|
|
|
|
|
Title
of Each Class of Securities Offered
|
|
Maximum
Aggregate
Offering
Price
|
|
Amount
of
Registration
Fee(1)
|
Medium-Term
Notes, Series B
|
|
$2,000,000
|
|
$61.40
|
(1)
Calculated in accordance with Rule 457(r) of the Securities Act of 1933, as
amended. The filing fee of $61.40 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.
Medium-Term
Notes, Linked to an Equity Index Portfolio
Due
January 6, 2011
·
|
The
Notes are linked to the performance of a portfolio comprised of the
following four equity indices with the following respective weightings
within the portfolio: (1) 30.00% the S&P 500®
Index; (2) 30.00% the DJ Euro STOXX 50®
Index; (3) 30.00% the Nikkei 225SM
Index; and (4) 10.00% the FTSE/Xinhua China 25 Index (each such index
a “Component”
and together the “Portfolio”).
When we refer to Notes in this pricing supplement, we mean Notes
with a
principal amount of $1,000.
|
·
|
On
the Maturity Date, you will receive the Cash Settlement Value, an
amount
in cash 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 four Component
Performances, where the “Component Performance” with respect to a
Component measures the average level of such Component as of each
of four
Observation Dates relative to its Initial Component Level on the
Pricing
Date.
|
·
|
The
Cash Settlement Value will be calculated as
follows:
|
(i) If,
at
maturity, the Portfolio Return is greater than or equal to zero, then the Cash
Settlement Value for each Note will be equal to the $1,000 principal amount
of
the Note plus the product of: (i) the $1,000 principal amount multiplied by
(ii)
the Portfolio Return multiplied by (iii) the Upside Participation
Rate.
(ii) If,
at
maturity, the Portfolio Return is less than zero but greater than or equal
to
-20%, then the Cash Settlement Value for each Note will be equal to the $1,000
principal amount of the Note.
(iii) If,
at
maturity, the Portfolio Return is less than -20%, then the Cash Settlement
Value
for each Note will be equal to the $1,000 principal amount minus 1% of the
$1,000 principal amount for each percentage point that the Portfolio Return
is
less than -20%. For example, if the Portfolio Return is -40%, you will suffer
a
20% loss and, therefore, receive 80% of the principal amount.
·
|
The
Upside Participation Rate is
190.00%.
|
·
|
We
will not pay interest during the term of the
Notes.
|
·
|
The
CUSIP number for the Notes is
073928W66.
|
·
|
The
Notes will not be listed on any securities exchange or quotation
system.
|
INVESTMENT
IN THE NOTES INVOLVES CERTAIN RISKS INCLUDING
THE RISK THAT YOU MAY LOSE UP TO 80% OF YOUR INVESTMENT IN THE NOTES. 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-12.
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%‡
|
|
$
|
2,000,000
|
|
Agent’s
commission
|
|
|
0.00%
|
|
$
|
0
|
|
Proceeds,
before expenses, to us
|
|
|
100.00%
|
|
$
|
2,000,000
|
|
‡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
may
grant Bear, Stearns & Co. Inc. a 30-day option from and including the date
of this pricing supplement to purchase from us up to an additional $300,000
of
Notes at the public offering price to cover any over-allotments.
We
expect
that the Notes will be ready for delivery in book-entry form only through the
book-entry facilities of The Depository Trust Company in New York, New York,
on
or about July 5, 2007, against payment in immediately available funds. The
distribution of the Notes will conform to the requirements set forth in Rule
2720 of the National Association of Securities Dealers, Inc. Conduct
Rules.
_______________
Bear,
Stearns & Co. Inc.
June
29
2007
This
summary highlights selected information from the accompanying prospectus and
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 due January 6, 2011 (the
“Notes”),
are
Notes whose return is tied or “linked” to the performance of a portfolio
comprised of the following four equity indices with the following respective
weightings within the portfolio: (1) 30.00% the S&P 500®
Index
(the “SPX”); (2) 30.00% the DJ Euro STOXX 50 Index®
(the
“SX5E”); (3) 30.00% the Nikkei 225SM
Index
(the “NKY”); and (4) 10.00%
the FTSE/Xinhua China 25 Index (the “XIN0I”).
When we
refer to Note or Notes in this pricing supplement, we mean $1,000 principal
amount of Notes, either singularly, or collectively. On the Maturity Date,
you
will receive the Cash Settlement Value, an amount in cash 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 four Component Performances, where the “Component Performance”
with respect to a Component measures the average level of such Component as
of
each of four Observation Dates relative to its Initial Component Level on the
Pricing Date. If the Portfolio Return is less than zero but greater than or
equal to -20% at maturity, then you will receive the principal amount at
maturity. 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 the product of: (i) the principal amount multiplied by (ii) the
Portfolio Return multiplied by (iii) the Upside Participation Rate. If, at
maturity, the Portfolio Return is less than zero but greater than or equal
to
-20%, then the Cash Settlement Value for each Note will be equal to the
principal amount of the Note. If, at maturity, the Portfolio Return is less
than
-20%, then the Cash Settlement Value for each Note will be equal to the
principal amount minus 1% of the principal amount for each percentage point
that
the Portfolio Return is less than -20%. For example, if the Portfolio Return
is
-40%, you will suffer a 20% loss and, therefore, receive 80% of the principal
amount. We will not pay interest during the term of the Notes.
Selected
Investment Considerations
|
·
|
Partial
principal protection—If the Portfolio Return is less than zero but greater
than or equal to -20% at maturity, then you will receive the principal
amount at maturity.
|
|
·
|
No
current income—We will not pay interest during the term of the
Notes.
|
|
·
|
Growth
potential—The Notes offer the possibility to participate in the potential
appreciation in the Portfolio. The Cash Settlement Value is based
upon
whether the Portfolio Return is greater than zero at maturity. In
addition, because of the Upside Participation Rate, you will receive
a
1.90% return for every 1.00% increase in the Portfolio Return over
zero.
|
|
·
|
Medium-term
investment—The Notes may be an attractive investment for investors who
have a bullish view of the Portfolio during the term of the
Notes.
|
|
·
|
Diversification—The
Notes are linked to the following four equity indices and their respective
Weightings within the Portfolio: (1) the SPX; (2) the SX5E;
(3) the NKY; and (4) the XIN0I. Therefore, the Notes may allow
you to diversify an existing portfolio or
investment.
|
Selected
Risk Considerations
|
·
|
Possible
loss of principal—Your investment in the Notes is not fully principal
protected and you may lose up to 80% of your initial investment.
If you
sell your Notes prior to maturity or the Portfolio Return is less
than
-20%, you may receive less than the amount you originally
invested.
|
|
·
|
No
interest, dividend or other payments—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.
|
|
·
|
Liquidity—If
a trading market were to develop in the Notes, it may not be liquid.
Our
subsidiary, Bear Stearns has advised us that they intend under ordinary
market conditions to indicate prices for the Notes upon request.
However,
we cannot guarantee that bids for outstanding Notes will be made;
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.
|
|
·
|
Yield—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.
|
|
·
|
Return
related to movements in the Portfolio—If the Portfolio Return is less than
zero but greater than or equal to 20%, your return will be limited
to the
principal amount of your Notes. In addition, investors will lose
1% of
their principal amount for every percentage point that the Portfolio
Return is less than 20%.
|
KEY
TERMS
Issuer:
|
The
Bear Stearns Companies Inc.
|
Components:
|
The
following are the four equity indices with the following respective
Weightings within the portfolio: (1) 30.00% the S&P
500®
Index (the “SPX”); (2) 30.00% the DJ Euro STOXX 50®
Index (the “SX5E”); (3) 30.00% the Nikkei 225SM
Index (the “NKY”) and; (4) 10.00% the the FTSE/Xinhua China 25 Index
(“XIN0I”) (each such index a “Component”
and together the “Portfolio”).
|
Sponsors:
|
Standard
& Poor’s (“S&P”), a division of The McGraw-Hill Companies, as the
sponsor of the SPX; STOXX Limited, a partnership of Deutsche Börse AG, Dow
Jones & Company and the SWX Group as the sponsor of the SX5E; Nihon
Keizai Shimbun, Inc. as the sponsor of the NKY; and FTSE/Xinhua Index
Limited, a joint venture of FTSE International Limited and Xinhua
Financial Network Limited, each as the sponsor of the
XIN0I.
|
Principal
Amount:
|
Each
Note will be issued in minimum denominations of $1,000 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
$2,000,000. When we refer to Note or Notes in this pricing supplement,
we
mean Notes with a principal amount of
$1,000.
|
Further
Issuances:
|
Under
certain limited circumstances, and at our sole discretion, we may
offer
further issuances of the Notes. These further issuances, if any,
will be
consolidated to form a single series with the Notes and will have
the same
CUSIP number and will trade interchangeably with the Notes immediately
upon settlement.
|
Cash
Settlement Value:
|
If,
at maturity, the Portfolio Return is greater than or equal to zero,
the
Cash Settlement Value for each Note will be equal to the $1,000 principal
amount of the Note plus the product of: (i) the $1,000 principal
amount
multiplied by (ii) the Portfolio Return multiplied by (iii) the Upside
Participation Rate.
|
|
If,
at maturity, the Portfolio Return is less than zero but greater than
or
equal to -20%, then the Cash Settlement Value for each Note will
be equal
to the $1,000 principal amount of the
Note.
|
|
If,
at maturity, the Portfolio Return is less than -20%, then the Cash
Settlement Value for each Note will be equal to the $1,000 principal
amount minus 1% of the principal amount for each percentage point
that the
Portfolio Return is less than -20%. For example, if the Portfolio
Return
is -40%, you will suffer a 20% loss and, therefore, receive 80% of
the
principal amount.
|
Upside
Participation Rate:
|
190.00%
|
Portfolio
Return:
|
An
amount, determined by the Calculation Agent, and equal to the sum
of (i)
the Component Performance for each Component multiplied by (ii) its
respective Weighting within 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 Level 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
January 3, 2011.
|
|
“Observation
Level”
means, as of any Observation Date and with respect to each Component,
the
closing index level as reported by the relevant Sponsor and displayed
on
Bloomberg Page SPX <Index> <Go> with respect to the SPX;
Bloomberg Page SX5E <Index> <Go> with respect to the SX5E;
Bloomberg Page NKY<Index> <Go> with respect to the NKY; and
Bloomberg Page XIN0I <Index> <Go> with respect to the
XIN0I.
|
|
“Observation
Date”
means January 2, 2008, January 2, 2009, January 2, 2010, and January
3,
2011; 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
applicable 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. For the avoidance of doubt,
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:
|
|
·
|
1,519.43
with respect to the SPX;
|
|
·
|
4,470.26
with respect to the SX5E;
|
|
·
|
18,146.30
with respect to the NKY; and
|
|
·
|
19,688.97
with respect to the XIN0I; each representing the closing level of
the
respective Component on July 2, 2007 with respect to the SPX, SX5E
and
NKY, and on July 3, 2007 with respect to the XIN0I.
|
|
·
|
30.00%
with respect to the SPX;
|
|
·
|
30.00%
with respect to the SX5E;
|
|
·
|
30.00%
with respect to the NKY; and
|
|
·
|
10.00%
with respect to the XIN0I.
|
Interest:
|
The
Notes will not bear interest.
|
Component
Level:
|
For
each Component, the closing level of such Component, as determined
by the
relevant Sponsor, on each Component Business Day.
|
Maturity
Date:
|
The
Notes are expected to mature on January 6, 2011 unless such date
is not a
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, as postponed
for
the last Component for which an Observation Level is
determined.
|
Exchange
Listing:
|
The
Notes will not be listed on any securities exchange or quotation
system.
|
Component
Business Day:
|
Means,
with respect to each Component, any day on which the Relevant Exchange
and
each Related Exchange are scheduled to be open for trading.
|
Business
Day:
|
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.
|
Relevant
Exchanges:
|
The
“Summary of the Components” below details the Relevant
Exchanges for each Component, which represent the primary exchanges
or
markets of trading of any security then included in a
Component.
|
Related
Exchange:
|
With
respect to any Component, means 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 a
Component.
|
Summary
of the Components
Component
|
Relevant
Exchanges
|
SPX
|
New
York Stock Exchange, NASDAQ and their successors
|
SX5E
|
Major
stock exchanges, respectively located in one of 17 European countries,
including London Stock Exchange (the “LSE”), Frankfurt Stock Exchange and
their successors
|
NKY
|
Tokyo
Stock Exchange and its successor (the “TSE”)
|
XIN0I
|
The
Stock Exchange of Hong Kong and its
successor
|
Offers
and sales of the Notes are subject to restrictions in certain jurisdictions.
The
distribution of this pricing supplement and the accompanying prospectus
supplement and prospectus and the offer or sale of the Notes in certain other
jurisdictions may be restricted by law. Persons who come into possession of
this
pricing supplement, and the accompanying prospectus supplement and prospectus
or
any Notes must inform themselves about and observe any applicable restrictions
on the distribution of this pricing supplement, the accompanying prospectus
supplement and prospectus and the offer and sale of the Notes. Notwithstanding
the minimum denomination of $1,000, 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 debt securities, the value of which is linked to
the
performance of the Portfolio over the term of the Notes as measured by the
Portfolio Return. The Notes will not bear interest and no other payments will
be
made prior to maturity. See the section “Risk Factors.”
The
Notes
are expected to mature on January 6, 2011. The Notes do not provide for earlier
redemption. When we refer to Notes in this pricing supplement, we mean Notes
with a principal amount of $1,000. You should refer to the section “Description
of Notes,” for a detailed description of the Notes prior to making an investment
in the Notes.
Are
the Notes equity or debt securities?
The
Notes
are our unsecured debt securities. However, the Notes differ from traditional
debt securities in that the Notes are not fully principal protected and offer
the opportunity to positively participate in the appreciation, if any, of the
Portfolio. In addition, because of the Upside Participation Rate you will
receive a 1.90% return for every 1.0% increase in the Portfolio Return over
zero. If, at maturity, the Portfolio Return is less than -20%, you will receive
less, and possibly up to 80% less, than your initial investment in the Notes.
In
that case, we will pay you an amount equal to the principal amount of your
Notes, minus 1% of the principal amount for each percentage point that the
Portfolio Return is below -20%. In no event will we pay you less than 20% of
the
principal amount of your Notes.
Are
there any risks associated with my investment?
Yes.
The
Notes are subject to a number of risks, including the risk that you may lose
up
to 80% of your original investment in the Notes. 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?
On
the
Maturity Date, you will receive the Cash Settlement Value, an amount in cash
that depends upon the performance of the Portfolio over the term of the Notes
as
measured by 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 $1,000 principal amount of the Note
plus the product of: (i) the $1,000 principal amount multiplied by (ii) the
Portfolio Return multiplied by (iii) the Upside Participation Rate.
If,
at
maturity, the Portfolio Return is between zero and -20%, inclusive, then the
Cash Settlement Value for each Note will be equal to the $1,000 principal amount
of the Note.
If,
at
maturity, the Portfolio Return is less than -20%, then the Cash Settlement
Value
for each Note will be equal to the $1,000 principal amount minus 1% of the
$1,000 principal amount for each percentage point that the Portfolio Return
is
less than -20%. For example, if the Portfolio Return is -40%, you will suffer
a
20% loss and, therefore, receive 80% of the principal amount.
For
more
specific information about the Cash Settlement Value and for illustrative
examples, you should refer to “Description of the Notes.”
Are
the Notes principal protected?
No.
The
Notes are not fully principal protected and 80% of your principal investment
in
the Notes is at risk of loss. The Notes are linked to the performance of the
Portfolio and will result in a loss if the Portfolio Return is less than -20%.
In this case, the Cash Settlement Value you will receive will equal the
principal amount of your Notes, minus 1% of the principal amount for each
percentage point that the Portfolio Return is below -20%. In no event will
we
pay you less than 20% of the principal amount of your Notes.
Will
I receive interest on the Notes?
You
will
not receive any periodic interest payments on the Notes. The only interest
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 30-day option we grant
to
Bear, Stearns & Co. 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 the following four equity indices with the following
respective Weightings within the portfolio: (1) 30.00% the SPX; (2) 30.00%
the SX5E; (3) 30.00% the NKY; and (4) 10.00% the XIN0I (each such
index a “Component” and together the “Portfolio”). The Weighting of each
Component is fixed at the weight 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 Sponsors or other publicly available sources.
Who
publishes information regarding the Components and where can I obtain further
information?
S&P
500®
Index.
The SPX
is a capitalization weighted stock index published by Standard and Poor’s
(“S&P”) and is intended to provide an indication of the pattern of common
stock price movement. The calculation of the level of the Index, discussed
below
in further detail, is based on the relative value of the aggregate market value
of the common stocks of 500 companies as of a particular time compared to the
aggregate average market value of the common stocks of 500 similar companies
during the base period of the years 1941 through 1943. As of June 6, 2007,
the
common stocks of 424 companies or 84.8% of the market capitalization of the
SPX,
were traded on the New York Stock Exchange (“NYSE”) and the common stocks of 76
companies, or 15.2% of the market capitalization of the Index, were traded
on
The Nasdaq Stock Market (“Nasdaq”). As of that date, none of the common stocks
included in the Index were traded on the American Stock Exchange. The SPX is
quoted in U.S. dollars. You can obtain the level of the SPX from the Bloomberg
Financial Service under the symbol SPX <Index> or from the S&P website
at http://www.spglobal.com. Other information on the S&P website is not
incorporated into this document.
Dow
Jones EuroSTOXX 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 Financial
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
225TM
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 Financial 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.
How
has the Portfolio performed historically?
We
have
provided tables depicting the month-end closing levels for each of the
Components for each month beginning with January 1998 (and in the case of XIN01,
beginning with March 2001). You can find these tables in the section
“Description of the Portfolio—Historical Data on 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.”
Will
the Notes be listed on a securities exchange?
The
Notes
will not be listed on any securities exchange or quotation system, and we do
not
expect a trading market to develop, which may affect the price that you receive
for your Notes upon any sale prior to maturity. Bear Stearns has advised us
that
they intend under ordinary market conditions to indicate prices for the Notes
on
request. However, we cannot guarantee that bids for outstanding Notes will
be
made; nor can we predict the price at which any such bids will be made. In
any
event, the Notes will cease trading as of the close of business on the Maturity
Date. You should refer to the section “Risk Factors.”
What
is the role of Bear, Stearns & Co. Inc.?
Bear,
Stearns & Co. Inc. (“Bear
Stearns”)
will
be our agent for the offering and sale of the Notes. After the initial offering,
Bear Stearns intends, under ordinary market conditions, to buy and sell the
Notes to create a secondary market for holders of the Notes, and may stabilize
or maintain the market price of the Notes during the initial distribution of
the
Notes. However, Bear Stearns will not be obligated to engage in any of these
market activities or to continue them if they are begun.
Bear
Stearns also 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 acting on behalf of the
Holders, to exercise rights and remedies available under the Indenture. If
the
Calculation Agent uses its discretion to make a determination, the Calculation
Agent will notify the Company 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 performance of the Components, they may be appropriate
for investors with specific investment horizons who seek to participate in
the
potential appreciation of the Components. In particular, the Notes may be an
attractive investment for investors who:
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believe
that the level of the Portfolio will increase over the term of the
Notes;
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want
potential upside exposure to the securities underlying the
Components;
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are
willing to risk the possible loss of up to 80.00% of their investment
in
exchange for the opportunity to participate in a positive Portfolio
Return, if any;
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are
willing to forgo interest payments or dividend payments on the stocks
underlying the Components; and
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wish
to gain leveraged exposure to the appreciation, if any, of the
Portfolio.
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The
Notes
may not be a suitable investment for you if you:
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seek
full principal protection under all market
conditions;
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seek
current income or dividend payments from your
investment;
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seek
an investment with an active secondary
market;
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are
unable or unwilling to hold the Notes until maturity;
or
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do
not have a bullish view of the Portfolio over the term of the
Notes.
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What
are the U.S. federal income tax consequences of investing in the
Notes?
We
intend
to treat the Notes as contingent payment debt instruments 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. You
should review the discussion under the section “Certain U.S. Federal Income Tax
Considerations.”
Does
ERISA impose any limitations on purchases of the Notes?
An
employee benefit plan subject to the fiduciary responsibility provisions of
the
Employee Retirement Income Security Act of 1974 (“ERISA”), a plan that is
subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the
“Code”), including individual retirement accounts, individual retirement
annuities or Keogh plans, a governmental or other plan subject to any law
similar to Section 406 of ERISA or Section 4975 of the Code or any entity the
assets of which are deemed to be “plan assets” for purposes of ERISA, Section
4975 of the Code 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” herein.
Are
there any risks associated with my investment?
Yes.
The
Notes are subject to a number of risks. You should refer to “Risk Factors” in
this pricing supplement and “Risk Factors” in the accompanying prospectus
supplement.
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. Prospective purchasers
of
the Notes should understand the risks of investing in the Notes and should
reach
an investment decision only after careful consideration, with their advisers,
of
the suitability of the Notes in light of their particular financial
circumstances, the following risk factors and the other information set forth
in
this pricing supplement and the accompanying prospectus supplement and
prospectus. These risks include the possibility that the Components will
fluctuate. We have no control over a number of matters, including economic,
financial, regulatory, geographic, judicial and political events, that are
important in determining the existence, magnitude, and longevity of these risks
and their influence on the value of, or the payment made on, the
Notes.
The
Notes are not fully principal protected. At maturity, the Notes may pay less
than the principal amount.
The
Notes
are not fully principal protected and 80% of your principal investment in the
Notes is at risk of loss. If the Portfolio Return is less than -20%, you will
receive less, and possibly up to 80% less, than the original public offering
price of $1,000 per Note. In this case, you will lose 1% of the principal amount
for each percentage point that the Portfolio Return is below -20%. In no event
will we pay you less than 20% of the principal amount of your Notes.
Accordingly, you may lose up to 80% of your initial investment in the Notes.
If
you sell your Notes prior to maturity, you may receive less than the amount
you
originally invested.
The
positive performance of a Component on one or 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 four Observation Dates.
Even if a Component exhibits a positive performance on one or more of the
Observation Dates, the negative performance of that same 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.
Owning
the Notes is not the same as having rights in the securities underlying the
Components.
Even
if
the Components increase above their respective Initial Component 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
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 fully 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.”
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
in
respect of 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.
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 any of the Components and in the stocks underlying any
of
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
Components and the stocks that underlie the Components and not rely on our
views
with respect to future movements in the Components and the stocks that underlie
the Components. You should make such investigation as you deem appropriate
as to
the merits of an investment linked to an increase, if any, in the
Portfolio.
Equity
market risks may affect the trading value of the Notes and the amount you will
receive at maturity.
We
expect
that the Component Levels will fluctuate in accordance with changes in the
financial condition of the companies issuing the stocks comprising the
Components, the value of the underlying stocks comprising the Components
generally and other factors. The financial condition of the companies issuing
the stocks comprising the Components may weaken or the general condition of
the
equity market may decline, either of which may cause a decrease in the Component
Levels and thus a decrease in the value of the Notes. 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 stocks
comprising the Components change. Investor perceptions regarding the companies
issuing the stocks 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 Component Levels may be expected to fluctuate until the Final Observation
Date.
The
historical performance of the Components is not an indication of the future
performance of the Components.
The
historical performance of the Components, which 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 stocks comprising
the
Components will determine the Component Levels, it is impossible to predict
whether the Component Levels will fall or rise. Trading prices of the underlying
stocks comprising the Components will be influenced by the complex 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 stocks are traded, and by various
circumstances that can influence the values of the underlying stocks in a
specific market segment or the value of a particular underlying
stock.
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.
The
Cash Settlement Value will not be adjusted for changes in currency exchange
rates.
Although
the securities underlying certain of the Components are traded in currencies
other than the U.S. dollar and the Notes are denominated in U.S. dollars, the
amount payable at maturity will not be adjusted for the currency exchange rates
in effect on the Maturity Date. Any amount in addition to the principal amount
of each Note payable to you on the Maturity Date is based solely upon the
percentage increase in the Portfolio Return. Changes in exchange rates, however,
may reflect changes in various international economies, which in turn may affect
the levels of the Components and the trading value of the Notes.
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 Component Levels, 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
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
Components may not move in tandem, and gains in one Component may be offset
by
declines in another Component.
Movements
in the Components comprising the Portfolio may not move in tandem. At a time
when the level of one or more of the Components increases, the level of one
or
more of the other Components may decline. Therefore, in calculating the
Portfolio Return, increases in the level of one or more of the Components may
be
moderated, or wholly offset, by lesser increases or declines in the level of
one
or more of the other Components.
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 levels of the Components are
greater than or equal to their initial levels, 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 Component Levels are less than, equal to or not sufficiently above
their respective Initial Component Levels. 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 Return 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 Component Levels.
Correlation is the extent to which the Component Levels 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 underlying 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. Bear Stearns has advised us that they intend,
under ordinary market conditions, to indicate prices for the Notes
on
request. However, we cannot guarantee that bids for outstanding Notes
will
be made in the future; nor can we predict the price at which any
such bids
will be made.
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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 Bear Stearns
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
Bear Stearns 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 the
Components. 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 Components.
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
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
Calculation Agent is one of our affiliates, which could result in a conflict
of
interest.
Bear
Stearns will act as the Calculation Agent. The Calculation Agent will make
certain determinations and judgments in connection with calculating the Cash
Settlement Value, or deciding whether a Market Disruption Event (as defined
herein) has occurred. You should refer to “Description of the
Notes—Discontinuance of one or more Components,” “—Adjustments to the
Components” and “—Market Disruption Events.” Because Bear Stearns is our
affiliate, conflicts of interest may arise in connection with Bear Stearns
performing its role as Calculation Agent. Rules and regulations regarding
broker-dealers (such as Bear Stearns) require Bear Stearns to maintain policies
and procedures regarding the handling and use of confidential proprietary
information, and such policies and procedures will be in effect throughout
the
term of the Notes. Bear Stearns is obligated to carry out its duties and
functions as Calculation Agent in good faith, and using its reasonable judgment.
See “Description of the Notes - 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. 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 will affect the trading value of
the
Notes and the amount you will receive at maturity.
The
Sponsors are responsible for calculating and maintaining the Components. The
policies of the Sponsors concerning the calculation of a Component will affect
the level of the Component and, therefore, the trading value of the Notes and
the Cash Settlement Value.
If
a
Sponsor discontinues or suspends calculation or publication of a Component,
it
may become difficult to determine the trading value of the Notes or the Cash
Settlement Value. If a Sponsor discontinues or suspends calculation of a
Component at any time prior to the Maturity Date and a Successor Component
is
not available or is not acceptable to the Calculation Agent, then the
Calculation Agent will determine the amount payable at maturity by reference
to
a group of stocks and a computation methodology that the Calculation Agent
determines will as closely as reasonably possible replicate the Component.
In
addition, if the method of calculating a Component (or a Successor Component)
is
changed in a material respect, or if a Component (or a Successor Component)
is
in any other way modified so that such Component (or Successor Component) does
not, in the opinion of the Calculation Agent, fairly represent the level of
the
Component (or Successor Component) 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
Component (or Successor Component) 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 will receive at maturity. See
“Description of the Notes” and “Description of the Portfolio.”
The
Sponsors may change the companies underlying the Components in a way that
affects the Component Levels and consequently the value of the
Notes.
The
Sponsors can add, delete or substitute the stocks underlying the Components
or
make other methodological changes that could decrease the Component Levels
and
hence adversely affect the value of the Notes. You should realize that changes
in the companies included in the Component may affect the Components, as a
newly
added company may perform significantly better or worse than the company or
companies it replaces.
We
cannot control actions by any of the companies whose securities are included
in
any Component.
The
common stock of The Bear Stearns Companies Inc. is an underlying stock of the
SPX. We are not affiliated with any of the other companies whose securities
underlie any of 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 other 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 (other than with respect to our common
stock) or the Components. You should make your own investigation into the
companies underlying each Component.
We
and our affiliates have no affiliation with any Sponsor and are not responsible
for any Sponsor’s public disclosure of information.
We
and
our affiliates are not affiliated in any way with any Sponsor (except for the
licensing arrangements discussed in the section “Description of the Portfolio”)
and have no ability to control or predict any Sponsor’s 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 or the Sponsors contained in this pricing
supplement. You, as an investor in the Notes, should make your own investigation
into the Components and the Sponsors. The Sponsors 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 Components, the Component Levels, 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 any of the Components or derivative instruments related to those
securities or the Components 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
Component Levels 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 Bear
Stearns 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 Bear Stearns 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 Component Levels
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 Components, or derivative or synthetic instruments
related to those securities or the Components, we or any of our affiliates
may
liquidate a portion of such holdings at or about the time of the maturity of
the
Notes or at or about the time of a change in the securities that underlie the
Components. 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 levels of the Components, 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 Components or the companies issuing the
securities included in the Components. 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 Components 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 or a Component thereof. 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 included in the Components, 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 Calculation 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
effectively subordinated to the claims of creditors of our
subsidiaries.
The
aggregate principal amount of the Notes will be $2,000,000. The Notes are
expected to mature on January 6, 2011 and do not provide for earlier redemption.
The Notes will be issued only in fully registered form, and in minimum
denominations of $1,000; 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.
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
On
the
Maturity Date, you will receive the Cash Settlement Value, an amount in cash
that depends upon the performance of the Portfolio over the term of the Notes
as
measured by the Portfolio Return.
If,
at
maturity, the Portfolio Return is greater than zero, the Cash Settlement Value
for each Note will be equal to the $1,000 principal amount of the Note plus
the
product of: (i) the $1,000 principal amount multiplied by (ii) the Portfolio
Return multiplied by (iii) the Upside Participation Rate.
If,
at
maturity, the Portfolio Return is between zero and -20%, inclusive, then the
Cash Settlement Value for each Note will be equal to the $1,000 principal amount
of the Note.
If,
at
maturity, the Portfolio Return is less than -20%, then the Cash Settlement
Value
for each Note will be equal to the $1,000 principal amount minus 1% of the
principal amount for each percentage point that the Portfolio Return is less
than -20%. For example, if the Portfolio Return is -40%, you will suffer a
20%
loss and, therefore, receive 80% of the principal amount.
The
“Upside Participation Rate” is 190.00%.
|
Portfolio
Return:
|
An
amount, determined by the Calculation Agent, and equal to the sum
of (i)
the Component Performance for each Component multiplied by (ii) its
respective Weighting within 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 Level 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
January 3, 2011.
|
|
|
“Observation
Level”
means, as of any Observation Date and with respect to each Component,
the
closing index level as reported by the relevant Sponsor and displayed
on
Bloomberg Page SPX <Index> <Go> with respect to the SPX;
Bloomberg Page SX5E <Index> <Go> with respect to the SX5E;
Bloomberg Page NKY<Index> <Go> with respect to the NKY; and
Bloomberg Page XIN0I <Index> <Go> with respect to the
XIN0I.
|
|
|
“Observation
Date”
means January 2, 2008, January 2, 2009, January 2, 2010, and January
3,
2011; 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
applicable 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. For the avoidance of doubt,
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:
|
|
·
|
1,519.43
with respect to the SPX;
|
|
·
|
4,470.26
with respect to the SX5E;
|
|
·
|
18,146.30
with respect to the NKY; and
|
|
·
|
19,688.97
with respect to the XIN0I; each representing the closing level of
the
respective Component on July 2, 2007 with respect to the SPX, SX5E
and
NKY, and on July 3, 2007 with respect to the XIN0I.
|
|
·
|
30.00%
with respect to the SPX;
|
|
·
|
30.00%
with respect to the SX5E;
|
|
·
|
30.00%
with respect to the NKY; and
|
|
·
|
10.00%
with respect to the XIN0I.
|
The
“Component Level” equals the closing level of a Component, as determined by the
relevant Sponsor, on each Component Business Day.
The
“Maturity Date” is expected to be January 6, 2011 unless such date is not a
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, as postponed for the last
Component for which an Observation Level is determined.
A
“Component Business Day” means,
with
respect to any Component,
any day
on which the Relevant Exchange and each Related Exchange are scheduled to be
open for trading.
A
“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.
The
“Calculation Agent” is Bear, Stearns & Co. Inc.
The
“Relevant Exchanges” means the primary exchanges or markets of trading of any
security then included in a Component. The “Summary of the Components” below
details the Relevant Exchanges for each Component.
A
“Related Exchange”, with
respect to any Component,
means
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 a Component.
Summary
of the Components
Component
|
Relevant
Exchanges
|
SPX
|
New
York Stock Exchange, NASDAQ and their successors
|
SX5E
|
Major
stock exchanges, respectively located in one of 17 European countries,
including London Stock Exchange (the “LSE”), Frankfurt Stock Exchange and
their successors
|
NKY
|
Tokyo
Stock Exchange and its successor (the “TSE”)
|
XIN0I
|
The
Stock Exchange of Hong Kong and its
successor
|
Illustrative
Examples
The
examples set forth below and the related table depict the hypothetical Cash
Settlement Value of a Note based on the assumptions below. The hypothetical
Component Levels in the examples and related table do not purport to be
representative of every possible scenario concerning increases or decreases
in
the Components. You should not construe these examples or the data included
in
the table as an indication or assurance of the expected performance of the
Notes.
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
Initial Component Level for the SPX is equal to
1,500.00.
|
|
·
|
The
Initial Component Level for the SX5E is equal to
4,500.00.
|
|
·
|
The
Initial Component Level for the NKY is equal to
18,200.00.
|
|
·
|
The
Initial Component Level for the XIN0I is equal to
18,700.00.
|
|
·
|
The
Upside Participation Rate is
190.00%.
|
|
·
|
All
returns are based on a 42-month term; pre-tax
basis.
|
|
·
|
There
are four Observation Dates.
|
|
·
|
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 Component Performance for each Component is positive. This example
illustrates how holders of the Notes may benefit from the positive Component
Performances of the Components over the term of the Notes.
Index
|
Initial
Component
Level
|
Observation
Date
1
|
Observation
Date
2
|
Observation
Date
3
|
Observation
Date
4
|
Component
Performance
|
Weighting
within
the
Portfolio
|
SPX
|
1,500.00
|
1,432.00
|
1,460.40
|
1,653.60
|
1,691.80
|
3.96%
|
30.00%
|
SX5E
|
4,500.00
|
4,840.50
|
5,308.00
|
5,170.60
|
5,194.40
|
13.96%
|
30.00%
|
NKY
|
18,200.00
|
22,175.60
|
31,663.60
|
35,420.30
|
42,529.60
|
81.03%
|
30.00%
|
XIN0I
|
18,700.00
|
22,588.80
|
26,067.90
|
25,055.70
|
25,648.90
|
32.84%
|
10.00%
|
On
the
Final Observation Date, the Component Performance for SPX would be 3.96%, the
Component Performance for SX5E would be 13.96%, the Component Performance for
NKY would be 81.03%, and the Component Performance for XIN0I would be 32.84%,
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 Weighting in the Portfolio.
Portfolio
Return = (3.96% x 30.00%) + (13.96% x 30.00%) + (81.03% x 30.00%) + (32.84%
x
10.00%)
Portfolio
Return = 32.97%
The
Cash
Settlement Value, using the formula below, would equal $1,626.43.
Cash
Settlement Value
=
Principal Amount of Note + [$1,000 x Portfolio Return x Participation
Rate]
=
$1,000
+ [$1,000 x 32.97% x 190.00%]
=
$1,626.43
Example
2: The Portfolio Return is less than zero but greater than -20.00%.
In
this
example, the Component Performance for three Components is negative and the
Component Performance for the remaining Component is positive. On the
Calculation Date, the Portfolio Return is -6.74%. Because the Portfolio Return
is less than zero but greater than -20.00%, at maturity you would receive the
principal amount of the Note. This example shows that an Portfolio Return
between zero and -20.00% results in an investor receiving 100% of the principal
amount of the Note.
Index
|
Initial
Component
Level
|
Observation
Date
1
|
Observation
Date
2
|
Observation
Date
3
|
Observation
Date
4
|
Component
Performance
|
Weighting
within
the
Portfolio
|
SPX
|
1,500.00
|
1,470.90
|
1,587.60
|
1,683.10
|
1,797.00
|
8.98%
|
30.00%
|
SX5E
|
4,500.00
|
4,295.00
|
3,741.70
|
3,853.30
|
3,726.00
|
-13.24%
|
30.00%
|
NKY
|
18,200.00
|
17,656.30
|
16,647.90
|
16,464.20
|
12,917.40
|
-12.52%
|
30.00%
|
XIN0I
|
18,700.00
|
16,476.40
|
15,054.60
|
14,890.10
|
15,655.30
|
-17.01%
|
10.00%
|
On
the
Final Observation Date, the Component Performance for SPX would be 8.98%, the
Component Performance for SX5E would be -13.24%, the Component Performance
for
NKY would be -12.52%, and the Component Performance for XIN0I would be -17.01%,
each as calculated pursuant to the below formula:
In
this
example, using the formula below, the Portfolio Return would be less than
zero.
The
Portfolio Return is an amount equal to the sum of the Component Performance
for
each Component multiplied by its respective Weighting in the Portfolio.
Portfolio
Return = (8.98% x 30.00%) + (-13.24% x 30.00%) + (-12.52% x 30.00%) + (-17.01%
x
10.00%)
Portfolio
Return = -6.74%
Since
the
Portfolio Return would be less than zero, but greater than -20.00%, the Cash
Settlement Value for each Note would be the principal amount of
$1,000.
Example
3: The Portfolio Return is less than -20.00%.
In
this
example, the Component Performance for each Component is negative. This examples
shows how, if the Portfolio Return is less than -20.00%, you will lose 1% of
your principal amount for each percentage point that the Portfolio Return is
less than -20.00%.
Index
|
Initial
Component
Level
|
Observation
Date
1
|
Observation
Date
2
|
Observation
Date
3
|
Observation
Date
4
|
Component
Performance
|
Weighting
within
the
Portfolio
|
SPX
|
1,500.00
|
1,596.80
|
1,390.30
|
894.70
|
791.00
|
-22.12%
|
30.00%
|
SX5E
|
4,500.00
|
3,838.50
|
3,864.60
|
2,466.40
|
2,096.70
|
-31.85%
|
30.00%
|
NKY
|
18,200.00
|
11,313.70
|
10,852.00
|
12,068.30
|
10,760.20
|
-38.19%
|
30.00%
|
XIN0I
|
18,700.00
|
19,329.10
|
14,956.00
|
14,128.30
|
13,915.60
|
-16.67%
|
10.00%
|
On
the
Final Observation Date, the Component Performance for SPX would be -22.12%,
the
Component Performance for SX5E would be -31.85%, the Component Performance
for
NKY would be -38.19%, and the Component Performance for XIN0I would be -16.67%,
each as calculated pursuant to the below formula:
In
this
example, using the formula below, the Portfolio Return would be less than
zero.
The
Portfolio Return is an amount equal to the sum of the Component Performance
for
each Component multiplied by its respective Weighting in the Portfolio.
Portfolio
Return = (-22.12% x 30.00%) + (-31.85% x 30.00%) + (-38.19% x 30.00%) + (-16.67%
x 10.00%)
Portfolio
Return = -29.32%
The
Cash
Settlement Value, using the formula below, would equal $906.80.
Cash
Settlement Value
=
$906.80
Discontinuance
of one or more Components
If
a
Sponsor discontinues publication of or otherwise fails to publish any Component
and such Sponsor or another entity publishes a successor or substitute Component
that the Calculation Agent determines to be comparable to the discontinued
Component (the new Component being referred to as a “Successor Component”), then
the Observation Levels for that Component will be determined by reference to
the
level of the Successor Component at the close of trading on the Relevant
Exchanges or markets for the Successor Component on all future Observation
Dates. For the avoidance of doubt, only Observation Levels for that Component
determined on or after the discontinuance for such Component will be determined
by reference to the level of the Successor Index, any Observation Levels for
that Component determined prior to the discontinuance will remain the same.
Upon
any
selection by the Calculation Agent of a Successor Component, the Calculation
Agent will cause notice thereof to be furnished to us and the Trustee. If a
Successor Component is selected by the Calculation Agent, the Successor
Component will be used as a substitute for the Component for all purposes,
including for purposes of determining whether a Market Disruption Event exists
with respect to the Component.
If
a
Component is discontinued or if a Sponsor fails to publish the Component prior
to, and such discontinuance is continuing on, any Observation Date and the
Calculation Agent determines that no Successor Component is available at such
time, then the Calculation Agent will determine the level to be used for the
Observation Level for the Observation Date for such Component. The Observation
Level to be used for the Observation Date will be computed by the Calculation
Agent in accordance with the formula for and method of calculating that
Component last in effect prior to the relevant discontinuance or failure but
using only those securities that comprised that Component immediately prior
to
such discontinuance or failure. In such event, the Calculation Agent will cause
notice thereof to be furnished to us and the Trustee. For the avoidance of
doubt, such a determination by the Calculation Agent will not affect the manner
of calculating the Observation Level with respect to any other Component.
Notwithstanding
these alternative arrangements, discontinuance of the publication of the
Component may adversely affect the value of, and trading in, the
Notes.
Adjustments
to the Components
If,
at
any time, the method of calculating a Component or a Successor Component is
changed in a material respect, or if a Component or a Successor Component is
in
any other way modified so that such Component or Successor Component does not,
in the opinion of the Calculation Agent, fairly represent the level of the
Component or Successor Component had such changes or modifications not been
made, then, for purposes of calculating the Observation Levels with respect
to
such Component or the Cash Settlement Value or making any other determinations
as of or after such time, the Calculation Agent will make such calculations
and
adjustments as, the Calculation Agent determines may be necessary in order
to
arrive at a level of a Component comparable to the Component or Successor
Component, 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 Component or the Successor Component, as adjusted.
Accordingly, if the method of calculating a Component or Successor Component
is
modified so that the Component Level is a fraction of what it would have been
if
it had not been modified (e.g., due to a split in the Component), then the
Calculation Agent will adjust that Component in order to arrive at a Component
Level or level for the Successor Component as if it had not been modified (e.g.,
as if such split had not occurred). In such event, the Calculation Agent will
cause notice thereof to be furnished to us and the Trustee.
In
the
event that, on any Observation Date, the Component is not calculated by the
Sponsor but is calculated by a third party acceptable to the Calculation Agent,
the Calculation Agent will use such third party’s calculation as its reference
for determining the value of the Component.
Market
Disruption Events
If
there
is a Market Disruption Event, with respect to a Component, on an Observation
Date, the applicable Component Level of that Component will be determined on
the
first succeeding Component Business Day on which there is no Market Disruption
Event for that Component. In no event, however, will the applicable 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 for that Component. In that case, the third
Component Business Day will be deemed to be the Observation Date for that
Component, notwithstanding the Market Disruption Event, and the Calculation
Agent will determine the level of that Component on that third Component
Business Day in accordance with the formula for and method of calculating the
applicable Component in effect prior to the Market Disruption Event using the
closing level of each security in such 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. For the avoidance of doubt, if no Market Disruption Event exists
with respect to a Component, the Component Level of that Component shall be
determined on the scheduled Observation Date for that Component. In the event
of
a Market Disruption Event, with respect to any Component, 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 20.00%
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 20.00% 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, 20.00% 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.
For
the
purposes of determining whether a Market Disruption Event in respect of the
Component exists at any time, if a Market Disruption Event occurs in respect
of
a security included in the Component at any time, then the relevant percentage
contribution of that security to the level of the Component shall be based
on a
comparison of (x) the portion of the level of the Component attributable to
that
security and (y) the overall level of the Component, in each case immediately
before the occurrence of such Market Disruption Event.
“Related
Exchange”, with
respect to any Component,
means
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.
“Relevant
Exchange” means the primary exchange or market of trading of any security then
included in the Component.
“Component
Business Day” means,
with
respect to any Component,
any day
on which the Relevant Exchange and each Related Exchange are scheduled to be
open for trading.
For
purposes of the above definition:
(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 the Relevant 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.”
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 Bear Stearns 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 COMPONENTS
The
S&P 500® Index
(“SPX”)
We
have
derived all information relating to the SPX, including, without limitation,
its
make-up, performance, method of calculation and changes in its components,
from
publicly available sources. Such information reflects the policies of and is
subject to change by Standard & Poor’s. Standard & Poor’s is under no
obligation to continue to publish, and may discontinue or suspend the
publication of the SPX at any time.
Standard
& Poor’s publishes the SPX. The SPX is a capitalization-weighted index and
is intended to provide an indication of the pattern of common stock price
movement. The calculation of the level of the SPX, discussed below in further
detail, is based on the relative value of the aggregate market value of the
common stocks of 500 companies as of a particular time compared to the aggregate
average market value of the common stocks of 500 similar companies during the
base period of the years 1941 through 1943. As of May 14, 2007, shares of
422 companies
included in the SPX are traded on the New York Stock Exchange and shares of
78
companies included in the SPX are traded on The NASDAQ Stock Market. Standard
& Poor’s chooses companies for inclusion in the SPX with the aim of
achieving a distribution by broad industry groupings that approximates the
distribution of these groupings in the common stock population of the New York
Stock Exchange (the “NYSE”), which Standard & Poor’s uses as an assumed
model for the composition of the total market. Relevant criteria employed by
Standard & Poor’s include the viability of the particular company, the
extent to which that company represents the industry group to which it is
assigned, the extent to which the market price of that company’s common stock is
generally responsive to changes in the affairs of the respective industry and
the market value and trading activity of the common stock of that company.
Ten
main groups of companies comprise the SPX with the number of companies included
in each group, as of May 14, 2007, indicated in parenthesis: Industrials (52),
Utilities (32), Telecommunication Services (9), Materials (28), Information
Technology (74), Energy (33), Consumer Staples (37), Consumer Discretionary
(91), Healthcare (54) and Financials (90). Changes in the SPX are reported
daily
in the financial pages of many major newspapers, on the Bloomberg Financial
Service under the symbol “SPX” and on the Standard & Poor’s website
(http://www.spglobal.com). Information contained in the Standard & Poor’s
website is not incorporated by reference in, and should not be considered a
part
of, this pricing supplement. The SPX does not reflect the payment of dividends
on the stocks included in the SPX.
Computation
of the SPX
Standard
& Poor’s currently computes the SPX as of a particular time as
follows:
(i) the
product of the market price per share and the number of then outstanding shares
of each component stock as determined as of that time (referred to as the
“market value” of that stock);
(ii) the
market values of all component stocks as of that time are
aggregated;
(iii) the
average of the market values as of each week in the base period of the years
1941 through 1943 of the common stock of each company in a group of 500
substantially similar companies is determined;
(iv) the
mean
average market values of all these common stocks over the base period are
aggregated (the aggregate amount being referred to as the “Base
Value”);
(v) the
current aggregate market value of all component stocks is divided by the Base
Value; and
(vi) the
resulting quotient, expressed in decimals, is multiplied by ten.
While
Standard & Poor’s currently employs the above methodology to calculate the
SPX, no assurance can be given that Standard & Poor’s will not modify or
change this methodology in a manner that may affect the performance of the
SPX.
Standard
& Poor’s adjusts the foregoing formula to offset the effects of changes in
the market value of a component stock that are determined by Standard &
Poor’s to be arbitrary or not due to true market fluctuations.
These
changes may result from causes such as:
|
·
|
the
issuance of stock dividends,
|
|
·
|
the
granting to shareholders of rights to purchase additional shares
of
stock,
|
|
·
|
the
purchase of shares by employees pursuant to employee benefit
plans,
|
|
·
|
consolidations
and acquisitions,
|
|
·
|
the
granting to shareholders of rights to purchase other securities of
the
company,
|
|
·
|
the
substitution by Standard & Poor’s of particular component stocks in
the SSPX, and
|
In
these
cases, Standard & Poor’s first recalculates the aggregate market value of
all component stocks, after taking account of the new market price per share
of
the particular component stock or the new number of outstanding shares of that
stock or both, as the case may be, and then determines the new base value in
accordance with the following formula:
The
result is that the base value is adjusted in proportion to any change in the
aggregate market value of all component stocks resulting from the causes
referred to above to the extent necessary to negate the effects of these causes
upon the SPX.
In
addition, Standard & Poor’s’ standard practice is to remove all closely held
shares and shares held between corporations who are both in the calculations
of
the SPX and an Index component’s market value.
License
Agreement with Standard and Poor’s
The
Bear
Stearns Companies Inc. has entered
into a non-exclusive license agreement with Standard & Poor’s providing for
the license to us, in exchange for a fee, of the right to use the SPX, which
is
owned and published by Standard & Poor’s, in connection with certain
securities, including the Notes.
The
license agreement between Standard & Poor’s and us provides that the
following language must be set forth in this pricing supplement.
“The
Notes are not sponsored, endorsed, sold or promoted by Standard & Poor’s.
Standard & Poor’s 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.
Standard & Poor’s only relationship to us is the licensing of certain
trademarks, trade names and service marks of Standard & Poor’s and of the
SPX, which is determined, composed and calculated by Standard & Poor’s
without regard to us or the Notes. Standard & Poor’s has no obligation to
take our needs or the needs of holders of the Notes into consideration in
determining, composing, or calculating the SPX. Standard & Poor’s is not
responsible for and has not participated in the determination of the timing
of,
prices at which Notes are sold, or quantities of the Notes to be issued or
in
the determination or calculation of the amount payable at maturity. Standard
& Poor’s has no obligation or liability in connection with the
administration, marketing, or trading of the Notes.
Standard
& Poor’s does not guarantee the accuracy and/or the completeness of the SPX
or any data included therein and Standard & Poor’s shall have no liability
for any errors, omissions, or interruptions therein. Standard & Poor’s makes
no warranty, express or implied, as to results to be obtained by us, owners
of
the Notes, or any other person or entity from the use of the SPX or any data
included therein. Standard & Poor’s makes no express or implied warranties,
and expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the SPX or any data included therein.
Without limiting any of the foregoing, in no event shall Standard & Poor’s
have any liability for any lost profits or indirect, punitive, special, or
consequential damages or losses, even if notified of the possibility thereof.
There are no third party beneficiaries or any agreements or arrangements between
Standard & Poor’s and the Company.”
Historical
Data on the SPX
The
following table sets forth the month-end closing Component Levels of the SPX
for
each month in the period from January 1998 through June 2007. The SPX’s closing
Component Levels listed below were obtained from the Bloomberg Financial
Service, without independent verification by us. The
historical values of the SPX should not be taken as an indication of future
performance, and no assurance can be given that the level of the SPX will
increase relative to its the Initial Component Level during the term of the
Notes.
The
closing Component Level of the SPX
on July
2, 2007 was 1,519.43.
Month
End Closing Component Levels: January 1998-June 2007
|
|
1998
|
|
1999
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
January
|
|
|
980.28
|
|
|
1,279.64
|
|
|
1,394.46
|
|
|
1,366.01
|
|
|
1,130.20
|
|
|
855.70
|
|
|
1,131.13
|
|
|
1,181.27
|
|
|
1,280.08
|
|
|
1,438.24
|
|
February
|
|
|
1,049.34
|
|
|
1,238.33
|
|
|
1,366.42
|
|
|
1,239.94
|
|
|
1,106.73
|
|
|
841.15
|
|
|
1,144.94
|
|
|
1,203.60
|
|
|
1,280.66
|
|
|
1,406.82
|
|
March
|
|
|
1,101.75
|
|
|
1,286.37
|
|
|
1,498.58
|
|
|
1,160.33
|
|
|
1,147.39
|
|
|
848.18
|
|
|
1,126.21
|
|
|
1,180.59
|
|
|
1,294.83
|
|
|
1,420.86
|
|
April
|
|
|
1,111.75
|
|
|
1,335.18
|
|
|
1,452.43
|
|
|
1,249.46
|
|
|
1,076.92
|
|
|
916.92
|
|
|
1,107.30
|
|
|
1,156.85
|
|
|
1,310.61
|
|
|
1,482.37
|
|
May
|
|
|
1,090.82
|
|
|
1,301.84
|
|
|
1,420.60
|
|
|
1,255.82
|
|
|
1,067.14
|
|
|
963.59
|
|
|
1,120.68
|
|
|
1,191.50
|
|
|
1,270.09
|
|
|
1,530.62
|
|
June
|
|
|
1,133.84
|
|
|
1,372.71
|
|
|
1,454.60
|
|
|
1,224.42
|
|
|
989.82
|
|
|
974.50
|
|
|
1,140.84
|
|
|
1,191.33
|
|
|
1,270.20
|
|
|
1,503.35
|
|
July
|
|
|
1,120.67
|
|
|
1,328.72
|
|
|
1,430.83
|
|
|
1,211.23
|
|
|
911.62
|
|
|
990.31
|
|
|
1,101.72
|
|
|
1,234.18
|
|
|
1,276.66
|
|
|
|
|
August
|
|
|
957.28
|
|
|
1,320.41
|
|
|
1,517.68
|
|
|
1,133.58
|
|
|
916.07
|
|
|
1,008.01
|
|
|
1,104.24
|
|
|
1,220.33
|
|
|
1,303.82
|
|
|
|
|
September
|
|
|
1,017.01
|
|
|
1,282.71
|
|
|
1,436.51
|
|
|
1,040.94
|
|
|
815.28
|
|
|
995.97
|
|
|
1,114.58
|
|
|
1,228.81
|
|
|
1,335.85
|
|
|
|
|
October
|
|
|
1,098.67
|
|
|
1,362.93
|
|
|
1,429.40
|
|
|
1,059.78
|
|
|
885.76
|
|
|
1,050.71
|
|
|
1,130.20
|
|
|
1,207.01
|
|
|
1,377.94
|
|
|
|
|
November
|
|
|
1,163.63
|
|
|
1,388.91
|
|
|
1,314.95
|
|
|
1,139.45
|
|
|
936.31
|
|
|
1,058.20
|
|
|
1,173.82
|
|
|
1,249.48
|
|
|
1,400.63
|
|
|
|
|
December
|
|
|
1,229.23
|
|
|
1,469.25
|
|
|
1,320.28
|
|
|
1,148.08
|
|
|
879.82
|
|
|
1,111.92
|
|
|
1,211.92
|
|
|
1,248.29
|
|
|
1,418.30
|
|
|
|
|
The
following graph illustrates the historical performance of the SPX based on
the
closing level on the last Component Business Day of each month from January
1998
to June 2007.
The
Dow Jones EuroSTOXX 50® Index
(“SX5E”)
We
have
derived all information relating to the SX5E, including, without limitation,
its
make-up, performance, method of calculation and changes in its components,
from
publicly available sources. Such information reflects the policies of and is
subject to change by STOXX Limited. STOXX Limited is under no obligation to
continue to publish, and may discontinue or suspend the publication of the
SPX
at any time.
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 EuroSTOXX 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:
![](formula6.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
The
Bear
Stearns Companies Inc. has entered
into a non-exclusive license agreement with STOXX Limited, whereby The Bear
Stearns Companies Inc. 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.
STOXX
Limited has no relationship with us, other than the licensing of the SX5E and
the related trademarks for use in connection with the Notes.
STOXX
Limited does
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.
|
STOXX
Limited will not have any liability in connection with the Notes.
Specifically,
·
|
STOXX
Limited does 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;
|
·
|
STOXX
Limited will have no liability for any errors, omissions or interruptions
in the SX5E or its data;
|
·
|
Under
no circumstances will STOXX Limited be liable for any lost profits
or
indirect, punitive, special or consequential damages or losses, even
if
STOXX Limited knows that they might
occur.
|
Historical
Data on the SX5E
The
following table sets forth the month-end closing Component Levels of the SX5E
for each month in the period from January 1998 through June 2007. The SX5E
closing Component Levels listed below were obtained from the Bloomberg Financial
Service, without independent verification by us. The
historical values of the EuroSTOXX 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.
The
closing Component Level of the SX5E on July 2, 2007 was 4,470.26.
Month
End Closing Component Levels: January 1998-June 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
|
|
|
4,181.03
|
|
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
|
|
|
4,392.34
|
|
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
|
|
|
4,512.65
|
|
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
|
|
|
4,489.77
|
|
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 June 2007.
The
Nikkei 225 SM Index
(“NKY”)
We
have
derived all information relating to the NKY, including, without limitation,
its
make-up, performance, method of calculation and changes in its components,
from
publicly available sources. Such information reflects the policies of and is
subject to change by Nihon Keizai Shimbun, Inc. (“Nihon
Keizai”).
Nihon
Keizai
is under
no obligation to continue to publish, and may discontinue or suspend the
publication of the NKY at any time.
The
NKY
is a stock index calculated, published and disseminated by 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.
|
Computation
of the NKY
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. The Divisor
was 24.29 as of May 14, 2007 and is subject to periodic adjustments as set
forth
below. 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
The
Bear
Stearns Companies Inc. has entered
into non-exclusive license agreement with Nihon Keizai, whereby The Bear Stearns
Companies Inc. 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 the
Company and Nihon Keizei assumes no obligation or responsibility
therefor.
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
Data on the NKY
The
following table sets forth the month-end closing Component Levels of the NKY
for
each month in the period from January 1998 through June 2007. The NKY closing
Component Levels listed below were obtained from the 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.
The
closing Component Level of the NKY on July 2, 2007 was 18,146.30.
Month
End Closing Component Levels: January 1998-June 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
|
|
|
17,400.41
|
|
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
|
|
|
17,875.75
|
|
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
|
|
|
18,138.36
|
|
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 June 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 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 Component Levels of the XIN0I
for each month in the period from March 2001 through June 2007. The XIN0I
closing Component Levels listed below were obtained from the 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.
The
closing Component Level of the XIN0I on July 3, 2007 was 19,688.97.
Month
End Closing Index Levels: March 2001-June 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
|
|
|
16,095.23
|
|
May
|
|
|
5,962.93
|
|
|
5,027.92
|
|
|
4,860.58
|
|
|
7,450.70
|
|
|
8,105.44
|
|
|
10,937.19
|
|
|
16,849.14
|
|
June
|
|
|
5,916.72
|
|
|
4,934.55
|
|
|
5,169.87
|
|
|
7,414.40
|
|
|
8,496.46
|
|
|
11,314.83
|
|
|
19,050.96
|
|
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 March 2001
to June 2007.
CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
You
should carefully consider, among other things, the matters set forth in “Certain
U.S. Federal Income Tax Considerations” in the prospectus supplement. The
following discussion (in conjunction with the discussion in the prospectus
supplement) summarizes certain of the material U.S. federal income tax
consequences of the purchase, beneficial ownership, and disposition of
Notes.
The
Issuer intends to treat the Notes as having original issue discount subject
to
taxation as described under the heading “Certain
U.S. Federal Income Tax Considerations— U.S. Federal Income Tax Treatment of the
Notes as Indebtedness for U.S. Federal Income Tax Purposes -Contingent Payment
Debt Instruments”
in the
prospectus supplement. Pursuant to the terms of the Notes, you agree to treat
the Notes consistent with this treatment for all U.S. federal income tax
purposes.
CERTAIN
ERISA CONSIDERATIONS
Section
4975 of the Code prohibits the borrowing of money, the sale of property and
certain other transactions involving the assets of plans that are qualified
under the Code ("Qualified Plans") or individual retirement accounts ("IRAs")
and persons who have certain specified relationships to them. Section 406 of
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, Bear
Stearns and/or certain of our affiliates is a fiduciary and/or a service
provider (or otherwise is a "party in interest" or "disqualified person") would
constitute or result in a prohibited transaction under Section 406 of ERISA
or
Section 4975 of the Code, unless such the Notes are acquired or held pursuant
to
and in accordance with an applicable statutory or administrative exemption.
Each
of us, Bear Stearns and Bear Stearns Securities Corp. is considered a
"disqualified person" under the Code or a "party in interest" under ERISA with
respect to many Plans, although neither we nor Bear Stearns can be a "party
in
interest" to any IRA other than certain employer-sponsored IRAs, as only
employer-sponsored IRAs are covered by ERISA.
Applicable
administrative exemptions may include certain prohibited transaction class
exemptions (for example, Prohibited Transaction Class Exemption ("PTCE") 84-14
relating to qualified professional asset managers, PTCE 96-23 relating to
certain in-house asset managers, PTCE 91-38 relating to bank collective
investment funds, PTCE 90-1 relating to insurance company separate accounts
and
PTCE 95-60 relating to insurance company general accounts).
It
should
also be noted that the Pension Protection Act of 2006 contains a 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
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 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, Bear Stearns, nor any of our affiliates
directly or indirectly exercises any discretionary authority or control or
renders investment advice (as defined above) with respect to the assets of
the
Plan which such fiduciary is using to purchase the Notes, both of which are
necessary preconditions to utilizing this exemption. Any purchaser that is
a
Plan is encouraged to consult with counsel regarding the application of the
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, Bear Stearns, and/or certain of our affiliates 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 (direct or indirect) 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 underlying the
Components, exchange-traded and over-the-counter options on, or other derivative
or synthetic instruments related to, the Components, individual futures
contracts on the Components and on stocks underlying the Components, futures
contracts on the Components 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 levels of the Components, 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
August 16, 2006, as amended, we have agreed to sell to Bear Stearns & Co.
Inc. as principal, and Bear, Stearns & Co. Inc. has agreed to purchase from
us, the aggregate principal amount of Notes set forth opposite its name
below.
Agent
|
|
Principal
Amount
of
Notes
|
Bear,
Stearns & Co. Inc.
|
|
$2,000,000
|
Total
|
|
$2,000,000
|
The
Agent
intends to initially offer $2,000,000 of the Notes to the public at the offering
price set forth on the cover page of this pricing supplement, and to
subsequently resell the remaining face amount of the Notes at prices related
to
the prevailing market prices at the time of resale.
In
order
to facilitate the offering of the Notes, we may grant the Agent a 30-day option
from the date of the final pricing supplement, to purchase from us up to an
additional $300,000 at the public offering price 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. Bear, Stearns & Co. Inc. 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.
Because
Bear, Stearns & Co. Inc. is our wholly-owned subsidiary, each distribution
of the Notes will conform to the requirements set forth in Rule 2720 of the
NASD
Conduct Rules.
LEGAL
MATTERS
The
validity of the Notes will be passed upon for us by Cadwalader, Wickersham
&
Taft LLP, New York, New York.
|
|
|
|
|
|
|
|
You
should only rely on the information contained in this pricing supplement
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
and
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, or a solicitation
of
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.
$2,000,000
Medium-Term
Notes, Series B
Linked
to an Equity Index Portfolio
Due
January 6, 2011
PRICING
SUPPLEMENT
Bear,
Stearns & Co. Inc.
June
29, 2007
|
___________________
|
|
TABLE
OF CONTENTS
|
|
|
|
Pricing
Supplement
|
|
|
Page
|
|
Summary
|
PS-2
|
|
Key
Terms
|
PS-4
|
|
Questions
and Answers
|
PS-7
|
|
Risk
Factors
|
PS-12
|
|
Description
of the Notes
|
PS-20
|
|
Description
of the Components
|
PS-28
|
|
Certain
U.S. Federal Income Tax Considerations
|
PS-42
|
|
Certain
ERISA Considerations
|
PS-42
|
|
Use
of Proceeds and Hedging
|
PS-43
|
|
Supplemental
Plan of Distribution
|
PS-44
|
|
Legal
Matters
|
PS-44
|
|
|
|
|
Prospectus
Supplement
|
|
Risk
Factors
|
S-3
|
|
Pricing
Supplement
|
S-8
|
|
Description
of Notes
|
S-8
|
|
Certain
US Federal Income Tax Considerations
|
S-32
|
|
Supplemental
Plan of Distribution
|
S-46
|
|
Listing
|
S-47
|
|
Validity
of the Notes
|
S-47
|
|
Glossary
|
S-47
|
|
|
|
|
Prospectus
|
|
Where
You Can Find More Information
|
1
|
|
The
Bear Stearns Companies Inc.
|
2
|
|
Use
of Proceeds
|
4
|
|
Description
of Debt Securities
|
4
|
|
Description
of Warrants
|
16
|
|
Description
of Preferred Stock
|
21
|
|
Description
of Depositary Shares
|
25
|
|
Description
of Depository Contracts
|
28
|
|
Description
of Units
|
31
|
|
Book-Entry
Procedures and Settlement
|
33
|
|
Limitations
on Issuance of Bearer Debt Securities and Bearer Warrants
|
43
|
|
Plan
of Distribution
|
44
|
|
ERISA
Considerations
|
48
|
|
Legal
Matters
|
49
|
|
Experts
|
49
|
|
|
|
|
|