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Filed
Pursuant to Rule 433
Registration
No. 333−136666
February
27, 2008
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STRUCTURED
EQUITY PRODUCTS
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 |
New
Issues
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Indicative
Terms
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 |
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The
Bear Stearns Companies Inc.
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Reverse
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INVESTMENT
HIGHLIGHTS
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Convertible
Note
Securities |
·
Two
separate Note offerings; each linked to one of the listed American
Depositary Shares or common stock, as applicable,
(each, a “Reference Asset”) identified below. You may elect to participate
in either or both of the Note
offerings. Please note that the Notes each have a six-month term
to
maturity.
·
Each
of the Notes pays a fixed rate coupon; payable as a single cash
payment at
Maturity, each equal to one-half of
the applicable Coupon Rate times the applicable principal amount
of the
Notes, in arrears. Interest will be computed
using a 360-day year of twelve 30-day months,
unadjusted.
·
Each
of the Notes is a direct obligation of The Bear Stearns Companies
Inc.
(Rated A2 by Moody’s / A by S&P / A
by
DBRS Limited).
·
Issue
price for each Note offering: [100]% of principal amount
($1,000).
·
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.
·
Neither
of the Notes participate 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 two separate Note offerings)
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Symbol
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Term
to Maturity
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Coupon
Rate,
per Annum
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Contingent
Protection Percentage
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Initial
Public Offering Price
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Elan
Corporation, plc, American Depositary Shares, traded on the
NYSE
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ELN
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6-months
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[25.00]%
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[80]%
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[100]%
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Celgene
Corporation, common stock, traded on the NASDAQ
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CELG
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6-months
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[18.00]%
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[80]%
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[100]%
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BEAR,
STEARNS & CO. INC.
STRUCTURED
PRODUCTS GROUP
(212)
272-6928
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The
issuer has filed a registration statement (including a prospectus)
with
the SEC for the two 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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STRUCTURED
PRODUCTS GROUP
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GENERAL
TERMS FOR THE NOTE
OFFERINGS
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This
free
writing prospectus relates to two separate offerings of Notes each linked
to a
different Reference Asset. A
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 two
Note offerings or, at your election, in both offerings. 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 either
of
such Reference Assets 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:
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The
Bear Stearns Companies Inc.
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Issuer’s
Rating:
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A2
/
A / A (Moody’s / S&P/ DBRS Limited)
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Principal
Amount of Offerings:
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(1)
For the Note linked to the American Depositary Shares (“ADSs”) of Elan
Corporation, plc (“Elan”): [●].
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(2)
For the Note linked to the common stock of Celgene Corporation
(“Celgene”): [●].
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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 ADSs of Elan are traded on the New York Stock Exchange, Inc.
(“NYSE”)
under the symbol “ELN.”
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(2)
The common stock of Celgene is traded on the Nasdaq Stock Market,
Inc.
(“NASDAQ”) under the symbol “CELG.”
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Selling
Period Ends:
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February
[●], 2008.
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Pricing
Date:
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February
[●], 2008.
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Settlement
Date:
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March
[●], 2008.
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Calculation
Date:
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(1)
For the Note linked to the ADSs of Elan, September [●], 2008.
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(2)
For the Note linked to the common stock of Celgene, September [●], 2008.
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Maturity
Date:
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(1) For
the Note linked to the ADSs of Elan, September [●], 2008.
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(2)
For the Note linked to the common stock of Celgene, September [●], 2008.
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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 twelve 30-day months, unadjusted.
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Contingent
Protection Percentages:
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See
cover page for applicable Contingent Protection
Percentages.
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Contingent
Protection Level:
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For
the Note linked to the ADSs of Elan, [●] (applicable Contingent Protection
Percentage x applicable Initial Level).
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For
the Note linked to the common stock of Celgene, [●] (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.
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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 ADSs of Elan, September [●], 2008.
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(2)
For the Note linked to the common stock of Celgene, September [●],
2008.
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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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For
the Note linked to the ADSs of Elan, [●], i.e., $1,000 divided by the
applicable Initial Level (rounded down to the nearest whole number,
with
fractional shares to be paid in cash).
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For
the Note linked to the common stock of Celgene, [●], i.e., $1,000 divided
by the applicable Initial Level (rounded down to the nearest whole
number,
with fractional shares to be paid in cash).
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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 ADSs
of Elan:
[073902QF8].
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For
the Notes linked to the common
stock of Celgene:
[073902QG6].
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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
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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:
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·
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Prospectus
Supplement, dated August 16, 2006:
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·
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Prospectus,
dated August 16, 2006:
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SELECTED
RISK CONSIDERATIONS
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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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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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·
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Taxes —
We
intend to treat the Notes 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
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. Recently,
the
Internal Revenue Service (“IRS”) and the Treasury Department issued Notice
2008-2 under which they requested comments as to whether the purchaser
of certain notes (which may include the Notes) should be
required to accrue income during its term under a mark-to-market,
accrual
or other methodology, whether income and gain on such a note or
contract
should be ordinary or capital, and whether foreign holders should
be
subject to withholding tax on any deemed income accrual. Accordingly,
it
is possible that regulations or other guidance could provide that
a U.S.
Holder of a Note is required to accrue income in respect of the
Note prior
to the receipt of payments under the Note or its earlier sale.
Moreover,
it is possible that any such regulations or other guidance could
treat all
income and gain of a U.S. holder in respect of a note as ordinary
income
(including gain on a sale). Finally, it is possible that a Non-U.S.
Holder of the Note could be subject to U.S. withholding tax in
respect
of the Note. It is unclear whether any regulations or other guidance
would apply to the Notes (possibly on a retroactive basis). Prospective
investors are urged to consult with their tax advisors regarding
Notice
2008-2 and the possible effect to them of the issuance of regulations
or
other guidance that affects the federal income tax treatment of
the
Notes. See “Certain U.S. Federal Income Tax Considerations”
below.
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BEAR,
STEARNS & CO. INC.
-3-
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STRUCTURED
PRODUCTS GROUP
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·
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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 or American Depositary Shares (“ADSs”), of a successor
corporation to the underlying company, based on the Closing Price
of such
successor’s common stock or ADSs, as applicable. 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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|
·
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ADSs
of Elan Corporation, plc (“Elan”), which are quoted and traded in the
U.S., may trade differently from Elan ordinary shares, which are
quoted
and traded in Euros—
Fluctuations in the exchange rate between the Euro and the U.S.
Dollar may
affect the U.S. Dollar equivalent of the Euro price of Elan ordinary
shares on the Irish Stock Exchange and, as a result, may affect
the market
price of the ADSs of Elan, which may consequently affect the market
value
of the Notes.
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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 payable
on
the Maturity Date will be payable to the person to whom principal is payable.
Interest will be computed using a 360-day year of twelve 30-day months,
unadjusted.
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.
The
following scenarios and graphs generally illustrate how the Cash Settlement
Value of the Reverse Convertible Note Securities is determined:
BEAR,
STEARNS & CO. INC.
-4-
|
STRUCTURED
PRODUCTS GROUP
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BEAR,
STEARNS & CO. INC.
-5-
|
STRUCTURED
PRODUCTS GROUP
|
|
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.
Elan
Corporation, plc (“ELN”)
The
stock
of Elan Corporation, plc (“Elan”) is traded in the U.S. market in the form of
American Depositary Shares (“ADSs”) on the New York Stock Exchange under the
symbol “ELN.” Each ADS represents one ordinary share, par value €0.50 each, of
Elan’s stock. Elan is a neuroscience-based biotechnology company
headquartered in Dublin, Ireland. Elan engages in research, development and
commercial activities in the areas of autoimmune diseases, and neurodegenerative
diseases, and also is engaged in product development, scale-up and manufacturing
of such products. Elan’s
SEC file number is 001-13896.
Celgene
Corporation (“CELG”)
Celgene
Corporation (“Celgene”) common stock, par value $.01 per share, trades on the
Nasdaq Stock Market, Inc. under the symbol “CELG.” Celgene, headquartered in
Summit, NJ, is a global integrated biopharmaceutical company primarily engaged
in the discovery, development and commercialization of innovative therapies
designed to treat cancer and immune-inflammatory related diseases. Celgene’s
SEC file number is 0-
16132.
|
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.
Elan
Corporation, plc (“ELN”)
Assumptions:
|
·
|
Investor
purchases $1,000.00 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: $ 25.00
|
|
·
|
Contingent
Protection Percentage: 80%
|
|
·
|
Contingent
Protection Level: $ 20.00 ($25.00 x
80%)
|
|
·
|
Exchange
Ratio: 40 ($1,000.00/$25.00)
|
|
·
|
Coupon:
25.00% per annum, payable as a single payment at maturity equal
to
one-half of the coupon, in arrears.
|
|
·
|
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.
|
BEAR,
STEARNS & CO. INC.
-6-
|
STRUCTURED
PRODUCTS GROUP
|
|
·
|
Assumes
cash settlement at maturity.
|
|
·
|
Maturity:
Six months.
|
|
·
|
Dividend
and dividend yield on the Reference Asset: No dividend distributed.
|
Example
1
- On the
Calculation Date, the Final Level of $30.00 is greater than the Initial Level,
resulting in a payment at maturity of $1,000.00, regardless of whether the
Contingent Protection Level was ever reached or breached, plus one interest
payment of $125.00, for payments totaling $1,125.00. 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 12.50% 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 $22.50 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 a total payment of
$1,125.00, earning a 12.50% 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 12.50% 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 $17.50 is below the Initial Level and
also
is below the Contingent Protection Level. At our election, an investor would
receive a cash payment in the amount of $700.00 plus one interest payment
of
$125.00, for payments totaling $825.00. If you had invested directly in the
Reference Asset for the same six-month period, you would have received a
total cash payment 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 17.50%,
while
a direct investment in the Reference Asset would have resulted in a loss
of
30.00%.
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
|
|
|
25.00
|
32.50
|
$1,000.00
|
12.50%
|
12.50%
|
30.00%
|
0.00%
|
30.00%
|
|
|
25.00
|
31.25
|
$1,000.00
|
12.50%
|
12.50%
|
25.00%
|
0.00%
|
25.00%
|
|
|
25.00
|
30.00
|
$1,000.00
|
12.50%
|
12.50%
|
20.00%
|
0.00%
|
20.00%
|
|
|
25.00
|
28.75
|
$1,000.00
|
12.50%
|
12.50%
|
15.00%
|
0.00%
|
15.00%
|
|
|
25.00
|
27.50
|
$1,000.00
|
12.50%
|
12.50%
|
10.00%
|
0.00%
|
10.00%
|
|
|
25.00
|
26.25
|
$1,000.00
|
12.50%
|
12.50%
|
5.00%
|
0.00%
|
5.00%
|
|
|
25.00
|
25.00
|
$1,000.00
|
12.50%
|
12.50%
|
0.00%
|
0.00%
|
0.00%
|
|
|
25.00
|
23.75
|
$1,000.00
|
12.50%
|
12.50%
|
-5.00%
|
0.00%
|
-5.00%
|
|
|
25.00
|
22.50
|
$1,000.00
|
12.50%
|
12.50%
|
-10.00%
|
0.00%
|
-10.00%
|
|
|
25.00
|
21.25
|
$1,000.00
|
12.50%
|
12.50%
|
-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
|
|
|
25.00
|
31.25
|
$1,000.00
|
12.50%
|
12.50%
|
25.00%
|
0.00%
|
25.00%
|
|
|
25.00
|
30.00
|
$1,000.00
|
12.50%
|
12.50%
|
20.00%
|
0.00%
|
20.00%
|
|
BEAR,
STEARNS & CO. INC.
-7-
|
STRUCTURED
PRODUCTS GROUP
|
|
25.00
|
28.75
|
$1,000.00
|
12.50%
|
12.50%
|
15.00%
|
0.00%
|
15.00%
|
|
|
25.00
|
27.50
|
$1,000.00
|
12.50%
|
12.50%
|
10.00%
|
0.00%
|
10.00%
|
|
|
25.00
|
26.25
|
$1,000.00
|
12.50%
|
12.50%
|
5.00%
|
0.00%
|
5.00%
|
|
|
25.00
|
25.00
|
$1,000.00
|
12.50%
|
12.50%
|
0.00%
|
0.00%
|
0.00%
|
|
|
25.00
|
23.75
|
$950.00
|
12.50%
|
7.50%
|
-5.00%
|
0.00%
|
-5.00%
|
|
|
25.00
|
22.50
|
$900.00
|
12.50%
|
2.50%
|
-10.00%
|
0.00%
|
-10.00%
|
|
|
25.00
|
21.25
|
$850.00
|
12.50%
|
-2.50%
|
-15.00%
|
0.00%
|
-15.00%
|
|
|
25.00
|
20.00
|
$800.00
|
12.50%
|
-7.50%
|
-20.00%
|
0.00%
|
-20.00%
|
|
|
25.00
|
18.75
|
$750.00
|
12.50%
|
-12.50%
|
-25.00%
|
0.00%
|
-25.00%
|
|
|
25.00
|
17.50
|
$700.00
|
12.50%
|
-17.50%
|
-30.00%
|
0.00%
|
-30.00%
|
|
|
25.00
|
16.25
|
$650.00
|
12.50%
|
-22.50%
|
-35.00%
|
0.00%
|
-35.00%
|
|
|
25.00
|
15.00
|
$600.00
|
12.50%
|
-27.50%
|
-40.00%
|
0.00%
|
-40.00%
|
|
|
25.00
|
13.75
|
$550.00
|
12.50%
|
-32.50%
|
-45.00%
|
0.00%
|
-45.00%
|
|
|
25.00
|
12.50
|
$500.00
|
12.50%
|
-37.50%
|
-50.00%
|
0.00%
|
-50.00%
|
|
|
25.00
|
11.25
|
$450.00
|
12.50%
|
-42.50%
|
-55.00%
|
0.00%
|
-55.00%
|
The
following table sets forth, on a per share basis, the quarterly high and
low
trading 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, 2002
|
3.09
|
1.03
|
2.46
|
|
September
30, 2005
|
9.49
|
6.72
|
8.86
|
|
|
March
31, 2003
|
4.98
|
2.25
|
2.79
|
|
December
30, 2005
|
14.51
|
7.62
|
13.93
|
|
|
June
30, 2003
|
9.02
|
2.70
|
5.64
|
|
March
31, 2006
|
16.83
|
11.88
|
14.44
|
|
|
September
30, 2003
|
6.46
|
4.05
|
5.29
|
|
June
30, 2006
|
19.42
|
14.06
|
16.70
|
|
|
December
31, 2003
|
7.07
|
4.72
|
6.89
|
|
September
29, 2006
|
16.85
|
13.14
|
15.60
|
|
|
March
31, 2004
|
21.02
|
6.88
|
20.62
|
|
December
29, 2006
|
16.15
|
13.80
|
14.75
|
|
|
June
30, 2004
|
25.60
|
19.10
|
24.74
|
|
March
30, 2007
|
15.10
|
11.70
|
13.29
|
|
|
September
30, 2004
|
25.90
|
16.45
|
23.40
|
|
June
29, 2007
|
22.40
|
13.31
|
21.93
|
|
|
December
31, 2004
|
30.45
|
20.52
|
27.25
|
|
September
28, 2007
|
23.11
|
16.37
|
21.04
|
|
|
March
31, 2005
|
29.93
|
3.00
|
3.24
|
|
December
31, 2007
|
24.90
|
20.90
|
21.98
|
|
|
June
30, 2005
|
8.42
|
3.30
|
6.82
|
|
January
2, 2008 to
February 26, 2008 |
26.88
|
21.31
|
24.31
|
|
Celgene
Corporation (“CELG”)
Assumptions:
|
·
|
Investor
purchases $1,000.00 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: $ 57.00
|
|
·
|
Contingent
Protection Percentage: 80%
|
|
·
|
Contingent
Protection Level: $45.60 ($57.00 x
80%)
|
|
·
|
Exchange
Ratio: 17 ($1,000.00/$57.00)
|
|
·
|
Coupon:
18.00% per annum, payable as a single payment at maturity equal
to
one-half of the coupon, in
arrears..
|
|
·
|
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
|
BEAR,
STEARNS & CO. INC.
-8-
|
STRUCTURED
PRODUCTS GROUP
|
|
·
|
Assumes
cash settlement at maturity.
|
|
·
|
Maturity:
Six-months.
|
|
·
|
Dividend
and dividend yield on the Reference Asset: No dividend distributed.
|
Example
1
- On the
Calculation Date, the Final Level of $68.40 is greater than the Initial
Level,
resulting in a payment at maturity of $1,000.00, regardless of whether
the
Contingent Protection Level was ever reached or breached, plus one interest
payment of $90.00, for payments totaling $1,090.00. 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 9.00% 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 $51.30 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
$1,090.00, earning a 9.00% 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 9.00% 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 $39.90 is below the Initial Level
and also
is below the Contingent Protection Level. At our election, an investor
would
receive a cash payment in the amount of $700.00 plus one interest payment
of
$90.00, for payments totaling $790.00. 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 21.00%, while
a direct
investment in the Reference Asset would have resulted in a loss of
30.00%.
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
|
|
|
57.00
|
74.10
|
$1,000.00
|
9.00%
|
9.00%
|
30.00%
|
0.00%
|
30.00%
|
|
|
57.00
|
71.25
|
$1,000.00
|
9.00%
|
9.00%
|
25.00%
|
0.00%
|
25.00%
|
|
|
57.00
|
68.40
|
$1,000.00
|
9.00%
|
9.00%
|
20.00%
|
0.00%
|
20.00%
|
|
|
57.00
|
65.55
|
$1,000.00
|
9.00%
|
9.00%
|
15.00%
|
0.00%
|
15.00%
|
|
|
57.00
|
62.70
|
$1,000.00
|
9.00%
|
9.00%
|
10.00%
|
0.00%
|
10.00%
|
|
|
57.00
|
59.85
|
$1,000.00
|
9.00%
|
9.00%
|
5.00%
|
0.00%
|
5.00%
|
|
|
57.00
|
57.00
|
$1,000.00
|
9.00%
|
9.00%
|
0.00%
|
0.00%
|
0.00%
|
|
|
57.00
|
54.15
|
$1,000.00
|
9.00%
|
9.00%
|
-5.00%
|
0.00%
|
-5.00%
|
|
|
57.00
|
51.30
|
$1,000.00
|
9.00%
|
9.00%
|
-10.00%
|
0.00%
|
-10.00%
|
|
|
57.00
|
48.45
|
$1,000.00
|
9.00%
|
9.00%
|
-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)
|
1-Year
Total Return
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
1-Year
Total Return
|
|
|
57.00
|
71.25
|
$1,000.00
|
9.00%
|
9.00%
|
25.00%
|
0.00%
|
25.00%
|
|
|
57.00
|
68.40
|
$1,000.00
|
9.00%
|
9.00%
|
20.00%
|
0.00%
|
20.00%
|
|
|
57.00
|
65.55
|
$1,000.00
|
9.00%
|
9.00%
|
15.00%
|
0.00%
|
15.00%
|
|
|
57.00
|
62.70
|
$1,000.00
|
9.00%
|
9.00%
|
10.00%
|
0.00%
|
10.00%
|
|
BEAR,
STEARNS & CO. INC.
-9-
|
STRUCTURED
PRODUCTS GROUP
|
|
57.00
|
59.85
|
$1,000.00
|
9.00%
|
9.00%
|
5.00%
|
0.00%
|
5.00%
|
|
|
57.00
|
57.00
|
$1,000.00
|
9.00%
|
9.00%
|
0.00%
|
0.00%
|
0.00%
|
|
|
57.00
|
54.15
|
$950.00
|
9.00%
|
4.00%
|
-5.00%
|
0.00%
|
-5.00%
|
|
|
57.00
|
51.30
|
$900.00
|
9.00%
|
-1.00%
|
-10.00%
|
0.00%
|
-10.00%
|
|
|
57.00
|
48.45
|
$850.00
|
9.00%
|
-6.00%
|
-15.00%
|
0.00%
|
-15.00%
|
|
|
57.00
|
45.60
|
$800.00
|
9.00%
|
-11.00%
|
-20.00%
|
0.00%
|
-20.00%
|
|
|
57.00
|
42.75
|
$750.00
|
9.00%
|
-16.00%
|
-25.00%
|
0.00%
|
-25.00%
|
|
|
57.00
|
39.90
|
$700.00
|
9.00%
|
-21.00%
|
-30.00%
|
0.00%
|
-30.00%
|
|
|
57.00
|
37.05
|
$650.00
|
9.00%
|
-26.00%
|
-35.00%
|
0.00%
|
-35.00%
|
|
|
57.00
|
34.20
|
$600.00
|
9.00%
|
-31.00%
|
-40.00%
|
0.00%
|
-40.00%
|
|
|
57.00
|
31.35
|
$550.00
|
9.00%
|
-36.00%
|
-45.00%
|
0.00%
|
-45.00%
|
|
|
57.00
|
28.50
|
$500.00
|
9.00%
|
-41.00%
|
-50.00%
|
0.00%
|
-50.00%
|
|
|
57.00
|
25.65
|
$450.00
|
9.00%
|
-46.00%
|
-55.00%
|
0.00%
|
-55.00%
|
The
following table sets forth on a per share basis the quarterly high and
low
trading 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, 2002
|
6.38
|
3.77
|
5.37
|
|
September
30, 2005
|
29.41
|
19.78
|
27.16
|
|
|
March
31, 2003
|
6.99
|
5.04
|
6.52
|
|
December
30, 2005
|
32.68
|
22.59
|
32.40
|
|
|
June
30, 2003
|
9.28
|
6.18
|
7.60
|
|
March
31, 2006
|
44.22
|
31.51
|
44.22
|
|
|
September
30, 2003
|
12.22
|
7.13
|
10.83
|
|
June
30, 2006
|
48.39
|
36.02
|
47.43
|
|
|
December
31, 2003
|
12.04
|
9.13
|
11.26
|
|
September
29, 2006
|
49.41
|
39.32
|
43.30
|
|
|
March
31, 2004
|
12.23
|
9.38
|
11.91
|
|
December
29, 2006
|
60.12
|
41.68
|
57.53
|
|
|
June
30, 2004
|
15.15
|
11.25
|
14.32
|
|
March
30, 2007
|
58.60
|
49.46
|
52.46
|
|
|
September
30, 2004
|
15.05
|
11.67
|
14.56
|
|
June
29, 2007
|
66.95
|
52.40
|
57.33
|
|
|
December
31, 2004
|
16.29
|
12.88
|
13.27
|
|
September
28, 2007
|
72.23
|
56.56
|
71.31
|
|
|
March
31, 2005
|
17.62
|
12.36
|
17.03
|
|
December
31, 2007
|
75.44
|
41.26
|
46.21
|
|
|
June
30, 2005
|
21.58
|
16.61
|
20.39
|
|
January
2, 2008 to
February 26, 2008 |
59.99
|
46.07
|
56.63
|
|
|
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.
BEAR,
STEARNS & CO. INC.
-10-
|
STRUCTURED
PRODUCTS GROUP
|
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.
Recently,
the Internal Revenue Service (“IRS”) and the Treasury Department issued Notice
2008-2 under which they requested comments as to whether the purchaser
of certain notes (which may include the Notes) should be required
to accrue income during its term under a mark-to-market, accrual or other
methodology, whether income and gain on such a note or contract should be
ordinary or capital , and whether foreign holders should be subject to
withholding tax on any deemed income accrual. Accordingly, it is possible
that
regulations or other guidance could provide that a U.S. Holder of a Note
is
required to accrue income in respect of the Note prior to the receipt of
payments under the Note or its earlier sale. Moreover, it is possible that
any
such regulations or other guidance could treat all income and gain of a U.S.
holder in respect of a note as ordinary income (including gain on a sale).
Finally, it is possible that a Non-U.S. Holder of the Note could be subject
to
U.S. withholding tax in respect of the Note. It is unclear whether any
regulations or other guidance would apply to the Notes (possibly on a
retroactive basis). Prospective investors are urged to consult with their
tax
advisors regarding Notice 2008-2 and the possible effect to them of the issuance
of regulations or other guidance that affects the federal income tax treatment
of the Notes.
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
|
|
American
Depositary Shares of Elan Corporation, plc.
|
6-months
|
[25.00]%
|
[3.92]%
|
[21.08]%
|
|
Celgene
Corporation
|
6-months
|
[18.00]%
|
[3.92]%
|
[14.08]%
|
BEAR,
STEARNS & CO. INC.
-11-