Filed Pursuant to Rule 424(b)(5)
Registration No. 333-52902
PROSPECTUS SUPPLEMENT
(To Prospectus Dated January 11, 2001)
US$750,000,000
THE BEAR STEARNS COMPANIES INC.
6.50% GLOBAL NOTES DUE 2006
SET FORTH BELOW IS A SUMMARY OF THE TERMS OF THE NOTES OFFERED BY THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. FOR MORE DETAIL, SEE
"DESCRIPTION OF THE NOTES."
- GLOBAL OFFERING
We are offering the Notes in the United States and in parts of Europe and Asia
where it is legal to offer the Notes.
- INTEREST
The Notes have a fixed annual rate of 6.50%, which will be paid every six
months on May 1 and November 1.
- MATURITY
The Notes will mature on May 1, 2006.
- RANKING
The Notes will be our unsecured senior debt and will rank equally with all of
our other unsecured and unsubordinated debt.
- REDEMPTION
The Notes are only redeemable prior to maturity if certain events involving US
taxation occur.
- NO SINKING FUND
The Notes will not be subject to any sinking fund.
- BOOK-ENTRY NOTES
The Notes will be represented by one or more global securities registered in
the name of Cede & Co., as nominee of The Depository Trust Company.
- LISTING
We will make application to the Financial Services Authority in its capacity as
competent authority under the Financial Services Act 1986 for the Notes to be
admitted to the official list of the UK Listing Authority and to the London
Stock Exchange Limited for such Notes to be admitted to trading on the London
Stock Exchange's market for listed securities.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PER NOTE TOTAL
-------- -------------
Initial public offering price............................... 99.965% $749,737,500
Underwriting discount....................................... 0.350% $ 2,625,000
Proceeds, before expenses, to us............................ 99.615% $747,112,500
Bear, Stearns & Co. Inc. is the Global Coordinator for the offering of the
Notes. Bear, Stearns International Limited is the International Coordinator for
all Notes to be sold to purchasers in Europe. The Underwriters expect to deliver
the Notes in book-entry form only through the facilities of The Depository Trust
Company, Clearstream Banking, societe anonyme and Morgan Guaranty Trust Company
of New York, Brussels office, as operator of the Euroclear system against
payment on or about April 27, 2001.
After this offering is complete, the Underwriters may use this prospectus
supplement and the accompanying prospectus in connection with market-making
transactions at negotiated prices related to the prevailing market prices at the
time of sale. The Underwriters may act as principal or agent in these
transactions.
BEAR, STEARNS & CO. INC.
BEAR, STEARNS INTERNATIONAL LIMITED
BANC ONE CAPITAL MARKETS, INC. FLEET SECURITIES, INC.
JPMORGAN MELLON FINANCIAL MARKETS, LLC
WELLS FARGO BROKERAGE SERVICES, LLC
The date of this prospectus supplement is April 20, 2001
OFFERS AND SALES OF THE NOTES ARE SUBJECT TO RESTRICTIONS IN CERTAIN
JURISDICTIONS. IN PARTICULAR, THERE ARE RESTRICTIONS ON THE DISTRIBUTION OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE OFFER OR SALE OF
THE NOTES IN THE UNITED KINGDOM, AND DETAILS OF THESE RESTRICTIONS ARE SET OUT
IN "UNDERWRITING" IN THIS PROSPECTUS SUPPLEMENT. THE DISTRIBUTION OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE OFFER OR SALE OF
THE NOTES IN CERTAIN OTHER JURISDICTIONS MAY BE RESTRICTED BY LAW. PERSONS WHO
COME INTO POSSESSION OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS OR ANY NOTES MUST INFORM THEMSELVES ABOUT AND OBSERVE ANY APPLICABLE
RESTRICTIONS ON THE DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS AND THE OFFER AND SALE OF THE NOTES.
WE ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. TO THE BEST OF OUR KNOWLEDGE AND
BELIEF (HAVING TAKEN ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE) THE
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING LIKELY TO
AFFECT THE IMPORT OF THE INFORMATION.
YOU MUST READ THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AS
ONE ALONG WITH ALL THE DOCUMENTS WHICH ARE DEEMED TO BE INCORPORATED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BY REFERENCE (SEE "WHERE
YOU CAN FIND MORE INFORMATION"). THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS MUST BE READ AND CONSTRUED ON THE BASIS THAT THE INCORPORATED
DOCUMENTS ARE SO INCORPORATED AND FORM PART OF THIS DOCUMENT, EXCEPT AS
SPECIFIED IN THIS DOCUMENT.
WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR REPRESENT
ANYTHING NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
IN ORDER TO FACILITATE THE OFFERING OF THE NOTES, BEAR STEARNS, IN ITS
CAPACITY AS GLOBAL COORDINATOR OF THE OFFERING OF THE NOTES, MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT
A LEVEL WHICH MIGHT NOT OTHERWISE PREVAIL IN THE OPEN MARKET. SPECIFICALLY, BEAR
STEARNS, ON BEHALF OF THE UNDERWRITERS, MAY OVER-ALLOT OR OTHERWISE CREATE A
SHORT POSITION IN THE NOTES FOR THE ACCOUNT OF THE UNDERWRITERS BY SELLING MORE
NOTES THAN HAVE BEEN SOLD TO THEM BY US. BEAR STEARNS, ON BEHALF OF THE
UNDERWRITERS, MAY ELECT TO COVER ANY SUCH SHORT POSITION BY PURCHASING NOTES IN
THE OPEN MARKET. IN ADDITION, BEAR STEARNS, ON BEHALF OF THE UNDERWRITERS, MAY
STABILIZE OR MAINTAIN THE PRICE OF THE NOTES BY BIDDING FOR OR PURCHASING NOTES
IN THE OPEN MARKET AND MAY IMPOSE PENALTY BIDS, UNDER WHICH SELLING CONCESSIONS
ALLOWED TO SYNDICATE MEMBERS OR OTHER BROKER-DEALERS PARTICIPATING IN THE
OFFERING ARE RECLAIMED IF NOTES PREVIOUSLY DISTRIBUTED IN THE OFFERING ARE
REPURCHASED IN CONNECTION WITH STABILIZATION TRANSACTIONS OR OTHERWISE. THE
EFFECT OF THESE TRANSACTIONS MAY BE TO STABILIZE OR MAINTAIN THE MARKET PRICE OF
THE NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. THE IMPOSITION OF A PENALTY BID MAY ALSO AFFECT THE PRICE OF THE NOTES
TO THE EXTENT THAT IT DISCOURAGES RESALES OF NOTES. NO REPRESENTATION IS MADE AS
TO THE MAGNITUDE OR EFFECT OF ANY SUCH STABILIZATION OR OTHER TRANSACTIONS. SUCH
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS INCLUDE AND
INCORPORATE BY REFERENCE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
SECURITIES LAWS. ALL STATEMENTS REGARDING OUR EXPECTED FINANCIAL POSITION,
BUSINESS AND FINANCING PLANS ARE FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING
STATEMENTS ALSO INCLUDE REPRESENTATIONS OF OUR EXPECTATIONS OR BELIEFS
CONCERNING FUTURE EVENTS THAT INVOLVE RISKS AND UNCERTAINTIES, INCLUDING THOSE
ASSOCIATED WITH THE EFFECT OF INTERNATIONAL, NATIONAL AND REGIONAL ECONOMIC
CONDITIONS AND THE PERFORMANCE OF OUR PRODUCTS WITHIN THE PREVAILING ECONOMIC
ENVIRONMENT. ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN THOSE
FORWARD-LOOKING STATEMENTS ARE REASONABLE, THOSE EXPECTATIONS MAY PROVE TO BE
INCORRECT. CAUTIONARY STATEMENTS DESCRIBING IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM OUR EXPECTATIONS ARE DISCLOSED IN THIS
PROSPECTUS SUPPLEMENT ALONG WITH THE FORWARD-LOOKING STATEMENTS INCLUDED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO US OR PERSONS ACTING ON OUR BEHALF ARE EXPRESSLY QUALIFIED IN
THEIR ENTIRETY BY SUCH CAUTIONARY STATEMENTS. THESE FORWARD-LOOKING STATEMENTS
SPEAK ONLY AS OF THE DATE OF THE DOCUMENT IN WHICH THEY ARE MADE. WE DISCLAIM
ANY OBLIGATION OR UNDERTAKING TO PROVIDE ANY UPDATES OR REVISIONS TO ANY
FORWARD-LOOKING STATEMENT TO REFLECT ANY CHANGE IN OUR EXPECTATIONS OR ANY
CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH THE FORWARD-LOOKING
STATEMENT IS BASED.
CERTAIN DEFINITIONS
Unless otherwise stated in this prospectus supplement:
- the "Company," "we," "us" and "our" refer to The Bear Stearns
Companies Inc. and its subsidiaries;
- "AMEX" refers to the American Stock Exchange;
- "Bear Stearns" refers to Bear, Stearns & Co. Inc.;
- "BSB" refers to Bear Stearns Bank plc;
- "BSSC" refers to Bear, Stearns Securities Corp.;
- "BSIL" refers to Bear, Stearns International Limited;
- "NYSE" refers to the New York Stock Exchange; and
- "US dollars," "dollars," "US $" and "$" refer to the lawful currency of
the United States of America.
Other capitalized terms that are used but not defined in this prospectus
supplement have the meanings given to them in the accompanying prospectus.
Bear Stearns, BSB, BSSC and BSIL are subsidiaries of The Bear Stearns
Companies Inc.
S-3
WHERE YOU CAN FIND MORE INFORMATION
We file annual and quarterly reports, proxy statements and other information
required by the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with the Securities and Exchange Commission (the "SEC"). You may read and
copy any document we file at the SEC's public reference rooms located at 450
Fifth Street, N.W., Washington, D.C. 20549, at Seven World Trade Center, 13th
Floor, New York, New York 10048, U.S.A. and at Northwest Atrium Center, 5000
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, U.S.A. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public from the SEC's web site
at http://www.sec.gov. Copies of these reports, proxy statements and other
information can also be inspected at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005, U.S.A.
The SEC allows us to "incorporate by reference" the information that we file
with them, which means that we can disclose important information to you by
referring you to the other information we have filed with the SEC. The
information that we incorporate by reference is considered to be part of this
prospectus supplement, and information that we file later with the SEC will
automatically update and supersede this information.
The following documents filed by us with the SEC pursuant to Section 13 of
the Exchange Act (File No. 1-8989) and any future filings under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act made before the termination of the
offering of the Notes are incorporated by reference:
(i) the Annual Report on Form 10-K (including the portions of the Company's
Annual Report to Stockholders and Proxy Statement incorporated by
reference therein) for the fiscal year ended November 30, 2000;
(ii) the Quarterly Report on Form 10-Q for the quarter ended February 23,
2001; and
(iii) the Current Reports on Form 8-K dated December 13, 2000, January 4,
2001, January 11, 2001, February 15, 2001, February 15, 2001, March 21,
2001 and March 30, 2001.
We will provide to you without charge, a copy of any or all documents
incorporated by reference into this prospectus supplement except the exhibits to
such documents (unless such exhibits are specifically incorporated by reference
in such documents). You may request copies by writing or telephoning us at the
Corporate Communications Department, The Bear Stearns Companies Inc., 245 Park
Avenue, New York, New York 10167, U.S.A.; telephone number (212) 272-2000. In
addition, once the Notes are admitted to the Official List of the UK Listing
Authority (as defined below), these documents will be available from BSIL in its
capacity as listing agent for the Notes at its principal office at One Canada
Square, London E14 5AD, England.
S-4
SUMMARY OF THE OFFERING
ISSUER................................. The Bear Stearns Companies Inc.
SECURITIES OFFERED..................... US $750,000,000 aggregate principal amount of 6.50% Global
Notes due 2006.
SPECIFIED CURRENCY..................... The Notes will be denominated in US dollars and all
payments on the Notes will be made in US dollars.
OFFERING PRICE......................... The Notes are being offered at a price of 99.965% of par.
DATE OF ORIGINAL ISSUANCE (SETTLEMENT
DATE)................................ April 27, 2001.
MATURITY DATE.......................... May 1, 2006.
INTEREST PAYMENT DATES................. May 1 and November 1 in each year, beginning November 1,
2001.
RANKING................................ The Notes will be unsecured and will rank equally with all
our other unsecured and unsubordinated debt. Because we
are a holding company, the Notes will be effectively
subordinated to the claims of creditors of our
subsidiaries with respect to their assets. At
February 23, 2001:
- we had outstanding (on an unconsolidated basis)
approximately $35.9 billion of debt and other
obligations, including approximately $34.5 billion
of senior debt, none of which is secured; and
- our subsidiaries had outstanding (after
consolidation and eliminations) approximately
$124.5 billion of debt and other obligations
(including $47.3 billion related to securities sold
under repurchase agreements, $46.7 billion related
to payables to customers, $20.9 billion related to
financial instruments sold, but not yet purchased,
and $9.6 billion of other liabilities, including
$4.2 billion of debt).
MANDATORY REDEMPTION OR SINKING FUND... None.
OPTIONAL REDEMPTION.................... The Notes may only be redeemed prior to maturity if
certain events involving US taxation occur. See
"Redemption Upon Certain Tax Events" below.
S-5
PAYMENT OF ADDITIONAL AMOUNTS.......... Subject to the various exceptions and limitations set
forth in this prospectus supplement, we will pay as
additional interest or, as the case may be, principal on
the Notes all such additional amounts that are necessary
in order that the net payment by us or a paying agent of
the principal of and interest on the Notes to a person
that is not a US Holder (as defined under "Certain US
Federal Income Tax Considerations"), after deduction for
any present or future tax, assessment or governmental
charge of the United States or a political subdivision or
taxing authority of the United States or in the United
States, imposed by withholding with respect to the
payment, will not be less than the amount provided in the
Notes to be then due and payable. See "Description of the
Notes--Payment of Additional Amounts" below.
REDEMPTION UPON CERTAIN TAX EVENTS..... If (a) as a result of any change in, or amendment to, the
laws (or any regulations or rulings promulgated under
those laws) of the United States (or any political
subdivision or taxing authority of the United States or in
the United States), or any change in, or amendments to,
the official position regarding the application or
interpretation of these laws, regulations or rulings,
which is announced or becomes effective on or after the
date of this prospectus supplement, we become or will
become obligated to pay additional amounts as described in
this prospectus supplement under the heading "Description
of the Notes--Payment of Additional Amounts" below or (b)
any act is taken by a taxing authority of the United
States on or after the date of this prospectus supplement,
whether that act is taken with respect to us or any
affiliate, that results in a substantial probability that
we will or may be required to pay such additional amounts,
then we may, at our option, redeem, in whole but not in
part, the Notes on any interest payment date on not less
than 30 nor more than 60 days' prior notice, at a
redemption price equal to 100% of their principal amount,
together with interest accrued on the Notes to the date
fixed for redemption; provided that we determine, in our
business judgment, that the obligation to pay such
additional amounts cannot be avoided by the use of
reasonable measures available to us, not including
substitution of the obligor under the Notes. See
"Description of the Notes--Redemption Upon Certain Tax
Events" below.
USE OF PROCEEDS........................ We will use the net proceeds before expenses from the sale
of the Notes of approximately $747.1 million for general
corporate purposes. These purposes may include additions
to working capital, the repayment of short-term and
long-term debt and making investments in or extending
credit to our subsidiaries.
S-6
BOOK-ENTRY FORM........................ The Notes will be issued only in book-entry form. This
means that we will not issue certificates to you. Instead,
the Notes will be issued in the form of one or more fully
registered global securities, which will be deposited with
a custodian. The Notes will be registered in the name of
Cede & Co., as the nominee for The Depository Trust
Company. You will not receive a definitive note
representing your interest. This form will be referred to
as "book-entry only." You may elect to hold your interests
in the global securities through either The Depository
Trust Company ("DTC") (in the United States) or
Clearstream Banking, societe anonyme ("Clearstream") or
Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system ("Euroclear")
(in Europe). Interests will be held on behalf of the
participants of Clearstream and Euroclear on the books of
their respective depositaries. See "Description of Debt
Securities--Global Securities" in the accompanying
prospectus and "Description of the Notes--Book-Entry,
Delivery and Form--Global Clearance and Settlement
Procedures" below.
EVENTS OF DEFAULT...................... See "Description of Debt Securities--Events of Default" in
the accompanying prospectus.
LIMITATION ON LIENS.................... See "Description of Debt Securities--Limitation on Liens"
in the accompanying prospectus.
LISTING................................ We will make application to the Financial Services
Authority in its capacity as competent authority under the
Financial Services Act 1986 (the "UK Listing Authority")
for the Notes to be admitted to the official list of the
UK Listing Authority (the "Official List") and to the
London Stock Exchange Limited (the "London Stock
Exchange") for such Notes to be admitted to trading on the
London Stock Exchange's market for listed securities. We
cannot guarantee that our application will be approved,
and settlement of the Notes is not conditioned on
obtaining the listing.
GOVERNING LAW.......................... New York.
SELLING RESTRICTIONS................... There are selling restrictions for certain jurisdictions,
including the United Kingdom. See "Underwriting" below.
S-7
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges was 1.3 for the three months ended
February 23, 2001 and 1.2 for the fiscal year ended November 30, 2000. The ratio
was calculated by dividing the sum of the fixed charges into the sum of the
earnings before taxes and fixed charges. Fixed charges for purposes of the ratio
consist of interest expense and certain other immaterial expenses.
THE BEAR STEARNS COMPANIES INC.
We are a holding company that, through our subsidiaries, principally Bear
Stearns, BSSC, BSIL and BSB, is a leading investment banking, securities trading
and brokerage firm serving corporations, governments, institutional and
individual investors worldwide. BSSC, a subsidiary of Bear Stearns, provides
professional and correspondent clearing services, in addition to clearing and
settling our proprietary and customer transactions. Our business includes:
- market-making and trading in US government, government agency, corporate
debt and equity, mortgage-related, asset-backed and municipal securities;
- trading in options, futures, foreign currencies, interest rate swaps and
other derivative products;
- securities, options and futures brokerage;
- providing securities clearance services;
- managing equity and fixed income assets for institutional and individual
clients;
- financing customer activities;
- securities lending;
- securities and futures arbitrage;
- involvement in specialist activity on both the NYSE and the AMEX;
- underwriting and distributing securities;
- arranging for the private placement of securities;
- assisting in mergers, acquisitions, restructurings and leveraged
transactions;
- making principal investments in leveraged acquisitions;
- engaging in commercial real estate activities;
- investment management and advisory services; and
- advisory, fiduciary, custody, agency and securities research services.
Our business is conducted:
- from our principal offices in New York City;
- from domestic regional offices in Atlanta, Boston, Chicago, Dallas,
Denver, Los Angeles, San Francisco and San Juan;
- from representative offices in Beijing, Buenos Aires, Sao Paulo, Seoul and
Shanghai;
- through international offices in Dublin, Hong Kong, London, Lugano,
Singapore and Tokyo; and
- through joint ventures with other firms in Belgium, Greece and Spain.
We are incorporated in the State of Delaware. Our principal executive office
is located at 245 Park Avenue, New York, New York 10167, USA, and our telephone
number is (212) 272-2000. Our internet address is http://www.bearstearns.com.
S-8
DIRECTORS OF THE COMPANY
The following table sets forth certain information concerning the directors
of the Company.
YEAR FIRST
ELECTED TO
SERVE AS
AGE DIRECTOR OF
NAME (AS OF JANUARY 22, 2001) PRINCIPAL OCCUPATION AND DIRECTORSHIPS HELD THE COMPANY
---- ------------------------- ------------------------------------------- -----------
James E. Cayne................. 66 President and Chief Executive Officer of 1985
the Company and Bear Stearns and member of
the Executive Committee
Carl D. Glickman............... 74 Private Investor; Director, Office Max 1985
Inc.; Trustee, Lexington Corporate Property
Trust
Alan C. Greenberg.............. 73 Chairman of the Board of the Company and 1985
Bear Stearns and Chairman of the Executive
Committee
Donald J. Harrington, C.M...... 55 President, St. John's University; Director, 1993
The Reserve Fund, Reserve Institutional
Trust, Reserve Tax-Exempt Trust, Reserve
New York Tax-Exempt Trust and Reserve
Special Portfolios Trust
William L. Mack................ 60 President and Senior Managing Partner, The 1997
Mack Organization; Founder and Managing
Partner, The Apollo Real Estate Investment
Funds; Chairman of the Board of Metropolis
Realty Trust, Inc. and Mack-Cali Realty
Corporation; Director, Koger Equity, Inc.,
Vail Resorts, Inc. and Wyndham
International, Inc.
Frank T. Nickell............... 53 President and Chief Executive Officer of 1993
Kelso & Company; Director, Blackrock Inc,
Earle M. Jorgensen Company and Peebles Inc.
Frederic V. Salerno............ 57 Vice Chairman and CFO of Verizon 1992
Communications; Director, Avnet, Inc.,
Orion Power Holdings and Viacom, Inc.
Alan D. Schwartz............... 50 Executive Vice President and Head of the 1987(1)
Investment Banking Group of Bear Stearns;
Director, Unique Casual Restaurants, Inc.
Warren J. Spector.............. 43 Executive Vice President and Head of the 1990(1)
Fixed Income Group of Bear Stearns
S-9
YEAR FIRST
ELECTED TO
SERVE AS
AGE DIRECTOR OF
NAME (AS OF JANUARY 22, 2001) PRINCIPAL OCCUPATION AND DIRECTORSHIPS HELD THE COMPANY
---- ------------------------- ------------------------------------------- -----------
Vincent Tese................... 57 Chairman and Director of Wireless Cable 1994
International Inc.; Director, Allied Waste
Industries Inc., Angram, Inc., Bowne & Co.,
Inc., Xanboo Inc., Cablevision Inc.,
Mack-Cali Realty Corp., Orion Power
Holdings, Inc., National Wireless Holdings
Inc. and Lynch Interactive Corp.
Fred Wilpon.................... 64 Chairman of the Board of Directors of 1993
Sterling Equities, Inc.; Director, Loews
Corporation; President and Chief Executive
Officer of the New York Mets
------------------------
(1) Did not serve as director during 1997 and 1998.
Mr. Cayne has been Chief Executive Officer and President of the Company and
Bear Stearns for more than the past five years.
Mr. Glickman has been a private investor for more than the past five years.
Mr. Glickman is also currently Chairman of the Compensation Committee of the
Board of Directors of the Company.
Mr. Greenberg has been Chairman of the Board of the Company for more than
the past five years.
Father Harrington has been the President of St. John's University for more
than the past five years.
Mr. Mack has been President and Senior Managing Partner of The Mack
Organization (a national owner, developer and investor in office and industrial
buildings and other real estate) and Managing Partner of the Apollo Real Estate
Investment Funds for more than the past five years. Mr. Mack is Chairman of the
Board of Mack-Cali Realty Corporation (a publicly traded real estate investment
trust). Mr. Mack is Chairman of the Board of Metropolis Realty Trust, Inc. (the
owner of high rise office buildings).
Mr. Nickell has been President of Kelso & Company, a privately held merchant
banking firm, for more than the past five years. Mr. Nickell was appointed Chief
Executive Officer of Kelso & Company in 1998.
Mr. Salerno is the Vice Chairman and CFO of Verizon Communications (formerly
Bell Atlantic Corporation). Prior to June 2000, Mr. Salerno was the Senior
Executive Vice President and CFO/ Strategy and Business Development of Bell
Atlantic Corporation. Prior to the merger of NYNEX Corp. ("NYNEX") and Bell
Atlantic Corporation, Mr. Salerno was the Vice Chairman of the Board of NYNEX
for more than five years. Mr. Salerno served as Chairman of the Board of the
State University of New York from 1990 to 1996.
Mr. Schwartz has been an Executive Vice President of Bear Stearns for more
than the past five years. Prior to June 30, 1999, Mr. Schwartz was an Executive
Vice President of the Company and a member of the Executive Committee for more
than the past five years. Mr. Schwartz is responsible for all of the investment
banking activities of Bear Stearns.
S-10
Mr. Spector has been an Executive Vice President of Bear Stearns for more
than the past five years. Prior to June 30, 1999, Mr. Spector was an Executive
Vice President of the Company and a member of the Executive Committee for more
than the past five years. Mr. Spector is responsible for all of the fixed income
activities of Bear Stearns.
Mr. Tese has been Chairman of Wireless Cable International Inc. since
April 1995. Mr. Tese was Chairman of Cross Country Wireless Inc. from
October 1994 to July 1995 and was a corporate officer and a general partner of
Cross Country Wireless Inc.'s predecessors, Cross Country Wireless Cable--I,
L.P. and Cross Country Wireless Cable West, L.P., from 1990 until October 1994.
Mr. Tese was the Director of Economic Development for the State of New York from
June 1987 to December 1994. Mr. Tese is currently Chairman of the Audit
Committee of the Board of Directors of the Company.
Mr. Wilpon has been Chairman of the Board of Directors of Sterling
Equities, Inc., a privately held entity, and certain affiliates thereof, which
are primarily real estate development/owner management companies, for more than
the past five years. Mr. Wilpon has also been President and Chief Executive
Officer of the New York Mets baseball team for more than the past five years.
There is no family relationship among any of the directors or executive
officers.
All directors hold office until our next Annual Meeting of Stockholders or
until their successors have been duly elected and qualified. Officers serve at
the discretion of the Board of Directors.
The business address for each director is 245 Park Avenue, New York, New
York 10167, USA.
USE OF PROCEEDS
We will use the net proceeds before expenses from the sale of the Notes of
approximately $747.1 million for general corporate purposes. These purposes may
include additions to working capital, the repayment of short-term and long-term
debt and making investments in or extending credit to our subsidiaries.
S-11
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
February 23, 2001 and as adjusted to give effect to the offering of the Notes.
It is important that you read the following information along with the
consolidated financial statements and notes thereto incorporated by reference in
this prospectus supplement and the accompanying prospectus. See "Where You Can
Find More Information" and "General Information."
FEBRUARY 23, 2001
-------------------------
ACTUAL AS ADJUSTED
----------- -----------
(UNAUDITED, IN THOUSANDS)
Short-Term Borrowings(1)(3):
Bank Borrowings........................................... $ 1,901,898 $ 1,901,898
Commercial Paper.......................................... 7,669,291 7,669,291
Medium-Term Notes......................................... 6,236,083 6,236,083
----------- -----------
Total Short-Term Borrowings............................. $15,807,272 $15,807,272
=========== ===========
Long-Term Borrowings(2)(3):
Floating Rate Notes due 2001 to 2007...................... $ 4,810,541 $ 4,810,541
Fixed Rate Senior Notes due 2001 to 2009; interest rates
ranging from 6.125% to 9.375%........................... 6,965,907 7,715,645
Medium-Term Notes......................................... 7,870,417 7,870,417
----------- -----------
Total Long-Term Borrowings.............................. 19,646,865 20,396,603
----------- -----------
Guaranteed Preferred Beneficial Interests in Company
Subordinated Debt Securities(4)........................... 500,000 500,000
----------- -----------
Stockholders' Equity:
Preferred Stock, $1.00 par value, Series A, E, F and G,
10,000,000 shares authorized, 6,250,000 shares issued... 800,000 800,000
Common Stock, $1.00 par value; 200,000,000 shares
authorized; 184,805,848 shares issued................... 184,806 184,806
Paid-in Capital............................................. 2,585,506 2,585,506
Retained Earnings........................................... 2,733,919 2,733,919
Employee Stock Compensation Plans........................... 1,867,646 1,867,646
Unearned Compensation....................................... (206,516) (206,516)
Treasury Stock:
Adjustable Rate Cumulative Preferred Stock, Series
A--2,520,750 shares..................................... (103,421) (103,421)
Common Stock--78,222,638 shares........................... (2,240,535) (2,240,535)
----------- -----------
Total Stockholders' Equity.............................. 5,621,405 5,621,405
----------- -----------
Total Long-Term Borrowings, Guaranteed Preferred Beneficial
Interests in Company Subordinated Debt Securities and
Stockholders' Equity...................................... $25,768,270 $26,518,008
=========== ===========
------------------------
(1) Between February 23, 2001 and April 19, 2001, there was a net decrease in
short-term borrowings of approximately $801.5 million.
(2) Between February 23, 2001 and April 19, 2001, the Company issued
approximately $529.1 million in long-term borrowings and retired
approximately $472.5 million of its long-term borrowings.
(3) By virtue of the nature of our business and that of our subsidiaries, our
borrowings, particularly our short-term borrowings, fluctuate from day to
day in the ordinary course of business. Except as disclosed in Notes (1) and
(2), since February 23, 2001, there has been no material change in our
consolidated capitalization.
(4) The Guaranteed Preferred Beneficial Interests in Company Subordinated Debt
Securities reflects the preferred securities of Bear Stearns Capital Trust I
and Bear Stearns Capital Trust II. Each of the trusts is a wholly-owned
subsidiary of the Company and holds certain of our subordinated debentures
as its sole asset.
S-12
SELECTED CONSOLIDATED FINANCIAL DATA
The financial data in the following table for the three months ended
February 23, 2001 and February 25, 2000 has been derived from our unaudited
consolidated financial statements for those periods. The financial data in the
following table for the fiscal year ended November 30, 2000, the five months
ended November 26, 1999, and the fiscal years ended June 30, 1999, 1998, 1997
and 1996 has been derived from our audited consolidated financial statements for
those periods. See "Where You Can Find More Information" and "General
Information."
THREE MONTHS ENDED
----------------------------------------
FEBRUARY 23, 2001 FEBRUARY 25, 2000
------------------ -------------------
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE,
PER SHARE AND OTHER DATA)
OPERATING RESULTS:
Revenues.................................................... $ 2,146,069 $ 2,688,025
Interest expense............................................ 932,282 1,181,959
------------ ------------
Revenues, net of interest expense........................... 1,213,787 1,506,066
------------ ------------
Non-interest expenses
Employee compensation and benefits.......................... 642,259 718,655
Other....................................................... 318,564 333,608
------------ ------------
Total non-interest expenses................................. 960,823 1,052,263
------------ ------------
Income before provision for income taxes and cumulative
effect of change in accounting principle.................. 252,964 453,803
Provision for income taxes.................................. 87,010 175,622
------------ ------------
Income before cumulative effect of change in accounting
principle................................................. 165,954 278,181
Cumulative effect of change in accounting principle, net of
tax....................................................... (6,273) --
------------ ------------
Net income.................................................. $ 159,681 $ 278,181
============ ============
Net income applicable to common shares...................... $ 149,903 $ 268,403
============ ============
FINANCIAL POSITION:
Total assets................................................ $167,817,274 $175,009,863
Long-term borrowings........................................ $ 19,646,865 $ 17,748,479
Stockholders' equity(1)..................................... $ 6,121,405 $ 5,437,291
Common shares and common share equivalents outstanding(2)... 159,125,959 162,607,443
PER SHARE DATA:(2)
Basic earnings per share:
Before change in accounting principle....................... $ 1.15 $ 1.89
Cumulative effect of change in accounting principle......... (.04) --
------------ ------------
$ 1.11 $ 1.89
============ ============
Diluted earnings per share:
Before change in accounting principle....................... $ 1.10 $ 1.89
Cumulative effect of change in accounting principle......... (.04) --
------------ ------------
$ 1.06 $ 1.89
============ ============
Cash dividends declared per common share.................... $ 0.15 $ 0.15
Book value per common share................................. $ 31.94 $ 28.21
OTHER DATA:
Return on average common equity............................. 13.6% 27.9%
Profit margin(3)............................................ 20.8% 30.1%
Employees................................................... 11,298 10,210
------------------------------
(1) As of February 23, 2001 and February 25, 2000, stockholders' equity includes
$500 million of Guaranteed Preferred Beneficial Interests in Company
Subordinated Debt Securities, which reflects preferred securities of Bear
Stearns Capital Trust I and Bear Stearns Capital Trust II.
(2) Reflects all stock dividends prior to February 23, 2001.
(3) Represents the ratio of income before provision for income taxes to
revenues, net of interest expense.
S-13
FISCAL YEAR FIVE MONTHS
ENDED ENDED FISCAL YEAR ENDED JUNE 30,
NOVEMBER 30, NOVEMBER 26, ---------------------------------------------------------
2000 1999 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE, PER SHARE AND OTHER DATA)
OPERATING RESULTS:
Revenues.............................. $10,276,569 $ 3,470,290 $ 7,882,038 $ 7,979,936 $ 6,077,278 $ 4,963,863
Interest expense...................... 4,800,891 1,531,787 3,379,914 3,638,513 2,551,364 1,981,171
------------ ------------ ------------ ------------ ------------ ------------
Revenues, net of interest expense..... 5,475,678 1,938,503 4,502,124 4,341,423 3,525,914 2,982,692
------------ ------------ ------------ ------------ ------------ ------------
Non-interest expenses
Employee compensation and benefits.... 2,814,193 973,990 2,285,594 2,111,741 1,726,931 1,469,448
Other................................. 1,489,962 510,921 1,152,422 1,166,190 785,293 678,318
------------ ------------ ------------ ------------ ------------ ------------
Total non-interest expenses........... 4,304,155 1,484,911 3,438,016 3,277,931 2,512,224 2,147,766
------------ ------------ ------------ ------------ ------------ ------------
Income before provision for income
taxes............................... 1,171,523 453,592 1,064,108 1,063,492 1,013,690 834,926
Provision for income taxes............ 398,340 167,778 391,060 403,063 400,360 344,288
------------ ------------ ------------ ------------ ------------ ------------
Net income............................ $ 773,183 $ 285,814 $ 673,048 $ 660,429 $ 613,330 $ 490,638
============ ============ ============ ============ ============ ============
Net income applicable to common
shares.............................. $ 734,070 $ 269,517 $ 633,618 $ 629,417 $ 589,497 $ 466,145
============ ============ ============ ============ ============ ============
FINANCIAL POSITION:
Total assets.......................... $171,166,473 $162,037,962 $153,894,340 $154,495,895 $121,433,535 $ 92,085,157
Long-term borrowings.................. $20,095,888 $15,911,392 $ 14,647,092 $ 13,295,952 $ 8,120,328 $ 6,043,614
Stockholders' equity(1)............... $ 6,154,288 $ 5,441,947 $ 5,455,509 $ 4,641,533 $ 3,626,371 $ 2,895,414
Common shares and common share
equivalents outstanding(2).......... 158,039,960 165,956,810 167,265,996 167,173,826 167,096,515 166,780,371
PER SHARE DATA:(2)
Basic earnings per share.............. $ 5.37 $ 1.78 $ 4.26 $ 4.17 $ 3.81 $ 2.96
Diluted earnings per share............ $ 5.35 $ 1.78 $ 4.26 $ 4.17 $ 3.81 $ 2.96
Cash dividends declared per common
share............................... $ 0.55 $ 0.29 $ 0.56 $ 0.54 $ 0.52 $ 0.50
Book value per common share........... $ 31.51 $ 26.93 $ 25.60 $ 21.64 $ 17.74 $ 14.54
OTHER DATA:
Return on average common equity....... 19.1% 16.6% 18.8% 21.7% 27.9% 25.6%
Profit margin(3)...................... 21.4% 23.4% 23.6% 24.5% 28.7% 28.0%
Employees............................. 11,201 10,081 9,808 9,180 8,309 7,749
------------------------------
(1) As of November 30, 2000, November 26, 1999 and June 30, 1999, stockholders'
equity includes $500 million of Guaranteed Preferred Beneficial Interests in
Company Subordinated Debt Securities, which consists of $200 million of
Capital Securities issued by Bear Stearns Capital Trust I and $300 million
of Preferred Securities issued by Bear Stearns Capital Trust II. As of
June 30, 1998 and 1997, stockholders' equity includes $350 million of
Preferred Stock issued by our subsidiaries, which consists of $150 million
of Exchangeable Preferred Income Cumulative Shares ("EPICS") and
$200 million of Guaranteed Preferred Beneficial Interests in Company
Subordinated Debt Securities. As of June 30, 1996, stockholders' equity
includes $150 million of EPICS, which were issued by one of our
subsidiaries.
(2) Reflects all stock dividends prior to February 23, 2001.
(3) Represents the ratio of income before provision for income taxes to
revenues, net of interest expense.
S-14
DESCRIPTION OF THE NOTES
The following discussion of the terms of the Notes and the Indenture
supplements the general terms and provisions of the debt securities contained in
the accompanying prospectus under the heading "Description of Debt Securities"
and identifies any general terms and provisions described in the accompanying
prospectus that will not apply to the Notes.
You can find the definitions of certain capitalized terms used in this
section under "Description of Debt Securities" in the accompanying prospectus.
For purposes of this section only, references to "we," "us" and "our" include
only The Bear Stearns Companies Inc. and not its subsidiaries. We will issue the
Notes under the Indenture, dated as of May 31, 1991, as supplemented by the
First Supplemental Indenture, dated January 29, 1998 (as supplemented, the
"Indenture"), between us and The Chase Manhattan Bank (formerly known as
Chemical Bank and successor by merger to Manufacturers Hanover Trust Company),
as trustee (the "Trustee").
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended. A copy of the Indenture has been filed as an exhibit to the
Registration Statement and is available as set forth under "Where You Can Find
More Information" and "General Information."
The following description along with the description in the accompanying
prospectus is a summary of the material provisions of the Indenture. It does not
restate the Indenture in its entirety. We urge you to read the Indenture because
it, and not these descriptions, defines your rights as a holder of the Notes (a
"Holder").
BRIEF DESCRIPTION OF THE NOTES
The Notes will:
- be a single series of our debt securities under the Indenture;
- be our unsecured senior debt;
- rank equally with all of our other unsecured and unsubordinated debt;
- only be redeemable before their maturity if certain events involving US
taxation occur as discussed under "--Redemption by the Company Upon
Certain Tax Events";
- be subject to defeasance in compliance with the Indenture, see
"Description of Debt Securities--Defeasance" in the accompanying
prospectus; and
- be issued in denominations of $1,000 increased in multiples of $1,000.
Because we are a holding company, the Notes will be effectively subordinated
to the claims of creditors of our subsidiaries with respect to their assets. At
February 23, 2001:
- we had outstanding (on an unconsolidated basis) approximately
$35.9 billion of debt and other obligations, including approximately
$34.5 billion of senior debt, none of which is secured; and
- our subsidiaries had outstanding (after consolidation and eliminations)
approximately $124.5 billion of debt and other obligations (including
$47.3 billion related to securities sold under repurchase agreements,
$46.7 billion related to payables to customers, $20.9 billion related to
financial instruments sold, but not yet purchased, and $9.6 billion of
other liabilities, including $4.2 billion of debt).
S-15
PRINCIPAL, MATURITY AND INTEREST
The Notes will be issued in the offering and will mature on May 1, 2006. We
may, without your consent, issue additional notes having the same ranking and
the same interest rate, maturity and other terms as the Notes. Any of these
additional notes, together with the Notes described in this Prospectus
Supplement will constitute a single series of debt securities under the
Indenture. However, no additional notes may be issued if an Event of Default has
occurred and is continuing with respect to the Notes.
Interest on the Notes will accrue at the rate of 6.50% per annum and will be
paid every six months on each May 1 and November 1, beginning on November 1,
2001 (which first payment includes interest from the date of issuance), to the
persons who are registered Holders at the close of business on the April 15 and
October 15 immediately before the applicable interest payment date. If an
interest payment date is not a business day, the interest payment will be made
on the next business day, and the Holder is not entitled to any additional
interest for the delay.
Interest on the Notes will accrue from the most recent date to which
interest has been paid, or if no interest has been paid, from and including
April 27, 2001. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Notes will not be entitled to the benefit of any
mandatory sinking fund.
PRINCIPAL PAYING AGENT, PAYING AGENTS, REGISTRAR AND TRANSFER AGENT
The Chase Manhattan Bank, the Trustee under the Indenture, will initially
act as the principal office or agency where Notes may be presented for payment
(the "Principal Paying Agent"). We have also agreed that as long as the Notes
are listed on the London Stock Exchange and its rules require, we will appoint
and maintain a transfer agent and paying agent in London. We have appointed The
Chase Manhattan Bank to serve as registrar (the "Registrar") under the
Indenture. The terms "paying agent" and "transfer agent" include the Principal
Paying Agent and the Registrar and any additional or successor agents appointed
by us. The names of the initial Paying Agents and Transfer Agents and their
initial specified offices are set out below.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
The Principal Paying Agent will pay interest to DTC, or its nominee, by wire
transfer of same day funds for credit to the accounts of DTC's participants and
subsequent distribution to the beneficial owners of the Notes, or, if the Notes
are issued in certificated form under the circumstances described below in
"--Book-Entry, Delivery and Form--Definitive Notes," the Principal Paying Agent
will pay the registered Holder of the Notes against presentation and surrender
by such Holder of its Note to any paying agent, by US dollar check drawn on a
bank in New York City and mailed on the business day immediately before the
interest due date.
PAYMENT OF ADDITIONAL AMOUNTS
Subject to the various exceptions and limitations set forth below, we will
pay as additional interest or principal, as the case may be, on the Notes, all
such additional amounts that are necessary in order that the net payment by us
or a paying agent of the principal of and interest on the Notes to a person that
is not a US Holder (as defined under "Certain US Federal Income Tax
Considerations," below), after deduction for any present or future tax,
assessment or governmental charge of the United States or a political
subdivision or taxing authority thereof or therein, imposed by withholding with
respect to
S-16
the payment, will not be less than the amount provided in the Notes to be then
due and payable. However, the obligation to pay additional amounts shall not
apply:
(1) to a tax, assessment or governmental charge that is imposed or
withheld solely by reason of the Holder, or a fiduciary, settlor,
beneficiary, member or shareholder of the Holder, if the Holder is an
estate, trust, partnership or corporation for federal income tax purposes,
or a person holding a power over such an estate, trust, partnership or
corporation, or a person holding a power over such an estate or trust
administered by a fiduciary holder, being considered as:
(a) being or having been present or engaged in a trade or business in
the United States or having or having had a permanent establishment in
the United States;
(b) having a current or former connection with the United States,
including a connection as a citizen or resident thereof;
(c) being or having been a foreign or domestic personal holding
company, a passive foreign investment company or a controlled foreign
corporation with respect to the United States or a corporation that has
accumulated earnings to avoid United States federal income tax;
(d) being or having been a private foundation or other tax-exempt
organization;
(e) being or having been a "10-percent shareholder" of the Company as
defined in Section 871(h)(3) of the United States Internal Revenue Code
or any successor provision; or
(f) being a bank receiving payments on an extension of credit made
pursuant to a loan agreement entered into in the ordinary course of its
trade or business;
(2) to any Holder that is not the sole beneficial owner of the Notes, or
a portion thereof, or that is a fiduciary or partnership, but only to the
extent that a beneficiary or settlor with respect to the fiduciary, a
beneficial owner or member of the partnership would not have been entitled
to the payment of an additional amount had the beneficiary, settlor,
beneficial owner or member received directly its beneficial or distributive
share of the payment;
(3) to a tax, assessment or governmental charge that is imposed or
withheld solely by reason of the failure of the Holder or any other person
to comply with certification, identification or information reporting
requirements concerning the nationality, residence, identity or connection
with the United States of the Holder or beneficial owner of such Note, if
compliance is required by statute or regulation of the United States or of
any political subdivision or taxing authority thereof or therein, or by an
applicable income tax treaty to which the United States is a party as a
precondition to exemption from such tax, assessment or other governmental
charge;
(4) to a tax, assessment or governmental charge that is imposed
otherwise than by withholding by us or a paying agent from payments on or in
respect of a Note;
(5) to a tax, assessment or governmental charge that is imposed or
withheld by reason of the presentation by or on behalf of the beneficial
owner of any Note for payment on a date more than 15 days after the payment
becomes due or is duly provided for, whichever occurs later;
(6) to an estate, inheritance, gift, sales, excise, transfer, wealth or
personal property tax or a similar tax, assessment or governmental charge;
(7) to any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal of or interest on
any Note, if such payment can be made without such withholding by any other
paying agent; or
(8) in the case of any combination of any of the above items;
S-17
nor shall additional amounts be paid with respect to any payment on a Note to a
Holder who is a fiduciary or partnership or other than the sole beneficial owner
of such payment to the extent such payment would be required by the laws of the
United States (or any political subdivision thereof) to be included in the
income, for tax purposes, of a beneficiary or settlor with respect to such
fiduciary or a member of such partnership or a beneficial owner who would not
have been entitled to the additional amounts had such beneficiary, settlor,
member or beneficial owner held its interest in the Note directly.
The Notes are subject in all cases to any tax, fiscal or other law or
regulation or administrative or judicial interpretation that is applicable to
them. Except as specifically provided under this heading "--Payment of
Additional Amounts" and under the heading "--Redemption Upon Certain Tax
Events," we are not required to make any payments with respect to any tax,
assessment or governmental charge imposed by any government or a political
subdivision or taxing authority thereof or therein.
REDEMPTION UPON CERTAIN TAX EVENTS
If,
(a) as a result of any change in, or amendment to, the laws (or any
regulations or rulings promulgated thereunder) of the United States (or any
political subdivision or taxing authority thereof or therein), or any change
in, or amendment to, the official position regarding the application or
interpretation of such laws, regulations or rulings, which is announced or
becomes effective on or after the date of this prospectus supplement, we
determine that we will be or will become obligated to pay additional amounts
as described in this prospectus supplement under the heading "--Payment of
Additional Amounts"; or
(b) any act is taken by a taxing authority of the United States on or
after the date of this prospectus supplement, whether such act is taken with
respect to us or any affiliate, that results in a substantial probability
that we will or may be required to pay such additional amounts;
then we may, at our option, redeem, as a whole, but not in part, the Notes on
any interest payment date on not less than 30 nor more than 60 days' prior
notice, at a redemption price equal to 100% of their principal amount, together
with interest accrued thereon to the date fixed for redemption; provided that we
determine, in our business judgement, that the obligation to pay such additional
amounts cannot be avoided by the use of reasonable measures available to us, not
including substitution of the obligor under the Notes. No redemption pursuant to
clause (b) above may be made unless we have delivered to the Trustee a written
opinion of independent legal counsel of recognized legal standing to the effect
that an act taken by a taxing authority of the United States has resulted or
will result in a substantial probability that it will or may be required to pay
the additional amounts described herein under the heading "--Payment of
Additional Amounts" and that we are therefore entitled to redeem the Notes
pursuant to their terms.
UNCLAIMED AMOUNTS
The Indenture provides that any payments in respect of principal and any
interest remaining that are unclaimed for two years after their due date will be
paid to us, and the Holder of the Note will after that time look, as an
unsecured creditor, only to us for payment of those amounts.
NOTICES
All notices regarding the Notes will be valid if published (i) in a leading
English language daily newspaper of general circulation in London, and (ii) in a
leading English language daily newspaper of general circulation in New York.
However, it is expected that that publication will be made in (i) the FINANCIAL
TIMES or another daily newspaper in London approved by the Trustee or, if this
is not
S-18
possible, in one other English language daily newspaper approved by the Trustee
with general circulation in Europe, and (ii) THE WALL STREET JOURNAL (Eastern
Edition) in New York. Any notice will be deemed to have been given on the date
of the first publication in all the relevant newspapers.
Until the time any definitive Notes are issued under the circumstances
described below in "--Book-Entry, Delivery and Form--Definitive Notes," and as
long as the Global Securities are held in their entirety on behalf of Euroclear
and/or Clearstream and DTC, publication in the specified newspapers may be
replaced with the delivery of the relevant notice to Euroclear and/or
Clearstream and DTC for communication by them to the Holders of the Notes. Any
notice shall be deemed to have been given to the Holders of the Notes on the
seventh day after the day on which the notice was given to Euroclear and/or
Clearstream or DTC.
BOOK-ENTRY, DELIVERY AND FORM
The Notes will be issued only in book-entry form. This means that we will
not issue certificates to you. Instead, the Notes will be issued in the form of
one or more fully registered global notes (the "Global Securities"), which will
be deposited with a custodian. The Notes will be registered in the name of
Cede & Co., as the nominee for DTC. You will not receive a definitive note
representing your interest. This form will be referred to as "book-entry only."
You may elect to hold your interests in the Global Securities either through
DTC (in the United States) or through Clearstream or Euroclear (in Europe).
Interests will be held on behalf of Clearstream and Euroclear participants on
the books of their respective depositaries.
DENOMINATIONS
Beneficial interests in the Global Securities will be held in denominations
of $1,000 increased in multiples of $1,000. Except as set forth below, the
Global Securities may be transferred, in whole and not in part, only to another
nominee of DTC or to a successor of DTC or its nominee.
DTC SERVICES
DTC has informed us that DTC is:
- a limited purpose trust company organized under the New York Banking Law;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934.
DTC holds securities that its participants ("DTC Participants") deposit with
DTC. DTC Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC also
facilitates the settlement among these DTC Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, which
eliminates the need for the physical movement of securities certificates.
DTC's book-entry system is also available for use by other organizations
such as securities brokers and dealers, banks and trust companies that work
through a DTC Participant, either directly or indirectly. The rules applicable
to DTC and the DTC Participants are on file with the SEC.
S-19
DTC is owned by a number of DTC Participants and by the NYSE, the AMEX and
the National Association of Securities Dealers, Inc.
A further description of DTC's procedures with respect to the Global
Securities is set forth in the accompanying prospectus under "Description of
Debt Securities--Global Securities."
CLEARSTREAM AND EUROCLEAR SERVICES
Clearstream is incorporated under the laws of Luxembourg as a professional
depositary. Clearstream holds securities for its participating organizations
("Clearstream Participants") and facilitates the clearance and settlement of
securities transactions between Clearstream Participants through electronic
book-entry charges in accounts of Clearstream Participants, which eliminates the
need for physical movement of certificates. Clearstream provides to Clearstream
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing.
Conducting business in the domestic markets of several countries as a
professional depositary, Clearstream is regulated by the Luxembourg Monetary
Institute. Clearstream Participants are recognized financial institutions around
the world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may include
some of the Underwriters. Indirect access to Clearstream is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Clearstream Participant either
directly or indirectly.
Distributions with respect to the Notes that are held beneficially through
Clearstream will be credited to cash accounts of Clearstream Participants in
accordance with its rules and procedures, and to the extent received by the US
depositary for Clearstream.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries.
Euroclear is operated by the Brussels, Belgium office of Morgan Guaranty
Trust Company of New York (the "Euroclear Operator"), under contract with
Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include some of the
Underwriters.
Indirect access to Euroclear is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian Branch of a New York banking
corporation which is a member bank of the Federal Reserve System and is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission. The Terms and Conditions Governing Use of Euroclear and the related
Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Euroclear Terms and Conditions") govern securities clearance
accounts and cash accounts with the Euroclear Operator. The Euroclear Terms and
Conditions govern transfers of securities and cash within Euroclear, withdrawals
of securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear.
S-20
All securities in Euroclear are held on a fungible basis and no certificates
are apportioned to specific securities clearance accounts. The Euroclear
Operator acts under the Euroclear Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Notes held beneficially through Euroclear will
be credited to the cash accounts of Euroclear Participants in accordance with
the Euroclear Terms and Conditions, to the extent received by the US depositary
for Euroclear.
DEFINITIVE NOTES
Definitive Notes may be issued upon:
(i) Euroclear and/or Clearstream being closed for a continuous period of
14 days (other than by reason of public holidays); and/or
(ii) in the limited circumstances set forth in "Description of the Debt
Securities--Global Securities" in the accompanying prospectus.
If definitive Notes are issued, payment of principal of and interest on the
Notes will be made as set forth under "--Methods of Receiving Payments on the
Notes" above. Definitive Notes can be transferred by presentation for
registration to the Registrar or other transfer agent at any of their specified
offices and must be duly endorsed by the holder or his attorney duly authorized
in writing, or accompanied by a written instrument or instruments of transfer in
form satisfactory to us or the Trustee duly executed by the holder or his
attorney duly authorized in writing. We may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any exchange or registration of transfer of definitive Notes.
For the purposes of this description, "business day" means any day, other
than a Saturday or Sunday, that is not a day on which banks are authorized or
required by law or regulation to close in New York and, where definitive Notes
have been issued, the relevant place of presentation.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for the Notes will be made in same day funds. Secondary
market trading and transfers within DTC, Clearstream or Euroclear, as the case
may be, will be made in accordance with the usual rules and operating procedures
of those systems. Secondary market trading between DTC Participants will occur
in the ordinary way in accordance with DTC rules and will be settled in same day
funds using DTC's Same-Day Funds Settlement System. Secondary market trading
between Clearstream Participants and/or Euroclear Participants will occur in the
ordinary way in accordance with the applicable rules and operating procedures of
Clearstream and Euroclear and will be settled using the procedures applicable to
conventional eurobonds in registered form in same day funds.
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PURCHASERS AND SELLERS. Secondary market trading
between DTC Participants will be settled using the procedures applicable to
global bonds in same-day funds.
TRADING BETWEEN EUROCLEAR AND/OR CLEARSTREAM PARTICIPANTS. Secondary market
trading between Euroclear Participants and/or Clearstream Participants will be
settled using the procedures applicable to conventional eurobonds in same-day
funds.
TRADING BETWEEN DTC SELLER AND EUROCLEAR OR CLEARSTREAM PURCHASER. When
Notes are to be transferred from the account of a DTC Participant to the account
of a Euroclear or Clearstream
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Participant, the purchaser will send instructions to Euroclear or Clearstream
through a Euroclear or Clearstream Participant, as the case may be, at least one
business day before settlement. Euroclear or Clearstream will instruct its
respective depositary to receive those Notes against payment. Payment for the
Notes will then be made by the depositary to the DTC Participant's account
against delivery of the Notes. After settlement has been completed, the Notes
will be credited to the respective clearing systems, and by the clearing system,
in accordance with its usual procedures, to the Euroclear or Clearstream
Participant's account. The securities credit will appear the next day (European
time) and the cash debit will be back-valued to the value date, which would be
the preceding day when settlement occurred in New York. If settlement is not
completed on the intended value date and the trade fails, the Euroclear or
Clearstream cash debit will be valued as of the actual settlement date.
Euroclear and Clearstream Participants will need to make available to the
respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit. However, under
this approach, DTC Participants may take on credit exposure to Euroclear and
Clearstream until the interests in the Global Security are credited to their
accounts one day later.
As an alternative, if Euroclear or Clearstream has extended a line of credit
to a Euroclear or Clearstream Participant, as the case may be, that Participant
may elect not to preposition funds and allow that credit line to be drawn upon
to finance settlement. Under this procedure, Euroclear or Clearstream
Participants purchasing Notes would incur overdraft charges for one day,
assuming they cleared the overdraft when the Notes were credited to their
accounts. However, interest on the Notes would accrue from the value date.
Therefore, in many cases the investment income on Notes earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Participant's particular cost
of funds.
Since the settlement occurs during New York business hours, DTC Participants
can employ their usual procedures for transferring global bonds to the
respective depositaries of Euroclear or Clearstream for the benefit of Euroclear
or Clearstream Participants. The sale proceeds will be available to the DTC
seller on the settlement date. Thus, to the DTC seller, a cross-market sale
transaction will settle no differently than a trade between two DTC
Participants.
TRADING BETWEEN EUROCLEAR OR CLEARSTREAM SELLER AND DTC PURCHASER. Because
the time zone difference operates in their favor, Euroclear and Clearstream
Participants may employ their customary procedures for transactions in which
Notes are to be transferred by the respective clearing system, through its
respective depositary, to a DTC Participant. The seller will send instructions
to Euroclear or Clearstream through a Euroclear or Clearstream Participant at
least one business day before settlement. In these cases, Euroclear or
Clearstream will instruct its respective depositary to credit the Notes to the
DTC Participant's account against payment. The payment will then be reflected in
the account of the Euroclear or Clearstream Participant on the following day,
and receipt of the cash proceeds in the Euroclear or Clearstream Participant's
account would be back-valued to the value date (which would be the preceding
day, when settlement occurred in New York).
If the Euroclear or Clearstream Participant has a line of credit in its
respective clearing system and elects to be in a debt position in anticipation
of receipt of the sale proceeds in its account, the back-valuation may
substantially reduce or offset any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date (that is, the
trade fails), receipt of the cash proceeds in the Euroclear or Clearstream
Participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use Euroclear or Clearstream to purchase Notes
from DTC Participants for delivery to Euroclear or Clearstream Participants
should note that these trades automatically fail on
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the sale side unless some form of affirmative action is taken. At least three
techniques should be readily available to eliminate this potential problem:
(i) borrowing through Euroclear or Clearstream for one day (until the
purchase side of the day trade is reflected in their Euroclear or
Clearstream accounts) in accordance with the clearing system's customary
procedures;
(ii) borrowing the Notes in the United States from a DTC Participant no
later than one day before settlement, which would give the Notes sufficient
time to be reflected in their Euroclear or Clearstream account in order to
settle the sale side of the trade; or
(iii) staggering the value date for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day before the value date for the sale to the Euroclear or Clearstream
Participant.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Notes among participants of DTC,
Clearstream and Euroclear, they are not obligated to perform or continue to
perform these procedures. As a result, these procedures may be discontinued at
any time.
The information in this section concerning DTC, Clearstream, Euroclear and
their book-entry systems has been obtained from sources that we believe to be
accurate, but we assume no responsibility for the accuracy of this information.
We are not responsible for DTC's, Clearstream's, Euroclear's or their
participants' performance of their respective obligations, as they are described
above or under the rules and procedures governing their respective operations.
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DESCRIPTION OF THE COMPANY
GENERAL DEVELOPMENT OF THE BUSINESS
The Bear Stearns Companies Inc. was incorporated under the laws of the State
of Delaware on August 21, 1985. We are a holding company that through our
subsidiaries, principally Bear Stearns, BSSC, BSIL and BSB, is a leading
investment banking, securities trading and brokerage firm serving corporations,
governments, institutional and individual investors worldwide. BSSC, a
subsidiary of Bear Stearns, provides professional and correspondent clearing
services, in addition to clearing and settling our proprietary and customer
transactions. We succeeded on October 29, 1985, to the business of Bear,
Stearns & Co., a New York limited partnership (the "Partnership"). As used in
this section, "we," "us" or "our" refer (unless the context requires otherwise)
to The Bear Stearns Companies Inc., its subsidiaries and the prior business
activities of the Partnership.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
We are primarily engaged in business as a securities broker and dealer
operating in three principal segments: Capital Markets, Global Clearing Services
and Wealth Management. These segments are strategic business units analyzed
separately due to the distinct nature of the products they provide and the
clients they serve. Certain Capital Markets products are distributed by the
Wealth Management and Global Clearing Services distribution network with related
revenues of such intersegment services allocated to the respective segments.
The Capital Markets segment is comprised of the Equities, Fixed Income and
Investment Banking areas. Equities combines the efforts of sales, trading and
research in such areas as block trading, convertible bonds, over-the-counter
("OTC") equities, equity derivatives and risk arbitrage. Fixed Income includes
the efforts of sales, trading and research for institutional clients in a
variety of products such as mortgage-backed and asset-backed securities,
corporate and government bonds, municipal and high yield instruments, foreign
exchange and derivatives. Investment Banking offers a variety of services to our
clients, that include capital raising, strategic advice, mergers and
acquisitions and merchant banking. Capital raising encompasses our underwriting
of equity, investment grade debt and high yield debt securities.
The Global Clearing Services segment provides clearing, operational and
administrative services to approximately 2,900 clients worldwide at
November 30, 2000. These clients include approximately 2,500 prime brokerage
clients including hedge funds, clients of money managers, short sellers,
arbitrageurs and other professional investors. In addition, there are
approximately 400 fully disclosed introducing brokers who engage in either the
retail or the institutional brokerage business. The Company processed an average
of more than 251,000 trades per day during the twelve months ended November 30,
2000.
Wealth Management provides fee-based products and services through the
Private Client Services ("PCS") and Asset Management areas to both individual
and institutional investors. PCS provides high-net-worth individuals with an
institutional level of service, including access to our resources and
professionals. PCS maintains a select team of approximately 500 account
executives in its principal office and six regional offices. The Asset
Management area had approximately $19.5 billion in assets under management at
November 30, 2000, which reflected a 49.5% increase over November 26, 1999. The
largest components of the increase were attributable to alternative investments
and mutual funds. Asset Management serves the diverse investment needs of
corporations, municipal governments, multi-employer plans, foundations,
endowments, family groups and high-net-worth individuals.
Financial information regarding our business segments and foreign operations
as of November 30, 2000, the five months ended November 26, 1999 and the fiscal
years ended June 30, 1999 and 1998 is set forth under the Notes to the
Consolidated Financial Statements in Footnote 14, entitled "Segment
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and Geographic Area Data," in our Annual Report on Form 10-K for the fiscal year
ended November 30, 2000. See "Where You Can Find More Information" and "General
Information."
NARRATIVE DESCRIPTION OF BUSINESS
Our business includes:
- market-making and trading in US government, government agency, corporate
debt and equity, mortgage-related, asset-backed and municipal securities;
- trading in options, futures, foreign currencies, interest rate swaps and
other derivative products;
- securities, options and futures brokerage;
- providing securities clearance services;
- managing equity and fixed income assets for institutional and individual
clients;
- financing customer activities;
- securities lending;
- securities and futures arbitrage;
- involvement in specialist activity on both the NYSE and the AMEX;
- underwriting and distributing securities;
- arranging for the private placement of securities;
- assisting in mergers, acquisitions, restructurings and leveraged
transactions;
- making principal investments in leveraged acquisitions;
- engaging in commercial real estate activities;
- investment management and advisory services; and
- advisory, fiduciary, custody, agency and securities research services.
Our business is conducted:
- from our principal offices in New York City;
- from domestic regional offices in Atlanta, Boston, Chicago, Dallas,
Denver, Los Angeles, San Francisco and San Juan;
- from representative offices in Beijing, Buenos Aires, Sao Paulo, Seoul and
Shanghai;
- through international offices in Dublin, Hong Kong, London, Lugano,
Singapore and Tokyo; and
- through joint ventures with other firms in Belgium, Greece and Spain.
Our international offices provide services and engage in investment activities
involving foreign clients and international transactions. Additionally, certain
of these foreign offices provide services to US clients. We provide trust
company services through our subsidiary, Custodial Trust Company ("CTC"),
located in Princeton, New Jersey.
Bear Stearns and BSSC are broker-dealers registered with the SEC.
Additionally, Bear Stearns is registered as an investment adviser with the SEC.
Bear Stearns and/or BSSC are also members of the NYSE, all other principal US
securities and futures exchanges, the National Association of Securities Dealers
("NASD"), the Commodity Futures Trading Commission ("CFTC"), the National
Futures
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Association ("NFA") and the International Stock Exchange ("ISE"). Bear Stearns
is a "primary dealer" in US government securities as designated by the Federal
Reserve Bank of New York.
BSIL is a full service broker-dealer based in London and is a member of
Eurex (formerly the Deutsche Terminborse), the International Petroleum Exchange
("IPE"), the London Commodity Exchange ("LCE"), the London International
Financial Futures and Options Exchange ("LIFFE"), the London Securities &
Derivatives Exchange ("OMLX"), Marche a Terme International de France, SA
("MATIF") and the London Clearing House ("LCH"). BSIL is supervised by and is
regulated in accordance with the rules of the Securities and Futures Authority
("SFA").
BSB is an Irish-based bank, which was incorporated in 1996 and subsequently
granted a banking license under the Irish Central Bank Act, 1971. BSB allows our
existing and prospective clients the choice of dealing with a banking
counterparty.
As of November 30, 2000, we had 11,201 employees.
INSTITUTIONAL EQUITIES
GENERAL. We provide customers with liquidity, sales and trading expertise
and equity research in products such as domestic and international equities and
convertible securities.
OPTION AND INDEX PRODUCTS. We provide an array of equity and index
option-related execution services to institutional and individual clients. We
utilize sophisticated research and computer modeling to formulate for clients
specific recommendations relating to options and index trading.
ARBITRAGE. We engage for our own account in both "classic" and "risk"
securities-arbitrage. Our risk arbitrage activities generally involve the
purchase of securities at a discount from a value that is expected to be
realized if a proposed or anticipated merger, recapitalization, tender or
exchange offer is consummated. In classic arbitrage, we seek to profit from
temporary discrepancies (i) between the price of a security in two or more
markets, (ii) between the price of a convertible security and its underlying
security, (iii) between securities that are, or will be, exchangeable at a
future date, and (iv) between the prices of securities with contracts settling
on differing dates.
STRATEGIC STRUCTURING AND TRANSACTIONS (SST). We target mispriced assets
using sophisticated models and proprietary quantitative methods. We maintain
substantial proprietary trading and investment positions in domestic and foreign
markets covering a wide spectrum of equity and futures products including listed
and OTC options and swaps.
OTC EQUITY SECURITIES. We make markets on a principal basis in common and
preferred stocks, warrants, and other securities traded on the NASD's Automated
Quotation System and otherwise in the OTC market.
EQUITY RESEARCH.
We provide innovative, in-depth analysis of the global investment
environment. Known for theme-oriented research underpinned by meticulous
financial modeling, we offer detailed information on over 1,200 companies in
roughly 100 industries (including approximately 55% of the S&P 500). We also
have a group of distinguished economists and strategists that maintain a close
watch on domestic and international markets, and are known for the quality of
their strategic guidance. Our broad-based domestic coverage is complemented by
extensive research teams in Latin America, Asia and Europe, giving our clients a
crucial advantage in a world where national boundaries are becoming more porous.
This breadth of coverage allows the Department to maintain a particularly
wide-ranging recommended list, and gives clients a steady stream of new
investment ideas and insights into the more obscure corners of the financial
world.
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EQUITY SALES. We believe that we are one of the leading firms in the US in
providing brokerage services to institutional investors. Institutional equity
sales involves the execution of transactions in US equity securities for
domestic and foreign institutional customers and providing these customers with
liquidity, trading expertise, trade execution, research and investment advice.
We provide transaction services for institutional customers who trade in futures
and futures-related instruments. We are also involved in specialist activities
on both the NYSE and the AMEX.
BLOCK TRADING. We effect transactions in large blocks of securities mainly
with institutional customers. We also provide customers execution capabilities
for baskets of equity securities using sophisticated computer systems.
Transactions are handled on an agency basis whenever possible, but we may be
required to take a long or short position in a security to the extent that an
offsetting purchaser or seller is not immediately available.
SPECIALIST ACTIVITIES. We are participants in a specialist unit on the NYSE
and the AMEX that performs specialist functions in NYSE-listed stocks as well as
stocks and options traded on the AMEX. The market-making functions of a
specialist involve risk of loss during periods of market fluctuation, since
specialists are obliged to take positions in their issues counter to the
direction of the market in order to minimize short-term imbalances in the
auction market.
FIXED INCOME
GENERAL. We make inter-dealer markets and trade on a principal basis in a
wide range of instruments including:
- corporate debt;
- US and foreign government securities;
- government agency securities, mortgages and mortgage-backed securities;
- other asset-backed securities;
- municipal and other tax-exempt securities; and
- interest rate swaps and other derivative products.
Bear Stearns is one of the largest dealers in the US in fixed income securities.
Inventories of fixed income securities are generally carried to facilitate sales
to customers and other dealers.
US GOVERNMENT AND AGENCY OBLIGATIONS. We are designated by the Federal
Reserve Bank of New York as a primary dealer in US government obligations. We
participate in the auction of, and maintain proprietary positions in, US
Treasury bills, notes, bonds, and stripped principal and coupon securities. We
also participate as a selling group member and/or underwriter in the
distribution of various US government agency and sponsored corporation
securities and maintain proprietary positions in such securities. In connection
with these activities, we enter into transactions in options, futures and
forward contracts to hedge our proprietary positions.
As a primary dealer, Bear Stearns furnishes weekly reports of its inventory
positions and market transactions in US government securities to the Federal
Reserve Bank of New York. Bear Stearns also buys and sells government securities
directly with the Federal Reserve Bank of New York as part of the Bank's
open-market activities. In addition, we engage in matched book activities, which
involve acting as an intermediary between borrowers and lenders of short-term
funds, mainly via repurchase agreements and reverse repurchase agreements. The
objective of this matched book activity is to earn a positive spread between
interest rates.
CORPORATE FIXED INCOME SECURITIES. We act as a dealer in sovereign and
corporate fixed income securities and preferred stocks in New York, London and
Tokyo. We buy and sell these securities for
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our own account in principal transactions with institutional and individual
customers, as well as other dealers. We conduct trading in the full spectrum of
dollar and non-dollar debt securities. We offer hedging and arbitrage services
to domestic and foreign institutional and individual customers utilizing
financial futures and other instruments. Moreover, we offer quantitative,
strategic, and research services relating to fixed income securities to our
domestic and international clients. We participate in the trading of high yield,
non-investment grade securities and the securities and bank loans of companies,
sovereigns and sovereign agencies.
MORTGAGE-RELATED SECURITIES AND PRODUCTS. We trade and make markets in the
following mortgage-related securities and products:
- Government National Mortgage Association ("GNMA") securities;
- Federal Home Loan Mortgage Corporation ("FHLMC") participation
certificates;
- Federal National Mortgage Association ("FNMA") mortgage-backed securities;
- Small Business Administration loans;
- loans guaranteed by the Farmers Home Loan Administration;
- Federal Housing Authority insured multi-family loans;
- real estate mortgage investment conduit ("REMIC") and non-REMIC
collateralized mortgage obligations, including residual interests; and
- other derivative mortgage-backed securities and products.
We also trade real estate mortgage loans originated by unaffiliated mortgage
lenders, both on a securitized and non-securitized basis. We act as underwriter
and placement agent in transactions involving rated and unrated mortgage-related
securities issued by affiliated and unaffiliated parties. We enter into
significant commitments--such as forward contracts--on GNMA, FNMA, and FHLMC
securities, and on other rated and unrated mortgage-related securities. Certain
rated and unrated mortgage-related securities are considered to be liquid, while
other such securities, and non-securitized mortgage loans, are considered to be
less readily marketable.
We trade GNMA, FNMA and FHLMC "to be announced" securities (i.e., securities
having a stated coupon and the original term to maturity, although the issuer
and/or the specific pool of mortgage loans is not known at the time of the
transaction). We buy and sell such securities for our own account in
transactions with institutional and individual customers, as well as with other
dealers.
Through various special purpose subsidiaries, we purchase, sell, and service
entire loan portfolios of varying quality. These portfolios are generally
purchased from financial institutions and other secondary mortgage-market
sellers. Prior to bidding on a portfolio of loans, an analysis of the portfolio
is performed by experienced mortgage-loan underwriters. Upon acquisition of a
loan portfolio, the loans are classified as either investment grade or
non-investment grade. Loan collection is emphasized for the non-investment grade
segment of the loan portfolio. A collection department employs a staff of
workout specialists and loan counselors who assist delinquent borrowers. If
collection efforts are unsuccessful, the foreclosure unit will commence and
monitor the foreclosure process until either the borrower makes the loan
current, or the property securing the loan is foreclosed or otherwise acquired.
The portfolio may include real estate that has been foreclosed or was in the
process of foreclosure at the time of its acquisition. The foreclosure unit
maintains and markets properties through regional real estate brokers.
Investment grade mortgage loans are sold to other institutional investors in
either securitized or non-securitized form. In addition, special purpose
vehicles issue REMIC and non-REMIC collateralized mortgage obligations directly
or through trusts that are established for this purpose.
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We also operate a commercial mortgage conduit that originates and
accumulates commercial mortgage loans for the purpose of securitizing our
portfolio. After receipt of loan applications, extensive credit underwriting
reviews are conducted. After completing pricing analysis and successful
negotiations, the loan will "close" and be included in an ensuing
securitization.
ASSET-BACKED SECURITIES. We act as underwriter and placement agent with
respect to investment grade and non-investment grade, asset-backed securities
issued by unaffiliated third parties. These asset-backed securities include:
- securities backed by consumer automobile receivables originated by the
captive finance subsidiaries of automobile manufacturers, commercial banks
and finance companies;
- credit card receivables; and
- home-equity lines of credit or second mortgages.
We also trade and make markets in these asset-backed securities. While there are
ready markets for the investment grade asset-backed securities described above,
non-investment grade securities and related varieties thereof may lack
liquidity.
MUNICIPAL SECURITIES AND RELATED PRODUCTS. We are a dealer in tax-exempt
and taxable municipal securities and instruments including:
- general obligation and revenue bonds;
- notes;
- leases; and
- variable-rate obligations issued by states and local governmental
authorities, as well as not-for-profit institutions.
We are active as a managing underwriter of negotiated and competitive new
security issuances and on a select basis, provide financial advisory services.
We make markets in a broad spectrum of long-term and short-term municipal
securities, mainly to facilitate transactions with institutional and individual
customers, as well as other dealers. As agent for issuers, we earn fees by
remarketing short-term debt instruments to investors in the variable rate,
demand bond market. We periodically use both municipal and treasury bond futures
to hedge our cash-market bond inventory. In addition, we maintain a municipal
arbitrage portfolio for our own account consisting of municipal futures and cash
bond positions. Our underwriting, trading and sales activities are supported by
a municipal research group.
DERIVATIVES. We offer to customers, and trade for our own account, a
variety of exchange-traded and OTC derivative products, including fixed income,
credit, and equity derivatives. These products are transacted, as principal,
with customers for hedging, risk management, asset/liability management,
investment, financing and other purposes. These transactions are in the form of
swaps, options, swaptions, asset swaps, and structured notes, as well as more
complex, structured trades which are customized to meet customers' specific
needs. We also enter into derivative transactions for various purposes and to
manage risks to which we are exposed in our businesses and funding activities.
We manage our market and counterparty derivatives risks in a manner consistent
with our overall risk-management policies.
FOREIGN EXCHANGE. We trade foreign exchange with clients as principal, for
our own account and to hedge our securities positions or other assets and
liabilities. Foreign exchange products include major and minor currencies on a
spot and forward basis, listed and OTC foreign currency options, and foreign
exchange futures contracts. Foreign exchange trading desks are maintained in New
York and London and clients can trade or leave orders 24 hours per day. We serve
a select list of funds, major
S-29
corporations, and mid-size commercial banks. Currency option strategies are made
available to customers to help them meet their specific risk management
objectives.
FIXED INCOME RESEARCH. We are a leader in the distribution, trading and
underwriting of corporate, government, high yield, emerging markets, municipal
debt, and mortgage-backed and asset-backed securities. The Fixed Income Research
Department is comprised of economists, industry analysts and strategists
covering the full range of research disciplines: quantitative, economic,
strategic, credit portfolio, relative value and market-specific analysis. The
Fixed Income Research Department provides ongoing support for our sales and
trading efforts, producing reports, studies, and technical market analyses.
Fixed Income Research is comprised of the following three units:
(1) FINANCIAL ANALYTICS AND STRUCTURED TRANSACTIONS GROUP ("F.A.S.T."), a
unique firm-wide resource, has developed innovative fixed income
strategies through the application of its advanced and fully integrated
technology. Through F.A.S.T., we afford our clients financial
engineering and securitization capabilities, investment research, fixed
income portfolio management and analytical systems and trading
technology for mortgage-related and fixed income securities. F.A.S.T.
offers the means to create and implement financial strategies designed
to maximize portfolio returns.
(2) HIGH GRADE RESEARCH consists of approximately 23 analysts and
researchers, and provides coverage for over 25 industries and 500
companies.
(3) HIGH YIELD RESEARCH consists of 28 analysts and researchers for domestic
issues and 23 analysts and researchers for international issues,
providing coverage for over 650 corporate and sovereign issuers whose
fixed income securities are non-investment grade.
INVESTMENT BANKING
We are a major global investment banking firm providing a full range of
capital formation and advisory services to a broad spectrum of clients. We
manage and participate in public offerings and arrange the private placement of
debt and equity securities directly with institutional investors. We provide
advisory services to clients on a wide range of financial matters and assist
with mergers, acquisitions, leveraged buyouts, divestitures, corporate
reorganizations, and recapitalizations.
Our strategy is to concentrate a major portion of our corporate finance
business development efforts within those industries in which we have
established a leadership position in providing investment banking services.
Industry specialty groups include financial services, general industrial
services and products, health care/pharmaceuticals, media/entertainment,
merchandising, natural resources, real estate, gaming and lodging, technology
and telecommunications. We also have a group that focuses on financial sponsors.
These groups are responsible for initiating, developing and maintaining client
relationships, and for executing transactions involving these clients. We have
focused primarily on those industries in which we also have a strong research
capability.
In addition to being structured according to distinct industry groups, we
have a number of professionals who specialize in specific types of transactions.
These include mergers and acquisitions ("M&A"), equity offerings, high yield
securities, leveraged and syndicated bank loans, leveraged acquisitions,
commercial real estate, and other transaction specialties.
MERGERS AND ACQUISITIONS. We are active in arranging various M&A
transactions for our clients. We participate in a broad range of domestic and
international assignments including acquisitions, divestitures, strategic
restructurings, proxy contests, leveraged buyouts, and defenses against
unsolicited takeovers.
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EQUITY OFFERINGS. The equity capital markets group focuses on providing
financing for issuers of equity and convertible equity securities in the public
markets. The group assists in the origination, and is responsible for the
structuring and execution of transactions for a broad range of clients.
HIGH YIELD SECURITIES. The high yield securities group focuses on providing
financing in the public and private capital markets. The group is responsible
for originating, structuring, and executing high yield transactions across a
wide range of companies and industries, as well as managing client relationships
with both high yield corporate issuers and financial sponsors of leveraged
transactions.
LEVERAGED LOAN ORIGINATION AND SYNDICATION. This area integrates the
origination, structuring, underwriting, distribution and trading of loans. Such
loans include both funded and unfunded and investment grade and non-investment
grade loans.
LEVERAGED ACQUISITIONS. As part of our investment banking activities, we
make investments as principal in leveraged acquisitions and in leveraged buy-out
funds as a limited partner. Our investments generally take the form of either
common or preferred stock or warrants. Equity securities purchased in these
transactions generally are held for appreciation and are not readily marketable.
While we believe that the current carrying value of these instruments is at
least equal to their eventual realizable value, it is not possible to determine
whether or when we will realize the value of these investments.
COMMERCIAL REAL ESTATE. We are engaged in a variety of real estate
activities on a nationwide basis. We provide comprehensive real estate-related
investment banking, capital markets and financial advisory services.
EMERGING MARKETS
We provide financial services in various emerging markets worldwide
including: securities brokerage, equity and fixed income trading and sales, and
securities research; besides offering a full range of investment banking,
capital formation and advisory services. As part of these activities, we manage
and participate in public offerings and arrange the private placement of debt
and equity securities with institutional investors. The markets currently
covered by us include Latin America, Asia, and Eastern Europe.
CLEARANCE ACTIVITIES
We provide a full range of clearing services to clients. Organizations that
are engaged in the retail or institutional brokerage business and are members of
the NYSE and/or NASD comprise one category of client called "fully-disclosed
correspondents." In addition, we have extensive involvement in the clearing of
securities transactions for "professional clearing clients" such as: hedge
funds, market-makers, specialists, arbitrageurs, money managers, and other
professional investors trading at multiple securities firms.
Besides commissions and service charges realized from clearing activities,
we also earn substantial amounts of interest income. We extend credit directly
to the customers of correspondent firms in order to facilitate the conduct of
customer securities transactions on a margin basis. We also extend margin credit
directly to correspondents to the extent that such firms pledge proprietary
assets as collateral.
In addition to clearing trades, we provide other products and services to
our correspondents such as recordkeeping, trading reports, accounting, general
back-office support, securities lending, reorganization and custody of
securities. Our Prime Broker Plus system provides consolidated reporting and
securities processing for professional investors executing trades at more than
one securities firm. The financial responsibilities arising from our clearing
relationships are allocated in accordance with agreements with correspondents.
To the extent that the correspondent has available resources, we are protected
against claims by customers of the correspondent when the latter has been
allocated
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responsibility for a function giving rise to a claim. However, if the
correspondent is unable to meet its obligations, dissatisfied customers may
attempt to seek recovery from us.
We attempt to broaden, wherever possible, our relationships with
broker-dealer and prime broker clients. In addition to performing
administrative, operational and settlement functions, we also advise clients on
communications systems and provide a variety of non-brokerage products and
services on favorable terms, enabling them to benefit from our centralized
purchasing power.
CUSTOMER FINANCING AND SECURITIES LENDING ACTIVITIES
We derive substantial net-interest income from customer margin loans and
securities lending.
CUSTOMER FINANCING. Securities transactions are effected for customers on
either a cash or margin basis. In a margin transaction, we extend credit to a
customer for a portion of the purchase price that is collateralized by
securities and cash in the customer's account, in accordance with regulatory and
internal requirements. We receive income from interest charged on the extension
of credit. The rate of interest charged to customers for margin financing is
based upon the federal funds rate, broker's call rate or LIBOR.
SECURITIES LENDING ACTIVITIES. In connection with both our trading and
brokerage activities, we borrow and lend securities to broker-dealers and other
trading entities to cover short sales and to complete transactions in which
customers have failed to deliver securities by settlement date.
CUSTODIAL TRUST COMPANY
We offer a range of trust company and securities-clearance services through
our wholly owned subsidiary CTC. CTC provides us with banking powers, such as
access to the securities and funds-wire services of the Federal Reserve System.
CTC provides: fiduciary, custody, and agency services for institutional
accounts; clearance of government securities for institutions and dealers;
processing of mortgage and mortgage-related products, including derivatives and
collateralized mortgage obligations products; and margin lending. At
November 30, 2000, CTC held approximately $150 billion of assets for clients,
including institutional clients such as pension funds, mutual funds, endowment
funds, religious organizations and insurance companies.
FUTURES
Through BSSC and other subsidiaries, we provide, directly or through
third-party brokers, futures commission merchant services for customers and
other Bear Stearns affiliates who trade contracts in futures on financial
instruments and physical commodities, including options on futures. Exchange-
traded futures and options derive their values from the values of selected stock
indices, fixed income securities, currencies, agricultural and energy products
and precious metals.
Domestic futures and options trading is subject to extensive regulation by
the CFTC pursuant to the Commodity Exchange Act and the Commodity Futures
Trading Commission Act of 1974. International futures and options trading
activities are subject to regulation by the respective regulatory authorities in
the locations where futures exchanges reside, including the SFA in the United
Kingdom.
Margin requirements (good faith deposits) covering substantially all
transactions in futures and options contracts are subject to each particular
exchange's regulations in addition to other regulations. In the US, we are a
clearing member of the Chicago Board of Trade, the Chicago Mercantile Exchange,
the New York Mercantile Exchange and other principal futures exchanges. In the
United Kingdom, we are a member of the IPE, the LCE, the LIFFE and OMLX. We also
have non-clearing memberships with MATIF and Eurex in Europe. In Japan
memberships are held with the Tokyo Stock Exchange, the Osaka Stock Exchange and
the Tokyo International Financial Futures Exchange
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("TIFFE") for clearing Japanese government bond futures, for clearing Japanese
stock index products, and for executing financial futures, respectively.
PCS
PCS provides high-net-worth individuals with an institutional level of
service, including access to our resources and professionals. PCS maintains a
select team of approximately 500 account executives in six regional offices.
ASSET MANAGEMENT
Our asset management department manages equity and fixed income assets for
some of the leading corporate pension plans, public systems, endowments,
foundations, multi-employer plans, insurance companies, corporations, families
and high net-worth individuals in the US. With $19.5 billion under management at
November 30, 2000, the asset management department provides its clients with
diverse products, expertise and experience for enhancing investment returns by
identifying, and capitalizing on, investment opportunities in the financial
markets. Institutional and high-net-worth products include: large and small cap
value equity and core equity; emerging markets fixed income; high yield fixed
income; leveraged loan portfolios; cash management; alternative investment
strategies, including hedge funds, private equity, venture capital and
collateralized bond obligations; and wrap accounts.
In addition, the asset management department serves individual investors
through its management of The Bear Stearns Funds, a family of mutual funds which
include: S&P STARS, Large Cap Value, Small Cap Value, The Insiders Select, Focus
List, International Equity, Balanced, Income, High Yield Total Return, and The
Emerging Markets Debt Portfolios.
ADMINISTRATION AND OPERATIONS
Administration and operations personnel, beside performing other functions,
are responsible for processing of securities transactions; receipt,
identification and delivery of funds and securities; internal financial
controls; accounting functions; regulatory and financial reporting; office
services; the custody of customer securities; and the overseeing of our margin
accounts and correspondent organizations. The processing, settlement, and
accounting for transactions for us, correspondent organizations, and the
customers of correspondent organizations are handled by employees located in
separate operations offices in New York City and Whippany, New Jersey and, to a
lesser extent, in our offices worldwide.
We execute our own and correspondent transactions on US exchanges and in the
OTC market. We clear all of our domestic and international transactions (i.e.,
delivery of securities sold, receipt of securities purchased, and transfer of
related funds) through our own facilities, unaffiliated commercial banks, other
broker-dealers, and through memberships in various clearing corporations.
INTERNATIONAL
Outside the US, we, through our international subsidiaries, provide various
services including investment banking, securities trading and brokerage and
clearance activities to corporations, governments, institutions and individuals
throughout the world. These international subsidiaries have memberships on
various foreign securities and futures exchanges.
BSIL is based in London and provides investors and issuers with a full range
of products and services in both international and US equities, fixed income,
exchange-traded futures and options, and foreign exchange. In addition, BSIL is
a major sales and trading center within our global fixed income and
equity-related derivative businesses. BSIL has a growing investment banking
capability and is also enhancing its service to our growing clearance business
in Europe.
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Bear Stearns Japan Ltd. ("BSJL"), based in Tokyo, serves the diverse needs
of Japanese corporations, financial institutions and government agencies by
offering a range of international fixed income and equity products as well as
listed futures. BSJL also offers a range of derivative products within Japan
with special focus on credit and equity derivatives. Mergers and acquisitions,
corporate finance and restructuring services are also available for local and
cross-border business.
Bear Stearns Asia Limited ("BSAL"), based in Hong Kong, acts as the regional
headquarters for our activities in the Asia-Pacific region, excluding Japan.
This office provides equity and fixed income sales and trading, international
equity research, and investment banking services to institutional and individual
clients in Asia. The representative offices of Bear Stearns located in Beijing,
Shanghai and Seoul support the efforts of BSAL.
BSB, based in Dublin, allows our existing and prospective clients the choice
of dealing with a banking counterparty. BSB also serves as a platform from which
we direct our international banking activities, gaining easier access to
worldwide markets, and thereby expanding our client base and product range. BSB
engages in capital market activities with particular focus on the trading and
sales of OTC interest rate derivative products.
COMPETITION
We encounter intense competition in all aspects of the securities business
and compete directly with other securities firms--both domestic and
foreign--many having substantially greater capital and resources and offering a
wider range of financial services than we do. Besides competition from firms in
the securities business, in recent years we have experienced increasing
competition from other sources, such as commercial banks and insurance
companies. We believe that the principal factors affecting competition involve
the caliber and ability of professional personnel, the relative price of the
service and products being offered, and the quality of service.
REGULATIONS AND OTHER FACTORS AFFECTING THE COMPANY AND THE SECURITIES
INDUSTRY
The securities industry in the US is subject to extensive regulation under
both federal and state laws. Moreover, Bear Stearns is registered as an
investment adviser with the SEC. Much of the regulation of broker-dealers has
been delegated to self-regulatory organizations, principally the NASD, the
Municipal Securities Rulemaking Board, and national securities exchanges such as
the NYSE, which has been designated by the SEC as the primary regulator of
certain of our subsidiaries, including Bear Stearns and BSSC. These
self-regulatory organizations (i) adopt rules, subject to approval by the SEC,
that govern the industry and (ii) conduct periodic examinations of our
operations. Securities firms are also subject to regulation by state securities
administrators in those states where they conduct business.
US broker-dealers are subject to regulations which cover all aspects of the
securities business including: sales methods; trade practices; use and
safekeeping of customer funds and securities; capital structures; recordkeeping;
and the conduct of directors, officers and employees. The types of regulations
to which investment advisers are subject include: recordkeeping; fee
arrangements; client disclosure; and the conduct of directors, officers and
employees. The mode of operation and profitability of broker-dealers or
investment advisers may be directly affected by new legislation, changes in
rules promulgated by the SEC and self-regulatory organizations, and changes in
the interpretation or enforcement of existing laws and rules. The SEC,
self-regulatory organizations and state securities commissions may conduct
administrative proceedings that can result in censures, fines, the issuance of
cease-and-desist orders, and the suspension or expulsion of a broker-dealer or
an investment adviser, its officers or employees. The principal purpose of
regulation and discipline of broker-dealers and investment advisers is the
protection of customers and the securities markets, rather than the protection
of creditors and stockholders of broker-dealers or investment advisers. On
occasion our subsidiaries have been subject to investigations and proceedings,
and sanctions have been imposed
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for infractions of various regulations, none of which, to date, has had a
material adverse effect on us or our business.
The Market Reform Act of 1990 (the "Market Reform Act") was adopted to
strengthen the SEC's regulatory oversight of the national securities markets and
to increase the efficacy and stability of such markets by, among other things:
(i) providing the SEC with discretion to halt securities trading on any national
exchange for the protection of investors; (ii) requiring broker-dealers and
other registrants to regularly provide information to the SEC regarding holding
companies and other affiliated entities whose activities can impact their
financial condition; (iii) requiring broker-dealers and other registrants who
execute large-trade orders to provide information to the SEC regarding such
transactions; and (iv) allowing the SEC to prosecute market participants who
violate SEC rules and regulations designed to maintain fair and orderly markets.
The SEC has adopted the Risk Assessment Reporting Requirements for Brokers and
Dealers (the "Risk Assessment Rules") to implement the provisions of the Market
Reform Act. The Risk Assessment Rules require that broker-dealers: (i) have an
organizational chart; (ii) maintain risk-management procedures or standards for
monitoring and controlling risks; (iii) maintain and preserve records and other
information; and (iv) file quarterly reports covering the risk-management
procedures and the financial and securities activities of the holding companies
of broker-dealers, or broker-dealer affiliates or subsidiaries that are
reasonably likely to have a material impact on the financial and operational
condition of the broker-dealer.
The Insider Trading and Securities Fraud Enforcement Act of 1988 was adopted
to strengthen the SEC's ability to deter, detect, and punish insider trading by,
among other things: (i) increasing civil penalties that can be assessed against
controlling persons who purposefully or recklessly fail to take adequate
measures to prevent insider trading; (ii) allowing the SEC to provide cash
rewards to individuals who provide evidence of insider trading; (iii) affirming
the government's ability to obtain criminal sanctions against those found guilty
of insider trading; and (iv) requiring broker-dealers and investment advisors to
establish and enforce written procedures reasonably designed to prevent the
misuse of material, non-public information.
The Government Securities Act of 1986 (the "Government Securities Act") was
adopted to decrease volatility and increase investor confidence and liquidity in
the government securities market by creating a coordinated and comprehensive
regulatory structure for the market where none had previously existed. In
particular, the Government Securities Act: (i) requires broker-dealers solely
involved in government securities to register with the SEC; (ii) allows the
Secretary of the Treasury to adopt rules regarding the custody, use, transfer,
and control of government securities; and (iii) bestows upon the SEC the
authority to enforce such rules as to broker-dealers and other SEC registrants.
The futures industry in the US is subject to regulation under the Commodity
Exchange Act, as amended. The CFTC is the federal agency charged with the
administration of the Commodity Exchange Act and the regulations thereunder.
Bear Stearns and BSSC are registered with the CFTC as futures commission
merchants and are subject to regulation as such by the CFTC and various domestic
boards of trade and other futures exchanges. Bear Stearns' and BSSC's futures
business is also regulated by the NFA, a not-for-profit membership corporation,
which has been designated a registered futures association by the CFTC.
As registered broker-dealers and member firms of the NYSE, both Bear Stearns
and BSSC are subject to the Net Capital Rule (Rule 15c3-1) (the "Net Capital
Rule") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which has been adopted through incorporation by reference in NYSE
Rule 325. The Net Capital Rule, which specifies minimum net capital requirements
for registered broker-dealers, is designed to measure the general financial
integrity and liquidity of broker-dealers and requires that at least a minimal
portion of assets be kept in relatively liquid form.
Bear Stearns and BSSC are also subject to the net capital requirements of
the CFTC and various futures exchanges, which generally require Bear Stearns and
BSSC to maintain minimum net capital
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equal to the greater of the alternative net capital requirement provided for
under the Exchange Act or 4% of the funds required to be segregated under the
Commodity Exchange Act and the regulations promulgated thereunder.
Compliance with the Net Capital Rule could limit those operations of Bear
Stearns and/or BSSC that require significant capital usage, such as
underwriting, trading and the financing of customer margin-account debit
balances. The Net Capital Rule could also restrict our ability to withdraw
capital from Bear Stearns or BSSC, which in turn could limit our ability to pay
dividends, pay interest, repay debt, or redeem or purchase shares of our
outstanding capital stock. Additional information regarding net capital
requirements is set forth in Footnote 7, entitled "Regulatory Requirements" in
our Annual Report on Form 10-K for the fiscal year ended November 30, 2000. See
"Where You Can Find More Information" and "General Information."
Bear Stearns and BSSC are members of the Securities Investor Protection
Corporation ("SIPC"), which provides insurance protection for customer accounts
held by these entities of up to $500,000 for each customer, subject to a
limitation of $100,000 for cash balance claims in the event of the liquidation
of a broker-dealer. In addition, all BSSC security accounts are fully protected
by an excess securities bond, issued by the Travelers Casualty and Surety
Company, up to the amount of total net equity (both cash and securities) in
excess of the underlying SIPC protection.
The activities of our bank and trust company subsidiary, CTC, are regulated
by the New Jersey Department of Banking and Insurance and the Federal Deposit
Insurance Corporation ("FDIC"). FDIC regulations applicable to CTC limit the
extent to which CTC and Bear Stearns may have common directors or may share
physical facilities. FDIC regulations require certain disclosures in connection
with joint advertising or promotional activities conducted by Bear Stearns and
CTC. Such regulations also restrict certain activities of CTC in connection with
the securities business of Bear Stearns. The Competitive Banking Act limits
(i) an expansion in the scope of the activities of CTC, (ii) the cross-marketing
of certain services with its affiliates and (iii) the use of overdrafts at
Federal Reserve banks on behalf of affiliates.
BSIL is a full service broker-dealer based in London and is a member of the
Eurex, IPE, LCE, LIFFE, OMLX, MATIF and LCH. Another London subsidiary, Bear,
Stearns International Trading Limited ("BSIT"), is a market-maker in various
non-dollar denominated equity securities and is a member of the London Stock
Exchange. BSIL and BSIT are subject to the United Kingdom Financial Services Act
1986, which governs all aspects of the investment business in the United Kingdom
including: regulatory capital, sales and trading practices, use and safekeeping
of customer funds, securities recordkeeping, margin practices and procedures,
registration standards for individuals, periodic reporting and settlement
procedures. BSIL and BSIT are supervised by and are regulated in accordance with
the rules of the SFA.
BSJL is a Tokyo broker-dealer registered with the Japanese Ministry of
Finance. BSJL has a membership on the Tokyo Stock Exchange, TIFFE and the Osaka
Stock Exchange. Bear Stearns Hong Kong Ltd. is a member of the Securities and
Futures Commission and sells US futures to retail customers. BSAL is a member of
the Shanghai Stock Exchange and the Stock Exchange of Hong Kong. Bear Stearns
Singapore Pte. Limited is a broker-dealer registered with the Monetary Authority
of Singapore and sells fixed income and equity securities, including
derivatives, to institutional investors in Singapore, Southeast Asia, Australia
and New Zealand.
BSB is an Dublin-based bank incorporated in 1996 and subsequently granted a
banking license under the Irish Central Bank Act, 1971.
Our principal business activities, investment banking, securities trading
and brokerage, are, by their nature, highly competitive and subject to various
risks, in particular, volatile trading markets and fluctuations in the volume of
market activity. Consequently, our net income and revenues have been,
S-36
and are likely to continue to be, subject to wide fluctuations, reflecting the
impact of many factors, including securities market conditions, the level and
volatility of interest rates, competitive conditions, liquidity of global
markets, international and regional political events, regulatory developments
and the size and timing of transactions. These and other factors can affect our
volume of security new-issues, mergers and acquisitions, and business
restructurings; the stability and liquidity of securities and futures markets;
and ability of issuers, other securities firms and counterparties to perform on
their obligations. Decrease in the volume of security new-issues, mergers and
acquisitions or restructurings generally results in lower revenues from
investment banking and, to a lesser extent, reduced principal transactions. A
reduced volume of securities and futures transactions and reduced market
liquidity generally results in lower revenues from principal transactions and
commissions. Lower price levels for securities may result in a reduced volume of
transactions, and may also result in losses from declines in the market value of
securities held in proprietary trading and underwriting accounts. In periods of
reduced sales and trading or investment banking activity, profitability may be
adversely affected because certain expenses remain relatively fixed.
Our securities trading, derivatives, arbitrage, market-making, specialist,
leveraged lending, leveraged buyout and underwriting activities are conducted by
us on a principal basis and expose us to significant risk of loss. Such risks
include market, counterparty credit, and liquidity risks.
Unless otherwise noted, all information contained under "Description of the
Company" is as of November 30, 2000.
S-37
CERTAIN US FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Cadwalader, Wickersham & Taft, special tax counsel to us,
the following discussion summarizes certain US federal income tax consequences
of the purchase, beneficial ownership and disposition of Notes. Except as
provided below under "--Federal Income Tax Consequences to Non-US Holders," this
summary deals only with a Holder that is:
- a citizen or resident of the United States;
- a corporation, partnership or other business entity created or organized
in or under the laws of the United States or any State or political
subdivision thereof (including the District of Columbia);
- an estate whose income is subject to US federal income taxation regardless
of its source; or
- a trust if a court within the United States is able to exercise primary
supervision over its administration, and one or more United States persons
have the authority to control all of its substantial decisions (each, a
"US Holder").
As used in this summary, the term "Non-US Holder" means a Holder that is not a
"US Holder."
An individual may, subject to certain exceptions, be deemed to be a resident
of the United States by reason of being present in the United States for at
least 31 days in the calendar year and for an aggregate of at least 183 days
during a three-year period ending in the current calendar year (counting for
such purposes all of the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days present in
the second preceding year).
This summary is based on interpretations of the Internal Revenue Code of
1986, as amended (the "Code"), regulations issued thereunder, and rulings and
decisions currently in effect (or in some cases proposed), all of which are
subject to change. Any such change may be applied retroactively and may
adversely affect the federal income tax consequences described herein. This
summary addresses only Holders that purchase Notes at initial issuance and own
Notes as capital assets and not as part of a "straddle" or a "conversion
transaction" for federal income tax purposes or as part of some other integrated
investment. This summary does not discuss all of the tax consequences that may
be relevant to particular investors or to investors subject to special treatment
under the federal income tax laws (such as life insurance companies, retirement
plans, regulated investment companies, securities dealers, expatriates or
investors whose functional currency is not the US dollar). Persons considering
the purchase of Notes should consult their own tax advisors concerning the
application of US federal income tax laws to their particular situations as well
as any consequences of the purchase, beneficial ownership and disposition of
Notes arising under the laws of any other taxing jurisdiction.
FEDERAL INCOME TAX CONSEQUENCES TO US HOLDERS
TREATMENT OF INTEREST
Stated interest on the Notes will be taxable to a US Holder as ordinary
interest income as the interest accrues or is paid (in accordance with the US
Holder's method of tax accounting).
TREATMENT OF DISPOSITIONS OF NOTES
Upon the sale, exchange, retirement or other taxable disposition of a Note,
a US Holder will recognize gain or loss equal to the difference between the
amount received (other than amounts in respect of accrued and unpaid interest,
which will be taxable as such) and the adjusted tax basis of the Note. A US
Holder's tax basis in a Note will be, in general, such US Holder's cost
therefor. Gain or loss realized on the sale, exchange or retirement of a Note
generally will be capital gain or loss, and
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will be long-term capital gain or loss if, at the time of such sale, exchange or
retirement, the Note had been held for more than one year.
FEDERAL INCOME TAX CONSEQUENCES TO NON-US HOLDERS
The following is a summary of the US federal income tax consequences
generally applicable to Non-US Holders of the Notes. For purposes of the
following discussion, interest and gain on the sale, exchange or other
disposition of the Note will be considered "US trade or business income" if such
income or gain is (i) effectively connected with the conduct of a trade or
business in the United States, or (ii) in the case of a treaty resident,
attributable to a permanent establishment (or in the case of an individual, to a
fixed base) in the United States.
TREATMENT OF INTEREST
A Non-US Holder will not be subject to US federal income or withholding tax
in respect of interest income on the Notes if:
- the interest is not US trade or business income;
- the Non-US Holder provides an appropriate statement on IRS Form W-8BEN or
Form W-8IMY, as the case may be, together with all appropriate
attachments, signed under penalties of perjury, identifying the Non-US
Holder and stating, among other things, that the Non-US Holder is not a
United States person; and
- the Non-US Holder is not a "10-percent shareholder" or a "related
controlled foreign corporation" with respect to the Company (as specially
defined for US federal income tax purposes).
If a Note is held through a securities clearing organization or certain other
financial institutions, the organization or institution may provide a signed
statement accompanied by a copy of the IRS Form W-8BEN or Form W-8IMY provided
by the beneficial owner to the organization or institution.
To the extent these conditions are not met, a 30% withholding tax will apply
to interest income on the Notes, unless an income tax treaty reduces or
eliminates such tax or unless the interest is US trade or business income and
the Non-US Holder provides an appropriate statement to that effect. In the
latter case, such Non-US Holder generally will be subject to US federal income
tax with respect to all income from the Notes in the same manner as US Holders,
as described above. Additionally, in such event, Non-US Holders that are
corporations could be subject to a branch profits tax on such income as well.
TREATMENT OF DISPOSITIONS OF NOTES
Generally, a Non-US Holder will not be subject to federal income tax on any
amount which constitutes capital gain upon the sale, exchange, retirement or
other disposition of a Note unless such Holder is an individual present in the
United States for 183 days or more in the taxable year of the sale, exchange,
retirement or other disposition and certain other conditions are met, or unless
the gain is US trade or business income. In the latter event, generally Non-US
Holders will be subject to US federal income tax with respect to such gain in
the same manner as US Holders, as described above. Additionally, in such event,
Non-US Holders that are corporations could be subject to a branch profits tax on
such income as well.
TREATMENT OF NOTES FOR US FEDERAL ESTATE TAX PURPOSES
A Note will not be subject to US federal estate tax, provided the Non-US
Holder is not at the time of death a "10-percent shareholder" of the Company (as
specially defined for US federal income
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tax purposes) and payments of interest on such Notes would not have been
considered US trade or business income.
US INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
Under certain circumstances, the Code requires "information reporting"
annually to the Internal Revenue Service (the "IRS") and to each Holder and
"backup withholding" at a rate of 31% with respect to certain payments made on
or with respect to the Notes. Backup withholding and information reporting
generally do not apply with respect to certain Holders, including corporations,
tax-exempt organizations, qualified pension and profit sharing trusts and
individual retirement accounts. Backup withholding will apply to a non-exempt US
Holder only if the US Holder:
- fails to furnish its Taxpayer Identification Number ("TIN"), which for an
individual would be his or her Social Security Number;
- furnishes an incorrect TIN;
- is notified by the IRS that it has failed to properly report payments of
interest and dividends; or
- under certain circumstances, fails to certify, under penalty of perjury,
that it has furnished a correct TIN and has not been notified by the IRS
that it is subject to backup withholding for failure to report interest
and dividend payments. The application for exemption is available by
providing a properly completed IRS Form W-9.
A Non-US Holder that provides an IRS Form W-8BEN or Form W-8IMY, together
with all appropriate attachments, signed under penalties of perjury, identifying
the Non-US Holder and stating that the Non-US Holder is not a United States
person will not be subject to IRS reporting requirements and US backup
withholding. An IRS Form W-8BEN generally is required from the beneficial owners
of interests in a Non-US Holder that is treated as a partnership or disregarded
entity for US federal income tax purposes.
The payment of the proceeds on the disposition of a Note by a Holder to or
through the US office of a broker generally will be subject to information
reporting and backup withholding at a rate of 31% unless the Holder either
certifies its status as a Non-US Holder under penalties of perjury on IRS Form
W-8BEN or Form W-8IMY (as described above) or otherwise establishes an
exemption. The payment of the proceeds on the disposition of a Note by a Non-US
Holder to or through a non-US office of a non-US broker will not be subject to
backup withholding or information reporting unless the non-US broker is a "US
related person" (as defined below). The payment of proceeds on the disposition
of a Note by a Non-US Holder to or through a non-US office of a US broker or a
US related person generally will be subject to information reporting and backup
withholding unless the Holder certifies its status as a Non-US Holder under
penalties of perjury or the broker has certain documentary evidence in its files
as to the Non-US Holder's foreign status and the broker has no actual knowledge
to the contrary.
For this purpose, a "US related person" is:
- a "controlled foreign corporation" (as specially defined for US federal
income tax purposes);
- a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding
the payment (or for such part of the period that the broker has been in
existence) is derived from activities that are effectively connected with
the conduct of a US trade or business; or
- a foreign partnership if, at any time during its tax year, one or more of
its partners are United States persons who, in the aggregate, hold more
than 50% of the income or capital interest of
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the partnership or if, at any time during its taxable year, the
partnership is engaged in the conduct of a US trade or business.
Backup withholding is not an additional tax and may be refunded (or credited
against the Holder's US federal income tax liability, if any), provided that
certain required information is furnished. The information reporting
requirements may apply regardless of whether withholding is required. Copies of
the information returns reporting such interest and withholding also may be made
available to the tax authorities in the country in which a Non-US Holder is a
resident under the provisions of an applicable income tax treaty or agreement.
STATE, LOCAL AND FOREIGN TAXES
Holders should consult their tax advisors with respect to state, local and
foreign tax considerations relevant to an investment in Notes.
S-41
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated April 20, 2001 (the "Underwriting Agreement") between us and the
Underwriters named below, we have agreed to sell to each of the Underwriters,
and each of the Underwriters has severally, and not jointly, agreed to purchase
from us, the aggregate principal amount of Notes set forth opposite its name
below.
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
----------- ------------
Bear, Stearns & Co. Inc. ................................... $206,250,000
Bear, Stearns International Limited ........................ $206,250,000
Banc One Capital Markets, Inc. ............................. $187,500,000
Chase Securities, Inc....................................... $ 37,500,000
Fleet Securities, Inc....................................... $ 37,500,000
Mellon Financial Markets, LLC............................... $ 37,500,000
Wells Fargo Brokerage Services, LLC......................... $ 37,500,000
------------
Total................................................... $750,000,000
============
The Underwriters have advised us that they propose to offer some or all of
the Notes to the public at the offering price set forth on the cover page of
this prospectus supplement and any balance to certain dealers at a price that
reflects concessions not in excess of 0.250% of the principal amount of the
Notes. Such dealers may reallow a concession to other dealers not in excess of
0.200% of the principal amount of the Notes. After the initial offering to the
public, the public offering price and other selling terms may be changed. The
Underwriting Agreement provides that we will pay as underwriters' compensation
the amounts set forth as underwriting discount on the table on the cover page of
this prospectus supplement. The expenses of the offering of the Notes are
estimated to be approximately $300,000.
In the event of default by one or more Underwriters, the Underwriting
Agreement provides that in certain circumstances other underwriters may be
substituted or the commitment of each non-defaulting Underwriter may be
increased up to 10%. However, if the default involves more than 10% of the
aggregate principal amount of the Notes, the Underwriting Agreement may be
terminated.
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the Notes if any are purchased. The Underwriters reserve the
right to withdraw, cancel or modify the offering, and to reject orders in whole
or in part.
Bear Stearns is acting as Global Coordinator and BSIL as the International
Coordinator for the offering of the Notes. The Underwriters propose initially to
offer the Notes for sale in the United States and in those jurisdictions in
Europe and Asia where it is legal to make such offers. All Notes to be sold to
purchasers in Europe will be sold through BSIL, as the International
Coordinator. However, no action has been or, except in connection with the
application for the Notes to be admitted to the Official List of the UK Listing
Authority, will be taken in any jurisdiction by the Underwriters or us that
would permit a public offering of the Notes or possession or distribution of
this prospectus supplement and the accompanying prospectus in any jurisdiction,
other than the United States, where, or in any circumstances in which, action
for that purpose is required.
Each Underwriter has represented and agreed that:
(a) it has not offered or sold and will not offer or sell any Notes to
persons in the United Kingdom, prior to the earlier of the expiry of the
period of six months from the Settlement Date and the admission of the Notes
to listing in accordance with Part IV of the Financial Services Act
S-42
1986, except to those persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995, as amended or the Financial Services Act 1986;
(b) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to the Notes in, from or otherwise involving the United Kingdom;
and
(c) it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the issue
of the Notes, other than any document which consists of or any part of
listing particulars, supplementary listing particulars or any other document
required or permitted to be published by listing rules under Part IV of the
Financial Services Act 1986, to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996, as amended or is a person to whom the document may
otherwise lawfully be issued or passed on.
Each Underwriter has agreed that it will (to the best of its knowledge and
belief) comply with all applicable securities laws and regulations in force in
any jurisdiction in which it offers, sells or delivers any of the Notes or
possesses or distributes this prospectus supplement and the accompanying
prospectus and will obtain any consent, approval or permission which is (to the
best of its knowledge and belief) required by it for the purchase, offer, sale
or delivery by it of the Notes under the laws and regulations in force in any
jurisdiction to which it is subject or in which it makes such purchases, offers,
sales or deliveries and neither we nor any other Underwriter shall have any
responsibility therefor.
You may be required to pay stamp taxes and other charges in accordance with
the laws and practices of the country of purchase in addition to the issue price
set forth on the cover page hereof.
The Notes are a new issue of securities with no established trading market.
Although we intend to cause the Notes to be admitted to the Official List of the
UK Listing Authority, no guarantees can be given that the application will be
approved, and we do not intend to apply for listing of the Notes on a national
securities exchange in the United States. We have been advised by Bear Stearns
that, following completion of the offering of the Notes, Bear Stearns and its
affiliates and certain of the other Underwriters intend to make a market in the
Notes, although they are under no obligation to do so and may discontinue any
market-making activities at any time without notice. Accordingly, no guarantees
can be given as to whether an active trading market for the Notes will develop
or, if such a trading market develops, as to the liquidity of such trading
market.
All secondary trading in the Notes will settle in same day funds. See
"Description of the Notes--Book-Entry, Delivery and Form--Global Clearance and
Settlement Procedures."
It is expected that delivery of the Notes will be made against payment
therefor on or about April 27, 2001, which is the fifth business day following
the date hereof (such settlement cycle being herein referred to as "T+5").
Purchasers of Notes should note that the ability to settle secondary market
trades of the Notes executed on the date of pricing may be affected by the T+5
settlement.
The Underwriting Agreement provides that we will indemnify the Underwriters
against certain liabilities, including liabilities under the United States
Securities Act of 1933, as amended, or contribute to payments the Underwriters
may be required to make in respect thereof.
Bear Stearns and BSIL, in their capacity as Underwriters, have committed to
purchase from us 55% of the principal amount of the Notes being underwritten by
the Underwriters, on the same basis as the other Underwriters. Bear Stearns and
BSIL are our wholly-owned subsidiaries. To the extent that part or all of the
Notes so purchased by Bear Stearns or BSIL are not resold by them at the initial
S-43
offering price, the funds derived from our sale of the Notes on a consolidated
basis may be reduced, because we will not derive any additional funds from Notes
purchased by Bear Stearns or BSIL and not resold. Bear Stearns and BSIL intend
to resell any Notes that they are unable to resell from time to time, at
prevailing market prices, subject to applicable prospectus delivery and other
legal requirements.
Certain of the Underwriters and their affiliates engage from time to time in
general financing and banking transactions with us and our affiliates. In
addition, the Trustee is an affiliate of Chase Securities Inc., one of the
Underwriters.
The offer and sale of the Notes in respect of which this prospectus
supplement is delivered complies with the requirements set forth in Rule 2720 of
the Conduct Rules of the NASD regarding underwriting securities of an affiliate
of an NASD member.
In order to facilitate the offering of the Notes, Bear Stearns, in its
capacity as Global Coordinator of the offering of the Notes, may over-allot or
effect transactions which stabilize or maintain the market price of the Notes at
a level which might not otherwise prevail in the open market. Specifically, Bear
Stearns, on behalf of the Underwriters, may over-allot or otherwise create a
short position in the Notes for the account of the Underwriters by selling more
Notes than have been sold to us. Bear Stearns, on behalf of the Underwriters,
may elect to cover any such short position by purchasing Notes in the open
market. In addition, Bear Stearns, on behalf of the Underwriters, may stabilize
or maintain the price of the Notes by bidding for or purchasing Notes in the
open market and may impose penalty bids, under which selling concessions allowed
to syndicate members or other broker-dealers participating in the offering are
reclaimed if Notes previously distributed in the offering are repurchased in
connection with stabilization transactions or otherwise. The effect of these
transactions may be to stabilize or maintain the market price of the Notes at a
level above that which might otherwise prevail in the open market. The
imposition of a penalty bid may also affect the price of the Notes to the extent
that it discourages resales of Notes. No representation is made as to the
magnitude or effect of any such stabilization or other transactions. Such
transactions, if commenced, may be discontinued at any time.
Bear Stearns will make the Notes available for distribution on the Internet
through a proprietary web site and/or a third-party system operated by Market
Axess Inc., an Internet-based communications technology provider. Market Axess
Inc. is providing the system as a conduit for communications between Bear
Stearns and its customers and is not a party to any transactions. We do not
believe that Market Axess Inc. will function as our underwriter or agent of the
issuer, nor do we believe that Market Axess Inc. will act as a broker for any
customer of Bear Stearns. Market Axess Inc., a registered broker-dealer, will
receive compensation from Bear Stearns based on transactions Bear Stearns
conducts through the system. Bear Stearns will make the Notes available to its
customers through the Internet distributions, whether through a proprietary or
third-party system, on the same terms as distributions made through other
channels.
LEGAL MATTERS
The validity of the Notes will be passed upon for us by Cadwalader,
Wickersham & Taft, New York, New York, U.S.A. Certain legal matters will be
passed upon for the Underwriters by Kramer Levin Naftalis & Frankel LLP, New
York, New York, U.S.A. Certain legal matters relating to the laws of England and
Wales are being passed upon for us by Cadwalader, Wickersham & Taft, London,
England, and for the Underwriters by Allen & Overy, London, England.
S-44
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated by reference in this prospectus supplement from our 2000
Annual Report on Form 10-K have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
GENERAL INFORMATION
We are incorporated with shares and limited liability under the laws of the
State of Delaware, the United States. Our registered office is at The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, USA. Our principal executive office is 245 Park
Avenue, New York, New York 10167, USA.
So long as the Notes are outstanding, copies of the following documents will
be available from our principal executive office and from the specified offices
of the paying agents in London:
(i) our Certificate of Incorporation and By-laws;
(ii) our published audited consolidated financial statements contained
in our Annual Report on Form 10-K for the two fiscal years ended
November 30, 2000 and June 30, 1999;
(iii) our published unaudited consolidated financial statements
contained in our Quarterly Report on Form 10-Q for the three month period
ended February 23, 2001;
(iv) the Underwriting Agreement and the Indenture;
(v) a copy of this prospectus supplement and accompanying prospectus;
(vi) the written agreement of Cadwalader, Wickersham & Taft referred to
below; and
(vii) any other documents incorporated herein by reference.
Our consolidated financial statements for the fiscal year ended
November 30, 2000, the five-month period ended November 26, 1999 and fiscal
years ended June 30, 1999 and 1998 were audited, without qualification, by
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
U.S.A., independent certified public accountants, in accordance with auditing
standards generally accepted in the United States.
Cadwalader, Wickersham & Taft have given and have not withdrawn their
written agreement to the inclusion of their tax summary in this prospectus
supplement in the form and context in which it appears.
Other than as disclosed or contemplated herein, there has been no material
change in our financial or trading position or material adverse change in our
financial position or prospects since November 30, 2000.
In the normal course of our business, we have been named as defendant in
numerous civil actions arising out of our activities as broker and dealer in
securities, as an underwriter, as an investment banker, as employer or arising
out of alleged employee misconduct. Several of these actions are class actions
that allege damages in large or indeterminate amounts. Although the ultimate
outcome of these actions cannot be ascertained at this time, it is the opinion
of our management, after consultation with relevant counsel, that the resolution
of these actions will not have a material effect on our consolidated financial
condition; such resolution may, however, have a material effect on the operating
results in any future period, depending upon the level of such results in such
period.
The Notes have been assigned Euroclear and Clearstream Common Code 12870361,
International Security Identification Number (ISIN) US073902BX55 and CUSIP
No. 073902BX5.
S-45
PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY
THE BEAR STEARNS COMPANIES INC.
245 Park Avenue
New York, New York 10167
USA
TRUSTEE, REGISTRAR AND PRINCIPAL PAYING AGENT
THE CHASE MANHATTAN BANK
450 West 33rd Street
New York, New York 10001
USA
PAYING AGENT AND TRANSFER AGENT
THE CHASE MANHATTAN BANK
Trinity Towers
9 Thomas More Street
London E1 9YT
England
LEGAL ADVISERS
To the Underwriters as to US Law To the Company as to US Law
KRAMER LEVIN NAFTALIS & FRANKEL LLP CADWALADER, WICKERSHAM & TAFT
919 Third Avenue 100 Maiden Lane
New York, New York 10022 New York, New York 10038
USA USA
To the Underwriters as to English Law To the Company as to English Law
ALLEN & OVERY CADWALADER, WICKERSHAM & TAFT
One New Change 55 Gracechurch Street, First Floor
London EC4M 9QQ London EC3V 0EE
England England
AUDITORS OF THE COMPANY
DELOITTE & TOUCHE LLP
2 World Financial Center
New York, New York 10281
USA
LISTING AGENT AND INTERNATIONAL COORDINATOR
BEAR, STEARNS INTERNATIONAL LIMITED
One Canada Square
London E14 5AD
England
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WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED
INFORMATION. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS NOT
AN OFFER TO SELL OR BUY ANY SECURITIES IN ANY JURISDICTION WHERE IT IS UNLAWFUL.
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS CURRENT AS OF APRIL 20, 2001
AND THE INFORMATION IN THE ACCOMPANYING PROSPECTUS IS CURRENT AS OF JANUARY 11,
2001.
--------------
TABLE OF CONTENTS
PAGE
--------
PROSPECTUS SUPPLEMENT
Forward-Looking Statements............ S-3
Certain Definitions................... S-3
Where You Can Find More Information... S-4
Summary of the Offering............... S-5
Ratio of Earnings to Fixed Charges.... S-8
The Bear Stearns Companies Inc........ S-8
Use of Proceeds....................... S-11
Capitalization........................ S-12
Selected Consolidated Financial
Data................................ S-13
Description of the Notes.............. S-15
Description of the Company............ S-24
Certain US Federal Income Tax
Considerations...................... S-38
Underwriting.......................... S-42
Legal Matters......................... S-44
Experts............................... S-45
General Information................... S-45
PROSPECTUS
Where You Can Find More Information... 3
Certain Definitions................... 4
The Bear Stearns Companies Inc........ 4
Use of Proceeds....................... 5
Ratio Information..................... 5
Description of Debt Securities........ 6
Description of Warrants............... 13
Limitations on Issuance of Bearer Debt
Securities and Bearer Warrants...... 16
Description of Preferred Stock........ 17
Description of Depositary Shares...... 20
Book-Entry Procedures and Settlement.. 24
Plan of Distribution.................. 25
ERISA Considerations.................. 27
Experts............................... 28
Validity of the Securities............ 28
US$750,000,000
THE BEAR STEARNS
COMPANIES INC.
6.50% GLOBAL
NOTES DUE 2006
----------------------------------
PROSPECTUS SUPPLEMENT
----------------------------------
BEAR, STEARNS & CO. INC.
BEAR, STEARNS INTERNATIONAL LIMITED
BANC ONE CAPITAL MARKETS, INC.
FLEET SECURITIES, INC.
JPMORGAN
MELLON FINANCIAL MARKETS, LLC
WELLS FARGO BROKERAGE SERVICES, LLC
APRIL 20, 2001
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