Title
of Each Class of Securities Offered
|
|
Maximum
Aggregate
Offering
Price
|
|
Amount
of
Registration
Fee
(1)
|
Medium
Term Notes, Series B
|
|
$2,000,000
|
|
$78.60
|
(1)
Calculated in accordance with Rule 457(r) of the Securities Act of 1933, as
amended. The filing fee of $78.60 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.
$2,000,000
Medium-Term Notes, Linked to a Portfolio of Indices
Due
August 29, 2013
·
|
The
Notes are fully principal protected if held to maturity and are
linked to
the potential positive performance of an equally-weighted portfolio
comprised of the following three equity indices
:
(1)
the S&P 500
®
Index (the “SPX”); (2) the Dow Jones EURO STOXX 50
®
Index (the “SX5E”); and (3) the Nikkei 225™ Stock Index (the “NKY”) (each
such index a “Component” and together the “Portfolio”). The weighting of
each Component within the Portfolio is fixed at 1/3 and will not
change
during the term of the Notes unless one or more Components is modified
during the term of the Notes as further described
herein.
|
·
|
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,
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 equally-weighted average of the three Index
Performances, where “Index Performance” means, as of the Calculation Date
and with respect to a Component, the quotient, expressed as a percentage,
of (i) the Final Component Level for that Component minus its Initial
Component Level divided by (ii) its Initial Component
Level.
|
·
|
If
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 (a) $1,000 multiplied by (b) the Portfolio Return multiplied
by
(c) the Participation Rate
|
·
|
If
the Portfolio Return is equal to or less than zero, the Cash Settlement
Value for each Note will be $1,000. Because the Notes are principal
protected if held to maturity, in no event will the Cash Settlement
Value
for each Note be less than $1,000.
|
·
|
The
Participation Rate will equal 100.00%.
|
·
|
The
CUSIP number for the Notes is 0739282D4.
|
·
|
The
Notes will not pay interest during the term of the
Notes.
|
·
|
The
Notes will not be listed on any securities exchange or quotation
system.
|
·
|
The
Calculation Date for each Component is expected to be August 26,
2013. The
Calculation Date is subject to adjustment as described
herein.
|
·
|
The
Maturity Date for the Notes is expected to be August 29, 2013.
If the
Calculation Date is postponed, the Maturity Date will be three
Business
Days following the postponed Calculation
Date.
|
INVESTMENT
IN THE NOTES INVOLVES CERTAIN RISKS. THERE MAY NOT BE AN ACTIVE SECONDARY MARKET
IN THE NOTES, AND IF THERE WERE TO BE AN ACTIVE SECONDARY MARKET, IT MAY NOT
BE
LIQUID. YOU SHOULD REFER TO “RISK FACTORS” BEGINNING ON PAGE
PS-11.
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
|
100.0000%*
‡
|
|
$2,000,000
|
Agent’s
discount
|
3.8080%
|
|
$76,160
|
Proceeds,
before expenses, to us
|
96.1920%
|
|
$1,923,840
|
*
Investors
who purchase an aggregate principal amount of at least $1,000,000 of this Note
offering will be entitled to purchase Notes for 99.00% of the principal
amount.
‡
Any
additional reissuance will be offered at a price to be determined at the time
of
pricing of each offering of Notes, which price will be a function of the
prevailing market conditions and the levels of the Components at the time of
the
relevant sale.
We
expect
that the Notes will be ready for delivery in book-entry form only through the
book-entry facilities of The Depository Trust Company in New York, New York,
on
or about February 29, 2008, against payment in immediately available funds.
The
distribution of the Notes will conform to the requirements set forth in Rule
2720 of the Financial Industry Regulatory Authority, Inc. (“FINRA”) Conduct
Rules.
We
may
grant our affiliate Bear, Stearns & Co. Inc. a 13-day option from the date
of the final pricing supplement to purchase from us up to an additional $300,000
of Notes at the public offering price to cover any over-allotments.
_______________
Bear,
Stearns & Co. Inc.
February
29, 2008
SUMMARY
This
summary highlights selected information from the accompanying prospectus,
prospectus supplement and this pricing supplement to help you understand the
Notes linked to the Portfolio. You should carefully read this entire pricing
supplement and the accompanying prospectus supplement and prospectus to fully
understand the terms of the Notes, as well as certain tax and other
considerations that are important to you in making a decision about whether
to
invest in the Notes. You should carefully review the section “Risk Factors” in
this pricing supplement and “Risk Factors” in the accompanying prospectus
supplement which highlight a number of significant risks, to determine whether
an investment in the Notes is appropriate for you. All of the information set
forth below is qualified in its entirety by the more detailed explanation set
forth elsewhere in this pricing supplement and the accompanying prospectus
supplement and prospectus. If information in this pricing supplement is
inconsistent with the prospectus or prospectus supplement, this pricing
supplement will supersede those documents. In this pricing supplement, the
terms
“Company,” “we,” “us” and “our” refer only to The Bear Stearns Companies Inc.
excluding its consolidated subsidiaries.
The
Bear
Stearns Companies Inc. Medium-Term Notes, Series B, Linked to a Portfolio of
Indices, due August 29, 2013 (the “Notes”) are Notes whose return is tied or
“linked” to the potential positive performance of an equally-weighted portfolio
comprised of the following three equity indices: (1) the S&P 500
®
Index
(the “SPX”); (2) the Dow Jones EURO STOXX 50
®
Index
(the “SX5E”); and (3) the Nikkei 225™ Stock Index (the “NKY”) (each such index a
“Component” and together the “Portfolio”). When we refer to Note or Notes in
this pricing supplement, we mean $1,000 principal amount of Notes. The Notes
are
principal protected. On the Maturity Date, you will receive the Cash Settlement
Value, an amount in cash that depends on the Portfolio Return. The Portfolio
Return is calculated as the equally-weighted average of the three Index
Performances, where “Index Performance” means, as of the Calculation Date and
with respect to a Component, the quotient, expressed as a percentage, of (i)
the
Final Component Level for that Component minus its Initial Component Level
divided by (ii) its Initial Component Level. The Cash Settlement Value, per
Note, will be calculated as follows:
(i)
If
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 (a) $1,000 multiplied by (b) the Portfolio Return multiplied by
(c)
the Participation Rate
(ii)
If
the
Portfolio Return is equal to or less than zero, the Cash Settlement Value for
each Note will be $1,000. Because the Notes are principal protected if held
to
maturity, in no event will the Cash Settlement Value for each Note be less
than
$1,000.
The
Participation Rate will equal 100.00%.
Selected
Investment Considerations
|
·
|
Principal
protection—Because the Notes are principal protected if held to maturity,
in no event will you receive a Cash Settlement Value less than $1,000
per
Note. If the Portfolio Return is less than or equal to zero, you
will
receive the principal amount of the
Notes.
|
|
·
|
Diversification—The
Notes are linked to an equally-weighted Portfolio of the following
three
equity indices: (1) the SPX; (2) the SX5E; and (3) the NKY. Therefore,
the
Notes may allow you to diversify an existing portfolio or
investment.
|
|
·
|
Taxes—For
U.S. federal income tax purposes, we intend to treat the Notes as
contingent payment debt instruments. As a result, you will be required
to
include original issue discount (“OID”) in income during your ownership of
the Notes even though no cash payments will be made with respect
to the
Notes until maturity. Additionally, you will generally be required
to
recognize ordinary income on the gain, if any, realized on a sale,
upon
maturity, or other disposition of the Notes. You should review the
discussion under the section entitled “Certain U.S. Federal Income Tax
Considerations” in this pricing
supplement.
|
Selected
Risk Considerations
|
·
|
No
current income—We will not pay any interest on the Notes. The yield on the
Notes therefore 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 Date from an issuer with a comparable credit
rating.
|
|
·
|
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. If you sell the Notes prior to maturity, you may receive
less, and possibly significantly less, than your initial investment
in the
Notes.
|
|
·
|
Liquidity—Because
the Notes will not be listed on any securities exchange, we do not
expect
a trading market to develop, and, if such a market were to develop,
it may
not be liquid. Our subsidiary, Bear, Stearns & Co. Inc. has advised us
that they intend under ordinary market conditions to indicate prices
for
the Notes on request. However, we cannot guarantee that bids for
outstanding Notes will be made in the future; nor can we predict
the price
at which those bids will be made. In any event, Notes will cease
trading
as of the close of business on the Maturity Date.
|
|
·
|
The
Components may not move in tandem—At a time when the level 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
and
the Cash Settlement Value, 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.
|
K
ey
Terms
Issuer:
|
The
Bear Stearns Companies Inc.
|
Components:
|
The
Notes are linked to an equally-weighted portfolio of three equity
indices:
(1) the SPX; (2) the SX5E; and (3) the NKY (each such index a
“
Component
”
and together the “Portfolio”). The weighting of each Component is fixed at
1/3 and will not change during the term of the Notes unless one or
more
Components are modified during the term of the Notes as described
herein.
|
|
Standard
& Poor’s, a division of The McGraw-Hill Companies, Inc. 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; and Nihon
Keizai Shimbun, Inc. as the sponsor of the NKY are hereinafter referred
to
as “Component Sponsors.” See “Description of the Portfolio”
herein.
|
Principal
amount:
|
The
Notes will be denominated in U.S. dollars. Each Note will be issued
in
minimum denominations of $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 each with a
principal amount of $1,000.
|
Further
Issuances:
|
Under
certain limited circumstances, and at our sole discretion, we may
offer
further issuances of the Notes. These further issuances, if any,
will be
consolidated to form a single series with the Notes and will have
the same
CUSIP number and will trade interchangeably with the Notes immediately
upon settlement.
|
Interest:
|
The
Notes will not bear interest.
|
Cash
Settlement Value:
|
On
the Maturity Date, you will receive the Cash Settlement Value, an
amount
in cash that depends upon the Portfolio
Return.
|
|
If
the Portfolio Return is greater than zero, the Cash Settlement Value
for
each Note will be equal to the principal amount of the Notes, plus:
|
|
the
product of (a) $1,000 multiplied by (b) the Portfolio Return multiplied
by
(c) the Participation Rate
|
|
If
the Portfolio Return is equal to or less than zero, the Cash Settlement
Value for each Note will be equal to the principal amount of the
Note.
Because the Notes are principal protected if held to maturity, in
no event
will the Cash Settlement Value for each Note held to maturity be
less than
$1,000.
|
Participation
Rate:
|
100.00%
|
Portfolio
Return:
|
An
amount determined by the Calculation Agent and equal to the arithmetic
average of the Index Performance for each
Component.
|
|
For
purposes of determining the Portfolio
Return:
|
|
“
Index
Performance
”
means, as of the Calculation Date and with respect to a Component,
the
quotient, expressed as a percentage, of (i) the Final Component Level
for
that Component minus its Initial Component Level divided by (ii)
its
Initial Component Level.
|
|
“
Final
Component Level
”
means, as of the Calculation Date and for each Component, the closing
index level as reported by the relevant Component Sponsor and displayed
on
Bloomberg Professional
®
service (“Bloomberg”) Page SPX <Index> <Go> with respect to
the SPX, Bloomberg Page SX5E <Index> <Go> with respect to the
SX5E; and Bloomberg Page NKY <Index> <Go> with respect to the
NKY.
|
|
“
Calculation
Date
”
means August 26, 2013; 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 Calculation 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 Calculation Date, the Calculation 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
Calculation 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 Calculation Date for that Component. If no Market Disruption
Event
exists with respect to a Component on the Calculation Date, the
determination of that Component’s Final Component Level will be made on
the Calculation Date, irrespective of the existence of a Market Disruption
Event with respect to one or more of the other
Components.
|
|
“
Initial
Component Level
”
for each Component is detailed below in “Summary of the
Components.”
|
Pricing
Date:
|
“Summary
of the Components” below details the
Pricing
Date for each Component.
|
Issue
Date:
|
February
29, 2008.
|
Maturity
Date:
|
The
Notes are expected to mature on August 29, 2013 unless such date
is not a
Component Business Day, in which case the Maturity Date shall be
the next
Business Day. If the Calculation Date is postponed, the Maturity
Date will
be three Business Days following the postponed Calculation Date.
|
Exchange
listing:
|
The
Notes will not be listed on any securities exchange or quotation
system.
|
Component
Business Day:
|
Means
any day on which the Relevant Exchange and each Related Exchange
are
scheduled to be open for trading.
|
Business
Day:
|
Means
any day other than a Saturday or Sunday, on which banking institutions
in
the cities of New York, New York and London, England are not authorized
or
obligated by law or executive order to be
closed.
|
Calculation
Agent:
|
Bear,
Stearns & Co. Inc (“Bear Stearns”). See “Description of the Notes -
Calculation Agent” herein.
|
Relevant
Exchanges:
|
The
“Summary of the Components” below details the
Relevant
Exchanges for each Component, which are the primary exchanges or
markets
of trading of any security then included in a
Component.
|
Related
Exchange
:
|
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
|
Sponsor
|
Bloomberg
Ticker Symbol
|
Pricing
Date
(the
date
below represents
the
date in the time
zone
of the applicable
Relevant
Exchanges)
|
Initial
Component
Level
|
Relevant
Exchanges
|
S&P
500
®
Index
|
Standard
& Poor’s or its successor (“S&P”)
|
SPX
<Index>
|
February
27, 2008
|
1,380.02
|
New
York Stock Exchange and Nasdaq or their successors
|
Dow
Jones EURO STOXX 50
®
Index
|
STOXX
Limited or its successor (“STOXX”)
|
SX5E
<Index>
|
February
27, 2008
|
3,856.69
|
Major
stock exchanges, respectively located in one of 12 European countries,
including London Stock Exchange, Frankfurt Stock Exchange and others,
or
their successors
|
Nikkei
225
TM
Stock Index
|
Nihon
Keizai Shimbun, Inc. or its successor (“NKS”)
|
NKY
<Index>
|
February
27, 2008
|
14,031.30
|
Tokyo
Stock Exchange or its successor (the
“TSE”)
|
Offers
and sales of the Notes are subject to restrictions in certain jurisdictions.
The
distribution of this pricing supplement, the accompanying prospectus supplement
and prospectus and the offer or sale of the Notes in certain other jurisdictions
may be restricted by law. Persons who come into possession of this pricing
supplement, and the accompanying prospectus supplement and prospectus or any
Notes must inform themselves about and observe any applicable restrictions
on
the distribution of this pricing supplement, the accompanying prospectus
supplement and prospectus and the offer and sale of the Notes. Notwithstanding
the minimum denomination of $1,000, the minimum purchase for any purchaser
domiciled in a member state of the European Economic Area shall be $100,000.
Q
UESTIONS
AND ANSWERS
What
are the Notes?
The
Notes
are a series of our senior, unsecured, unsubordinated debt securities, the
value
of which is linked to the performance of the Portfolio Return. The Notes will
not bear interest, and no other payments will be made prior to maturity. The
Notes are principal protected if held to maturity. However, the Notes differ
from conventional debt securities in that the Notes offer the opportunity to
participate in 100% of the positive performance of the Portfolio Return, if
any.
See the section “Risk Factors” for selected risk considerations prior to making
an investment in the Notes.
The
Notes
are expected to mature on August 29, 2013. The Notes do not provide for earlier
redemption. When we refer to Notes in this pricing supplement, we mean Notes
with a principal amount of $1,000. You should refer to the section “Description
of the Notes,” for a detailed description of the Notes prior to making an
investment in the Notes.
Are
there any risks associated with my investment?
Yes.
The
Notes are subject to a number of risks. You should refer to the section “Risk
Factors” in this pricing supplement and the section “Risk Factors” in the
accompanying prospectus supplement.
What
will I receive at maturity of the Notes?
We
have
designed the Notes for investors who want to protect their investment by
receiving at least 100% of the principal amount of their Notes at maturity.
On
the Maturity Date, you will receive the Cash Settlement Value, which is based
on
the appreciation, if any, in the Portfolio over the term of the Notes as
measured by the Portfolio Return. The “Portfolio Return” is calculated as the
equally-weighted average of the three Index Performances, where “Index
Performance” means, as of the Calculation Date and with respect to a Component,
the quotient, expressed as a percentage, of (i) the Final Component Level for
that Component minus its Initial Component Level divided by (ii) its Initial
Component Level.
If
the
Portfolio Return is greater than zero, the Cash Settlement Value for each Note
will be equal to the principal amount of the Notes, plus:
the
product of (a) $1,000 multiplied by (b) the Portfolio Return multiplied by
(c)
the Participation Rate
If
the
Portfolio Return is equal to or less than zero, the Cash Settlement Value for
each Note will be equal to the principal amount of the Note. Because the Notes
are principal protected if held to maturity, in no event will the Cash
Settlement Value for each Note held to maturity be less than
$1,000.
For
more
specific information about the Cash Settlement Value and for illustrative
examples, you should refer to the section “Description of the
Notes.”
What
does
“principal
protected” mean?
“P
rincipal
protected
”
means
that at maturity your principal investment in the Notes will not be at risk
as a
result of a decrease in the Portfolio Return. If the Portfolio Return is equal
to or less than zero on the Calculation Date, the Cash Settlement Value at
maturity will be $1,000. You may receive less than the principal amount of
the
Notes if you sell your Notes prior to maturity.
Will
I
receive
interest on the Notes?
You
will
not receive any periodic interest payments on the Notes. The only 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 13-day option we grant
to
Bear Stearns. 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 three indices: (1) the SPX; (2) the SX5E; and (3)
the
NKY (each such index a “Component” and together the “Portfolio”). The weighting
of each Component is fixed at 1/3 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 as described herein. 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 February 27, 2008,
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 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 EURO STOXX 50
®
Index
.
The
SX5E is a free-float weighted index of 50 European blue-chip companies and
is
calculated, published and disseminated by STOXX Limited, a partnership of
Deutsche Börse AG, Dow Jones & Company, Euronext Paris SA and SWX Swiss
Exchange. The SX5E is currently comprised of 50 stocks that respectively trade
on major stock exchanges located in one of 17 European countries, including
the
London Stock Exchange, Frankfurt Stock Exchange and others. The SX5E is quoted
in Euros. You can obtain the level of the SX5E from the Bloomberg service under
the symbol SX5E <Index> or from the Dow Jones website at
http://www.djindexes.com. Other information on the Dow Jones website is not
incorporated into this document.
Nikkei
225
TM
Stock Index
.
The NKY
is a modified, price-weighted stock index calculated, published and disseminated
by Nihon Keizai Shimbun, Inc. that measures the composite price performance
of
selected Japanese stocks. The NKY is currently comprised of 225 stocks that
trade on the Tokyo Stock Exchange and represents a broad cross-section of
Japanese industry. All 225 of the stocks underlying the NKY are stocks listed
in
the First Section of the Tokyo Stock Exchange. The NKY is quoted in Japanese
yen. You can obtain the level of the NKY from the Bloomberg service under the
symbol NKY <Index> or from the Tokyo Stock Exchange website at
http://www.nni.nikkei.co.jp/. Other information on the Tokyo Stock Exchange
website is not incorporated into this document.
How
has the
Portfolio
performed historically?
We
have
provided tables depicting the highest and lowest daily levels for each of the
Components, as well as the end-of-quarter closing levels for each of the
Components, for each quarter beginning with January 2002. 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. 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 those 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 generally to the section “Risk Factors.” If you sell the
Notes prior to maturity, you may receive less, and possibly significantly less,
than your initial investment in the Notes.
What
is the role of Bear
Stearns?
Bear
Stearns will be our agent for the offering and sale of the Notes. After the
initial offering, Bear Stearns intends to buy and sell the Notes to create
a
secondary market for holders of the Notes, and may stabilize or maintain the
market price of the Notes during the initial distribution of the Notes. However,
Bear Stearns will not be obligated to engage in any of these market activities
or to continue them once they are begun.
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. You should refer to “Risk Factors - The
Calculation Agent is one of our affiliates, which could result in a conflict
of
interest.”
Can
you tell me more about The Bear Stearns Companies Inc.?
We
are a
holding company that, through our broker-dealer and international bank
subsidiaries, principally Bear Stearns, Bear, Stearns Securities Corp., Bear,
Stearns International Limited (“BSIL”) and Bear Stearns Bank Plc, is a leading
investment banking, securities and derivatives trading, clearance and brokerage
firm serving corporations, governments, institutional and individual investors
worldwide. For more information about us, please refer to the section “The Bear
Stearns Companies Inc.” in the accompanying prospectus. You should also read the
other documents we have filed with the Securities and Exchange Commission,
which
you can find by referring to the section “Where You Can Find More Information”
in the accompanying prospectus.
Who
should consider purchasing the Notes?
Because
the Notes are tied to the price performance of the Components, they may be
appropriate for investors with specific investment horizons who seek to
participate in the potential price appreciation of the Components. In
particular, the Notes may be an attractive investment for investors
who:
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want
potential upside exposure to the Components underlying the
Portfolio;
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believe
that the Portfolio will increase over the term of the
Notes;
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understand
that the Components may not move in tandem and that increases in
one or
more Components may be offset by decreases in one or more other
Components;
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do
not want to place principal at risk and are willing to hold the Notes
until maturity; and
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are
willing to forgo interest payments or dividend payments on the stocks
underlying the Components of
Portfolio.
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The
Notes
may not be a suitable investment for investors who:
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seek
current income or dividend payments from this
investment;
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are
unable or unwilling to hold the Notes until maturity;
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seek
an investment with an active secondary market;
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.
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.
RISK
FACTORS
Your
investment in the Notes involves a degree of risk similar to investing in the
Components underlying the Portfolio. Your investment in the Notes will be
subject to risks not associated with conventional fixed-rate or floating-rate
debt securities. Prospective purchasers should recognize the possibility of
a
loss with respect to their investment in the Notes if they sell the Notes prior
to maturity. Prospective purchasers of the Notes should understand the risks
of
investing in the Notes and should reach an investment decision only after
careful consideration, with their advisers, of the suitability of the Notes
in
light of their particular financial circumstances, the following risk factors
and the other information set forth in this pricing supplement and the
accompanying prospectus supplement and prospectus. These risks include the
possibility that the Components will fluctuate. We have no control over a number
of matters that may affect the value of the Notes, including economic,
financial, regulatory, geographic, judicial and political events, that are
important in determining the existence, magnitude, and longevity of these risks
and their influence on the value of, or the payment made on, the
Notes.
Your
Notes are principal protected only if you hold the Notes until
maturity.
If
you
sell your Notes prior to maturity, you may receive less than the amount you
originally invested.
You
will not receive any interest payments on the Notes
.
Your yield may be lower than the yield on a conventional debt security of
comparable maturity.
You
will
not receive any periodic payments of interest or any other periodic payments
on
the Notes. On the Maturity Date, you will receive a payment per Note equal
to
the Cash Settlement Value. Thus, the overall return you earn on your Notes
may
be less than that you would have earned by investing in a non-indexed debt
security of comparable maturity that bears interest at a prevailing market
rate
and is principal protected. For more specific information about the Cash
Settlement Value and for illustrative examples, you should refer to the section
“Description of the Notes.”
Increases
in the levels of the Components may not correspond to increases in the trading
value of the Notes.
Even
if
the Components increase above the initial levels during the term of the Notes,
the trading value of the Notes may not increase by the same amount. It is also
possible for the Portfolio Return to increase while the trading value of the
Notes declines.
You
must rely on your own evaluation of the merits of an investment linked to the
Portfolio.
In
the
ordinary course of our business, we may from time to time express views on
expected movements in the Components and the securities underlying the
Components. These views may vary over differing time horizons and are subject
to
change without notice. Moreover, other professionals who deal in the equity
markets may at any time have views that differ significantly from ours. In
connection with your purchase of the Notes, you should investigate the Portfolio
and the securities underlying the Components and not rely on our views with
respect to future movements in these industries and stocks. You should make
such
investigation as you deem appropriate as to the merits of an investment linked
to the Portfolio.
Your
yield will not reflect dividends on the underlying stocks that comprise the
Components.
The
Portfolio does not reflect the payment of dividends or other distributions
on
the securities underlying the Components. Therefore, the yield you will receive
by holding the Notes to maturity will not be the same as if you had purchased
the Components and held them for a similar period. You should refer to the
section “Description of the Notes” for a detailed description of the notes prior
to making an investment in the Notes.
Tax
Consequences.
For
U.S.
federal income tax purposes, we intend to treat the Notes as contingent payment
debt instruments. As a result, U.S. Holders will be required to include OID
in
income during their ownership of the Notes even though no cash payments will
be
made with respect to the Notes until maturity. The amount of OID includible
in
each year is based on the “comparable yield.” In addition, we have computed a
“projected payment schedule” that reflects a single payment at maturity that
produces the comparable yield. The comparable yield and the projected payment
schedule are neither predictions nor guarantees of the actual yield on the
Notes
or the actual payment at maturity. If the amount we actually pay at maturity
is,
in fact, less than the amount reflected on the projected payment schedule,
then
a U.S. Holder would have recognized taxable income in periods prior to maturity
that exceeds the U.S. Holder’s economic income from holding the Note during such
periods (with an offsetting ordinary loss). Additionally, U.S. Holders will
generally be required to recognize ordinary income on the gain, if any, realized
on a sale, upon maturity, or other disposition of the Notes. You should review
the discussion under the section entitled “Certain U.S. Federal Income Tax
Considerations” in this pricing supplement.
Equity
market risks may affect the trading value of the Notes and the amount you will
receive at maturity.
We
expect
that the level of the Portfolio will fluctuate in accordance with changes in
the
financial condition of the companies issuing the securities comprising the
Components, the level of the underlying securities comprising the Components
generally and other factors. The financial condition of the companies issuing
the securities underlying the Components may become impaired or the general
condition of the global equity market may deteriorate, either of which may
cause
a decrease in the level of the Portfolio and thus in the value of the Notes.
Common stocks are susceptible to general equity market fluctuations and to
volatile increases and decreases in value, as market confidence in and
perceptions regarding the underlying securities comprising the Components
change. Investor perceptions regarding the companies issuing the securities
comprising the Components are based on various and unpredictable factors,
including expectations regarding government, economic, monetary and fiscal
policies, inflation and interest rates, economic expansion or contraction,
and
global or regional political, economic, and banking crises. The level of the
Portfolio is expected to fluctuate until the Maturity Date.
The
historical performance of the Components is not an indication of the future
performance of the Components.
The
historical performance of the Components 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 securities comprising
the Components will determine the level of the Portfolio, it is impossible
to
predict whether the level of the Portfolio will fall or rise. Trading prices
of
the underlying securities comprising the Components will be influenced by the
complex and interrelated economic, financial, regulatory, geographic, judicial,
political and other factors that can affect the capital markets generally and
the equity trading markets on which the underlying securities are traded, in
particular, and by various circumstances that can influence the levels of the
underlying securities in a specific market segment or the value of a particular
underlying security.
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 on the Maturity Date 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 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 levels of the Components, and the trading
prices of the Notes. In addition, there may be periods when the international
securities markets are closed for trading (for example during holidays in an
applicable country), causing the level of a particular Component to remain
unchanged for multiple New York City trading days.
Your
return may be affected by factors affecting international securities markets.
The
securities underlying certain of the Components are issued by international
companies. Investors should be aware that investments linked to the value of
international equity securities might involve particular risks. The
international securities markets may have less liquidity and could be more
volatile than U.S. or other longer-established international securities markets.
Direct or indirect government intervention to stabilize the international
securities markets, as well as cross-shareholdings in international companies,
may affect trading prices and volumes in those markets. Also, there is generally
less publicly available information about international companies than about
those U.S. companies that are subject to the reporting requirements of the
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 Performance, 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 level of the Portfolio is
greater than or equal to its initial level, changes in U.S. interest rates,
the
supply of and demand for the Notes and a number of other factors. Some of these
factors are interrelated in complex ways; as a result, the effect of any one
factor may be offset or magnified by the effect of another factor. The price,
if
any, at which you will be able to sell your Notes prior to maturity may be
substantially less than the amount you originally invested if, at such time,
the
closing level of the Portfolio is less than, equal to or not sufficiently above
its initial level. If you sell the Notes prior to maturity, you may receive
less, and possibly significantly less, than your initial investment in the
Notes. The following paragraphs describe the manner in which we expect the
trading value of the Notes will be affected in the event of a change in a
specific factor, assuming all other conditions remain constant.
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Value
of the Portfolio
.
We expect that the trading value of the Notes will depend substantially
on
the amount, if any, by which the Portfolio 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 Return increases
or
decreases, the trading value of the Notes may be adversely affected.
This
volatility may increase the risk that the Portfolio Return will decline,
which could negatively affect the trading value of Notes. The effect
of
the volatility of the Portfolio on the trading value of the Notes
may not
necessarily decrease over time during the term of the
Notes.
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Correlation
among the level of the Components underlying the
Portfolio
.
Correlation is the extent to which the levels of the Components underlying
the Portfolio increase or decrease to the same degree at the same
time. To
the extent that correlation among the Components underlying the Portfolio
changes, the volatility of the Components underlying the Portfolio
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 interest rates. In general, if 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, A2 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, it is uncertain whether an improvement in our credit
ratings, financial condition or results of operations will have a
positive
effect on the trading value of the Notes
.
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Time
remaining to maturity.
A
“time premium” results from expectations concerning the 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 of the Portfolio. In general, because
the
Portfolio does not incorporate the value of dividend payments, higher
dividend yields will likely reduce the value of the Notes and, conversely,
lower dividend yields is 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.
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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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.
The
effect of one of the factors specified above may offset some or all of any
change in the value of the Notes attributable to another factor.
You
have no 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 the 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 underlying the Portfolio may adversely affect
the
market price of the Notes.
Because
the Notes are linked to changes in the levels of equity indices representing
three specific 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.
Suspensions
or disruptions of market trading in the equity securities markets may adversely
affect the Cash Settlement Value at maturity and/or the market value of the
Notes.
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.
Adjustments
to the Components could adversely affect the value of the
Notes.
The
policies of a Sponsor concerning additions, deletions and substitutions of
the
securities underlying the applicable Component and the manner in which that
Sponsor takes account of certain changes affecting those underlying securities
may affect the level of the Component and thus the Portfolio. You should realize
that changes in the companies included in a Component may affect the Component,
as a newly-added company may perform significantly better or worse than the
company or companies it replaces. The Sponsor of a Component also may
discontinue or suspend calculation or dissemination of that Component or
materially alter the methodology by which it calculates that Component. Any
such
actions could affect the value of the Notes.
The
Calculation Agent is one of our affiliates, which could result in a conflict
of
interest.
Bear
Stearns will act as the Calculation Agent. 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, for their proprietary
accounts and for other accounts under their management, engage in transactions
involving 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 included in the Components, futures contracts on the Components and/or
options on these futures contracts. These transactions may influence the value
of such stocks, and therefore the level of the Components. 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 the section “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 its obligations under our hedge.
C
hanges
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 a Sponsor 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 on the Maturity Date by
reference to a group of stocks and a computation methodology that the
Calculation Agent determines will as closely as reasonably possible replicate
the 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.”
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 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 have 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—License Agreements”) 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 Portfolio, the level of the Portfolio, the trading value
of the Notes or the amount you may receive at maturity.
We
and
our affiliates may from time to time buy or sell shares of the securities
underlying the Portfolio or derivative instruments related to those securities
for our own accounts in connection with our normal business practices or in
connection with hedging our obligations under the Notes and other instruments.
These trading activities may present a conflict of interest between your
interest in the Notes and the interests we and our affiliates may have in our
proprietary accounts, in facilitating transactions, including block trades,
for
our other customers and in accounts under our management. The transactions
could
affect the prices of those securities or the level of the Portfolio in a manner
that would be adverse to your investment in the Notes. See the section “Use of
Proceeds and Hedging.”
The
original issue price of the Notes includes the cost of hedging our obligations
under the Notes. Such cost includes BSIL’s expected cost of providing such hedge
and the profit BSIL expects to realize in consideration for assuming the risks
inherent in providing such hedge. As a result, assuming no change in market
conditions or any other relevant factors, the price, if any, at which 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 level of the
Portfolio and, accordingly, increase or decrease the trading value of the Notes
prior to maturity and the Cash Settlement Value you would receive at maturity.
To the extent that we or any of our affiliates has a hedge position in any
of
the securities that underlie the Portfolio, or derivative or synthetic
instruments related to those securities or the Portfolio, we or any of our
affiliates may liquidate a portion of such holdings at or about the time of
the
maturity of the Notes or at or about the time of a change in the securities
that
underlie the Portfolio. Depending on, among other things, future market
conditions, the aggregate amount and the composition of such hedge positions
are
likely to vary over time. Profits or losses from any of those positions cannot
be ascertained until the position is closed out and any offsetting position
or
positions are taken into account. Although we have no reason to believe that
any
of those activities will have a material effect on the level of the Portfolio,
we cannot assure you that these activities will not affect such level and the
trading value of the Notes prior to maturity or the Cash Settlement Value
payable at maturity.
In
addition, we or any of our affiliates may purchase or otherwise acquire a long
or short position in the Notes. We or any of our affiliates may hold or resell
the Notes. We or any of our affiliates may also take positions in other types
of
appropriate financial instruments that may become available in the future.
Research
reports and other transactions may create conflicts of interest between you
and
us.
We
or one
or more of our affiliates have published, and may in the future publish,
research reports relating to the Portfolio or the companies issuing the
securities included in the Portfolio. This research may be modified from time
to
time without notice and may express opinions or provide recommendations that
are
inconsistent with purchasing or holding the Notes. Any of these activities
may
affect the market prices of the securities included in the Portfolio and,
therefore, the value of the Notes.
We
or any
of our affiliates may also issue, underwrite or assist unaffiliated entities
in
the issuance or underwriting of other securities or financial instruments with
returns indexed to the Portfolio 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 Portfolio, including making
loans to, equity investments in, or providing investment banking, asset
management or other advisory services to those companies.
In
connection with these activities, we may receive information about those
companies that we will not divulge to you or other third parties.
The
Cash Settlement Value you receive on the Notes may be delayed or reduced upon
the occurrence of a Market Disruption Event, or an Event of
Default.
If
the
Calculation Agent determines that, on the 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
structurally 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 August 29, 2013 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.
You
should refer to the section “Certain U.S. Federal Income Tax Considerations,”
for a discussion of certain federal income tax considerations to you as a holder
of the Notes.
Future
Issuances
Under
certain limited circumstances, and at our sole discretion, we may offer further
issuances of the Notes. These further issuances, if any, will be consolidated
to
form a single series with the Notes and will have the same CUSIP number and
will
trade interchangeably with the Notes immediately upon settlement. Any additional
issuances will increase the aggregate principal amount of the outstanding Notes
of this series, plus the aggregate principal amount of any Notes bearing the
same CUSIP number that are issued pursuant to any 13-day option we grant to
Bear
Stearns. The prices of any additional offerings will be determined at the time
of pricing of each offering, which will be a function of the prevailing market
conditions and level of the Portfolio at the time of the relevant
sale.
Interest
We
will
not make any periodic payments of interest on the Notes. The only payment you
will receive, if any, will be the Cash Settlement Value upon the maturity of
the
Notes.
Payment
at Maturity
Your
investment is principal protected only if you hold the Notes until maturity.
On
the Maturity Date you will receive the Cash Settlement Value, an amount in
cash
that depends on upon the performance of the Portfolio Return. The Cash
Settlement Value, per Note, will be calculated as follows:
If
the
Portfolio Return is greater than zero, the Cash Settlement Value will be equal
to the principal amount of the Notes, plus:
t
he
product of (a) $1,000 multiplied by (b)
the
Portfolio Return multiplied by (c) the Participation Rate
If
the
Portfolio Return is equal to or less than zero, the Cash Settlement Value for
each Note will be $1,000. Because the Notes are principal protected if held
to
maturity, in no event will the Cash Settlement Value for each Note be less
than
$1,000.
The
Notes
are linked to an equally-weighted portfolio of three equity indices: (1) the
SPX; (2) the SX5E; and (3) the NKY (each such index is a “
Component
”
and
together the “Portfolio.”) The weighting of each Component is fixed at 1/3 and
will not change during the term of the Notes unless one or more Components
are
modified during the term of the Notes as described herein.
Portfolio
Return:
|
An
amount determined by the Calculation Agent and equal to the arithmetic
average of the Index Performance for each
Component.
|
|
For
purposes of determining the Portfolio
Return:
|
|
“Index
Performance” means, as of the Calculation Date and with respect to a
Component, the quotient, expressed as a percentage, of (i) the Final
Component Level for that Component minus its Initial Component Level
divided by (ii) its Initial Component
Level.
|
|
“Final
Component Level” means, as of the Calculation Date and for each Component,
the closing index level as reported by the relevant Component Sponsor
and
displayed on Bloomberg Page SPX <Index> <Go> with respect to
the SPX, Bloomberg Page SX5E <Index> <Go> with respect to the
SX5E; and Bloomberg Page NKY <Index> <Go> with respect to the
NKY.
|
|
“Calculation
Date” means August 26, 2013; 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 Calculation 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 Calculation Date, the Calculation 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
Calculation 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 Calculation Date for that Component. If no Market Disruption
Event
exists with respect to a Component on the Calculation Date, the
determination of that Component’s Final Component Level will be made on
the Calculation Date, irrespective of the existence of a Market Disruption
Event with respect to one or more of the other
Components.
|
|
“Initial
Component Level” for each Component is detailed below in “Summary of the
Components.”
|
The
“Participation Rate” is 100.00%.
The
“Pricing Date” for each Component is detailed below in “Summary of the
Components.”
The
“Issue Date” is February 29, 2008.
A
“Component Business Day” means any day on which the Relevant Exchange and each
Related Exchange are scheduled to be open for trading.
A
“Business Day” is any day other than a Saturday or Sunday, on which banking
institutions in the cities of New York, New York and London, England are not
authorized or obligated by law or executive order to be closed.
The
“Maturity Date” is August 29, 2013. The Notes are expected to mature on August
29, 2013 unless such date is not a Component Business Day, in which case the
Maturity Date shall be the next Business Day. If the Calculation Date is
postponed, the Maturity Date will be three Business Days following the
Calculation Date.
The
“Calculation Agent” is
Bear
Stearns.
The
“Relevant Exchanges” for each Component are listed in the “Summary of the
Components” below, which are the primary exchanges or markets of trading of any
security then included in a Component.
A
“Related Exchange” 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 Index.
Summary
of the Components
Component
|
Sponsor
|
Bloomberg
Ticker
Symbol
|
Pricing
Date
(the
date
below represents
the
date in the time
zone
of the applicable
Relevant
Exchanges)
|
Initial
Component
Level
|
Relevant
Exchanges
|
S&P
500
®
Index
|
Standard
& Poor’s or its successor (“S&P”)
|
SPX
<Index>
|
February
27, 2008
|
1,380.02
|
New
York Stock Exchange and Nasdaq or their successors
|
Dow
Jones EURO STOXX 50
®
Index
|
STOXX
Limited or its successor (“STOXX”)
|
SX5E
<Index>
|
February
27, 2008
|
3,856.69
|
Major
stock exchanges, respectively located in one of 12 European countries,
including London Stock Exchange, Frankfurt Stock Exchange and others,
or
their successors
|
Nikkei
225
TM
Stock Index
|
Nihon
Keizai Shimbun, Inc. or its successor (“NKS”)
|
NKY
<Index>
|
February
27, 2008
|
14,031.30
|
Tokyo
Stock Exchange or its successor (the
“TSE”)
|
Illustrative
Examples
The
following tables are for illustrative purposes and are not indicative of the
future performance of the Components or the future value of the
Notes.
The
following table demonstrates the hypothetical Cash Settlement Value of a Note
based on the assumptions outlined below. The table does not purport to be
representative of every possible scenario concerning increases or decreases
in
the Portfolio. You should not construe this table as an indication or assurance
of the expected performance of the Notes. Actual returns may be different.
Numbers may be rounded for ease of use. The table demonstrating the hypothetical
Cash Settlement Value of a Note is based on the following
assumptions:
|
·
|
Investor
purchases $1,000 aggregate principal amount of Notes at the initial
public
offering price of $1,000.
|
|
·
|
Investor
holds the Notes to maturity.
|
|
·
|
The
Initial Component Level for the SPX is equal to 1,400.
|
|
·
|
The
Initial Component Level for the SX5E is equal to 3,900.
|
|
·
|
The
Initial Component Level for the NKY is equal to
13,750.
|
|
·
|
The
Participation Rate is 100.00%.
|
|
·
|
All
returns are based on a 66-month term, pre-tax
basis.
|
|
·
|
No
Market Disruption Events or Events of Default occur during the term
of the
Notes.
|
Example
1: The Portfolio Return is greater than zero.
In
this
example, the Index Performance of each Component is positive.
|
SPX
|
SX5E
|
NKY
|
Initial
Component Level
|
1,400
|
3,900
|
13,750
|
Final
Component Level
|
1,950
|
6,400
|
22,500
|
Index
Performance
|
39.29%
|
64.10%
|
63.64%
|
On
the
Calculation Date, the Index Performance for the SPX would be 39.29%, the Index
Performance for the SX5E would be 64.10%, and the Index Performance for the
NKY
would be 63.64%, each as calculated pursuant to the below formula:
In
this
example, using the formula below, the Portfolio Return would be greater than
zero.
Portfolio
Return
The
Cash
Settlement Value, using the formula below, would equal $1,556.77.
Cash
Settlement Value
=
Principal Amount of Note + [$1,000 x Portfolio Return x Participation
Rate]
=
$1,000
+ [$1,000 x 55.67% x 100.00%]
=
$1,556.77
Example
2
:
The Portfolio Return might be less than zero.
In
this
example, the Index Performance of each Component is negative.
|
SPX
|
SX5E
|
NKY
|
Initial
Component Level
|
1,400
|
3,900
|
13,750
|
Final
Component Level
|
1,000
|
3,000
|
9,000
|
Index
Performance
|
-28.57%
|
-23.08%
|
-34.55%
|
On
the
Calculation Date, the Index Performance for the SPX would be -28.57%, the Index
Performance for the SX5E would be -23.08%, and the Index Performance for the
NKY
would be -34.55%, each as calculated pursuant to the below formula:
In
this
example, using the formula below, the Portfolio Return would be greater than
zero.
Portfolio
Return
Since
the
Portfolio Return would be less than zero, the Cash Settlement Value for each
Note would be the principal amount of $1,000.
Example
3: Some Components move higher while others move lower.
In
this
example, two Components have a positive Index Performance, while the other
Component has a negative Index Performance.
|
SPX
|
SX5E
|
NKY
|
Initial
Component Level
|
1,400
|
3,900
|
13,750
|
Final
Component Level
|
1,950
|
4,650
|
10,000
|
Index
Performance
|
39.29%
|
19.23%
|
-27.27%
|
On
the
Calculation Date, the Index Performance for the SPX would be 39.29%, the Index
Performance for the SX5E would be 19.23%, and the Index Performance for the
NKY
would be -27.27%, each as calculated pursuant to the below formula:
In
this
example, using the formula below, the Portfolio Return would be greater than
zero.
Portfolio
Return
The
Cash
Settlement Value, using the formula below, will equal $1,104.16.
Cash
Settlement Value
=
Principal Amount of Note + [$1,000 x Portfolio Return x Participation
Rate]
=
$1,000
+ [$1,000 x 10.41% x 100.00%]
=
$1,104.16
Summary
of Examples 1-3 Reflecting the Cash Settlement Value
|
Example
1
|
Example
2
|
Example
3
|
Hypothetical
Initial Component Level for SPX
|
1,400
|
1,400
|
1,400
|
Hypothetical
Final Component Level for SPX
|
1,950
|
1,000
|
1,950
|
Hypothetical
Initial Component Level for SX5E
|
3,900
|
3,900
|
3,900
|
Hypothetical
Final Component Level for SX5E
|
6,400
|
3,000
|
4,650
|
Hypothetical
Initial Component Level for NKY
|
13,750
|
13,750
|
13,750
|
Hypothetical
Final Component Level for NKY
|
22,500
|
9,000
|
10,000
|
Portfolio
Return
|
Positive
|
Negative
|
Positive
|
Principal
protected?
|
Yes
|
Yes
|
Yes
|
Cash
Settlement Value per Note
|
$1,556.77
|
$1,000.00
|
$1,104.16
|
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 Final Component Level 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 the Calculation Date for
which the Final Component Level for that Component is to be
determined.
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, the Calculation 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
Final Component Level for such Component. The Final Component Level 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 discontinuance,
failure or modification but using only those securities that comprised that
Component immediately prior to such discontinuance, failure or modification.
In
such event, the Calculation Agent will cause notice thereof to be furnished
to
us and the Trustee.
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 Final Component Level 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 level
of
that Component 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 level of the Component or
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 the Calculation Date, the Portfolio 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 Portfolio.
Market
Disruption Events
If
there
is a Market Disruption Event on the Calculation Date, the Final Component Level
of that Component will be determined on the first succeeding Component Business
Day on which there is no Market Disruption Event. In no event, however, will
the
Calculation 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 Calculation Date. In that case, the third Component
Business Day will be deemed to be the Calculation Date, notwithstanding the
Market Disruption Event, and the Calculation Agent will determine the level
of a
Component on that third Component Business Day in accordance with the formula
for and method of calculating the applicable underlying Component in effect
prior to the Market Disruption Event using the closing level of each security
in
the Component as described above (or, if trading in any such security has been
materially suspended or materially limited, the Calculation Agent’s estimate of
the closing level that would have prevailed but for such suspension or
limitation) as of that third Component Business Day. If no Market Disruption
Event exists with respect to a Component, the Final Component Level of that
Component shall be determined on the scheduled Calculation Date. In the event
of
a Market Disruption Event on the Calculation Date, the Maturity Date will be
three Business Days following the Calculation Date, as postponed.
A
“Market
Disruption Event” means 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 the Relevant Exchanges or Related Exchanges or
otherwise, (A) relating to any security underlying a Component or (B) in futures
or options contracts relating to the Component on any Related
Exchange;
(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 or relating
to any security underlying a Component or (B) to effect transactions in, or
obtain market values for, futures or options contracts relating to the Component
on any Related Exchange;
(c)
the
closure on any Component Business Day of any Relevant Exchange relating to
any
security underlying a Component or any Related Exchange 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 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.
“Related
Exchange” 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 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, FINRA Rule 4120 or any analogous rule
or regulation enacted or promulgated by the NYSE, FINRA 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.
D
ESCRIPTION
OF THE PORTFOLIO
All
disclosures contained in this Supplement regarding the Components are derived
from publicly available information. Neither we nor any Agent takes any
responsibility for the accuracy or completeness of such
information.
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. That 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 February 27, 2008, shares
of
424 companies included in the SPX are traded on the New York Stock Exchange
and
shares of 76 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 February 27, 2008, indicated in
parentheses: Industrials (56), Utilities (31), Telecommunication Services (9),
Materials (28), Information Technology (71), Energy (36), Consumer Staples
(39),
Consumer Discretionary (87), Health Care (51) and Financials (92). 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 SPX, 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
Company 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
D
ata
on the
SPX
The
following table sets forth the month-end closing index levels of the SPX for
each month in the period from January 2002 through January 2008. The SPX’s
closing index levels listed below were obtained from Bloomberg, without
independent verification by the Company.
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 level of the SPX on February 27, 2008 was 1,380.02.
Month
End Closing Index Levels: January 2002 - January 2008
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
January
|
|
1,130.20
|
|
855.70
|
|
1131.13
|
|
1,181.27
|
|
1,280.08
|
|
1,438.24
|
|
1,378.55
|
February
|
|
1,106.73
|
|
841.15
|
|
1144.94
|
|
1,203.60
|
|
1,280.66
|
|
1,406.82
|
|
|
March
|
|
1,147.39
|
|
848.18
|
|
1126.21
|
|
1,180.59
|
|
1,294.83
|
|
1,420.86
|
|
|
April
|
|
1,076.92
|
|
916.92
|
|
1107.3
|
|
1,156.85
|
|
1,310.61
|
|
1,482.37
|
|
|
May
|
|
1,067.14
|
|
963.59
|
|
1120.68
|
|
1,191.50
|
|
1,270.09
|
|
1,530.62
|
|
|
June
|
|
989.82
|
|
974.50
|
|
1140.84
|
|
1,191.33
|
|
1,270.20
|
|
1,503.35
|
|
|
July
|
|
911.62
|
|
990.31
|
|
1101.72
|
|
1,234.18
|
|
1,276.66
|
|
1,455.27
|
|
|
August
|
|
916.07
|
|
1,008.01
|
|
1104.24
|
|
1,220.33
|
|
1,303.82
|
|
1,473.99
|
|
|
September
|
|
815.28
|
|
995.97
|
|
1114.58
|
|
1,228.81
|
|
1,335.85
|
|
1,526.75
|
|
|
October
|
|
885.76
|
|
1,050.71
|
|
1130.2
|
|
1,207.01
|
|
1,377.94
|
|
1,549.38
|
|
|
November
|
|
936.31
|
|
1,058.20
|
|
1173.82
|
|
1,249.48
|
|
1,400.63
|
|
1,481.14
|
|
|
December
|
|
879.82
|
|
1,111.92
|
|
1211.92
|
|
1,248.29
|
|
1,418.30
|
|
1,468.36
|
|
|
The
Dow Jones EURO STOXX 50
®
Index
(“SX5E”)
We
have
derived all information relating to the SX5E, including, without limitation,
its
make-up, method of calculation and changes in its components, from publicly
available sources. That 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 SX5E at any
time.
We do not assume any responsibility for the accuracy or completeness of any
information relating to the SX5E. You should make your own investigation into
the SX5E.
The
SX5E
was created by STOXX Limited, a joint venture between Deutsche Börse AG, Dow
Jones & Company and the SWX Group. Publication of the SX5E began on February
28, 1998, based on an initial EURO STOXX 50
®
Index
value of 1,000 at December 31, 1991. The SX5E is reported daily in the financial
pages of many major newspapers, on Bloomberg Page SX5E <Index> <Go>
and on the STOXX Limited website:
http://www.stoxx.com
.
Information contained in the STOXX Limited website is not incorporated by
reference in, and should not be considered a part of, this Pricing
Supplement.
Computation
of the SX5E
The
SX5E
is composed of 50 component stocks of market sector leaders from within the
Dow
Jones EURO STOXX
SM
Index,
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 Dow Jones EURO STOXX
SM
Index.
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:
Each
component’s weight is capped at 10% of the SX5E’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 STOXX Limited
The
Company has entered or expects to enter into non-exclusive license agreement
with STOXX Limited, whereby the Company and its 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 and Dow Jones & Company, Inc. (“
Dow
Jones
”)
have
no relationship to the Company, other than the licensing of the SX5E and the
related trademarks for use in connection with the Notes.
STOXX
Limited and Dow Jones do
not
:
·
|
Sponsor,
endorse, sell or promote the Notes.
|
·
|
Recommend
that any person invest in the Notes or any other
securities.
|
·
|
Have
any responsibility or liability for or make any decisions about the
timing, amount or pricing of Notes.
|
·
|
Have
any responsibility or liability for the administration, management
or
marketing of the Notes.
|
·
|
Consider
the needs of the Notes or the owners of the Notes in determining,
composing or calculating the SX5E or have any obligation to do
so.
|
STOXX
Limited and Dow Jones will not have any liability in connection with the Notes.
Specifically,
·
|
STOXX
Limited and Dow Jones do not make any warranty, express or implied
and
disclaim any and all warranty
about:
|
|
·
|
The
results to be obtained by the Notes, the owner of the Notes or any
other
person in connection with the use of the SX5E and the data included
in the
SX5E;
|
|
·
|
The
accuracy or completeness of the SX5E and its
data;
|
|
·
|
The
merchantability and the fitness for a particular purpose or use of
the
SX5E and its data;
|
·
|
STOXX
Limited and Dow Jones will have no liability for any errors, omissions
or
interruptions in the SX5E or its
data;
|
·
|
Under
no circumstances will STOXX Limited
or
Dow Jones be liable for any lost profits or indirect, punitive, special
or
consequential damages or losses, even if STOXX Limited or Dow Jones
knows
that they might occur.
|
The
licensing agreement between the Company and STOXX Limited is solely for their
benefit and not for the benefit of the owners of the Notes or any other third
parties.
Historical
Data on the SX5E
The
following table sets forth the month-end closing index levels of the SX5E for
each month in the period from January 2002 through January 2008. The SX5E
closing index levels listed below were obtained from Bloomberg, without
independent verification by the Company.
The
historical values of the SX5E 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 level of the SX5E on February 27, 2008 was 3,856.69.
Month
End Closing Index Levels: January 2002 -January 2008
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
January
|
3,670.26
|
2,248.17
|
2,839.13
|
2,984.59
|
3,691.41
|
4,178.54
|
3,792.80
|
February
|
3,624.74
|
2,140.73
|
2,893.18
|
3,058.32
|
3,774.51
|
4,087.12
|
|
March
|
3,784.05
|
2,036.86
|
2,787.49
|
3,055.73
|
3,853.74
|
4,181.03
|
|
April
|
3,574.23
|
2,324.23
|
2,787.48
|
2,930.10
|
3,839.90
|
4,392.34
|
|
May
|
3,425.79
|
2,330.06
|
2,749.62
|
3,076.70
|
3,637.17
|
4,512.65
|
|
June
|
3,133.39
|
2,419.51
|
2,811.08
|
3,181.54
|
3,648.92
|
4,489.77
|
|
July
|
2,685.79
|
2,519.79
|
2,720.05
|
3,326.51
|
3,691.87
|
4,315.69
|
|
August
|
2,709.29
|
2,556.71
|
2,670.79
|
3,263.78
|
3,808.70
|
4,294.56
|
|
September
|
2,204.39
|
2,395.87
|
2,726.30
|
3,428.51
|
3,899.41
|
4,381.71
|
|
October
|
2,518.99
|
2,575.04
|
2,811.72
|
3,320.15
|
4,004.80
|
4,489.79
|
|
November
|
2,656.85
|
2,630.47
|
2,876.39
|
3,447.07
|
3,987.23
|
4,394.95
|
|
December
|
2,386.41
|
2,760.66
|
2,951.01
|
3,578.93
|
4,119.94
|
4,399.72
|
|
The
Nikkei 225
®
Index
(“NKY”)
We
have
derived all information relating to the NKY, including, without limitation,
its
make-up, method of calculation and changes in its components, from publicly
available sources. That information reflects the policies of and is subject
to
change by Nihon Keizai Shimbun (“NKS”). NKS has no obligation to continue to
publish, and may discontinue publication of, the NKY. We do not assume any
responsibility for the accuracy or completeness of any information relating
to
the NKY. You should make your own investigation into the NKY.
The
NKY
is a stock index calculated, published and disseminated by NKS that measures
the
composite price performance of selected Japanese stocks. NKS first calculated
and published the NKY in 1970. The NKY 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. NKS rules require that the 75 most liquid issues (one-third of
the
component count of the NKY) be included in the NKY.
The
225
companies included in the NKY are divided into six sector categories:
Technology, Financials, Consumer Goods, Materials, Capital Goods/Others and
Transportation and Utilities. These six sector categories are further divided
into 36 industrial classifications as follows:
|
·
|
Technology
— Pharmaceuticals, Electrical Machinery, Automobiles, Precision Machinery,
Telecommunications;
|
|
·
|
Financials
— Banks, Miscellaneous Finance, Securities,
Insurance;
|
|
·
|
Consumer
Goods — Marine Products, Food, Retail,
Services;
|
|
·
|
Materials
— Mining, Textiles, Paper and Pulp, Chemicals, Oil, Rubber, Ceramics,
Steel, Nonferrous Metals, Trading
House;
|
|
·
|
Capital
Goods/Others — Construction, Machinery, Shipbuilding, Transportation
Equipment, Miscellaneous Manufacturing, Real Estate;
and
|
|
·
|
Transportation
and Utilities — Railroads and Buses, Trucking, Shipping, Airlines,
Warehousing, Electric Power, Gas.
|
The
NKY
is a modified, price-weighted index (i.e., a Nikkei Underlying Stock’s weight in
the index is based on its price per share rather than the total market
capitalization of the issuer) that is calculated by (i) multiplying the
per-share price of each Nikkei Underlying Stock by the corresponding weighting
factor for such Nikkei Underlying Stock (a “
Weight
Factor
”),
(ii)
calculating the sum of all these products and (iii) dividing such sum by a
divisor (the “
Divisor
”).
The
Divisor was initially set at 225 for the date of May 16, 1949 using historical
numbers from May 16, 1949, the date on which the TSE was reopened. The Divisor
was 24.341 as of January 3, 2008 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 NKS. 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 NKS. Upon deletion of a stock from the Nikkei
Underlying Stocks, NKS 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 NKS
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 NKS.
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 NKS.
License
Agreement with NKS
The
Company has entered or expects to enter into non-exclusive license agreement
with NKS, whereby the Company and its 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 NKS.
NKS
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
D
ata
on the NKY
The
following table sets forth the month-end closing index levels of the NKY for
each month in the period from January 2002 through January 2008. The NKY closing
index levels listed below were obtained from Bloomberg, without independent
verification by the Company.
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 level of the NKY on February 27, 2008 was 14,031.30.
Month
End Closing Index Levels: January 2002 - January 2008
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
January
|
9,997.80
|
8,339.94
|
10,783.61
|
11,387.59
|
16,649.82
|
17,383.42
|
13,592.47
|
February
|
10,587.83
|
8,363.04
|
11,041.92
|
11,740.60
|
16,205.43
|
17,604.12
|
|
March
|
11,024.94
|
7,972.71
|
11,715.39
|
11,668.95
|
17,059.66
|
17,287.65
|
|
April
|
11,492.54
|
7,831.42
|
11,761.79
|
11,008.90
|
16,906.23
|
17,400.41
|
|
May
|
11,763.70
|
8,424.51
|
11,236.37
|
11,276.59
|
15,467.33
|
17,875.75
|
|
June
|
10,621.84
|
9,083.11
|
11,858.87
|
11,584.01
|
15,505.18
|
18,138.36
|
|
July
|
9,877.94
|
9,563.21
|
11,325.78
|
11,899.60
|
15,456.81
|
17,248.89
|
|
August
|
9,619.30
|
10,343.55
|
11,081.79
|
12,413.60
|
16,140.76
|
16,569.09
|
|
September
|
9,383.29
|
10,219.05
|
10,823.57
|
13,574.30
|
16,127.58
|
16,785.69
|
|
October
|
8,640.48
|
10,559.59
|
10,771.42
|
13,606.50
|
16,399.39
|
16,737.63
|
|
November
|
9,215.56
|
10,100.57
|
10,899.25
|
14,872.15
|
16,274.33
|
15,680.67
|
|
December
|
8,578.95
|
10,676.64
|
11,488.76
|
16,111.43
|
17,225.83
|
15,307.78
|
|
CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The
following discussion summarizes certain U.S. federal income tax consequences
of
the purchase, beneficial ownership and disposition of Notes. As used in this
discussion, the term “U.S. Holder” means a beneficial owner of a Note that
is:
•
an
individual who is a citizen or resident of the United States for U.S. federal
income tax purposes;
•
a
corporation (or other entity that is treated as a corporation for U.S. federal
tax purposes) that is created or organized in or under the laws of the United
States or any State thereof (including the District of Columbia);
•
an
estate whose income is subject to U.S. federal income taxation regardless of
its
source; or
•
a
trust
if a court within the United States is able to exercise primary supervision
over
its administration, and one or more United States persons have the authority
to
control all of its substantial decisions.
As
used
in this discussion, the term “Non-U.S. Holder” means a beneficial owner of a
Note that is, for U.S. federal income tax purposes:
•
a
nonresident alien individual,
•
a
foreign corporation,
•
an
estate whose income is not subject to U.S. federal income tax on a net income
basis, or
•
a
trust
if no court within the United States is able to exercise primary jurisdiction
over its administration or if no United States persons have the authority to
control all of its substantial decisions.
An
individual may, subject to certain exceptions, be deemed to be a resident of
the
United States by reason of being present in the United States for at least
31
days in the calendar year and for an aggregate of at least 183 days during
a
three-year period ending in the current calendar year (counting for such
purposes all of the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days present
in
the second preceding year).
This
summary is based on interpretations of the Internal Revenue Code of 1986, as
amended (the “Code”), regulations issued there under, and rulings and decisions
currently in effect (or in some cases proposed), all of which are subject to
change. Any such change may be applied retroactively and may adversely affect
the federal income tax consequences described herein. This summary addresses
only U.S. Holders that purchase Notes at initial issuance and beneficially
own
such Notes as capital assets and not as part of a “straddle,” “hedge,”
“synthetic security” or a “conversion transaction” for federal income tax
purposes, or as part of some other integrated investment. This summary does
not
discuss all of the tax consequences that may be relevant to particular investors
or to investors subject to special treatment under the federal income tax laws
(such as banks, thrifts, or other financial institutions; insurance companies;
securities dealers or brokers, or traders in securities electing mark to market
treatment; mutual funds or real estate investment trusts; small business
investment companies; S corporations; investors that hold their Notes through
a
partnership or other entity treated as a partnership for federal tax purposes;
investors whose functional currency is not the U.S. dollar; certain former
citizens or residents of the United States; persons subject to the alternative
minimum tax; retirement plans or other tax-exempt entities, or persons holding
the Notes in tax-deferred or tax-advantaged accounts; or “controlled foreign
corporations” or “passive foreign investment companies” for federal income tax
purposes). This summary also does not address the tax consequences to
shareholders, or other equity holders in, or beneficiaries of, a holder, or
any
state, local or foreign tax consequences of the purchase, ownership or
disposition of the Notes.
Accordingly,
prospective investors are urged to consult their tax advisors with respect
to
the federal, state and local tax consequences of investing in the Notes, as
well
as any consequences arising under the laws of any other taxing jurisdiction
to
which they may be subject.
Prospective
purchasers of Notes should consult their tax advisors as to the federal, state,
local, and other tax consequences to them of the purchase, ownership and
disposition of Notes.
Federal
Income Tax Treatment of U.S. Holders
Accruals
of Original Issue Discount on the Notes
For
U.S.
federal income tax purposes, we intend to treat the Notes as “contingent payment
debt instruments” (“CPDIs”) subject to taxation under the “noncontingent bond
method.” Under the noncontingent bond method, U.S. Holders of the Notes will
accrue OID over the term of the Notes based on the Notes’ “comparable yield.” As
a result, U.S. Holders will be required to include OID over the term of the
Notes even though no cash payments will be made with respect to the Notes until
maturity.
In
general, the comparable yield of a CPDI is equal to the yield at which its
issuer would issue a fixed-rate debt instrument with terms and conditions
similar to those of the CPDI, including the level of subordination, term, timing
of payments, and general market conditions. If a hedge of the CPDI is available
that, if integrated with the CPDI, would produce a synthetic debt instrument
with a determinable yield to maturity, the comparable yield will be equal to
the
yield on the synthetic debt instrument. Alternatively, if such a hedge is not
available, but fixed-rate debt instruments of the issuer trade at a price that
reflects a spread above a benchmark rate, the comparable yield is the sum of
the
value of the benchmark rate on the issue date and the spread. Under the
noncontingent bond method, the issuer’s reasonable determination of a comparable
yield is respected and binding on holders of the CPDI.
Based
on
these factors, we estimate that the comparable yield of the Notes will be an
annual rate of approximately 5.61%, compounded annually. U.S. Holders may obtain
the actual comparable yield by contacting The Bear Stearns Companies Inc.,
Bill
Bamber at (212) 272-6635. U.S. Holders will accrue OID in respect of the Notes
at a rate equal to the comparable yield. The amount of OID allocable to each
annual accrual period will be the product of the “adjusted issue price” of the
Notes at the beginning of each such annual accrual period and the comparable
yield. The “adjusted issue price” of the Notes at the beginning of an accrual
period will equal the issue price of the Notes, increased by the OID accrued
in
all prior periods. The issue price of the Notes will be the first price at
which
a substantial amount of the Notes are sold to the public for money (excluding
sales to bond houses, brokers or similar persons or organizations acting in
the
capacity of underwriters, placement agents or wholesalers). U.S. Holders may
obtain the issue price of the Notes by contacting The Bear Stearns Companies
Inc., Bill Bamber at (212) 272-6635. (The accrual of OID by U.S. Holders that
purchase their Notes at a price other than the issue price of the Notes will
be
subject to an adjustment described below.) The amount of OID includible in
income of each U.S. Holder for each taxable year will equal the sum of the
“daily portions” of the total OID on the Notes allocable to each day during the
taxable year in which a U.S. Holder held the Notes, regardless of the U.S.
Holder’s method of accounting. The daily portion of the OID is determined by
allocating to each day in any accrual period a ratable portion of the OID
allocable to such accrual period. Under the noncontingent bond method, the
comparable yield of a CPDI is used to construct a projected payment schedule
that reflects an estimate of the Cash Settlement Value upon the maturity of
the
Notes and which is adjusted to produce the comparable yield. U.S. Holders may
obtain the projected payment schedule by contacting The Bear Stearns Companies
Inc., Bill Bamber at (212) 272-6635.
Under
the
noncontingent bond method, the projected payment schedule is not revised to
account for changes in circumstances that occur while the Notes are
outstanding.
The
comparable yield and the projected payment amount for the Notes are used to
determine accruals of OID for tax purposes only, and are not assurances by
us or
any of our affiliates with respect to the actual yield or payments on the Notes
and do not represent expectations by any such person regarding a Note’s yield or
the index price return amount.
A
U.S.
Holder will generally be bound by our determination of the comparable yield
and
projected payment schedule for the Notes, unless the U.S. Holder determines
its
own projected payment schedule and comparable yield, explicitly discloses such
schedule to the Internal Revenue Service (the “IRS”), and explains to the IRS
the reason for preparing its own schedule. We believe that the projected payment
schedule and comparable yield that we provide for the Notes will be reasonable
and therefore will be respected by the IRS. Our determination, however, is
not
binding on the IRS, and the IRS could conclude that some other comparable yield
or projected payment schedule should be used for the Notes.
A
U.S.
Holder that purchases a Note for an amount other than the issue price of the
Note will be required to adjust its OID inclusions to account for the
difference. These adjustments will affect the U.S. Holder’s basis in the Note.
Reports to US Holders may not include these adjustments. U.S. Holders that
purchase Notes at other than the issue price should consult their tax advisors
regarding these adjustments.
Sale,
Exchange, Retirement, or Other Disposition of the Notes
If
the
payment of the Cash Settlement Value on the Maturity Date exceeds the projected
maturity amount in the projected payment schedule, a U.S. Holder will be
required to include such excess in income as ordinary interest on the Maturity
Date. Alternatively, if the Cash Settlement Value payment is less than the
projected maturity amount, the shortfall will be treated as an offset to any
OID
otherwise includible in income by the U.S. Holder with respect to the Note
for
the taxable year in which the Maturity Date occurs, and any remaining portion
of
such shortfall may be recognized and deducted by the U.S. Holder as an ordinary
loss that will not be subject to the two percent floor limitation imposed on
miscellaneous deductions under section 67 of the Code.
A
U.S.
Holder will generally recognize gain or loss on the sale, exchange, or other
disposition of a Note to the extent that the amount realized is more or less
than its purchase price, increased by the OID previously accrued by the U.S.
Holder on the Note. In general, any gain realized by a U.S. Holder on the sale,
exchange or other disposition of a Note will be treated as ordinary interest
income, and any loss realized will be treated as an ordinary loss to the extent
of the OID previously accrued by the U.S. Holder on the Note, and the loss
will
not be subject to the two percent floor limitation imposed on miscellaneous
deductions under section 67 of the Code. Any loss in excess of the accrued
OID
will be treated as a capital loss. The deductibility of capital losses by U.S.
Holders is subject to limitations.
Federal
Income Tax Treatment of Non-U.S. Holders
Payments
on the Notes to Non-U.S. Holders will not be subject to U.S. federal income
or
withholding tax if the following conditions are satisfied:
•
the
Non-U.S. Holder does not actually or constructively own 10% or more of the
total
combined voting power of all classes of our stock entitled to vote,
•
the
Non-U.S. Holder is not a controlled foreign corporation for U.S. federal income
tax purposes that is related to us through actual or constructive
ownership,
•
the
Non-U.S. Holder is not a bank receiving interest on a loan made in the ordinary
course of its trade or business,
•
the
stocks included in the Components are actively traded within the meaning of
section 871(h)(4)(C)(v) of the Code, and
•
the
payments are not effectively connected with a trade or business conducted by
the
Non-U.S. Holder in the United States and either (a) the Non-U.S. Holder provides
a correct, complete and executed IRS Form W-8BEN, Form W-8EXP or Form W-8IMY
(or
successor form) with all of the attachments required by the IRS, or (b) the
Non-U.S. Holder holds its Note through a qualified intermediary (generally
a
foreign financial institution or clearing organization or a non-U.S. branch
or
office of a U.S. financial institution or clearing organization that is a party
to a withholding agreement with the IRS) which has provided to us an IRS Form
W-8IMY stating that it is a qualified intermediary and has received
documentation upon which it can rely to treat the payment as made to a foreign
person.
We
expect
that the stocks included in the Components will be treated as actively traded
within the meaning of section 871(h)(4)(C)(v). If any of the above conditions
are not satisfied, payments on the Notes will be subject to a withholding tax
equal to 30% of any income with respect to a Note for which amounts were not
previously withheld, unless an income tax treaty reduces or eliminates the
tax
or the income with respect to the Note is effectively connected with the conduct
of a U.S. trade or business and the Non-U.S. Holder provides a correct, complete
and executed IRS Form W-8ECI. In the latter case, the Non-U.S. Holder will
be
subject to U.S. federal income tax with respect to all income with respect
to
the Note at regular rates applicable to U.S. taxpayers, unless an income tax
treaty reduces or eliminates the tax, and Non-U.S. Holders that are treated
as
corporations for federal income tax purposes may also be subject to a 30% branch
profits tax, unless an income tax treaty reduces or eliminates the branch
profits tax.
Federal
Estate Tax Treatment of Non-U.S. Holders.
A
Note
held by an individual who at death is a Non-U.S. Holder will not be includible
in the Non-U.S. Holder’s gross estate for U.S. federal estate tax purposes if
payments on the Notes to the Non-U.S. Holder would not have been subject to
U.S.
federal income or withholding tax at the time of death under the tests described
above.
Information
Reporting and Backup Withholding
Information
reporting will apply to certain payments on a Note (including interest and
OID)
and proceeds of the sale of a Note held by a U.S. Holder that is not an exempt
recipient (such as a corporation). Backup withholding may apply to payments
made
to a U.S. Holder if (a) the U.S. Holder has failed to provide its correct
taxpayer identification number on IRS Form W-9, (b) we have been notified by
the
IRS of an underreporting by the U.S. Holder (underreporting generally refers
to
a determination by the IRS that a payee has failed to include in income on
its
tax return any reportable dividend and interest payments required to be shown
on
a tax return for a taxable year), or (c) we have been notified by the IRS that
the tax identification number provided to the IRS on an information return
does
not match IRS records or that the number was not on the information
return.
Backup
withholding and nonresident alien withholding will not be required with respect
to interest paid to Non- U.S. Holders, so long as we have received from the
Non-U.S. Holder a correct and complete IRS Form W-8BEN, W-8ECI, W-8EXP or Form
W-8IMY with all of the attachments required by the IRS. Interest paid to a
Non-U.S. Holder will be reported on IRS Form 1042-S which is filed with the
IRS
and sent to Non-U.S. Holders.
Information
reporting and backup withholding may apply to the proceeds of a sale of a Note
by a Non-U.S. Holder made within the United States or conducted through certain
U.S. related financial intermediaries, unless we receive one of the tax forms
described above.
Backup
withholding is not an additional tax and may be refunded (or credited against
your U.S. federal income tax liability, if any). The information reporting
requirements may apply regardless of whether withholding is required. For
Non-U.S. Holders, copies of the information returns reporting such interest
and
withholding also may be made available to the tax authorities in the country
in
which a Non-U.S. Holder is a resident under the provisions of an applicable
income tax treaty or agreement.
THE
PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX IMPLICATIONS OF
AN
INVESTMENT IN NOTES. PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR
OWN
TAX ADVISORS PRIOR TO INVESTING TO DETERMINE THE TAX IMPLICATIONS OF SUCH
INVESTMENT IN LIGHT OF EACH SUCH INVESTOR’S PARTICULAR
CIRCUMSTANCES.
C
ERTAIN
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 included in the
Component, exchange-traded and over-the-counter options on, or other derivative
or synthetic instruments related to, the Component, individual futures contracts
on the Component and on stocks included in the Component, futures contracts
on
the Component and/or options on these futures contracts. At various times after
the initial offering and before the maturity of the Notes, depending on market
conditions (including the levels of the Components), in connection with hedging
with respect to the Notes, we expect that we and/or one or more of our
subsidiaries will increase or decrease those initial hedging positions using
dynamic hedging techniques and may take long or short positions in any of these
instruments. We or one or more of our subsidiaries may also take positions
in
other types of appropriate financial instruments that may become available
in
the future. If we or one or more of our subsidiaries has a long hedge position
in any of these instruments then we or one or more of our subsidiaries may
liquidate a portion of these instruments at or about the time of the maturity
of
the Notes. Depending on, among other things, future market conditions, the
total
amount and the composition of such positions are likely to vary over time.
We
will not be able to ascertain our profits or losses from any hedging position
until such position is closed out and any offsetting position or positions
are
taken into account. Although we have no reason to believe that such hedging
activity will have a material effect on the price of any of these instruments
or
on the level of the Component, we cannot guarantee that we and one or more
of
our subsidiaries will not affect such levels as a result of its hedging
activities. You should also refer to “Use of Proceeds” in the accompanying
prospectus.
SUPPLEMENTAL
PLAN
OF
DISTRIBUTION
Subject
to the terms and conditions set forth in the Distribution Agreement dated as
of
June 19, 2003, as amended, we have agreed to sell to Bear Stearns, as principal,
and Bear Stearns has agreed to purchase from us, the aggregate principal amount
of Notes set forth opposite its name below.
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 principal amount of the Notes at prices
related to the prevailing market prices at the time of resale. In the future,
the Agent may repurchase and resell the Notes in market-making transactions,
with resales being made at prices related to prevailing market prices at the
time of resale or at negotiated prices. We will offer the Notes to Bear Stearns
at a discount of 3.8080% of the price at which the Notes are offered to the
public. Bear Stearns may reallow a discount to other agents not in excess of
3.8080% of the public offering price.
In
order
to facilitate the offering of the Notes, we may grant the Agent a 13-day option
from the date of the final pricing supplement, to purchase from us up to an
additional $
300,000
at the
public offering price, less the agent’s discount, to cover any over-allotments.
The Agent may over-allot or effect transactions which stabilize or maintain
the
market price of the Notes at a level higher than that which might otherwise
prevail in the open market. Specifically, the Agent may over-allot or otherwise
create a short position in the Notes for its own account by selling more Notes
than have been sold to it by us. If this option is exercised, in whole or in
part, subject to certain conditions, the Agent will become obligated to purchase
from us and we will be obligated to sell to the Agent an amount of Notes equal
to the amount of the over-allotment exercised. The Agent may elect to cover
any
such short position by purchasing Notes in the open market. No representation
is
made as to the magnitude or effect of any such stabilization or other
transactions. Such stabilizing, if commenced, may be discontinued at any time
and in any event shall be discontinued within a limited period. No other party
may engage in stabilization.
Payment
of the purchase price shall be made in funds that are immediately available
in
New York City.
The
agents may be deemed to be “underwriters” within the meaning of the Securities
Act of 1933, as amended (the “Securities Act”). We have agreed to indemnify the
agents against or to make contributions relating to certain civil liabilities,
including liabilities under the Securities Act. We have agreed to reimburse
the
agents for certain expenses.
The
Notes
are a new issue of securities with no established trading market. The Notes
will
not be listed on any securities exchange and we do not expect a trading market
will develop. Bear Stearns has advised us that, following completion of the
offering of the Notes, it intends under ordinary market conditions to indicate
prices for the Notes on request, although it is under no obligation to do so
and
may discontinue any market-making activities at any time without notice.
Accordingly, no guarantees can be given as to whether an active 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 is our wholly-owned subsidiary, each distribution of the Notes
will
conform to the requirements set forth in Rule 2720 of the FINRA 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
or
the accompanying prospectus supplement and prospectus. If anyone
provides
you with different or inconsistent information, you should not rely
on it.
This pricing supplement and the accompanying prospectus supplement
and
prospectus are not an offer to sell these securities, and these documents
are not soliciting an offer to buy these securities, in any jurisdiction
where the offer or sale is not permitted. You should not under any
circumstances assume that the information in this pricing supplement
and
the accompanying prospectus supplement and prospectus is correct
on any
date after their respective dates.
|
|
The
Bear Stearns
Companies
Inc.
$2,000,000
Medium-Term
Notes, Series B
5.5-Year
Note
Linked
to a Portfolio of Indices
Due
August 29, 2013
PRICING
SUPPLEMENT
Bear,
Stearns & Co. Inc.
February
29, 2008
|
______________________
|
|
TABLE
OF CONTENTS
|
|
Pricing
Supplement
|
|
|
Page
|
|
Summary
|
PS-2
|
|
Key
Terms
|
PS-4
|
|
Questions
and Answers
|
PS-7
|
|
Risk
Factors
|
PS-13
|
|
Description
of the Notes
|
PS-19
|
|
Description
of the PortFolio
|
PS-26
|
|
Certain
U.S. Federal Income Tax Considerations
|
PS-36
|
|
Certain
ERISA Considerations
|
PS-39
|
|
Use
of Proceeds and Hedging
|
PS-41
|
|
Supplemental
Plan of Distribution
|
PS-41
|
|
Legal
Matters
|
PS-42
|
|
|
|
|
Prospectus
Supplement
|
|
Risk
Factors
|
S-3
|
|
Pricing
Supplement
|
S-8
|
|
Description
of the Notes
|
S-8
|
|
Certain
U.S. Federal Income Tax Considerations
|
S-32
|
|
Supplemental
Plan of Distribution
|
S-46
|
|
Listing
|
S-47
|
|
Validity
of the Notes
|
S-47
|
|
Glossary
|
S-47
|
|
|
|
|
Prospectus
|
|
Where
You Can Find More Information
|
1
|
|
The
Bear Stearns Companies Inc.
|
2
|
|
Use
of Proceeds
|
4
|
|
Description
of Debt Securities
|
4
|
|
Description
of Warrants
|
16
|
|
Description
of Preferred Stock
|
21
|
|
Description
of Depositary Shares
|
25
|
|
Description
of Depositary Contracts
|
28
|
|
Description
of Units
|
31
|
|
Book-Entry
Procedures and Settlement
|
33
|
|
Limitations
on Issuance of Bearer Debt Securities and Bearer Warrants
|
43
|
|
Plan
of Distribution
|
44
|
|
ERISA
Considerations
|
48
|
|
Legal
Matters
|
49
|
|
Experts
|
49
|
|
|
|
|
|
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