.40
|
|
6,672.70
|
|
5,345.00
|
|
4,227.30
|
|
4,161.10
|
|
4,459.30
|
|
5,296.90
|
|
5,906.10
|
|
-
|
September
|
|
5,064.40
|
|
6,029.80
|
|
6,294.20
|
|
4,903.40
|
|
3,721.80
|
|
4,091.30
|
|
4,570.80
|
|
5,477.70
|
|
5,960.80
|
|
-
|
October
|
|
5,438.40
|
|
6,255.70
|
|
6,438.40
|
|
5,039.70
|
|
4,039.70
|
|
4,287.60
|
|
4,624.20
|
|
5,317.30
|
|
6,129.20
|
|
-
|
November
|
|
5,743.90
|
|
6,597.20
|
|
6,142.20
|
|
5,203.60
|
|
4,169.40
|
|
4,342.60
|
|
4,703.20
|
|
5,423.20
|
|
6,048.80
|
|
-
|
December
|
|
5,882.60
|
|
6,930.20
|
|
6,222.50
|
|
5,217.40
|
|
3,940.40
|
|
4,476.90
|
|
4,814.30
|
|
5,618.80
|
|
6,220.80
|
|
-
|
The
following graph illustrates the historical performance of the UKX based on
the
closing level on the last Component Business Day of each month from January
1998
to February 2007.
The
KOSPI 200 Index (“KOSPI2”)
We
have
obtained all information contained in this pricing supplement regarding the
KOSPI 200, including, without limitation, its make-up, method of calculation
and
changes in its components, from publicly available information. Such information
reflects the policies of, and is subject to change by, Korea Exchange (“KRX”),
the publisher of the KOSPI 200. KRX has no obligation to continue to publish,
and may discontinue publication of, the KOSPI 200.
The
KOSPI
200 is a capitalization-weighted index of 200 Korean blue-chip stocks which
make
up a large majority of the total market value of the Korea Exchange (“KSE”). The
KOSPI 200 is the underlying index for stock index futures and options trading.
The constituent stocks are selected on a basis of the market value of the
individual stocks, liquidity and their relative positions in their respective
industry groups.
The
KOSPI
200 is reported by Bloomberg L.P. under the ticker symbol “KOSPI2.”
Selection
Criteria
All
common stocks listed on the KSE as of the periodic realignment date will be
included in the selection process, except for the stocks which fall into one
of
the following categories:
•
stocks
with administrative issues;
•
stocks
with liquidation issues;
•
stocks
issued by securities investment companies;
•
stocks
that have been listed less than one year as of the last trading in April of
the
year in which the periodic review and selection process occurs;
•
stocks
belonging to the industry groups other than those industry groups listed
below;
•
a
constituent stock merged into a non-constituent stock;
•
a
company established as a result of a merger between two constituent stocks;
and
•
any
other stocks that are deemed unsuitable to be included in the constituents
of
the KOSPI 200.
The
companies listed on the KOSPI 200 are classified into the following industry
groups: (i) fisheries, (ii) mining, (iii) manufacturing, (iv) construction,
(v)
electricity and gas, (vi) services, (vii) post and communication and (viii)
finance. The constituents of the KOSPI 200 are selected first from the
non-manufacturing industry cluster, and then from the manufacturing industry
cluster. The constituents from the non-manufacturing industry cluster are
selected in accordance with the following:
•
Selection is made in descending order of market capitalization, from large
to
small, in the same industry group, while ensuring the accumulated market
capitalization of the concerned industry group is within 70% of that of all
industry groups.
•
Notwithstanding the above, the stocks whose ranking of trading volume in
descending order is below 85% of the stocks included in deliberation within
the
same industry group are excluded. In such case, the excluded stock is replaced
by a stock that is next in ranking in market capitalization, but satisfies
the
trading volume criteria.
The
constituents from the manufacturing industry cluster are selected in descending
order of market capitalization, while excluding stocks whose ranking of trading
volume in descending order is below 85% of the stocks included in the process
within the same industry group. The excluded stock is replaced by a stock that
is next in ranking in market capitalization, but satisfies the trading volume
criteria.
Notwithstanding
anything above, if a stock whose market capitalization is within the top 50
in
terms of market capitalization, such stock may be included in the constituents
of the KOSPI 200, by taking into consideration the influence that the industry
group has on the KOSPI 200, as well as the liquidity of the concerned stock.
Stocks to be placed on the replacement list are selected from the stocks
included for deliberation, excluding those already selected as constituents
of
the KOSPI 200.
KOSPI
200 Calculation
The
KOSPI
200 is computed by multiplying (i) the market capitalization as of the
calculation time divided by the market capitalization as of the base date,
by
(ii) 100. The base date of the KOSPI 200 is January 3, 1990 with a base index
of
100. Market capitalization is obtained by multiplying the number of listed
common shares of the constituents by the price of the concerned common
share.
If
the
number of listed shares increases due to rights offering, bonus offering and
stock dividend, which accompany ex-right or ex-dividend, such increase is
included in the number of listed shares on the ex-right date or ex-dividend
date. Share prices refer to the market price established during the regular
trading session. If no trading took place on such day, quotation price is used
and if no quotation price is available, the closing price of the most recent
trading day is used.
Stock
Revision
The
constituents of the KOSPI 200 are realigned once a year while observing each
of
the following:
•
An
existing constituent will not be removed if the ranking of the market
capitalization of such stock is within 100/110 of the ranking of the KOSPI
200
constituents of the same industry group;
•
In
order to be included in the constituents of the KOSPI 200, the ranking of the
market capitalization of a stock must be within 90/100 of the ranking of the
KOSPI 200 constituents of the same industry group;
•
If
the
ranking of the market capitalization of an existing constituent falls below
100/110 of the ranking of the KOSPI 200 constituents of the same industry group,
but there is no stock satisfying the requirement specified in the preceding
clause, the existing constituent will not be removed; and
•
When
removing the existing constituents, a constituent whose ranking of market
capitalization within the same industry group is the lowest will be removed
first. The periodic realignment date is the trading day following the last
trading day of June contracts in the KOSPI 200 index futures and index options.
With respect to any component security in the KOSPI 200, if any of the following
events occur, such component security shall be removed from the KOSPI 200 and
the removal date is as follows:
•
Delisting: the trading day following the delisting date;
•
Designation as administrative issue: the designation date;
•
Merger:
the day of trading halt; and
•
It
is
determined that the stock is unsuitable as a component security of the KOSPI
200: the trading day following the day of such determination, which is the
last
trading day of the nearest month contracts of both the index futures and index
options, after the date of such decision.
When
realigning the component securities of the KOSPI 200, the replacement stocks
are
chosen from the replacement list in accordance with the rank order. In the
case
of an industry group that has no stock listed on the replacement list, a
replacement stock is chosen from the replacement list of manufacturing industry
cluster.
The
Korea Exchange
The
KSE’s
predecessor, the Daehan Stock Exchange, was established in 1956. The KSE is
a
typical order-driven market, where buy and sell orders compete for best prices.
The KSE seeks to maintain a fair and orderly market for trading and regulates
and supervises its member firms. Throughout the trading hours, orders are
matched at a price satisfactory to both buy and sell sides, according to price
and time priorities. The opening and closing prices, however, are determined
by
call auctions: at the market opening and closing, orders received for a certain
period of time are pooled and matched at the price at which the most number
of
shares can be executed. The KSE uses electronic trading procedures, from order
placement to trade confirmation. The KSE is open from 9:00 a.m. to 3:00 p.m.,
Korean time, during weekdays. Investors can submit their orders from 8:00 a.m.,
one hour before the market opening. Orders delivered to the market during the
period from 8:00 a.m. to 9:00 a.m. are queued in the order book and matched
by
call auction method at 9:00 a.m. to determine opening prices. After opening
prices are determined, the trades are conducted by continuous auctions until
2:50 p.m. (10 minutes before the market closing).
Besides
the regular session, the KSE conducts pre-hours and after-hours sessions for
block trading and basket trading. During pre-hours sessions from 7:30 to 8:30
a.m., orders are matched at previous day’s respective closing prices.
After-hours sessions are open for 50 minutes from 3:10 p.m. to 4:00 p.m. During
after-hours sessions, orders are matched at the closing prices of the
day.
On
January 26, 2004, the KSE introduced the random-end system at the opening and
closing call auctions. The stated purpose of the random-end system is to prevent
any distortion in the price discovery function of the KSE caused by “fake”
orders placed with an intention of misleading other investors. In cases where
the highest or lowest indicative price of a stock set during the last 5 minutes
before the closing time of the opening (or closing) call session, 8:55-9:00
a.m.
(or 2:55-3:00 p.m.), deviates from the provisional opening (or closing) price
by
5% or more, the KSE delays the determination of the opening (or closing) price
of the stock up to five minutes. The official opening (or closing) price of
such
stock is determined at a randomly chosen time within five minutes after the
regular opening (or closing) time. The KSE makes public the indicative prices
during the opening (or closing) call trading sessions. Pooling together all
bids
and offers placed during the order receiving hours for the opening (or closing)
session, 8:10-9:00 a.m. (or 2:50-3:00 p.m.), the indicative opening (or closing)
prices of all stocks are released to the public on a real-time
basis.
The
KSE
sets a limit on the range that the price of individual stocks can change during
a day. As of June 2004, that limit was set at 15%, which meant that the price
of
each stock could neither fall nor rise by more than 15% from the previous day’s
closing price. In addition, when the price and/or trading activities of a stock
are expected to show an abnormal movement in response to an unidentified rumor
or news, or when an abnormal movement is observed in the market, the KSE may
halt the trading of the stock. In such cases, the KSE requests the company
concerned to make a disclosure regarding the matter. Once the company makes
an
official announcement regarding the matter, trading can resume within an hour;
however, if the KSE deems that the situation was not fully resolved by the
disclosure, trading resumption may be delayed. The KSE introduced circuit
breakers in December 1998. The trading in the equity markets is halted for
20
minutes when the KOSPI 200 falls by 10% or more from the previous day’s closing
and the situation lasts for one minute or longer. The trading resumes by call
auction where the orders submitted during the 10 minutes after the trading
halt
ended are matched at a single price.
Discontinuation
of the KOSPI 200; Alteration of Method of Calculation
If
KRX
discontinues publication of the KOSPI 200 and KRX or another entity publishes
a
successor or substitute index that the calculation agent determines, in its
sole
discretion, to be comparable to the discontinued KOSPI 200 (such index being
referred to herein as a “KOSPI 200 successor index”), then the KOSPI 200 closing
level will be determined by reference to the level of such KOSPI 200 successor
index at the close of trading on the relevant exchange or market for the KOSPI
200 successor index on the relevant Initial Averaging Date, if applicable,
Basket Final Valuation Date(s) or other relevant date or dates as set forth
in
the relevant terms supplement.
Upon
any
selection by the calculation agent of a KOSPI 200 successor index, the
calculation agent will cause written notice thereof to be promptly furnished
to
the trustee, to us and to the holders of the notes. If KRX discontinues
publication of the KOSPI 200 prior to, and such discontinuation is continuing
on, an Initial Averaging Date, if applicable, Basket Final Valuation Date or
other relevant date as set forth in the relevant terms supplement, and the
calculation agent determines, in its sole discretion, that no KOSPI 200
successor index is available at such time, or the calculation agent has
previously selected a KOSPI 200 successor index and publication of such KOSPI
200 successor index is discontinued prior to, and such discontinuation is
continuing on, such Initial Averaging Date, if applicable, Basket Final
Valuation Date or other relevant date, then the calculation agent will determine
the KOSPI 200 closing level for such date. The KOSPI 200 closing level will
be
computed by the calculation agent in accordance with the formula for and method
of calculating the KOSPI 200 or KOSPI 200 successor index, as applicable, last
in effect prior to such discontinuation, using the closing price (or, if trading
in the relevant securities has been materially suspended or materially limited,
its good faith estimate of the closing price that would have prevailed but
for
such suspension or limitation) at the close of the principal trading session
on
such date of each security most recently composing the KOSPI 200 or KOSPI 200
successor index, as applicable.
Notwithstanding
these alternative arrangements, discontinuation of the publication of the KOSPI
200 on the relevant exchange may adversely affect the value of the notes. If
at
any time the method of calculating the KOSPI 200 or a KOSPI 200 successor index,
or the level thereof, is changed in a material respect, or if the KOSPI 200
or a
KOSPI 200 successor index is in any other way modified so that the KOSPI 200
or
such KOSPI 200 successor index does not, in the opinion of the calculation
agent, fairly represent the level of the KOSPI 200 or such KOSPI 200 successor
index had such changes or modifications not been made, then the calculation
agent will, at the close of business in New York City on each date on which
the
KOSPI 200 closing level is to be determined, make such calculations and
adjustments as, in the good faith judgment of the calculation agent, may be
necessary in order to arrive at a level of a stock index comparable to the
KOSPI
200 or such KOSPI 200 successor index, as the case may be, as if such changes
or
modifications had not been made, and the calculation agent will calculate the
KOSPI 200 closing level with reference to the KOSPI 200 or such KOSPI 200
successor index, as adjusted. Accordingly, if the method of calculating the
KOSPI 200 or a KOSPI 200 successor index is modified so that the level of the
KOSPI 200 or such KOSPI 200 successor index is a fraction of what it would
have
been if there had been no such modification (e.g.,
due to
a split in the KOSPI 200), then the calculation agent will adjust its
calculation of the KOSPI 200 or such KOSPI 200 successor index in order to
arrive at a level of the KOSPI 200 or such KOSPI 200 successor index as if
there
had been no such modification (e.g.,
as if
such split had not occurred).
License
Agreement with Korea Exchange
The
Bear
Stearns Companies Inc. has entered, or is exploring entering, into a
non-exclusive license agreement with Korea Exchange, whereby The Bear Stearns
Companies Inc. and its affiliates and subsidiary companies, in exchange for
a
fee, will be permitted to use the KOSPI2, which is owned and published by Korea
Exchange, in connection with certain products, including the Notes.
The
Notes
are not sponsored, endorsed, sold or promoted by the Korea Exchange (including
its affiliates). Korea Exchange has not passed on the legality or
appropriateness of, or the accuracy or adequacy of descriptions and disclosures
relating to the Notes. Korea Exchange makes no representation or warranty,
express or implied to the owners of the Notes or any member of the public
regarding the advisability of investing in securities generally or in the Notes
particularly, or the ability of the KOSPI2 to track general stock market
performance. Korea Exchange has no relationship to The Bear Stearns Companies,
Inc. other than the licensing of the KOSPI2 and the related trademarks for
use
in connection with the Notes, which index is determined, composed and calculated
by Korea Exchange without regard to The Bear Stearns Companies, Inc. or the
Notes. Korea Exchange has no obligation to take the needs of The Bear Stearns
Companies, Inc. or the owners of the Notes into consideration in determining,
composing or calculating the KOSPI2. Korea Exchange is not responsible for
and
has not participated in the determination of the timing of, prices at, or
quantities of the Notes to be issued or in the determination or calculation
of
the equation by which the Notes are to be converted into cash. Korea Exchange
has no liability in connection with the administration, marketing or trading
of
the Notes.
Korea
Exchange is under no obligation to continue the calculation and dissemination
of
the KOSPI2 and the method by which the KOSPI2 is calculated and the name “KOSPI
200 Index” or “KOSPI2” may be changed at the discretion of Korea Exchange. No
inference should be drawn from the information contained in this pricing
supplement that Korea Exchange makes any representation or warranty, implied
or
express, to you or any member of the public regarding the advisability of
investing in securities generally or in the Notes in particular or the ability
of the KOSPI2 to track general stock market performance. Korea Exchange has
no
obligation to take into account your interest, or that of anyone else having
an
interest in determining, composing or calculating the KOSPI2. Korea Exchange
is
not responsible for, and has not participated in the determination of the timing
of, prices for or quantities of, the Notes or in the determination or
calculation of the equation by which the Notes are to be settled in cash. Korea
Exchange has no obligation or liability in connection with the administration,
marketing or trading of the Notes. The use of and reference to the KOSPI2 in
connection with the Notes have been consented to by Korea Exchange.
Korea
Exchange disclaims all responsibility for any inaccuracies in the data on which
the KOSPI2 is based, or any mistakes or errors or omissions in the calculation
or dissemination of the KOSPI2.
Historical
Performance of the KOSPI2
The
following table sets forth the monthly levels of the KOSPI2 for each month
in
the period from January 1, 1998 through March 30, 2007. The final level of
the
KOSPI2 on February 28, 2007 was 183.20. We obtained the data in the following
table from Bloomberg Financial Service, without independent verification by
us.
Historical
levels of the KOSPI2 should not be taken as an indication of future performance
and no assurance can be given that the level of the KOSPI2 will increase
relative to its Initial Component Level during the term of the
Notes.
Month-End
Closing Level of the Component
|
|
1998
|
|
1999
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
January
|
|
65.45
|
|
65.72
|
|
119.08
|
|
77.98
|
|
92.99
|
|
75.22
|
|
110.89
|
|
121.06
|
|
180.65
|
|
175.99
|
February
|
|
65.79
|
|
60.28
|
|
103.17
|
|
72.14
|
|
102.62
|
|
72.85
|
|
115.92
|
|
130.85
|
|
177.45
|
|
183.20
|
March
|
|
55.28
|
|
71.84
|
|
108.03
|
|
65.16
|
|
111.84
|
|
68.05
|
|
115.98
|
|
124.78
|
|
176.21
|
|
-
|
April
|
|
49.39
|
|
87.15
|
|
91.21
|
|
72.45
|
|
106.39
|
|
76.45
|
|
112.40
|
|
117.58
|
|
184.10
|
|
-
|
May
|
|
38.48
|
|
85.68
|
|
92.74
|
|
76.09
|
|
100.80
|
|
80.53
|
|
104.14
|
|
124.84
|
|
171.01
|
|
-
|
June
|
|
34.37
|
|
105.47
|
|
104.43
|
|
73.20
|
|
93.69
|
|
85.47
|
|
101.85
|
|
129.43
|
|
167.45
|
|
-
|
July
|
|
39.51
|
|
116.14
|
|
89.35
|
|
66.98
|
|
90.16
|
|
91.52
|
|
95.27
|
|
143.32
|
|
168.51
|
|
-
|
August
|
|
35.55
|
|
112.79
|
|
86.54
|
|
67.42
|
|
92.55
|
|
97.59
|
|
102.89
|
|
140.09
|
|
175.44
|
|
-
|
September
|
|
35.45
|
|
100.71
|
|
76.37
|
|
58.91
|
|
81.37
|
|
89.55
|
|
107.69
|
|
157.55
|
|
178.05
|
|
-
|
October
|
|
47.61
|
|
100.19
|
|
64.00
|
|
66.44
|
|
83.10
|
|
101.44
|
|
107.99
|
|
148.84
|
|
176.84
|
|
-
|
November
|
|
51.93
|
|
123.59
|
|
63.48
|
|
80.03
|
|
92.05
|
|
103.61
|
|
113.40
|
|
165.95
|
|
184.96
|
|
-
|
December
|
|
64.94
|
|
130.02
|
|
63.35
|
|
86.97
|
|
79.87
|
|
105.21
|
|
115.25
|
|
177.43
|
|
185.39
|
|
-
|
The
following graph illustrates the historical performance of the KOSPI2 based
on
the closing level on the last Component Business Day of each month from February
2001 to February 2007.
Swiss
Market Index
The
SMI
(Swiss Market Index) is Switzerland's blue-chip market segment index. It is
made
up of a maximum of 30 of the largest and most liquid SPI® large- and mid-cap
stocks. As a price index, the SMI is not adjusted for dividends, but a
performance index that takes account of such distributions is
available.
The
securities contained in the SMI currently represent more than 90% of the entire
market capitalization, as well as of 90 % trading volume, of all Swiss and
Liechtenstein equities listed on the SWX Swiss Exchange. Because the SMI is
considered to be a mirror of the overall Swiss stock market, it is used as
the
underlying index for numerous derivative financial instruments such as options,
futures and index funds (e.g. ETFs).
Acceptance
criteria: To be accepted into the SMI, a given issue must meet stringent
requirements with regard to liquidity and market capitalization. On one hand,
it
must represent at least 50 % of the average liquidity of the SPI constituent
issues and, on the other, have a minimum free-float capitalization equal to
0.45
% or more of the entire SPI capitalization. Moreover, trading volume and
capitalization are the determining factors in the quarterly
rankings.
The
SMI
was introduced on June 30, 1988 at a baseline value of 1500 points. Its
composition is examined once a year. Calculation takes place in real-time:
as
soon as a new transaction occurs in a security contained in the SMI, an updated
index level is calculated and displayed.
The
indices of the SMI® Family are calculated according to the Laspeyres method
using a weighted arithmetic mean over a defined selection of securities. The
current index level can be calculated by dividing the sum of the market
capitalizations of the securities contained in the index by the
divisor.
Market
capitalization is calculated on the basis of freely tradable shares. Capital
in
circulation is the issued capital, which as a rule is fully subscribed and
wholly or partially paid up and entered in the commercial register. Authorized
and approved capital does not count as capital in circulation.
If
a
company has various categories of listed equity securities, these are viewed
separately for the purpose of index calculation. The free float is the
proportion of shares of a limited company which exists after block ownership
shares have been deducted from the total number of shares. When calculating
the
free float, only listed stocks are taken into account.
The
indices of the SMI® Family are free-float market capitalization weighted. The
market capitalization is adjusted to take account of current block ownership.
This adjustment is made when one person or a group of persons hold at least
5%
(in total) of the shares. Shareholdings of less than 5% are not taken into
account.
The
free-float regulation is only used for bearer and registered shares.
Participation certificates (PCs) and dividend-right certificates are always
included 100% in the calculation. In principle, shares in block ownership are
those shares which are registered with the SWX Swiss Exchange by a person or
group of people in accordance with the Federal Law on Stock Exchanges and
Securities Trading (Art. 20 SESTA, disclosure of shareholdings).
In
extraordinary circumstances, other sources may be relevant for the calculation
of the free float or block ownership in accordance with Arts. 20 ff. SESTA
(e.g.
issuer surveys, voluntary publication in SHAB, annual reports, etc.). Regardless
of any registration, shares held by the following groups are regarded as
belonging to the free float:
•
Custodian nominees
•
Trustee
companies
•
Fund
management companies
•
Pension
funds
•
Investment companies
Shares
of
persons and groups of persons who are subject to contracts binding on
shareholders or who, in the estimation of the SWX in view of available
information, have a long-term interest in a company, do not belong to the free
float. The SWX classifies at its own discretion persons and groups of persons
who, because of their area of activity or the absence of important information,
cannot be clearly assigned to one of the above categories.
In
order
to be admitted and to remain in the SPI® universe and therefore in the SMI®
Family, a given security must meet a minimum free float rate of 20%. If a stock
falls below this limit and does not reach or exceed it again within three
months, it is excluded from the SPI® universe and therefore also from the SMI®
Family.
Stocks
which are not admitted to the SPI® universe on free float grounds are admitted
to the SPI® if the minimum free float rate of 20% has been met continuously over
a period of three months.
The
SMI®
index family is calculated in real time. The index is recalculated every time
a
new transaction is made for a stock included in the index. Publication is made
every second via EXFEED LTD through the Swiss Market Feed (SMF) if the index
value has changed since the previous publication. The last price paid is used
for the index calculation. If no price has been paid on the day of calculation,
then the previous day’s closing price applies. Only the electronic trading
prices of virt-x and the SWX Swiss Exchange (on order book) are taken into
account.
The
stock-exchange trading times are laid down by the SWX Swiss Exchange and virt-x.
Due to the tendency that stocks are subject to sharp price fluctuations in
the
opening phase, the calculation of all SMI® Family indices begins two minutes
after trading commences (on order book). This index value is published by EXFEED
LTD via Swiss Market Feed (SMF) as ‘open’. Ten minutes before close of trading
(on order book) a closing auction takes place for all stocks. At close of
trading, the definite daily closing prices are known, and these are used to
calculate the final values of the indices.
The
Index
Commission advises the SWX Executive Board in all matters related to the index.
Where necessary, it submits proposals regarding changes in index regulations,
treatment of capital events and adjustments outside the established review
and
acceptance period. The Index Commission meets at least twice per year. It
provides valuable advice on how to improve existing products and the design
of
new products. When members for the Index Commission are selected, care is taken
to ensure that they represent a variety of viewpoints. The indices of the SMI®
Family form the basis for derivative products, which serve as investment and
hedging instruments. In order to complete arbitrage and hedging transactions
as
quickly as possible and with the minimal amount of effort, the SMI® includes a
maximum of 30 of the Swiss stock market's most important and liquid securities.
The SMIM® contains a maximum of 30 securities from the mid-cap segment (excl.
SMI® stocks).
Taken
together, the SMI® and SMIM® form a single index, the SMI Expanded®, which
includes a maximum of 60 of the Swiss stock market’s most liquid and highly
capitalized shares. Continuity is a basic tenet of the SMI® Family indices. It
is guaranteed by special admission and exclusion criteria which are evaluated
on
a quarterly basis. The key dates for the capitalization are at the end of each
quarter: 31 March, 30 June, 30 September and 31 December. The on-order-book
sales of the relevant quarter apply for the ‘sales’ criterion. If in the case of
a security that has only recently been listed and for which four quarters are
not available for the evaluation, the quarters available will be taken into
account.
The
changes to the index-basket composition will be made once a year after prior
notice of at least two months along with the revision of the number of shares
on
the first day of trading in October.
The
basic
universe for admission to the SMI® is the Swiss Performance Index (SPI)®.
Further information concerning the SPI® can be found in the SPI® Regulations.
Market capitalization represents the market value of a company. The calculation
of the relevant market value for the index calculation results from the
multiplication of the number of shares used in the index by the free-float
factor and the current market price. For an SMI® candidate, the market value
must amount to a minimum of 0.45% of the overall SPI® capitalization as at the
key date of 30 June.
An
additional factor relating to admission of a security to the SMI® is the key
liquidity figure 'turnover rate'. The on-order-book sales per quarter divided
by
the free-float market capitalization at the end of the same quarter serves
as
benchmark for the measurement of the turnover rate. For an SMI® candidate, the
turnover rate on the key date of 30 June and on the three previous quarter-end
dates must have amounted to at least 50% of the average turnover rate of the
SPI®.
The
SMI®
ranking as of June 30, 2005 shown above may serve as an example. The market
capitalization of the SPI® amounted to CHF 859.2 billion, whilst the total sales
from April 1st through June 30, 2005 were CHF 193.9 billion. The resultant
turnover rate per quarter is 22.57%. For qualification as an SMI® stock, the
average turnover rate must amount to at least half of this, i.e. a minimum
of
11.28%.
The
determination of the ranking of a maximum of 30 securities from the stock
universe is calculated through a combination of market capitalization and the
percentage sales at market value of each individual security.
The
market shares sales and capitalization are both weighted at 50% and result
in
what is termed the weighted market share.
License
Agreement with the SWX Group
The
Bear
Stearns Companies Inc. has entered, or is exploring entering, into a
non-exclusive license agreement with the SWX Group, whereby The Bear Stearns
Companies Inc. and its affiliates and subsidiary companies, in exchange for
a
fee, will be permitted to use the SMI, which is owned and published by the
SWX
Group, in connection with certain products, including the Notes.
The
Notes
are not sponsored, endorsed, sold or promoted by the SWX Group (including its
affiliates). The SWX Group has not passed on the legality or appropriateness
of,
or the accuracy or adequacy of descriptions and disclosures relating to the
Notes. The SWX Group makes no representation or warranty, express or implied
to
the owners of the Notes or any member of the public regarding the advisability
of investing in securities generally or in the Notes particularly, or the
ability of the SMI to track general stock market performance. The SWX Group
has
no relationship to The Bear Stearns Companies, Inc. other than the licensing
of
the SMI and the related trademarks for use in connection with the Notes, which
index is determined, composed and calculated by the SWX Group without regard
to
The Bear Stearns Companies, Inc. or the Notes. The SWX Group has no obligation
to take the needs of The Bear Stearns Companies, Inc. or the owners of the
Notes
into consideration in determining, composing or calculating the SMI. The SWX
Group is not responsible for and has not participated in the determination
of
the timing of, prices at, or quantities of the Notes to be issued or in the
determination or calculation of the equation by which the Notes are to be
converted into cash. The SWX Group has no liability in connection with the
administration, marketing or trading of the Notes.
The
SWX
Group is under no obligation to continue the calculation and dissemination
of
the SMI and the method by which the SMI is calculated and the name “Swiss Market
Index” or “SMI” may be changed at the discretion of the SWX Group. No inference
should be drawn from the information contained in this pricing supplement that
the SWX Group makes any representation or warranty, implied or express, to
you
or any member of the public regarding the advisability of investing in
securities generally or in the Notes in particular or the ability of the SMI
to
track general stock market performance. The SWX Group has no obligation to
take
into account your interest, or that of anyone else having an interest in
determining, composing or calculating the SMI. The SWX Group is not responsible
for, and has not participated in the determination of the timing of, prices
for
or quantities of, the Notes or in the determination or calculation of the
equation by which the Notes are to be settled in cash. The SWX Group has no
obligation or liability in connection with the administration, marketing or
trading of the Notes. The use of and reference to the SMI in connection with
the
Notes have been consented to by the SWX Group.
The
SWX
Group disclaims all responsibility for any inaccuracies in the data on which
the
SMI is based, or any mistakes or errors or omissions in the calculation or
dissemination of the SMI.
Historical
Performance of the SMI
The
following table sets forth the monthly levels of the SMI for each month in
the
period from January 1, 1998 through February 28, 2007. The closing level of
the
SMI on February 28, 2007 was 8,789.70. We obtained the data in the following
table from Bloomberg Financial Service, without independent verification by
us.
Historical
levels of the SMI should not be taken as an indication of future performance
and
no assurance can be given that the level of the SMI will increase relative
to
its Initial Component Level during the term of the Notes.
Month-End
Closing Level of the Component
|
|
1998
|
|
1999
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
January
|
|
6,582.60
|
|
7,201.20
|
|
6,894.70
|
|
8,057.40
|
|
6,237.30
|
|
4,422.50
|
|
5,736.40
|
|
5,771.40
|
|
7,810.88
|
|
9,135.11
|
February
|
|
7,153.10
|
|
7,063.80
|
|
6,910.10
|
|
7,701.80
|
|
6,352.80
|
|
4,148.20
|
|
5,798.40
|
|
5,931.30
|
|
7,892.63
|
|
8,789.70
|
March
|
|
7,585.50
|
|
7,130.20
|
|
7,428.10
|
|
7,167.80
|
|
6,655.20
|
|
4,085.60
|
|
5,618.60
|
|
5,929.70
|
|
8,023.30
|
|
-
|
April
|
|
7,401.40
|
|
7,335.50
|
|
7,406.20
|
|
7,327.20
|
|
6,557.60
|
|
4,542.70
|
|
5,774.40
|
|
5,870.79
|
|
8,047.29
|
|
-
|
May
|
|
7,656.10
|
|
6,911.60
|
|
7,754.00
|
|
7,487.60
|
|
6,574.80
|
|
4,630.80
|
|
5,627.10
|
|
6,127.20
|
|
7,604.40
|
|
-
|
June
|
|
7,882.00
|
|
6,908.90
|
|
7,761.60
|
|
7,240.20
|
|
5,979.70
|
|
4,813.70
|
|
5,619.10
|
|
6,253.08
|
|
7,652.10
|
|
-
|
July
|
|
8,239.50
|
|
6,887.40
|
|
8,023.20
|
|
6,847.30
|
|
5,196.70
|
|
5,079.10
|
|
5,547.20
|
|
6,600.88
|
|
7,941.83
|
|
-
|
August
|
|
6,679.40
|
|
7,008.80
|
|
8,219.90
|
|
6,582.40
|
|
5,230.50
|
|
5,124.20
|
|
5,421.70
|
|
6,517.21
|
|
8,167.96
|
|
-
|
September
|
|
5,760.40
|
|
6,907.40
|
|
7,713.30
|
|
6,014.20
|
|
4,783.00
|
|
5,043.50
|
|
5,465.30
|
|
6,898.88
|
|
8,425.91
|
|
-
|
October
|
|
6,550.60
|
|
7,160.30
|
|
7,977.50
|
|
6,081.00
|
|
4,949.10
|
|
5,211.40
|
|
5,363.40
|
|
7,036.65
|
|
8,569.72
|
|
-
|
November
|
|
7,083.10
|
|
7,399.70
|
|
7,981.90
|
|
6,237.00
|
|
5,117.50
|
|
5,317.50
|
|
5,444.20
|
|
7,407.52
|
|
8,484.57
|
|
-
|
December
|
|
7,160.70
|
|
7,570.10
|
|
8,135.40
|
|
6,417.80
|
|
4,630.80
|
|
5,487.80
|
|
5,693.20
|
|
7,583.93
|
|
8,785.74
|
|
-
|
The
following graph illustrates the historical performance of the SMI based on
the
closing level on the last Component Business Day of each month from January
1998
to February 2007.
The
S&P/ASX 200 Index (“AS51”)
Unless
otherwise stated, all information regarding the S&P/ASX 200 Index provided
in this pricing supplement is derived from Standard & Poor's, a division of
The McGraw-Hill Companies, Inc. (“S&P”), or other publicly available
sources. Such information reflects the policies of S&P as stated in such
sources, and such policies are subject to change by S&P. We do not assume
any responsibility for the accuracy or completeness of such information. S&P
is under no obligation to continue to publish the S&P/ASX 200 Index and may
discontinue publication of the S&P/ASX 200 Index at any time.
The
S&P/ASX 200 Index is intended to provide an investable benchmark for the
Australian equity market and represents approximately 78% of Australian market
capitalization. The S&P/ASX 200 Index is a float-adjusted
capitalization-weighted index, meaning that each underlying stock's weight
in
the index is based on its free float-adjusted market capitalization. The
S&P/ASX 200 Index is comprised of the 100 largest stocks listed on the
Australian Stock Exchange (the “ASX”), plus an additional 100 stocks, all of
which must meet certain liquidity requirements. S&P chooses companies for
inclusion in the S&P/ASX 200 Index with an aim of providing a broad market
representation, while maintaining underlying investability and liquidity.
S&P may from time to time, in its sole discretion, add companies to, or
delete companies from, the S&P/ASX 200 Index to achieve the objectives
stated above. Relevant criteria employed by S&P (discussed in more detail
below) include a stock's liquidity, free float and market
capitalization.
Calculation
of the S&P/ASX 200 Index
The
calculation of the value of the S&P/ASX 200 Index is based on the relative
float-adjusted aggregate market capitalization of the stocks of 200 companies
in
the Australian market (the “Component Stocks”) as of a particular time as
compared to the base value of the S&P/ASX 200 Index. The index market
capitalization for each Component Stock is calculated by multiplying the
company's stock price times the number of ordinary shares times the investable
weight factor (as discussed below). Calculations for the S&P/ASX 200 Index
are based on stock prices taken from the ASX. The official daily S&P/ASX 200
Index closing values are calculated after the market closes and are based on
the
last traded price for each Component Stock.
Component
Stocks of the S&P/ASX 200 Index are determined after an analysis of the
stocks' liquidity, free float and market capitalization. A constituent of the
S&P/ASX 200 Index must be sufficiently liquid to enable institutional
investors to buy in and sell out of the company without severely distorting
the
share price of that stock. The S&P Australian Index Committee (the
“Committee”) assesses whether a company has sufficient liquidity to be eligible
for the S&P/ASX 200 Index by analyzing each company's free float and daily
share turnover. Free float is defined as the portion of shares not being held
by
the following: (i) government and government agencies, (ii) controlling and
strategic shareholders/partners, (iii) any other entities or individuals which
hold more than 5%, excluding some financial institutions and funds and (iv)
other restricted portions such as treasury stocks. Stocks are deemed ineligible
for inclusion in the S&P/ASX 200 if their free float is less than 30%. In
addition, the Committee considers market capitalization, adjusting each
company's market capitalization for free float. An investable weight factor
is
used in the adjustment process. In most cases, a stock's factor will be a direct
reflection of its level of free float; however, some stocks are allocated a
factor at half of its free float level as a result of low liquidity. The
Committee considers average float-adjusted market capitalization over a
six-month period when assessing whether a company's market capitalization is
sufficient for the company to be represented in the S&P/ASX
200.
The
Committee is responsible for setting policy, determining index composition
and
administering the S&P/ASX 200 Index in accordance with the S&P/ASX
methodology. The Committee is comprised of five members representing S&P and
ASX. The Committee may add, remove or bypass any company or security during
the
selection process. In maintaining the S&P/ASX 200 Index, the Committee
considers the guiding principle of minimizing changes to the index portfolio.
The Committee deletes Component Stocks from the S&P/ASX 200 Index for
reasons including acquisition, insufficient market capitalization, insufficient
liquidity, liquidation or insolvency and company restructurings. Additions
to
the S&P/ASX 200 Index are triggered only by deletions, and are evaluated
using the criteria described above for selection of Component Stocks. Initial
public offerings may be eligible for inclusion prior to six months of data
being
available, but only if a deletion occurs and the Committee decides that the
inclusion is justified.
The
Committee rebalances the S&P/ASX 200 Index quarterly at the end of February,
May, August, and November; the free float and investable weight factors of
Component Stocks are reviewed as part of the February rebalance. Quarterly
rebalances analyze market capitalization and liquidity over the previous six
months. The Committee announces index deletions and replacements to the
S&P/ASX 200 Index to the market on the first Friday of March, June,
September and December. Quarterly changes become effective at the close of
trade
on the third Friday of March, June, September and December. The S&P/ASX 200
Index is also rebalanced, and investable weight factors are adjusted, on an
as
needed basis when significant corporate events occur.
S&P
makes changes to the S&P/ASX 200 Index shares on issue under the following
circumstances: (i) market-wide placements and buybacks that are 5% of the index
issued capital and greater than 5 million Australian dollars (“A$”), (ii) shares
issued as a result of dividend reinvestment plans and (iii) rights issues,
bonus
issues and other major corporate actions. The ASX may quote a different number
of shares than the S&P/ASX 200 Index; however, if the aggregated difference
between the ASX quoted shares and the S&P/ASX index quoted shares at
quarter-end is greater than A$100 million or 5% of the index issued capital,
shares will be adjusted to reflect those quoted by the ASX.
While
S&P currently employs the above methodology to calculate the S&P/ASX 200
Index, we cannot assure you that S&P will not modify or change this
methodology in a manner that may affect the redemption amount at maturity to
beneficial owners of the securities. Neither we nor any of our affiliates
accepts any responsibility for the calculation, maintenance or publication
of,
or for any error, omission or disruption in, the S&P/ASX 200 Index or any
successor index. S&P does not guarantee the accuracy or completeness of the
S&P/ASX 200 Index or any data included in the S&P/ASX 200 Index. S&P
assumes no liability for any errors, omissions or disruption in the calculation
and dissemination of the S&P/ASX 200 Index. S&P disclaims all
responsibility for any errors or omissions in the calculation and dissemination
of the S&P/ASX 200 Index or the manner in which the S&P/ASX 200 Index is
applied in determining the amount payable on the securities.
License
Agreement with Standard and Poor’s and the Australian Stock Exchange
(“S&P/ASX”)
The
Bear
Stearns Companies Inc. has entered, or is exploring entering, into a
non-exclusive license agreement with S&P/ASX, whereby The Bear Stearns
Companies Inc. and its affiliates and subsidiary companies, in exchange for
a
fee, will be permitted to use the AS51, which is owned and published by
S&P/ASX, in connection with certain products, including the
Notes.
The
Notes
are not sponsored, endorsed, sold or promoted by the S&P/ASX (including its
affiliates). S&P/ASX has not passed on the legality or appropriateness of,
or the accuracy or adequacy of descriptions and disclosures relating to the
Notes. S&P/ASX makes no representation or warranty, express or implied to
the owners of the Notes or any member of the public regarding the advisability
of investing in securities generally or in the Notes particularly, or the
ability of the AS51 to track general stock market performance. S&P/ASX has
no relationship to The Bear Stearns Companies, Inc. other than the licensing
of
the AS51 and the related trademarks for use in connection with the Notes, which
index is determined, composed and calculated by S&P/ASX without regard to
The Bear Stearns Companies, Inc. or the Notes. S&P/ASX has no obligation to
take the needs of The Bear Stearns Companies, Inc. or the owners of the Notes
into consideration in determining, composing or calculating the AS51.
S&P/ASX is not responsible for and has not participated in the determination
of the timing of, prices at, or quantities of the Notes to be issued or in
the
determination or calculation of the equation by which the Notes are to be
converted into cash. S&P/ASX has no liability in connection with the
administration, marketing or trading of the Notes.
S&P/ASX
is under no obligation to continue the calculation and dissemination of the
AS51
and the method by which the AS51 is calculated and the name “S&P/ASX 200
Index” or “AS51” may be changed at the discretion of S&P/ASX. No inference
should be drawn from the information contained in this pricing supplement that
S&P/ASX makes any representation or warranty, implied or express, to you or
any member of the public regarding the advisability of investing in securities
generally or in the Notes in particular or the ability of the AS51 to track
general stock market performance. S&P/ASX has no obligation to take into
account your interest, or that of anyone else having an interest in determining,
composing or calculating the AS51. S&P/ASX is not responsible for, and has
not participated in the determination of the timing of, prices for or quantities
of, the Notes or in the determination or calculation of the equation by which
the Notes are to be settled in cash. S&P/ASX has no obligation or liability
in connection with the administration, marketing or trading of the Notes. The
use of and reference to the AS51 in connection with the Notes have been
consented to by S&P/ASX.
S&P/ASX
disclaims all responsibility for any inaccuracies in the data on which the
AS51
is based, or any mistakes or errors or omissions in the calculation or
dissemination of the AS51.
Historical
Performance of the AS51
The
following table sets forth the monthly levels of the AS51 for each month in
the
period from June 1, 2000 through March 30, 2007. The final level of the AS51
on
March 30, 2007 was 5,995.00. We obtained the data in the following table from
Bloomberg Financial Service, without independent verification by us.
Historical
levels of the AS51 should not be taken as an indication of future performance
and no assurance can be given that the level of the AS51 will increase relative
to its initial level during the term of the Notes.
Month-End
Closing Level of the Component
|
|
1998
|
|
1999
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
January
|
|
2,600.80
|
|
2,781.70
|
|
3,080.20
|
|
3,341.70
|
|
3,464.20
|
|
2,956.90
|
|
3,272.00
|
|
4,107.30
|
|
4,929.60
|
|
5,773.40
|
February
|
|
2,626.90
|
|
2,768.40
|
|
3,124.60
|
|
3,326.50
|
|
3,414.30
|
|
2,800.90
|
|
3,360.60
|
|
4,172.80
|
|
4,921.30
|
|
5,832.50
|
March
|
|
2,686.00
|
|
2,867.00
|
|
3,133.30
|
|
3,147.20
|
|
3,414.80
|
|
2,885.20
|
|
3,415.30
|
|
4,109.90
|
|
5,129.70
|
|
5,995.00
|
April
|
|
2,709.00
|
|
3,027.80
|
|
3,115.80
|
|
3,329.40
|
|
3,350.00
|
|
3,007.50
|
|
3,400.80
|
|
3,983.20
|
|
5,258.80
|
|
-
|
May
|
|
2,655.30
|
|
2,831.90
|
|
3,081.00
|
|
3,379.10
|
|
3,373.60
|
|
3,011.00
|
|
3,460.20
|
|
4,106.40
|
|
5,001.70
|
|
-
|
June
|
|
2,620.10
|
|
2,903.70
|
|
3,311.20
|
|
3,490.30
|
|
3,216.00
|
|
3,025.80
|
|
3,532.90
|
|
4,277.50
|
|
5,073.90
|
|
-
|
July
|
|
2,661.30
|
|
2,951.00
|
|
3,251.10
|
|
3,324.50
|
|
3,086.20
|
|
3,122.30
|
|
3,536.10
|
|
4,388.80
|
|
4,986.00
|
|
-
|
August
|
|
2,430.10
|
|
2,875.70
|
|
3,297.80
|
|
3,275.60
|
|
3,120.10
|
|
3,199.70
|
|
3,553.70
|
|
4,446.80
|
|
5,115.40
|
|
-
|
September
|
|
2,511.30
|
|
2,817.00
|
|
3,298.80
|
|
3,049.50
|
|
2,970.90
|
|
3,169.50
|
|
3,665.00
|
|
4,641.20
|
|
5,154.10
|
|
-
|
October
|
|
2,563.00
|
|
2,821.40
|
|
3,254.60
|
|
3,249.60
|
|
3,042.90
|
|
3,272.00
|
|
3,778.60
|
|
4,459.70
|
|
5,384.40
|
|
-
|
November
|
|
2,685.60
|
|
2,970.30
|
|
3,274.60
|
|
3,337.50
|
|
3,061.40
|
|
3,186.40
|
|
3,931.30
|
|
4,634.80
|
|
5,482.10
|
|
-
|
December
|
|
2,717.60
|
|
3,117.70
|
|
3,206.20
|
|
3,422.30
|
|
3,007.10
|
|
3,299.80
|
|
4,050.60
|
|
4,763.40
|
|
5,669.90
|
|
-
|
The
following graph illustrates the historical performance of the AS51 based on
the
closing level on the last Component Business Day of each month from February
2001 to March 2007.
MSCI
South Africa Index Fund
According
to publicly available information, the iShares MSCI South Africa Index Fund
is
one of numerous separate investment portfolios called “Funds” which make up
iShares, Inc., a registered investment company. The stated objective of iShares
MSCI South Africa Index Fund is to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of
the
MSCI South Africa Index.
The
Barclays Global Fund Advisors, the Index Fund’s investment adviser uses a
representative sampling strategy to try to track the performance of the MSCI
South Africa Index whereby iShares MSCI South Africa Index Fund invests in
a
representative sample of securities in the MSCI South Africa Index, which have
a
similar investment profile as the MSCI South Africa Index. Securities selected
by Barclays Global Fund Advisors have aggregate investment characteristics
(based on market capitalization and industry weightings), fundamental
characteristics (such as return variability, earnings valuation and yield)
and
liquidity measures similar to those of the MSCI South Africa Index. As Barclays
Global Fund Advisors uses the representative sampling strategy, iShares MSCI
South Africa Index Fund generally will not hold all of the securities that
are
including in the MSCI South Africa Index. iShares MSCI South Africa Index Fund
will invest at least 80% of its assets in the securities of the MSCI South
Africa Index and American Depositary Receipts based on securities of the MSCI
South Africa Index. The iShares MSCI South Africa Index Fund may invest its
other assets in futures contracts, options on futures contracts, other types
of
options, and swaps related to the MSCI South Africa Index, as well as cash
and
cash equivalents, including shares of money market funds affiliated with
Barclays Global Fund Advisors.
As
iShares MSCI South Africa Index Fund is an actual investment portfolio, and
the
MSCI South Africa Index is a theoretical financial calculation, Barclays Global
Fund Advisors expects that, over time, the correlation between iShares MSCI
South Africa Index Fund’s performance and that of the MSCI South Africa Index,
before fees and expenses, will be less than 100% but will be 95% or better.
The
performance of iShares MSCI South Africa Index Fund and the MSCI South Africa
Index may vary due to transaction costs, foreign currency valuations, asset
valuations, market impact, corporate actions (such as mergers and spin-offs)
and
timing variances.
The
iShares MSCI South Africa Index Fund will not concentrate its investments (i.e.
hold 25% or more of its total assets) in the stocks of a particular industry
or
group of industries, except that iShares MSCI South Africa Index Fund will
concentrate its investments to approximately the same extent that the MSCI
South
Africa Index is so concentrated.
The
shares of iShares MSCI South Africa Index Fund are traded on the New York Stock
Exchange under the symbol “EZA”. The shares of iShares MSCI South Africa Index
Fund are registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and the Investment Company Act of 1940, as amended (the
“Investment Company Act”). Companies with securities registered under the
Exchange Act and Investment Company Act are required to file financial and
other
information specified by the SEC periodically. Information provided to or filed
with the U.S. Securities and Exchange Commission (“SEC”) by iShares, Inc. can be
inspected or copied at the SEC’s public reference room located at 100 F Street,
N.E., Washington, D.C. 20549, at prescribed rates. You may obtain information
on
the operation of the public reference room by calling the SEC at 1-800-SEC-0330.
Information provided to or filed with the SEC by iShares, Inc. pursuant to
the
Exchange Act and Investment Company Act can be located by reference to SEC
file
number RRS and RRI, respectively, through the SEC’s website at
http://www.sec.gov.
In
addition, information regarding the iShares MSCI South Africa Index Fund may
be
obtained from other sources including, but not limited to, press releases,
newspaper articles, other publicly disseminated documents, and the iShares®
website at http://www.ishares.com. Information on the iShares® website is not
incorporated by reference into this pricing supplement. We make no
representation or warrant as to the accuracy or completeness of this
information.
“iShares®”
is a registered mark of Barclays Global Investors, N.A. (“BGI”). The copyright
and all rights to the iShares® South Africa Index Fund belong to BGI and
iShares, Inc.. The Notes are not sponsored, endorsed, sold or promoted by BGI,
iShares, Inc. or Barclays Global Fund Advisors. Neither BGI, nor iShares, Inc.
nor Barclays Global Fund Advisors makes any representations or warranties to
the
holders of the Notes or any member of the public regarding the advisability
of
investing the Notes. iShares, Inc. has no obligation to continue to list iShares
MSCI South Africa Index Fund and may de-list iShares MSCI South Africa Index
Fund.
Neither
we nor any of our affiliates makes any representation to you as to the
performance of the iShares MSCI South Africa Index Fund.
Historical
Performance of the EZA US
The
following table sets forth the monthly prices of the EZA US for each month
in
the period from February 1, 2003 through March 30, 2007. The final price of
the
EZA US on March 30, 2007 was 120.92. We obtained the data in the following
table
from Bloomberg Financial Service, without independent verification by us.
Historical
prices of the EZA US should not be taken as an indication of future performance
and no assurance can be given that the price of the EZA US will increase
relative to its Initial Component Level during the term of the
Notes.
Month-End
Closing Price of the Component
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
January
|
|
-
|
|
55.72
|
|
74.40
|
|
114.90
|
|
115.71
|
February
|
|
38.49
|
|
58.80
|
|
80.55
|
|
107.19
|
|
115.94
|
March
|
|
36.10
|
|
61.12
|
|
73.20
|
|
115.01
|
|
120.92
|
April
|
|
38.74
|
|
52.10
|
|
71.72
|
|
120.68
|
|
-
|
May
|
|
39.83
|
|
56.01
|
|
69.20
|
|
101.85
|
|
-
|
June
|
|
41.45
|
|
57.79
|
|
72.49
|
|
98.00
|
|
-
|
July
|
|
44.31
|
|
57.94
|
|
78.70
|
|
99.50
|
|
-
|
August
|
|
46.61
|
|
60.35
|
|
84.60
|
|
98.78
|
|
-
|
September
|
|
47.62
|
|
65.00
|
|
92.00
|
|
91.25
|
|
-
|
October
|
|
52.72
|
|
68.39
|
|
83.55
|
|
101.80
|
|
-
|
November
|
|
56.76
|
|
77.53
|
|
89.70
|
|
109.53
|
|
-
|
December
|
|
56.27
|
|
79.60
|
|
98.23
|
|
115.02
|
|
-
|
The
following graph illustrates the historical performance of the EZA US based
on
the closing price on the last Component Business Day of each month from February
2003 to March 2007.
iShares
MSCI Taiwan Index Fund (“EWT US”)
According
to publicly available information, the iShares MSCI Taiwan Index Fund is one
of
numerous separate investment portfolios called “Funds” which make up iShares,
Inc., a registered investment company. The stated objective of iShares MSCI
Taiwan Index Fund is to provide investment results that correspond generally
to
the price and yield performance, before fees and expenses, of the MSCI Taiwan
Index.
The
Barclays Global Fund Advisors, the Index Fund’s investment advisor uses a
representative sampling strategy to try to track the performance of the MSCI
Taiwan Index whereby iShares MSCI Taiwan Index Fund invests in a representative
sample of securities in the MSCI Taiwan Index, which have a similar investment
profile as the MSCI Taiwan Index. Securities selected by Barclays Global Fund
Advisors have aggregate investment characteristics (based on market
capitalization and industry weightings), fundamental characteristics (such
as
return variability, earnings valuation and yield) and liquidity measures similar
to those of the MSCI Taiwan Index. As Barclays Global Fund Advisors uses the
representative sampling strategy, iShares MSCI Taiwan Index Fund generally
will
not hold all of the securities that are including in the MSCI Taiwan Index.
iShares MSCI Taiwan Index Fund will invest at least 80% of its assets in the
securities of the MSCI Taiwan Index and American Depositary Receipts based
on
securities of the MSCI Taiwan Index. The iShares MSCI Taiwan Index Fund may
invest its other assets in futures contracts, options on futures contracts,
other types of options, and swaps related to the MSCI Taiwan Index, as well
as
cash and cash equivalents, including shares of money market funds affiliated
with Barclays Global Fund Advisors.
As
iShares MSCI Taiwan Index Fund is an actual investment portfolio, and the MSCI
Taiwan Index is a theoretical financial calculation, Barclays Global Fund
Advisors expects that, over time, the correlation between iShares MSCI Taiwan
Index Fund’s performance and that of the MSCI Taiwan Index, before fees and
expenses, will be less than 100% but will be 95% or better. The performance
of
iShares MSCI Taiwan Index Fund and the MSCI Taiwan Index may vary due to
transaction costs, foreign currency valuations, asset valuations, market impact,
corporate actions (such as mergers and spin-offs) and timing variances.
The
iShares MSCI Taiwan Index Fund will not concentrate its investments (i.e. hold
25% or more of its total assets) in the stocks of a particular industry or
group
of industries, except that iShares MSCI Taiwan Index Fund will concentrate
its
investments to approximately the same extent that the MSCI Taiwan Index is
so
concentrated.
The
shares of iShares MSCI Taiwan Index Fund are traded on the New York Stock
Exchange under the symbol “EWT”. The shares of iShares MSCI Taiwan Index Fund
are registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and the Investment Company Act of 1940, as amended (the
“Investment Company Act”). Companies with securities registered under the
Exchange Act and Investment Company Act are required to file financial and
other
information specified by the SEC periodically. Information provided to or filed
with the U.S. Securities and Exchange Commission (“SEC”) by iShares, Inc. can be
inspected or copied at the SEC’s public reference room located at 100 F Street,
N.E., Washington, D.C. 20549, at prescribed rates. You may obtain information
on
the operation of the public reference room by calling the SEC at 1-800-SEC-0330.
Information provided to or filed with the SEC by iShares, Inc. pursuant to
the
Exchange Act and Investment Company Act can be located by reference to SEC
file
number RRS and RRI, respectively, through the SEC’s website at
http://www.sec.gov.
In
addition, information regarding the iShares MSCI Taiwan Index Fund may be
obtained from other sources including, but not limited to, press releases,
newspaper articles, other publicly disseminated documents, and the iShares®
website at http://www.ishares.com. Information on the iShares® website is not
incorporated by reference into this pricing supplement. We make no
representation or warrant as to the accuracy or completeness of this
information.
“iShares®”
is a registered mark of Barclays Global Investors, N.A. (“BGI”). The copyright
and all rights to the iShares® Taiwan Index Fund belong to BGI and iShares,
Inc.. The Notes are not sponsored, endorsed, sold or promoted by BGI, iShares,
Inc. or Barclays Global Fund Advisors. Neither BGI, nor iShares, Inc. nor
Barclays Global Fund Advisors makes any representations or warranties to the
holders of the Notes or any member of the public regarding the advisability
of
investing the Notes. iShares, Inc. has no obligation to continue to list iShares
MSCI Taiwan Index Fund and may de-list iShares MSCI Taiwan Index Fund.
Neither
we nor any of our affiliates makes any representation to you as to the
performance of the iShares MSCI Taiwan Index Fund.
Historical
Performance of the EWT US
The
following table sets forth the monthly prices of the EWT US for each month
in
the period from June 1, 2000 through March 30, 2007. The final price of the
EWT
US on March 30, 2007 was 13.87. We obtained the data in the following table
from
Bloomberg Financial Service, without independent verification by us.
Historical
levels of the EWT US should not be taken as an indication of future performance
and no assurance can be given that the level of the EWT US will increase
relative to its Initial Component Level during the term of the
Notes.
Month-End
Closing Price of the Component
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
January
|
|
-
|
|
13.07
|
|
11.35
|
|
8.91
|
|
12.22
|
|
11.78
|
|
13.48
|
|
14.22
|
February
|
|
-
|
|
12.00
|
|
11.02
|
|
8.05
|
|
12.64
|
|
12.44
|
|
12.64
|
|
13.93
|
March
|
|
-
|
|
12.03
|
|
11.97
|
|
7.79
|
|
12.18
|
|
11.58
|
|
12.73
|
|
13.87
|
April
|
|
-
|
|
11.26
|
|
11.68
|
|
7.56
|
|
11.17
|
|
11.37
|
|
13.84
|
|
-
|
May
|
|
-
|
|
10.40
|
|
11.20
|
|
8.50
|
|
11.24
|
|
11.85
|
|
12.87
|
|
-
|
June
|
|
18.75
|
|
10.54
|
|
10.37
|
|
8.94
|
|
10.82
|
|
12.10
|
|
12.82
|
|
-
|
July
|
|
18.06
|
|
8.80
|
|
8.92
|
|
10.22
|
|
9.80
|
|
12.25
|
|
12.27
|
|
-
|
August
|
|
16.88
|
|
8.87
|
|
8.80
|
|
11.13
|
|
10.64
|
|
11.75
|
|
12.50
|
|
-
|
September
|
|
14.13
|
|
7.10
|
|
7.65
|
|
10.99
|
|
10.70
|
|
11.71
|
|
12.80
|
|
-
|
October
|
|
12.44
|
|
7.83
|
|
8.36
|
|
11.65
|
|
10.69
|
|
11.06
|
|
13.24
|
|
-
|
November
|
|
11.38
|
|
8.87
|
|
8.69
|
|
11.08
|
|
11.26
|
|
11.87
|
|
14.52
|
|
-
|
December
|
|
10.56
|
|
10.78
|
|
8.15
|
|
11.24
|
|
12.06
|
|
12.48
|
|
14.51
|
|
-
|
The
following graph illustrates the historical performance of the EWT US based
on
the closing price on the last Component Business Day of each month from February
2001 to March 2007.
CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The
following discussion summarizes certain U.S. federal income tax consequences
of
the purchase, beneficial ownership and disposition of Notes. As used in this
discussion, the term “U.S. Holder” means a beneficial owner of a Note that
is:
•
an
individual who is a citizen or resident of the United States for U.S. federal
income tax purposes;
•
a
corporation (or other entity that is treated as a corporation for U.S. federal
tax purposes) that is created or organized in or under the laws of the United
States or any State thereof (including the District of Columbia);
•
an
estate whose income is subject to U.S. federal income taxation regardless of
its
source; or
•
a
trust
if a court within the United States is able to exercise primary supervision
over
its administration, and one or more United States persons have the authority
to
control all of its substantial decisions.
As
used
in this discussion, the term “Non-U.S. Holder” means a beneficial owner of a
Note that is, for U.S. federal income tax purposes:
•
a
nonresident alien individual,
•
a
foreign corporation,
•
an
estate whose income is not subject to U.S. federal income tax on a net income
basis, or
•
a
trust
if no court within the United States is able to exercise primary jurisdiction
over its administration or if no United States persons have the authority to
control all of its substantial decisions.
This
summary is based on interpretations of the Internal Revenue Code of 1986, as
amended (the “Code”), regulations issued there under, and rulings and decisions
currently in effect (or in some cases proposed), all of which are subject to
change. Any such change may be applied retroactively and may adversely affect
the federal income tax consequences described herein. This summary addresses
only U.S. Holders that purchase Notes at initial issuance and beneficially
own
such Notes as capital assets and not as part of a “straddle,” “hedge,”
“synthetic security” or a “conversion transaction” for federal income tax
purposes, or as part of some other integrated investment. This summary does
not
discuss all of the tax consequences that may be relevant to particular investors
or to investors subject to special treatment under the federal income tax laws
(such as banks, thrifts, or other financial institutions; insurance companies;
securities dealers or brokers, or traders in securities electing mark to market
treatment; mutual funds or real estate investment trusts; small business
investment companies; S corporations; investors that hold their Notes through
a
partnership or other entity treated as a partnership for federal tax purposes;
investors whose functional currency is not the U.S. dollar; certain former
citizens or residents of the United States; persons subject to the alternative
minimum tax; retirement plans or other tax-exempt entities, or persons holding
the Notes in tax-deferred or tax-advantaged accounts; or “controlled foreign
corporations” or “passive foreign investment companies” for federal income tax
purposes). This summary also does not address the tax consequences to
shareholders, or other equity holders in, or beneficiaries of, a holder, or
any
state, local or foreign tax consequences of the purchase, ownership or
disposition of the Notes.
Accordingly,
prospective investors are urged to consult their tax advisors with respect
to
the federal, state and local tax consequences of investing in the Notes, as
well
as any consequences arising under the laws of any other taxing jurisdiction
to
which they may be subject.
Prospective
purchasers of Notes should consult their tax advisors as to the federal, state,
local, and other tax consequences to them of the purchase, ownership and
disposition of Notes.
Federal
Income Tax Treatment of U.S. Holders
Accruals
of Original Issue Discount on the Notes
For
U.S.
federal income tax purposes, we intend to treat the Notes as “contingent payment
debt instruments” (“CPDIs”) subject to taxation under the “noncontingent bond
method.” Under the noncontingent bond method, U.S. Holders of the Notes will
accrue OID over the term of the Notes based on the Notes’ “comparable yield.” As
a result, U.S. Holders will be required to include OID over the term of the
Notes even though no cash payments will be made with respect to the Notes until
maturity.
In
general, the comparable yield of a CPDI is equal to the yield at which its
issuer would issue a fixed-rate debt instrument with terms and conditions
similar to those of the CPDI, including the level of subordination, term, timing
of payments, and general market conditions. If a hedge of the CPDI is available
that, if integrated with the CPDI, would produce a synthetic debt instrument
with a determinable yield to maturity, the comparable yield will be equal to
the
yield on the synthetic debt instrument. Alternatively, if such a hedge is not
available, but fixed-rate debt instruments of the issuer trade at a price that
reflects a spread above a benchmark rate, the comparable yield is the sum of
the
value of the benchmark rate on the issue date and the spread. Under the
noncontingent bond method, the issuer’s reasonable determination of a comparable
yield is respected and binding on holders of the CPDI.
Based
on
these factors, we estimate that the comparable yield of the Notes will be an
annual rate of approximately 5.18%, compounded annually. U.S. Holders may obtain
the actual comparable yield by contacting The Bear Stearns Companies Inc.,
Bill
Bamber at (212) 272-6635. U.S. Holders will accrue OID in respect of the Notes
at a rate equal to the comparable yield. The amount of OID allocable to each
annual accrual period will be the product of the “adjusted issue price” of the
Notes at the beginning of each such annual accrual period and the comparable
yield. The “adjusted issue price” of the Notes at the beginning of an accrual
period will equal the issue price of the Notes, increased by the OID accrued
in
all prior periods. The issue price of the Notes will be the first price at
which
a substantial amount of the Notes are sold to the public for money (excluding
sales to bond houses, brokers or similar persons or organizations acting in
the
capacity of underwriters, placement agents or wholesalers). U.S. Holders may
obtain the issue price of the Notes by contacting The Bear Stearns Companies
Inc., Bill Bamber at (212) 272-6635. (The accrual of OID by U.S. Holders that
purchase their Notes at a price other than the issue price of the Notes will
be
subject to an adjustment described below.) The amount of OID includible in
income of each U.S. Holder for each taxable year will equal the sum of the
“daily portions” of the total OID on the Notes allocable to each day during the
taxable year in which a U.S. Holder held the Notes, regardless of the U.S.
Holder’s method of accounting. The daily portion of the OID is determined by
allocating to each day in any accrual period a ratable portion of the OID
allocable to such accrual period. Under the noncontingent bond method, the
comparable yield of a CPDI is used to construct a projected payment schedule
that reflects an estimate of the Cash Settlement Value upon the maturity of
the
Notes and which is adjusted to produce the comparable yield. U.S. Holders may
obtain the projected payment schedule by contacting The Bear Stearns Companies
Inc., Bill Bamber at (212) 272-6635.
Under
the
noncontingent bond method, the projected payment schedule is not revised to
account for changes in circumstances that occur while the Notes are
outstanding.
The
comparable yield and the projected payment amount for the Notes are used to
determine accruals of OID for tax purposes only, and are not assurances by
us or
any of our affiliates with respect to the actual yield or payments on the Notes
and do not represent expectations by any such person regarding a Note’s yield or
the index price return amount.
A
U.S.
Holder will generally be bound by our determination of the comparable yield
and
projected payment schedule for the Notes, unless the U.S. Holder determines
its
own projected payment schedule and comparable yield, explicitly discloses such
schedule to the Internal Revenue Service (the “IRS”), and explains to the IRS
the reason for preparing its own schedule. We believe that the projected payment
schedule and comparable yield that we provide for the Notes will be reasonable
and therefore will be respected by the IRS. Our determination, however, is
not
binding on the IRS, and the IRS could conclude that some other comparable yield
or projected payment schedule should be used for the Notes.
A
U.S.
Holder that purchases a Note for an amount other than the issue price of the
Note will be required to adjust its OID inclusions to account for the
difference. These adjustments will affect the U.S. Holder’s basis in the Note.
Reports to US Holders may not include these adjustments. U.S. Holders that
purchase Notes at other than the issue price should consult their tax advisors
regarding these adjustments.
Sale,
Exchange, Retirement, or Other Disposition of the Notes
If
the
payment of the Cash Settlement Value on the Maturity Date exceeds the projected
maturity amount in the projected payment schedule, a U.S. Holder will be
required to include such excess in income as ordinary interest on the Maturity
Date. Alternatively, if the Cash Settlement Value payment is less than the
projected maturity amount, the shortfall will be treated as an offset to any
OID
otherwise includible in income by the U.S. Holder with respect to the Note
for
the taxable year in which the Maturity Date occurs, and any remaining portion
of
such shortfall may be recognized and deducted by the U.S. Holder as an ordinary
loss that will not be subject to the two percent floor limitation imposed on
miscellaneous deductions under section 67 of the Code.
A
U.S.
Holder will generally recognize gain or loss on the sale, exchange, or other
disposition of a Note to the extent that the amount realized is more or less
than its purchase price, increased by the OID previously accrued by the U.S.
Holder on the Note. In general, any gain realized by a U.S. Holder on the sale,
exchange or other disposition of a Note will be treated as ordinary interest
income, and any loss realized will be treated as an ordinary loss to the extent
of the OID previously accrued by the U.S. Holder on the Note, and the loss
will
not be subject to the two percent floor limitation imposed on miscellaneous
deductions under section 67 of the Code. Any loss in excess of the accrued
OID
will be treated as a capital loss. The deductibility of capital losses by U.S.
Holders is subject to limitations.
Federal
Income Tax Treatment of Non-U.S. Holders
Payments
on the Notes to Non-U.S. Holders will not be subject to U.S. federal income
or
withholding tax if the following conditions are satisfied:
•
the
Non-U.S. Holder does not actually or constructively own 10% or more of the
total
combined voting power of all classes of our stock entitled to vote,
•
the
Non-U.S. Holder is not a controlled foreign corporation for U.S. federal income
tax purposes that is related to us through actual or constructive
ownership,
•
the
Non-U.S. Holder is not a bank receiving interest on a loan made in the ordinary
course of its trade or business,
•
the
stocks included in the Components are actively traded within the meaning of
section 871(h)(4)(C)(v) of the Code, and
•
the
payments are not effectively connected with a trade or business conducted by
the
Non-U.S. Holder in the United States and either (a) the Non-U.S. Holder provides
a correct, complete and executed IRS Form W-8BEN, Form W-8EXP or Form W-8IMY
(or
successor form) with all of the attachments required by the IRS, or (b) the
Non-U.S. Holder holds its Note through a qualified intermediary (generally
a
foreign financial institution or clearing organization or a non-U.S. branch
or
office of a U.S. financial institution or clearing organization that is a party
to a withholding agreement with the IRS) which has provided to us an IRS Form
W-8IMY stating that it is a qualified intermediary and has received
documentation upon which it can rely to treat the payment as made to a foreign
person.
We
expect
that the stocks included in the Components will be treated as actively traded
within the meaning of section 871(h)(4)(C)(v). If any of the above conditions
are not satisfied, payments on the Notes will be subject to a withholding tax
equal to 30% of any income with respect to a Note for which amounts were not
previously withheld, unless an income tax treaty reduces or eliminates the
tax
or the income with respect to the Note is effectively connected with the conduct
of a U.S. trade or business and the Non-U.S. Holder provides a correct, complete
and executed IRS Form W-8ECI. In the latter case, the Non-U.S. Holder will
be
subject to U.S. federal income tax with respect to all income with respect
to
the Note at regular rates applicable to U.S. taxpayers, unless an income tax
treaty reduces or eliminates the tax, and Non-U.S. Holders that are treated
as
corporations for federal income tax purposes may also be subject to a 30% branch
profits tax, unless an income tax treaty reduces or eliminates the branch
profits tax.
Federal
Estate Tax Treatment of Non-U.S. Holders.
A
Note
held by an individual who at death is a Non-U.S. Holder will not be includible
in the Non-U.S. Holder’s gross estate for U.S. federal estate tax purposes if
payments on the Notes to the Non-U.S. Holder would not have been subject to
U.S.
federal income or withholding tax at the time of death under the tests described
above.
Information
Reporting and Backup Withholding
Information
reporting will apply to certain payments on a Note (including interest and
OID)
and proceeds of the sale of a Note held by a U.S. Holder that is not an exempt
recipient (such as a corporation). Backup withholding may apply to payments
made
to a U.S. Holder if (a) the U.S. Holder has failed to provide its correct
taxpayer identification number on IRS Form W-9, (b) we have been notified by
the
IRS of an underreporting by the U.S. Holder (underreporting generally refers
to
a determination by the IRS that a payee has failed to include in income on
its
tax return any reportable dividend and interest payments required to be shown
on
a tax return for a taxable year), or (c) we have been notified by the IRS that
the tax identification number provided to the IRS on an information return
does
not match IRS records or that the number was not on the information
return.
Backup
withholding and nonresident alien withholding will not be required with respect
to interest paid to Non- U.S. Holders, so long as we have received from the
Non-U.S. Holder a correct and complete IRS Form W-8BEN, W-8ECI, W-8EXP or Form
W-8IMY with all of the attachments required by the IRS. Interest paid to a
Non-U.S. Holder will be reported on IRS Form 1042-S which is filed with the
IRS
and sent to Non-U.S. Holders.
Information
reporting and backup withholding may apply to the proceeds of a sale of a Note
by a Non-U.S. Holder made within the United States or conducted through certain
U.S. related financial intermediaries, unless we receive one of the tax forms
described above.
Backup
withholding is not an additional tax and may be refunded (or credited against
your U.S. federal income tax liability, if any). The information reporting
requirements may apply regardless of whether withholding is required. For
Non-U.S. Holders, copies of the information returns reporting such interest
and
withholding also may be made available to the tax authorities in the country
in
which a Non-U.S. Holder is a resident under the provisions of an applicable
income tax treaty or agreement.
THE
PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX IMPLICATIONS OF
AN
INVESTMENT IN NOTES. PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR
OWN
TAX ADVISORS PRIOR TO INVESTING TO DETERMINE THE TAX IMPLICATIONS OF SUCH
INVESTMENT IN LIGHT OF EACH SUCH INVESTOR’S PARTICULAR
CIRCUMSTANCES.
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
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, an 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 Notes by a Plan with respect to which we, certain
of
our affiliates, and/or Fifth Third 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 the Notes are acquired or held pursuant to and in
accordance with an applicable statutory or administrative exemption. Each of
us,
Bear Stearns, Bear, Stearns Securities Corp., and Fifth Third is considered
a
"disqualified person" under the Code or a “party in interest” under ERISA with
respect to many Plans, although neither we, Bear Stearns, nor Fifth Third 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 Notes 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, any of our affiliates, nor Fifth Third
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 who 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 Notes 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, certain of our affiliates, and/or Fifth Third should consult
with counsel before making any acquisition. Each purchaser of any Notes, 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
Notes, will be deemed to represent that the purchase, holding and disposition
of
the Notes 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 Notes. Each fiduciary of a Similar Law Plan will be deemed to represent
that
the Similar Law Plan’s acquisition and holding of the Notes will not result in a
non-exempt violation of applicable Similar Law.
The
sale
of any Note 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
We
will
use the net proceeds from the sale of the Notes for general corporate purposes.
We or one or more of our subsidiaries (including BSIL) may hedge our obligations
under the Notes by the purchase and sale of the stocks included in the
Component, exchange-traded and over-the-counter options on, or other derivative
or synthetic instruments related to, the Component, individual futures contracts
on the Component and on stocks included in the Component, futures contracts
on
the Component and/or options on these 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 we and/or one or more of our
subsidiaries will increase or decrease those initial hedging positions using
dynamic hedging techniques and may take long or short positions in any of these
instruments. We or one or more of our subsidiaries may also take positions
in
other types of appropriate financial instruments that may become available
in
the future. If we or one or more of our subsidiaries has a long hedge position
in any of these instruments then we or one or more of our subsidiaries may
liquidate a portion of these instruments 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.
We
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 any of these instruments
or
on the level of the Component, we cannot guarantee that we and one or more
of
our subsidiaries will not affect such levels 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
April 20, 2007, as amended, we have agreed to sell to Fifth Third, as principal,
and Fifth Third has agreed to purchase from us, the aggregate principal amount
of Notes set forth opposite its name below.
Agent
|
Principal
Amount
of
Notes
|
Fifth
Third Securities, Inc.
|
$10,400,000
|
Total
|
$10,400,000
|
The
Agent
intends to initially offer $10,400,000
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 principal amount
of
the Notes at prices related to the prevailing market prices at the time of
resale. In the future, the Agent 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 Fifth Third at a discount of 3.00% of the price at which
the
Notes are offered to the public. Fifth Third may reallow a discount to other
agents not in excess of 3.00% of the public offering price.
In
order
to facilitate the offering of the Notes, we may grant the Agent a 13-day option
from the date of the final pricing supplement, to purchase from us up to an
additional $1,560,000
at the
public offering price, less the agent’s discount, to cover any over-allotments.
The Agent 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 Agent 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 it by us. If this option is exercised, in whole or in
part, subject to certain conditions, the Agent will become obligated to purchase
from us and we will be obligated to sell to the Agent an amount of Notes equal
to the amount of the over-allotment exercised. The Agent may elect to cover
any
such short position by purchasing Notes in the open market. 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.
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 of 1933, as amended (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 trading market. The Notes
will
not be listed on any securities exchange and we do not expect a trading market
will develop. Fifth Third 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 trading market
for the Notes will develop or, if such a trading market develops, as to the
liquidity of such trading 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.
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
and 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
or
the accompanying prospectus supplement and prospectus. If anyone
provides
you with different or inconsistent information, you should not rely
on it.
This pricing supplement and 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
and
the accompanying prospectus supplement and prospectus is correct
on any
date after their respective dates.
|
|
The
Bear Stearns
Companies
Inc.
$10,400,000
Medium-Term
Notes, Series B
5-Year
Note
Linked
to a Portfolio of
Indices
and Index Funds
Due
May 11, 2012
PRICING
SUPPLEMENT
Fifth
Third Securities Inc.
May
9, 2007
|
________________
|
|
TABLE
OF CONTENTS
|
|
Pricing
Supplement
|
|
|
Page
|
|
Summary
|
2
|
|
Key
Terms
|
4
|
|
Questions
and Answers
|
8
|
|
Risk
Factors
|
13
|
|
Description
of the Notes
|
22
|
|
Description
of the Portfolio
|
35
|
|
Certain
U.S. Federal Income Tax Considerations
|
71
|
|
Certain
ERISA Considerations
|
74
|
|
Use
of Proceeds and Hedging
|
76
|
|
Supplemental
Plan of Distribution
|
76
|
|
Legal
Matters
|
77
|
|
Prospectus
Supplement
|
|
Risk
Factors
|
S-3
|
|
Pricing
Supplement
|
S-8
|
|
Description
of the Notes
|
S-8
|
|
Certain
U.S. 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 Depositary 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
|
|
|
|
|
|
|
|
|
|