================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended November 30, 2000.
Or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ___________ to
________________
COMMISSION FILE NUMBER: 1-8989
THE BEAR STEARNS COMPANIES INC.
-------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3286161
------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
245 PARK AVENUE, NEW YORK, NEW YORK 10167
(212) 272-2000
--------------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
--------------------------------------------------------------------------------
COMMON STOCK, PAR VALUE $1.00 PER SHARE NEW YORK STOCK EXCHANGE
ADJUSTABLE RATE CUMULATIVE PREFERRED STOCK, NEW YORK STOCK EXCHANGE
SERIES A
DEPOSITARY SHARES, EACH REPRESENTING A NEW YORK STOCK EXCHANGE
ONE-FOURTH INTEREST IN A SHARE OF 6.15%
CUMULATIVE PREFERRED STOCK, SERIES E
DEPOSITARY SHARES, EACH REPRESENTING A NEW YORK STOCK EXCHANGE
ONE-FOURTH INTEREST IN A SHARE OF 5.72%
CUMULATIVE PREFERRED STOCK, SERIES F
DEPOSITARY SHARES, EACH REPRESENTING A NEW YORK STOCK EXCHANGE
ONE-FOURTH INTEREST IN A SHARE OF 5.49%
CUMULATIVE PREFERRED STOCK, SERIES G
9-3/8% SENIOR NOTES DUE 2001 NEW YORK STOCK EXCHANGE
S&P LINKED NOTES DUE 2003 CHICAGO BOARD OPTIONS EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
(TITLE OF CLASS)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
At February 16, 2001, the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant was approximately
$5,829,058,213. For purposes of this information, the outstanding shares of
common stock owned by directors and executive officers of the registrant were
deemed to be shares of common stock held by affiliates.
On February 16, 2001, the registrant had 106,915,091 outstanding shares of
common stock, par value $1.00 per share, which is the registrant's only class of
common stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Parts II and IV of this Form 10-K incorporate information by reference from
certain portions of the registrant's 2000 Annual Report to Stockholders. The
information required to be furnished pursuant to Part III of this Form 10-K will
be set forth in, and incorporated by reference from, the registrant's definitive
proxy statement for the annual meeting of stockholders to be held March 29,
2001, which definitive proxy statement will be filed by the registrant with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year ended November 30, 2000.
==============================================================================
PART I
ITEM 1. BUSINESS.
(a) General Development of the Business
The Bear Stearns Companies Inc. (the "Company") was incorporated under the
laws of the State of Delaware on August 21, 1985. The Company is a holding
company that through its subsidiaries, principally Bear, Stearns & Co. Inc.
("Bear Stearns"); Bear, Stearns Securities Corp. ("BSSC"); Bear, Stearns
International Limited ("BSIL") and Bear Stearns Bank plc ("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 the Company's proprietary and
customer transactions. The Company succeeded on October 29, 1985, to the
business of Bear, Stearns & Co., a New York limited partnership (the
"Partnership"). As used in this report, the "Company" refers (unless the context
requires otherwise) to The Bear Stearns Companies Inc., its subsidiaries and the
prior business activities of the Partnership.
(b) Financial Information About Industry Segments
The Company is 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 the
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 the Company's 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 the Company's 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 the Company's business segments and
foreign operations as of November 30, 2000, November 26, 1999, June 30, 1999 and
1998 and for the fiscal years ended November 30, 2000, June 30, 1999 and 1998
and the five months ended November 26, 1999 is set forth under Item 8. Financial
Statements and Supplementary Data in Notes to Consolidated Financial Statements,
Footnote 14, entitled "Segment and Geographic Area Data," incorporated herein by
reference.
(c) Narrative Description of Business
The business of the Company 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 New York Stock
Exchange ("NYSE") and the American Stock Exchange ("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; fiduciary, custody,
agency and securities research services.
The Company's business is conducted from its 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. The Company's
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. The Company provides
trust company and clearance services through its subsidiary, Custodial Trust
Company ("CTC"), which is located in Princeton, New Jersey.
Bear Stearns and BSSC are broker-dealers registered with the Securities
and Exchange Commission (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 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 the Company's existing and prospective clients the choice of dealing
with a banking counterparty.
As of November 30, 2000, the Company had 11,201 employees.
The following areas are included in the three business segments mentioned
above in Item 1(b).
INSTITUTIONAL EQUITIES
GENERAL. The Company provides customers with liquidity, sales and trading
expertise and equity research in products such as domestic and international
equities and convertible securities.
2
OPTIONS AND INDEX PRODUCTS. The Company provides an array of equity and
index option-related execution services to institutional and individual clients.
The Company utilizes sophisticated research and computer modeling to formulate
specific recommendations relating to options and index trading.
ARBITRAGE. The Company engages for its own account in both "classic" and
"risk" arbitrage. The Company's 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, the Company seeks 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 different dates.
STRATEGIC STRUCTURING AND TRANSACTIONS (SST). The Company targets
mispriced assets using sophisticated models and proprietary quantitative
methods. The Company maintains 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. The Company makes 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. The Equity Research Department provides innovative,
in-depth analysis of the global investment environment. Known for theme-oriented
research underpinned by meticulous financial modeling, the Department offers
detailed information on over 1,200 companies in roughly 100 industries
(including approximately 55% of the S&P 500). It also has 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. The Department's broad-based domestic coverage is complemented by
extensive research teams in Latin America, Asia and Europe, giving its 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.
EQUITY SALES
The Company is 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. The Company provides
transaction services for institutional customers who trade in futures and
futures-related instruments. The Company is also involved in specialist
activities on both the NYSE and the AMEX.
BLOCK TRADING
The Company effects transactions in large blocks of securities mainly with
institutional customers. The Company also provides customers execution
capabilities for baskets of equity securities using sophisticated computer
systems. Transactions are handled on an agency basis whenever possible, but the
Company 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.
3
SPECIALIST ACTIVITIES
The Company is a participant 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. The Company makes inter-dealer markets and trades 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, interest rate swaps and other derivative products. Bear
Stearns is one of the largest dealers in the US in such fixed income securities.
Inventories of fixed income securities are generally carried to facilitate sales
to customers and other dealers.
US GOVERNMENT AND AGENCY OBLIGATIONS. The Company is designated by the
Federal Reserve Bank of New York as a primary dealer in US government
obligations. The Company participates in the auction of, and maintains
proprietary positions in, US Treasury bills, notes, bonds, and stripped
principal and coupon securities. The Company also participates as a selling
group member and/or underwriter in the distribution of various US government
agency and sponsored corporation securities and maintains proprietary positions
in such securities. In connection with these activities, the Company enters into
transactions in options, futures and forward contracts to hedge such 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, the Company engages 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. The Company acts as a dealer in
sovereign and corporate fixed income securities and preferred stocks in New
York, London and Tokyo. It buys and sells these securities for its own account
in principal transactions with institutional and individual customers, as well
as other dealers. The Company conducts trading in the full spectrum of dollar
and non-dollar debt securities. The Company offers hedging and arbitrage
services to domestic and foreign institutional and individual customers
utilizing financial futures and other instruments. Moreover, the Company offers
quantitative, strategic, and research services relating to fixed income
securities to its domestic and international clients. The Company participates
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. The Company trades and makes
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. The
Company also trades real estate mortgage loans originated by unaffiliated
mortgage lenders, both on a securitized and non-securitized basis. The Company
acts as underwriter and placement agent in transactions involving rated and
4
unrated mortgage-related securities issued by affiliated and unaffiliated
parties. The Company enters 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.
The Company trades 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). The Company buys and sells such securities for its
own account in transactions with institutional and individual customers, as well
as with other dealers.
The Company, through various special purpose subsidiaries, purchases,
sells, and services 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.
The Company also operates a commercial mortgage conduit that originates
and accumulates commercial mortgage loans for the purpose of securitizing its
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. The Company acts 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. The Company also trades and makes 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. The Company is 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 state and local governments and authorities, as well as not-for-profit
institutions. The Company is active as a managing underwriter of negotiated and
competitive new security issuances and on a select basis, provides financial
advisory services. The Company makes 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, the Company earns fees by remarketing short-term debt instruments to
investors in the variable rate, demand bond market. The Company periodically
uses both municipal and treasury bond futures to hedge its cash-market bond
inventory. In addition, the Company maintains a municipal arbitrage portfolio
for its own account consisting of municipal futures and cash bond positions. The
Company's underwriting, trading and sales activities are supported by a
municipal research group.
DERIVATIVES. The Company offers to customers, and trades for its 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
5
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. The Company also enters into derivative transactions for various
purposes and to manage the risks to which the Company is exposed in its various
businesses and through its funding activities. The Company manages its market
and counterparty derivatives risks in a manner consistent with its overall
risk-management policies.
FOREIGN EXCHANGE. The Company trades foreign exchange with clients as
principal, for its own account and to hedge its 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. The Company serves a select list of funds, major 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. The Company is one of the leaders 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 the Company's sales and trading efforts, producing reports,
studies, and technical market analyses. Fixed Income Research is comprised of
the following three units:
(i) 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., the Company affords its
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.
(ii) High grade research consists of 23 analysts and researchers and
provides coverage of over 25 industries and 500 companies.
(iii) 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
The Company is a major global investment banking firm providing a full
range of capital formation and advisory services to a broad spectrum of clients.
The Company manages and participates in public offerings and arranges the
private placement of debt and equity securities directly with institutional
investors. The Company provides advisory services to clients on a wide range of
financial matters and assists with mergers, acquisitions, leveraged buyouts,
divestitures, corporate reorganizations, and recapitalizations.
The Company's strategy is to concentrate a major portion of its corporate
finance business development efforts within those industries in which the
Company has 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. The Company also has 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. The Company has focused primarily on those industries
in which the Company also has a strong research capability.
6
In addition to being structured according to distinct industry groups, the
Company has 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. The Company is active in arranging various M&A
transactions for its clients. The Company participates in a broad range of
domestic and international assignments including acquisitions, divestitures,
strategic restructurings, proxy contests, leveraged buyouts, and defenses
against unsolicited takeovers.
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 of the Company
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 its investment banking activities, the
Company makes investments as principal in leveraged acquisitions and in
leveraged buy-out funds as a limited partner. The Company's 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 the Company believes 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, the Company
will realize the value of these investments.
COMMERCIAL REAL ESTATE. The Company is engaged in a variety of real estate
activities on a nationwide basis. It provides comprehensive real estate-related
investment banking, capital markets and financial advisory services.
EMERGING MARKETS
The Company provides 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,
the Company manages and participates in public offerings and arranges the
private placement of debt and equity securities with institutional investors.
The markets currently covered by the Company include Latin America, Asia, and
Eastern Europe.
CLEARANCE ACTIVITIES
The Company provides 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, the Company has 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,
the Company also earns substantial amounts of interest income. The Company
extends credit directly to the customers of correspondent firms in order to
facilitate the conduct of customer securities transactions on a margin basis.
7
The Company also extends margin credit directly to correspondents to the extent
that such firms pledge proprietary assets as collateral.
In addition to clearing trades, the Company provides other products and
services to its correspondents such as recordkeeping, trading reports,
accounting, general back-office support, securities lending, reorganization and
custody of securities. The Company's 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 the Company's clearing relationships are allocated
in accordance with agreements with correspondents. To the extent that the
correspondent has available resources, the Company is protected against claims
by customers of the correspondent when the latter has been allocated
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 the Company.
The Company attempts to broaden, wherever possible, its relationships with
broker-dealer and prime broker clients. In addition to performing
administrative, operational and settlement functions, the Company also advises
clients on communications systems and makes available to them a variety of
non-brokerage products and services on favorable terms enabling them to benefit
from the Company's centralized purchasing power.
CUSTOMER FINANCING AND SECURITIES LENDING ACTIVITIES
The Company derives 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, the Company extends
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. The Company receives 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, brokers call rate or LIBOR.
SECURITIES LENDING ACTIVITIES. In connection with both its trading and
brokerage activities, the Company borrows securities from and lends securities
to brokers and 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
The Company offers a range of trust company and securities-clearance
services through its wholly owned subsidiary CTC. CTC provides the Company 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; the clearance of government securities for institutions
and dealers; the 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
The Company, through BSSC and other subsidiaries, provides, 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
8
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, the Company
is 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, the Company is a member of the IPE, the LCE,
the LIFFE and OMLX. The Company also has 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
("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 the Company's resources and professionals. PCS
maintains a select team of approximately 500 account executives in its principal
office and six regional offices.
ASSET MANAGEMENT
The Company's 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 over $19.5
billion in assets under management at November 30, 2000, the asset management
area provides its clients with diverse products, expertise and experience in an
effort to enhance 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
Emerging Markets Debt Portfolios.
ADMINISTRATION AND OPERATIONS
Administration and operations personnel, besides performing other
functions, are responsible for the 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 margin
accounts of the Company and correspondent organizations. The processing,
settlement, and accounting for transactions for the Company, 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, the Company's offices worldwide.
The Company executes its own and correspondent transactions on US
exchanges and in the OTC market. The Company clears all of its domestic and
international transactions (i.e., delivery of securities sold, receipt of
securities purchased, and transfer of related funds) through its own facilities,
unaffiliated commercial banks, other broker-dealers and through memberships in
various clearing corporations.
INTERNATIONAL
Outside the US, the Company, through its international subsidiaries,
provides various services including investment banking, securities trading and
brokerage and clearing activities to corporations, governments, institutions and
9
individual clients throughout the world. These international subsidiaries of the
Company 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 the Company's global fixed
income and equity-related derivative businesses. BSIL has a growing investment
banking capability and is also enhancing its service to the Company's growing
clearance business in Europe.
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 the Company's activities in the Asia-Pacific region,
excluding Japan. This office provides equity and fixed income sales and trading,
international equity and fixed income 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 the Company's existing and prospective
clients the choice of dealing with a banking counterparty. BSB also serves as a
platform from which the Company directs its international banking activities,
gaining easier access to worldwide markets, and thereby expanding its capacity
to increase its 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
The Company encounters intense competition in all aspects of the
securities business and competes 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 does the Company. Besides
competition from firms in the securities business, in recent years the Company
has experienced increasing competition from other sources, such as commercial
banks and insurance companies. The Company believes that the principal factors
affecting competition involve the caliber and abilities 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 the Company's 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 the Company's
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
10
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, the Company's subsidiaries have been subject to routine investigations
and proceedings, and sanctions have been imposed for infractions of various
regulations, none of which, to date, has had a material adverse effect on the
Company or its 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
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, nonpublic information.
The Government Securities Act of 1986 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 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 its assets be kept in relatively liquid form.
11
Bear Stearns and BSSC are also subject to the net capital requirements of
the CFTC and various futures exchanges, which generally require that Bear
Stearns and BSSC maintain a minimum net capital 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 the Company's ability to
withdraw capital from Bear Stearns or BSSC, which in turn could limit the
Company's ability to pay dividends, pay interest, repay debt, or redeem or
purchase shares of its outstanding capital stock. Additional information
regarding net-capital requirements is set forth under Item 8. Financial
Statements and Supplementary Data in Notes to Consolidated Financial Statements,
Footnote 7, entitled "Regulatory Requirements".
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 protected by an
excess securities bond issued by the Travelers Casualty and Surety Company, up
to the amount of their total net equity (both cash and securities) in excess of
the underlying SIPC protection.
The activities of the Company's 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 Irish-based bank, which was incorporated in 1996 and
subsequently granted a banking license under the Irish Central Bank Act, 1971.
The Company's 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, the Company's net
income and revenues have been, 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,
12
liquidity of global markets, international and regional political events,
regulatory developments and the size and timing of transactions. These and other
factors can affect the Company's 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. The Company's securities trading, derivatives,
arbitrage, market-making, specialist, leveraged lending, leveraged buyout and
underwriting activities are conducted by the Company on a principal basis and
expose the Company to significant risk of loss. Such risks include market,
counterparty credit, and liquidity risks. See Item 7A. Quantitative and
Qualitative Disclosures about Market Risk.
CERTAIN STATEMENTS CONTAINED IN THIS DISCUSSION INCLUDING (WITHOUT
LIMITATION) CERTAIN MATTERS DISCUSSED UNDER "LEGAL PROCEEDINGS" IN PART I, ITEM
3 OF THIS REPORT, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" INCORPORATED BY REFERENCE IN PART II, ITEM 7 OF THIS
REPORT, AND "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK"
INCORPORATED BY REFERENCE IN PART II, ITEM 7A OF THIS REPORT ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS CONCERNING
MANAGEMENT'S EXPECTATIONS, STRATEGIC OBJECTIVES, BUSINESS PROSPECTS, ANTICIPATED
ECONOMIC PERFORMANCE AND FINANCIAL CONDITION AND OTHER SIMILAR MATTERS ARE
SUBJECT TO RISKS AND UNCERTAINTIES, INCLUDING THOSE PREVIOUSLY MENTIONED, WHICH
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. 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.
ITEM 2. PROPERTIES.
The Company's executive offices and principal administrative offices
occupy approximately 753,000 square feet of space at 245 Park Avenue, New York,
New York under leases expiring through 2002. The Company has recently completed
a lease for approximately 207,000 square feet on floors 15-20 at 245 Park Avenue
(part of current premises). This lease will commence on January 1, 2003 (after
expiration of current lease) and is scheduled to expire December 31, 2022 (20
years).
The Company also leases approximately 320,000 square feet of office space
at One MetroTech Center, Brooklyn, New York pursuant to a lease expiring in 2004
for its securities processing, accounting and clearance operations.
Additionally, the Company leases approximately 43,000, 30,000, 140,000, 13,000,
59,000 and 61,000 square feet of space at five locations in New York City under
leases expiring in 2001, 2002, 2004, 2007, 2009 and 2011, respectively. The
Company's offices in Atlanta, Boston, Chicago, Dallas, Denver, Houston, Irving,
Los Angeles, Philadelphia, Princeton, Puerto Rico, San Francisco and Tampa
occupy an aggregate of approximately 618,000 square feet, while its eleven
foreign offices occupy a total of approximately 168,000 square feet under leases
expiring on various dates through the year 2016.
The Company owns approximately 65 acres of land in Whippany, New Jersey,
including five buildings comprising an aggregate of approximately 493,000 square
feet. The Company is currently using the existing facilities on the property to
house its data processing facility and other operations, compliance, personnel
and accounting functions. Because the Whippany property includes land in excess
of current needs, the Company has received approval to construct two additional
buildings, one of which it is currently developing for itself. This building
under construction (approximately 187,500 square feet) is scheduled for
completion by mid-2001.
The Company has entered into a lease arrangement with respect to the
development and building of an office tower at 383 Madison Avenue, New York, New
York. This tower will serve as its new world headquarters. The office tower
13
under construction will contain 1.2 million square feet and is scheduled to be
completed in advance of the expiration of the current lease at 245 Park Avenue
in 2002.
ITEM 3. LEGAL PROCEEDINGS.
The Company and Bear Stearns have been named as defendants in lawsuits in the
normal course of business which involve claims for substantial amounts.
Additionally, the Company is involved from time to time in investigations and
proceedings by governmental agencies and self-regulatory organizations. Although
the ultimate outcome of these matters cannot be ascertained at this time, it is
the opinion of management, after consultation with counsel, that the resolution
of the foregoing matters will not have a material adverse effect on the
financial condition of the Company, taken as a whole; 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.
A.I.A. Holding, S.A., et al. v. Lehman Brothers, Inc., et al. On July
8, 1997, 277 alleged customers of Ahmad Ihsan El-Daouk ("Daouk") commenced an
action in the United States District Court for the Southern District of New
York against Lehman Brothers, Inc. ("Lehman") and Bear Stearns. Plaintiffs
alleged that Daouk, acting through corporations he controlled, entered into
introducing broker agreements with Lehman and then Bear Stearns, and that he
arranged for each of the plaintiffs to invest funds with Lehman and/or Bear
Stearns.
On July 3, 1998, 276 of the 277 original plaintiffs filed an amended
complaint against Lehman and Bear Stearns. As amended, the complaint alleges,
among other things, that the defendants committed breach of fiduciary duty,
fraud, constructive fraud, breach of contract, negligent hiring, retention and
supervision, aided and abetted fraud and aided and abetted breach of fiduciary
duty in connection with alleged improper trading activities in the accounts of
Daouk's customers. Plaintiffs seek compensatory damages in unspecified amounts
and imposition of constructive trusts with respect to any property that
"belongs, or may belong" to plaintiffs in Lehman's or Bear Stearns' possession.
On August 12, 1998, Bear Stearns filed an answer to the amended complaint
denying liability.
On May 5, 1999, the court granted permission to 21 moving plaintiffs to
dismiss their cases with prejudice on the condition that each provides a
covenant not to sue and a release.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in this litigation and believes that it has substantial defenses to these
claims.
A.R. Baron & Company, Inc. The following matters arise out of Bear
Stearns' role as clearing broker for A.R. Baron & Company, Inc. ("Baron")
from July 20, 1995 through June 28, 1996:
(i) John Berwecky, et al. v. Bear, Stearns & Co. Inc., et al./Jack
Perry v. Bear, Stearns & Co. Inc., et al. On July 21 and August 22, 1997,
shareholders of companies whose securities were underwritten by, or that
otherwise had some relationship with Baron (these securities are referred to
below as "Baron securities") commenced two actions in the United States
District Court for the Southern District of New York against Bear Stearns,
BSSC and a managing director of Bear Stearns.
On January 13, 1998, the Berwecky and Perry cases were consolidated for
all purposes and lead plaintiffs and lead counsel for plaintiffs were appointed.
On April 1, 1998, an amended consolidated class action complaint was filed. As
amended, the complaint alleges, among other things, that Bear Stearns, BSSC, a
managing director of Bear Stearns and Baron engaged in a scheme to manipulate
the market for and to inflate the prices of the Baron securities. Plaintiffs
allege violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5
promulgated thereunder. Plaintiffs purport to represent a class consisting of
all persons who acquired Baron securities from Baron between July 20, 1995 and
June 28, 1996. Damages in an unspecified amount are sought.
14
On December 1, 1998, defendants filed an answer to the complaint in which
they denied liability and asserted affirmative defenses.
On September 18, 2000, the court certified a class consisting of all
persons who acquired Baron securities from Baron between July 20, 1995 and June
28, 1996.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in this litigation and believes that it has substantial defenses to these
claims.
(ii) Fezanni, et al. v. Bear, Stearns & Co. Inc., et al. On February 2,
1999, an action was commenced in the United States District Court for the
Southern District of New York by eleven individuals or entities that allegedly
purchased certain securities underwritten by Baron. Named as defendants are Bear
Stearns, BSSC, an officer of BSSC, thirteen former officers and employees of
Baron, and 33 other individuals and entities that allegedly participated in
alleged misconduct by Baron involving attempts to manipulate the market for
securities underwritten by Baron. The complaint alleges that the Bear Stearns
defendants violated Sections 9 and 10(b) of the Exchange Act and Rule 10b-5
promulgated thereunder and RICO, aided and abetted breach of fiduciary duty and
committed common law fraud in connection with providing clearing services and
financing for Baron. The complaint seeks to recover compensatory damages in
excess of $6.5 million, treble damages in excess of $19.5 million, punitive
damages of $6.5 million from each defendant other than Bear Stearns and BSSC,
and punitive damages in the aggregate of $130 million from Bear Stearns and
BSSC.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in these litigations, and believes that it has substantial defenses to these
claims.
(iii) 110958 Ontario Inc. v. Bear, Stearns & Co. Inc., et al. On February
19, 1997, a brokerage customer of Baron commenced an NASD arbitration proceeding
against Bear Stearns, BSSC, and three Bear Stearns directors and/or officers. On
September 9, 1997, an amended Statement of Claim was filed. Claimant alleges,
among other things, that defendants violated Sections 10(b) and 20(a) of the
Exchange Act and Rule 10b-5 promulgated thereunder, and committed common law
fraud, breach of contract, and negligence, in connection with alleged misconduct
by Baron (for whom Bear Stearns acted as clearing broker), Baron's principal and
Baron's parent corporation, The Baron Group Inc. ("BGI"), including engaging in
unauthorized trading in claimant's brokerage account and fraudulently inducing
claimant to give Baron a secured demand note and to invest in BGI. Claimant
seeks compensatory damages of $22 million and punitive damages of $75 million.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in this arbitration proceeding and believes that it has substantial defenses to
these claims.
In re Blech Securities Litigation. On October 24, 1994, a shareholder of
certain biotechnology companies whose securities were underwritten by, or that
otherwise had some relationship with, D. Blech & Co. ("Blech Securities"),
commenced an action in the United States District Court for the Southern
District of New York against D. Blech & Co., David Blech, certain money managers
and investment advisors, and Bear Stearns, which had been a clearing broker for
D. Blech & Co. from September 1993 through September 1994. On December 14, 1994,
the action was consolidated with three related actions. On March 27, 1995, an
amended consolidated class action complaint was filed. On June 6, 1996, the
court dismissed, with leave to replead, all claims in the first amended
complaint asserted against Bear Stearns. On July 26, 1996, a second amended
consolidated complaint was filed.
Plaintiffs' current pleading alleges, among other things, a scheme to
manipulate the market for and to inflate the prices of Blech Securities, and
alleges that Bear Stearns violated Sections 10(b) and 20(a) of the Exchange Act
and Rule 10b-5 promulgated thereunder, and committed common law fraud. On April
2, 1997, the court dismissed plaintiffs' Section 20(a) claim. Plaintiffs seek
damages in an unspecified amount.
On May 16, 1997, Bear Stearns filed an answer denying liability and
15
asserting affirmative defenses.
On May 11, 1999, the court certified the following sub-classes: (i)
all persons who traded Blech Securities in the "primary market" between
October 21, 1991 and September 21, 1994; (ii) all persons who traded Blech
Securities in the "secondary market" between October 21, 1991 and September
21, 1994; and (iii) all persons who traded Blech Securities in the secondary
market between September 27, 1993, the date on which Bear Stearns became a
clearing broker for D. Blech & Co., Inc., and September 21, 1994.
Goldberger v. Bear, Stearns & Co. Inc., et al./ Bier, et al. v. Bear,
Stearns & Co. Inc., et al. On December 8, 1998 and February 8, 1999, two
purported class actions were commenced in the United States District Court
for the Southern District of New York on behalf of all persons who purchased
securities through certain retail brokerage firms for which BSSC provided
clearing services and financing during the period from December 8, 1992
through December 8, 1998. Named as defendants in each of these actions are
Bear Stearns, BSSC and an officer of BSSC. The complaints in these actions
allege, among other things, that the defendants violated Sections 10(b) and
20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder and committed
breach of contract, common law fraud and negligent misrepresentation in
connection with providing clearing services and financing for the brokerage
firms named in the complaint. Compensatory and punitive damages in
unspecified amounts are sought.
On April 5, 1999, the Goldberger and Bier actions were consolidated for
all purposes.
On October 22, 1999, this action was transferred by the Judicial Panel on
Multi-District Litigation to the United States District Court for the Eastern
District of New York.
On December 28, 2000, the district court granted defendants' motion to
dismiss this action.
Kennilworth Partners LP, et al. v. Bear, Stearns Securities Corp., et
al.
On May 2, 2000, Kennilworth Partners LP and Kennilworth Partners II LP
commenced a National Association of Securities Dealers ("NASD") arbitration
proceeding against Bear, Stearns Securities Corp. ("BSSC") and Bear, Stearns &
Co. Inc. Claimants allege that respondents committed breach of contract, breach
of the covenant of good faith and fair dealing, breach of fiduciary duty, common
law fraud and tortious interference with contract in connection with the
provision of clearing services to the claimants. Compensatory and punitive
damages in excess of $50 million are sought.
Bear Stearns and BSSC have denied all allegations of wrongdoing asserted
against them in this NASD arbitration proceeding, and believe that they have
substantial defenses to these claims.
Henryk de Kwiatkowski v. Bear, Stearns & Co. Inc., et al.
On June 25, 1996, a complaint was filed in the United States District
Court for the Southern District of New York by a former customer against Bear
Stearns, BSSC, Bear Stearns Forex Inc. and a registered representative. On
November 4, 1996, an amended complaint was filed, and on October 22, 1998, a
second amended complaint was filed against the same individual and entities that
were named as defendants in the original complaint. As amended, the complaint
alleges, among other things, claims for breach of fiduciary duty and negligence
and violations of Section 4(0) of the Commodity Exchange Act. Plaintiff seeks to
recover at least $300 million in losses and at least $100 million in punitive
damages.
On November 5, 1998, defendants filed an answer to the second amended
complaint in which they denied liability and asserted affirmative defenses.
On May 17, 2000, a jury returned a verdict finding that Bear Stearns, BSSC
and Bear Stearns Forex Inc. ("Forex") were liable to plaintiff for negligence
and awarded damages in the amount of $111,500,000. The jury also found that
defendants had not breached any fiduciary duties. On June 2, 2000, the court
also awarded pre-judgement interest of $52.3 million. On December 29, 2000, the
16
court denied defendants' motions to overturn the verdict. Defendants are
appealing the verdict to the United States Court of Appeals for the Second
Circuit.
In re Lady Luck Gaming Corporation Securities Litigation.
Beginning in March 1995, a series of actions were commenced in the United
States District Court for the District of Nevada involving an initial public
offering ("IPO") of 4,500,000 shares of Lady Luck Corporation ("Lady Luck") on
September 29, 1993. A consolidated class action complaint was filed on August
14, 1995, and second, third, fourth and fifth amended class action complaints
were filed on October 31, 1996, November 6, 1997, November 15, 1998, and
September 20, 1999, respectively. As amended, the complaint names as defendants
Bear Stearns and Oppenheimer & Co., Inc. ("Oppenheimer"), which are sued in
their capacities as co-lead underwriters of the IPO.
Plaintiffs' fifth amended complaint alleges, among other things, that the
prospectus issued in connection with the IPO (the "Prospectus") contained
certain false or misleading statements concerning Lady Luck and the
casino-gaming industry as a whole. Plaintiffs allege violations of Sections 11,
12(2) and 15 of the Securities Act of 1933. Plaintiffs purport to represent a
class consisting of all persons who purchased shares of Lady Luck from September
29, 1993 to October 11, 1994. Compensatory damages in an unspecified amount are
sought.
On October 4, 1999, defendants filed an answer to the fifth amended
complaint in which they denied liability and asserted affirmed defenses.
McKesson HBOC, Inc.
The following matters arise out of a merger between McKesson
Corporation ("McKesson") and HBOC, Inc. ("HBOC").
(i) Mitchell v. McCall, et al. On June 23, 1999, a shareholder of McKesson
HBOC, Inc. ("McKesson HBOC") commenced a purported derivative action on behalf
of McKesson HBOC in the Superior Court of the State of California, County of San
Francisco, against Bear Stearns, Arthur Andersen LLP, and certain present and
former directors and/or officers of McKesson HBOC, McKesson and/or HBOC. On
March 31, 2000, plaintiffs filed an amended complaint against the same
defendants as were named in the original complaint. As amended, the complaint
alleges, among other things, that Bear Stearns committed breach of fiduciary
duty and negligence in connection with acting as a financial advisor to McKesson
with respect to a merger between McKesson and HBOC. Compensatory and punitive
damages in unspecified amounts are sought.
(ii) In re McKesson HBOC, Inc. Securities Litigation. Beginning on June
29, 1999, 53 purported class actions were commenced in the United States
District Court for the Northern District of California. On November 2, 1999,
these actions were consolidated, and on February 25, 2000, an amended
consolidated complaint was filed. Plaintiffs purport to represent a class
consisting of all persons who either (i) acquired publicly traded securities of
HBOC between January 20, 1997 and January 12, 1999, or (ii) acquired publicly
traded securities of McKesson or McKesson HBOC between October 18, 1998 and
April 27, 1999, and who held McKesson securities on November 27, 1998 and
January 22, 1999. Named as defendants are McKesson HBOC, certain present and
former directors and/or officers of McKesson HBOC, McKesson and/or HBOC, Bear
Stearns, and Arthur Andersen LLP. The complaint alleges, among other things,
that Bear Stearns violated Section 14(a) of the Exchange Act in connection with
allegedly false and misleading disclosure contained in a joint proxy
statement/prospectus that was issued with respect to the McKesson/HBOC merger.
Compensatory damages in an unspecified amount are sought.
On September 28, 2000, the court entered an order dismissing without
prejudice the claims against Bear Stearns.
On November 14, 2000, the plaintiffs filed a second amended consolidated
complaint asserting claims against Bear Stearns under Sections 10(b) and 14(a)
of the Exchange Act with respect to the joint proxy statement/prospectus issued
17
in connection with the McKesson/HBOC merger. Compensatory damages in an
unspecified amount are sought.
(iii) Ash, et al. v. Charles W. McCall, et al. On January 22, 2001, Bear
Stearns was added as a defendant in a purported derivative action commenced by
four shareholders of McKesson HBOC in the Chancery Court of the State of
Delaware, New Castle County. Also named as defendants are Arthur Andersen LLP
and certain present and former directors and/or officers of McKesson HBOC,
McKesson and/or HBOC. The third amended complaint in this action alleges, among
other things, that Bear Stearns committed negligence and breach of contract and
aided and abetted a breach of fiduciary duty in connection with acting as a
financial advisor to McKesson with respect to a merger between McKesson and
HBOC. Compensatory damages in an unspecified amount are sought.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in these litigations, and believes that it has substantial defenses to these
claims.
Manhattan Investment Fund Limited
The following matters arise out of the failure and subsequent bankruptcy
filing of Manhattan Investment Fund Limited ("MIFL").
(i) Scotia Nominees, as nominees for L.C.O. Investments, Ltd. v. Michael
Berger, et al. On January 25, 2000, an action was commenced in the Supreme Court
of the State of New York, County of New York, by Scotia Nominees, a shareholder
of MIFL. On March 27, 2000, plaintiff filed an amended complaint. Named as
defendants in the amended complaint are MIFL, three directors of MIFL, Manhattan
Capital Management, Inc., Bear, Stearns Securities Corp. ("BSSC"), Deloitte &
Touche, and Fund Administration Services (Bermuda) Ltd. ("FASB"). The complaint
alleges, among other things, that BSSC committed breach of duty and aided and
abetted a breach of fiduciary duty by failing to alert the shareholders of MIFL
about false and misleading statements made by certain of the other defendants
related to the financial condition of MIFL. Compensatory damages in excess of $5
million are sought from Bear Stearns.
(ii) Cromer Finance Ltd. v. Michael Berger, et al. On March 24, 2000, a
purported class action was commenced in the United States District Court for the
Southern District of New York by Cromer Finance, Ltd., a shareholder of MIFL, on
behalf of a purported class consisting of all persons who purchased securities
of MIFL and suffered damages between September 1, 1996 through January 18, 2000.
On September 8, 2000, plaintiff filed an amended complaint. Named as defendants
are a director of MIFL, Deloitte & Touche, FASB, Ernst & Young LLP, and BSSC.
The complaint alleges, among other things, that BSSC aided and abetted common
law fraud in connection with providing clearing services for MIFL. Compensatory
and punitive damages in unspecified amounts are sought. On October 20, 2000, the
Bear Stearns defendants moved to dismiss the amended complaint. The court has
not yet issued a ruling on this motion.
(iii) Argos, et al. v. Michael Berger, et al. On March 31, 2000, an action
was commenced in the United States District Court for the Southern District of
New York by 17 shareholders of MIFL. Named as defendants are a director of MIFL,
Financial Asset Management, Inc., FASB, Ernst & Young International, Deloitte &
Touche, Bear Stearns and BSSC. The complaint alleges, among other things, that
the Bear Stearns defendants aided and abetted a breach of fiduciary duty in
connection with BSSC providing clearing services and financing for MIFL.
Compensatory damages in excess of $53 million, and $1 billion in punitive
damages from each defendant, are sought.
On June 21, 2000, an amended complaint was filed adding nine shareholders
of Manhattan Investment Fund Limited as plaintiffs and asserting the same claims
against the same defendants as were named in the original complaint.
Compensatory damages in excess of $93.5 million, and $1 billion in punitive
18
damages from each defendant, are sought. On October 20, 2000, the Bear Stearns
defendants moved to dismiss the amended complaint. The court has not yet issued
a ruling on this motion.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in these litigations, and believes that it has substantial defenses to these
claims.
Sterling Foster & Co., Inc.
The following matters arise out of Bear Stearns' role as clearing
broker for Sterling Foster & Co., Inc. ("Sterling Foster").
(i) Rogers v. Sterling Foster & Co., Inc. On February 16, 1999, Bear
Stearns, BSSC and an officer of BSSC were added as defendants in a purported
class action pending in the United States District Court for the Eastern
District of New York. The action is brought on behalf of a purported class
consisting of all persons who purchased or otherwise acquired certain securities
that were underwritten by Sterling Foster & Co., Inc. ("Sterling Foster"). Named
as defendants, in addition to the Bear Stearns defendants set forth above, are
Sterling Foster, seven individuals alleged to have had an employment
relationship with, or exercised control over, Sterling Foster, six companies
that issued securities underwritten by Sterling Foster, eight individuals who
were directors, officers and/or employees of these issuers, and Bernstein &
Wasserman LLP and two of its partners. The second amended complaint alleges,
among other things, that the Bear Stearns defendants violated Section 10(b) of
the Exchange Act and Rule 10b-5 promulgated thereunder and Section 349 of the
New York General Business Law and committed common law fraud in connection with
providing clearing services to Sterling Foster. Compensatory damages in an
unspecified amount are sought.
(ii) Levitt, et al. v. Bear Stearns, et al. On February 16, 1999, a
purported class action was commenced in the United States District Court for the
Southern District of New York on behalf of all persons who purchased ML Direct,
Inc. common stock or warrants through Sterling Foster between September 4, 1996
and December 31, 1996. Named as defendants are Bear Stearns and BSSC. The
complaint alleges, among other things, that the defendants violated Sections
10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder and
committed common law fraud in connection with providing clearing services to
Sterling Foster with respect to certain transactions by customers of Sterling
Foster in ML Direct common stock and warrants. Compensatory damages of $50
million and punitive damages of approximately $100 million are sought.
On March 15, 1999, this action was transferred by the Judicial Panel on
Multi-District Litigation to the United States District Court for the Eastern
District of New York.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in these litigations, and believes that it has substantial defenses to these
claims.
In re Stewart Enterprises, Inc. Securities Litigation. Beginning on August
25, 1999, a series of purported class actions were commenced in the United
States District Court for the Eastern District of Louisiana, later consolidated
under the above caption. On December 13, 1999, a consolidated amended class
action complaint was filed. Named as defendants are Stewart Enterprises, Inc.
("Stewart"), three officers of Stewart, Bear Stearns, Merrill Lynch & Co. and
Johnson Rice & Company L.L.C. The complaint alleges, among other things, that
the defendants violated Sections 11 and 12(a)(2) of the Securities Act in
connection with certain allegedly false and misleading statements regarding
Stewart's business prospects contained in a prospectus for a public offering of
Stewart common stock. Plaintiffs purport to represent a class of all persons who
purchased Stewart stock pursuant to the offering. Plaintiffs seek compensatory
damages in an unspecified amount.
On December 6, 2000, the court granted defendants' motions to dismiss this
action. Plaintiffs have filed a notice of appeal.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in this litigation, and believes that it has substantial defenses to these
claims.
19
In re Twinlab Securities Litigation. On March 16, 1999, two previously
filed purported class actions commenced in the United States District Court for
the Eastern District of New York were consolidated into a single action. On May
14, 1999, an amended consolidated complaint was filed. As amended, the action
purports to be brought on behalf of all persons who purchased Twinlab Corp.
("Twinlab") common stock between April 8, 1998 and February 24, 1999. Named as
defendants are four directors of Twinlab, an officer of Twinlab, two
stockholders of Twinlab, Donaldson, Lufkin & Jenrette, Inc., and Bear Stearns.
The complaint alleges, among other things, that the defendants violated Sections
11 and 12(a)(2) of the Securities Act in connection with disclosure contained in
offering documents with respect to a public offering of Twinlab common stock.
Compensatory damages in an unspecified amount are sought.
On August 10, 2000, Bear Stearns filed an answer to the complaint in which
it denied liability and asserted affirmative defenses.
* * *
The Company or a subsidiary of the Company also has been named as a
defendant in numerous other civil actions arising out of its activities as a
broker and dealer in securities, as an underwriter, as an investment banker, as
an employer or arising out of alleged employee misconduct. Several of these
actions allege damages in large or indeterminate amounts and some of these
actions are class actions. With respect to claims involving the Partnership,
Bear Stearns has assumed from the Partnership, and has agreed to indemnify the
Partnership against, the Partnership's liability, if any, arising out of all
legal proceedings to which the Partnership is or was named as a party. Although
the ultimate outcome of these matters cannot be ascertained at this time, it is
the opinion of management, after consultation with counsel, that the resolution
of such matters will not have a material adverse effect on the financial
condition of the Company, taken as a whole; such resolution, may, however, have
a material adverse effect on the operating results in any future period,
depending upon the level of such results in such period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
20
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information as of January 22, 2001
concerning executive officers of the Company as of November 30, 2000.
AGE AS OF
JANUARY 22, PRINCIPAL OCCUPATION AND
NAME 2001 DIRECTORSHIPS HELD
------------------------- ----------- --------------------------------------
Alan C. Greenberg........ 73 Chairman of the Board of the Company
and Bear Stearns and Chairman of the
Executive Committee of the Company
(the "Executive Committee")
James E. Cayne........... 66 President and Chief Executive Officer
of the Company and Bear Stearns,
member of the Executive Committee
Mark E. Lehman........... 49 Executive Vice President and General
Counsel of the Company and Bear
Stearns and member of the Executive
Committee
Marshall J Levinson...... 58 Controller of the Company
Michael Minikes.......... 57 Treasurer of the Company and Bear
Stearns, member of the Executive
Committee
Samuel L. Molinaro Jr.... 43 Senior Vice President - Finance and
Chief Financial Officer of the
Company and Bear Stearns, member of
the Executive Committee
Each of the executive officers of the Company has been a Senior Managing
Director of Bear Stearns for more than the past five years.
Mr. Greenberg has been Chairman of the Board of the Company for more than
the past five years. Mr. Greenberg was Chief Executive Officer of the Company
and Bear Stearns from the Company's inception until July 1993.
Mr. Cayne has been Chief Executive Officer and President of the Company
and Bear Stearns for more than the past five years.
Mr. Lehman became an Executive Vice President of the Company in September
1995. Prior thereto, Mr. Lehman was Senior Vice President - General Counsel of
Bear Stearns for more than five years. Mr. Lehman is General Counsel of the
Company and Bear Stearns.
Mr. Levinson has been Controller of the Company since October 1998. Prior
thereto, Mr. Levinson was Chief Financial Officer and Chief Administrative
Officer of Bear, Stearns International Limited in London. Prior to September
1996, Mr. Levinson was in charge of the Company's internal audit function.
Mr. Minikes has been Treasurer of the Company and Bear Stearns for more
than the past five years.
Mr. Molinaro has been Chief Financial Officer of the Company since October
1996. Prior thereto, Mr. Molinaro was the Senior Vice President-Finance of the
Company and Bear Stearns for more than the past five years.
21
Officers serve at the discretion of the Board of Directors.
22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information required to be furnished pursuant to this item is set
forth under the caption "Price Range of Common Stock and Dividends" in the
Annual Report, which is incorporated herein by reference to Exhibit No. 13 of
this report.
ITEM 6. SELECTED FINANCIAL DATA.
The information required to be furnished pursuant to this item is set
forth under the caption "Selected Financial Data" in the Annual Report, which is
incorporated herein by reference to Exhibit No. 13 of this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required to be furnished pursuant to this item is set
forth under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Annual Report, which is incorporated
herein by reference to Exhibit No. 13 of this report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required to be furnished pursuant to this item is set
forth under the caption "Risk Management" in the Annual Report, which is
incorporated herein by reference to Exhibit No. 13 of this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required to be furnished pursuant to this item is
contained in the Consolidated Financial Statements and the Notes to Consolidated
Financial Statements in the Annual Report. Such information and the Independent
Auditors' Report in the Annual Report are incorporated herein by reference to
Exhibit No. 13 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required to be furnished pursuant to this item with
respect to Directors of the Company will be set forth under the caption
"Election of Directors" in the registrant's proxy statement (the "Proxy
Statement") to be furnished to stockholders in connection with the solicitation
of proxies by the Company's Board of Directors for use at the 2001 Annual
Meeting of Stockholders to be held on March 29, 2001, and is incorporated herein
by reference, and the information with respect to Executive Officers is set
forth, pursuant to General Instruction G of Form 10-K, under Part I of this
Report.
The information required to be furnished pursuant to this item with
respect to compliance with Section 16(a) of the Exchange Act will be set forth
under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in
the Proxy Statement and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required to be furnished pursuant to this item will be set
forth under the caption "Executive Compensation" in the Proxy Statement, and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required to be furnished pursuant to this item will be set
forth under the captions "Voting Securities" and "Security Ownership of
Management" of the Proxy Statement, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required to be furnished pursuant to this item will be set
forth under the caption "Certain Relationships and Related Party Transactions"
in the Proxy Statement, and is incorporated herein by reference.
24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) LIST OF FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
EXHIBITS:
FINANCIAL STATEMENTS:
The financial statements required to be filed hereunder are listed on page
F-1 hereof.
FINANCIAL STATEMENT SCHEDULES:
The financial statement schedules required to be filed hereunder are
listed on page F-1 hereof.
EXHIBITS:
(3)(a)(1) Restated Certificate of Incorporation of the registrant
(incorporated by reference to Exhibit No. (4)(a)(1) to the
registrant's registration statement on Form S-3 (File No.
333-57083)).
(3)(a)(2) Certificate of Stock Designation to the Restated Certificate of
Incorporation of the registrant, filed October 29, 1985
(incorporated by reference to Exhibit No. (4)(a)(3) to the
registrant's registration statement on Form S-8 (File No.
33-49979)).
(3)(a)(3) Certificate of Stock Designation to the Restated Certificate of
Incorporation of the registrant, filed February 19, 1987
(incorporated by reference to Exhibit No. (4)(a)(6) to the
registrant's registration statement on Form S-8 (File No.
33-49979)).
(3)(a)(4) Certificate of Stock Designation to the Restated Certificate of
Incorporation of the registrant, filed March 23, 1993 (incorporated
by reference to Exhibit No. (4)(a)(12) to the registrant's
registration statement on Form S-8 (File No. 33-49979)).
(3)(a)(5) Certificate of Stock Designation to the Restated Certificate of
Incorporation of the registrant, filed July 22, 1993 (incorporated
by reference to Exhibit No. (4)(a)(13) to the registrant's
registration statement on Form S-8 (File No. 33-49979)).
(3)(a)(6) Certificate of Stock Designations to the Restated Certificate of
Incorporation of the registrant (incorporated by reference to
Exhibit No. 1.4 to the registrant's registration statement on Form
8-A filed on January 14, 1998).
(3)(a)(7) Certificate of Stock Designations to the Restated Certificate of
Incorporation of the registrant (incorporated by reference to
Exhibit No. 1.4 to the registrant's registration statement on Form
8-A filed on April 20, 1998).
(3)(a)(8) Certificate of Stock Designations to the Restated Certificate of
Incorporation of the registrant (incorporated by reference to
Exhibit No. 1.4 to the registrant's registration statement on Form
8-A filed on June 18, 1998).
(3)(b) Amended and Restated By-laws of the registrant as amended through
July 21, 1999 (incorporated by reference to Exhibit No. 4(b) to
post-effective amendment no. 1 to the registrant's registration
statement on Form S-8 (File No. 333-81901)).
(4)(a) Indenture, dated as of April 13, 1989, between the registrant and
Citibank, N.A., as trustee (incorporated by reference to the
identically numbered exhibit to the registrant's registration
statement on Form S-3 (File No. 33-27713)).
25
(4)(b) Indenture, dated as of May 31, 1991, between the registrant and The
Chase Manhattan Bank (formerly known as Chemical Bank and successor
by merger to Manufacturers Hanover Trust Company), as trustee
(incorporated by reference to Exhibit No. (4)(a) to registrant's
registration statement on Form S-3 (File No. 33-40933)).
(4)(c) Supplemental Indenture, dated as of January 29, 1998, between the
registrant and The Chase Manhattan Bank, as trustee (incorporated by
reference to Exhibit 4(a)(2) to the registrant's Current Report on
Form 8-K filed with the Commission on February 2, 1998).
(4)(d) Except as set forth in (4)(a), (4)(b), and 4(c) above, the
instruments defining the rights of holders of long-term debt
securities of the registrant and its subsidiaries are omitted
pursuant to Section (b)(4)(iii) of Item 601 of Regulation S-K.
Registrant hereby agrees to furnish copies of these instruments to
the SEC upon request.
(4)(e) Form of Deposit Agreement (incorporated by reference to Exhibit
(4)(d) to the registrant's registration statement on Form S-3 (File
No. 33-59140)).
(10)(a)(1) Capital Accumulation Plan for Senior Managing Directors, as amended
and restated as of October 28, 1999 (incorporated by reference to
Exhibit (10)(a)(4) to the registrant's Quarterly Report on Form 10-Q
for its fiscal quarter ended December 31, 1999).*
(10)(a)(2) Performance Compensation Plan, as amended and restated as of October
28, 1999 (incorporated by reference to Exhibit 10(a)(5) to the
registrant's Quarterly Report on Form 10-Q for its fiscal quarter
ended December 31, 1999).*
(10)(a)(3) Stock Award Plan, as amended and restated as of January 11, 2000
(incorporated by reference to Exhibit 10(a)(6) to the registrant's
Quarterly Report on Form 10-Q for its fiscal quarter ended December
31, 1999).*
(10)(a)(4) The Bear Stearns Companies Inc. AE Investment and Deferred
Compensation Plan, effective January 1, 1989 (the "AE Investment and
Deferred Compensation Plan") (incorporated by reference to Exhibit
10(a)(14) to the registrant's Annual Report on Form 10-K for its
fiscal year ended June 30, 1996).*
(10)(a)(5) Amendment to the AE Investment and Deferred Compensation Plan,
adopted April 29, 1996 and effective as of January 1, 1995
(incorporated by reference to Exhibit 10(a)(15) to the registrant's
Annual Report on Form 10-K for its fiscal year ended June 30,
1996).*
(10)(b)(1) Lease, dated as of November 1, 1991, between Forest City Jay Street
Associates and The Bear Stearns Companies Inc. with respect to the
premises located at One Metrotech Center, Brooklyn, New York
(incorporated by reference to Exhibit (10)(b)(1) to the registrant's
Annual Report on Form 10-K for its fiscal year ended June 30, 1992).
(10)(b)(2) Lease, dated as of March 6, 1987, among Olympia & York 245 Lease
Company, 245 Park Avenue Company and The Bear Stearns Companies Inc.
(incorporated by reference to Exhibit (10)(c)(2) to the registrant's
registration statement on Form S-1 (File No. 33-15948)).
(10)(b)(3) Lease, dated as of August 26, 1994, between Tenth City Associates
and The Bear Stearns Companies Inc. (incorporated by reference to
Exhibit 10(b)(3) to the registrant's Annual Report on Form 10-K for
its fiscal year ended June 30, 1994).
(10)(b)(4) Lease, dated as of November 20, 2000 between WFP 245 Park Co. L.P.
and The Bear Stearns Companies Inc.
(11) Statement re: computation of per share earnings.
(12) Statement re: computation of ratio of earnings to fixed charges and
computation of ratio of earnings to fixed charges and preferred
stock dividends.
(13) 2000 Annual Report to Stockholders (only those portions expressly
incorporated by reference herein shall be deemed filed with the
Commission).
26
(21) Subsidiaries of the registrant.
(23) Consent of Deloitte & Touche LLP.
* Executive Compensation Plans and Arrangements
(B) REPORTS ON FORM 8-K.
The Company filed the following Current Reports on Form 8-K during
the last quarter of the period covered by this report:
(i) A Current Report on Form 8-K dated September 14, 2000 and
filed September 15, 2000, pertaining to the Company's results
of operations for the quarter ended August 25, 2000.
(ii) A Current Report on Form 8-K dated September 20, 2000 and
filed September 27, 2000, pertaining to an opinion of
Cadwalader, Wickersham & Taft as to the legality of the
Floating Rate Global Notes ("Global Notes") due 2007 issued by
the Company, an opinion of Cadwalader, Wickersham & Taft as to
the certain federal income tax consequences in the Prospectus
Supplement, dated September 20, 2000, to the prospectus dated
August 8, 2000, included in the Registration Statement on Form
S-3 filed by the Company, and a consent in connection with the
offering of the Global Notes.
(iii) A Current Report on Form 8-K dated and filed September 28,
2000, to update certain information for the five month
transition period July 1, 1999 through November 26, 1999 (the
"Transition Period") as a result of the Company's change of
its fiscal year-end to November 30 from June 30, effective
with the year beginning November 27, 1999.
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 28th day of
February 2001.
THE BEAR STEARNS COMPANIES INC.
(Registrant)
By: /s/ Samuel L. Molinaro Jr.
....................................
Samuel L. Molinaro Jr.
Senior Vice President-Finance and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 28th day of February 2001.
NAME TITLE
---- -----
/s/ Alan C. Greenberg
....................................
Alan C. Greenberg Chairman of the Board; Director
/s/ James E. Cayne President and Chief Executive
.................................... Officer (Principal Executive
James E. Cayne Officer); Director
/s/ Carl D. Glickman
....................................
Carl D. Glickman Director
/s/ Donald J. Harrington
....................................
Donald J. Harrington Director
/s/ William L. Mack
....................................
William L. Mack Director
/s/ Frank T. Nickell
....................................
Frank T. Nickell Director
....................................
Frederic V. Salerno Director
28
/s/ Alan D. Schwartz
....................................
Alan D. Schwartz Director
/s/ Warren J. Spector
....................................
Warren J. Spector Director
/s/ Vincent Tese
....................................
Vincent Tese Director
/s/ Fred Wilpon
....................................
Fred Wilpon Director
/s/ Samuel L. Molinaro Jr. Senior Vice President-Finance and
.................................... Chief Financial Officer (Principal
Samuel L. Molinaro Jr. Financial Officer)
/s/ Marshall J Levinson
.................................... Controller (Principal Accounting
Marshall J Levinson Officer)
29
THE BEAR STEARNS COMPANIES INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
ITEMS 14 (A) (1) AND 14 (A) (2)
PAGE REFERENCE
ANNUAL
FINANCIAL STATEMENTS FORM 10-K REPORT*
-------------------- --------- -------
Independent Auditor's Report 88
THE BEAR STEARNS COMPANIES INC.
(i) Consolidated Statements of Income--
fiscal year ended November 30, 2000, five months
ended November 26, 1999 and the fiscal years ended
June 30, 1999 and 1998 63
(ii) Consolidated Statements of Financial Condition at
November 30, 2000 and November 26, 1999 64
(iii) Consolidated Statements of Cash Flows--
fiscal year ended November 30, 2000, five months
ended November 26, 1999 and the fiscal years ended
June 30, 1999 and 1998 65
(iv) Consolidated Statements of Changes in
Stockholders' Equity--
fiscal year ended November 30, 2000, five months
ended November 26, 1999 and the fiscal years ended
June 30, 1999 and 1998 66-67
(v) Notes to Consolidated Financial Statements 68-87
FINANCIAL STATEMENT SCHEDULES
Independent Auditors' Report F-2
I Condensed financial information of registrant F-3 - F-6
* Incorporated by reference from the indicated pages of the 2000 Annual
Report to Stockholders.
All other schedules are omitted because they are not applicable or the
requested information is included in the consolidated financial statements
or notes thereto.
F-1
Deloitte & Touche
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
The Bear Stearns Companies Inc.:
We have audited the consolidated financial statements of The Bear Stearns
Companies Inc. and Subsidiaries as of November 30, 2000, November 26, 1999, and
the related consolidated statements of income, cash flows and changes in
stockholders' equity for the fiscal year ended November 30, 2000, the five
months ended November 26, 1999, and the fiscal years ended June 30, 1999 and
1998, and have issued our report thereon dated January 16, 2001; such
consolidated financial statements and report are included in the Annual Report
to Stockholders and are incorporated herein by reference. Our audit also
included the financial statement schedules of The Bear Stearns Companies Inc.
and Subsidiaries listed in Item 14. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedules based on our audits. In our
opinion, such financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
/s/ Deloitte & Touche LLP
-------------------------
DELOITTE & TOUCHE LLP
New York, New York
January 16, 2001
F-2
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
THE BEAR STEARNS COMPANIES INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS)
FISCAL YEAR FIVE MONTHS FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED
NOVEMBER 30, NOVEMBER 26, JUNE 30, JUNE 30,
2000 1999 1999 1998
----------- ----------- ----------- -----------
REVENUES
Interest............................................. $ 1,863,498 $ 522,973 $ 1,264,041 $ 1,300,087
Other................................................ 155,932 67,300 178,904 103,344
----------- ----------- ----------- -----------
2,019,430 590,273 1,442,945 1,403,431
----------- ----------- ----------- -----------
EXPENSES
Interest............................................. 2,483,116 711,874 1,500,137 1,471,042
Other................................................ 105,860 43,986 91,620 98,872
----------- ----------- ----------- -----------
2,588,976 755,860 1,591,757 1,569,914
----------- ----------- ----------- -----------
Loss before benefit from income taxes and
equity in earnings of subsidiaries................ (569,546) (165,587) (148,812) (166,483)
Benefit from income taxes............................ 118,740 31,005 34,823 62,467
----------- ----------- ----------- -----------
Loss before equity in earnings of subsidiaries....... (450,806) (134,582) (113,989) (104,016)
Equity in earnings of subsidiaries, net of tax....... 1,223,989 420,396 787,037 764,445
----------- ----------- ----------- -----------
Net income .......................................... $ 773,183 $ 285,814 $ 673,048 $ 660,429
=========== =========== =========== ===========
See Notes to Condensed Financial Information.
F-3
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
THE BEAR STEARNS COMPANIES INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
NOVEMBER 30, NOVEMBER 26,
2000 1999
------------ ------------
ASSETS
Cash .......................................................................... $ 1,004,787 $ 202,154
Receivables from subsidiaries ................................................. 31,633,182 28,108,951
Investment in subsidiaries, at equity ......................................... 5,807,576 5,116,151
Property, equipment and leasehold improvements, net of accumulated
depreciation and amortization of $772,044 and $636,919 in 2000 and 1999,
respectively ............................................................... 416,319 383,921
Other assets .................................................................. 2,017,703 979,118
------------ ------------
Total Assets .................................................................. 40,879,567 $ 34,790,295
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings ......................................................... $ 13,575,506 $ 12,179,280
Payables to subsidiaries ...................................................... 867,689 571,227
Other liabilities ............................................................. 793,925 826,355
------------ ------------
15,237,120 13,576,862
------------ ------------
Long-term borrowings .......................................................... 19,661,368 15,738,508
Long-term borrowings from subsidiaries ........................................ 326,791 532,978
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value; 10,000,000 shares authorized ................ 800,000 800,000
Common stock, $1.00 par value; 200,000,000 shares authorized; 184,805,848
shares issued as of November 30, 2000 and November 26, 1999 ............. 184,806 184,806
Paid-in capital ............................................................... 2,583,638 2,509,801
Retained earnings ............................................................. 2,600,149 1,916,516
Employee stock compensation plans ............................................. 1,916,708 1,179,101
Unearned compensation ......................................................... (218,791)
Treasury stock, at cost -
Adjustable Rate Cumulative Preferred Stock, Series A: 2,520,750 shares
as of November 30, 2000 and November 26, 1999 ........................... (103,421) (103,421)
Common stock: 75,823,544 and 66,367,276 shares as of November 30, 2000
and November 26, 1999, respectively ..................................... (2,108,801) (1,544,856)
------------ ------------
Total Stockholders' Equity .................................................... 5,654,288 4,941,947
------------ ------------
Total Liabilities and Stockholders' Equity .................................... $ 40,879,567 $ 34,790,295
============ ============
See Notes to Condensed Financial Information.
F-4
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
THE BEAR STEARNS COMPANIES INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FISCAL YEAR FIVE MONTHS FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED
NOVEMBER 30, NOVEMBER 26, JUNE 30, JUNE 30,
2000 1999 1999 1998
----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................... $ 773,183 $ 285,814 $ 673,048 $ 660,429
Adjustments to reconcile net income to cash (used in) provided
by operating activities:
Equity in earnings of subsidiaries, net of dividends
received ........................................... (1,133,686) (365,319) (656,715) (448,805)
Depreciation and amortization ........................... 137,092 56,285 136,896 109,936
Other ................................................... 157,294 3,575 (201)
(Increases) decreases in assets:
Receivables from subsidiaries ........................... (3,524,231) 53,052 (490,532) (6,306,236)
Investments in subsidiaries, net ........................ 442,261 398,090 (140,808) (266,080)
Other assets ............................................ (993,595) 75,166 (145,849) 44,578
Increases (decreases) in liabilities:
Payables to subsidiaries ................................ 296,462 324,623 138,247 53,466
Other liabilities ....................................... (137,748) (58,897) 122,121 (154,168)
----------- ----------- ----------- -----------
Cash (used in) provided by operating activities .............. (3,982,968) 772,389 (363,592) (6,307,081)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (payments for) short-term borrowings ....... 1,396,226 (1,330,822) (932,133) 946,029
Net proceeds from issuance of long-term borrowings ........... 8,183,991 1,776,547 4,179,637 7,045,745
(Decrease) increase in long-term borrowings from
subsidiaries .............................................. (206,187) (3,041) 140,055 6,122
Issuance of preferred stock .................................. 650,000
Redemption of preferred stock ................................ (287,500)
Employee stock compensation plans ............................ 679,500 70,406 483,260 259,816
Tax Benefit of common stock distributions .................... 72,973 2,568 92,893 86,968
Proceeds from put option premium ............................. 1,065
Note repayment from ESOP Trust ............................... 7,114 6,587
Payments for:
Retirement of long-term borrowings ........................ (4,304,964) (668,656) (2,846,752) (1,881,841)
Treasury stock purchases .................................. (726,836) (311,289) (482,818) (258,036)
Cash dividends paid .......................................... (99,329) (54,548) (107,666) (97,990)
----------- ----------- ----------- -----------
Cash provided by (used in) financing activities .............. 4,996,439 (518,835) 533,590 6,475,900
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, equipment and leasehold
improvement ............................................... (169,490) (66,792) (127,561) (169,527)
Purchases of investment securities and other assets .......... (51,202) (4,031) (26,290) (4,769)
Proceeds from sale of investment securities and other
assets .................................................... 9,854 146 3,126 5,402
----------- ----------- ----------- -----------
Cash used in investing activities ............................ (210,838) (70,677) (150,725) (168,894)
----------- ----------- ----------- -----------
Net increase (decrease) in cash .............................. 802,633 182,877 19,273 (75)
Cash, beginning of year ...................................... 202,154 19,277 4 79
----------- ----------- ----------- -----------
Cash, end of year ............................................ $ 1,004,787 $ 202,154 $ 19,277 $ 4
=========== =========== =========== ===========
See Notes to Condensed Financial Information.
F-5
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
THE BEAR STEARNS COMPANIES INC.
(PARENT COMPANY ONLY)
NOTES TO CONDENSED FINANCIAL INFORMATION
1. GENERAL
The condensed financial information of the Company (Parent Company Only)
should be read in conjunction with the consolidated financial statements
of The Bear Stearns Companies Inc. and subsidiaries and the notes thereto
incorporated by reference in this Form 10-K.
On January 18, 2000, the Company's Board of Directors elected to change
its fiscal year-end to November 30 from June 30, effective with the year
beginning November 27, 1999. The five-month period ended November 26, 1999
is the Company's "Transition Period."
2. DIVIDENDS RECEIVED FROM SUBSIDIARIES
The Company received from its consolidated subsidiaries cash dividends of
$90.3 million, $55.1 million, $132.3 million and $315.6 million, for the
fiscal year ended November 30, 2000, five months ended November 26, 1999
and the fiscal years ended June 30, 1999 and 1998, respectively.
3. STATEMENT OF CASH FLOWS
Income taxes paid (consolidated) totaled $985.0 million, $57.8 million,
$223.2 million and $459.7 million in the fiscal year ended November 30,
2000, five-months ended November 26, 1999 and the fiscal years ended June
30, 1999 and 1998, respectively. Cash payments for interest approximated
interest expense for each of the periods presented.
F-6
EXHIBIT INDEX
EXHIBITS:
---------
(3)(a)(1) Restated Certificate of Incorporation of the registrant
(incorporated by reference to Exhibit No. (4)(a)(1) to the
registrant's registration statement on Form S-3 (File No.
333-57083)).
(3)(a)(2) Certificate of Stock Designation to the Restated Certificate of
Incorporation of the registrant, filed October 29, 1985
(incorporated by reference to Exhibit No. (4)(a)(3) to the
registrant's registration statement on Form S-8 (File No.
33-49979)).
(3)(a)(3) Certificate of Stock Designation to the Restated Certificate of
Incorporation of the registrant, filed February 19, 1987
(incorporated by reference to Exhibit No. (4)(a)(6) to the
registrant's registration statement on Form S-8 (File No.
33-49979)).
(3)(a)(4) Certificate of Stock Designation to the Restated Certificate of
Incorporation of the registrant, filed March 23, 1993 (incorporated
by reference to Exhibit No. (4)(a)(12) to the registrant's
registration statement on Form S-8 (File No. 33-49979)).
(3)(a)(5) Certificate of Stock Designation to the Restated Certificate of
Incorporation of the registrant, filed July 22, 1993 (incorporated
by reference to Exhibit No. (4)(a)(13) to the registrant's
registration statement on Form S-8 (File No. 33-49979)).
(3)(a)(6) Certificate of Stock Designations to the Restated Certificate of
Incorporation of the registrant (incorporated by reference to
Exhibit No. 1.4 to the registrant's registration statement on Form
8-A filed on January 14, 1998).
(3)(a)(7) Certificate of Stock Designations to the Restated Certificate of
Incorporation of the registrant (incorporated by reference to
Exhibit No. 1.4 to the registrant's registration statement on Form
8-A filed on April 20, 1998).
(3)(a)(8) Certificate of Stock Designations to the Restated Certificate of
Incorporation of the registrant (incorporated by reference to
Exhibit No. 1.4 to the registrant's registration statement on Form
8-A filed on June 18, 1998).
(3)(b) Amended and Restated By-laws of the registrant as amended through
July 21, 1999 (incorporated by reference to Exhibit No. 4(b) to
post-effective amendment no. 1 to the registrant's registration
statement on Form S-8 (File No. 333-81901)).
(4)(a) Indenture, dated as of April 13, 1989, between the registrant and
Citibank, N.A., as trustee (incorporated by reference to the
identically numbered exhibit to the registrant's registration
statement on Form S-3 (File No. 33-27713)).
(4)(b) Indenture, dated as of May 31, 1991, between the registrant and The
Chase Manhattan Bank (formerly known as Chemical Bank and successor
by merger to Manufacturers Hanover Trust Company), as trustee
(incorporated by reference to Exhibit No. (4)(a) to registrant's
registration statement on Form S-3 (File No. 33-40933)).
(4)(c) Supplemental Indenture, dated as of January 29, 1998, between the
registrant and The Chase Manhattan Bank, as trustee (incorporated by
reference to Exhibit 4(a)(2) to the registrant's Current Report on
Form 8-K filed with the Commission on February 2, 1998).
(4)(d) Except as set forth in (4)(a), (4)(b), and 4(c) above, the
instruments defining the rights of holders of long-term debt
securities of the registrant and its subsidiaries are omitted
pursuant to Section (b)(4)(iii) of Item 601 of Regulation S-K.
Registrant hereby agrees to furnish copies of these instruments to
the SEC upon request.
(4)(e) Form of Deposit Agreement (incorporated by reference to Exhibit
(4)(d) to the registrant's registration statement on Form S-3 (File
No. 33-59140)).
(10)(a)(1) Capital Accumulation Plan for Senior Managing Directors, as amended
and restated as of October 28, 1999 (incorporated by reference to
Exhibit (10)(a)(4) to the registrant's Quarterly Report on Form 10-Q
for its fiscal quarter ended December 31, 1999).*
(10)(a)(2) Performance Compensation Plan, as amended and restated as of October
28, 1999 (incorporated by reference to Exhibit 10(a)(5) to the
registrant's Quarterly Report on Form 10-Q for its fiscal quarter
ended December 31, 1999).*
(10)(a)(3) Stock Award Plan, as amended and restated as of January 11, 2000
(incorporated by reference to Exhibit 10(a)(6) to the registrant's
Quarterly Report on Form 10-Q for its fiscal quarter ended December
31, 1999).*
(10)(a)(4) The Bear Stearns Companies Inc. AE Investment and Deferred
Compensation Plan, effective January 1, 1989 (the "AE Investment and
Deferred Compensation Plan") (incorporated by reference to Exhibit
10(a)(14) to the registrant's Annual Report on Form 10-K for its
fiscal year ended June 30, 1996).*
(10)(a)(5) Amendment to the AE Investment and Deferred Compensation Plan,
adopted April 29, 1996 and effective as of January 1, 1995
(incorporated by reference to Exhibit 10(a)(15) to the registrant's
Annual Report on Form 10-K for its fiscal year ended June 30,
1996).*
(10)(b)(1) Lease, dated as of November 1, 1991, between Forest City Jay Street
Associates and The Bear Stearns Companies Inc. with respect to the
premises located at One Metrotech Center, Brooklyn, New York
(incorporated by reference to Exhibit (10)(b)(1) to the registrant's
Annual Report on Form 10-K for its fiscal year ended June 30, 1992).
(10)(b)(2) Lease, dated as of March 6, 1987, among Olympia & York 245 Lease
Company, 245 Park Avenue Company and The Bear Stearns Companies Inc.
(incorporated by reference to Exhibit (10)(c)(2) to the registrant's
registration statement on Form S-1 (File No. 33-15948)).
(10)(b)(3) Lease, dated as of August 26, 1994, between Tenth City Associates
and The Bear Stearns Companies Inc. (incorporated by reference to
Exhibit 10(b)(3) to the registrant's Annual Report on Form 10-K for
its fiscal year ended June 30, 1994).
(10)(b)(4) Lease, dated as of November 20, 2000 between WFP 245 Park Co. L.P.
and The Bear Stearns Companies Inc.
(11) Statement re: computation of per share earnings.
(12) Statement re: computation of ratio of earnings to fixed charges and
computation of ratio of earnings to fixed charges and preferred
stock dividends.
(13) 2000 Annual Report to Stockholders (only those portions expressly
incorporated by reference herein shall be deemed filed with the
Commission).
(21) Subsidiaries of the registrant.
(23) Consent of Deloitte & Touche LLP.
* Executive Compensation Plans and Arrangements