PRICING SUPPLEMENT NO. 44 Rule 424(b)(5)
DATED: December 13, 2004 File No. 333-109793
(To Prospectus dated November 17, 2003,
and Prospectus Supplement dated November 17, 2003)
$10,668,950,162
THE BEAR STEARNS COMPANIES INC.
Medium-Term Notes, Series B
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Principal Amount: $5,000,000 Floating Rate Notes [x] Book Entry Notes [x]
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Original Issue Date: 1/06/2005 Fixed Rate Notes [ ] Certificated Notes [ ]
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Maturity Date: 1/06/2020 CUSIP No.: 073928J20
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Option to Extend Maturity: No [x]
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Yes [ ] Final Maturity Date:
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Minimum Denominations: $100,000 increased in multiples of $10,000
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Optional Optional
Redeemable On Redemption Price(s) Repayment Date(s) Repayment Price(s)
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* * N/A N/A
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Applicable Only to Fixed Rate Notes:
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Interest Rate:
Interest Payment Dates:
Applicable Only to Floating Rate Notes:
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Interest Rate Basis: Maximum Interest Rate: N/A
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[ ] Commercial Paper Rate Minimum Interest Rate: 0.00%
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[ ] Federal Funds Effective Rate
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[ ] Federal Funds Open Rate Interest Reset Date(s): **
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[ ] Treasury Rate Interest Reset Period: Quarterly
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[ ] LIBOR Reuters Interest Payment Date(s): ***
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[ ] LIBOR Telerate Interest Payment Period: Quarterly
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[ ] Prime Rate
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[ ] CMT Rate
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[x] Other: See "Interest Rate" below
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Index Maturity: N/A Interest Determination Date(s): Fifth Business
Day prior to but not including the applicable
Interest Reset Date
Day Count Basis: 360-day year of twelve
30-day months
* Commencing April 6, 2005 and on each Interest Payment Date thereafter until
Maturity, the Notes may be called in whole at par at the option of the Company
on five New York Business Days' notice.
** Commencing April 6, 2005 and on each July 6th, October 6th, January 6th and
April 6th thereafter prior to Maturity. If any Interest Reset Date is not a
Business Day, then the Interest Reset Date will be postponed to the next
Business Day. If the next Business Day is in the next succeeding calendar month,
the Interest Reset Date will be the preceding Business Day (any such adjustment
being referred to as the "Modified Business Day Convention").
*** Commencing April 6, 2005 and on each July 6th, October 6th, January 6th and
April 6th thereafter, including the Maturity Date.
If any Interest Payment Date, Maturity Date or redemption date is not a Business
Day, the related payment of principal, premium, if any, or interest will be
postponed to the next Business Day and no additional interest shall accrue for
the period from and after that Interest Payment Date, Maturity Date or
redemption date, as the case may be, to the next Business Day. If the next
Business Day is in the next calendar month, principal, premium, if any, or
interest will be paid on the preceding Business Day.
Business Day: Any day that is both a London Banking Day and a
New York Business Day.
London Banking Day: A day other than a Saturday or Sunday on which
dealings in deposits in U.S. dollars are
transacted, or with respect to any future date
are expected to be transacted, in the London
interbank market.
New York Business Day: Any day that is not a Saturday or Sunday, and
that, in New York City, is not a legal holiday nor
a day on which banking institutions or trust
companies in New York City are authorized or
obligated by law to close.
Interest Rate: USD Callable CMS Spread Principal Protected Range
Accrual Note.
The Calculation Agent will determine the Interest
Rate for each Interest Payment Period in
accordance with the following:
For each Interest Payment Period from the Original
Issue Date through January 5, 2010, the Interest
Rate shall equal:
(7.00% X n/N)
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For each Interest Payment Period from January 6,
2010 through January 5, 2015, the Interest Rate
shall equal:
(9.00% X n/N)
For each Interest Payment Period from January 6,
2015 until the Maturity Date, the Interest Rate
shall equal:
(18.00% X n/N)
Where n equals the number of days in the
respective Interest Payment Period in which the
Accrual Provision is satisfied, and N equals the
actual number of days in the respective Interest
Payment Period. See "Accrual Provision" below.
Accrual Provision: Interest will accrue (at the rate per annum
under Interest Rate above for each Interest
Payment Period) on each day on which the
30-Year CMS Rate minus the 10-Year CMS Rate for
the relevant Accrual Determination Date is
equal to or greater than 0% (such calculation
referred to as the "Accrual Provision"). If
however, the difference of the 30-Year CMS Rate
minus the 10-Year CMS Rate for any Accrual
Determination Date is less than 0%, then no
interest will accrue for any day relating to
such Accrual Determination Date. No
determination as to satisfaction of the Accrual
Provision will be made with respect to the
Exclusion Period (as defined below). The
determination with respect to each day of an
Exclusion Period will be deemed to have been
made on the last New York Business Day prior to
such Exclusion Period. See "Risk Factors"
below.
Accrual Determination Date: A determination as to whether the Accrual
Provision has been satisfied will be made on
each Accrual Determination Date. Each New York
Business Day during an Interest Payment Period
will be an Accrual Determination Date, provided
that such New York Business Day is not within
the Exclusion Period. For each day during an
Interest Payment Period that is not a New York
Business Day and not within the Exclusion
Period, the Accrual Determination Date will be
the preceding New York Business Day. The
Exclusion Period means the period beginning on
the fifth
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New York Business Day prior to but not including
the last day of the current Interest Payment
Period.
30-Year CMS Rate: The rate in effect for each Interest Payment
Period will be the rate that appears on Reuters
page ISDA FIX1 under the heading "30YR" at
11:00 a.m., New York City time on the Interest
Determination Date for that Interest Payment
Period. If such rate does not appear on
Reuters page ISDA FIX1 on such date, the rate
for such date shall be determined as if the
parties had specified "USD-CMS-Reference Banks"
as the applicable rate.
10-Year CMS Rate: The rate in effect for each Interest Payment
Period will be the rate that appears on Reuters
page ISDA FIX1 under the heading "10YR" at
11:00 a.m., New York City time on the Interest
Determination Date for that Interest Payment
Period. If such rate does not appear on
Reuters page ISDA FIX1 on such date, the rate
for such date shall be determined as if the
parties had specified "USD-CMS-Reference Banks"
as the applicable rate.
USD-CMS-Reference Banks: The rate determined on the basis of the
mid-market semi-annual swap rate quotations
provided by the Reference Banks at
approximately 11:00 a.m., New York City time on
any Interest Determination Date; and for this
purpose, the semi-annual swap rate means the
mean of the bid and offered rates for the
semi-annual fixed leg, calculated on a 30/360
day count basis, of a fixed-for-floating U.S.
Dollar interest rate swap transaction with a
term equal to the Designated Maturity
commencing on that date and in a Representative
Amount with an acknowledged dealer of good
credit in the swap market, where the floating
leg, calculated on an actual/360 day count
basis, is equivalent to USD-LIBOR-BBA with a
designated maturity of three months. The rate
for that Interest Determination Date will be
the arithmetic mean of the quotations,
eliminating the highest quotation (or, in the
event of equality, one of the highest) and the
lowest quotation (or, in the event of equality,
one of the lowest).
Reference Banks: The five leading swap dealers in the New York
City interbank market selected by the
Calculation Agent for the purposes of providing
quotations as provided above.
Designated Maturity: Either 30 years or 10 years, as the case may be.
Representative Amount: The amount that is representative for a single
transaction in the relevant market at the
relevant time.
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Calculation Agent: Bear, Stearns & Co. Inc.
RISK FACTORS
The Notes are subject to special considerations. An investment in the
Notes entails risks that are not associated with an investment in conventional
floating-rate or fixed-rate debt securities. Prospective purchasers of the Notes
should understand the risks of investing in the Notes and should reach an
investment decision only after careful consideration, with their financial and
legal advisers, of the suitability of the Notes in light of their particular
financial circumstances, the following risk factors and the other information
set forth in this pricing supplement and the accompanying prospectus supplement
and prospectus. See "Risk Factors" generally in the Prospectus Supplement.
Interest Rate Risk. Investors should consider the risk that the 30-Year
CMS Rate minus the 10-Year CMS Rate, determined on a daily basis, may be less
than zero on one or more New York Business Days during the applicable Interest
Payment Period, in which case the Notes will not accrue interest for any day
relating to an Accrual Determination Date on which the Accrual Provision is not
satisfied during the Interest Payment Period. During the period from January 26,
2000 through September 10, 2000, the difference of the 30-Year CMS Rate minus
the 10-Year CMS Rate was, at times, less than zero.
The following table, showing the historical performance of the 30-Year CMS
Rate, 10-Year CMS Rate, 30-Year CMS Rate minus the 10-Year CMS Rate and the
actual number of days during the respective Interest Payment Periods
corresponding to each Interest Payment Date in which the Accrual Provision is
not satisfied (i.e., the difference between the 30-Year CMS Rate and the 10-Year
CMS Rate is less than 0%), should not be taken as an indication of the future
performance of this calculation during the term of the Notes. It is impossible
to predict whether the difference between the 30-Year CMS Rate and the 10-Year
CMS Rate will fall or rise. This calculation depends on and is influenced by a
number of complex and interrelated factors, including political, economic,
financial and other factors over which the Company has no control.
Actual # Days
10-Year 30-Year CMS
Interest Payment 30-Year CMS CMS Rate Difference minus 10-Year
Date Rate (%) (%) 30Y-10Y (%) CMS is < 0
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July 6, 1994 8.1200 7.6650 0.4550 *
October 6, 1994 8.5100 8.1650 0.3450 *
January 6, 1995 8.3700 8.2450 0.1250 *
April 6, 1995 7.7700 7.4650 0.3050 *
July 6, 1995 6.8900 6.3750 0.5150 *
October 6, 1995 6.8100 6.4550 0.3550 *
January 6, 1996 6.3900 6.0550 0.3350 *
April 6, 1996 7.2400 7.0000 0.2400 *
July 6, 1996 7.5500 7.1300 0.4200 *
October 6, 1996 7.0900 6.8050 0.2850 *
January 6, 1997 7.1000 6.8900 0.2100 *
April 6, 1997 7.4700 7.2750 0.1950 *
July 6, 1997 6.9400 6.7050 0.2350 *
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Actual # Days
10-Year 30-Year CMS
Interest Payment 30-Year CMS CMS Rate Difference minus 10-Year
Date Rate (%) (%) 30Y-10Y (%) CMS is < 0
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October 6, 1997 6.6100 6.4150 0.1950 *
January 6, 1998 6.1200 5.9550 0.1650 *
April 6, 1998 6.2200 6.0350 0.1850 *
July 6, 1998 6.0300 5.9550 0.0750 *
October 6, 1998 5.5900 5.1250 0.4650 *
January 6, 1999 5.7900 5.4700 0.3200 *
April 6, 1999 6.1900 5.9000 0.2900 0**
July 6, 1999 6.8350 6.7000 0.1350 0**
October 6, 1999 7.1100 6.9450 0.1650 0**
January 6, 2000 7.4300 7.3200 0.1100 0**
April 6, 2000 7.2270 7.2000 0.0270 61**
July 6, 2000 7.2200 7.2220 -0.0020 57**
October 6, 2000 7.0070 6.9710 0.0360 56**
January 6, 2001 6.0340 5.7700 0.2640 0**
April 6, 2001 6.2640 5.7930 0.4710 0**
July 6, 2001 6.5145 6.2260 0.2885 0**
October 6, 2001 5.8080 5.1830 0.6250 0**
January 6, 2002 6.2310 5.8490 0.3820 0**
April 6, 2002 6.2200 5.8280 0.3920 0**
July 6, 2002 6.0200 5.3950 0.6250 0**
October 6, 2002 5.1605 4.3250 0.8355 0**
January 6, 2003 5.3415 4.4950 0.8465 0**
April 6, 2003 5.2510 4.3860 0.8650 0**
July 6, 2003 4.9510 3.9950 0.9560 0**
October 6, 2003 5.4100 4.6150 0.7950 0**
January 6, 2004 5.3990 4.6450 0.7540 0**
April 6, 2004 5.3335 4.5715 0.7620 0**
July 6, 2004 5.5810 4.9480 0.6330 0**
October 6, 2004 5.3330 4.6825 0.6505 0**
* Daily data not available.
** Calculated based upon consideration of the 30-Year CMS Rate minus
the 10-Year CMS Rate determined from the last trade data as reported
by Bloomberg L.P.
The historical experience of the 30-Year CMS Rate minus the 10-Year CMS
Rate should not be taken as an indication of the future performance of the
30-Year CMS Rate minus the 10-Year CMS Rate during the term of the Notes.
Fluctuations in the level of the 30-Year CMS Rate and the 10-Year CMS Rate make
the Notes' effective interest rate difficult to predict and can result in
effective interest rates to investors that are lower than anticipated. In
addition, historical interest rates are not necessarily indicative of future
interest rates. Fluctuations in interest rates and interest rate trends that
have occurred in the past are not necessarily indicative of fluctuations that
may occur in the future, which may be wider or narrower than those that have
occurred historically.
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Call Risk. Investors should consider that it is more likely that we will
redeem the Notes prior to the Maturity Date if the Interest Rate results in an
interest payment greater than instruments of comparable maturity and credit
rating trading in the market.
Liquidity Risk. The Notes will not be listed on any securities exchange
and we do not expect a trading market to develop, which may affect the price
that you receive for your Notes upon any sale prior to Maturity. You should be
aware that we cannot ensure that a secondary market in the Notes will develop
and, if such market were to develop, it may not be liquid. If you sell your
Notes prior to Maturity, you may receive less than the amount you originally
invested. The Calculation Agent has advised us that it intends under ordinary
market conditions to indicate prices for the Notes on request. However, we
cannot guarantee that bids for outstanding Notes will be made in the future, nor
can we predict the price at which those bids will be made. The secondary market
for, and the market value of, the Notes will be affected by a number of factors
independent of our creditworthiness, including the level and direction of
interest rates, the Accrual Provisions applicable to the Notes, the anticipated
level and potential volatility of the 30-Year CMS Rate and the 10-Year CMS Rate,
the method of calculating the 30-Year CMS Rate and the 10-Year CMS Rate, the
time remaining to Maturity of the Notes, our right to redeem the Notes, the
aggregate principal amount of the Notes, the availability of comparable
instruments and the cost to us of unwinding any related hedging activity or any
funding arrangement.
ILLUSTRATIVE EXAMPLES
The following are illustrative examples demonstrating the hypothetical
Accrual Provision and Interest Rate during an Interest Payment Period based on
the following assumptions:
o The hypothetical Interest Payment Period shall be January 6, 2006
through April 5, 2006, representing 89 actual days (i.e., N = 89).
o Each example below will specify the number of days in the Interest
Payment Period in which the Accrual Provision is satisfied (i.e.,
the value of n).
Example 1.
For each day during the Interest Payment Period, the 30-Year CMS Rate
minus the 10-Year CMS Rate is always greater than or equal to 0%. Therefore, the
Accrual Provision is satisfied for each of the 89 days in the Interest Payment
Period. The Interest Rate for this Interest Payment Period is 7.00%, calculated
as follows:
= (7.00% X n/N)
= (7.00% X 89/89)
= 7.00%
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Example 2.
There were 82 days during the Interest Payment Period in which the 30-Year
CMS Rate minus the 10-Year CMS Rate was greater than or equal to 0%. The Accrual
Provision is satisfied for 82 days in the Interest Payment Period and the
Interest Rate for this Interest Payment Period is 6.45%, calculated as follows:
= (7.00% X n/N)
= (7.00% X 82/89)
= 6.45%
Example 3.
There were no days during the Interest Payment Period in which the 30-Year
CMS Rate minus the 10-Year CMS Rate was greater than or equal to 0%. The Accrual
Provision is not satisfied for any day in the Interest Payment Period and the
Interest Rate for this Interest Payment Period is 0.00%, calculated as follows:
= (7.00% X n/N)
= (7.00% X 0/89)
= 0.00%
CERTAIN US FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain US federal income tax
consequences of the purchase, beneficial ownership and disposition of Notes.
This summary deals only with a beneficial owner of a Note that is:
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o an individual who is a citizen or resident of the United States for
US federal income tax purposes;
o a corporation (or other entity that is treated as a corporation for
US federal tax purposes) that is created or organized in or under
the laws of the United States or any State thereof (including the
District of Columbia);
o an estate whose income is subject to US federal income taxation
regardless of its source; or
o a trust if a court within the United States is able to exercise
primary supervision over its administration, and one or more United
States persons have the authority to control all of its substantial
decisions (each, a "US Holder").
If a partnership (or other entity that is treated as a partnership for US
federal tax purposes) is a beneficial owner of Notes, the treatment of a partner
in the partnership will generally depend upon the status of the partner and upon
the activities of the partnership. A beneficial owner of Notes that is a
partnership, and partners in such a partnership, should consult their tax
advisors about the US federal income tax consequences of holding and disposing
of the Notes.
An individual may, subject to certain exceptions, be deemed to be a
resident of the United States for US federal income tax purposes by reason of
being present in the United States for at least 31 days in the calendar year and
for an aggregate of at least 183 days during a three-year period ending in the
current calendar year (counting for such purposes all of the days present in the
current year, one-third of the days present in the immediately preceding year,
and one-sixth of the days present in the second preceding year).
This discussion is based on interpretations of the Internal Revenue Code
of 1986, as amended (the "Code"), regulations issued thereunder, and rulings and
decisions currently in effect (or in some cases proposed), all of which are
subject to change. Any such change may be applied retroactively and may
adversely affect the federal income tax consequences described herein. This
summary addresses only US Holders that purchase Notes at initial issuance and
beneficially own such Notes as capital assets and not as part of a "straddle,"
"hedge," "synthetic security" or a "conversion transaction" for federal income
tax purposes, or as part of some other integrated investment. This summary does
not discuss all of the tax consequences that may be relevant to particular
investors or to investors subject to special treatment under the federal income
tax laws (such as S corporations, banks, thrifts, other financial institutions,
insurance companies, mutual funds, small business investment companies,
tax-exempt organizations, retirement plans, real estate investment trusts,
regulated investment companies, securities dealers or brokers, traders in
securities electing mark to market treatment, investors whose functional
currency is not the US dollar, persons subject to the alternative minimum tax,
and former citizens or residents of the United States), and this summary does
not discuss the tax consequences under the laws of any foreign, state or local
taxing jurisdictions. Accordingly, prospective investors are urged to consult
their tax advisors with respect to the federal, state and local tax consequences
of investing in the Notes, as well as any consequences arising under the laws of
any other taxing jurisdiction to which they may be subject.
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PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR TAX ADVISORS AS TO
THE FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF NOTES.
Federal Income Tax Treatment of US Holders
General
There are no statutory provisions, regulations, published rulings,
judicial decisions or other authorities addressing the federal income tax
treatment of debt instruments with terms that are substantially similar to the
Notes, and therefore the federal income tax treatment of the Notes is subject to
some uncertainty. As discussed below, we intend to take the position that
January 5, 2010 is the maturity date of the Notes for federal income tax
purposes. However, this position is not free from doubt.
Treatment of the Notes
Under the Treasury regulations governing original issue discount on debt
instruments (the "OID Regulations"), for purposes of determining the yield and
maturity of a debt instrument, an issuer is generally deemed to exercise an
option or combination of options if the exercise would minimize the yield on the
debt instrument. Because the interest payable after January 5, 2010 is greater
than the interest payable from the Original Issue Date to January 5, 2010,
computed as if the Original Issue Date was the last day of a monthly interest
payment period, for purposes of OID Regulations we intend to take the position
that the Company should be deemed to elect on January 5, 2010, to call the Notes
and therefore that January 5, 2010 is the maturity date of the Notes for federal
income tax purposes.
The remainder of this summary assumes that January 5, 2010 is the maturity
date of the Notes.
Interest
A US Holder will be required to include in gross income payments of stated
interest on the Notes when accrued or received, in accordance with its usual
method of tax accounting, as ordinary interest income.
Sale, Exchange, Redemption, Repayment or Other Disposition of the Notes
In addition, upon a sale, exchange, redemption, repayment or other
disposition of a Note, a US Holder would generally recognize capital gain or
loss equal to the difference between the amount realized on the sale, exchange,
redemption, repayment or other disposition (less any accrued and unpaid
interest, which will be taxable as such) and the US Holder's tax basis in the
Note, which would generally equal the US Holder's cost of the Note reduced by
payments of principal on the Note. Such gain or loss will be long-term capital
gain or loss if the US Holder held the Note for more than one year at the time
of disposition. US Holders that are individuals are entitled to preferential
treatment for net long-term capital gains; however, the ability of US Holders to
offset capital losses against ordinary income is limited.
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Possible Alternative Tax Treatments of an Investment in the Notes.
Because there are no statutory provisions, regulations, published rulings,
or judicial decisions addressing the treatment for federal income tax purposes
of securities with terms that are substantially the same as those of the Notes,
other treatments are possible. For example, it is possible that the IRS could
assert that the Notes are subject to special rules governing "contingent payment
debt instruments." If the IRS were successful in this assertion, US Holders may
be required to accrue original issue discount income, subject to adjustments, at
a "comparable yield" on the issue price of the Notes and any gain recognized
with respect to the Notes generally would be treated as ordinary income. The
federal income tax treatment of contingent payment debt instruments is
summarized in the Prospectus Supplement dated November 17, 2003 under the
caption "Certain US Federal Income Tax Considerations - Contingent Payment Debt
Instruments." Each US Holder is urged to consult its tax advisors regarding its
tax treatment of the Notes.
Information Reporting and Backup Withholding
Information reporting will apply to certain payments on a Note (including
interest and OID) and proceeds of the sale of a Note held by a US Holder that is
not an exempt recipient (such as a corporation). Backup withholding may apply to
payments made to a US Holder if (a) the US Holder has failed to provide its
correct taxpayer identification number on IRS Form W-9, (b) we have been
notified by the IRS of an underreporting by the US Holder (underreporting
generally refers to a determination by the IRS that a payee has failed to
include in income on its tax return any reportable dividend and interest
payments required to be shown on a tax return for a taxable year) or (c) we have
been notified by the IRS that the tax identification number provided to the IRS
on an information return does not match IRS records or that the number was not
on the information return.
THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX
IMPLICATIONS OF AN INVESTMENT IN NOTES. PROSPECTIVE PURCHASERS ARE URGED TO
CONSULT WITH THEIR OWN TAX ADVISORS PRIOR TO INVESTING TO DETERMINE THE TAX
IMPLICATIONS OF SUCH INVESTMENT IN LIGHT OF EACH SUCH INVESTOR'S PARTICULAR
CIRCUMSTANCES.
The distribution of the Notes will conform to the requirements set forth
in Rule 2720 of the NASD Conduct Rules.
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