|
New
Issue
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Filed
Pursuant to Rule 433
Registration
No. 333−136666
October
17, 2006
STRUCTURED
EQUITY PRODUCTS
Indicative
Terms
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||
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THE
BEAR
STEARNS
COMPANIES
INC.
INVESTMENT
HIGHLIGHTS
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Reverse
Convertible
Note
Securities
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·
Four
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 two of the
Notes
have one-year terms to maturity, while the other two Notes have six-month
maturities.
·
Each
of the Notes pays an annualized fixed rate coupon; payments are made
semi-annually in arrears. Each interest payment will equal one-half
of the
applicable Coupon Rate stated below times the principal amount of
the
Notes. In the case of the six-month Notes, there will be only one
coupon
payment.
·
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: (i) in the case of the
Notes
maturing in one year, 99.00% of the principal amount; and (ii) in
the case
of the Notes maturing in six months, 99.5% 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 four separate Note offerings)
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Symbol
|
Term
to Maturity
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Coupon
Rate,
per Annum
|
Contingent
Protection Percentage
|
Initial
Public Offering Price1
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|
SanDisk
Corporation, common stock, traded on the NASDAQ
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SNDK
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1-year
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[16.75]%
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75%
|
100%
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Valero
Energy Corporation, common stock, traded on the NYSE
|
VLO
|
1-year
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[12.00]%
|
80%
|
100%
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|
JetBlue
Airways Corporation, common stock, traded on the NASDAQ
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JBLU
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6-months
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[17.00]%
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70%
|
100%
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Dell
Inc., common stock, traded on the NASDAQ
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DELL
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6-months
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[12.00]%
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80%
|
100%
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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: (i) in the case of the Notes maturing in one
year,
99.00% of the principal amount; and (ii) in the case of the Notes maturing
in
six months, 99.5% of the principal amount.
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STRUCTURED
PRODUCTS
GROUP
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|
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BEAR,
STEARNS & CO. INC.
Structured
Products Group
(212)
272-6928
|
The
issuer has filed a registration statement (including a prospectus)
with
the SEC for the four 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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-2-
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STRUCTURED
PRODUCTS
GROUP
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| GENERAL TERMS FOR THE NOTE OFFERINGS |
This
free
writing prospectus relates to four 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
four 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.
|
ISSUER:
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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:
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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 SanDisk Corporation (“SanDisk”), traded on the Nasdaq
Stock Market, Inc. (“NASDAQ”) under the symbol “SNDK.”
(2)
The common stock of Valero Energy Corporation (“Valero”), traded on the
New York Stock Exchange, Inc. (“NYSE”) under the symbol
“VLO.”
(3)
The common stock of JetBlue Airways Corporation (“JetBlue”), traded on the
NASDAQ under the symbol “JBLU.”
(4)
The common stock of Dell, Inc. (“Dell”), traded on the NASDAQ under the
symbol “DELL.”
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SELLING
PERIOD ENDS:
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October
[●], 2006
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PRICING
DATE:
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October
[●], 2006
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SETTLEMENT
DATE:
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October
[●], 2006
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CALCULATION
DATE:
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(1)
For the Note linked to the common stock of SanDisk, October [●], 2007.
(2)
For the Note linked to the common stock of Valero, October [●], 2007.
(3)
For the Note linked to the common stock of JetBlue, April [●], 2007.
(4)
For the Note linked to the common stock of Dell, April [●],
2007.
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MATURITY
DATE:
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(1)
For the Note linked to the common stock of SanDisk, October [●],
2007.
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(2)
For the Note linked to the common stock of Valero, October [●],
2007.
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(3)
For the Note linked to the common stock of JetBlue, April [●],
2007.
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(4)
For the Note linked to the common stock of Dell, April [●],
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:
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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 Notes linked to the common stock of SanDisk: April [●], 2007 and
October [●], 2007.
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(2)
For the Notes linked to the common stock of Valero: April [●], 2007 and
October [●], 2007.
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(3)
For the Notes linked to the common stock of JetBlue: April [●],
2007.
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(4)
For the Notes linked to the common stock of Dell: April [●],
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:
|
For
the Notes linked to the common stock of SanDisk:
073902LB2
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For
the Notes linked to the common stock of Valero:
073902LC0
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For
the Notes linked to the common stock of JetBlue:
073902LD8
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For
the Notes linked to the common stock of Dell: 073902LE6
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LISTING:
|
The
Notes will not be listed on any U.S. securities exchange or quotation
system.
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BEAR,
STEARNS & CO.
INC.
|
-3-
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STRUCTURED
PRODUCTS
GROUP
|
| 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: http://www.sec.gov/Archives/edgar/data/777001/000104746906011011/a2172742z424b5.htm
| 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.
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·
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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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|
·
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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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|
·
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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.
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|
·
|
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.
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BEAR,
STEARNS & CO. INC.
|
-4-
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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 relevant Interest Payment
Date or
Maturity Date. Interest will be paid to the person in whose name the Note
is
registered at the close of business on the Record Date before each Interest
Payment Date. However, interest payable on the Maturity Date will be payable
to
the person to whom principal is payable. If the Interest Payment Date is
also a
day on which principal is due, the interest payable will include interest
accrued to, but excluding, the stated Maturity Date.
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.
SanDisk
Corporation (“SNDK”)
SanDisk
Corporation (“SanDisk”) common stock, par value $0.001 per share, trades on the
NASDAQ under the symbol “SNDK.” SanDisk
designs, develops and markets flash storage devices used for a wide variety
of
consumer electronics products, such as digital cameras, mobile phones, Universal
Serial Bus (USB), drives, gaming devices, MP3 players and other digital consumer
devices. SanDisk’s
SEC file number is 000-26734.
Valero
Energy Corporation (“VLO”)
Valero
Energy Corporation (“VLO”) common stock, par value $0.01 per share, trades on
the NYSE under the symbol “VLO.” Valero owns and operates refineries that
produce refined products, such as gasoline, diesel fuel, distillates, jet
fuel,
asphalt, petrochemicals, lubricants and other refined products. Valero’s
SEC file number is 001-13175.
JetBlue
Airways Corporation (“JBLU”)
JetBlue
Airways Corporation (“JetBlue”) common stock, par value $0.01 per share, trades
on the NASDAQ under the symbol “JBLU.” JetBlue
is a passenger airline currently serving destinations in the United States,
Puerto Rico, the Dominican Republic and The Bahamas. JetBlue’s
SEC file number is 000-49728.
Dell,
Inc. (“DELL”)
Dell,
Inc. (“Dell”) common stock, par value $0.01 per share, trades on the NASDAQ
under the symbol “DELL.” Dell Inc., is a provider of products and services
worldwide that enable customers to build their information technology and
Internet infrastructures. Dell offers a broad range of product categories,
including desktop computer systems, mobility products, software and peripherals,
servers and networking products, enhanced services, and storage products.
Dell’s
SEC file number is 000-17017.
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|
BEAR,
STEARNS & CO. INC.
|
-5-
|
|
STRUCTURED
PRODUCTS
GROUP
|
|
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.
SanDisk
Corporation (“SNDK”)
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: $59.00
|
|
·
|
Contingent
Protection Percentage: 75%
|
|
·
|
Contingent
Protection Level: $44.25 ($59.00 x
75%)
|
|
·
|
Exchange
Ratio: 16 ($1,000/$59.00)
|
|
·
|
Coupon:
16.75% per annum, paid semi-annually ($83.75 per semester) in
arrears.
|
|
·
|
The
reinvestment rate on any interest payments made during the term
of the
Notes is assumed to be 0%. The 1-year 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: One year
|
|
·
|
Dividend
and dividend yield on the Reference Asset: No dividend
distributed.
|
Example
1
- On the
Calculation Date, the Final Level of $70.80 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 two interest
payments of $83.75 each, for payments totaling $1,167.50. If you had invested
directly in the Reference Asset for the same one-year period, you would have
received total cash payments of $1,200.00 (number of shares of the Reference
Asset multiplied by the Final Level), assuming liquidation of shares at the
Final Level. You would have earned a 16.75% return with an investment in
the
Notes and a 20.00% return with a direct investment in the Reference
Asset.
Example
2
- On the
Calculation Date, the Final Level of $53.10 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
$1,167.50, earning a 16.75% return over the term of the Notes. A direct
investment in the Reference Asset during that same one-year time period would
have generated a return of $900.00 (number of shares of the Reference Asset
multiplied by the Final Level), assuming liquidation of shares at the Final
Level. You would have earned a 16.75% return with an investment in the Notes
and
incurred a loss of 10.00% with a direct investment in the Reference
Asset.
Example
3
- On the
Calculation Date, the Final Level of $35.40 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 the two interest payments of $83.75, which is 16
shares
(worth $35.40 each) plus $33.59 (the Fractional Share Cash Amount) plus
$167.50
(two interest payments of $83.75 each). The cash equivalent equals $767.49.
If
you had invested directly in the Reference Asset for the same one-year
period,
you would have received total cash payments of $600.00 (number of shares
of the
Reference Asset multiplied by the Final Level), assuming liquidation of
shares
at the Final Level. An investment in the Notes would have resulted in a
loss of
23.25%, while a direct investment in the Reference Asset would have resulted
in
a loss of 40.00%.
|
|
BEAR,
STEARNS & CO. INC.
|
-6-
|
|
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)
|
1-Year
Total Return
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
1-Year
Total Return
|
|
|
59.00
|
76.70
|
$1,000.00
|
16.75%
|
16.75%
|
30.00%
|
0.00%
|
30.00%
|
|
|
59.00
|
73.75
|
$1,000.00
|
16.75%
|
16.75%
|
25.00%
|
0.00%
|
25.00%
|
|
|
59.00
|
70.80
|
$1,000.00
|
16.75%
|
16.75%
|
20.00%
|
0.00%
|
20.00%
|
|
|
59.00
|
67.85
|
$1,000.00
|
16.75%
|
16.75%
|
15.00%
|
0.00%
|
15.00%
|
|
|
59.00
|
64.90
|
$1,000.00
|
16.75%
|
16.75%
|
10.00%
|
0.00%
|
10.00%
|
|
|
59.00
|
61.95
|
$1,000.00
|
16.75%
|
16.75%
|
5.00%
|
0.00%
|
5.00%
|
|
|
59.00
|
59.00
|
$1,000.00
|
16.75%
|
16.75%
|
0.00%
|
0.00%
|
0.00%
|
|
|
59.00
|
56.05
|
$1,000.00
|
16.75%
|
16.75%
|
-5.00%
|
0.00%
|
-5.00%
|
|
|
59.00
|
53.10
|
$1,000.00
|
16.75%
|
16.75%
|
-10.00%
|
0.00%
|
-10.00%
|
|
|
59.00
|
50.15
|
$1,000.00
|
16.75%
|
16.75%
|
-15.00%
|
0.00%
|
-15.00%
|
|
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)
|
1-Year
Total Return
|
Percentage
Change
in
Value of
Reference
Asset
|
Dividend
Yield
|
1-Year
Total Return
|
||
|
59.00
|
76.70
|
$1,000.00
|
16.75%
|
16.75%
|
30.00%
|
0.00%
|
30.00%
|
||
|
59.00
|
73.75
|
$1,000.00
|
16.75%
|
16.75%
|
25.00%
|
0.00%
|
25.00%
|
||
|
59.00
|
70.80
|
$1,000.00
|
16.75%
|
16.75%
|
|
20.00%
|
0.00%
|
20.00%
|
|
|
59.00
|
67.85
|
$1,000.00
|
16.75%
|
16.75%
|
|
15.00%
|
0.00%
|
15.00%
|
|
|
59.00
|
64.90
|
$1,000.00
|
16.75%
|
16.75%
|
|
10.00%
|
0.00%
|
10.00%
|
|
|
59.00
|
61.95
|
$1,000.00
|
16.75%
|
16.75%
|
|
5.00%
|
0.00%
|
5.00%
|
|
|
59.00
|
59.00
|
$1,000.00
|
16.75%
|
16.75%
|
|
0.00%
|
0.00%
|
0.00%
|
|
|
59.00
|
56.05
|
$950.01
|
16.75%
|
11.75%
|
|
-5.00%
|
0.00%
|
-5.00%
|
|
|
59.00
|
53.10
|
$899.00
|
16.75%
|
6.75%
|
|
-10.00%
|
0.00%
|
-10.00%
|
|
|
59.00
|
50.15
|
$849.99
|
16.75%
|
1.75%
|
|
-15.00%
|
0.00%
|
-15.00%
|
|
|
59.00
|
47.20
|
$799.99
|
16.75%
|
-3.25%
|
|
-20.00%
|
0.00%
|
-20.00%
|
|
|
59.00
|
44.25
|
$749.99
|
16.75%
|
-8.25%
|
|
-25.00%
|
0.00%
|
-25.00%
|
|
|
59.00
|
41.30
|
$699.99
|
16.75%
|
-13.25%
|
|
-30.00%
|
0.00%
|
-30.00%
|
|
|
59.00
|
38.35
|
$649.99
|
16.75%
|
-18.25%
|
|
-35.00%
|
0.00%
|
-35.00%
|
|
|
59.00
|
35.40
|
$600.00
|
16.75%
|
-23.25%
|
|
-40.00%
|
0.00%
|
-40.00%
|
|
|
59.00
|
32.45
|
$550.00
|
16.75%
|
-28.25%
|
|
-45.00%
|
0.00%
|
-45.00%
|
|
|
59.00
|
29.50
|
$500.00
|
16.75%
|
-33.25%
|
|
-50.00%
|
0.00%
|
-50.00%
|
|
|
59.00
|
26.55
|
$450.00
|
16.75%
|
-38.25%
|
|
-55.00%
|
0.00%
|
-55.00%
|
|
|
|
BEAR,
STEARNS & CO. INC.
|
-7-
|
|
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
|
|
|
March
28, 2002
|
10.85
|
6.41
|
10.85
|
September
30, 2004
|
29.12
|
19.61
|
29.12
|
|
|
June
28, 2002
|
11.53
|
4.88
|
6.20
|
December
31, 2004
|
31.42
|
19.74
|
24.97
|
|
|
September
30, 2002
|
8.70
|
5.83
|
6.56
|
March
31, 2005
|
28.09
|
21.45
|
27.80
|
|
|
December
31, 2002
|
14.00
|
6.03
|
10.15
|
June
30, 2005
|
28.75
|
23.70
|
23.73
|
|
|
March
31, 2003
|
11.80
|
7.58
|
8.41
|
September
30, 2005
|
48.25
|
23.64
|
48.25
|
|
|
June
30, 2003
|
20.60
|
8.30
|
20.18
|
December
30, 2005
|
65.14
|
46.37
|
62.82
|
|
|
September
30, 2003
|
33.45
|
20.84
|
31.87
|
March
31, 2006
|
77.22
|
53.06
|
57.52
|
|
|
December
31, 2003
|
42.49
|
27.63
|
30.57
|
June
30, 2006
|
65.54
|
49.92
|
50.98
|
|
|
March
31, 2004
|
36.24
|
28.31
|
28.37
|
September
29, 2006
|
58.92
|
37.51
|
53.54
|
|
|
June
30, 2004
|
32.65
|
20.08
|
21.69
|
October
1, 2006 to October 13, 2006
|
59.16
|
53.23
|
59.16
|
Valero
Energy Corporation (“VLO”)
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: $53.50
|
|
·
|
Contingent
Protection Percentage: 80%
|
|
·
|
Contingent
Protection Level: $42.80 ($53.50 x
80%)
|
|
·
|
Exchange
Ratio: 18 ($1,000/$53.50)
|
|
·
|
Coupon:
12.00% per annum, paid semi-annually ($60.00 per semester) in
arrears.
|
|
·
|
The
reinvestment rate on any interest payments made during the term
of the
Notes is assumed to be 0%. The 1-year 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: One
year
|
|
·
|
Dividend
and dividend yield on the Reference Asset: $0.32 and 0.60% per
annum.
|
Example
1
- On the
Calculation Date, the Final Level of $64.20 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 two interest
payments of $60.00 each, for payments totaling $1,120.00. If you had invested
directly in the Reference Asset for the same one-year period, you would have
received total cash payments of $1,206.00 (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 12.00%
return
with an investment in the Notes and a 20.60% return with a direct investment
in
the Reference Asset.
Example
2
- On the
Calculation Date, the Final Level of $48.15 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
$1,120.00, earning a 12.00% return over the term of the Notes. A direct
investment in the Reference Asset during that same one-year time period would
have generated a return of $906.00 (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 12.00% return with
an
investment in the Notes and incurred a loss of 9.40% with a direct investment
in
the Reference Asset.
Example
3
- On the
Calculation Date, the Final Level of $34.78 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 the two interest payments of $60.00, which is 18
shares
(worth $34.78 each) plus $24.07 (the Fractional Share Cash Amount) plus
$120.00
(two interest payments of $60.00 each). The cash equivalent equals $770.11.
If
you had invested directly in the Reference Asset for the same one-year
period,
you would have received total cash payments of $656.09 (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 22.99%, while a direct investment in the
Reference Asset would have resulted in a loss of 34.39%.
|
|
BEAR,
STEARNS & CO. INC.
|
-8-
|
|
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)
|
1-Year
Total Return
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
1-Year
Total Return
|
|
|
53.50
|
69.55
|
$1,000.00
|
12.00%
|
12.00%
|
30.00%
|
0.60%
|
30.60%
|
|
|
53.50
|
66.88
|
$1,000.00
|
12.00%
|
12.00%
|
|
25.01%
|
0.60%
|
25.61%
|
|
53.50
|
64.20
|
$1,000.00
|
12.00%
|
12.00%
|
|
20.00%
|
0.60%
|
20.60%
|
|
53.50
|
61.53
|
$1,000.00
|
12.00%
|
12.00%
|
|
15.01%
|
0.60%
|
15.61%
|
|
53.50
|
58.85
|
$1,000.00
|
12.00%
|
12.00%
|
|
10.00%
|
0.60%
|
10.60%
|
|
53.50
|
56.18
|
$1,000.00
|
12.00%
|
12.00%
|
|
5.01%
|
0.60%
|
5.61%
|
|
53.50
|
53.50
|
$1,000.00
|
12.00%
|
12.00%
|
|
0.00%
|
0.60%
|
0.60%
|
|
53.50
|
50.83
|
$1,000.00
|
12.00%
|
12.00%
|
|
-4.99%
|
0.60%
|
-4.39%
|
|
53.50
|
48.15
|
$1,000.00
|
12.00%
|
12.00%
|
|
-10.00%
|
0.60%
|
-9.40%
|
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)
|
1-Year
Total Return
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
1-Year
Total Return
|
|
|
53.50
|
69.55
|
$1,000.00
|
12.00%
|
12.00%
|
30.00%
|
0.60%
|
30.60%
|
|
|
53.50
|
66.88
|
$1,000.00
|
12.00%
|
12.00%
|
|
25.01%
|
0.60%
|
25.61%
|
|
53.50
|
64.20
|
$1,000.00
|
12.00%
|
12.00%
|
|
20.00%
|
0.60%
|
20.60%
|
|
53.50
|
61.53
|
$1,000.00
|
12.00%
|
12.00%
|
|
15.01%
|
0.60%
|
15.61%
|
|
53.50
|
58.85
|
$1,000.00
|
12.00%
|
12.00%
|
|
10.00%
|
0.60%
|
10.60%
|
|
53.50
|
56.18
|
$1,000.00
|
12.00%
|
12.00%
|
|
5.01%
|
0.60%
|
5.61%
|
|
53.50
|
53.50
|
$1,000.00
|
12.00%
|
12.00%
|
|
0.00%
|
0.60%
|
0.60%
|
|
53.50
|
50.83
|
$950.11
|
12.00%
|
7.01%
|
|
-4.99%
|
0.60%
|
-4.39%
|
|
53.50
|
48.15
|
$900.02
|
12.00%
|
2.00%
|
|
-10.00%
|
0.60%
|
-9.40%
|
|
53.50
|
45.48
|
$850.11
|
12.00%
|
-2.99%
|
|
-14.99%
|
0.60%
|
-14.39%
|
|
53.50
|
42.80
|
$800.02
|
12.00%
|
-8.00%
|
|
-20.00%
|
0.60%
|
-19.40%
|
|
53.50
|
40.13
|
$750.11
|
12.00%
|
-12.99%
|
|
-24.99%
|
0.60%
|
-24.39%
|
|
53.50
|
37.45
|
$700.02
|
12.00%
|
-18.00%
|
|
-30.00%
|
0.60%
|
-29.40%
|
|
53.50
|
34.78
|
$650.11
|
12.00%
|
-22.99%
|
|
-34.99%
|
0.60%
|
-34.39%
|
|
53.50
|
32.10
|
$600.01
|
12.00%
|
-28.00%
|
|
-40.00%
|
0.60%
|
-39.40%
|
|
53.50
|
29.43
|
$550.11
|
12.00%
|
-32.99%
|
|
-44.99%
|
0.00%
|
-44.39%
|
|
53.50
|
26.75
|
$500.01
|
12.00%
|
-38.00%
|
|
-50.00%
|
0.00%
|
-49.40%
|
|
53.50
|
24.08
|
$450.10
|
12.00%
|
-42.99%
|
|
-54.99%
|
0.00%
|
-54.39%
|
|
BEAR,
STEARNS & CO. INC.
|
-9-
|
|
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
|
|
|
March
28, 2002
|
11.94
|
9.31
|
11.94
|
September
30, 2004
|
19.84
|
15.92
|
19.84
|
|
|
June
28, 2002
|
11.83
|
8.75
|
9.04
|
December
31, 2004
|
23.60
|
19.78
|
22.50
|
|
|
September
30, 2002
|
9.18
|
6.42
|
6.42
|
March
31, 2005
|
36.66
|
20.90
|
36.36
|
|
|
December
31, 2002
|
9.13
|
5.69
|
8.98
|
June
30, 2005
|
40.24
|
30.16
|
39.33
|
|
|
March
31, 2003
|
10.20
|
8.05
|
10.09
|
September
30, 2005
|
57.79
|
39.63
|
56.27
|
|
|
June
30, 2003
|
10.20
|
8.67
|
8.88
|
December
30, 2005
|
57.76
|
46.26
|
51.41
|
|
|
September
30, 2003
|
9.82
|
8.68
|
9.38
|
March
31, 2006
|
62.61
|
49.64
|
59.63
|
|
|
December
31, 2003
|
11.50
|
9.26
|
11.39
|
June
30, 2006
|
68.93
|
55.68
|
66.44
|
|
|
March
31, 2004
|
14.98
|
13.50
|
14.77
|
September
29, 2006
|
67.37
|
48.15
|
51.47
|
|
|
June
30, 2004
|
18.34
|
13.87
|
18.21
|
October
1, 2006 to October 13, 2006
|
53.59
|
48.17
|
53.59
|
JetBlue
Airways Corporation (“JBLU”)
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: $10.10
|
|
·
|
Contingent
Protection Percentage: 70%
|
|
·
|
Contingent
Protection Level: $7.07 ($10.00 x
70%)
|
|
·
|
Exchange
Ratio: 99 ($1,000/$10.10)
|
|
·
|
Coupon:
17.00% per annum, paid semi-annually in arrears ($85.00 to be paid
on the
Maturity Date).
|
|
·
|
The
reinvestment rate on any interest payments made during the term
of the
Notes is assumed to be 0%. The six-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: No dividend
distributed.
|
Example
1
- On the
Calculation Date, the Final Level of $12.12 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 the interest
payment of $85.00 for payments totaling $1,085.00. If you had invested directly
in the Reference Asset for the same six-month period, you would have received
total cash payments of $1,200.00 (number of shares of the Reference Asset
multiplied by the Final Level), assuming liquidation of shares at the Final
Level. You would have earned a 8.50% return with an investment in the Notes
and
a 20.00% return with a direct investment in the Reference Asset.
Example
2
- On the
Calculation Date, the Final Level of $9.09 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
$1,085.00, earning a 8.50% return over the term of the Notes. A direct
investment in the Reference Asset during that same six-month period would
have
generated a return of $900.00 (number of shares of the Reference Asset
multiplied by the Final Level), assuming liquidation of shares at the Final
Level. You would have earned a 8.50% return with an investment in the Notes
and
incurred a loss of 10.00% with a direct investment in the Reference
Asset.
Example
3
- On the
Calculation Date, the Final Level of $6.57 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 the interest payment of $85.00, which is 99 shares
(worth
$6.57 each) plus $0.07 (the Fractional Share Cash Amount) plus $85.00. The
cash
equivalent equals $735.50. If you had invested directly in the Reference
Asset
for the same six-month period, you would have received total cash payments
of
$650.50 (number of shares of the Reference Asset multiplied by the Final
Level),
assuming liquidation of shares at the Final Level. An investment in the Notes
would have resulted in a loss of 26.45%, while a direct investment in the
Reference Asset would have resulted in a loss of 34.95%.
|
|
BEAR,
STEARNS & CO. INC.
|
-10-
|
|
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
|
6-Month
Dividend Yield
|
6-Month
Total Return
|
|
|
10.10
|
12.63
|
$1,000.00
|
8.50%
|
8.50%
|
25.05%
|
0.00%
|
25.05%
|
|
|
10.10
|
12.12
|
$1,000.00
|
8.50%
|
8.50%
|
20.00%
|
0.00%
|
20.00%
|
|
|
10.10
|
11.62
|
$1,000.00
|
8.50%
|
8.50%
|
15.05%
|
0.00%
|
15.05%
|
|
|
10.10
|
11.11
|
$1,000.00
|
8.50%
|
8.50%
|
10.00%
|
0.00%
|
10.00%
|
|
|
10.10
|
10.61
|
$1,000.00
|
8.50%
|
8.50%
|
5.05%
|
0.00%
|
5.05%
|
|
|
10.10
|
10.10
|
$1,000.00
|
8.50%
|
8.50%
|
0.00%
|
0.00%
|
0.00%
|
|
|
10.10
|
9.60
|
$1,000.00
|
8.50%
|
8.50%
|
-4.95%
|
0.00%
|
-4.95%
|
|
|
10.10
|
9.09
|
$1,000.00
|
8.50%
|
8.50%
|
-10.00%
|
0.00%
|
-10.00%
|
|
|
10.10
|
8.59
|
$1,000.00
|
8.50%
|
8.50%
|
-14.95%
|
0.00%
|
-14.95%
|
|
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
|
6-Month
Dividend Yield
|
6-Month
Total Return
|
|
|
10.10
|
12.63
|
$1,000.00
|
8.50%
|
8.50%
|
|
25.05%
|
0.00%
|
25.05%
|
|
10.10
|
12.12
|
$1,000.00
|
8.50%
|
8.50%
|
|
20.00%
|
0.00%
|
20.00%
|
|
10.10
|
11.62
|
$1,000.00
|
8.50%
|
8.50%
|
|
15.05%
|
0.00%
|
15.05%
|
|
10.10
|
11.11
|
$1,000.00
|
8.50%
|
8.50%
|
|
10.00%
|
0.00%
|
10.00%
|
|
10.10
|
10.61
|
$1,000.00
|
8.50%
|
8.50%
|
|
5.05%
|
0.00%
|
5.05%
|
|
10.10
|
10.10
|
$1,000.00
|
8.50%
|
8.50%
|
|
0.00%
|
0.00%
|
0.00%
|
|
10.10
|
9.60
|
$950.50
|
8.50%
|
3.55%
|
|
-4.95%
|
0.00%
|
-4.95%
|
|
10.10
|
9.09
|
$900.00
|
8.50%
|
-1.50%
|
|
-10.00%
|
0.00%
|
-10.00%
|
|
10.10
|
8.59
|
$850.50
|
8.50%
|
-6.45%
|
|
-14.95%
|
0.00%
|
-14.95%
|
|
10.10
|
8.08
|
$800.00
|
8.50%
|
-11.50%
|
|
-20.00%
|
0.00%
|
-20.00%
|
|
10.10
|
7.58
|
$750.50
|
8.50%
|
-16.45%
|
|
-24.95%
|
0.00%
|
-24.95%
|
|
10.10
|
7.07
|
$700.00
|
8.50%
|
-21.50%
|
|
-30.00%
|
0.00%
|
-30.00%
|
|
10.10
|
6.57
|
$650.50
|
8.50%
|
-26.45%
|
|
-34.95%
|
0.00%
|
-34.95%
|
|
10.10
|
6.06
|
$600.00
|
8.50%
|
-31.50%
|
|
-40.00%
|
0.00%
|
-40.00%
|
|
10.10
|
5.56
|
$550.50
|
8.50%
|
-36.45%
|
|
-44.95%
|
0.00%
|
-44.95%
|
|
10.10
|
5.05
|
$500.00
|
8.50%
|
-41.50%
|
|
-50.00%
|
0.00%
|
-50.00%
|
|
10.10
|
4.55
|
$450.50
|
8.50%
|
-46.45%
|
|
-54.95%
|
0.00%
|
-54.95%
|
|
|
BEAR,
STEARNS & CO. INC.
|
-11-
|
|
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
|
|
|
June
28, 2002
|
16.15
|
12.44
|
13.50
|
December
31, 2004
|
17.20
|
13.59
|
15.48
|
|
|
September
30, 2002
|
14.12
|
10.78
|
11.95
|
March
31, 2005
|
15.32
|
11.52
|
12.69
|
|
|
December
31, 2002
|
12.42
|
8.93
|
12.00
|
June
30, 2005
|
15.31
|
12.31
|
13.63
|
|
|
March
31, 2003
|
13.14
|
10.59
|
12.32
|
September
30, 2005
|
15.17
|
11.69
|
11.73
|
|
|
June
30, 2003
|
18.80
|
12.11
|
18.80
|
December
30, 2005
|
15.69
|
11.53
|
15.38
|
|
|
September
30, 2003
|
27.61
|
18.64
|
27.10
|
March
31, 2006
|
14.74
|
9.72
|
10.72
|
|
|
December
31, 2003
|
31.23
|
17.24
|
17.68
|
June
30, 2006
|
12.85
|
8.95
|
12.14
|
|
|
March
31, 2004
|
19.28
|
13.73
|
16.86
|
September
29, 2006
|
12.31
|
9.27
|
9.27
|
|
|
June
30, 2004
|
20.23
|
16.21
|
19.59
|
October
1, 2006 to October 13, 2006
|
10.36
|
9.27
|
10.14
|
|
|
September
30, 2004
|
19.15
|
13.71
|
13.95
|
Dell,
Inc. (“DELL”)
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: $24.00
|
|
·
|
Contingent
Protection Percentage: 80%
|
|
·
|
Contingent
Protection Level: $19.20 ($24.00 x
80%)
|
|
·
|
Exchange
Ratio: 41 ($1,000/$24)
|
|
·
|
Coupon:
12.00% per annum, paid semi-annually in arrears ($60.00 to be paid
on the
Maturity Date).
|
|
·
|
The
reinvestment rate on any interest payments made during the term
of the
Notes is assumed to be 0%. The six-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: No dividend
distributed.
|
Example
1
- On the
Calculation Date, the Final Level of $28.80 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 the interest
payment of $60.00, for payments totaling $1,060.00. If you had invested directly
in the Reference Asset for the same six-month period, you would have received
total cash payments of $1,200.00 (number of shares of the Reference Asset
multiplied by the Final Level), assuming liquidation of shares at the Final
Level. You would have earned a 6.00% return with an investment in the Notes
and
a 20.00% return with a direct investment in the Reference Asset.
Example
2
- On the
Calculation Date, the Final Level of $21.60 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
$1,060.00, earning a 6.00% 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 $900.00 (number of shares of the Reference Asset
multiplied by the Final Level), assuming liquidation of shares at the Final
Level. You would have earned a 6.00% return with an investment in the Notes
and
incurred a loss of 10.00% with a direct investment in the Reference
Asset.
Example
3
- On the
Calculation Date, the Final Level of $16.80 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 the interest payment of $60.00, which is 41 shares
(worth
$16.80 each) plus $11.21 (the Fractional Share Cash Amount) plus $60.00.
The
cash equivalent equals $760.01. If you had invested directly in the Reference
Asset for the same six-month period, you would have received total cash payments
of $700.00 (number of shares of the Reference Asset multiplied by the Final
Level), assuming liquidation of shares at the Final Level. An investment
in the
Notes would have resulted in a loss of 24.00%, while a direct investment
in the
Reference Asset would have resulted in a loss of 30.00%.
|
|
BEAR,
STEARNS & CO. INC.
|
-12-
|
|
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
|
|
|
24.00
|
30.00
|
$1,000.00
|
6.00%
|
6.00%
|
25.00%
|
0.00%
|
25.00%
|
|
|
24.00
|
28.80
|
$1,000.00
|
6.00%
|
6.00%
|
20.00%
|
0.00%
|
20.00%
|
|
|
24.00
|
27.60
|
$1,000.00
|
6.00%
|
6.00%
|
15.00%
|
0.00%
|
15.00%
|
|
|
24.00
|
26.40
|
$1,000.00
|
6.00%
|
6.00%
|
10.00%
|
0.00%
|
10.00%
|
|
|
24.00
|
25.20
|
$1,000.00
|
6.00%
|
6.00%
|
5.00%
|
0.00%
|
5.00%
|
|
|
24.00
|
24.00
|
$1,000.00
|
6.00%
|
6.00%
|
0.00%
|
0.00%
|
0.00%
|
|
|
24.00
|
22.80
|
$1,000.00
|
6.00%
|
6.00%
|
-5.00%
|
0.00%
|
-5.00%
|
|
|
24.00
|
21.60
|
$1,000.00
|
6.00%
|
6.00%
|
-10.00%
|
0.00%
|
-10.00%
|
|
|
24.00
|
20.40
|
$1,000.00
|
6.00%
|
6.00%
|
-15.00%
|
0.00%
|
-15.00%
|
|
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
|
|
|
24.00
|
30.00
|
$1,000.00
|
6.00%
|
6.00%
|
25.00%
|
0.00%
|
25.00%
|
|
|
24.00
|
28.80
|
$1,000.00
|
6.00%
|
6.00%
|
20.00%
|
0.00%
|
20.00%
|
|
|
24.00
|
27.60
|
$1,000.00
|
6.00%
|
6.00%
|
15.00%
|
0.00%
|
15.00%
|
|
|
24.00
|
26.40
|
$1,000.00
|
6.00%
|
6.00%
|
10.00%
|
0.00%
|
10.00%
|
|
|
24.00
|
25.20
|
$1,000.00
|
6.00%
|
6.00%
|
5.00%
|
0.00%
|
5.00%
|
|
|
24.00
|
24.00
|
$1,000.00
|
6.00%
|
6.00%
|
0.00%
|
0.00%
|
0.00%
|
|
|
24.00
|
22.80
|
$950.00
|
6.00%
|
1.00%
|
-5.00%
|
0.00%
|
-5.00%
|
|
|
24.00
|
21.60
|
$900.00
|
6.00%
|
-4.00%
|
-10.00%
|
0.00%
|
-10.00%
|
|
|
24.00
|
20.40
|
$850.01
|
6.00%
|
-9.00%
|
-15.00%
|
0.00%
|
-15.00%
|
|
|
24.00
|
19.20
|
$800.01
|
6.00%
|
-14.00%
|
-20.00%
|
0.00%
|
-20.00%
|
|
|
24.00
|
18.00
|
$750.01
|
6.00%
|
-19.00%
|
-25.00%
|
0.00%
|
-25.00%
|
|
|
24.00
|
16.80
|
$700.01
|
6.00%
|
-24.00%
|
-30.00%
|
0.00%
|
-30.00%
|
|
|
24.00
|
15.60
|
$650.01
|
6.00%
|
-29.00%
|
-35.00%
|
0.00%
|
-35.00%
|
|
|
24.00
|
14.40
|
$600.00
|
6.00%
|
-34.00%
|
-40.00%
|
0.00%
|
-40.00%
|
|
|
24.00
|
13.20
|
$550.00
|
6.00%
|
-39.00%
|
-45.00%
|
0.00%
|
-45.00%
|
|
|
24.00
|
12.00
|
$500.00
|
6.00%
|
-44.00%
|
-50.00%
|
0.00%
|
-50.00%
|
|
|
24.00
|
10.80
|
$450.00
|
6.00%
|
-49.00%
|
-55.00%
|
0.00%
|
-55.00%
|
|
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
|
|
|
March
28, 2002
|
29.64
|
23.76
|
26.11
|
September
30, 2004
|
36.18
|
33.12
|
35.60
|
|
|
June
28, 2002
|
27.95
|
22.33
|
26.14
|
December
31, 2004
|
42.39
|
34.25
|
42.14
|
|
|
September
30, 2002
|
28.43
|
22.61
|
23.51
|
March
31, 2005
|
41.82
|
38.04
|
38.42
|
|
|
December
31, 2002
|
30.94
|
24.64
|
26.74
|
June
30, 2005
|
40.77
|
34.83
|
39.51
|
|
|
March
31, 2003
|
28.78
|
22.86
|
27.31
|
September
30, 2005
|
41.54
|
33.37
|
34.20
|
|
|
June
30, 2003
|
32.46
|
27.21
|
31.96
|
December
30, 2005
|
33.97
|
28.85
|
29.99
|
|
|
September
30, 2003
|
34.91
|
30.92
|
33.39
|
March
31, 2006
|
32.00
|
28.90
|
29.76
|
|
|
December
31, 2003
|
36.99
|
32.65
|
33.96
|
June
30, 2006
|
29.85
|
23.63
|
24.41
|
|
|
March
31, 2004
|
36.02
|
31.14
|
33.62
|
September
29, 2006
|
24.59
|
19.94
|
22.84
|
|
|
June
30, 2004
|
36.67
|
34.03
|
35.82
|
October
1, 2006 to October 13, 2006
|
23.97
|
22.72
|
23.97
|
|
|
BEAR,
STEARNS & CO. INC.
|
-13-
|
|
STRUCTURED
PRODUCTS
GROUP
|
|
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.
|
Reference
Asset
|
Term
to Maturity
|
Coupon
Rate, per Annum
|
Yield
on the Deposit, per Annum
|
Put
Premium, per Annum
|
|
SanDisk
Corporation
|
1-year
|
[16.75]%
|
[●]%
|
[●]%
|
|
Valero
Energy Corporation
|
1-year
|
[12.00]%
|
[●]%
|
[●]%
|
|
JetBlue
Airways Corporation
|
6-months
|
[17.00]%
|
[●]%
|
[●]%
|
|
Dell,
Inc.
|
6-months
|
[12.00]%
|
[●]%
|
[●]%
|
|
|
BEAR,
STEARNS & CO. INC.
|
-14-