|
Filed
Pursuant to Rule 433
Registration
No. 333−136666
February 27, 2008 |
|
 |
STRUCTURED
EQUITY PRODUCTS
Indicative
Terms
|
|
Reverse
|
New
Issues
 The
Bear Stearns Companies Inc.
INVESTMENT
HIGHLIGHTS
|
|
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 have a
one-year term to maturity.
·
Each
of the Notes pays an annualized fixed rate coupon; payable as
two
semi-annual cash payments, 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).
However, investors who purchase an
aggregate principal amount of at least $1,000,000 of any
particular Note
offering will be entitled to purchase each
Note of that particular offering for [l]%
of the principal amount.
·
Each
of the Notes is not principal protected if: (i) the Trading
Level of the
applicable Reference Asset ever equals
or falls below the applicable Contingent Protection Level
at any time 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.
|
|
Reference
Assets
(for
each of two separate Note offerings)
|
Symbol
|
Term
to Maturity
|
Coupon
Rate,
per Annum
|
Contingent
Protection Percentage
|
Initial
Public Offering Price1
|
|
Research
In Motion Limited, common stock, traded on the NASDAQ
|
RIMM
|
1-year
|
[18.50]%
|
[55]%
|
[100]%
|
|
MasterCard
Incorporated, Class A common stock, traded on the NYSE
|
MA
|
1-year
|
[13.75]%
|
[60]%
|
[100]%
|
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
|
1
Investors who purchase an aggregate principal amount of at least $1,000,000
of
any particular Note offering will be entitled to purchase each Note of
that
particular offering for [l]%
of theprincipal amount.
 |
Structured
Products Group
|
|
GENERAL
TERMS FOR THE NOTE
OFFERINGS
|
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.
|
Issuer:
|
The
Bear Stearns Companies Inc.
|
|
Issuer’s
Rating:
|
A2
/
A / A (Moody’s / S&P/ DBRS Limited)
|
|
Principal
Amount of Offerings:
|
(1)
For the Note linked to the common stock of Research in Motion
Limited
("RIM"): [●].
|
| (2) For the Note linked to the Class A common stock of MasterCard Incorporated ("MasterCard"): [●]. | |
|
Denominations:
|
$1,000
per Note and $1,000 multiples thereafter.
|
|
Reference
Assets:
|
(1)
The common stock of RIM is traded on the Nasdaq Stock Market,
Inc.
(“NASDAQ”) under the symbol “RIMM.”
|
|
(2)
The Class A common stock of MasterCard is traded on the New York
Stock
Exchange, Inc. (“NYSE”) under the symbol “MA.”
|
|
|
Selling
Period Ends:
|
February
[●], 2008.
|
|
Pricing
Date:
|
February
[●], 2008.
|
|
Settlement
Date:
|
March
[●], 2008.
|
|
Calculation
Date:
|
(1)
For the Note linked to the common stock of RIM, February [●], 2009.
|
|
(2)
For the Note linked to the Class A common stock of MasterCard,
February
[●], 2009.
|
|
|
Maturity
Date:
|
(1) For
the Note linked to the common stock of RIM, March [●], 2009.
|
|
(2)
For the Note linked to the Class A common stock of MasterCard,
March [●],
2009.
|
|
|
Coupon
Rate (Per Annum):
|
See
cover page for applicable Coupon Rates, calculated on the basis
of a 360
day year of twelve 30-day months, unadjusted.
|
|
Contingent
Protection Percentages:
|
See cover page for applicable Contingent Protection Percentages. |
|
Contingent
Protection Level:
|
For
the Note linked to the common stock of RIM, [●] (applicable Contingent
Protection Percentage x applicable Initial Level).
|
|
For
the Note linked to the Class A common stock of MasterCard, [●] (applicable
Contingent Protection Percentage x applicable Initial
Level).
|
|
|
Agent’s
Discount:
|
[●]%
, to be disclosed in the final pricing supplement.
|
|
Cash
Settlement Value:
|
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 Trading Level of the applicable
Reference
Asset never equals or falls below the Contingent Protection Level
at any
time 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 Trading Level of the applicable Reference Asset
ever equals
or falls below the Contingent Protection Level at any time 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.
|
|
|
Interest
Payment Dates:
|
(1)
For the Note linked to the common stock of RIM, September [●], 2008 and
March [●], 2009.
|
|
(2)
For the Note linked to the Class A common stock of MasterCard,
September
[●], 2008 and March [●], 2009.
|
|
|
Initial
Level:
|
For
each Note offering, the Closing Price of the applicable Reference
Asset on
the Pricing Date.
|
|
Final
Level:
|
For
each Note offering, the Closing Price of the applicable Reference
Asset on
the Calculation Date.
|
|
Exchange
Ratio:
|
For
the Note linked to the common stock of RIM, [●], 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).
|
|
For
the Note linked to the Class A common stock of MasterCard, [●], 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).
|
|
|
Fractional
Share Cash Amount:
|
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.
|
|
Cusip:
|
For
the Notes linked to the common stock of RIM:
[073902QD3].
|
|
For
the Notes linked to the Class
A common
stock of MasterCard:
[073902QE1].
|
|
|
Listing:
|
The
Notes will not be listed on any U.S. securities exchange or quotation
system.
|
-2-
|
Structured
Products Group
|
|
ADDITIONAL
TERMS SPECIFIC TO THE
NOTES
|
You
should read this document together with the prospectus, dated August 16,
2006
(the “Prospectus”), as supplemented by the prospectus supplement, dated August
16, 2006 (the “Prospectus Supplement”). You should carefully consider, among
other things, the matters set forth in “Risk Factors” and “Risk Factors -
Additional Risks Relating to Notes with an Equity Security or Equity Index
as
the Reference Asset” in the Prospectus Supplement, as the Notes involve risks
not associated with conventional debt securities. We urge you to consult
your
investment, legal, tax, accounting and other advisers before you invest in
the
Notes. The Prospectus and Prospectus Supplement may be accessed on the SEC
Web
site at www.sec.gov as follows:
|
·
|
Prospectus
Supplement, dated August 16, 2006:
|
|
·
|
Prospectus,
dated August 16, 2006:
|
|
GENERAL
TERMS FOR THE NOTE
OFFERINGS
|
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.
|
·
|
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.
|
|
·
|
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 Trading Level of the applicable Reference Asset
ever equals
or falls below the Contingent Protection Level at any time 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.
|
|
·
|
Return
Limited to Coupon — Your
return is limited to the principal amount you invested plus the
coupon
payments. You will not participate in any appreciation in the value
of the
applicable Reference Asset.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
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 under certain circumstances the Notes may be outstanding
for more
than one year it is possible that the Notes may not be treated
as
short-term obligations, in which case the tax treatment of interest
payments on the Notes is described in “U.S. Federal Income Tax
Considerations — Tax Treatment of U.S. Holders — Tax Treatment of the
Deposit on Notes with a Term of More Than a Year” in the prospectus
supplement. Moreover, 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 relevant Interest Payment
Date or
the Maturity Date. Interest will be paid to the person in whose name the
Note is
registered at the close of business on the Record Date before each Interest
Payment Date. However, interest payable on the Maturity Date will be payable
to
the person to whom principal is payable. If the Interest Payment Date is
also a
day on which principal is due, the interest payable will include interest
accrued to, but excluding, the stated Maturity Date. 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 Trading Level of the applicable Reference Asset
never
equals or falls below the Contingent Protection Level
at any
time 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
Trading Level of the applicable Reference Asset ever equals or falls below
the
Contingent Protection Level at any time 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:
-4-
|
Structured
Products Group
|
-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.
Research
In Motion Limited (“RIMM”)
Research
In Motion Limited (“RIM”) common stock, no par value, trades on the NASDAQ under
the symbol “RIMM.” RIM is a designer, manufacturer and marketer of wireless
solutions for the worldwide mobile communications market. RIM’s
SEC file number is 0- 29898.
MasterCard
Incorporated (“MA”)
MasterCard
Incorporated (“MasterCard”) Class A common stock, par value $.0001 per share,
trades on the NYSE under the symbol “MA.” MasterCard is a global payment
solutions company that provides a variety of services in support of the credit,
debit and related payment programs of financial institutions. MasterCard’s
SEC file number is 001-
32877.
|
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.
Research
In Motion Limited (“RIMM”)
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: $ 110.00
|
|
·
|
Contingent
Protection Percentage: 55%
|
|
·
|
Contingent
Protection Level: $ 60.50 ($110.00 x
55%)
|
|
·
|
Exchange
Ratio: 9 ($1,000.00/$110.00)
|
|
·
|
Coupon:
18.50% per annum, paid semi-annually, in
arrears.
|
|
·
|
The
reinvestment rate on any interest payments made during the term
of the
Notes is assumed to be 0%. The one-year total return on a direct
investment in the Reference Asset is calculated below prior to
the
deduction of any brokerage fees or charges. Both a positive reinvestment
rate, or the incurrence of any brokerage fees or charges, would
increase
the total return on the Notes relative to the total return of the
Reference Asset.
|
|
·
|
Assumes
cash settlement at maturity.
|
|
·
|
Maturity:
One year.
|
|
·
|
Dividend
and dividend yield on the Reference Asset: No dividend distributed.
|
-6-
|
Structured
Products Group
|
Example
1
- On the
Calculation Date, the Final Level of $132.00 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 two interest
payments of $92.50, for payments totaling $1,185.00. If you had invested
directly in the Reference Asset for the same one-year period, you would have
received total cash payments of $1,200.00 (number of shares of the Reference
Asset multiplied by the Final Level), assuming liquidation of shares at the
Final Level. You would have earned an 18.50% return with an investment in
the
Notes and a 20.00% return with a direct investment in the Reference
Asset.
Example
2
- On the
Calculation Date, the Final Level of $99.00 is below the Initial Level, but
the
Trading Level never equaled or fell below the Contingent Protection Level.
As
discussed in example 1 above, an investor would receive total payments of
$1,185.00, earning a 18.50% return over the term of the Notes. A direct
investment in the Reference Asset during that same one-year time period would
have generated a return of $900.00 (number of shares of the Reference Asset
multiplied by the Final Level), assuming liquidation of shares at the Final
Level. You would have earned an 18.50% return with an investment in the Notes
and incurred a loss of 10.00% with a direct investment in the Reference
Asset.
Example
3
- On the
Calculation Date, the Final Level of $49.50 is below the Initial Level and
also
is below the Contingent Protection Level. At our election, an investor would
receive a cash payment in the amount of $450.00 plus two interest payments
of
$92.50, for payments totaling $635.00. If you had invested directly in the
Reference Asset for the same one-year period, you would have received total
cash
payments of $450.00 (number of shares of the Reference Asset multiplied by
the
Final Level), assuming liquidation of shares at the Final Level. An investment
in the Notes would have resulted in a loss of 36.50%, while a direct investment
in the Reference Asset would have resulted in a loss of 55.00%.
Table
of Hypothetical Cash Settlement Values
Assumes
the Trading Level Never
Equals
or Falls Below the Contingent Protection Level Before the Calculation
Date
|
Investment
in the Notes
|
Direct
Investment in the Reference Asset
|
|||||||
|
Initial
Level
|
Hypothetical
Final Level
|
Cash
Settlement Value
|
Total
Coupon Payments (in % Terms)
|
1-Year
Total Return
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
1-Year
Total Return
|
|
|
110.00
|
143.00
|
$1,000.00
|
18.50%
|
18.50%
|
30.00%
|
0.00%
|
30.00%
|
|
|
110.00
|
137.50
|
$1,000.00
|
18.50%
|
18.50%
|
25.00%
|
0.00%
|
25.00%
|
|
|
110.00
|
132.00
|
$1,000.00
|
18.50%
|
18.50%
|
20.00%
|
0.00%
|
20.00%
|
|
|
110.00
|
126.50
|
$1,000.00
|
18.50%
|
18.50%
|
15.00%
|
0.00%
|
15.00%
|
|
|
110.00
|
121.00
|
$1,000.00
|
18.50%
|
18.50%
|
10.00%
|
0.00%
|
10.00%
|
|
|
110.00
|
115.50
|
$1,000.00
|
18.50%
|
18.50%
|
5.00%
|
0.00%
|
5.00%
|
|
|
110.00
|
110.00
|
$1,000.00
|
18.50%
|
18.50%
|
0.00%
|
0.00%
|
0.00%
|
|
|
110.00
|
104.50
|
$1,000.00
|
18.50%
|
18.50%
|
-5.00%
|
0.00%
|
-5.00%
|
|
|
110.00
|
99.00
|
$1,000.00
|
18.50%
|
18.50%
|
-10.00%
|
0.00%
|
-10.00%
|
|
|
110.00
|
93.50
|
$1,000.00
|
18.50%
|
18.50%
|
-15.00%
|
0.00%
|
-15.00%
|
|
Table
of Hypothetical Cash Settlement Values
Assumes
the Trading Level Does
Equal or
Fall Below the Contingent Protection Level Before the Calculation
Date
|
Investment
in the Notes
|
Direct
Investment in the Reference Asset
|
|||||||
|
Initial
Level
|
Hypothetical
Final Level
|
Cash
Settlement Value
|
Total
Coupon Payments (in % Terms)
|
1-Year
Total Return
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
1-Year
Total Return
|
|
|
110.00
|
137.50
|
$1,000.00
|
18.50%
|
18.50%
|
25.00%
|
0.00%
|
25.00%
|
|
|
110.00
|
132.00
|
$1,000.00
|
18.50%
|
18.50%
|
20.00%
|
0.00%
|
20.00%
|
|
|
110.00
|
126.50
|
$1,000.00
|
18.50%
|
18.50%
|
15.00%
|
0.00%
|
15.00%
|
|
|
110.00
|
121.00
|
$1,000.00
|
18.50%
|
18.50%
|
10.00%
|
0.00%
|
10.00%
|
|
|
110.00
|
115.50
|
$1,000.00
|
18.50%
|
18.50%
|
5.00%
|
0.00%
|
5.00%
|
|
|
110.00
|
110.00
|
$1,000.00
|
18.50%
|
18.50%
|
0.00%
|
0.00%
|
0.00%
|
|
|
110.00
|
104.50
|
$950.00
|
18.50%
|
13.50%
|
-5.00%
|
0.00%
|
-5.00%
|
|
|
110.00
|
99.00
|
$900.00
|
18.50%
|
8.50%
|
-10.00%
|
0.00%
|
-10.00%
|
|
|
110.00
|
93.50
|
$850.00
|
18.50%
|
3.50%
|
-15.00%
|
0.00%
|
-15.00%
|
|
|
110.00
|
88.00
|
$800.00
|
18.50%
|
-1.50%
|
-20.00%
|
0.00%
|
-20.00%
|
|
|
110.00
|
82.50
|
$750.00
|
18.50%
|
-6.50%
|
-25.00%
|
0.00%
|
-25.00%
|
|
|
110.00
|
77.00
|
$700.00
|
18.50%
|
-11.50%
|
-30.00%
|
0.00%
|
-30.00%
|
|
|
110.00
|
71.50
|
$650.00
|
18.50%
|
-16.50%
|
-35.00%
|
0.00%
|
-35.00%
|
|
|
110.00
|
66.00
|
$600.00
|
18.50%
|
-21.50%
|
-40.00%
|
0.00%
|
-40.00%
|
|
|
110.00
|
60.50
|
$550.00
|
18.50%
|
-26.50%
|
-45.00%
|
0.00%
|
-45.00%
|
|
|
110.00
|
55.00
|
$500.00
|
18.50%
|
-31.50%
|
-50.00%
|
0.00%
|
-50.00%
|
|
|
110.00
|
49.50
|
$450.00
|
18.50%
|
-36.50%
|
-55.00%
|
0.00%
|
-55.00%
|
|
-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
|
2.84
|
1.39
|
2.19
|
|
September
30, 2005
|
27.50
|
22.37
|
22.77
|
|
|
March
31, 2003
|
2.67
|
1.79
|
2.18
|
|
December
30, 2005
|
23.15
|
17.00
|
22.00
|
|
|
June
30, 2003
|
3.91
|
2.13
|
3.60
|
|
March
31, 2006
|
30.18
|
20.95
|
28.29
|
|
|
September
30, 2003
|
6.51
|
3.41
|
6.37
|
|
June
30, 2006
|
29.37
|
20.34
|
23.26
|
|
|
December
31, 2003
|
11.83
|
6.17
|
11.14
|
|
September
29, 2006
|
34.83
|
20.71
|
34.22
|
|
|
March
31, 2004
|
16.94
|
11.02
|
15.56
|
|
December
29, 2006
|
47.55
|
32.92
|
42.59
|
|
|
June
30, 2004
|
23.09
|
14.17
|
22.82
|
|
March
30, 2007
|
49.02
|
39.92
|
45.50
|
|
|
September
30, 2004
|
25.81
|
17.42
|
25.45
|
|
June
29, 2007
|
66.86
|
42.93
|
66.66
|
|
|
December
31, 2004
|
34.52
|
24.06
|
27.47
|
|
September
28, 2007
|
100.98
|
61.54
|
98.55
|
|
|
March
31, 2005
|
27.88
|
20.09
|
25.47
|
|
December
31, 2007
|
137.01
|
95.02
|
113.40
|
|
|
June
30, 2005
|
28.18
|
20.62
|
24.60
|
|
January
2, 2008 to February 26, 2008
|
116.05
|
80.20
|
108.76
|
|
MasterCard
Incorporated (“MA”)
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: $ 200.00
|
|
·
|
Contingent
Protection Percentage: 60%
|
|
·
|
Contingent
Protection Level: $ 120.00 ($200.00 x
60%)
|
|
·
|
Exchange
Ratio: 5 ($1,000.00/$200.00)
|
|
·
|
Coupon:
13.75% per annum, paid semi-annually, in
arrears.
|
|
·
|
The
reinvestment rate on any interest payments made during the term
of the
Notes is assumed to be 0%. The one-year total return on a direct
investment in the Reference Asset is calculated below prior to
the
deduction of any brokerage fees or charges. Both a positive reinvestment
rate, or the incurrence of any brokerage fees or charges, would
increase
the total return on the Notes relative to the total return of the
Reference Asset
|
|
·
|
Assumes
cash settlement at maturity.
|
|
·
|
Maturity:
One year.
|
|
·
|
Dividend
and dividend yield on the Reference Asset: $0.60 and 0.30% per
annum.
|
-8-
|
Structured
Products Group
|
Example
1
- On the
Calculation Date, the Final Level of $240.00 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 two interest
payments of $68.75, for payments totaling $1,137.50. If you had invested
directly in the Reference Asset for the same one-year period, you would have
received total cash payments of $1,203.00 (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 13.75%
return
with an investment in the Notes and a 20.30% return with a direct investment
in
the Reference Asset.
Example
2
- On the
Calculation Date, the Final Level of $180.00 is below the Initial Level,
but the
Trading Level never equaled or fell below the Contingent Protection Level.
As
discussed in example 1 above, an investor would receive total payments of
$1,137.50, earning a 13.75% return over the term of the Notes. A direct
investment in the Reference Asset during that same one-year time period would
have generated a return of $903.00 (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 13.75% return with
an
investment in the Notes and incurred a loss of 9.70% with a direct investment
in
the Reference Asset.
Example
3
- On the
Calculation Date, the Final Level of $100.00 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 $500.00 plus two interest payments
of
$68.75, for payments totaling $637.50. If you had invested directly in the
Reference Asset for the same one-year period, you would have received total
cash
payments of $503.00 (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
36.25%,
while a direct investment in the Reference Asset would have resulted in a
loss
of 49.70%.
Table
of Hypothetical Cash Settlement Values
Assumes
the Trading Level Never
Equals
or Falls Below the Contingent Protection Level Before the Calculation
Date
|
Investment
in the Notes
|
Direct
Investment in the Reference Asset
|
|||||||
|
Initial
Level
|
Hypothetical
Final Level
|
Cash
Settlement Value
|
Total
Coupon Payments (in % Terms)
|
1-Year
Total Return
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
1-Year
Total Return
|
|
|
200.00
|
260.00
|
$1,000.00
|
13.75%
|
13.75%
|
30.00%
|
0.30%
|
30.30%
|
|
|
200.00
|
250.00
|
$1,000.00
|
13.75%
|
13.75%
|
25.00%
|
0.30%
|
25.30%
|
|
|
200.00
|
240.00
|
$1,000.00
|
13.75%
|
13.75%
|
20.00%
|
0.30%
|
20.30%
|
|
|
200.00
|
230.00
|
$1,000.00
|
13.75%
|
13.75%
|
15.00%
|
0.30%
|
15.30%
|
|
|
200.00
|
220.00
|
$1,000.00
|
13.75%
|
13.75%
|
10.00%
|
0.30%
|
10.30%
|
|
|
200.00
|
210.00
|
$1,000.00
|
13.75%
|
13.75%
|
5.00%
|
0.30%
|
5.30%
|
|
|
200.00
|
200.00
|
$1,000.00
|
13.75%
|
13.75%
|
0.00%
|
0.30%
|
0.30%
|
|
|
200.00
|
190.00
|
$1,000.00
|
13.75%
|
13.75%
|
-5.00%
|
0.30%
|
-4.70%
|
|
|
200.00
|
180.00
|
$1,000.00
|
13.75%
|
13.75%
|
-10.00%
|
0.30%
|
-9.70%
|
|
|
200.00
|
170.00
|
$1,000.00
|
13.75%
|
13.75%
|
-15.00%
|
0.30%
|
-14.70%
|
|
Table
of Hypothetical Cash Settlement Values
Assumes
the Trading Level Does
Equal or
Fall Below the Contingent Protection Level Before the Calculation
Date
|
Investment
in the Notes
|
Direct
Investment in the Reference Asset
|
|||||||
|
Initial
Level
|
Hypothetical
Final Level
|
Cash
Settlement Value
|
Total
Coupon Payments (in % Terms)
|
1-Year
Total Return
|
Percentage
Change in Value of Reference Asset
|
Dividend
Yield
|
1-Year
Total Return
|
|
|
200.00
|
250.00
|
$1,000.00
|
13.75%
|
13.75%
|
25.00%
|
0.30%
|
25.30%
|
|
|
200.00
|
240.00
|
$1,000.00
|
13.75%
|
13.75%
|
20.00%
|
0.30%
|
20.30%
|
|
|
200.00
|
230.00
|
$1,000.00
|
13.75%
|
13.75%
|
15.00%
|
0.30%
|
15.30%
|
|
|
200.00
|
220.00
|
$1,000.00
|
13.75%
|
13.75%
|
10.00%
|
0.30%
|
10.30%
|
|
|
200.00
|
210.00
|
$1,000.00
|
13.75%
|
13.75%
|
5.00%
|
0.30%
|
5.30%
|
|
|
200.00
|
200.00
|
$1,000.00
|
13.75%
|
13.75%
|
0.00%
|
0.30%
|
0.30%
|
|
|
200.00
|
190.00
|
$950.00
|
13.75%
|
8.75%
|
-5.00%
|
0.30%
|
-4.70%
|
|
|
200.00
|
180.00
|
$900.00
|
13.75%
|
3.75%
|
-10.00%
|
0.30%
|
-9.70%
|
|
|
200.00
|
170.00
|
$850.00
|
13.75%
|
-1.25%
|
-15.00%
|
0.30%
|
-14.70%
|
|
|
200.00
|
160.00
|
$800.00
|
13.75%
|
-6.25%
|
-20.00%
|
0.30%
|
-19.70%
|
|
|
200.00
|
150.00
|
$750.00
|
13.75%
|
-11.25%
|
-25.00%
|
0.30%
|
-24.70%
|
|
|
200.00
|
140.00
|
$700.00
|
13.75%
|
-16.25%
|
-30.00%
|
0.30%
|
-29.70%
|
|
|
200.00
|
130.00
|
$650.00
|
13.75%
|
-21.25%
|
-35.00%
|
0.30%
|
-34.70%
|
|
|
200.00
|
120.00
|
$600.00
|
13.75%
|
-26.25%
|
-40.00%
|
0.30%
|
-39.70%
|
|
|
200.00
|
110.00
|
$550.00
|
13.75%
|
-31.25%
|
-45.00%
|
0.30%
|
-44.70%
|
|
|
200.00
|
100.00
|
$500.00
|
13.75%
|
-36.25%
|
-50.00%
|
0.30%
|
-49.70%
|
|
|
200.00
|
90.00
|
$450.00
|
13.75%
|
-41.25%
|
-55.00%
|
0.30%
|
-54.70%
|
|
-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
|
|
June
30, 20061
|
50.63
|
39.00
|
48.00
|
|
September
29, 2006
|
70.45
|
43.67
|
70.35
|
|
December
29, 2006
|
108.60
|
68.28
|
98.49
|
|
March
30, 2007
|
118.07
|
95.30
|
106.24
|
|
June
29, 2007
|
169.40
|
105.93
|
165.87
|
|
September
28, 2007
|
174.60
|
120.00
|
147.97
|
|
December
31, 2007
|
227.18
|
143.15
|
215.20
|
|
January
2, 2008 to February 26, 2008
|
222.25
|
160.82
|
195.77
|
|
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.
1
Shares
of MasterCard commenced
trading on May 25, 2006.
-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. However, because under certain circumstances the
Notes
may be outstanding for more than one year it is possible that the Notes may
not
be treated as short-term obligations, in which case the tax treatment of
interest payments on the Notes is described in “U.S. Federal Income Tax
Considerations -- Tax Treatment of U.S. Holders -- Tax Treatment of the Deposit
on Notes with a Term of More Than a Year” in the prospectus
supplement.
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
|
|
Research
in Motion Limited
|
1-year
|
[18.50]%
|
[5.425]%
|
[13.075]%
|
|
MasterCard
Incorporated
|
1-year
|
[13.75]%
|
[5.425]%
|
[8.325]%
|
-11-