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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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[x] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended June 30, 1999.
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.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3286161
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(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
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(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
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Common Stock, par value $1.00 per share New York Stock Exchange
Adjustable Rate Cumulative New York Stock Exchange
Preferred Stock, Series A
Depositary Shares, each representing New York Stock Exchange
a 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
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(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 September 8, 1999, the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant was approximately
$4,762,903,000. 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 September 8, 1999, the registrant had outstanding 117,453,197 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 1999 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 October 28,
1999, 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 June 30, 1999.
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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"); and Bear, Stearns
International Limited ("BSIL") 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, Execution
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 Execution Services distribution network with related
revenue of such intersegment services allocated to the respective segments
through transfer pricing policies.
The Capital Markets segment is comprised of the Equities, Fixed Income and
Investment Banking areas with over 2,600 directly attributable employees.
Equities combines the efforts of sales, trading and research professionals to
offer in-depth expertise in areas such as block trading, convertible bonds,
over-the-counter ("OTC") equities, equity derivatives and risk arbitrage. Fixed
Income provides distribution power for issuers in the primary market, liquidity
for investors in the secondary market, research for institutional clients and
offers expertise in products such as mortgage-backed and asset-backed
securities, corporate and government bonds, municipal and high yield securities,
foreign exchange and derivatives. Investment Banking provides a variety of
services to our clients, including capital raising, strategic advisory, mergers
and acquisitions and merchant banking capabilities. Capital raising encompasses
the Company's underwriting of equity, investment grade debt and high yield debt
securities.
The Execution Services segment is comprised of clearance and predominately
commission-related areas, including institutional equity sales, institutional
futures sales and specialists activities. At June 30, 1999, approximately 2,700
dedicated employees serve these business areas.
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 New York Stock Exchange
("NYSE") and the American Stock Exchange ("AMEX").
The Company also provides clearing, margin lending and securities
borrowing to facilitate customer short sales to over 2,700 clearing clients
worldwide. Such clients include approximately 2,300 prime brokerage clients
including hedge fund managers, money managers, short sellers, arbitrageurs and
other professional investors and approximately 400 fully disclosed clients, who
engage in either the retail or institutional brokerage business. The Company
processes trades in over 70 countries and accounts for approximately 10% of the
average daily NYSE volume, processing an average of in excess of 175,000 trades
per day.
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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 seven
regional offices. These account executives averaged approximately $1.0 million
in production in fiscal 1999. PCS had over $39 billion in client assets at June
30, 1999.
The Asset Management area, through Bear Stearns Asset Management Inc., had
$12.2 billion in assets under management at June 30, 1999 which reflected a
greater than 24% increase over the prior year. The largest component of the
increase was attributable to equities and alternative investments. Asset
Management serves the diverse investment needs of corporations, municipal
governments, multi-employer plans, foundations, endowments, family groups and
high-net-worth individuals. Innovation in products and services enables Asset
Management to serve clients in an increasingly competitive financial
marketplace.
Financial information regarding the Company's industry segments and
foreign operations for the three successive fiscal years ended June 30, 1999 is
set forth under the Notes to the Consolidated Financial Statements in Footnote
13, entitled "Segment and Geographic Area Data," in the registrant's 1999 Annual
Report to Stockholders (the "Annual Report"), which is incorporated herein by
reference to Exhibit No. 13 of this report.
(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; acting as specialist on the floor of the NYSE and the AMEX;
underwriting and distributing securities; arranging for the private placement of
securities; assisting in mergers, acquisitions, restructurings and leveraged
transactions; making principal investments in leveraged acquisitions; engaging
in commercial real estate activities; investment management and advisory;
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, Los
Angeles and San Francisco; from representative offices in Beijing, Hong Kong,
and Shanghai; through international offices in Buenos Aires, Dublin, London,
Lugano, Sao Paulo, Singapore and Tokyo; and through joint ventures with other
firms in Belgium, Greece, and Madrid. 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 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 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") and the National Futures Association ("NFA"). 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"), OMLX, 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
regulated in accordance with the rules of the Securities and Futures Authority
("SFA").
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As of June 30, 1999, the Company had 9,808 employees.
The following areas are included in the three industry segments mentioned
above in Item 1(b).
INSTITUTIONAL EQUITIES
General. The Company provides customers with liquidity, trading expertise,
equity research and extensive expertise in products such as domestic and
international equities and convertible securities.
Option 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
for clients specific recommendations relating to options and index trading.
Arbitrage. The Company engages for its own account in both "classic" and
"risk" securities-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 later
date, and (iv) between the prices of securities with contracts settling on
differing 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 traversing 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. Principal
transactions with customers are effected at a net price equal to the prevailing
inter-dealer price, plus or minus a mark-up or mark-down.
Equity Research. The Equity Research Department provides in-depth research
including economic forecasts, industry and company analyses, overall strategic
guidance and recommendations. The department provides comprehensive industry and
company coverage on approximately 1,200 stocks in over 100 industries, or 57% of
the stocks in the S&P 500. Ninety-three equity analysts provide coverage and
recommendations on domestic stocks as well as European, Latin American and Asian
stocks, complemented by the output of the Company's economists and strategists.
Some of the Company's larger global research teams are concentrated in the
health care, media, technology and telecommunications sectors.
FIXED INCOME
General. The Company makes inter-dealer markets and trades on a principal
basis in a wide range of instruments including: corporate debt and equity
securities, 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
fixed income securities, including US government and agency securities,
mortgage-backed securities, and corporate and municipal 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 recognized 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-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
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activities, the Company enters into transactions in options, futures and forward
contracts to hedge its proprietary positions. As a primary dealer, Bear Stearns
furnishes weekly reports of its inventory positions and market transactions in
US government securities to the Federal Reserve Bank of New York. Bear Stearns
also buys and sells government securities directly with the Federal Reserve Bank
of New York as part of the Bank's open-market activities. In addition, 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, reverse repurchase agreements and securities borrowed.
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
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. The Company does not retain any exposure to real estate risk
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subsequent to securitizing and selling the deal, but does have exposure to the
performance of the underlying real estate after the closing of the loan and
prior to 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 states, counties, cities, and local governmental authorities. 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
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 risks to which the Company is exposed in its businesses
and 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 products 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 a leader in the distribution,
trading and underwriting of corporate, government, high yield, emerging markets,
municipal debt, and mortgage-backed and asset-backed securities. The Fixed
Income Research Department is comprised of economists, industry analysts and
strategists covering the full range of research disciplines: quantitative,
economic, strategic, credit portfolio, relative value and market-specific
analysis. The Fixed Income Research Department provides ongoing support for 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
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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 approximately 18 analysts and
researchers, and provides coverage for over 30 industries and 700
companies.
(iii) High yield research consists of 28 analysts and researchers for
domestic issues and 15 analysts and researchers for international
issues, providing coverage for over 600 corporate and sovereign
issuers whose fixed income securities are non-investment grade.
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
Europe.
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.
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.
Correspondents indemnify the Company against margin losses on customer accounts.
The Company also extends margin credit directly to correspondents to the extent
that such firms pledge proprietary assets as collateral. Since the Company must
rely on the guarantees and general credit of the correspondents, the Company may
be exposed to significant risk of loss if correspondents are unable to meet
their financial commitments should there be a substantial adverse change in the
value of margined securities. The clearing business for hedge funds,
market-makers, specialists, arbitrageurs and other professional traders can
require a substantial commitment of the Company's capital involving varying
degrees of risk. The Company has developed computerized control systems to
monitor and analyze risk on a daily basis.
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,
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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 provides a variety of non-brokerage
products and services on favorable terms, enabling them to benefit from the
Company's centralized purchasing power.
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
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.
BLOCK TRADING
The Company effects transactions in large blocks of securities, generally
exceeding 50,000 shares, 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.
SPECIALIST ACTIVITIES
The Company is a participant in specialist units on the NYSE and the AMEX
that as of September 1999 perform specialist functions in approximately 180
NYSE-listed stocks in addition to approximately 100 stocks and 80 options on the
AMEX. These market-making operations are conducted through joint ventures with a
member organization pursuant to joint-account agreements. 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.
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; clearance of government securities for institutions
and dealers; processing of mortgage and mortgage-related products, including
derivatives and collateralized mortgage obligations products; and margin
lending. At
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June 30, 1999, CTC held approximately $140 billion of assets for clients such as
pension funds, mutual funds, endowment funds, religious organizations and
insurance companies.
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.
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, syndicated bank loans, 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 often assists with the origination, but is primarily
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 bank 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 equity securities, either common or preferred stock.
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.
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 seven
regional offices. These account executives averaged approximately $1.0 million
in production in fiscal 1999. PCS had over $39 billion in client assets at June
30, 1999.
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ASSET MANAGEMENT
The Company's asset management department manages equity and fixed income
assets for some of the leading domestic corporate pension plans, public systems,
endowments, foundations, multi-employer plans, insurance companies,
corporations, families and high net-worth individuals in the US. With over $12
billion under management, the asset management department provides its clients
with diverse products, expertise and experience for enhancing investment returns
by identifying, and capitalizing on, investment opportunities in the financial
markets. Institutional and high-net-worth products include: large and small cap
value equity and growth equity; global and emerging markets fixed income; 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, Total Return Bond, High Yield Total
Return, and The Emerging Markets Debt Portfolios.
OTHER
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, broker's call rate or LIBOR.
Securities Lending Activities. In connection with both its trading and
brokerage activities, the Company borrows and lends securities to broker-dealers
and other trading entities to cover short sales and to complete transactions in
which customers have failed to deliver securities by settlement date.
ADMINISTRATION AND OPERATIONS
Administration and operations personnel are responsible for processing of
securities transactions; receipt, identification and delivery of funds and
securities; internal financial controls; accounting functions; office services;
custody of customer securities; and overseeing the 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 is handled by a staff of
approximately 5,000 employees located in separate operations offices in New York
City and Whippany, New Jersey and, to a lesser extent, in 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.
There can be significant fluctuation in the volume of transactions the
Company processes, clears and settles. Operations personnel monitor day-to-day
operations to assure compliance with applicable laws, rules and regulations.
INTERNATIONAL
Outside the US, the Company, through its international subsidiaries,
provides various services including investment banking, securities trading and
brokerage and clearance activities to corporations, governments,
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institutions and individuals throughout the world. These international
subsidiaries have memberships on various foreign securities and futures
exchanges.
BSIL is based in London and provides investors and issuers with a full
range of products and services in both international and US equities, fixed
income, exchange-traded futures and options, and foreign exchange. In addition,
BSIL is a major sales and trading center within 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 Limited ("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. Over the past year, BSJL became active in the local
mortgage-backed securities and distressed debt markets.
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 and Shanghai support the efforts of BSAL.
Bear Stearns Bank plc (the "Bank") based in Dublin, allows the Company's
existing and prospective clients the choice of dealing with a banking
counterparty. The Bank also serves as a platform from which the Company directs
its international banking activities, gaining easier access to worldwide
markets, and thereby expanding its client base and product range.
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 ability of professional personnel,
the relative price of the service and products being offered, and the quality of
service.
REGULATIONS AND OTHER FACTORS AFFECTING THE COMPANY AND THE SECURITIES
INDUSTRY
The securities industry in the US is subject to extensive regulation under
both federal and state laws. Moreover, Bear Stearns is registered as an
investment adviser with the SEC. Much of the regulation of broker-dealers has
been delegated to self-regulatory organizations, principally the NASD, the
Municipal Securities Rulemaking Board, and national securities exchanges such as
the NYSE, which has been designated by the SEC as the primary regulator of
certain of 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
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changes in the interpretation or enforcement of existing laws and rules. The
SEC, self-regulatory organizations and state securities commissions may conduct
administrative proceedings that can result in censures, fines, the issuance of
cease-and-desist orders, and the suspension or expulsion of a broker-dealer or
an investment adviser, its officers or employees. The principal purpose of
regulation and discipline of broker-dealers and investment advisers is the
protection of customers and the securities markets, rather than the protection
of creditors and stockholders of broker-dealers or investment advisers. On
occasion the Company's subsidiaries have been subject to 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
to increase the efficacy and stability of such markets by, among other things:
(i) providing the SEC with discretion to halt securities trading on any national
exchange for the protection of investors; (ii) requiring broker-dealers and
other registrants to regularly provide information to the SEC regarding holding
companies and other affiliated entities whose activities can impact their
financial condition; (iii) requiring broker-dealers and other registrants who
execute large-trade orders to provide information to the SEC regarding such
transactions; and (iv) allowing the SEC to prosecute market participants who
violate SEC rules and regulations designed to maintain fair and orderly markets.
The SEC has adopted the Risk Assessment Reporting Requirements for Brokers and
Dealers (the "Risk Assessment Rules") to implement the provisions of the Market
Reform Act. The Risk Assessment Rules require that broker-dealers: (i) have an
organizational chart; (ii) maintain risk-management procedures or standards for
monitoring and controlling risks; (iii) maintain and preserve records and other
information; and (iv) file quarterly reports covering the risk-management
procedures and the financial and securities activities of the holding companies
of broker-dealers, or broker-dealer affiliates or subsidiaries that are
reasonably likely to have a material impact on the financial and operational
condition of the broker-dealer.
The Insider Trading and Securities Fraud Enforcement Act of 1988 was
adopted to strengthen the SEC's ability to deter, detect, and punish insider
trading by, among other things: (i) increasing civil penalties that can be
assessed against controlling persons who purposefully or recklessly fail to take
adequate measures to prevent insider trading; (ii) allowing the SEC to provide
cash rewards to individuals who provide evidence of insider trading; (iii)
affirming the government's ability to obtain criminal sanctions against those
found guilty of insider trading; and (iv) requiring broker-dealers and
investment advisors to establish and enforce written procedures reasonably
designed to prevent the misuse of material, non-public information.
The Government Securities Act of 1986 (the "Government Securities Act")
was adopted to decrease volatility and increase investor confidence and
liquidity in the government securities market by creating a coordinated and
comprehensive regulatory structure for the market where none had previously
existed. In particular, the Government Securities Act: (i) requires
broker-dealers solely involved in government securities to register with SEC;
(ii) allows the Secretary of the Treasury to adopt rules regarding the custody,
use, transfer, and control of government securities; and (iii) bestows upon the
SEC the authority to enforce such rules as to broker-dealers and other SEC
registrants.
The futures industry in the US is subject to regulation under the
Commodity Exchange Act, as amended. The CFTC is the federal agency charged with
the administration of the Commodity Exchange Act and the regulations thereunder.
Bear Stearns and BSSC are registered with the CFTC as futures commission
merchants and are subject to regulation as such by the CFTC and various domestic
boards of trade and other futures exchanges. Bear Stearns' and BSSC's futures
business is also regulated by the NFA, a not-for-profit membership corporation,
which has been designated a registered futures association by the CFTC.
As registered broker-dealers and member firms of the NYSE, both Bear
Stearns and BSSC are subject to the Net Capital Rule (Rule 15c3-1) (the "Net
Capital Rule") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which has been adopted through incorporation by reference in
NYSE Rule 325. The Net Capital Rule, which specifies minimum net capital
requirements for registered broker-dealers, is designed to measure the general
financial integrity and liquidity of broker-dealers and requires that at least a
minimal portion of assets be kept in relatively liquid form.
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Bear Stearns and BSSC are also subject to the net capital requirements of
the CFTC and various futures exchanges, which generally require Bear Stearns and
BSSC to maintain minimum net capital 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 in the Annual Report, Notes to
Consolidated Financial Statements, Footnote 7, entitled "Regulatory
Requirements," which is incorporated herein by reference to Exhibit No. 13 of
this report.
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 customer accounts are fully protected by an
excess securities bond, issued by the Travelers Casualty and Surety Company, up
to the amount of total net equity (both cash and securities) in excess of the
underlying SIPC protection.
The activities of 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 sells equity and fixed income securities to Japanese institutional
customers. 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 and
sells equity and fixed income securities and derivative products to
institutional and retail customers in Asia (excluding Japan) and also provides
investment banking services to institutional clients. 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.
Bear Stearns Bank plc is an Dublin-based bank incorporated in 1996 and
subsequently granted a banking license under the Irish Central Bank Act, 1971.
The Bank engages in capital markets activities with particular focus on the
trading and sales of OTC interest-rate derivatives products.
The Company, like other securities firms, is directly affected by such
things as: national and international economic and political conditions, broad
trends in business and finance, legislation and regulations affecting the
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national and international financial and business communities, fluctuating
currency values, the level and volatility of interest rates, and fluctuations in
the volume and the price levels in the securities and futures markets. 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 the 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 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."
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 also leases approximately 297,000 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, 140,000, 13,000 and
59,000 square feet of space at four locations in New York City under leases
expiring in 2001, 2004, 2007 and 2009, respectively. The Company's regional
offices in Atlanta, Boston, Chicago, Dallas, Houston, Irving (Texas), Los
Angeles, Philadelphia, Princeton (New Jersey) and San Francisco occupy an
aggregate of approximately 511,000 square feet, while its ten foreign offices
occupy a total of approximately 136,000 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 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; conversely, it may sell the
excess land and development rights to others.
The Company is a party to a ground lease with respect to 383 Madison
Avenue, New York, New York which provides for the development of this site as
its new world headquarters. The office tower under construction will contain 1.2
million square feet and is scheduled to be completed by 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.
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
results of operations or the financial condition of the Company, taken as a
whole.
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
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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 May 8, 1998, Bear Stearns and Lehman jointly filed counterclaims
against certain plaintiffs for unjust enrichment, monies had and received, and
for return of funds fraudulently conveyed and filed a third party claim for
contribution against Sigma International Limited S.A.R.L.
On August 12, 1998, Bear Stearns and Lehman filed an answer to the amended
complaint denying liability.
On January 28, 1999, the court dismissed with prejudice all counterclaims
asserted by Lehman Brothers and Bear Stearns against certain of the plaintiffs,
other than the counterclaim seeking contribution from plaintiff Monhem
Nassereddine, which was dismissed with leave to replead.
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.
Alpha Group Consultants, et al. v. Weintraub, et al./In re Weintraub
Entertainment Group Litigation. On January 31, 1991, a purported class action
was commenced in the United States District Court for the Southern District of
California on behalf of a class consisting of all persons who purchased
Weintraub Entertainment Group ("WEG") debentures and warrants during the period
January 23, 1987 through October 1, 1990. Named as defendants are WEG (a debtor
in bankruptcy, named as a defendant only to the extent permitted by federal
bankruptcy law), certain directors and officers of WEG and Bear Stearns, which
acted as the placement agent in WEG's private placement.
Plaintiffs allege, among other things, that the defendants violated
Sections 12(2) and 15 of the Securities Act of 1933 (the "Securities Act"),
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 10b-5 promulgated thereunder, the Racketeer Influenced and
Corrupt Organizations Act ("RICO"), California state statutes, and common law
duties allegedly owed to the plaintiffs in connection with allegedly false and
misleading statements concerning WEG's financial condition, the experience of
certain WEG officers, the intended use of proceeds from the sale of the WEG
securities, the prospects for a public market for WEG securities, WEG's business
plans, and certain terms of WEG's contracts with distributors. Plaintiffs seek
compensatory, punitive and treble damages in unspecified amounts.
On May 12, 1993, Bear Stearns filed an answer denying liability and
asserting affirmative defenses. On May 10, 1993, the court entered a final
judgment and order approving a settlement among plaintiffs and the WEG director
and officer defendants. On September 15, 1993, the court entered an order
granting class certification. On April 22, 1994, the court granted summary
judgment in favor of Bear Stearns on all claims.
On July 15, 1997, the United States Court of Appeals for the Ninth Circuit
reversed the district court's grant of summary judgment in connection with a
statement in the offering materials provided to investors concerning the timing
of the payment of guaranteed advances by certain motion picture distributors to
WEG. The Ninth Circuit affirmed the district court's dismissal of all other
claims in the litigation.
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On August 21, 1998, a jury returned a verdict against Bear Stearns finding
that statements in the offering materials relating to the timing of payment of
guaranteed advances to WEG were false and misleading. The jury awarded damages
to one of the three named plaintiffs in the amount of approximately $6.5
million.
On May 12, 1999, the court: (i) granted Bear Stearns' motion for
reconsideration of the denial of Bear Stearns' motion for a new trial and
ordered a new trial with respect to the issue of reliance with respect to the
named plaintiffs and the intervenor plaintiff, the Pension Reserve Investment
Trust; (ii) granted Bear Stearns' motion for summary judgment against certain
absent class members; (iii) granted plaintiffs' motion for summary judgment as
to liability with respect to certain absent class members (Kugler and Columbia
Savings); and (iv) granted plaintiffs' motion for a summary adjudication that
causation is established for all of the absent class members.
On August 5, 1999, the court granted plaintiffs' motion as to Kugler and
Columbia Savings' damages and determined that their damages are approximately
$350,000 and $5.5 million, respectively. The court also invited Bear Stearns to
move for a new trial with respect to the issue of damages suffered by Kugler and
Columbia Savings or, in the alternative, for remittitur. On September 13, 1999,
Bear Stearns moved for a new trial.
Amalgamated Insurance Fund-Insurance Fund, et al. v. Bear, Stearns & Co.
Inc., et al./Alico Services Corp., Alico Resources Corp. and Pension Plan for
Employees of Amalgamated Life Insurance Company v. Bear, Stearns & Co. Inc., et
al. On January 9, 1997, five former Bear Stearns brokerage customers who are
employee welfare benefit plans or employee pension benefit plans under the
Employee Retirement Income Security Act ("ERISA") commenced a NASD arbitration
proceeding against Bear Stearns, a former Bear Stearns account executive and two
current Bear Stearns employees (the "Amalgamated proceeding").
The claimants allege, among other things, unauthorized and unsuitable
trading and churning in their accounts involving derivative securities. The
claimants assert claims based upon breach of fiduciary duty, breach of fiduciary
duty under ERISA, participation in breach of fiduciary duty, breach of contract,
common law fraud, securities fraud, negligent misrepresentation, negligence,
investing in unsuitable securities, failure to supervise and churning, unjust
enrichment, and violations of the Sherman Antitrust Act and the Donnelly Act.
Claimants seek compensatory damages in excess of $40 million, and punitive and
treble damages in unspecified amounts.
On May 14, 1997, Bear Stearns filed an answer denying liability and
asserting affirmative defenses, counterclaims and third-party claims that allege
that certain trustees of the plans and registered investment advisors hired by
the plans are solely responsible for any losses suffered by the funds, and
seeking, among other things, indemnification and contribution.
On May 2, 1997, three additional former Bear Stearns brokerage customers
commenced an NASD arbitration proceeding against the same respondents, including
Bear Stearns, alleging essentially the same claims, based upon essentially the
same facts and circumstances and, once again, seeking damages including
unspecified compensatory, punitive and treble damages (the "Alico proceeding").
One of the three claimants in the Alico proceeding purports to assert claims as
assignee of claims purportedly assigned to it by 17 other pension and benefits
funds that formerly were brokerage customers of Bear Stearns.
The parties have reached an agreement to settle the Amalgamated and Alico
proceedings without any admission of wrongdoing by the Bear Stearns defendants.
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.
- 15 -
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 the defendants 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.
On December 1, 1998, defendants filed an answer to the complaint in which
they denied liability and asserted affirmative defenses.
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) Richard Schwarz v. Bear, Stearns & Co. Inc., et al. On July 22,
1997, a customer of Baron commenced an action in the Supreme Court of the State
of New York, New York County, against Bear Stearns and BSSC.
The complaint alleges, among other things, that Baron engaged in a scheme
to manipulate the market for and to inflate the prices of Baron securities, and
that Bear Stearns and BSSC, as clearing broker, wrongfully permitted Baron to
continue in business. Plaintiff alleges violations of the New York Consumer
Protection Act, common law negligence and negligent misrepresentation. Plaintiff
purports to represent a class consisting of all persons who were customers of
Baron from July 20, 1995 through July 3, 1996. Plaintiff seeks damages in an
unspecified amount.
On August 24, 1998, the court dismissed this action.
On October 8, 1998, plaintiff filed a notice of appeal.
(iii) 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 $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.
On July 30, 1999, the Bear Stearns defendants moved to dismiss the
complaint.
(iv) 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.
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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.
(v) On August 5, 1999, the SEC instituted, and simultaneously agreed with
BSSC, to settle an administrative proceeding against BSSC relating to BSSC's
role as a clearing broker for Baron. Under the terms of the agreement, BSSC,
without admitting or denying any wrongdoing, consented to the issuance of a
cease and desist order with respect to allegations that BSSC was a cause of
Baron's violations of Section 17(a) of the Securities Act and Section 10(b) of
the Exchange Act and Rule 10b-5 promulgated thereunder, that BSSC aided and
abetted Baron's violations of Sections 15(c)(2) and 15(c)(3) of the Exchange
Act, and that BSSC violated Sections 7 and 17(a) of the Exchange Act and Federal
Reserve Board Regulation T in connection with providing clearing services for
Baron. BSSC also agreed to the appointment of an independent consultant to be
selected by the SEC to conduct a review of various BSSC supervisory and
compliance procedures, the payment of a fine of $5 million, and the
establishment of a restitution fund of $30 million which will be used to settle
certain private claims. Separately, BSSC entered into an agreement with the New
York County District Attorney's Office ("NYDAO"), in which it has agreed to pay
$1.5 million to the NYDAO for the costs of its investigation. BSSC's payment of
$30 million to the restitution fund described above to satisfy the claims of
customers will also fulfill BSSC's restitution obligation in the agreement
entered into by BSSC and the NYDAO. BSSC has further agreed to make payments of
$1 million to the State of New York and $1 million to the City of New York. BSSC
has been informed that the District Attorney has stated that no criminal or
other charges will be filed against BSSC or Bear Stearns.
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 purport
to represent a class consisting of persons who purchased Blech Securities from
July 1, 1991 through September 21, 1994 in a public offering or in the public
market. Plaintiffs seek damages in an unspecified amount.
On May 16, 1997, Bear Stearns filed an answer denying liability and
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.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in this litigation and believes that it has substantial defenses to these
claims.
Crescent Porter Hale Foundation, et al. v. Bob K. Pryt, et al. On October
19, 1998, an action was commenced in the Superior Court of the State of
California, San Francisco County, by limited partners of BKP Partners, L.P.
("BKP"), an investment fund that allegedly engaged in a fraudulent scheme
involving unsuitable and excessively risky investments. Named as defendants are
BKP, an individual who allegedly acted as the general partner of BKP, BKP
Capital Management LLC, Bear Stearns, BSSC, Deloitte & Touche and a certified
public accountant who reviewed certain of BKP's financial statements. The
complaint alleges, among other things, that the Bear Stearns defendants
committed common law fraud, negligent misrepresentation and civil conspiracy,
breached a
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fiduciary duty and the covenant of good faith and fair dealing, and aided and
abetted a breach of fiduciary duty and a breach of the covenant of good faith
and fair dealing, in connection with BSSC acting as BKP's prime broker, engaging
in securities transaction with or on behalf of BKP, and making margin loans to
BKP. Compensatory damages in excess of $100 million are sought.
On January 8, 1999, the court granted defendants' motion to compel the
plaintiffs to arbitrate the claims asserted in this action.
On April 28, 1999, the California Court of Appeals denied plaintiffs'
petition seeking reversal of the lower court order compelling arbitration, and
on June 30, 1999, the California Supreme Court denied review of the order
compelling arbitration.
In re Daisy Systems Corporation, Debtor. On May 30, 1991, a Trustee for
Daisy Systems Corporation ("Daisy"), a debtor in bankruptcy, and
Daisy/Cadnetix, Inc. ("DCI") filed a complaint in the United States District
Court for the Northern District of California on behalf of Daisy and DCI
against Bear Stearns and six former directors of Cadnetix, Inc. ("Cadnetix")
and/or a Cadnetix subsidiary. The litigation arises out of Daisy's retention
of Bear Stearns in 1988 to provide investment banking services to Daisy with
respect to a potential merger of Daisy with Cadnetix. On March 20, 1992, a
first amended complaint was filed, and on July 24, 1992, a second amended
complaint was filed.
The second amended complaint alleges, among other things, that Bear
Stearns was negligent in performing its due diligence with respect to the
merger and in advising Daisy that it was "highly confident" that financing
could be obtained to fund the merger. The Trustee alleges that Bear Stearns
breached fiduciary duties to Daisy, committed professional malpractice in its
efforts on Daisy's behalf, made negligent representations upon which Daisy
relied, breached a covenant of good faith and fair dealing implied in its
contracts with Daisy, and should have its unsecured claim in the Daisy
bankruptcy proceeding equitably subrogated to the claims of all other
claimants in the bankruptcy. The Trustee seeks compensatory and punitive
damages in unspecified amounts.
On February 3, 1993, the court dismissed plaintiffs' breach of fiduciary
duty and equitable subrogation claims. On August 12, 1994, the court granted
summary judgment dismissing all remaining claims against Bear Stearns, and
denying a motion by the Trustee to file a third amended complaint.
On September 24, 1996, the United States Court of Appeals for the Ninth
Circuit affirmed the dismissal of the negligent misrepresentation claim,
reinstated the Trustee's negligence claim and reversed the denial of the motion
for leave to amend the breach of fiduciary duty claim, and remanded the case to
the district court for further proceedings.
On August 15, 1997, Bear Stearns filed an answer denying liability and
asserting affirmative defenses.
On May 15, 1998, a jury returned a verdict finding that Bear Stearns had
committed professional negligence and awarded damages in the amount of
$108,000,000. The jury also found that Bear Stearns had not breached any
fiduciary duties. On August 7, 1998, the court issued an order denying Bear
Stearns' motion for judgment as a matter of law and, at plaintiffs' option,
either granting Bear Stearns' motion for remittitur in the amount of
approximately $36,000,000 or granting Bear Stearns' motion for a new trial.
On or around December 2, 1998, plaintiffs accepted remittitur, and on
December 3, 1998, judgment was entered against Bear Stearns in the amount of
$36,073,196 plus costs of $138,826.63.
On December 29, 1998, Bear Stearns filed a notice of appeal. On
February 11, 1999, plaintiffs filed a notice of cross-appeal.
Del Rosario, et al. v. Bear, Stearns & Co., Inc., et al. On March 7, 1997,
three former Bear Stearns brokerage customers commenced an NASD arbitration
proceeding against Bear Stearns, a former Bear Stearns account executive and
Smith Barney, Inc.
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The claimants allege, among other things, unauthorized wire transfers and
unauthorized and unsuitable trading in their accounts. The claimants assert
claims based upon fraud, churning, breach of fiduciary duty, negligence, breach
of contract, failure to supervise the claimants' accounts and conspiracy. The
claimants seek compensatory damages in excess of $20 million and punitive
damages in an unspecified amount.
On June 27, 1997, Bear Stearns filed an answer denying liability and
asserting affirmative defenses.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in the Del Rosario proceeding and believes that it has substantial defenses to
the claims in this proceeding.
In March 1997, a related NASD arbitration proceeding captioned Parvus
Co. Ltd. v. Bear, Stearns & Co. Inc., et al. was commenced by a former Bear
Stearns' customer against Bear Stearns and a former Bear Stearns account
executive.
The claimant alleges, among other things, that the respondents committed
breach of fiduciary duty, negligence, breach of contract and failure to
supervise, and violated NASD, SEC and New York Stock Exchange Rules, in
connection with unauthorized wire transfers from its account. The claimant seeks
damages in excess of $15 million.
On June 13, 1997, Bear Stearns filed an answer denying liability and
asserting affirmative defenses.
The parties have reached an agreement in principle to settle this
proceeding.
Deutch v. Silverman, et al. On April 27, 1998, a shareholder of Cendant
Corp. ("Cendant") commenced a purported derivative action on behalf of Cendant
in the United States District Court for the District of New Jersey against the
Company, Bear Stearns, and certain present and former directors and/or officers
of Cendant, CUC International, Inc. ("CUC") and/or HFS, Inc. ("HFS"). The
Complaint alleges, among other things, that the Bear Stearns defendants
committed gross negligence in connection with acting as a financial advisor to
HFS with respect to a merger between CUC and HFS. Damages in an unspecified
amount are sought.
On August 9, 1999, the court granted the Bear Stearns defendants' motion
to dismiss the claims asserted against them in this action.
Bernard H. Glatzer v. Bear, Stearns & Co. Inc. On May 11, 1993, Bernard H.
Glatzer commenced an action in the District Court of Harris County, Texas,
against, among others, Bear Stearns. On October 11, 1993, the case was removed
to the United States District Court for the Southern District of Texas, and on
January 23, 1995 the case was transferred to the United States District Court
for the Southern District of New York. Plaintiff alleges that he devised and
presented "a novel, elegant, original and unique business plan" for financing
independent oil and gas production by independent oil and gas companies and
presented this plan to Bear Stearns on a confidential basis, and that Bear
Stearns utilized plaintiff's business plan as part of services it provided to
another corporate entity.
Plaintiff alleges, among other things, theft and misuse of trade secrets,
misappropriation, breach of fiduciary duty, tortious interference with
contractual opportunity, prospective business relationship, business
opportunity, contractual advantage and/or contractual relations, unjust
enrichment, quantum meruit/quasi-contract, fraud and conspiracy. Plaintiff seeks
damages in the amount of $200 million and punitive damages in an unspecified
amount.
On July 21, 1997, Bear Stearns filed an answer denying liability and
asserting affirmative defenses. On June 10, 1998, the District Court granted
summary judgment in favor of Bear Stearns on all of plaintiff's claims. On
June 23, 1998, plaintiff filed a notice of appeal.
On October 28, 1998, the parties reached an agreement to settle this
action.
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
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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. On April 5, 1999, the Goldberger and Bier actions were
consolidated for all purposes, and on August 27, 1999, an amended consolidated
complaint was filed on behalf of the same purported class as in the original
complaints. Named as defendants are Bear Stearns, BSSC and an officer of 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 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.
In re Granite Partners, L.P., Granite Corporation and Quartz Hedge Fund.
On April 7, 1994, Granite Partners, L.P., Granite Corporation, and Quartz Hedge
Fund (the "Funds"), three investment funds managed by Askin Capital Management
L.P. ("ACM") and David J. Askin ("Askin"), commenced a bankruptcy proceeding in
the United States Bankruptcy Court for the Southern District of New York after
suffering losses in mortgage-backed securities and related instruments. Seven
actions involving Bear Stearns relating to the Funds are pending. Six of these
actions involve allegations that, among other things, Bear Stearns, Kidder,
Peabody & Co., Inc. and Donaldson, Lufkin & Jenrette Securities Corporation (the
"Dealer Defendants") misrepresented and/or encouraged ACM to purchase certain
securities despite the alleged inappropriateness of those securities for the
investment funds ACM was managing, that the Dealer Defendants allegedly provided
inflated performance marks, that the Dealer Defendants allegedly provided
excessive financing to the Funds, and that the Dealer Defendants otherwise
departed from the standards of ordinary care. The seventh of these actions also
involves allegations that Bear Stearns, among other things, made improper margin
calls and wrongfully liquidated the Funds' positions after the Funds defaulted
on their obligations.
(i) Primavera Familienstiftung v. David J. Askin, et al. On September
20, 1995, Primavera Familienstiftung, a purported investor in Granite
Corporation, amended its complaint in a previously filed action in the United
States District Court for the Northern District of California to include for the
first time claims against the Dealer Defendants. Also named as defendants are
Askin and ACM (the "Askin Defendants"). The complaint alleges, among other
things, that the Dealer Defendants aided and abetted an alleged fraud, committed
common law fraud, aided and abetted a breach of fiduciary duty by the Askin
Defendants, committed breach of contract, and violated Uniform Commercial Code
provisions and Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5
promulgated thereunder. Plaintiff seeks to recover the amount it paid for its
interest in the Funds (alleged to be approximately $1 million) and punitive
damages in an unspecified amount.
On October 18, 1996, the action was transferred to the United States
District Court for the Southern District of New York. On August 22, 1996, the
court dismissed all claims, but granted plaintiff leave to replead its claim
that the Dealer Defendants aided and abetted an alleged fraud by the Askin
Defendants. On November 8, 1996, a third amended complaint was filed.
On July 11, 1997, Bear Stearns filed an answer to the complaint denying
liability and asserting affirmative defenses.
On October 27, 1997, this action was consolidated with the ABF Capital,
Montpellier and Johnston actions (described below) for pre-trial purposes.
On March 19, 1998, plaintiff's motion for class certification was denied.
On February 12, 1999, this action was consolidated with the Bambou and AIG
actions (described below) for pre-trial purposes.
(ii) ABF Capital Management, et al. v. Askin Capital Management, L.P.,
et al. On March 27, 1996, certain other purported investors in the Funds
commenced an action in the Supreme Court of the State of New York, County of New
York, against ACM and the Dealer Defendants. On April 24, 1996, the case was
removed to the United States District Court for the Southern District of New
York. Plaintiffs allege, among other things, that the
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Dealer Defendants aided and abetted fraud, aided and abetted an alleged breach
of fiduciary duty by ACM, were unjustly enriched and violated RICO.
On January 24, 1997, the court dismissed all claims other than plaintiffs'
claim that the Dealer Defendants aided and abetted an alleged fraud by ACM.
Plaintiffs seek to recover the amounts the plaintiffs paid for their interests
in the Funds (alleged to be approximately $230 million), an unspecified amount
of allegedly unjust enrichment, treble damages, and punitive damages of not less
than $1 billion from each defendant.
On February 28, 1997, Bear Stearns filed an answer to the complaint
denying liability and asserting affirmative defenses.
On October 27, 1997, this action was consolidated with the Primavera
action (described above) and the Montpellier and Johnston actions (described
below) for pretrial purposes.
On March 19, 1998, plaintiffs' motion for class certification was denied.
On February 12, 1999, this action was consolidated with the Bambou and AIG
actions (described below) for pre-trial purposes.
(iii) Montpellier Resources, Ltd., et al. v. Bear Stearns, et al. On
March 14, 1997, three purported investors in the Funds commenced an action
against ACM and the Dealer Defendants in the United States District Court for
the Southern District of New York. On June 2, 1997, the complaint was amended to
add sixteen additional plaintiffs.
Plaintiffs' allegations are substantially similar to those in the ABF
Capital action (as modified by the Court's ruling on the Dealer Defendants'
motion to dismiss in that action). Plaintiffs seek recovery of their investments
(alleged to have been approximately $34 million for the named plaintiffs) and
punitive damages of not less than $1 billion from each defendant.
On July 7, 1997, Bear Stearns filed an answer to the complaint denying
liability and asserting affirmative defenses.
On October 27, 1997, this action was consolidated with the ABF Capital and
Primavera actions (described above) and the Johnston action (described below)
for pretrial purposes.
On March 19, 1998, plaintiffs' motion for class certification was denied.
On February 12, 1999, this action was consolidated with the Bambou and AIG
actions (described below) for pre-trial purposes.
(iv) Richard Johnston, et al. v. Askin Capital Management, L.P., et al.
On June 9, 1997, three purported investors in the Funds commenced an action in
the United States District Court for the Southern District of New York against
ACM and the Dealer Defendants. Plaintiffs' allegations are substantially similar
to those in the ABF Capital action (as modified by the Court's ruling on the
Dealer Defendants' motion to dismiss in that action). Plaintiffs seek recovery
of their investments (alleged to have been approximately $6 million) and
punitive damages in excess of $100 million from each defendant.
On August 18, 1997, Bear Stearns filed an answer to the complaint denying
liability and asserting affirmative defenses.
On October 27, 1997, this action was consolidated with the Primavera, ABF
Capital and Montpellier actions (described above) for pretrial purposes.
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On February 12, 1999, this action was consolidated with the Bambou and AIG
actions (described below) for pre-trial purposes.
(v) Bambou Inc., et al. v. David J. Askin, et al. On September 4, 1998,
an action was commenced in the United States District Court for the Southern
District of New York by four purported investors in the Funds against Askin, ACM
and the Dealer Defendants. Plaintiffs allege, among other things, that the Askin
Defendants committed fraud and that the Dealer Defendants aided and abetted
fraud. Plaintiffs seek to recover their investments in the Funds (alleged to
have been approximately $9 million) and punitive damages in unspecified amounts.
On September 24, 1998, Bear Stearns filed an answer to the complaint
denying liability and asserting affirmative defenses.
On February 12, 1999, this action was consolidated with the Primavera,
ABF Capital, Montpellier and Johnston actions (described above) and the AIG
action (described below) for pre-trial purposes.
(vi) AIG Managed Market Neutral Fund, et al. v. Askin Capital
Management, L.P., et al. On October 22, 1998, ten purported investors in the
Funds commenced an action in the United States District Court for the Southern
District of New York against Askin, ACM and the Dealer Defendants. Plaintiffs
allege, among other things, that the Dealer Defendants aided and abetted an
alleged fraud committed by the Askin Defendants and aided and abetted a breach
of fiduciary duty by ACM. Plaintiffs seek to recover their investments in the
Funds (alleged to have been approximately $39.5 million) and punitive damages in
excess of $1 billion from each Dealer Defendant.
On February 12, 1999, this action was consolidated with the Primavera, ABF
Capital, Montpellier, Johnston and Bambou actions (described above) for
pre-trial purposes.
(vii) Granite Partners, L.P., et al. v. Bear, Stearns & Co. Inc., et al.
On September 12, 1996, a Trustee appointed by the Bankruptcy Court filed an
adversary proceeding on behalf of the Funds against Bear Stearns and Bear
Stearns Capital Markets in the United States Bankruptcy Court for the Southern
District of New York.
On December 2, 1996, the reference of this case to the Bankruptcy Court
was withdrawn, and the case now is pending in the United States District Court
for the Southern District of New York. On March 3, 1997, the Bankruptcy Court
ordered that control of the litigation be transferred from the Trustee to a
Litigation Advisory Board (the "LAB") consisting of seven members, including
five purported investors in the Funds. On August 4, 1997, LAB filed an amended
complaint, which was dismissed on August 25, 1998, and on October 16, 1998 the
LAB filed a second amended complaint against Bear Stearns, Bear Stearns Capital
Markets, a Senior Managing Director of Bear Stearns, Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), a senior vice president of DLJ, and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The second amended complaint alleges, among other things, that one or more
defendants induced and participated in breaches of fiduciary duty by Askin and
ACM, tortiously interfered with contracts between the Funds and ACM, breached
their contracts with and duty to the Funds through improper margin calls and
liquidations, violated the Sherman Act and the Donnelly Act in connection with
allegedly collusive liquidations, tortiously interfered with contracts between
the Funds and other dealers, committed common law fraud, negligent
misrepresentation and innocent misrepresentation, and unjustly enriched
themselves. The complaint seeks compensatory and punitive damages in unspecified
amounts (there is alleged to have been approximately $400 million in equity
invested in the Funds prior to liquidation), rescission of the purchase price
paid by the Funds for certain securities, treble damages for the antitrust
claims, and restitution of certain profits and compensation earned by the
defendants in connection with the Funds.
On December 22, 1998, defendants moved to dismiss the second amended
complaint except for claims alleging breach of contract in connection with
improper margin calls and liquidations.
Bear Stearns has reached an agreement in principle to resolve these
litigations, subject to certain approvals, and is in the process of attempting
to conclude these settlements.
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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.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in this litigation and believes that it has substantial defenses to these
claims.
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 a second
amended class action complaint was filed on October 31, 1996. The defendants are
Bear Stearns, Oppenheimer & Co., Inc. ("Oppenheimer"), Lady Luck and several
directors and officers of Lady Luck. Bear Stearns and Oppenheimer are sued in
their capacities as co-lead underwriters of the IPO.
Plaintiffs' second 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 and Sections 10(b) and 20(a) of the Exchange
Act against Bear Stearns and Oppenheimer. Plaintiffs purport to represent a
class consisting of all persons who purchased shares of Lady Luck from September
29, 1993 to October 11, 1994.
On October 8, 1997, the court dismissed with prejudice all of plaintiffs'
claims under Sections 10(b) and 20(a) of the Exchange Act, and dismissed with
prejudice plaintiffs' claims under Sections 11, 12(2), and 15 of the Securities
Act with respect to eleven of sixteen alleged misrepresentations or omissions in
the Prospectus. Plaintiffs' claims with respect to the remaining five alleged
misrepresentations or omissions were dismissed without prejudice.
On November 6, 1997, plaintiffs filed a third amended complaint alleging
claims under Sections 11, 12(2) and 15 of the Securities Act on behalf of the
same purported class and against the same defendants as in the second amended
complaint. Compensatory damages in an unspecified amount are sought.
On November 4, 1998, the court granted defendants' motion to dismiss
plaintiffs' third amended complaint with respect to three of the alleged
misrepresentations and omissions on which plaintiffs' claims are based, and
denied the motion with respect to the remaining allegations in the complaint.
On November 15, 1998, plaintiffs filed a fourth amended complaint alleging
claims under Sections 11, 12(2) and 15 of the Securities Act on behalf of the
same purported class and against the same defendants as in the third amended
complaint. Compensatory damages in an unspecified amount are sought.
On February 5, 1999, defendants filed an answer to the fourth amended
complaint in which they denied liability and asserted affirmative defenses.
Bear Stearns has denied all allegations of wrongdoing asserted against it
in this litigation and believes that it has substantial defenses to these
claims.
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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 Anderson LLP, and certain present
and former directors and/or officers of McKesson HBOC, McKesson and/or HBOC. 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. Damages in an
unspecified amount are sought.
(ii) The Jack Cooper Investment Corp. v. McKesson HBOC, Inc., et al. On
June 29, 1999, a purported class action was commenced in the United States
District Court for the Northern District of California on behalf of all persons
who owned McKesson shares from November 27, 1998 through January 12, 1999 or who
held McKesson stock on January 12, 1999. Named as defendants are McKesson HBOC,
certain present and former directors and/or officers of McKesson HBOC, McKesson
and/or HBOC, Salomon Smith Barney, Inc., Bear Stearns, and Arthur Anderson LLP.
The complaint alleges, among other things, that defendants 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.
(iii) John B. Kelly, III, et al. v. McKesson HBOC, Inc., et al. On July
6, 1999, a purported class action was commenced in the Chancery Court of the
State of Delaware, New Castle County, on behalf of all persons who held McKesson
common stock on January 12, 1999. Named as defendants are McKesson HBOC, certain
present and former directors and/or officers of McKesson HBOC, McKesson and/or
HBOC, Salomon Smith Barney, Inc., Bear Stearns, and Arthur Anderson LLP. The
complaint alleges, among other things, that Bear Stearns aided and abetted a
breach of fiduciary duty 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.
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.
On August 5, 1999, the Bear Stearns defendants filed a motion to dismiss
all claims asserted against them in the complaint in this action.
- 24 -
(ii) Greenberg v. Bear, Stearns & Co. Inc., et al. On January 19, 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 & Co., Inc.
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.
On July 22, 1999, defendants filed a motion to dismiss the complaint.
(iii) Levitt, et al. v. Bear, Stearns & Co. Inc., 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.
On July 22, 1999, defendants filed a motion to dismiss the complaint.
(iv) Mihalevich v. Bear, Stearns & Co. Inc. On February 5, 1999, a
purported class action was commenced in the United States District Court for the
Western District of Missouri on behalf of all persons who, "within or from the
State of Missouri," purchased ML Direct, Inc. common stock or warrants through
Sterling Foster between September 4, 1996 and February 13, 1997. Named as
defendants are Bear Stearns and BSSC. The complaint alleges, among other things,
that the defendants violated the Missouri Securities Act and committed common
law fraud, constructive fraud, negligence and made negligent misrepresentations
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 approximately $287,758 and punitive
damages in an unspecified amount are sought.
On July 28, 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.
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 9, 1999, defendants filed a motion to dismiss the complaint.
* * *
- 25 -
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 results of
operations or the financial condition of the Company, taken as a whole.
Periodically, the Company also is involved in investigations and
proceedings by governmental, regulatory and self-regulatory agencies.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
- 26 -
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information as of September 15,
1999 concerning executive officers of the Company as of July 1, 1999.
Age as of
September 15, Principal Occupation
Name 1999 and Directorships Held
- ---- ---- ----------------------
Alan C. Greenberg.......... 72 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............. 65 President and Chief Executive
Officer of the Company and Bear
Stearns, member of the Executive
Committee
Mark E. Lehman............. 48 Executive Vice President and General
Counsel of the Company and Bear
Stearns and member of the Executive
Committee
Samuel L. Molinaro Jr...... 41 Senior Vice President - Finance and
Chief Financial Officer of the
Company and Bear Stearns
Marshall J Levinson........ 57 Controller of the Company
Michael Minikes............ 56 Treasurer of the Company and Bear
Stearns
- 27 -
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 Compan's inception until July 1993.
Mr. Cayne has been Chief Executive Officer of the Company and Bear Stearns
since July 1993. Mr. Cayne has been President of the Company 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. 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.
Mr. Levinson has been Controller of the Company since October 1998. Prior
thereto, Mr. Levinson was Chief Financial Officer and Chief Administrative
Officer of BSIL in London. Mr. Levinson was also in charge of the Company's
internal audit function and was a Senior Managing Director prior to September
1996.
Mr. Minikes has been Treasurer of the Company and Bear Stearns for more
than the past five years.
Officers serve at the discretion of the Board of Directors.
- 28 -
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.
- 29 -
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 1999 Annual
Meeting of Stockholders to be held on October 28, 1999, 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" of 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"
of the Proxy Statement, and is incorporated herein by reference.
- 30 -
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)).
- 31 -
(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) Management Compensation Plan, as amended and restated as of July 1,
1994 (incorporated by reference to Exhibit (10)(a)(4) to the
registrant's Annual Report on Form 10-K for its fiscal year ended
June 30, 1994).*
(10)(a)(2) Amendment to the Management Compensation Plan, adopted September
10, 1996 (incorporated by reference to Exhibit (10)(a)(5) to the
registrant's Annual Report on Form 10-K for its fiscal year ended
June 30, 1996).*
(10)(a)(3) Amendment to the Management Compensation Plan, adopted September
18, 1997 (incorporated by reference to Exhibit (10)(a)(5) to the
registrant's Annual Report on Form 10-K for its fiscal year ended
June 30, 1997).*
(10)(a)(4) Capital Accumulation Plan for Senior Managing Directors, as amended
and restated as of October 29, 1998 (the "CAP Plan") (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,
1998).*
(10)(a)(5) Performance Compensation Plan, as restated as of October 29, 1998
(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, 1998).*
(10)(a)(6) 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)(7) 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).
- 32 -
(11) Statement re: computation of per share earnings.
(12) Statement re: computation of ratio of earnings to fixed charges.
(13) 1999 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.
(27) Financial Data Schedule.
* 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:
A Current Report on Form 8-K, dated April 12, 1999 and filed April
15, 1999, pertaining to the registrant's results of operations for the
three months and nine months ended March 26, 1999.
A Current Report on Form 8-K, dated April 14, 1999 and filed April
15, 1999, pertaining to the declaration of dividends.
A Current Report on Form 8-K, dated June 28, 1999 and filed June 28,
1999, pertaining to an agreement-in-principle reached by Bear, Stearns
Securities Corp. with the Staff of the Securities and Exchange Commission.
- 33 -
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
September 1999.
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 September 1999.
NAME TITLE
---- -----
/s/ ALAN C. GREENBERG Chairman of the Board; Director
---------------------------
Alan C. Greenberg
/s/ JAMES E. CAYNE President and Chief Executive Officer
--------------------------- (Principal.Executive Officer); Director
James E. Cayne
/s/ CARL D. GLICKMAN Director
---------------------------
Carl D. Glickman
/s/ DONALD J. HARRINGTON Director
---------------------------
Donald J. Harrington
/s/ WILLIAM L. MACK Director
---------------------------
William L. Mack
/s/ FRANK T. NICKELL Director
---------------------------
Frank T. Nickell
/s/ FREDERIC V. SALERNO Director
---------------------------
Frederic V. Salerno
- 34 -
/s/ VINCENT TESE Director
---------------------------
Vincent Tese
/s/ FRED WILPON Director
---------------------------
Fred Wilpon
- 35 -
/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 of The Bear Stearns
--------------------------- Companies Inc. (Principal
Marshal J Levinson Accounting Officer)
- 36 -
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 75
THE BEAR STEARNS COMPANIES, INC.
- --------------------------------
(i) Consolidated Statements of Income--
fiscal years ended June 30, 1999, 1998 and 1997 55
(ii) Consolidated Statements of Financial Condition at
June 30, 1999, 1998 and 1997 56
(iii) Consolidated Statements of Cash Flows--
fiscal years ended June 30, 1999, 1998 and 1997 57
(iv) Consolidated Statements of Changes in
Stockholders' Equity--
fiscal years ended June 30, 1999, 1998 and 1997 58-59
(v) Notes to Consolidated Financial Statements 60-74
FINANCIAL STATEMENT SCHEDULES
- -----------------------------
Independent Auditors' Report F-2
I Condensed financial information of registrant F-3 - F-6
II Valuation and qualifying accounts F-7
* Incorporated by reference from the indicated pages of the 1999 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 LLP
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 June 30, 1999 and 1998, and for each of
the three years in the period ended June 30, 1999, and have issued our report
thereon dated August 23, 1999; 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.
DELOITTE & TOUCHE LLP
August 23, 1999
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 Fiscal Year Fiscal Year
Ended Ended Ended
June 30, June 30, June 30,
1999 1998 1997
----------- ----------- -----------
Revenues
Interest
Intercompany..................... $1,264,041 $1,300,087 $979,757
Coupon........................... - - 744
Other............................. 178,904 103,344 82,682
----------- ----------- -----------
1,442,945 1,403,431 1,063,183
----------- ----------- -----------
Expenses
Interest.......................... 1,500,137 1,471,042 1,039,461
Other............................. 91,620 98,872 86,844
----------- ----------- -----------
1,591,757 1,569,914 1,126,305
----------- ----------- -----------
Loss before benefit from income taxes
and equity in earnings of
subsidiaries (148,812) (166,483) (63,122)
Benefit from income taxes........... 34,823 62,467 23,206
----------- ----------- -----------
Loss before equity in earnings of
subsidiaries...................... (113,989) (104,016) (39,916)
Equity in earnings of subsidiaries.. 787,037 764,445 653,246
----------- ----------- -----------
Net income.......................... $ 673,048 $660,429 $613,330
=========== =========== ===========
Earnings per Share.................. $4.48 $4.38(1) $4.00(1)
=========== =========== ===========
(1) Adjusted for the 5% stock dividend declared on January 20, 1999.
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)
June 30, June 30,
1999 1998
------------ ------------
ASSETS
Cash ........................................... $ 19,277 $ 4
Receivables from subsidiaries................... 28,162,003 27,671,471
Investment in subsidiaries, at equity........... 5,148,922 4,351,399
Property, equipment and leasehold
improvements, net of accumulated
depreciation and amortization of
$588,730 in 1999 and $463,336 in
1998, respectively ........................... 373,414 382,749
Other Assets.................................... 1,046,431 877,418
------------ ------------
Total Assets ................................... $ 34,750,047 $ 33,283,041
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings........................... $13,510,102 $14,442,235
Payables to subsidiaries........................ 240,632 102,385
Other liabilities............................... 881,112 754,972
------------ -------------
14,631,846 15,299,592
------------ -------------
Long-term borrrowings........................... 14,626,673 13,295,952
------------ -------------
Long-term borrowings from subsidiaries.......... 536,019 395,964
------------ -------------
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; 176,011,113 and
167,784,941 shares issued in 1999
and 1998, respectively....................... 176,011 167,785
Paid-in capital................................. 2,269,927 1,963,788
Retained earnings............................... 1,931,957 1,590,574
Capital Accumulation Plan....................... 1,144,329 833,427
Treasury stock, at cost -
Adjustable Rate Cumulative Preferred Stock,
Series A; 2,520,750 shares at June 30,
1999 and 1998, respectively.................. (103,421) (103,421)
Common stock; 56,333,508 and 50,639,294
shares at June 30, 1999 and 1998,
respectively................................. (1,263,294) (953,506)
Note receivable from ESOP Trust ................ -- (7,114)
------------ -------------
Total Stockholders' Equity...................... 4,955,509 4,291,533
============ =============
Total Liabilities and Stockholders' Equity...... $ 34,750,047 $ 33,283,041
============ =============
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 Fiscal Fiscal
Year Year Year
Ended Ended Ended
June 30, June 30, June 30,
1999 1998 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................... $ 673,048 $ 660,429 $ 613,330
Adjustments to reconcile net income to
cash used in operating activities:
Equity in earnings of subsidiaries, net
of dividends received ......................... (656,715) (448,805) (279,147)
Other ........................................... 136,896 109,735 84,658
Increases (decreases) in assets:
Receivables from subsidiaries ................. (490,532) (6,306,236) (6,058,415)
Investments in subsidiaries, net .............. (140,808) (266,080) (398,930)
Other assets .................................. (145,849) 44,578 (513,631)
Increases (decreases) in liabilities:
Payables to subsidiaries ...................... 138,247 53,466 24,564
Other liabilities ............................. 122,121 (154,168) 542,957
----------- ----------- -----------
Cash Used in Operating Activities ............... (363,592) (6,307,081) (5,984,614)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) proceeds from
short-term borrowings ......................... (932,133) 946,029 3,965,003
Net proceeds from issuance of long-term
borrowings ...................................... 4,179,637 7,045,745 3,129,439
Increase in long-term borrowings from
subsidiaries .................................... 140,055 6,122 198,973
Issuance of Preferred Stock ..................... - 650,000 -
Redemption of Preferred Stock ................... - (287,500) -
Capital Accumulation Plan ....................... 483,260 259,816 196,114
Tax Benefit of Common Stock
distributions ................................... 92,893 86,968 4,006
Note repayment from ESOP Trust .................. 7,114 6,587 6,099
Payments for:
Retirement of long-term borrowings............. (2,846,752) (1,881,841) (1,062,844)
Treasury Stock purchases ...................... (482,818) (258,036) (202,296)
Cash dividends paid ............................. (107,666) (97,990) (93,784)
----------- ----------- -----------
Cash provided by financing activities ........... 533,590 6,475,900 6,140,710
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, equipment and
leasehold improvement ......................... (127,561) (169,527) (124,590)
Purchases of investment securities and
other assets .................................... (26,290) (4,769) (46,706)
Proceeds from sale of investment
securities and other assets ................... 3,126 5,402 12,496
----------- ----------- -----------
Cash used in investing activities ............... (150,725) (168,894) (158,800)
----------- ----------- -----------
Net increase (decrease) in cash ................. 19,273 (75) (2,704)
Cash, beginning of year ......................... 4 79 2,783
----------- ----------- -----------
Cash, end of year ............................... $ 19,277 $ 4 $ 79
=========== =========== ===========
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 the notes thereto incorporated by
reference in this report.
2. Dividends Received from Subsidiaries
The Company received from its consolidated subsidiaries cash dividends of
$132.3 million, $315.6 million, and $374.1 million for the fiscal years
ended June 30, 1999, 1998 and 1997, respectively.
3. Statement of Cash Flows
Income taxes paid (consolidated) totaled $223.2 million, $459.7 million,
and $478.4 million in the fiscal years ended June 30, 1999, 1998 and 1997,
respectively. Cash payments for interest approximated interest expense for
the fiscal years ended June 30, 1999, 1998 and 1997, respectively.
4. Preferred Stock
The Company has issued several series of preferred stock. Preferred stock
outstanding as of June 30, 1999 and 1998 were as follows:
In thousands, except share data
JUNE 30, 1999 JUNE 30, 1998
Adjustable Rate Cumulative
Preferred Stock, Series A; $50
liquidation preference; 3,000,000
shares issued....................... $ 150,000 $ 150,000
Cumulative Preferred Stock, Series
E; $200 liquidation preference;
1,250,000 shares issued and
outstanding......................... 250,000 250,000
Cumulative Preferred Stock, Series
F; $200 liquidation preference;
1,000,000 shares issued and
outstanding......................... 200,000 200,000
Cumulative Preferred Stock, Series
G; $200 liquidation preference;
1,000,000 shares issued and
outstanding......................... 200,000 200,000
--------- ---------
Total Preferred Stock $ 800,000 $ 800,000
========= =========
F-6
SCHEDULE II
THE BEAR STEARNS COMPANIES INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(In thousands)
Balance at Balance at
Beginning of End of
Description Period Increases Deductions Period
- ----------- ------ --------- ---------- ------
Allowance for Doubtful Accounts:
Year ended June 30, 1999 ...... $ 53,361 $ 12,198 $(30,041) $ 35,518
Year ended June 30, 1998 ...... 51,399 2,619 (657) 53,361
Year ended June 30, 1997 ...... 50,649 4,916 (4,166) 51,399
F-7
EXHIBITS INDEX
NO. DESCRIPTION
--- -----------
(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) Management Compensation Plan, as amended and restated as of July 1,
1994 (incorporated by reference to Exhibit (10)(a)(4) to the
registrant's Annual Report on Form 10-K for its fiscal year ended
June 30, 1994).*
(10)(a)(2) Amendment to the Management Compensation Plan, adopted September
10, 1996 (incorporated by reference to Exhibit (10)(a)(5) to the
registrant's Annual Report on Form 10-K for its fiscal year ended
June 30, 1996).*
(10)(a)(3) Amendment to the Management Compensation Plan, adopted September
18, 1997 (incorporated by reference to Exhibit (10)(a)(5) to the
registrant's Annual Report on Form 10-K for its fiscal year ended
June 30, 1997).*
(10)(a)(4) Capital Accumulation Plan for Senior Managing Directors, as amended
and restated as of October 29, 1998 (the "CAP Plan") (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,
1998).*
(10)(a)(5) Performance Compensation Plan, as restated as of October 29, 1998
(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, 1998).*
(10)(a)(6) 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)(7) 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).
(11) Statement re: computation of per share earnings.
(12) Statement re: computation of ratio of earnings to fixed charges.
(13) 1999 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.
(27) Financial Data Schedule.
* Executive Compensation Plans and Arrangements