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Free
Writing Prospectus
Filed
Pursuant to Rule 433
Registration
No. 333−136666
June 22, 2007 |
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STRUCTURED
EQUITY
PRODUCTS
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New Issue
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Indicative
Terms
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THE
BEAR STEARNS COMPANIES INC.
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Notes
Linked to the Performance of the Alerian MLP Select
Index
Due
[June ●, 2027]
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INVESTMENT
HIGHLIGHTS
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20
year term to maturity.
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·
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The
Notes are not principal protected.
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·
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Issue
is a direct obligation of The Bear Stearns Companies Inc. (Rated
A1 by
Moody’s / A+ by S&P).
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·
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Issue
Price: 100.00% of Principal Amount ($[●] per Note).
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We
plan to apply to list the Notes on the New York Stock Exchange
under the
symbol “BSR”.
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·
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Linked
to the performance of the Alerian MLP Select Index (“AMZS” or
“Index”).
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The
AMZS is an index designed to track liquid Master Limited Partnerships
(“MLPs”) listed on the NYSE and NASDAQ.
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MLPs
are partnerships that own mid-stream US energy infrastructural
assets such
as pipelines.
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The
Cash Settlement Amount is based on the change, if any, of the
volume-weighted average prices of the constituents underlying
the Index
during the term of the Notes, and will equal an amount per Note
in U.S.
dollars equal to (i) the Principal Amount multiplied by the quotient
of
the Final VWAP Level divided by the Initial VWAP Level minus
(ii) the
accrued Tracking Fee, if any.
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·
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Monthly
coupon payments to the extent the amount of gross cash dividends
that a
Reference Holder would have received from the MLPs in the Index
exceed a
Tracking Fee equal to [0.070834]% per month.
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·
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Redeemable
in amounts of [75,000] Notes or greater as of the last Business
Day of
each week during the term of the
Notes.
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The
issuer has filed a registration statement (including a prospectus)
with
the SEC for the offering 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 this offering. 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 offering will arrange to send you the prospectus if you request
it by
calling toll free 1-866-803-9204.
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BEAR,
STEARNS & CO. INC.
STRUCTURED
EQUITY PRODUCTS
(212)
272-1786
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The
Notes will not be listed on any U.S. securities exchange or quotation
system. Neither the Securities and Exchange Commission nor any
state
securities commission has approved or disapproved of these securities
or
determined that this free writing prospectus is truthful or complete.
Any
representation to the contrary is a criminal offense.
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1
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STRUCTURED
PRODUCTS GROUP
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GENERAL
TERMS
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This
free
writing prospectus relates to a Note offering linked to the performance
of a the
Alerian MLP Select Index (the “Index”). The Index measures the composite
performance of energy oriented Master Limited Partnerships, and is
calculated by
Standard and Poor’s using a float-adjusted, market capitalization-weighted
methodology. We reserve the right to withdraw, cancel or modify the
offering and
to reject orders in whole or in part. Defined
terms not defined herein shall have the same meaning as in the Pricing
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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A1
/ A+ (Moody’s / S&P)
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CUSIP
NUMBER:
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073902835
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CLOSING
DATE:
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[July
●, 2007]
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PRICING
DATE:
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[●]
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SETTLEMENT
DATE:
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[●]
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ISSUE
PRICE:
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[100%]
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INDEX:
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The
Alerian MLP Select Index (ticker “AMZS”), as published by the Standard
& Poor’s, a division of the McGraw-Hill Companies, Inc. (the
“Sponsor”), in consultation with Alerian Capital Management LLC
(“Alerian”).
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The
Index measures the composite performance of energy oriented
Master Limited
Partnerships (“MLPs”), and is calculated by the Sponsor using a
float-adjusted, market capitalization weighted methodology.
The objective
of the Index is to provide investors with an unbiased,
comprehensive
benchmark for the performance of the energy MLP universe.
The MLPs
underlying the Index are generally limited partnerships
engaged in the
exploration, marketing, mining, processing, production,
storage or
transportation of any mineral or natural resource. The
Index itself is
disseminated real-time on a price-return basis and is
listed on the
Chicago Mercantile Exchange.
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INDEX
COMPONENTS:
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As
of any date of determination, the constituents underlying
the Index.
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PRINCIPAL
AMOUNT:
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The
Notes will be denominated in U.S. dollars. Each Note
will be issued in
minimum denominations to be determined by the Calculation
Agent based upon
the quotient of (1) the arithmetic mean of the sum for
each Index
Component of the products of (i) the volume-weighted
average price of that
Index Component and (ii) the published share weighting
of that Index
Component, each measured daily over a specified period
of Index Business
Days following the Closing Date (the “Initial Measurement Period”) in
accordance with the following schedule (the “VWAP Schedule”), divided by
2) the product of the Index Divisor and the number ten:
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Aggregate
Size of the Issuance
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Initial
VWAP Period
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Less
than $200 Million
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6
Index Business Days
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Equal
to or greater than $200 million and less than $250 million
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8
Index Business Days
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Equal
to or greater than $250 million and less than $300 million
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10
Index Business Days
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Equal
to or greater than $300 million and less than $350 million
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11
Index Business Days
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Equal
to or greater than $350 million and less than $400 million
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13
Index Business Days
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Equal
to or greater than $400 million and less than $450 million
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15
Index Business Days
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Equal
to or greater than $450 million and less than $500 million
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16
Index Business Days
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Equal
to or greater than $500 million
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21
Index Business Days
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VWAP
LEVEL
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As
of any date of determination and with respect to the Index,
the quotient
of (1) the arithmetic mean of the sum for each Index Component
of the
products of (i) the volume weighted-average price of that
Index Component
as of such date and (ii) the published share weighting
of that Index
Component as of such date divided by (2) the Index Divisor
as of such
date, as determined by the Calculation Agent.
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INDEX
DIVISOR:
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As
of any date of determination, the divisor used by the Sponsor
to calculate
the level of the Index, as further described under “Description of the
Index - Computation of the Index” in the Pricing Supplement.
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FURTHER
ISSUANCES:
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We
may,
without your consent, offer further issuances of the Notes
at offering
prices
based upon market conditions and Index levels at any time
during the term
of the Notes. If there is substantial demand for the Notes,
we may issue
additional Notes frequently. These further issuances, if
any, will be
consolidated to form a single series with the Notes and
will have the same
CUSIP number and will trade interchangeably with the Notes
immediately
upon settlement.
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BEAR,
STEARNS & CO.
INC.
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2
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STRUCTURED
PRODUCTS
GROUP
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COUPON:
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The
Notes will pay a coupon, if any, on each Coupon Payment
Date. For each
Note you hold, on each Coupon Payment Date you will receive
an amount in
U.S. dollars equal to the difference between the Reference
Dividend Amount
minus the Tracking Fee (the “Coupon Amount”). To the extent the Reference
Dividend Amount is less than the Tracking Fee on any Coupon
Valuation
Date, there will be no coupon payment made on the corresponding
Coupon
Payment Date, and an amount equal to the difference between
the Tracking
Fee and the Reference Dividend Amount in respect of such
period (the
“Tracking Fee Shortfall”) will be added to the Tracking Fee deducted from
the Reference Dividend Amount in respect of the next Coupon
Payment Date.
For the avoidance of doubt, the process will be repeated
to the extent
necessary until such time as the accrued Tracking Fee has
been deducted
from the appropriate Reference Dividend Amount in all prior
months.
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COUPON
PAYMENT DATE:
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The
fifth Business Day following each Coupon Valuation Date,
subject to
adjustment, as described in the Pricing Supplement.
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COUPON
VALUATION DATE:
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The
first Business Day of each calendar month during the term
of the Notes
beginning on [August 1, 2007], and the last Coupon Valuation
Date will be
the Calculation Date, subject to adjustment, as described
in the Pricing
Supplement.
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REFERENCE
DIVIDEND AMOUNT:
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As
of any Coupon Payment Date, an amount per Note equal to
the gross cash
dividends that would have been received by a Reference
Holder in respect
of a quantity of Index Components held by such Reference
Holder on an
“ex-dividend date” with respect to any Index Component, which “ex-dividend
date” occurred during the period from and including the first
Index
Business Day following the Initial Measurement Period to
and excluding the
immediately preceding Coupon Valuation Date. Any non-cash
dividends that
would have been received by a Reference Holder during any
period of
determination will be valued in cash by the Calculation
Agent and will be
included in the gross cash dividends for purposes of this
calculation.
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TRACKING
FEE:
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As
of any date of determination, an amount per Note equal
to the product of
[0.070834]% (representing [0.85]% per annum) multiplied
by the Current
NAV. The Tracking Fee will be increased by an amount equal
to any Tracking
Fee Shortfall.
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CURRENT
NAV:
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As
of any date of determination, an amount per Note equal
to the product of
(i) the Principal Amount multiplied by (ii) a fraction,
the numerator of
which is equal to the VWAP Level as of such date and the
denominator of
which is equal to the Initial VWAP Level, as determined
by the Calculation
Agent.
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CASH
SETTLEMENT AMOUNT:
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An
amount per Note payable in U.S. dollars on the Maturity
Date equal to (i)
the Principal Amount multiplied by the Index Ratio minus
(ii) the accrued
Tracking Fee, if any.
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INDEX
RATIO:
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As
of any date of determination, an amount equal to the quotient
of the Final
VWAP Level divided by the Initial VWAP Level.
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INITIAL
VWAP LEVEL:
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[●],
representing the arithmetic mean of the VWAP Levels measured
each Index
Business Day in the Initial Measurement Period determined
in accordance
with the VWAP Schedule set forth above, as determined by
the Calculation
Agent.
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FINAL
VWAP LEVEL:
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The
arithmetic mean of the VWAP Levels measured each Index
Business Day in the
Final Measurement Period, as determined by the Calculation
Agent.
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FINAL
MEASUREMENT PERIOD:
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The
five Index Business Days from and including the Calculation
Date. The
Final Measurement Period is subject to adjustment as described
in the
Pricing Supplement.
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CALCULATION
DATE:
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[June
●, 2027],
unless such day is not an Index Business Day, in which
case the
Calculation Date shall be the next Index Business Day.
The Calculation
Date is subject to further adjustment as described in the
Pricing
Supplement.
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MATURITY
DATE:
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The
third Business Day following the final Index Business Day
in the Final
Measurement Period.
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BEAR,
STEARNS & CO.
INC.
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3
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STRUCTURED
PRODUCTS
GROUP
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EARLY
REDEMPTION EVENT:
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You
may redeem your Notes as of the last Business Day of each
week during the
term of the Notes (each, a “Redemption Valuation Date”) by delivering a
Redemption Notice to us via email no later than 10:00 a.m.
New York City
time on the Business Day prior to such Redemption Valuation
Date. If we
receive your Redemption Notice in accordance with the foregoing,
we or our
affiliate will send a form of Redemption Confirmation to
you via return
email, which you must complete, execute and return to us
via facsimile by
no later than 4:00 p.m. New York City time on the same
Business Day. We or
our affiliate must acknowledge receipt of your completed
Redemption
Confirmation in order for your redemption to be effective.
The procedures
described in the foregoing paragraph are referred to herein
as the “Notice
Procedures.”
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Upon
compliance with the Notice Procedures, the Calculation
Agent will
accelerate the Calculation Date with respect to the Notes
being redeemed
to the relevant Redemption Valuation Date, which will automatically
accelerate the final Coupon Valuation Date and the Maturity
Date with
respect to the Notes being redeemed in accordance with
the terms set forth
herein. On the accelerated Maturity Date you will receive
an amount per
Note in U.S. dollars equal to (i) the Cash Settlement Amount
minus the
Redemption Fee Amount plus (ii) the Coupon Amount, if any
(the “Redemption
Amount”).
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The
Tracking Fee applicable to the Notes subject to an Early
Redemption Event
shall be an amount equal to the sum of (i) the Tracking
Fee Shortfall as
of the last Coupon Valuation Date (if any) plus (ii) the
Tracking Fee as
of the next Coupon Valuation Date multiplied by a percentage,
the
numerator of which is the total number of days since the
prior Coupon
Valuation Date, and the denominator of which is 30 (the
“Adjusted Tracking
Fee”). To the extent the Reference Dividend Amount as of the
accelerated
Calculation Date is greater than the Adjusted Tracking
Fee, the Redemption
Amount will include a coupon payment equal to the Coupon
Amount (with the
Calculation Agent using the Adjusted Tracking Fee in calculating
such
Coupon Amount). To the extent the Reference Dividend Amount
as of the
accelerated Calculation Date is less than the Adjusted
Tracking Fee, the
Redemption Amount will not include any coupon payment,
and an amount equal
to the difference between the Adjusted Tracking Fee less
the Reference
Dividend Amount will be subtracted from the Index Ratio
in determining the
Cash Settlement Amount payable on the accelerated Maturity
Date.
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We
will inform you of the Redemption Amount on the first Business
Day
following the final Index Business Day in the Final Measurement
Period.
Upon receipt, you must instruct your custodian at The Depositary
Trust
Company (“DTC”) to book a delivery vs. payment trade with respect to
your
Notes on such date at a price equal to the Redemption Amount,
facing Bear
Stearns DTC 0352, and cause your DTC custodian to deliver
the trade as
booked for settlement via DTC at or prior to 10:00 a.m.
New York City
time, on the applicable accelerated Maturity Date.
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You
may redeem your Notes only in amounts of [75,000] Notes
or greater,
subject to adjustment by the Calculation Agent. You may
not redeem your
Notes in the week in which the Notes mature.
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REDEMPTION
NOTICE:
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The
form of redemption notice attached to the Pricing Supplement
as Appendix
1.
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REDEMPTION
CONFIRMATION:
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The
form of redemption confirmation attached to the Pricing
Supplement as
Appendix 2.
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REDEMPTION
FEE:
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[0.125]%
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REDEMPTION
FEE AMOUNT:
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As
of any date of determination, an amount per Note in U.S.
dollars equal to
the product of the Redemption Fee multiplied by the applicable
Cash
Settlement Amount.
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REFERENCE
HOLDER:
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As
of any date of determination, a hypothetical holder of
a number of shares
of each of the Index Components in the then current weightings
within the
Index as if such holder had invested an amount in the Index
as of that
date equal to the then equivalent Cash Settlement Amount
(as if the
Calculation Agent were to determine the Cash Settlement
Amount on that
date), as determined by the Calculation Agent.
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EXCHANGE
LISTING:
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The
Notes will be listed on the New York Stock Exchange under
the ticker
symbol “BSR”.
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BEAR,
STEARNS & CO.
INC.
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4
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STRUCTURED
PRODUCTS GROUP
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BUSINESS
DAY:
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Any
day other than a Saturday or Sunday, on which banking institutions
in New
York, New York, are not authorized or obligated by law
or executive order
to close.
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INDEX
BUSINESS DAY:
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Any
day on which the Primary Exchange and each Related Exchange
are scheduled
to be open for trading.
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PRIMARY
EXCHANGE:
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With
respect to each Index Component, the primary exchange or
market of trading
of such Index Component.
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RELATED
EXCHANGE:
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With
respect to each Index Component, each exchange or quotation
system where
trading has a material effect (as determined by the Calculation
Agent) on
the overall market for futures or options contracts relating
to such Index
Component.
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CALCULATION
AGENT:
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Bear,
Stearns & Co. Inc.
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BEAR,
STEARNS & CO.
INC.
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5
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STRUCTURED
PRODUCTS GROUP
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ADDITIONL
TERMS SPECIFIC TO THE
NOTES
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You
should read this document together with the prospectus and prospectus
supplement, each dated August 16, 2006 (the “Prospectus” and “Prospectus
Supplement,” respectively), and the more detailed information contained in the
Pricing Supplement, dated June 22, 2007, (subject to completion) (the
“Pricing
Supplement”). You should carefully consider, among other things, the matters set
forth in “Risk Factors” in the Prospectus Supplement and the Pricing 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. You may access the Pricing Supplement,
the
Prospectus Supplement and the Prospectus on the SEC web site as
follows:
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·
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Pricing
Supplement dated June 22, 2007 (subject to completion):
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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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ILLUSTRATIVE
EXAMPLE OF COUPON
PAYMENT
|
The
following example illustrates hypothetical coupon calculations. The
example is
for illustrative purposes only and is not indicative of the future
performance
of the Index, the Index Components or any coupon payment that may be
paid with
respect to the Notes. It is impossible to predict what coupon payments
will be
paid under the Notes. You should not construe this example as an indication
or
assurance of the expected performance of the Notes or of any coupon
payment made
thereunder.
The
following example is based upon a hypothetical five month term. The
example
demonstrates how the Tracking Fee will accrue from month to month to
the extent
that there is Tracking Fee Shortfall. The Tracking Fee will accrue
until such
time as the Reference Dividend Yield is sufficient to cover the accrued
Tracking
Fee for all prior months.
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Coupon
Valuation Date
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Current
NAV
|
Reference
Dividend
Amount
|
Tracking
Fee
|
Coupon
Payment
|
Tracking
Fee
Shortfall
|
Coupon
Valuation
Date
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Month
1
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$37.70
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$0.19
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$0.02670
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$0.1633
|
$0.00
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Month
1
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Month
2
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$40.00
|
$0.00
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$0.02833
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$0.00
|
$0.02833
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Month
2
|
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Month
3
|
$45.00
|
$0.00
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$0.03188
|
$0.00
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$0.06021
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Month
3
|
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Month
4
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$35.00
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$0.25
|
$0.02479
|
$0.165
|
$0.00
|
Month
4
|
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Month
5
|
$30.00
|
$0.30
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$0.02125
|
$0.2788
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$0.00
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Month
5
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ILLUSTRATIVE
HYPOTHETICAL CASH SETTLEMENT AMOUNT
TABLE
|
The
following table is for illustrative purposes and is not indicative
of the future
performance of the Index or the future values of the Notes.
Because
the level of the Index may be subject to significant fluctuation
over the term
of the Notes, it is not possible to present a chart or table illustrating
the
complete range of all Cash Settlement Amounts. Therefore, the examples
do not
purport to be representative of every possible scenario concerning
increases or
decreases in the level of the Index or the VWAP Levels of any of
the Index
Components. You should not construe these examples or the data
included in
herein as an indication or assurance of the expected performance
of the Notes.
The
examples demonstrating the hypothetical Cash Settlement Amount
of a Note are
based on the following assumptions:
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·
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Investor
purchases $37.70 aggregate Principal Amount of Notes
at the initial
offering price of $37.70.
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·
|
Investor
holds the Notes to maturity or redeems the Notes prior
to
Maturity.
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·
|
There
is no accrued Tracking Fee.
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·
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The
Initial Index Level is equal to
377.00
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·
|
No
Market Disruption Events occur during the Final Measurement
Period.
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|
BEAR,
STEARNS & CO.
INC.
|
6
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STRUCTURED
PRODUCTS GROUP
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Table
of Hypothetical Cash Settlement Amounts
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Initial
VWAP Level
|
Final
VWAP Level
|
Face
Amount
|
Cash
Settlement Amount
|
Percent
Change in Note Value
|
|
377.00
|
282.75
|
$37.70
|
$28.28
|
-25.00%
|
|
377.00
|
301.60
|
$37.70
|
$30.16
|
-20.00%
|
|
377.00
|
320.45
|
$37.70
|
$32.05
|
-15.00%
|
|
377.00
|
339.30
|
$37.70
|
$33.93
|
-10.00%
|
|
377.00
|
358.15
|
$37.70
|
$35.82
|
-5.00%
|
|
377.00
|
377.00
|
$37.70
|
$37.70
|
0.00%
|
|
377.00
|
395.85
|
$37.70
|
$39.59
|
5.00%
|
|
377.00
|
414.70
|
$37.70
|
$41.47
|
10.00%
|
|
377.00
|
433.55
|
$37.70
|
$43.36
|
15.00%
|
|
377.00
|
452.40
|
$37.70
|
$45.24
|
20.00%
|
|
377.00
|
471.25
|
$37.70
|
$47.13
|
25.00%
|
|
377.00
|
490.10
|
$37.70
|
$49.01
|
30.00%
|
|
377.00
|
508.95
|
$37.70
|
$50.90
|
35.00%
|
|
377.00
|
527.80
|
$37.70
|
$52.78
|
40.00%
|
|
THE
INDEX
|
|
•
|
The
Index is a liquid subset of the Alerian MLP Index (AMZ),
a benchmark index
tracking US listed Master Limited Partnerships (MLPs).
The Index is
composed of 37 MLPs whose liquidity profile meets the
generic NYSE Index
requirements for listed linked
securities.
|
|
•
|
The
Index attempts to provide investors with an unbiased,
comprehensive
benchmark for the performance of the energy master
limited partnership
universe.
|
|
•
|
Using
the Sponsor’s proprietary and independent calculation methodology,
the
Index attempts to provide transparency into the historical
and ongoing
performance of Master Limited Partnership
investments.
|
The
following table sets forth the month-end closing levels of the
Index for each
month in the period from January 2002 through April 2007, but
does not include
dividend payments made by the constituent members of the Index
during this time
period. We obtained the data in each of the following tables
and graphs from
Bloomberg Financial Service, without independent verification
by us. All levels
provided in the charts and graphs below represent the Sponsor’s application of
the index methodology, as described in the Pricing Supplement,
beginning with
the initial selection of the Index Components on December 29,
1995, in order to
reconstruct historical data consistent with the Sponsor’s methodology.
The
historical values of the Index should not be taken as an indication
of future
performance, and no assurance can be given that the level of
the Index will
increase relative to the Initial VWAP Level during the term of
the
Notes.
Month-End
Closing Level of the Index (does not include dividends)
|
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
|
January
|
203.54
|
195.14
|
244.75
|
285.54
|
284.37
|
338.48
|
|
February
|
186.50
|
196.46
|
246.15
|
285.75
|
279.97
|
345.40
|
|
March
|
198.65
|
199.16
|
253.15
|
274.93
|
282.38
|
360.04
|
|
April
|
202.12
|
211.94
|
231.51
|
281.19
|
285.28
|
379.74
|
|
May
|
195.85
|
216.11
|
229.09
|
281.94
|
289.74
|
|
|
June
|
180.54
|
223.59
|
233.80
|
293.48
|
285.51
|
|
|
July
|
181.41
|
224.45
|
239.75
|
305.97
|
296.32
|
|
|
August
|
192.09
|
224.67
|
246.00
|
295.88
|
301.11
|
|
|
September
|
184.91
|
228.60
|
259.82
|
297.22
|
296.96
|
|
|
October
|
183.51
|
230.78
|
256.81
|
290.78
|
310.02
|
|
|
November
|
183.53
|
239.00
|
267.31
|
278.06
|
320.88
|
|
|
December
|
190.35
|
251.50
|
273.29
|
270.90
|
325.37
|
The
following graph illustrates the historical performance of the
Index based on the
closing level on the last Index Business Day of each month from
December 1995
through April 2007. The graph assumes a base level of 100. The
Index level
displayed does not include dividends paid by the constituent
members of the
Index during this time period. Again, all levels provided represent
the
Sponsor’s application of the index methodology, as described in the Pricing
Supplement, beginning with the limited selection of Index Components
on December
29, 1995 in order to construct historical data consistent with
the Sponsor’s
methodology.
|
BEAR,
STEARNS & CO.
INC.
|
7
|
|
STRUCTURED
PRODUCTS GROUP
|
The
following graph displays the growth of $100 invested in
the Index relative the
growth of $100 in other various indices (each as described
further below) over
the time period from December 29, 1995 through to April
30, 2007 (the IXE Index
is measured beginning January 1998). The line “AMZS 3TB” represents the growth
of the investment in the Index taking into consideration
dividends which would
have been received by an investor in the constituents underlying
the Index
during the period of measurement as if such proceeds were
re-invested by the
investor at the prevailing 3-month Treasury Bill rate.
The “AMZS 3TB” line is
meant to mimic the actual return similar to that available
to an investor in the
Notes on a pre-tax basis. With respect to other indices,
the graph includes
dividends fully reinvested in the underlying asset except
with respect to the
SPX Index, which is a traditional price return index. All
growth provided with
respect to the Index represent the Sponsor’s application of the index
methodology, as described in the Pricing Supplement, beginning
with the limited
selection of Index Components on December 29, 1995 in order
to construct
historical data consistent with the Sponsor’s methodology.
|
BEAR,
STEARNS & CO.
INC.
|
8
|
|
STRUCTURED
PRODUCTS GROUP
|
The
following table illustrates a comparison of certain
performance criteria of the
Index relative to other various benchmarks over
the time period measured from
December 29, 1995 through April 30, 2007.
|
|
Return
With
Dividends2
|
Volatility
|
%
Positive Months
|
Value
of
$1,000
|
Sharpe
Ratio3
|
Correlation
to
AMZS
Index4
|
|
Alerian
MLP Select Index (AMZS)
|
16.40%
|
9.79%
|
70%
|
$5,586
|
1.29
|
1.00
|
|
S&P
500
|
9.86%
|
14.93%
|
64%
|
$2,901
|
0.41
|
0.24
|
|
Russell
2000
|
10.11%
|
19.51%
|
61%
|
$2,979
|
0.32
|
0.27
|
|
NAREIT
|
16.07%
|
13.56%
|
64%
|
$5,410
|
0.90
|
0.29
|
|
NASDAQ
|
8.03%
|
27.86%
|
54%
|
$2,400
|
0.15
|
0.18
|
|
IXE
TR1
|
12.46%
|
20.34%
|
53%
|
$2,981
|
0.45
|
0.33
|
|
Dow
Jones
|
10.78%
|
15.14%
|
62%
|
$3,189
|
0.46
|
0.26
|
1
Data for
IXE TR is only available from January 1998 and,
therefore, the information
provided reflects data for that time period (3.351%
used as the risk free rate
in calculating the Sharpe Ratio).
2
With
respect to each of the indices, includes the dividends
that would have been
received by an investor in the components underlying
such index (on a pre-tax
basis) during the period of measurement on a fully
reinvested basis. The AMZS
Index return above reflects a value where dividends
were reinvested at the
prevailing 3-month Treasury Bill rate upon receipt.
3
In
general, the Sharpe Ratio is a ratio designed to
measure an asset's excess
return (over the risk free rate of return) relative
to the total variability of
its returns. Expressed as a formula, the Sharpe Ratio of an
asset is (i)
the asset's performance minus the risk free rate
of return, divided by (ii) the
volatility of the asset. Expressed herein, the
Sharpe Ratio is calculated using
a risk free rate of 3.808%, which is the daily
average 3 month US T-bill over
the period shown.
4
Correlation is the tendency of two variables to
move in the same direction by
proportional amounts, and is (usually) measured
by a number ranging between -1
and +1. A higher positive number means that the
two variables tend to move in
the same direction more often and larger / smaller
moves in one variable are
more likely to correspond to respectively larger
/ smaller moves in the other.
Similarly, a number closer to -1 means that the
two variables tend to move in
opposite directions more often, but larger / smaller
moves in one variable still
correspond to relatively larger / smaller magnitude
moves in the other.
Alternately, a number near zero means that the
two variables tend not to have
much of a significant relationship with one another
as far as the direction or
magnitude.
The
S&P 500 Index is a capitalization-weighted index
that measures the
performance of 500 large-capitalization domestic
stocks representing all major
industries. The Russell 2000 Index offers investors
access to the small-cap
segment of the U.S. equity universe, and is constructed
to provide a
comprehensive and unbiased small-cap barometer
and is completely reconstituted
annually to ensure larger stocks do not distort
the performance and
characteristics of the true small-cap opportunity
set. The National Association
of Real Estate Investment Trusts Index (NAREIT)
is an unmanaged, market
capitalization-weighted index of all equity Real
Estate Investment Trusts
(REITs). The NASDAQ (National Association of Securities
Dealers Automated
Quotation System) Composite Index measures over
3,000 stocks listed on the
NASDAQ Stock Market. The IXE TR is the Energy Select
Sector Index. The Dow Jones
Industrial Average is a price-weighted index comprised
of 30 leading companies
indicating the general state of the U.S. stock
market.
|
BEAR,
STEARNS & CO.
INC.
|
9
|
|
STRUCTURED
PRODUCTS GROUP
|
|
SELECTED
RISK CONSIDERATIONS
|
|
·
|
Possible
loss of principal - The
Notes are not principal protected. Therefore, you may
receive less, and
possibly significantly less, than the principal you
invested. If the Final
Index VWAP Level is less than the Initial Index VWAP
Level, the Cash
Settlement Amount you will receive at maturity will
be less than the
principal you invested. In that case, you will receive
less, and possibly
significantly less, than the principal you
invested.
|
|
·
|
Limited
portfolio diversification
-
The Index Components are concentrated in the energy
oriented Master
Limited Partnership sector. Your investment may, therefore,
carry risks
similar to a concentrated investment in a limited number
of industries or
sectors.
|
|
·
|
The
level of the Index cannot be predicted
-
The future performance of the Index is impossible to
predict and,
therefore, no future performance of the Notes or the
Cash Settlement
Amount may be inferred from any of the historical data
or any other
information set forth herein. Because it is impossible
to predict the
level of the Index or the performance of any of the
Index Components, it
is possible that the level of the Index and the VWAP
Level will decline
and you will lose all or part the principal you
invested.
|
|
·
|
Liquidity
-
Although we plan to apply to list the Notes on the
New York Stock
Exchange, a trading market for your Notes does not
currently exist and may
not develop. In addition, our subsidiary, Bear, Stearns
& Co. Inc. has
advised us that they intend under ordinary market conditions
to indicate
prices for the Notes on request. However, we cannot
guarantee that bids
for outstanding Notes will be made; nor can we predict
the price at which
such bids will be made. If you sell your Notes prior
to maturity, you may
receive less than the principal you invested.
|
|
·
|
Possible
loss of value in the secondary market
- If
you sell your Notes prior to maturity, you may receive
less than the
principal you invested.
|
|
·
|
Coupon
payments are not guaranteed
-
You will not receive a coupon payment to the extent
that, for any period
of calculation, the amount of gross cash dividends
that would be received
by a Reference Holder of the Index Components would
be less than the
Tracking Fee. The yield on the Notes, therefore, may
be less than the
overall return you would earn if you purchased a conventional
debt
security at the same time and with the same maturity.
|
|
·
|
Taxes
-
The U.S. federal income tax consequences of an investment
in the Notes are
uncertain. The Issuer and the holders agree (in the
absence of an
administrative or judicial ruling to the contrary)
to treat the Notes for
federal income tax purposes as pre-paid cash-settled
executory contracts
linked to the value of the Index and, where required,
to file information
returns with the Internal Revenue Service (the “IRS”) in accordance with
such treatment. Assuming the Notes are treated as pre-paid
cash-settled
executory contracts, you should generally recognize
capital gain or loss
to the extent that the cash you receive on the Maturity
Date or upon a
sale or exchange of the Notes prior to the Maturity
Date differs from your
tax basis on the Notes (which will generally be the
amount you paid for
the Notes) and you agree with the Issuer to currently
recognize as
ordinary income any coupon received in respect of the
Notes. However,
other treatments are possible. Prospective investors
are urged to consult
their tax advisors regarding the U.S. federal income
tax consequences of
an investment in the Notes.
|
|
LICENSE
AGREEMENT
|
We
have
entered into an exclusive license agreement with Gabriel Hammond
(“Hammond”) and
Alerian that provides a license to us, in exchange for a fee, for
the right to
use the Index, which is owned by Hammond and licensed to Alerian,
in connection
with certain securities, including the Notes.
The
license agreement between Hammond, Alerian and us provides that
the following
language must be set forth in this free writing prospectus:
“Alerian
MLP Select Index, Alerian MLP Select Total Return Index, Alerian
MLP Index and
Alerian MLP Total Return Index are trademarks of Alerian Capital
Management LLC
and their use is granted under a license from Alerian Capital Management
LLC.”
All
disclosures contained in this free writing prospectus regarding
the Index,
including its make-up, method of calculation and changes in its
components, are
derived from publicly available information prepared by the Sponsor
in
consultation with Alerian. None of us, Bear Stearns or the Trustee
assumes any
responsibility for the accuracy or completeness of such
information.
|
BEAR,
STEARNS & CO.
INC.
|
10