|
Free
Writing Prospectus
Filed
Pursuant to Rule 433
Registration
No. 333−136666
June
1, 2007
|
||
 |
|
STRUCTURED
EQUITY
PRODUCTS
|
|
New Issue
|
Indicative
Terms
|
|
 |
||
| The Bear Stearns Companies Inc. | |
| Notes Linked to the Performance of the Alerian MLP Select Index | |
| Due [June ●, 2027] | |
| INVESTMENT HIGHLIGHTS | |
|
·
|
20
year term to maturity.
|
|
·
|
The
Notes are not principal protected.
|
|
·
|
Issue
is a direct obligation of The Bear Stearns Companies Inc. (Rated
A1 by
Moody’s / A+ by S&P).
|
|
·
|
Issue
Price: 100.00% of Principal Amount ($[●] per Note).
|
|
·
|
We
plan to apply to list the Notes on the New York Stock
Exchange.
|
|
·
|
Linked
to the performance of the Alerian MLP Select Index (“AMZS” or
“Index”).
|
|
·
|
The
AMZS is an index designed to track liquid Master Limited Partnerships
(MLPs) listed on the NYSE and NASDAQ.
|
|
·
|
MLPs
are partnerships that own mid-stream US energy infrastructural
assets such
as pipelines.
|
|
·
|
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.
|
|
·
|
Monthly
coupon payments to the extent the amount of gross cash dividend
proceeds
that would have been received by a Reference Holder in the constituents
underlying the Index exceed a Tracking Fee equal to [0.070834]%
per month.
|
|
·
|
Redeemable
in amounts of [75,000] Notes or greater on the last Business
Day of each
week during the term of the
Notes.
|
| 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. | ||
|
BEAR,
STEARNS & CO. INC.
STRUCTURED
EQUITY PRODUCTS
(212)
272-1786
|
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.
|
|
1
|
|
STRUCTURED
PRODUCTS GROUP
|
|
GENERAL
TERMS
|
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.
|
ISSUER:
|
The
Bear Stearns Companies Inc.
|
|
ISSUER’S
RATING:
|
A1
/ A+ (Moody’s / S&P)
|
|
CUSIP
NUMBER:
|
073928V83
|
|
CLOSING
DATE:
|
[July
●, 2007]
|
|
PRICING
DATE:
|
[●]
|
|
SETTLEMENT
DATE:
|
[●]
|
|
ISSUE
PRICE:
|
[100%]
|
|
INDEX:
|
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”).
|
|
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
will
be disseminated real-time and may be listed on the Chicago Mercantile
Exchange.
|
|
|
INDEX
COMPONENTS:
|
As
of any date of determination, the constituents underlying the Index.
|
|
PRINCIPAL
AMOUNT:
|
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 (i) the arithmetic mean of the VWAP Levels measured
daily
over a period of days following the Closing Date (the “Initial Measurement
Period”) in accordance with the following schedule, divided by (ii) the
number ten:
|
|
Aggregate
Size of the Issuance
|
Initial
VWAP Period
|
|
|
Less
than $100 million
|
[6]
Index Business Days
|
|
|
Equal
to or greater than $100 million and less than $200 million
|
[10]
Index Business Days
|
|
|
Equal
to or greater than $200 million and less than $300 million
|
[18]
Index Business Days
|
|
|
Equal
to or greater than $300 million and less than $500 million
|
[25]
Index Business Days
|
|
|
Greater
than $500 million
|
[50]
Index Business Days
|
|
VWAP
LEVEL
|
As
of any date of determination and with respect to the Index, the
quotient
of (1) the arithmetic mean of the sum of the products of (i)
the volume
weighted-average price of each Index Component as of such date
multiplied
by (ii) the published share weighting of such Index Component
as of such
date divided by (2) the Index Divisor as of such date, as determined
by
the Calculation Agent.
|
|
INDEX
DIVISOR:
|
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.
|
|
FURTHER
ISSUANCES:
|
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.
|
|
BEAR,
STEARNS & CO.
INC.
|
2
|
|
STRUCTURED
PRODUCTS GROUP
|
|
COUPON:
|
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.
|
|
COUPON
PAYMENT DATE:
|
The
fifth Business Day following each Coupon Valuation Date, subject
to
adjustment, as described in the Pricing Supplement.
|
|
COUPON
VALUATION DATE:
|
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.
|
|
REFERENCE
DIVIDEND AMOUNT:
|
As
of any date of determination, an amount per Note equal to the
gross cash
dividend proceeds that would have been received by a Reference
Holder
during the period from the prior Coupon Valuation Date through
such date
of determination; provided, that in the event that no prior Coupon
Valuation Date has occurred as of such date of determination,
the
applicable period will begin as of the Pricing Date. Any non-cash
dividends that would have been received by a Reference Holder
during any
period of determination will be converted into cash by the Calculation
Agent and will be included in the gross cash dividend proceeds
for
purposes of this calculation.
|
|
TRACKING
FEE:
|
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.
|
|
CURRENT
NAV:
|
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.
|
|
CASH
SETTLEMENT AMOUNT:
|
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.
|
|
INDEX
RATIO:
|
As
of any date of determination, an amount equal to the quotient
of the Final
VWAP Level divided by the Initial VWAP Level.
|
|
INITIAL
VWAP LEVEL:
|
[●],
representing the arithmetic mean of the VWAP Levels measured
daily during
the Initial Measurement Period determined in accordance with
the VWAP
Schedule set forth above, as determined by the Calculation
Agent.
|
|
FINAL
VWAP LEVEL:
|
The
arithmetic mean of the VWAP Levels measured daily during the
Final
Measurement Period, as determined by the Calculation
Agent.
|
|
FINAL
MEASUREMENT PERIOD:
|
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.
|
|
CALCULATION
DATE:
|
[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.
|
|
MATURITY
DATE:
|
The
third Business Day following the final Index Business Day in
the Final
Measurement Period.
|
|
BEAR,
STEARNS & CO.
INC.
|
3
|
|
STRUCTURED
PRODUCTS GROUP
|
|
EARLY
REDEMPTION EVENT:
|
You
may redeem your Notes on 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.”
|
|
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”).
|
|
|
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.
|
|
|
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 052, 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.
|
|
|
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.
|
|
|
REDEMPTION
NOTICE:
|
The
form of redemption notice attached to the Pricing Supplement
as Appendix
1.
|
|
REDEMPTION
CONFIRMATION:
|
The
form of redemption confirmation attached to the Pricing Supplement
as
Appendix 2.
|
|
REDEMPTION
FEE:
|
[0.125]%
|
|
REDEMPTION
FEE AMOUNT:
|
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.
|
|
REFERENCE
HOLDER:
|
As
of any date of determination, a hypothetical holder of shares
of each of
the Index Components in the then current weightings within the
Index as if
such holder had invested an amount equal to the Principal Amount
in the
Index as of the Pricing Date, as determined by the Calculation
Agent.
|
|
EXCHANGE
LISTING:
|
The
Notes will be listed on the New York Stock Exchange.
|
|
BUSINESS
DAY:
|
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.
|
|
BEAR,
STEARNS & CO.
INC.
|
4
|
|
STRUCTURED
PRODUCTS GROUP
|
|
INDEX
BUSINESS DAY:
|
Any
day on which the Primary Exchange and each Related Exchange are
scheduled
to be open for trading.
|
|
PRIMARY
EXCHANGE:
|
With
respect to each Index Component, the primary exchange or market
of trading
of such Index Component.
|
|
RELATED
EXCHANGE:
|
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.
|
|
CALCULATION
AGENT:
|
Bear,
Stearns & Co. Inc.
|
|
BEAR,
STEARNS & CO.
INC.
|
5
|
|
STRUCTURED
PRODUCTS GROUP
|
|
ADDITIONL
TERMS SPECIFIC TO THE
NOTES
|
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 May 30, 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:
|
·
|
Pricing
Supplement dated May 30, 2007,(subject to completion):
|
|
·
|
Prospectus
Supplement dated August 16, 2006:
|
|
·
|
Prospectus
dated August 16, 2006:
|
|
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.
|
Coupon
Valuation
Date
|
Current
NAV
|
Reference
Dividend
Amount
|
Tracking
Fee
|
Coupon
Payment
|
Tracking
Fee
Shortfall
|
Coupon
Valuation
Date
|
|
Month
1
|
$37.70
|
$0.19
|
$0.02670
|
$0.1633
|
$0.00
|
Month
1
|
|
Month
2
|
$40.00
|
$0.00
|
$0.02833
|
$0.00
|
$0.02833
|
Month
2
|
|
Month
3
|
$45.00
|
$0.00
|
$0.03188
|
$0.00
|
$0.06021
|
Month
3
|
|
Month
4
|
$35.00
|
$0.25
|
$0.02479
|
$0.165
|
$0.00
|
Month
4
|
|
Month
5
|
$30.00
|
$0.30
|
$0.02125
|
$0.2788
|
$0.00
|
Month
5
|
|
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:
|
·
|
Investor
purchases $37.70 aggregate Principal Amount of Notes at the
initial
offering price of $37.70.
|
|
·
|
Investor
holds the Notes to maturity or redeems the Notes prior to
Maturity.
|
|
·
|
There
is no accrued Tracking Fee.
|
|
·
|
The
Initial Index Level is equal to
377.00
|
|
·
|
No
Market Disruption Events occur during the Final Measurement
Period.
|
|
BEAR,
STEARNS & CO.
INC.
|
6
|
|
STRUCTURED
PRODUCTS GROUP
|
Table
of Hypothetical Cash Settlement Amounts
|
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
|
|
BEAR,
STEARNS & CO.
INC.
|
7
|
|
STRUCTURED
PRODUCTS GROUP
|
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.
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 with Dividends Paid”
represents the growth of the investment in the Index taking into
consideration
dividend proceeds which would have been received by an investor in
the
constituents underlying the Index during the period of measurement
and not
re-invested by such investor. The “AMZS with Dividends Paid” line is meant to
mimic the actual return most similar to that available to an investor
in the
Notes on a pre-tax basis. With respect to other indices, the graph
does not
include dividend proceeds except with respect to the SPTR Index,
as these
indices are traditional price return indices. 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)
|
16.05%
|
8.95%
|
69%
|
$5,405
|
1.37
|
1.00
|
|
S&P
500
|
9.80%
|
14.80%
|
65%
|
$2,901
|
0.41
|
0.24
|
|
Russell
2000
|
10.00%
|
19.30%
|
61%
|
$2,979
|
0.32
|
0.29
|
|
NAREIT
|
15.90%
|
13.60%
|
64%
|
$5,410
|
0.89
|
0.34
|
|
NASDAQ
|
8.00%
|
27.50%
|
54%
|
$2,400
|
0.15
|
0.09
|
|
IXE
Index1
|
10.93%
|
23.73%
|
53%
|
$2,633
|
0.31
|
0.35
|
|
Dow
Jones
|
10.70%
|
15.10%
|
63%
|
$3,189
|
0.46
|
0.26
|
1
Data for
IXE Index 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 dividend proceeds 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,
except for the AMZS Index where the return reflects a value where no
dividend
re-investment took place.
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 Index 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 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