 |
New
Issue
|
Filed
Pursuant to Rule 433
Registration
No. 333−136666
November
[●],
2006
STRUCTURED
EQUITY PRODUCTS
Indicative
Terms
|
 |
|
|
The
Bear Stearns Companies Inc.
INVESTMENT
HIGHLIGHTS
|
|
|
Reverse
Convertible
Note
Securities
|
·
Three
separate Note offerings; each linked to one of the listed common
stocks
(each, a “Reference Asset”) identified below. You may elect to participate
in any or all of the Note offerings. Please note that one of the
Notes has
a three-month term to maturity, while the other two Notes have
six-month
maturities.
·
Each
of the Notes pays an annualized fixed rate coupon; for each Note,
payment
is made only at maturity. The payment at maturity will equal the
principal
amount of the Note times (i) one-quarter of the applicable Coupon
Rate
stated below in the case of the three-month Note and (ii) one-half
of the
applicable Coupon Rate stated below in the case of the six-month
Notes.
·
Each
of the Notes is a direct obligation of The Bear Stearns Companies
Inc.
(Rated A1 by Moody’s / A+ by S&P).
·
Issue
price for each Note offering: 100% of principal amount ($1,000).
However,
investors who purchase an aggregate principal amount of at least
$1,000,000 of any particular Note offering will be entitled to
purchase
each Note of that particular offering for 99.50% of the principal
amount.
·
Each
of the Notes is not principal protected if: (i) the Closing Price
of the
applicable Reference Asset ever equals or falls below the applicable
Contingent Protection Level on any day from the Pricing Date up
to and
including the Calculation Date; and
(ii) the Final Level of the applicable Reference Asset is less
than the
Initial Level of the applicable Reference Asset.
·
None
of the Notes participates in the upside of the Reference Asset.
Even if
the Final Level of the Reference Asset exceeds the Initial Level
of the
Reference Asset, your return will not exceed the principal amount
invested
plus the coupon payments.
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|
Reference
Assets
(for
each of three separate Note offerings)
|
Symbol
|
Term
to Maturity
|
Coupon
Rate,
per Annum
|
Contingent
Protection Percentage
|
Initial
Public Offering Price1
|
|
Sotheby’s,
common stock, traded on the NYSE
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BID
|
6-months
|
[15.50]%
|
[75]%
|
100%
|
|
United
States Steel Corporation, common stock, traded on the NYSE
|
X
|
3-months
|
[17.00]%
|
[80]%
|
100%
|
|
Whole
Foods Market, Inc., common stock, traded on the NASDAQ
|
WFMI
|
6-months
|
[14.00]%
|
[80]%
|
100%
|
|
The
issuer has filed a registration statement (including a prospectus)
with
the SEC for the three offerings to which this free writing prospectus
relates. Before you invest, you should read the prospectus in
that
registration statement and other documents the issuer has filed
with the
SEC for more complete information about the issuer and these
offerings.
You may get these documents for free by visiting EDGAR on the
SEC Web site
at www.sec.gov.
Alternatively, the issuer, any underwriter or any dealer participating
in
the offerings will arrange to send you the prospectus if you
request it by
calling toll free 1-866-803-9204.
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|
|
BEAR,
STEARNS & CO. INC.
STRUCTURED
PRODUCTS GROUP
(212)
272-6928
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|
|
1 Investors
who purchase an aggregate principal amount of at least $1,000,000
of any
particular Note offering will be entitled to purchase each Note
of that
particular offering for 99.50% of the principal
amount.
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 |
STRUCTURED
PRODUCTS GROUP
|
|
GENERAL
TERMS FOR THE NOTE
OFFERINGS
|
This
free
writing prospectus relates to three separate offerings of Notes each
linked to a
different Reference Asset. The
purchaser of a Note will acquire a security linked to a single Reference
Asset
(not to a basket of Reference Assets). You may participate in any one
of the
three Note offerings or, at your election, in more than one such offering.
We
reserve the right to withdraw, cancel or modify the offerings and to
reject
orders in whole or in part. Although each Note offering relates to only
one of
the securities identified below as Reference Assets, you should not construe
that fact as a recommendation as to the merits of acquiring an investment
linked
to any such Reference Asset or as to the suitability of an investment
in any of
the Notes. Defined
terms not defined herein shall have the same meaning as in the Prospectus
Supplement discussed below.
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ISSUER:
|
The
Bear Stearns Companies Inc.
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|
ISSUER’S
RATING:
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A1
/
A+ (Moody’s / S&P)
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PRINCIPAL
AMOUNT OF OFFERING:
|
To
be disclosed in the final pricing supplement.
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DENOMINATIONS:
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$1,000
per Note and $1,000 multiples thereafter.
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REFERENCE
ASSETS:
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(1)
The common stock of Sotheby’s (“Sotheby’s”), traded on the New York Stock
Exchange, Inc. (“NYSE”) under the symbol “BID.”
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(2)
The common stock of United States Steel Corporation (“US Steel”), traded
on the NYSE under the symbol “X.”
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(3)
The common stock of Whole Foods Market, Inc. (“Whole Foods”), traded on
the Nasdaq Stock Market, Inc. (“NASDAQ”) under the symbol
“WFMI.”
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SELLING
PERIOD ENDS:
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December
[●],
2006
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PRICING
DATE:
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December
[●],
2006
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SETTLEMENT
DATE:
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December
[●],
2006
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CALCULATION
DATE:
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(1)
For the Note linked to the common stock of Sotheby’s, June [●],
2007.
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(2)
For the Note linked to the common stock of US Steel, March
[●],
2007.
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(3)
For the Note linked to the common stock of Whole Foods, June
[●],
2007.
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MATURITY
DATE:
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(1)
For the Note linked to the common stock of Sotheby’s, June [●],
2007.
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(2)
For the Note linked to the common stock of US Steel, March
[●],
2007.
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(3)
For the Note linked to the common stock of Whole Foods, June
[●],
2007.
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COUPON
RATE (PER ANNUM):
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See
cover page for applicable coupon rates, calculated on the basis
of a 360
day year of 12 equal 30-day months.
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CONTINGENT
PROTECTION PERCENTAGE:
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See
cover page for applicable Contingent Protection
Percentages.
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CONTINGENT
PROTECTION LEVEL:
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(Applicable
Contingent Protection Percentage x applicable Initial
Level).
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AGENT’S
DISCOUNT:
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[●]%
,
to be disclosed in the final pricing supplement.
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CASH
SETTLEMENT VALUE:
|
We
will pay you 100% of the principal amount of your Notes, in
cash, at
maturity if either
of
the following is true: (i) the Closing Price of the applicable
Reference
Asset never equals or falls below the Contingent Protection
Level on any
day from the Pricing Date up to and including the Calculation
Date;
or
(ii) the Final Level of the applicable Reference Asset is equal
to or
greater than the Initial Level of the applicable Reference
Asset.
|
|
|
However,
if both
of
the following are true, the amount of principal you receive
at maturity
will be reduced by the percentage decrease in the applicable
Reference
Asset: (i) the Closing Price of the applicable Reference Asset
ever equals
or falls below the Contingent Protection Level on any day from
the Pricing
Date up to and including the Calculation Date; and
(ii) the Final Level of the applicable Reference Asset is less
than the
Initial Level of the applicable Reference Asset. In that event,
we, at our
option, will either: (i) physically deliver to you an amount
of the
applicable Reference Asset equal to the Exchange Ratio plus
the Fractional
Share Cash Amount (which means that you will receive shares
with a market
value that is less than the full principal amount of your Notes);
or (ii)
pay you a cash amount equal to the principal amount you invested
reduced
by the percentage decrease in the applicable Reference Asset.
It is our
intent to physically deliver the applicable Reference Asset
when
applicable, but we reserve the right to settle the Notes in
cash.
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INTEREST
PAYMENT DATES:
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(1)
For the Note linked to the common stock of Sotheby’s, June [●],
2007.
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(2)
For the Note linked to the common stock of US Steel, March
[●],
2007.
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(3)
For the Note linked to the common stock of Whole Foods, June
[●],
2007.
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INITIAL
LEVEL:
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For
each Note offering, the Closing Price of the applicable Reference
Asset on
the Pricing Date.
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FINAL
LEVEL:
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For
each Note offering, the Closing Price of the applicable Reference
Asset on
the Calculation Date.
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EXCHANGE
RATIO:
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Equals
$1,000 divided by the applicable Initial Level (rounded down
to the
nearest whole number, with fractional shares to be paid in
cash), to be
disclosed in the final pricing supplement.
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FRACTIONAL
SHARE CASH AMOUNT:
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An
amount in cash per Note equal to the applicable Final Level
multiplied by
the difference between (x) $1,000 divided by the applicable
Initial Level
(rounded to the nearest three decimal places), and (y) the applicable
Exchange Ratio.
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CUSIP:
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For
the Notes linked to the common stock of Sotheby’s:
[073902LH9]
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For
the Notes linked to the common stock of US
Steel:
[073902LL0]
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For
the Notes linked to the common stock of Whole
Foods:
[073902LK2]
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LISTING:
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The
Notes will not be listed on any U.S. securities exchange or
quotation
system.
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BEAR,
STEARNS & CO. INC.
-
2 -
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STRUCTURED
PRODUCTS GROUP
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ADDITIONAL
TERMS SPECIFIC TO THE
NOTES
|
You
should read this document together with the prospectus, dated
August 16, 2006 (the “Prospectus”), as supplemented by the prospectus
supplement, dated August 16, 2006 (the “Prospectus Supplement”). You should
carefully consider, among other things, the matters set forth in
“Risk Factors”
and “Risk Factors - Additional Risks Relating to Notes with an Equity
Security
or Equity Index as the Reference Asset” in the Prospectus Supplement, as the
Notes involve risks not associated with conventional debt securities.
We urge
you to consult your investment, legal, tax, accounting and other
advisers before
you invest in the Notes. The Prospectus and Prospectus Supplement
may be
accessed on the SEC Web site at www.sec.gov as follows:
|
·
|
Prospectus
Supplement, dated August 16, 2006:
|
|
http://www.sec.gov/Archives/edgar/data/777001/000104746906011011/a2172742z424b5.htm
|
|
·
|
Prospectus,
dated August 16, 2006:
|
|
http://www.sec.gov/Archives/edgar/data/777001/000104746906011007/a2172711zs-3asr.htm
|
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SELECTED
RISK CONSIDERATIONS
|
The
following highlights some, but not all, of the risk considerations
relevant to
investing in the Notes. The following must be read in conjunction with
the sections “Risk Factors” and “Risk Factors - Additional Risks Relating to
Notes with an Equity Security or Equity Index as the Reference Asset,” beginning
on pages S-7 and S-14, respectively, in the Prospectus
Supplement.
|
·
|
Suitability
of Note for Investment — A person
should reach a decision to invest in the Notes after carefully
considering, with his or her advisors, the suitability
of the Notes in
light of his or her investment objectives and the information
set out in
the Prospectus Supplement. Neither the Issuer nor any dealer
participating
in the offerings makes any recommendation as to the suitability
of the
Notes for investment.
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|
·
|
Not
Principal Protected —The
Notes are not principal protected. If both
of
the following are true, the amount of principal you receive
at maturity
will be reduced by the percentage decrease in the applicable
Reference
Asset: (i) the Closing Price of the applicable Reference
Asset ever equals
or falls below the Contingent Protection Level on any day
from the Pricing
Date up to and including the Calculation Date; and
(ii) the Final Level of the applicable Reference Asset
is less than the
Initial Level of the applicable Reference Asset. In that
event, we, at our
option, will either: (i) physically deliver to you an amount
of the
applicable Reference Asset equal to the Exchange Ratio
plus the Fractional
Share Cash Amount (which means that you will receive shares
with a market
value that is less than the full principal amount of your
Notes); or (ii)
pay you a cash amount equal to the principal amount you
invested reduced
by the percentage decrease in the applicable Reference
Asset.
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|
·
|
Return
Limited to Coupon — Your
return is limited to the principal amount you invested
plus the coupon
payments. You will not participate in any appreciation
in the value of the
applicable Reference Asset.
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|
·
|
No
Secondary Market — Because
the Notes will not be listed on any securities exchange,
a secondary
trading market is not expected to develop, and, if such
a market were to
develop, it may not be liquid. Bear, Stearns & Co. Inc. intends under
ordinary market conditions to indicate prices for each
of the Notes on
request. However, there can be no guarantee that bids for
any of the
outstanding Notes will be made in the future; nor can the
prices of any
such bids be predicted.
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|
·
|
No
Interest, Dividend or Other Payments —
You will not receive any interest or dividend payments
or other
distributions on the stock comprising the applicable Reference
Asset; nor
will such payments be included in the calculation of the
Cash Settlement
Value you will receive at maturity.
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|
·
|
Taxes —
We
intend to treat each Note as a put option written by you
in respect of the
applicable Reference Asset and a deposit with us of cash
in an amount
equal to the issue price of the Note to secure your potential
obligation
under the put option, and we intend to treat the deposit
as a short-term
obligation for U.S. federal income tax purposes. Pursuant
to the terms of
each of the Notes, you agree to treat the Notes in accordance
with this
characterization for all U.S. federal income tax purposes.
However,
because there are no regulations, published rulings or
judicial decisions
addressing the characterization for U.S. federal income
tax purposes of
securities with terms that are substantially the same as
those of the
Notes, other characterizations and treatments are possible.
See “Certain
U.S. Federal Income Tax Considerations”
below.
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|
·
|
The
Notes Are Subject to Equity Market Risks—
The
Notes involve exposure to price movements in the equity
securities to
which they are respectively linked. Equity securities price
movements are
difficult to predict, and equity securities may be subject
to volatile
increases or decreases in value.
|
|
·
|
Each
of the Notes May be Affected by Certain Corporate Events
and You Will Have
Limited Antidilution Protection —
Following certain corporate events relating to the underlying
applicable
Reference Asset (where the underlying company is not the
surviving
entity), you will receive at maturity, cash or a number
of shares of the
common stock of a successor corporation to the underlying
company, based
on the Closing Price of such successor’s common stock. The Calculation
Agent for each of the Notes will adjust the amount payable
at maturity by
adjusting the Initial Level of the applicable Reference
Asset, Contingent
Protection Level, Contingent Protection Percentage and
Exchange Ratio for
certain events affecting the applicable Reference Asset,
such as stock
splits and stock dividends and certain other corporate
events involving an
underlying company. However, the Calculation Agent is not
required to make
an adjustment for every corporate event that can affect
the applicable
Reference Asset. If an event occurs that is perceived by
the market to
dilute the applicable Reference Asset but that does not
require the
Calculation Agent to adjust the amount of the applicable
Reference Asset
payable at maturity, the market value of the Notes and
the amount payable
at maturity may be materially and adversely
affected.
|
BEAR,
STEARNS & CO. INC.
-
3 -
|
|
STRUCTURED
PRODUCTS GROUP
|
|
INTEREST
AND PAYMENT AT MATURITY
|
Interest.
The
interest rate for each of the Notes is designated on the
cover of this
free-writing prospectus. The interest paid will include interest
accrued from
the Original Issue Date to, but excluding, the Maturity Date.
Interest will be
payable to the person to whom principal is payable.
Payment
at Maturity.
We will
pay you 100% of the principal amount of your Notes, in cash,
at maturity if
either
of the
following is true: (i) the Closing Price of the applicable
Reference Asset never
equals or falls below the Contingent Protection Level on
any
day from the Pricing Date up to and including the Calculation
Date;
or
(ii) the
Final Level of the applicable Reference Asset is equal to
or greater than the
Initial Level of the applicable Reference Asset.
However,
if both
of the
following are true, the amount of principal you receive at
maturity will be
reduced by the percentage decrease in the applicable Reference
Asset: (i) the
Closing Price of the applicable Reference Asset ever equals
or falls below the
Contingent Protection Level on any day from the Pricing Date
up to and including
the Calculation Date; and
(ii) the
Final Level of the applicable Reference Asset is less than
the Initial Level of
the applicable Reference Asset.
In
that
event, we, at our option, will either: (i) physically deliver
to you an amount
of the applicable Reference Asset equal to the Exchange Ratio
plus the
Fractional Share Cash Amount (which means that you will receive
shares with a
market value that is less than the full principal amount
of your Notes); or (ii)
pay you a cash amount equal to the principal amount you invested
reduced by the
percentage decrease in the applicable Reference Asset. It
is our intent to
physically deliver the applicable Reference Asset when applicable,
but we
reserve the right to settle the Notes in cash.
We
will
(i) provide written notice to the Trustee and to the Depositary,
on or
prior to the Business Day immediately prior to the Maturity
Date of the amount
of cash or number of shares of the applicable Reference Asset
(and cash in
respect of coupon and cash in respect of any fractional shares
of the applicable
Reference Asset), as applicable, to be delivered, and (ii) deliver such
cash or shares of the applicable Reference Asset (and cash
in respect of coupon
and cash in respect of any fractional shares of the applicable
Reference Asset),
if applicable, to the Trustee for delivery to you. The Calculation
Agent shall
determine the Exchange Ratio.
|
REFERENCE
ASSET INFORMATION
|
We
urge
you to read the section “Sponsors or Issuers and Reference Asset” on
page S-25 in the Prospectus Supplement. Companies with securities
registered under the Exchange Act are required to file periodically
certain
financial and other information specified by the SEC. Information
provided to or
filed with the SEC electronically can be accessed through
a website maintained
by the SEC. The address of the SEC’s website is http://www.sec.gov. Information
provided to or filed with the SEC pursuant to the Exchange
Act by each company
issuing a Reference Asset can be located by reference to
the SEC file number
provided below.
The
summary information below regarding the companies issuing
the stocks comprising
the applicable Reference Assets comes from each issuer’s SEC filings and has not
been independently verified by us. We do not make any representations
as to the
accuracy or completeness of such information or of any filings
made by the
issuer of the applicable Reference Asset with the SEC. Investors
are urged to refer to the SEC filings made by the applicable
issuer and to other
publicly available information (such as the issuer’s annual report) to obtain an
understanding of the issuer’s business and financial prospects. The summary
information contained below is not designed to be, and should
not be interpreted
as, an effort to present information regarding the financial
prospects of the
applicable issuer or any trends, events or other factors
that may have a
positive or negative influence on those prospects or as an
endorsement of any
such issuer.
BEAR,
STEARNS & CO. INC.
-
4 -
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|
STRUCTURED
PRODUCTS GROUP
|
Sotheby’s
(“BID”)
Sotheby’s
(“Sotheby’s”) common stock, par value $0.10 per share, trades on the
NYSE under
the symbol “BID.” Sotheby's is one of the world's two largest auctioneers of
authenticated fine art, decorative arts and collectibles.
Sotheby’s is also
engaged in a number of related activities, including the
purchase and resale of
art and other collectibles and the brokering of private purchases
and sales of
art, jewelry and collectibles; art-related financing activities;
and to a lesser
extent, licensing activities. Sotheby’s
SEC file number is 001-09750.
United
States Steel Corporation (“X”)
United
States Steel Corporation (“US Steel”) common stock, par value $1.00 per share,
trades on the NYSE under the symbol “X.” US Steel is an integrated steel
producer with major production operations in the United States
and Central
Europe. US Steel is also engaged in several other business
activities, most of
which are related to steel manufacturing, including the production
of iron ore
pellets and of coke, transportation services and real estate
operations. US
Steel’s SEC file number is 001-16811.
Whole
Foods Market, Inc. (“WFMI”)
Whole
Foods Market, Inc. (“Whole Foods”) common stock, no par value, trades on the
NASDAQ under the symbol “WFMI.” Whole Foods owns and operates a chain of natural
and organic food stores. Whole
Foods’ SEC file number is 000-19797.
|
ILLUSTRATIVE
EXAMPLES & HISTORICAL
TABLES
|
The
following are illustrative examples demonstrating the hypothetical
amounts
payable at maturity based on the assumptions outlined below.
These examples do
not purport to be representative of every possible scenario
concerning increases
or decreases in the applicable Reference Asset or of the
movements that are
likely to occur with respect to the relevant Reference Asset.
You should not
construe these examples or the data included in the tables
set forth below as an
indication of the expected performance of any of the Notes.
Some amounts are
rounded and actual returns may be different.
Sotheby’s
(“BID”)
Assumptions:
|
·
|
Investor
purchases $1,000 principal amount of Notes on the
Pricing Date at the
initial offering price of 100% and holds the Notes
to maturity. No Market
Disruption Events or Events of Default occur during
the term of the
Notes.
|
|
·
|
Initial
Level: $ 31.00
|
|
·
|
Contingent
Protection Percentage: 75%
|
|
·
|
Contingent
Protection Level: $ 23.25 ($31.00 x
75%)
|
|
·
|
Exchange
Ratio: 32 ($1,000/$31.00)
|
|
·
|
Coupon:
15.50% per annum, paid upon maturity of six-month
term
($77.50).
|
|
·
|
The
reinvestment rate on any interest payments made
during the term of the
Notes is assumed to be 0%. The 6-month total return
on a direct investment
in the Reference Asset is calculated below prior
to the deduction of any
brokerage fees or charges. Both a positive reinvestment
rate, or the
incurrence of any brokerage fees or charges, would
increase the total
return on the Notes relative to the total return
of the Reference
Asset.
|
|
·
|
Maturity:
Six months
|
|
·
|
Dividend
and dividend yield on the Reference Asset: $0.10
and 0.32% per annum.
|
Example
1
- On the
Calculation Date, the Final Level of $37.20 is greater than
the Initial Level,
resulting in a payment at maturity of $1,000, regardless
of whether the
Contingent Protection Level was ever reached or breached,
plus one interest
payment of $77.50, for payments totaling $1,077.50. If you
had invested directly
in the Reference Asset for the same six-month period, you
would have received
total cash payments of $1,201.60 (number of shares of the
Reference Asset
multiplied by the Final Level, plus the dividend payments),
assuming liquidation
of shares at the Final Level. You would have earned a 7.750%
return with an
investment in the Notes and a 20.160% return with a direct
investment in the
Reference Asset.
Example
2
- On the
Calculation Date, the Final Level of $27.90 is below the
Initial Level, but the
Closing Price never equaled or fell below the Contingent
Protection Level. As
discussed in example 1 above, an investor would receive total
payments of
$1,077.50, earning a 7.750% return over the term of the Notes.
A direct
investment in the Reference Asset during that same six-month
time period would
have generated a return of $901.60 (number of shares of the
Reference Asset
multiplied by the Final Level, plus the dividend payments),
assuming liquidation
of shares at the Final Level. You would have earned a 7.750%
return with an
investment in the Notes and incurred a loss of 9.840% with
a direct investment
in the Reference Asset.
BEAR,
STEARNS & CO. INC.
-
5 -
|
|
STRUCTURED
PRODUCTS GROUP
|
Example
3
- On the
Calculation Date, the Final Level of $20.15 is below the
Initial Level and also
is below the Contingent Protection Level. At our election,
an investor would
receive a number of shares equal to the Exchange Ratio, plus
the Fractional
Share Cash Amount plus one interest payment of $77.50, which
is 32 shares (worth
$20.15 each) plus $5.20 (the Fractional Share Cash Amount)
plus $77.50 (one
interest payment of $77.50). The cash equivalent equals $727.50.
If you had
invested directly in the Reference Asset for the same six-month
period, you
would have received total cash payments of $651.60 (number
of shares of the
Reference Asset multiplied by the Final Level, plus the dividend
payments),
assuming liquidation of shares at the Final Level. An investment
in the Notes
would have resulted in a loss of 27.250%, while a direct
investment in the
Reference Asset would have resulted in a loss of 34.840%.
Table
of Hypothetical Cash Settlement Values
Assumes
the Closing Price Never
Equals
or Falls Below the Contingent Protection Level Before the
Calculation
Date
|
Investment
in the Notes
|
|
Direct
Investment in the Reference Asset
|
||||||
|
Initial
Level
|
Hypothetical
Final Level
|
Cash
Settlement Value
|
Total
Coupon Payments (in % Terms)
|
6-Month
Total Return
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
6-Month
Total Return
|
|
|
31.00
|
40.30
|
$1,000.00
|
7.75%
|
7.75%
|
|
30.00%
|
0.16%
|
30.16%
|
|
31.00
|
38.75
|
$1,000.00
|
7.75%
|
7.75%
|
|
25.00%
|
0.16%
|
25.16%
|
|
31.00
|
37.20
|
$1,000.00
|
7.75%
|
7.75%
|
|
20.00%
|
0.16%
|
20.16%
|
|
31.00
|
35.65
|
$1,000.00
|
7.75%
|
7.75%
|
|
15.00%
|
0.16%
|
15.16%
|
|
31.00
|
34.10
|
$1,000.00
|
7.75%
|
7.75%
|
|
10.00%
|
0.16%
|
10.16%
|
|
31.00
|
32.55
|
$1,000.00
|
7.75%
|
7.75%
|
|
5.00%
|
0.16%
|
5.16%
|
|
31.00
|
31.00
|
$1,000.00
|
7.75%
|
7.75%
|
|
0.00%
|
0.16%
|
0.16%
|
|
31.00
|
29.45
|
$1,000.00
|
7.75%
|
7.75%
|
|
-5.00%
|
0.16%
|
-4.84%
|
|
31.00
|
27.90
|
$1,000.00
|
7.75%
|
7.75%
|
|
-10.00%
|
0.16%
|
-9.84%
|
|
31.00
|
26.35
|
$1,000.00
|
7.75%
|
7.75%
|
|
-15.00%
|
0.16%
|
-14.84%
|
Table
of Hypothetical Cash Settlement Values
Assumes
the Closing Price Does
Equal or
Fall Below the Contingent Protection Level Before the Calculation
Date
|
Investment
in the Notes
|
|
Direct
Investment in the Reference Asset
|
||||||
|
Initial
Level
|
Hypothetical
Final Level
|
Cash
Settlement Value
|
Total
Coupon Payments (in % Terms)
|
6-Month
Total Return
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
6-Month
Total Return
|
|
|
31.00
|
38.75
|
$1,000.00
|
7.75%
|
7.75%
|
|
25.00%
|
0.16%
|
25.16%
|
|
31.00
|
37.20
|
$1,000.00
|
7.75%
|
7.75%
|
|
20.00%
|
0.16%
|
20.16%
|
|
31.00
|
35.65
|
$1,000.00
|
7.75%
|
7.75%
|
|
15.00%
|
0.16%
|
15.16%
|
|
31.00
|
34.10
|
$1,000.00
|
7.75%
|
7.75%
|
|
10.00%
|
0.16%
|
10.16%
|
|
31.00
|
32.55
|
$1,000.00
|
7.75%
|
7.75%
|
|
5.00%
|
0.16%
|
5.16%
|
|
31.00
|
31.00
|
$1,000.00
|
7.75%
|
7.75%
|
|
0.00%
|
0.16%
|
0.16%
|
|
31.00
|
29.45
|
$950.00
|
7.75%
|
2.75%
|
|
-5.00%
|
0.16%
|
-4.84%
|
|
31.00
|
27.90
|
$900.00
|
7.75%
|
-2.25%
|
|
-10.00%
|
0.16%
|
-9.84%
|
|
31.00
|
26.35
|
$850.00
|
7.75%
|
-7.25%
|
|
-15.00%
|
0.16%
|
-14.84%
|
|
31.00
|
24.80
|
$800.00
|
7.75%
|
-12.25%
|
|
-20.00%
|
0.16%
|
-19.84%
|
|
31.00
|
23.25
|
$750.00
|
7.75%
|
-17.25%
|
|
-25.00%
|
0.16%
|
-24.84%
|
|
31.00
|
21.70
|
$700.00
|
7.75%
|
-22.25%
|
|
-30.00%
|
0.16%
|
-29.84%
|
|
31.00
|
20.15
|
$650.00
|
7.75%
|
-27.25%
|
|
-35.00%
|
0.16%
|
-34.84%
|
|
31.00
|
18.60
|
$600.00
|
7.75%
|
-32.25%
|
|
-40.00%
|
0.16%
|
-39.84%
|
|
31.00
|
17.05
|
$550.00
|
7.75%
|
-37.25%
|
|
-45.00%
|
0.16%
|
-44.84%
|
|
31.00
|
15.50
|
$500.00
|
7.75%
|
-42.25%
|
|
-50.00%
|
0.16%
|
-49.84%
|
|
31.00
|
13.95
|
$450.00
|
7.75%
|
-47.25%
|
|
-55.00%
|
0.16%
|
-54.84%
|
BEAR,
STEARNS & CO. INC.
-
6 -
|
|
STRUCTURED
PRODUCTS GROUP
|
The
following table sets forth, on a per share basis, the high
and low Closing
Prices as well as end-of-quarter closing prices, for the
Reference Asset during
the periods indicated below. We obtained the information
in the tables below
from Bloomberg Financial Markets, without independent verification.
|
Quarter
Ending
|
Quarterly
High
|
Quarterly
Low
|
Quarterly
Close
|
|
Quarter
Ending
|
Quarterly
High
|
Quarterly
Low
|
Quarterly
Close
|
|
December
31, 2001
|
17.81
|
11.46
|
16.61
|
|
June
30, 2004
|
16.60
|
12.69
|
15.96
|
|
March
29, 2002
|
17.40
|
12.45
|
16.05
|
|
September
30, 2004
|
17.23
|
14.13
|
15.72
|
|
June
28, 2002
|
15.95
|
13.02
|
14.25
|
|
December
31, 2004
|
19.24
|
15.10
|
18.16
|
|
September
30, 2002
|
14.47
|
6.88
|
7.00
|
|
March
31, 2005
|
18.68
|
15.20
|
16.96
|
|
December
31, 2002
|
9.70
|
6.30
|
9.00
|
|
June
30, 2005
|
18.24
|
13.47
|
13.70
|
|
March
31, 2003
|
9.60
|
7.80
|
9.18
|
|
September
30, 2005
|
18.31
|
13.65
|
16.72
|
|
June
30, 2003
|
9.55
|
6.42
|
7.44
|
|
December
30, 2005
|
19.46
|
15.01
|
18.36
|
|
September
30, 2003
|
12.15
|
7.30
|
10.82
|
|
March
31, 2006
|
29.30
|
18.18
|
29.04
|
|
December
31, 2003
|
14.24
|
10.08
|
13.66
|
|
June
30, 2006
|
33.84
|
22.78
|
26.25
|
|
March
31, 2004
|
15.93
|
12.17
|
12.85
|
|
October
2, 2006 to November 22, 2006
|
38.64
|
29.82
|
31.26
|
United
States Steel Corporation (“X”)
Assumptions:
|
·
|
Investor
purchases $1,000 principal amount of Notes on the
Pricing Date at the
initial offering price of 100% and holds the Notes
to maturity. No Market
Disruption Events or Events of Default occur during
the term of the
Notes.
|
|
·
|
Initial
Level: $ 75.00
|
|
·
|
Contingent
Protection Percentage: 80%
|
|
·
|
Contingent
Protection Level: $ 60.00 ($75.00 x
80%)
|
|
·
|
Exchange
Ratio: 13 ($1,000/$75.00)
|
|
·
|
Coupon:
17.00% per annum, paid upon maturity of three-month
term
($42.50).
|
|
·
|
The
reinvestment rate on any interest payments made
during the term of the
Notes is assumed to be 0%. The 3-month total return
on a direct investment
in the Reference Asset is calculated below prior
to the deduction of any
brokerage fees or charges. Both a positive reinvestment
rate, or the
incurrence of any brokerage fees or charges, would
increase the total
return on the Notes relative to the total return
of the Reference
Asset.
|
|
·
|
Maturity:
Three months
|
|
·
|
Dividend
and dividend yield on the Reference Asset: $0.60
and 0.80% per annum.
|
Example
1
- On the
Calculation Date, the Final Level of $90.00 is greater than
the Initial Level,
resulting in a payment at maturity of $1,000, regardless
of whether the
Contingent Protection Level was ever reached or breached,
plus one interest
payment of $42.50, for payments totaling $1,042.50. If you
had invested directly
in the Reference Asset for the same three-month period, you
would have received
total cash payments of $1,202.00 (number of shares of the
Reference Asset
multiplied by the Final Level, plus the dividend payments),
assuming liquidation
of shares at the Final Level. You would have earned a 4.250%
return with an
investment in the Notes and a 20.200% return with a direct
investment in the
Reference Asset.
Example
2
- On the
Calculation Date, the Final Level of $67.50 is below the
Initial Level, but the
Closing Price never equaled or fell below the Contingent
Protection Level. As
discussed in example 1 above, an investor would receive total
payments of
$1,042.50, earning a 4.250% return over the term of the Notes.
A direct
investment in the Reference Asset during that same three-month
time period would
have generated a return of $902.00 (number of shares of the
Reference Asset
multiplied by the Final Level, plus the dividend payments),
assuming liquidation
of shares at the Final Level. You would have earned a 4.250%
return with an
investment in the Notes and incurred a loss of 9.800% with
a direct investment
in the Reference Asset.
BEAR,
STEARNS & CO. INC.
-
7 -
|
|
STRUCTURED
PRODUCTS GROUP
|
Example
3
- On the
Calculation Date, the Final Level of $52.50 is below the
Initial Level and also
is below the Contingent Protection Level. At our election,
an investor would
receive a number of shares equal to the Exchange Ratio, plus
the Fractional
Share Cash Amount plus one interest payment of $42.50, which
is 13 shares (worth
$52.50 each) plus $17.48 (the Fractional Share Cash Amount)
plus $42.50 (one
interest payment of $42.50). The cash equivalent equals $742.48.
If you had
invested directly in the Reference Asset for the same three-month
period, you
would have received total cash payments of $702.00 (number
of shares of the
Reference Asset multiplied by the Final Level, plus the dividend
payments),
assuming liquidation of shares at the Final Level. An investment
in the Notes
would have resulted in a loss of 25.752%, while a direct
investment in the
Reference Asset would have resulted in a loss of 29.800%.
Table
of Hypothetical Cash Settlement Values
Assumes
the Closing Price Never
Equals
or Falls Below the Contingent Protection Level Before the
Calculation
Date
|
|
|
Investment
in the Notes
|
|
Direct
Investment in the Reference Asset
|
||||
|
Initial
Level
|
Hypothetical
Final Level
|
Cash
Settlement Value
|
Total
Coupon Payments (in % Terms)
|
3-Month
Total Return
|
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
3-Month
Total Return
|
|
75.00
|
97.50
|
$1,000.00
|
4.25%
|
4.25%
|
|
30.00%
|
0.20%
|
30.20%
|
|
75.00
|
93.75
|
$1,000.00
|
4.25%
|
4.25%
|
|
25.00%
|
0.20%
|
25.20%
|
|
75.00
|
90.00
|
$1,000.00
|
4.25%
|
4.25%
|
|
20.00%
|
0.20%
|
20.20%
|
|
75.00
|
86.25
|
$1,000.00
|
4.25%
|
4.25%
|
|
15.00%
|
0.20%
|
15.20%
|
|
75.00
|
82.50
|
$1,000.00
|
4.25%
|
4.25%
|
|
10.00%
|
0.20%
|
10.20%
|
|
75.00
|
78.75
|
$1,000.00
|
4.25%
|
4.25%
|
|
5.00%
|
0.20%
|
5.20%
|
|
75.00
|
75.00
|
$1,000.00
|
4.25%
|
4.25%
|
|
0.00%
|
0.20%
|
0.20%
|
|
75.00
|
71.25
|
$1,000.00
|
4.25%
|
4.25%
|
|
-5.00%
|
0.20%
|
-4.80%
|
|
75.00
|
67.50
|
$1,000.00
|
4.25%
|
4.25%
|
|
-10.00%
|
0.20%
|
-9.80%
|
|
75.00
|
63.75
|
$1,000.00
|
4.25%
|
4.25%
|
|
-15.00%
|
0.20%
|
-14.80%
|
Table
of Hypothetical Cash Settlement Values
Assumes
the Closing Price Does
Equal or
Fall Below the Contingent Protection Level Before the Calculation
Date
|
|
|
Investment
in the Notes
|
|
Direct
Investment in the Reference Asset
|
||||
|
Initial
Level
|
Hypothetical
Final Level
|
Cash
Settlement Value
|
Total
Coupon Payments (in % Terms)
|
3-Month
Total Return
|
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
3-Month
Total Return
|
|
75.00
|
93.75
|
$1,000.00
|
4.25%
|
4.25%
|
|
25.00%
|
0.20%
|
25.20%
|
|
75.00
|
90.00
|
$1,000.00
|
4.25%
|
4.25%
|
|
20.00%
|
0.20%
|
20.20%
|
|
75.00
|
86.25
|
$1,000.00
|
4.25%
|
4.25%
|
|
15.00%
|
0.20%
|
15.20%
|
|
75.00
|
82.50
|
$1,000.00
|
4.25%
|
4.25%
|
|
10.00%
|
0.20%
|
10.20%
|
|
75.00
|
78.75
|
$1,000.00
|
4.25%
|
4.25%
|
|
5.00%
|
0.20%
|
5.20%
|
|
75.00
|
75.00
|
$1,000.00
|
4.25%
|
4.25%
|
|
0.00%
|
0.20%
|
0.20%
|
|
75.00
|
71.25
|
$949.98
|
4.25%
|
-0.75%
|
|
-5.00%
|
0.20%
|
-4.80%
|
|
75.00
|
67.50
|
$899.98
|
4.25%
|
-5.75%
|
|
-10.00%
|
0.20%
|
-9.80%
|
|
75.00
|
63.75
|
$849.98
|
4.25%
|
-10.75%
|
|
-15.00%
|
0.20%
|
-14.80%
|
|
75.00
|
60.00
|
$799.98
|
4.25%
|
-15.75%
|
|
-20.00%
|
0.20%
|
-19.80%
|
|
75.00
|
56.25
|
$749.98
|
4.25%
|
-20.75%
|
|
-25.00%
|
0.20%
|
-24.80%
|
|
75.00
|
52.50
|
$699.98
|
4.25%
|
-25.75%
|
|
-30.00%
|
0.20%
|
-29.80%
|
|
75.00
|
48.75
|
$649.98
|
4.25%
|
-30.75%
|
|
-35.00%
|
0.20%
|
-34.80%
|
|
75.00
|
45.00
|
$599.99
|
4.25%
|
-35.75%
|
|
-40.00%
|
0.20%
|
-39.80%
|
|
75.00
|
41.25
|
$549.99
|
4.25%
|
-40.75%
|
|
-45.00%
|
0.20%
|
-44.80%
|
|
75.00
|
37.50
|
$499.99
|
4.25%
|
-45.75%
|
|
-50.00%
|
0.20%
|
-49.80%
|
|
75.00
|
33.75
|
$449.99
|
4.25%
|
-50.75%
|
|
-55.00%
|
0.20%
|
-54.80%
|
BEAR,
STEARNS & CO. INC.
-
8 -
|
|
STRUCTURED
PRODUCTS GROUP
|
The
following table sets forth on a per share basis the high
and low Closing Prices,
as well as end-of-quarter closing prices, for the Reference
Asset during the
periods indicated below. We obtained the information in the
tables below from
Bloomberg Financial Markets, without independent verification.
|
Quarter
Ending
|
Quarterly
High
|
Quarterly
Low
|
Quarterly
Close
|
|
Quarter
Ending
|
Quarterly
High
|
Quarterly
Low
|
Quarterly
Close
|
|
December
31, 2001
|
18.75
|
13.00
|
18.11
|
|
June
30, 2004
|
39.98
|
25.22
|
35.12
|
|
March
29, 2002
|
19.99
|
16.36
|
18.15
|
|
September
30, 2004
|
39.98
|
32.95
|
37.62
|
|
June
28, 2002
|
22.00
|
17.22
|
19.89
|
|
December
31, 2004
|
54.06
|
32.12
|
51.25
|
|
September
30, 2002
|
19.99
|
10.66
|
11.61
|
|
March
31, 2005
|
63.90
|
45.20
|
50.85
|
|
December
31, 2002
|
14.90
|
10.87
|
13.12
|
|
June
30, 2005
|
52.18
|
34.05
|
34.37
|
|
March
31, 2003
|
17.73
|
9.61
|
9.83
|
|
September
30, 2005
|
45.95
|
34.09
|
42.35
|
|
June
30, 2003
|
17.88
|
9.72
|
16.37
|
|
December
30, 2005
|
51.63
|
33.59
|
48.07
|
|
September
30, 2003
|
20.05
|
15.10
|
18.38
|
|
March
31, 2006
|
64.47
|
48.05
|
60.68
|
|
December
31, 2003
|
37.05
|
18.54
|
35.02
|
|
June
30, 2006
|
77.77
|
56.15
|
70.12
|
|
March
31, 2004
|
40.15
|
31.40
|
37.27
|
|
October
2, 2006 to November 22, 2006
|
76.16
|
54.18
|
75.71
|
Whole
Foods Market, Inc. (“WFMI”)
Assumptions:
|
·
|
Investor
purchases $1,000 principal amount of Notes on the
Pricing Date at the
initial offering price of 100% and holds the Notes
to maturity. No Market
Disruption Events or Events of Default occur during
the term of the
Notes.
|
|
·
|
Initial
Level: $ 49.00
|
|
·
|
Contingent
Protection Percentage: 80%
|
|
·
|
Contingent
Protection Level: $ 39.20 ($49.00 x
80%)
|
|
·
|
Exchange
Ratio: 20 ($1,000/$49.00)
|
|
·
|
Coupon:
14.00% per annum, paid upon maturity of six-month
term
($70.00).
|
|
·
|
The
reinvestment rate on any interest payments made
during the term of the
Notes is assumed to be 0%. The 6-month total return
on a direct investment
in the Reference Asset is calculated below prior
to the deduction of any
brokerage fees or charges. Both a positive reinvestment
rate, or the
incurrence of any brokerage fees or charges, would
increase the total
return on the Notes relative to the total return
of the Reference
Asset.
|
|
·
|
Maturity:
Six months
|
|
·
|
Dividend
and dividend yield on the Reference Asset: $0.72
and 1.47% per annum.
|
Example
1
- On the
Calculation Date, the Final Level of $ 58.80
is
greater than the Initial Level, resulting in a payment at
maturity of $1,000,
regardless of whether the Contingent Protection Level was
ever reached or
breached, plus one interest payment of $70.00, for payments
totaling $1,070.00.
If you had invested directly in the Reference Asset for the
same six-month
period, you would have received total cash payments of $1,207.35
(number of
shares of the Reference Asset multiplied by the Final Level,
plus the dividend
payments), assuming liquidation of shares at the Final Level.
You would have
earned a 7.000% return with an investment in the Notes and
a 20.735% return with
a direct investment in the Reference Asset.
Example
2
- On the
Calculation Date, the Final Level of $44.10 is below the
Initial Level, but the
Closing Price never equaled or fell below the Contingent
Protection Level. As
discussed in example 1 above, an investor would receive total
payments of
$1,070.00, earning a 7.000% return over the term of the Notes.
A direct
investment in the Reference Asset during that same six-month
time period would
have generated a return of $907.35 (number of shares of the
Reference Asset
multiplied by the Final Level, plus the dividend payments),
assuming liquidation
of shares at the Final Level. You would have earned a 7.000%
return with an
investment in the Notes and incurred a loss of 9.265% with
a direct investment
in the Reference Asset.
Example
3
- On the
Calculation Date, the Final Level of $34.30 is below the
Initial Level and also
is below the Contingent Protection Level. At our election,
an investor would
receive a number of shares equal to the Exchange Ratio, plus
the Fractional
Share Cash Amount plus one interest payment of $70.00, which
is 20 shares (worth
$34.30 each) plus $13.99 (the Fractional Share Cash Amount)
plus $70.00 (one
interest payment of $70.00). The cash equivalent equals $769.99.
If you had
invested directly in the Reference Asset for the same six-month
period, you
would have received total cash payments of $707.35 (number
of shares of the
Reference Asset multiplied by the Final Level, plus the dividend
payments),
assuming liquidation of shares at the Final Level. An investment
in the Notes
would have resulted in a loss of 23.001%, while a direct
investment in the
Reference Asset would have resulted in a loss of 29.265%.
BEAR,
STEARNS & CO. INC.
-
9 -
|
|
STRUCTURED
PRODUCTS GROUP
|
Table
of Hypothetical Cash Settlement Values
Assumes
the Closing Price Never
Equals
or Falls Below the Contingent Protection Level Before the
Calculation
Date
|
|
|
Investment
in the Notes
|
|
Direct
Investment in the Reference Asset
|
||||
|
Initial
Level
|
Hypothetical
Final Level
|
Cash
Settlement Value
|
Total
Coupon Payments (in % Terms)
|
6-Month
Total Return
|
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
6-Month
Total Return
|
|
49.00
|
63.70
|
$1,000.00
|
7.00%
|
7.00%
|
|
30.00%
|
0.73%
|
30.73%
|
|
49.00
|
61.25
|
$1,000.00
|
7.00%
|
7.00%
|
|
25.00%
|
0.73%
|
25.73%
|
|
49.00
|
58.80
|
$1,000.00
|
7.00%
|
7.00%
|
|
20.00%
|
0.73%
|
20.73%
|
|
49.00
|
56.35
|
$1,000.00
|
7.00%
|
7.00%
|
|
15.00%
|
0.73%
|
15.73%
|
|
49.00
|
53.90
|
$1,000.00
|
7.00%
|
7.00%
|
|
10.00%
|
0.73%
|
10.73%
|
|
49.00
|
51.45
|
$1,000.00
|
7.00%
|
7.00%
|
|
5.00%
|
0.73%
|
5.73%
|
|
49.00
|
49.00
|
$1,000.00
|
7.00%
|
7.00%
|
|
0.00%
|
0.73%
|
0.73%
|
|
49.00
|
46.55
|
$1,000.00
|
7.00%
|
7.00%
|
|
-5.00%
|
0.73%
|
-4.27%
|
|
49.00
|
44.10
|
$1,000.00
|
7.00%
|
7.00%
|
|
-10.00%
|
0.73%
|
-9.27%
|
|
49.00
|
41.65
|
$1,000.00
|
7.00%
|
7.00%
|
|
-15.00%
|
0.73%
|
-14.27%
|
Table
of Hypothetical Cash Settlement Values
Assumes
the Closing Price Does
Equal or
Fall Below the Contingent Protection Level Before the Calculation
Date
|
|
|
Investment
in the Notes
|
|
Direct
Investment in the Reference Asset
|
||||
|
Initial
Level
|
Hypothetical
Final Level
|
Cash
Settlement Value
|
Total
Coupon Payments (in % Terms)
|
6-Month
Total Return
|
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
6-Month
Total Return
|
|
49.00
|
61.25
|
$1,000.00
|
7.00%
|
7.00%
|
|
25.00%
|
0.73%
|
25.73%
|
|
49.00
|
58.80
|
$1,000.00
|
7.00%
|
7.00%
|
|
20.00%
|
0.73%
|
20.73%
|
|
49.00
|
56.35
|
$1,000.00
|
7.00%
|
7.00%
|
|
15.00%
|
0.73%
|
15.73%
|
|
49.00
|
53.90
|
$1,000.00
|
7.00%
|
7.00%
|
|
10.00%
|
0.73%
|
10.73%
|
|
49.00
|
51.45
|
$1,000.00
|
7.00%
|
7.00%
|
|
5.00%
|
0.73%
|
5.73%
|
|
49.00
|
49.00
|
$1,000.00
|
7.00%
|
7.00%
|
|
0.00%
|
0.73%
|
0.73%
|
|
49.00
|
46.55
|
$949.99
|
7.00%
|
2.00%
|
|
-5.00%
|
0.73%
|
-4.27%
|
|
49.00
|
44.10
|
$899.99
|
7.00%
|
-3.00%
|
|
-10.00%
|
0.73%
|
-9.27%
|
|
49.00
|
41.65
|
$849.99
|
7.00%
|
-8.00%
|
|
-15.00%
|
0.73%
|
-14.27%
|
|
49.00
|
39.20
|
$799.99
|
7.00%
|
-13.00%
|
|
-20.00%
|
0.73%
|
-19.27%
|
|
49.00
|
36.75
|
$749.99
|
7.00%
|
-18.00%
|
|
-25.00%
|
0.73%
|
-24.27%
|
|
49.00
|
34.30
|
$699.99
|
7.00%
|
-23.00%
|
|
-30.00%
|
0.73%
|
-29.27%
|
|
49.00
|
31.85
|
$649.99
|
7.00%
|
-28.00%
|
|
-35.00%
|
0.73%
|
-34.27%
|
|
49.00
|
29.40
|
$600.00
|
7.00%
|
-33.00%
|
|
-40.00%
|
0.73%
|
-39.27%
|
|
49.00
|
26.95
|
$550.00
|
7.00%
|
-38.00%
|
|
-45.00%
|
0.73%
|
-44.27%
|
|
49.00
|
24.50
|
$500.00
|
7.00%
|
-43.00%
|
|
-50.00%
|
0.73%
|
-49.27%
|
|
49.00
|
22.05
|
$450.00
|
7.00%
|
-48.00%
|
|
-55.00%
|
0.73%
|
-54.27%
|
The
following table sets forth on a per share basis the high
and low Closing Prices,
as well as end-of-quarter closing prices, for the Reference
Asset during the
periods indicated below. We obtained the information in the
tables below from
Bloomberg Financial Markets, without independent verification.
BEAR,
STEARNS & CO. INC.
-
10 -
|
|
STRUCTURED
PRODUCTS GROUP
|
|
Quarter
Ending
|
Quarterly
High
|
Quarterly
Low
|
Quarterly
Close
|
|
Quarter
Ending
|
Quarterly
High
|
Quarterly
Low
|
Quarterly
Close
|
|
December
31, 2001
|
23.25
|
14.82
|
21.78
|
|
June
30, 2004
|
47.85
|
36.75
|
47.73
|
|
March
29, 2002
|
23.75
|
18.75
|
22.85
|
|
September
30, 2004
|
48.37
|
36.61
|
42.90
|
|
June
28, 2002
|
25.59
|
20.71
|
24.11
|
|
December
31, 2004
|
48.74
|
39.52
|
47.68
|
|
September
30, 2002
|
24.80
|
17.74
|
21.42
|
|
March
31, 2005
|
53.39
|
44.14
|
51.07
|
|
December
31, 2002
|
27.30
|
20.26
|
26.37
|
|
June
30, 2005
|
61.46
|
48.00
|
59.11
|
|
March
31, 2003
|
29.09
|
22.39
|
27.82
|
|
September
30, 2005
|
69.85
|
58.50
|
67.23
|
|
June
30, 2003
|
31.12
|
23.27
|
23.77
|
|
December
30, 2005
|
79.90
|
61.30
|
77.39
|
|
September
30, 2003
|
28.12
|
22.89
|
27.60
|
|
March
31, 2006
|
78.27
|
58.87
|
66.44
|
|
December
31, 2003
|
33.82
|
27.60
|
33.57
|
|
June
30, 2006
|
74.00
|
59.42
|
64.64
|
|
March
31, 2004
|
39.62
|
32.96
|
37.48
|
|
October
2, 2006 to November 22, 2006
|
66.25
|
45.56
|
49.37
|
|
CERTAIN
U.S. FEDERAL INCOME TAX
CONSIDERATIONS
|
This
summary supplements the section entitled “Certain U.S. Federal Income Tax
Considerations” in the prospectus supplement and supersedes it to the extent
inconsistent therewith but is subject to the limitations and qualifications
set
forth therein. In the opinion of Cadwalader, Wickersham & Taft LLP, special
U.S. tax counsel to us, the following discussion, when read together with
the
section entitled, “Certain U.S. Federal Income Tax Considerations” in the
prospectus supplement, summarizes certain of the material U.S. federal income
tax consequences of the purchase, beneficial ownership, and disposition of
each
of the Notes.
There
are
no statutory provisions, regulations, published rulings or judicial decisions
addressing the characterization for U.S. federal income tax purposes of
securities with terms that are substantially the same as those of the Notes.
Under one approach, each Note should be treated as a put option written by
you
(the “Put Option”) that permits us to (1) sell the Reference Assets to you at
maturity for an amount equal to the principal amount of the Note, or (2)
“cash
settle” the Put Option (i.e., require you to pay to us at maturity the
difference between the principal amount of the Note and the value of the
Reference Assets otherwise deliverable under the Put Option), and a deposit
with
us of cash (the “Deposit”) in an amount equal to the “issue price” (as described
in the prospectus supplement) of your Notes to secure your potential obligation
under the Put Option. We intend to treat the Notes consistent with this approach
and pursuant to the terms of the Notes, you agree to treat the Notes under
this
approach for all U.S. federal income tax purposes. The description below
of the
Reference Asset includes a chart that indicates the portion of each interest
payment that represents the yield on the Deposit and the Put Premium, assuming
that the issue price of the Notes is par. You may contact Bill Bamber at
(212)
272-6635 for the issue price of the Notes.
We
also
intend to treat the Deposits as “short-term obligations” for U.S. federal income
tax purposes. See “Certain U.S. Federal Income Tax Considerations —Tax Treatment
of the Deposit on Notes with a Term of One Year or Less” in the prospectus
supplement for certain U.S. federal income tax considerations applicable
to
short-term obligations.
Because
there are no statutory provisions, regulations, published rulings or judicial
decisions addressing the characterization for U.S. federal income tax purposes
of securities with terms that are substantially the same as those of the
Notes,
other characterizations and treatments are possible and the timing and character
of income in respect of the Notes might differ from the treatment described
above. For example, the Notes could be treated as short-term obligations
rather
than a Put Option and a Deposit.
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.
BEAR,
STEARNS & CO. INC.
-
11 -
|
|
STRUCTURED
PRODUCTS
GROUP
|
|
Reference
Asset
|
Term
to Maturity
|
Coupon
Rate, per Annum
|
Yield
on the Deposit, per Annum
|
Put
Premium, per Annum
|
|
Sotheby’s
|
6-months
|
[15.50]%
|
[●]%
|
[●]%
|
|
United
States Steel Corporation
|
3-months
|
[17.00]%
|
[●]%
|
[●]%
|
|
Whole
Foods Market, Inc.
|
6-months
|
[14.00]%
|
[●]%
|
[●]%
|
|
CERTAIN
ERISA CONSIDERATIONS
|
Section
4975 of the Internal Revenue Code of 1986 (the “Code”) prohibits the borrowing
of money, the sale of property and certain other transactions involving
the
assets of plans that are qualified under the Code ("Qualified Plans") or
individual retirement accounts ("IRAs") and persons who have certain specified
relationships to them. Section 406 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), prohibits similar transactions involving
employee benefit plans that are subject to ERISA ("ERISA Plans"). Qualified
Plans, IRAs and ERISA Plans are referred to as "Plans."
Persons
who have such specified relationships are referred to as "parties in interest"
under ERISA and as "disqualified persons" under the Code. "Parties in interest"
and "disqualified persons" encompass a wide range of persons, including
any
fiduciary (for example, investment manager, trustee or custodian) of a
Plan, any
person providing services (for example, a broker) to a Plan, the Plan sponsor,
an employee organization any of whose members are covered by the Plan,
and
certain persons related to or affiliated with any of the foregoing.
The
purchase and/or holding of securities by a Plan with respect to which we,
Bear,
Stearns & Co. Inc. (“Bear Stearns”) and/or certain of our affiliates is a
fiduciary and/or a service provider (or otherwise is a "party in interest"
or
"disqualified person") would constitute or result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code, unless such securities
are acquired or held pursuant to and in accordance with an applicable statutory
or administrative exemption. Each of us and Bear Stearns is considered
a
"disqualified person" under the Code or "party in interest" under ERISA
with
respect to many Plans, although neither we nor Bear Stearns can be a "party
in
interest" to any IRA other than certain employer-sponsored IRAs, as only
employer-sponsored IRAs are covered by ERISA.
Applicable
administrative exemptions may include certain prohibited transaction class
exemptions (for example, Prohibited Transaction Class Exemption ("PTCE")
84-14
relating to qualified professional asset managers, PTCE 96−23 relating to
certain in-house asset managers, PTCE 91-38 relating to bank collective
investment funds, PTCE 90−1 relating to insurance company separate accounts and
PTCE 95-60 relating to insurance company general accounts).
It
should
also be noted that the recently enacted Pension Protection Act of 2006
contains
a new statutory exemption from the prohibited transaction provisions of
Section
406 of ERISA and Section 4975 of the Code for transactions involving certain
parties in interest or disqualified persons who are such merely because
they are
a service provider to a Plan, or because they are related to a service
provider.
Generally, the new exemption would be applicable if the party to the transaction
with the Plan is a party in interest or a disqualified person to the Plan
but is
not (i) an employer, (ii) a fiduciary who has or exercises any discretionary
authority or control with respect to the investment of the Plan assets
involved
in the transaction, (iii) a fiduciary who renders investment advice (within
the
meaning of ERISA and Section 4975 of the Code) with respect to those assets,
or
(iv) an affiliate of (i), (ii) or (iii). Any Plan fiduciary relying on
this new
statutory exemption (Section 408(b)(17) of ERISA and Section 4975(d)(20)
of the
Code) and purchasing securities on behalf of a Plan will be deemed to represent
that (x) the fiduciary has made a good faith determination that the Plan
is
paying no more than, and is receiving no less than, adequate consideration
in
connection with the transaction and (y) neither we, Bear Stearns nor any
of our
affiliates directly or indirectly exercises any discretionary authority
or
control or renders investment advice (as defined above) with respect to
the
assets of the Plan which such fiduciary is using to purchase the Notes,
both of
which are necessary preconditions to utilizing this new exemption. Any
purchaser
that is a Plan is encouraged to consult with counsel regarding the application
of the new exemption.
A
fiduciary that causes a Plan to engage, directly or indirectly, in a non-exempt
prohibited transaction may be subject to a penalty under ERISA, and may
be
liable for any losses to the Plan resulting from such transaction. Code
Section
4975 generally imposes an excise tax on disqualified persons who engage,
directly or indirectly, in non-exempt transactions with the assets of Plans
subject to such Section. If an IRA engages in a prohibited transaction,
the
assets of the IRA are deemed to have been distributed to the IRA
beneficiaries.
BEAR,
STEARNS & CO. INC.
-
12 -
|
|
STRUCTURED
PRODUCTS GROUP
|
In
accordance with ERISA’s general fiduciary requirements, a fiduciary with respect
to any ERISA Plan who is considering the purchase of securities on behalf
of
such plan should consider the foregoing information and the information
set
forth in the applicable prospectus supplement and any applicable pricing
supplement, and should determine whether such purchase is permitted under
the
governing plan document and is prudent and appropriate for the ERISA Plan
in
view of its overall investment policy and the composition and diversification
of
its portfolio. Fiduciaries of Plans established with, or for which services
are
provided by, us, Bear Stearns and/or certain of our affiliates should consult
with counsel before making any acquisition. Each purchaser of any securities,
the assets of which constitute the assets of one or more Plans, and each
fiduciary that directs such purchaser with respect to the purchase or holding
of
such securities, will be deemed to represent that the purchase, holding
and
disposition of the securities does not and will not constitute a prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code for
which an
exemption is not available.
Certain
employee benefit plans, such as governmental plans (as defined in Section
3(32)
of ERISA) and, if no election has been made under Section 410(d) of the
Code,
church plans (as defined in Section 3(33) of ERISA), are not subject to
Section
406 of ERISA or Section 4975 of the Code. However, such plans may be subject
to
the provisions of applicable federal, state or local law ("Similar Law")
similar
to the foregoing provisions of ERISA or the Code. Fiduciaries of such plans
("Similar Law Plans") should consider applicable Similar Law when investing
in
the securities. Each fiduciary of a Similar Law Plan will be deemed to
represent
that the Similar Law Plan’s acquisition and holding of the securities will not
result in a non-exempt violation of applicable Similar Law.
The
sale
of any security to a Plan or a Similar Law Plan is in no respect a
representation by us or any of our affiliates that such an investment meets
all
relevant legal requirements with respect to investments by Plans or Similar
Law
Plans generally or any particular Plan or Similar Law Plan, or that such
an
investment is appropriate for a Plan or a Similar Law Plan generally or
any
particular Plan or Similar Law Plan.
BEAR,
STEARNS & CO. INC.
-
13 -