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Filed
Pursuant to Rule 433
Registration
No. 333−136666
March
3, 2008
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New
Issue
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Indicative
Terms
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 |
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THE
BEAR STEARNS COMPANIES INC.
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INVESTMENT
HIGHLIGHTS
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Reverse
Convertible
Note
Securities
|
·
Two
separate Note offerings; each linked to one of
the listed common stocks,
(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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JPMorgan
Chase & Co., common stock, traded on the NYSE
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JPM
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6-months
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[16.80]%
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[80]%
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[100]%
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Intel
Corporation, common stock, traded on the NASDAQ
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INTC
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6-months
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[14.10]%
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[80]%
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[100]%
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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 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 common stock of JPMorgan Chase & Co.
(“JPMorgan Chase”): [●].
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(2)
For the Note linked to the common stock of Intel Corporation
(“Intel”):
[●].
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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 JPMorgan Chase is traded on the New York
Stock
Exchange, Inc. (“NYSE”) under the symbol “JPM.”
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(2)
The common stock of Intel is traded on the Nasdaq Stock Market,
Inc.
(“NASDAQ”) under the symbol “INTC.”
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SELLING
PERIOD ENDS:
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March
[●], 2008.
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PRICING
DATE:
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March
[●], 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 common stock of JPMorgan Chase,
September [●],
2008.
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(2)
For the Note linked to the common stock of Intel, September
[●], 2008.
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MATURITY
DATE:
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(1) For
the Note linked to the common stock of JPMorgan Chase, September
[●],
2008.
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(2)
For the Note linked to the common stock of Intel, 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 common stock of JPMorgan Chase, [●] (applicable
Contingent Protection Percentage x applicable Initial
Level).
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For
the Note linked to the common stock of Intel, [●] (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 DATE:
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(1)
For the Note linked to the common stock of JPMorgan Chase,
the Maturity
Date.
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(2)
For the Note linked to the common stock of Intel, the Maturity
Date.
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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 common stock of JPMorgan Chase, [●], 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 Intel, [●], 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 common
stock of JPMorgan Chase:
[073902QH4].
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For
the Notes linked to the common
stock of Intel:
[073902QJ0].
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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
|
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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|
·
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Return
Limited to Coupon — Your
return is limited to the principal amount you invest plus the
coupon
payments. You will not participate in any appreciation in the
value of the
applicable Reference Asset.
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·
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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.
|
-3-
|
STRUCTURED
PRODUCTS
GROUP
|
|
·
|
The
Notes Are Subject to Equity Market Risks—
The
Notes involve exposure to price movements in the equity
securities to
which they are respectively linked. Equity securities price
movements are
difficult to predict, and equity securities may be subject
to volatile
increases or decreases in value.
|
|
·
|
Each
of the Notes May be Affected by Certain Corporate Events
and You Will Have
Limited Antidilution Protection —
Following certain corporate events relating to the underlying
applicable
Reference Asset (where the underlying company is not the
surviving
entity), you will receive at maturity, cash or a number
of shares of the
common stock, of a successor corporation to the underlying
company, based
on the Closing Price of such successor’s common stock. The Calculation
Agent for each of the Notes will adjust the amount payable
at maturity by
adjusting the Initial Level of the applicable Reference
Asset, Contingent
Protection Level, Contingent Protection Percentage and
Exchange Ratio for
certain events affecting the applicable Reference Asset,
such as stock
splits and stock dividends and certain other corporate
events involving an
underlying company. However, the Calculation Agent is not
required to make
an adjustment for every corporate event that can affect
the applicable
Reference Asset. If an event occurs that is perceived by
the market to
dilute the applicable Reference Asset but that does not
require the
Calculation Agent to adjust the amount of the applicable
Reference Asset
payable at maturity, the market value of the Notes and
the amount payable
at maturity may be materially and adversely
affected.
|
|
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
|
|
Scenario
1
|
 |
 |
|
Outcome
The
Cash Settlement Value equals 100% of the principal amount of
the Notes.
The share price generally increased over the term of the Note
and never
breached the Contingent Protection
Level.
|
|
Scenario
2
The
price of the underlying shares generally declines over the
term of the
Note. The Contingent Protection Level is never breached.
|
|
 |
|
Outcome
The
Cash Settlement Value equals 100% of the principal amount of
the Notes.
The share price decreased over the term of the Note and at
maturity was
below the Initial Level, but never breached the Contingent
Protection
Level.
|
|
Scenario
3
The
price of the underlying shares declines over the term of the
Note. The
Contingent Protection Level is breached.
|
|
 |
|
Outcome
The
Cash Settlement Value is less than the principal amount of
the Notes,
reflecting the percentage decline in the underlying shares
below the
Initial Level. The Contingent Protection Level is breached
so there is no
principal protection.
|
|
Scenario
4
The
price of the underlying shares declines below the Contingent
Protection
Level, but ultimately recovers to finish above its Initial
Level.
|
|
 |
|
Outcome
The
Cash Settlement Value equals 100% of the principal amount of
the Notes.
Even though the share price decreased below the Contingent
Protection
Level during the term of the Note, by the Calculation Date
the underlying
share price was above the Initial Level.
|
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.
JPMorgan
Chase & Co. (“JPM”)
JPMorgan
Chase & Co. (“JPMorgan Chase”) common stock, par value $1.00 per share,
trades on the New York Stock Exchange under the symbol “JPM.” JPMorgan Chase is
a financial holding company. JPMorgan Chase, through its subsidiaries
and
affiliates, is engaged in investment banking, retail financial
services, card
services, commercial banking, treasury services, securities services,
asset
management, and private equity. JPMorgan Chase’s
SEC file number is 1-5805.
Intel
Corporation (“INTC”)
Intel
Corporation (“Intel”) common stock, par value $.001 per share, trades on the
Nasdaq Stock Market under the symbol “INTC.” Intel is a developer and
manufacturer of semiconductor chips. Intel also develops and manufactures
digital technology products including integrated circuits, microprocessors,
memory products, connectivity products and software. Intel’s
SEC file number is 000- 06217.
|
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.
JPMorgan
Chase & Co.
(“JPM”)
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: $ 42.50.
|
|
·
|
Contingent
Protection Percentage: 80%.
|
|
·
|
Contingent
Protection Level: $ 34.00 ($42.50 x
80%).
|
|
·
|
Exchange
Ratio: 23 ($1,000.00/$42.50).
|
|
·
|
Coupon:
16.80% 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.
|
|
·
|
Assumes
cash settlement at
maturity.
|
BEAR,
STEARNS & CO.
INC.
-6-
|
STRUCTURED
PRODUCTS
GROUP
|
|
·
|
Maturity:
Six months.
|
|
·
|
Dividend
and dividend yield on the Reference Asset: $1.52 and
3.58%.
|
Example
1
- On the
Calculation Date, the Final Level of $51.00 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 $84.00, for payments totaling $1,084.00. If you had
invested directly
in the Reference Asset for the same six-month period, you would
have received
total cash payments of $1,217.88 (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 an 8.40%
return with an
investment in the Notes and a 21.79% return with a direct investment
in the
Reference Asset.
Example
2
- On the
Calculation Date, the Final Level of $38.25 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
$1,084.00, earning a 8.40% 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 $917.88 (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 an 8.40%
return with an
investment in the Notes and incurred a loss of 8.21% with a direct
investment in
the Reference Asset.
Example
3
- On the
Calculation Date, the Final Level of $29.75 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
$84.00, for payments totaling $784.00. If you had invested directly
in the
Reference Asset for the same one-year period, you would have
received a total
cash payment of $717.88 (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
21.60%, while a direct investment in the Reference Asset would
have resulted in
a loss of 28.21%.
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
|
|
|
42.50
|
55.25
|
$1,000.00
|
8.40%
|
8.40%
|
30.00%
|
1.79%
|
31.79%
|
|
|
42.50
|
53.13
|
$1,000.00
|
8.40%
|
8.40%
|
25.01%
|
1.79%
|
26.79%
|
|
|
42.50
|
51.00
|
$1,000.00
|
8.40%
|
8.40%
|
20.00%
|
1.79%
|
21.79%
|
|
|
42.50
|
48.88
|
$1,000.00
|
8.40%
|
8.40%
|
15.01%
|
1.79%
|
16.79%
|
|
|
42.50
|
46.75
|
$1,000.00
|
8.40%
|
8.40%
|
10.00%
|
1.79%
|
11.79%
|
|
|
42.50
|
44.63
|
$1,000.00
|
8.40%
|
8.40%
|
5.01%
|
1.79%
|
6.79%
|
|
|
42.50
|
42.50
|
$1,000.00
|
8.40%
|
8.40%
|
0.00%
|
1.79%
|
1.79%
|
|
|
42.50
|
40.38
|
$1,000.00
|
8.40%
|
8.40%
|
-4.99%
|
1.79%
|
-3.21%
|
|
|
42.50
|
38.25
|
$1,000.00
|
8.40%
|
8.40%
|
-10.00%
|
1.79%
|
-8.21%
|
|
|
42.50
|
36.13
|
$1,000.00
|
8.40%
|
8.40%
|
-14.99%
|
1.79%
|
-13.21%
|
|
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
|
|
|
42.50
|
53.13
|
$1,000.00
|
8.40%
|
8.40%
|
25.01%
|
1.79%
|
26.79%
|
|
|
42.50
|
51.00
|
$1,000.00
|
8.40%
|
8.40%
|
20.00%
|
1.79%
|
21.79%
|
|
|
42.50
|
48.88
|
$1,000.00
|
8.40%
|
8.40%
|
15.01%
|
1.79%
|
16.79%
|
|
|
42.50
|
46.75
|
$1,000.00
|
8.40%
|
8.40%
|
10.00%
|
1.79%
|
11.79%
|
|
|
42.50
|
44.63
|
$1,000.00
|
8.40%
|
8.40%
|
5.01%
|
1.79%
|
6.79%
|
|
|
42.50
|
42.50
|
$1,000.00
|
8.40%
|
8.40%
|
0.00%
|
1.79%
|
1.79%
|
|
|
42.50
|
40.38
|
$950.12
|
8.40%
|
3.41%
|
-4.99%
|
1.79%
|
-3.21%
|
|
|
42.50
|
38.25
|
$900.00
|
8.40%
|
-1.60%
|
-10.00%
|
1.79%
|
-8.21%
|
|
|
42.50
|
36.13
|
$850.12
|
8.40%
|
-6.59%
|
-14.99%
|
1.79%
|
-13.21%
|
|
|
42.50
|
34.00
|
$800.00
|
8.40%
|
-11.60%
|
-20.00%
|
1.79%
|
-18.21%
|
|
|
42.50
|
31.88
|
$750.12
|
8.40%
|
-16.59%
|
-24.99%
|
1.79%
|
-23.21%
|
|
|
42.50
|
29.75
|
$700.00
|
8.40%
|
-21.60%
|
-30.00%
|
1.79%
|
-28.21%
|
|
|
42.50
|
27.63
|
$650.12
|
8.40%
|
-26.59%
|
-34.99%
|
1.79%
|
-33.21%
|
|
|
42.50
|
25.50
|
$600.00
|
8.40%
|
-31.60%
|
-40.00%
|
1.79%
|
-38.21%
|
|
|
42.50
|
23.38
|
$550.12
|
8.40%
|
-36.59%
|
-44.99%
|
1.79%
|
-43.21%
|
|
|
42.50
|
21.25
|
$500.00
|
8.40%
|
-41.60%
|
-50.00%
|
1.79%
|
-48.21%
|
|
|
42.50
|
19.13
|
$450.12
|
8.40%
|
-46.59%
|
-54.99%
|
1.79%
|
-53.21%
|
|
BEAR,
STEARNS & CO.
INC.
-7-
|
STRUCTURED
PRODUCTS
GROUP
|
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
|
26.14
|
15.26
|
24.00
|
|
September
30, 2005
|
35.95
|
33.31
|
33.93
|
|
March
31, 2003
|
28.29
|
20.13
|
23.71
|
|
December
30, 2005
|
40.56
|
32.92
|
39.69
|
|
June
30, 2003
|
36.52
|
23.75
|
34.18
|
|
March
31, 2006
|
42.43
|
37.88
|
41.64
|
|
September
30, 2003
|
38.26
|
32.40
|
34.33
|
|
June
30, 2006
|
46.80
|
39.33
|
42.00
|
|
December
31, 2003
|
36.99
|
34.45
|
36.73
|
|
September
29, 2006
|
47.49
|
40.40
|
46.96
|
|
March
31, 2004
|
43.84
|
36.30
|
41.95
|
|
December
29, 2006
|
49.00
|
45.51
|
48.30
|
|
June
30, 2004
|
42.57
|
34.62
|
38.77
|
|
March
30, 2007
|
51.95
|
45.91
|
48.38
|
|
September
30, 2004
|
40.25
|
35.50
|
39.73
|
|
June
29, 2007
|
53.25
|
47.70
|
48.45
|
|
December
31, 2004
|
40.45
|
36.32
|
39.01
|
|
September
28, 2007
|
50.48
|
42.16
|
45.82
|
|
March
31, 2005
|
39.69
|
34.32
|
34.60
|
|
December
31, 2007
|
48.02
|
40.15
|
43.65
|
|
June
30, 2005
|
36.50
|
33.35
|
35.32
|
|
January
2, 2008 to
February 26, 2008 |
49.29
|
37.66
|
40.65
|
Intel
Corporation (“INTC”)
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: $ 20.00.
|
|
·
|
Contingent
Protection Percentage: 80%.
|
|
·
|
Contingent
Protection Level: $16.00 ($20.00 x
80%).
|
|
·
|
Exchange
Ratio: 50 ($1,000.00/$20.00).
|
|
·
|
Coupon:
14.10% 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:
$0.48 and 2.40%.
|
Example
1
- On the
Calculation Date, the Final Level of $24.00 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 $70.50, for payments totaling $1,070.50. If
you had invested directly
in the Reference Asset for the same six-month period,
you would have received
total cash payments of $1,212.00 (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
7.05% return with an
investment in the Notes and a 21.20 % return with a direct
investment in the
Reference Asset.
Example
2
- On the
Calculation Date, the Final Level of $18.00 is below
the Initial Level, but the
Closing Price never equaled or fell below the Contingent
Protection Level. As
discussed in example 1 above, an investor would receive
total payments of
$1,070.50, earning a 7.05 % 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 $912.00 (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
7.05% return with an
investment in the Notes and incurred a loss of 8.80%
with a direct investment in
the Reference Asset.
Example
3
- On the
Calculation Date, the Final Level of $14.00 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
$70.50, for payments totaling $770.50. If you had invested
directly in the
Reference Asset for the same six-month period, you would
have received total
cash payments of $712.00 (number of shares of the Reference
Asset multiplied by
the Final Level, plus the dividend payments), assuming
liquidation of shares at
the Final Level. An investment in the Notes would have
resulted in a loss of
22.95%, while a direct investment in the Reference Asset
would have resulted in
a loss of 28.80%.
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
|
|
|
20.00
|
26.00
|
$1,000.00
|
7.05%
|
7.05%
|
30.00%
|
1.20%
|
31.20%
|
|
|
20.00
|
25.00
|
$1,000.00
|
7.05%
|
7.05%
|
25.00%
|
1.20%
|
26.20%
|
|
|
20.00
|
24.00
|
$1,000.00
|
7.05%
|
7.05%
|
20.00%
|
1.20%
|
21.20%
|
|
|
20.00
|
23.00
|
$1,000.00
|
7.05%
|
7.05%
|
15.00%
|
1.20%
|
16.20%
|
|
|
20.00
|
22.00
|
$1,000.00
|
7.05%
|
7.05%
|
10.00%
|
1.20%
|
11.20%
|
|
|
20.00
|
21.00
|
$1,000.00
|
7.05%
|
7.05%
|
5.00%
|
1.20%
|
6.20%
|
|
|
20.00
|
20.00
|
$1,000.00
|
7.05%
|
7.05%
|
0.00%
|
1.20%
|
1.20%
|
|
|
20.00
|
19.00
|
$1,000.00
|
7.05%
|
7.05%
|
-5.00%
|
1.20%
|
-3.80%
|
|
|
20.00
|
18.00
|
$1,000.00
|
7.05%
|
7.05%
|
-10.00%
|
1.20%
|
-8.80%
|
|
|
20.00
|
17.00
|
$1,000.00
|
7.05%
|
7.05%
|
-15.00%
|
1.20%
|
-13.80%
|
|
Table
of Hypothetical Cash Settlement Values
Assumes
the Closing Price Does
Equal or
Fall Below the Contingent Protection Level Before the
Calculation
Date
|
Investment
in the Notes
|
Direct
Investment in the Reference Asset
|
|||||||
|
Initial
Level
|
Hypothetical
Final
Level
|
Cash
Settlement
Value
|
Total
Coupon
Payments
(in
%
Terms)
|
6-Month
Total
Return
|
Percentage
Change in
Value
of Reference
Asset
|
6-Month
Dividend
Yield
|
6-Month
Total Return
|
|
|
20.00
|
25.00
|
$1,000.00
|
7.05%
|
7.05%
|
25.00%
|
1.20%
|
26.20%
|
|
|
20.00
|
24.00
|
$1,000.00
|
7.05%
|
7.05%
|
20.00%
|
1.20%
|
21.20%
|
|
|
20.00
|
23.00
|
$1,000.00
|
7.05%
|
7.05%
|
15.00%
|
1.20%
|
16.20%
|
|
|
20.00
|
22.00
|
$1,000.00
|
7.05%
|
7.05%
|
10.00%
|
1.20%
|
11.20%
|
|
|
20.00
|
21.00
|
$1,000.00
|
7.05%
|
7.05%
|
5.00%
|
1.20%
|
6.20%
|
|
|
20.00
|
20.00
|
$1,000.00
|
7.05%
|
7.05%
|
0.00%
|
1.20%
|
1.20%
|
|
|
20.00
|
19.00
|
$950.00
|
7.05%
|
2.05%
|
-5.00%
|
1.20%
|
-3.80%
|
|
|
20.00
|
18.00
|
$900.00
|
7.05%
|
-2.95%
|
-10.00%
|
1.20%
|
-8.80%
|
|
|
20.00
|
17.00
|
$850.00
|
7.05%
|
-7.95%
|
-15.00%
|
1.20%
|
-13.80%
|
|
|
20.00
|
16.00
|
$800.00
|
7.05%
|
-12.95%
|
-20.00%
|
1.20%
|
-18.80%
|
|
|
20.00
|
15.00
|
$750.00
|
7.05%
|
-17.95%
|
-25.00%
|
1.20%
|
-23.80%
|
|
|
20.00
|
14.00
|
$700.00
|
7.05%
|
-22.95%
|
-30.00%
|
1.20%
|
-28.80%
|
|
|
20.00
|
13.00
|
$650.00
|
7.05%
|
-27.95%
|
-35.00%
|
1.20%
|
-33.80%
|
|
|
20.00
|
12.00
|
$600.00
|
7.05%
|
-32.95%
|
-40.00%
|
1.20%
|
-38.80%
|
|
|
20.00
|
11.00
|
$550.00
|
7.05%
|
-37.95%
|
-45.00%
|
1.20%
|
-43.80%
|
|
|
20.00
|
10.00
|
$500.00
|
7.05%
|
-42.95%
|
-50.00%
|
1.20%
|
-48.80%
|
|
|
20.00
|
9.00
|
$450.00
|
7.05%
|
-47.95%
|
-55.00%
|
1.20%
|
-53.80%
|
|
BEAR,
STEARNS & CO.
INC.
-9-
|
STRUCTURED
PRODUCTS
GROUP
|
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
|
22.09
|
12.95
|
15.57
|
|
September
30, 2005
|
28.84
|
23.80
|
24.65
|
|
March
31, 2003
|
19.01
|
14.88
|
16.28
|
|
December
30, 2005
|
27.49
|
22.53
|
24.96
|
|
June
30, 2003
|
22.92
|
16.28
|
20.81
|
|
March
31, 2006
|
26.63
|
19.31
|
19.46
|
|
September
30, 2003
|
29.38
|
20.51
|
27.52
|
|
June
30, 2006
|
20.27
|
16.75
|
19.00
|
|
December
31, 2003
|
34.51
|
27.81
|
32.05
|
|
September
29, 2006
|
20.95
|
16.84
|
20.57
|
|
March
31, 2004
|
34.60
|
26.03
|
27.20
|
|
December
29, 2006
|
22.50
|
20.03
|
20.25
|
|
June
30, 2004
|
29.01
|
25.61
|
27.60
|
|
March
30, 2007
|
22.30
|
18.75
|
19.13
|
|
September
30, 2004
|
27.48
|
19.64
|
20.06
|
|
June
29, 2007
|
24.45
|
19.03
|
23.74
|
|
December
31, 2004
|
24.99
|
20.22
|
23.39
|
|
September
28, 2007
|
26.52
|
22.09
|
25.86
|
|
March
31, 2005
|
25.47
|
21.89
|
23.23
|
|
December
31, 2007
|
27.99
|
24.32
|
26.66
|
|
June
30, 2005
|
28.00
|
21.94
|
26.02
|
|
January
2, 2008 to
February 26, 2008 |
26.34
|
18.05
|
19.97
|
|
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
|
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.
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
|
|
JPMorgan
Chase & Co.
|
6-months
|
[16.80]%
|
[3.76]%
|
[13.04]%
|
|
Intel
Corporation
|
6-months
|
[14.10]%
|
[3.76]%
|
[10.34]%
|
BEAR,
STEARNS & CO.
INC.
-11-