-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GslYIZMxpZ8RWPQqPxgEieIrRx9UsWX4wgPJv9IEx8LUXJkOBGt7k6G83EmjTL1k yfzjplrXzuzXbXUrCCJ6wA== 0000947871-10-000482.txt : 20100415 0000947871-10-000482.hdr.sgml : 20100415 20100415170728 ACCESSION NUMBER: 0000947871-10-000482 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20100415 DATE AS OF CHANGE: 20100415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH, PIERCE, FENNER & SMITH INC. CENTRAL INDEX KEY: 0000728612 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 333-78575 FILM NUMBER: 10752685 BUSINESS ADDRESS: STREET 1: 4 WORLD FINANCIAL CENTER STREET 2: NORTH TOWER CITY: NEW YORK STATE: NY ZIP: 10080 BUSINESS PHONE: 2126702273 MAIL ADDRESS: STREET 1: 4 WORLD FINANCIAL CENTER STREET 2: NORTH TOWER CITY: NEW YORK STATE: NY ZIP: 10080 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH PIERCE FENNER & SMITH INC DATE OF NAME CHANGE: 19920929 POS AM 1 ss87928_posam-internet.htm POST-EFFECTIVE AMENDMENT NO. 12
As filed with the Securities and Exchange Commission on April 15, 2010
Registration No. 333-78575


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
 
POST-EFFECTIVE AMENDMENT NO. 12
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________
 
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Initial Depositor
(Exact name of registrant as specified in charter)
__________
 
Internet HOLDRSSM Trust
[Issuer with respect to the receipts]
 
Delaware
6211
13-5674085
     
(State or other jurisdiction of incorporation or
organization)
(Primary Standard Industrial Classification
Code Number)
(I.R.S. Employer Identification
Number)
__________
 
One Bryant Park
New York, New York 10036
(212) 449-1000
(Address, including zip code, and telephone number, including area code, of
registrant’s principal executive offices)
__________
 
Copies to:
Merrill Lynch, Pierce, Fenner & Smith Incorporated
One Bryant Park
New York, New York 10036
(212) 449-1000
Attn:  Corporate Secretary
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
  
Andrew B. Jánszky, Esq.
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
(212) 848-4000

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  x
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨
 



PROSPECTUS
 
 
1,000,000,000 Depositary Receipts
Internet HOLDRSSM Trust
 
The Internet HOLDRSSM Trust issues Depositary Receipts called Internet HOLDRSSM representing your undivided beneficial ownership in the common stock of a group of specified companies that are involved in various segments of the Internet industry.  The Bank of New York Mellon is the trustee.  You only may acquire, hold or transfer Internet HOLDRSSM in a round-lot amount of 100 Internet HOLDRSSM or round-lot multiples.  Internet HOLDRSSM are separate from the underlying deposited common stock that are represented by the Internet HOLDRSSM.  For a list of the names and the number of shares of the companies that make up an Internet HOLDRSM, see “Highlights of Internet HOLDRS—The Internet HOLDRS” in this prospectus.  The Internet HOLDRSSM trust will issue Internet HOLDRSSM on a continuous basis.
Investing in Internet HOLDRSSM involves significant risks.  See Risk Factors” starting on page 4.
 
Internet HOLDRSSM are neither interests in nor obligations of Merrill Lynch, Pierce, Fenner & Smith Incorporated or any of its affiliates.  Internet HOLDRSSM are not interests in The Bank of New York Mellon, as trustee.  Please see “Description of the Depositary Trust Agreement” in this prospectus for a more complete description of the duties and responsibilities of the trustee, including the obligation of the trustee to act without negligence or bad faith.
 
The Internet HOLDRSSM are listed on the NYSE Arca under the symbol “HHH.”  On April 5, 2010, the last reported sale price of the Internet HOLDRSSM on the NYSE Arca was $60.86.
 
__________
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.
 
__________
 
The date of this prospectus is April 15, 2010.
“HOLDRS” and “HOLding Company Depositary ReceiptS” are service marks of Bank of America Corporation.
 
 
 

 
TABLE OF CONTENTS
 
Page
 
SUMMARY
3
RISK FACTORS
4
HIGHLIGHTS OF INTERNET HOLDRS
9
THE TRUST
17
DESCRIPTION OF INTERNET HOLDRS
17
DESCRIPTION OF THE UNDERLYING SECURITIES
18
DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT
20
U.S. FEDERAL INCOME TAX CONSEQUENCES
24
ERISA CONSIDERATIONS
29
PLAN OF DISTRIBUTION
29
LEGAL MATTERS
29
WHERE YOU CAN FIND MORE INFORMATION
29
__________
 
This prospectus contains information you should consider when making your investment decision.  With respect to information about Internet HOLDRS, you should rely only on the information contained in this prospectus.  We have not authorized any other person to provide you with different information.  If anyone provides you with different or inconsistent information, you should not rely on it.  We are not making an offer to sell Internet HOLDRS in any jurisdiction where the offer or sale is not permitted.
 
The Internet HOLDRS are not registered for public sale outside of the United States.  Non-U.S. receipt holders should refer to “U.S. Federal Income Tax Consequences—Non-U.S. receipt holders” and we recommend that non-U.S. receipt holders consult their tax advisors regarding U.S. withholding and other taxes which may apply to ownership of the Internet HOLDRS or of the underlying securities through an investment in the Internet HOLDRS.
 
 
 
 
 
2

 
SUMMARY
 
The Internet HOLding Company Depositary ReceiptS or HOLDRS Trust was formed under the depositary trust agreement, dated as of September 2, 1999, among The Bank of New York Mellon, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Internet HOLDRS.  The depositary trust agreement was amended on November 22, 2000.  The trust is not a registered investment company under the Investment Company Act of 1940.
The number of shares of each company’s common stock currently held by the trust with respect to each round-lot of Internet HOLDRS is specified under “Highlights of Internet HOLDRS—The Internet HOLDRS.”  This group of common stock, and the securities of any company that may be added to the Internet HOLDRS, are collectively referred to in this prospectus as the common stock, the securities or the underlying securities.  The companies included in the Internet HOLDRS may change as a result of reconstitution events, distributions of securities by underlying issuers or other events. See “Description of the Depositary Trust Agreement—Reconstitution events” for an explanation of these events.  The Internet HOLDRS are separate from the deposited underlying common stock that are represented by the Internet HOLDRS.  On April 5, 2010, there were 2,323,000 Internet HOLDRS outstanding.
 
 
 
 
 
 
 
 
 
 
 
3

 
RISK FACTORS
 
An investment in Internet HOLDRS involves risks similar to investing directly in each of the underlying securities outside of the Internet HOLDRS, including the risks associated with a concentrated investment in the Internet industry.
 
General Risk Factors
 
 
·
Loss of investment.  Because the value of Internet HOLDRS directly relates to the value of the underlying securities, you may lose all or a substantial portion of your investment in the Internet HOLDRS if the underlying securities decline in value.
 
 
·
Discount trading price.  Internet HOLDRS may trade at a discount to the aggregate value of the underlying securities.
 
 
·
Ownership of only fractional shares in the underlying securities.  As a result of distributions of securities by companies included in the Internet HOLDRS or other corporate events, such as mergers, an Internet HOLDR may represent an interest in a fractional share of an underlying security.  You will only be entitled to voting, distribution and other beneficial ownership rights in the underlying securities in which you own only fractional shares to the extent that the depositary aggregates your fractional shares with the other fractional shares of such underlying securities included in the Internet HOLDRS and passes on beneficial ownership rights, including distribution and voting rights, to you based on your proportional, fractional shares in the underlying securities.  In addition, if you surrender your Internet HOLDRS to receive the underlying securities you will receive cash in lieu of your fractional shares.  You will not be entitled to any securities if your interest in an underlying security is only a fraction of a share.
 
·
Not necessarily representative of the Internet industry.  At the time of the initial offering on September 22, 1999, the companies included in the Internet HOLDRS were generally considered to be involved in various segments of the Internet industry; however, since the time of the initial offering, the companies included in the Internet HOLDRS may not be involved in the Internet industry.  In this case, the Internet HOLDRS may not consist of securities issued only by companies involved in the Internet industry.  In addition, the market price of the underlying securities and the Internet HOLDRS may not necessarily follow the price movements of the entire Internet industry generally.  If the underlying securities decline in value, your investment in the Internet HOLDRS will decline in value, even if common stock prices of companies in the Internet industry generally increase in value.
 
·
Not necessarily comprised of solely Internet companies.  As a result of distributions of securities by companies included in the Internet HOLDRS or other corporate events, such as mergers, securities of companies that are not currently included in the Internet HOLDRS and that are not involved in the Internet industry may be included in the Internet HOLDRS.  The securities of a new company will only be distributed from the Internet HOLDRS if the securities have a different Standard & Poor’s Corporation (“Standard & Poor’s”) sector classification than any of the underlying issuers included in Internet HOLDRS at the time of the distribution or the corporate event or if the securities are not listed for trading on a U.S. national securities exchange.  As of January 2, 2002, Standard & Poor’s Corporation sector classifications are based upon the Standard & Poor’s Global Industry Classification Standard (“GICS”) sectors.  As there are only 10 broadly defined GICS sector classifications, the use of GICS sectors to determine whether a new company will be included in the Internet HOLDRS provides no assurance that each new company included in, or whether the securities of a new company are distributed from, the Internet HOLDRS will be involved in the Internet industry.  Currently, the underlying securities included in the Internet HOLDRS are represented in the Consumer Discretionary, Financials and Information Technology GICS sectors.  As each Standard & Poor’s GICS sector is defined very broadly, the securities of a new company could have the same GICS sector classification as a company currently included in the Internet HOLDRS yet not be involved in the Internet industry.  In addition, the GICS sector classifications of securities included in the Internet HOLDRS may change over time if the companies that issued these securities change their focus of operations resulting in a
 
4

 
 
 
change to a GICS sector classification or if Standard & Poor’s alters the criteria it uses to determine GICS sectors, or both.  Therefore, additional GICS sectors may be represented in the Internet HOLDRS, which may also result in the inclusion in the Internet HOLDRS of the securities of a new company that is not involved in the Internet industry.
 
 
·
No investigation of underlying securities.  The underlying securities initially included in the Internet HOLDRS were selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated based on the market capitalization of the issuers and the market liquidity of common stock in the Internet industry, without regard for the value, price performance, volatility or investment merit of the underlying securities.  Consequently, the Internet HOLDRS Trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and each of their respective affiliates, have not performed, and will not in the future perform, any investigation or review of the selected companies, including the public filings by the companies.  Investors and market participants should not conclude that the inclusion of a company is any form of investment recommendation by the trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or their respective affiliates.
 
·
Loss of diversification.  As a result of industry developments, reorganizations or market fluctuations affecting issuers of the underlying securities, Internet HOLDRS may not necessarily be a diversified investment in the Internet industry.  In addition, reconstitution events, distributions of securities by an underlying issuer or other events, which may result in distributions of securities from, or the inclusion of additional securities in, the Internet HOLDRS may also reduce diversification.  As a result, Internet HOLDRS may represent a concentrated investment in one or more of the underlying securities, which would reduce investment diversification and increase your exposure to the risks of concentrated investments.
 
·
Conflicting investment choices.  In order to sell one or more of the underlying securities individually, participate in any form of stock repurchase program by an issuer of an underlying security, or participate in a tender offer relating to one or more of the underlying securities, you will be required to cancel your Internet HOLDRS and receive delivery of each of the underlying securities, including those underlying securities that you may not want to sell or are not subject to a tender offer or repurchase offer.  The cancellation of your Internet HOLDRS will allow you to sell individual underlying securities or to deliver individual underlying securities in a tender offer or any form of stock repurchase program.  The cancellation of Internet HOLDRS will involve payment of a cancellation fee to the trustee.
 
·
Trading halts.  Trading in Internet HOLDRS on the NYSE Arca may be halted if (i) the Internet HOLDRS has fewer than the required number of record and/or beneficial holders for 30 or more consecutive trading days; (ii) the number of Internet HOLDRS issued and outstanding falls below levels prescribed by the NYSE Arca; (iii) the market value of all Internet HOLDRS issued and outstanding falls below levels prescribed by the NYSE Arca; or (iv) any other event shall occur or conditions exists which, in the opinion of the NYSE Arca, makes further dealings on the NYSE Arca inadvisable.  If trading is halted in Internet HOLDRS, you will not be able to trade Internet HOLDRS and you will only be able to trade the underlying securities if you cancel your Internet HOLDRS and receive each of the underlying securities.
 
·
Delisting from the NYSE Arca.  The NYSE Arca may consider delisting the Internet HOLDRS if (i) the Internet HOLDRS has fewer than the required number of record and/or beneficial holders for 30 or more consecutive trading days; (ii) the number of Internet HOLDRS issued and outstanding falls below levels prescribed by the NYSE Arca; (iii) the market value of all Internet HOLDRS issued and outstanding falls below levels prescribed by the NYSE Arca; or (iv) any other event shall occur or conditions exists which, in the opinion of the NYSE Arca, makes further listing of the Internet HOLDRS on the NYSE Arca inadvisable.  If the Internet HOLDRS are delisted by the NYSE Arca, a termination event will result unless the Internet HOLDRS are listed for trading on another U.S. national securities exchange within five business days from the date the Internet HOLDRS are delisted.
 
5

 
 
·
Possible conflicts of interest.  Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, selected the underlying securities that were originally included in the Internet HOLDRS and may face possible conflicts of interest in connection with its activities.  For example, Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates may provide investment banking or other services for issuers of the underlying securities in connection with its business.
 
 
·
Delays in distributions.  The depositary trust agreement provides that the trustee will use its reasonable efforts to distribute any cash or other distributions paid in respect of the underlying securities to you as soon as practicable after receipt of such distribution.  You may, however, receive such cash or other distributions later than you would if you owned the underlying securities outside of the Internet HOLDRS.  In addition, you will not be entitled to any interest on any distribution by reason of any delay in distribution by the depositary.
 
Risk Factors Specific to the Internet Industry
 
 
·
The stock prices of companies involved in the Internet industry have been and will likely continue to be volatile, which will directly affect the price volatility of the Internet HOLDRS, and you could lose all or a substantial part of your investment.  The trading prices of the common stock of Internet companies included in the Internet HOLDRS have been volatile.  These stock prices could be subject to wide fluctuations in response to a variety of factors, including the following:
 
 
general market fluctuations;
 
 
actual or anticipated variations in companies’ quarterly operating results;
 
 
announcements of technological innovations or new services offered by competitors of the companies included in the Internet HOLDRS;
 
 
changes in financial estimates by securities analysts;
 
 
conditions or trends in the Internet and online commerce industries;
 
 
conditions or trends in online securities trading;
 
 
changes in the market valuations of Internet or online service companies;
 
 
developments in Internet regulations;
 
 
legal or regulatory developments affecting companies included in the Internet HOLDRS or in the Internet industry;
 
 
announcements by Internet companies or their competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
 
 
unscheduled system downtime;
 
 
additions or departures of key personnel;
 
 
sales of Internet companies’ common stock or other securities in the open market; and
 
 
difficulty in obtaining additional financing.
 
In addition, the trading prices of Internet stocks in general have experienced price and volume fluctuations.  These fluctuations often have been and may in the future be unrelated or disproportionate to the operating performance of these companies.  The valuations of many Internet stocks are high when measured by conventional valuation standards such as price to earnings and price to sales ratios.  Some of the companies do not or in the future might not have earnings.  As a result, these trading prices may decline substantially and valuations may not be sustained.  Any negative change in the
 
6

 
public’s perception of the prospects of Internet or electronic commerce companies, generally, could depress the stock prices of an Internet company regardless of Internet companies’ results.  The sharp decline in the market price of many Internet and Internet-related companies since early 2000 is an example of this effect.  Other broad market and industry factors may decrease the stock price of Internet stocks, regardless of their operating results.  Market fluctuations, as well as general political and economic conditions such as recession, war or interest rate or currency rate fluctuations, also may decrease the market price of Internet stocks.  Current economic conditions have adversely affected employment and other significant elements of the economy that drive productivity and the financial strength of businesses.  These economic conditions could have a material adverse effect on the financial condition and results of operations of companies whose common stock are included in Internet HOLDRS.
 
As a result of fluctuations in the trading prices of the companies included in the Internet HOLDRS, the trading price of an Internet HOLDR has fluctuated significantly.  The initial offering price of an Internet HOLDR, on September 22, 1999, was $108.25 and during 2009, the price of an Internet HOLDR reached a high of $60.10 and a low of $28.37.
 
 
·
Internet companies must keep pace with rapid technological change to remain competitive.  The Internet market is characterized by rapidly changing technology, evolving industry standards and practices, frequent new product and service introductions and enhancements and changing customer demands.  Internet companies’ success therefore will depend on their ability to adapt to rapidly changing technologies, to adapt their services to evolving industry standards and to continually improve the performance, features and reliability of their products.  Failure to adapt to such changes would harm their businesses.  In addition, the widespread adoption of new Internet, networking or telecommunications technologies or other technological changes could require substantial expenditures to modify or adapt their services or infrastructure.  The online commerce market, particularly over the Internet, is new, rapidly evolving and intensely competitive, and this competition is expected to intensify in the future.  Barriers to entry are minimal, and companies can launch new sites and services at a relatively low cost.
 
 
·
The ability of an Internet company to obtain, maintain or increase market share depends on timely introduction and market acceptance of new products offered by Internet companies.  The Internet industry is characterized by rapidly changing technology, evolving industry standards and practices, frequent new product and service introductions and enhancements and changing customer demands.  The success of many Internet companies will depend on their ability to adapt to rapidly changing technologies, to adapt their services to evolving industry standards and to continually improve performance, features and the reliability of their products.  Internet companies must also quickly develop, introduce and deliver their products and services, or incur the risk that their competitors will introduce the same or similar products or services or products or services which could make their product obsolete.  Many Internet companies may not successfully introduce new products or services, develop and maintain a loyal customer base or achieve general market acceptance for their products or services, and failure to do so could have a material adverse effect on their business, result of operations and financial condition.
 
 
·
Some Internet companies are developing strategies to generate additional revenues for their products and services internationally and if these strategies fail it could result in slower revenue growth and losses.  Some Internet companies believe that they must expand their international sales activities to be successful as usage of the Internet increases globally.  The expansion to international markets will require significant management attention and financial resources to develop and expand international sales and marketing activities; however, some Internet companies cannot be certain that investments in establishing operations in other countries will produce anticipated revenues as they have limited experience marketing products and services internationally.
 
·
New laws and regulations with respect to the Internet could impede its commercial development and adversely affect the business of Internet companies.  Due to the popularity and widespread use of the Internet and other online services, it is possible that a number of laws and regulations may be adopted
 
7

 
 
 
with respect to the Internet or other online services covering issues such as user privacy, pricing, content, copyrights, distribution and characteristics and quality of products and services that may adversely affect the business of Internet companies.  Furthermore, the growth and development of the market for online interaction and commerce may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies conducting business online.  The adoption of any additional laws or regulations may impede the growth of the Internet or other online services which could have a material adverse effect on the business, results of operations and financial condition of many companies included in the Internet HOLDRS.
 
 
·
Inability to manage rapid growth could adversely affect systems, management resources and revenues.  Some Internet companies are, or plan to begin, rapidly expanding their operations.  Success of the marketing strategies of many of these companies will place extraordinary demands on their network infrastructure and technical support.  This expansion has placed and will continue to place a significant strain on the financial, operational, management, marketing, and sales systems and resources of many Internet companies.  There can be no assurance that these companies will complete the necessary improvements to their systems, procedures and controls necessary to support their future operations in a timely manner or that management will be able to hire, train, retain and manage required personnel to manage such rapid growth.
 
 
·
Many Internet companies are dependent on their ability to continue to attract and retain highly skilled technical and managerial personnel to develop and generate their business.  Many Internet companies are highly dependent on the experience, abilities and continued services of key executive officers and key technical personnel.  If these companies lose the services of any of these officers or key technical personnel, their future success could be undermined.  Competition for personnel has been and may continue to be intense.  There is no certainty that the companies included in the Internet HOLDRS will be able to continue to attract and retain qualified personnel.
 
 
·
Companies whose securities are included in the Internet HOLDRS may need additional financing, which may be difficult to obtain.  Failure to obtain necessary financing or doing so on unattractive terms could adversely affect development and marketing efforts and other operations of companies whose securities are included in the Internet HOLDRS.  Companies whose securities are included in the Internet HOLDRS may need to raise additional capital in order to fund the continued development and marketing of their products or to fund strategic acquisitions or investments.  Their ability to obtain additional financing will depend on a number of factors, including market conditions, operating performance and investor interest.  These factors may make the timing, amount, terms and conditions of any financing unattractive.  If adequate funds are not available or are not available on acceptable terms, companies whose securities are included in the Internet HOLDRS may have to forego strategic acquisitions or investments, reduce or defer their development activities, delay their introduction of new products and services or terminate operations completely.  Any of these actions may reduce the market price of stocks in the Internet industry.
 
 
 
 
 
 
 
 
 
 
 
 
8

 
HIGHLIGHTS OF INTERNET HOLDRS
 
This discussion highlights information regarding Internet HOLDRS.  We present certain information more fully in the rest of this prospectus.  You should read the entire prospectus carefully before you purchase Internet HOLDRS.
 
Issuer
Internet HOLDRS Trust
   
The trust
The Internet HOLDRS Trust was formed under the depositary trust agreement, dated as of September 2, 1999, among The Bank of New York Mellon, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Internet HOLDRS. The depositary trust agreement was amended on November 22, 2000.  The trust is not a registered investment company under the Investment Company Act of 1940.
   
Initial depositor
Merrill Lynch, Pierce, Fenner & Smith Incorporated
   
Trustee
The Bank of New York Mellon, a New York state-chartered banking organization, is the trustee and receives compensation as set forth in the depositary trust agreement.  The trustee is responsible for receiving deposits of underlying securities and delivering Internet HOLDRS representing the underlying securities issued by the trust.  The trustee holds the underlying securities on behalf of the holders of Internet HOLDRS.
   
Purpose of Internet HOLDRS
Internet HOLDRS were designed to achieve the following:
   
 
Diversification.  Internet HOLDRS were initially designed to allow you to diversify your investments in the Internet industry through a single, exchange-listed instrument representing your undivided beneficial ownership of the underlying securities.  See “Risk Factors—General Risk Factors.”
   
 
Flexibility.  The beneficial owners of Internet HOLDRS have undivided beneficial ownership interests in each of the underlying securities represented by the Internet HOLDRS, and can cancel their Internet HOLDRS to receive each of the underlying securities represented by the Internet HOLDRS.
   
 
Transaction costs.  The expenses associated with buying and selling Internet HOLDRS in the secondary market are expected to be less than separately buying and selling each of the underlying securities in a traditional brokerage account with transaction-based charges.
   
Trust assets
The trust holds shares of common stock issued by specified companies that, when initially selected, were involved in the Internet industry.  Except when a reconstitution event, distribution of securities by an underlying issuer or other event occurs, the underlying securities will not change and the securities of a new company will not be added to the securities underlying the Internet HOLDRS.  Reconstitution events are described in this prospectus under the heading “Description of the Depositary Trust Agreement—Distributions” and “—Reconstitution events.”
   
 
The trust’s assets may increase or decrease as a result of in-kind deposits and withdrawals of the underlying securities during the life
 
9

 
  of the trust.
   
The Internet HOLDRS
The trust has issued, and may continue to issue, Internet HOLDRS that represent an undivided beneficial ownership interest in the shares of common stock that are held by the trust on your behalf.
   
 
The following table provides:
 
 
·
the names of the issuers of the underlying securities currently represented by the Internet HOLDRS;
     
 
·
the stock ticker symbols;
     
 
·
the share amounts currently represented by a round-lot of 100 Internet HOLDRS; and
     
 
·
the principal market on which the shares of common stock of the selected companies are traded.

 
Name of Company
 
Ticker
 
Share Amounts
 
Primary
Trading
Market
Amazon.com, Inc.
 
AMZN
 
18.0000
 
NASDAQ GS
AOL Inc.(1)
 
AOL
 
1.2727
 
NYSE
E*TRADE Financial Corporation
 
ETFC
 
12.0000
 
NASDAQ GS
EarthLink, Inc.
 
ELNK
 
6.2300
 
NASDAQ GS
eBay Inc.
 
EBAY
 
48.0000
 
NASDAQ  GS
McAfee, Inc.
 
MFE
 
7.0000
 
NYSE
ModusLink Global Solutions, Inc.
 
MLNK
 
1.0000
 
NASDAQ GS
priceline.com Incorporated
 
PCLN
 
1.1667
 
NASDAQ GS
RealNetworks, Inc.
 
RNWK
 
8.0000
 
NASDAQ GS
TD AMERITRADE Holding Corporation
 
AMTD
 
9.0000
 
NASDAQ GS
Time Warner Cable Inc.(2) (3)
 
TWC
 
3.5141
 
NYSE
Time Warner Inc.
 
TWX
 
14.0000
 
NYSE
Yahoo! Inc.
 
YHOO
 
52.0000
 
NASDAQ GS

________________
(1) As a result of the spin-off of AOL Inc. from Time Warner Inc., a constituent of the Internet HOLDRS Trust, AOL Inc. was added as an underlying security of the Internet HOLDRS Trust effective December 15, 2009.  Shareholders of Time Warner Inc. received 0.0909 shares of AOL Inc. for each share of Time Warner Inc.  The Bank of New York Mellon received 1.2727 shares of AOL Inc. for the 14 shares of Time Warner Inc. per 100 share round-lot of Internet HOLDRS.  Effective December 15, 2009, 1.2727 shares of AOL Inc. were required for creations, or delivered in connection with the cancellations, of each 100 share round-lot of Internet HOLDRS.

(2) On April 2, 2009, as a result of the spin-off of Time Warner Cable Inc. from Time Warner Inc., a component of the Internet HOLDRS Trust, Time Warner Cable Inc. was added as an underlying security of the Internet HOLDRS Trust.  Shareholders of Time Warner Inc. received 0.083670 shares of Time Warner Cable Inc.  The Bank of New York Mellon received 3.51414 shares of Time Warner Cable Inc. for the 42 shares of Time Warner Inc. per 100 share round-lot of Internet HOLDRS.  After the distribution, Time Warner Inc. underwent a reverse 1 for 3 stock split.  Effective April 2, 2009, 3.51414 shares of Time Warner Cable Inc. were required for creations, or delivered in connection with the cancellations, of each 100 round-lot of Internet HOLDRS and 14 shares of Time Warner Inc. were required for creations, or delivered in connection with the cancellations, of each 100 round-lot of Internet HOLDRS.

 
The companies whose common stock were initially included in the Internet HOLDRS at the time Internet HOLDRS were originally issued on September 22, 1999 were generally considered to be among the largest and most liquid companies involved in the Internet industry as measured by market capitalization and trading volume on August 31, 1999.  The market capitalization of a company is determined by multiplying the market price of its common stock by
 
10

 
  the number of outstanding shares of its common stock.
   
 
The trust will only issue and cancel, and you may only obtain, hold, trade or surrender, Internet HOLDRS in a round-lot of 100 Internet HOLDRS and round-lot multiples.  The trust will only issue Internet HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 Internet HOLDRS.  In the event that a fractional share comes to be represented by a round-lot of Internet HOLDRS, the trust may require a minimum of more than one round-lot of 100 Internet HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Internet HOLDRS.
   
 
The number of outstanding Internet HOLDRS will increase and decrease as a result of in-kind deposits and withdrawals of the underlying securities.  The trust will stand ready to issue additional Internet HOLDRS on a continuous basis when an investor deposits the required shares of common stock with the trustee.
   
Purchases
You may acquire Internet HOLDRS in two ways:
 
 
·
through an in-kind deposit of the required number of shares of common stock of the underlying issuers with the trustee; or
     
 
·
through a cash purchase in the secondary trading market.
 
Issuance and cancellation fees
If you wish to create Internet HOLDRS by delivering to the trust the requisite shares of common stock represented by a round-lot of 100 Internet HOLDRS, The Bank of New York Mellon, as trustee, will charge you an issuance fee of up to $10.00 for each round-lot of 100 Internet HOLDRS.  If you wish to cancel your Internet HOLDRS and withdraw your underlying securities, The Bank of New York Mellon, as trustee, will charge you a cancellation fee of up to $10.00 for each round-lot of 100 Internet HOLDRS.
   
Commissions
If you choose to deposit underlying securities in order to receive Internet HOLDRS, you will be responsible for paying any sales commission associated with your purchase of the underlying securities that is charged by your broker in addition to the issuance fee charged by the trustee that is described above.
   
Custody fees
The Bank of New York Mellon, as trustee and as custodian, will charge you a quarterly custody fee of $2.00 for each round-lot of 100 Internet HOLDRS, to be deducted from any cash dividend or other cash distributions on underlying securities received by the trust.  With respect to the aggregate custody fee payable in any calendar year for each Internet HOLDR, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year.
   
Rights relating to Internet HOLDRS
You have the right to withdraw the underlying securities upon request by delivering a round-lot or integral multiple of a round-lot of Internet HOLDRS to the trustee, during the trustee’s business hours, and paying the cancellation fees, taxes and other charges.  You should receive the underlying securities no later than the business day after the trustee receives a proper notice of cancellation.  The trustee will not deliver fractional shares of underlying securities.  To the extent
 
11

 
  that any cancellation of Internet HOLDRS would otherwise require the delivery of a fractional share, the trustee will sell the fractional share in the market and the trust, in turn, will deliver cash in lieu of such fractional share.  Except with respect to the right to vote for dissolution of the trust, the Internet HOLDRS themselves will not have voting rights.
   
Rights relating to the underlying
securities
Internet HOLDRS represents your beneficial ownership of the underlying securities.  Owners of Internet HOLDRS have the same rights and privileges as if they owned the underlying securities beneficially in “street name” outside of Internet HOLDRS.  These include the right to instruct the trustee to vote the underlying securities or you may attend shareholder meetings yourself, the right to receive any dividends and other distributions on the underlying securities that are declared and paid to the trustee by an issuer of an underlying security, the right to pledge Internet HOLDRS and the right to surrender Internet HOLDRS to receive the underlying securities.  Internet HOLDRS does not change your beneficial ownership in the underlying securities under United States federal securities laws, including sections 13(d) and 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  As a result, you have the same obligations to file insider trading reports that you would have if you held the underlying securities outside of Internet HOLDRS.  However, due to the nature of Internet HOLDRS, you will not be able to participate in any dividend reinvestment program of an issuer of underlying securities unless you cancel your Internet HOLDRS (and pay the applicable fees) and receive all of the underlying securities.
 
 
A holder of Internet HOLDRS is not a registered owner of the underlying securities.  In order to become a registered owner, a holder of Internet HOLDRS would need to surrender their Internet HOLDRS, pay the applicable fees and expenses, receive all of the underlying securities and follow the procedures established by the issuers of the underlying securities for registering their securities in the name of such holder.
   
 
You retain the right to receive any reports and communications that the issuers of underlying securities are required to send to beneficial owners of their securities.  As such, you will receive such reports and communications from the broker through which you hold your Internet HOLDRS in the same manner as if you beneficially owned your underlying securities outside of Internet HOLDRS in “street name” through a brokerage account.  The trustee will not attempt to exercise the right to vote that attaches to, or give a proxy with respect to, the underlying securities other than in accordance with your instructions.
   
 
The depositary trust agreement entitles you to receive, subject to certain limitations and net of any fees and expenses of the trustee, any distributions of cash (including dividends), securities or property made with respect to the underlying securities.  However, any distribution of securities by an issuer of underlying securities will be deposited into the trust and will become part of the underlying securities unless the distributed securities are not listed for trading on a U.S. national securities exchange or the distributed securities have a
 
12

 
  Standard & Poor’s GICS sector classification that is different from the GICS sector classifications represented by the companies included in the Internet HOLDRS at the time of the distribution.  In addition, if the issuer of underlying securities offers rights to acquire additional underlying securities or other securities, the rights may be distributed to you, may be disposed of for your benefit or may lapse.
   
 
There may be a delay between the time any cash or other distribution is received by the trustee with respect to the underlying securities and the time such cash or other distributions are distributed to you.  In addition, you are not entitled to any interest on any distribution by reason of any delay in distribution by the trustee.  If any tax or other governmental charge becomes due with respect to Internet HOLDRS or any underlying securities, you will be responsible for paying that tax or governmental charge.
   
 
If you wish to participate in a tender offer for any of the underlying securities, or any form of stock repurchase program by an issuer of an underlying security, you must surrender your Internet HOLDRS (and pay the applicable fees and expenses) and receive all of your underlying securities in exchange for your Internet HOLDRS, including those underlying securities not subject to a tender offer or repurchase offer.  For specific information about obtaining your underlying securities, you should read the discussion under the caption “Description of the Depositary Trust Agreement—Withdrawal of underlying securities.”
   
Ownership rights in fractional shares
in the underlying securities
As a result of distributions of securities by companies included in the Internet HOLDRS or other corporate events, such as mergers, an Internet HOLDR may represent an interest in a fractional share of an underlying security.  You are entitled to receive distributions proportionate to your fractional shares.
   
 
In addition, you are entitled to receive proxy materials and other shareholder communications and you are entitled to exercise voting rights proportionate to your fractional shares.  The trustee will aggregate the votes of all of the share fractions represented by Internet HOLDRS and will vote the largest possible number of whole shares.  If, after aggregation, there is a fractional remainder, this fraction will be ignored, because the issuer will only recognize whole share votes.  For example, if 100,001 round-lots of 100 Internet HOLDRS are outstanding and each round-lot of 100 Internet HOLDRS represents 1.75 shares of an underlying security, there will be 175,001.75 votes of the underlying security represented by Internet HOLDRS.  If holders of 50,000 round-lots of 100 Internet HOLDRS vote their underlying securities “yes” and holders of 50,001 round-lots of 100 Internet HOLDRS vote their underlying securities “no,” there will be 87,500 affirmative votes and 87,501.75 negative votes.  The trustee will ignore the .75 negative votes and will deliver to the issuer 87,500 affirmative votes and 87,501 negative votes.
   
Reconstitution events
The depositary trust agreement provides for the automatic distribution of underlying securities from the Internet HOLDRS to you in the following four circumstances:
 
 
A.
If an issuer of underlying securities no longer has a class of securities registered under section 12 of the Exchange Act, then
 
13

 
 
 
its securities will no longer be an underlying security and the trustee will distribute the shares of that company to the owners of the Internet HOLDRS.
     
 
B.
If the Securities and Exchange Commission (the “SEC”) finds that an issuer of underlying securities should be registered as an investment company under the Investment Company Act of 1940, and the trustee has actual knowledge of the SEC finding, then its securities will no longer be an underlying security and the trustee will distribute the shares of that company to the owners of the Internet HOLDRS.
     
 
C.
If the underlying securities of an issuer cease to be outstanding as a result of a merger, consolidation, corporate combination or other event, the trustee will distribute the consideration received from the acquiring company to the beneficial owners of Internet HOLDRS; provided that any securities received as consideration will be distributed only if the distributed securities have a different Standard & Poor’s GICS sector classification than any of the underlying securities represented in the Internet HOLDRS at the time of the distribution or exchange or if the securities received are not listed for trading on a U.S. national securities exchange.  In any other case, the additional securities received will be deposited into the trust.
     
 
D.
If an issuer’s underlying securities are delisted from trading on a U.S. national securities exchange and are not listed for trading on another U.S. national securities exchange within five business days from the date the securities are delisted.
 
 
To the extent a distribution of underlying securities from the Internet HOLDRS is required as a result of a reconstitution event, the trustee will deliver the underlying security to you as promptly as practicable after the date that the trustee has knowledge of the occurrence of a reconstitution event.
   
 
In addition, securities of a new company will be added to the Internet HOLDRS, as a result of a distribution of securities by an underlying issuer, where a corporate event occurs, or where the securities of an underlying issuer are exchanged for the securities of another company, unless the securities have a Standard & Poor’s GICS sector classification that is different from the GICS sector classification of any other security then included in the Internet HOLDRS or if the securities received are not listed for trading on a U.S. national securities exchange.
   
 
It is anticipated that, as a result of the broadly defined Standard & Poor’s GICS sectors, most distributions or exchanges of securities will result in the inclusion of new securities in the Internet HOLDRS.  The trustee will review the Standard & Poor’s GICS sector classifications of securities to determine whether securities received as a result of a distribution by an underlying issuer or as consideration for securities will be included in the Internet HOLDRS or distributed to you.
   
Standard & Poor’s sector classifications
Standard & Poor’s Corporation is an independent source of market information that, among other things, maintains the Global Industry
 
14

 
  Classification Standard, which classifies the securities of public companies into various sector classifications based upon GICS sectors, which are derived from its own criteria.  The GICS classification standards were exclusively effective as of January 2, 2002.  There are 10 Standard & Poor’s GICS sector classifications and each class of publicly traded securities of a company is given only one GICS sector classification.  The securities included in the Internet HOLDRS are currently represented in the Consumer Discretionary, Financials and Information Technology GICS sectors.  The Standard & Poor’s GICS sector classifications of the securities included in the Internet HOLDRS may change over time if the companies that issued these securities change their focus of operations or if Standard & Poor’s alters the criteria it uses to determine GICS sectors, or both.
 
Termination events
A.
The Internet HOLDRS are delisted from the NYSE Arca and are not listed for trading on another U.S. national securities exchange within five business days from the date the Internet HOLDRS are delisted.
     
 
B.
The trustee resigns and no successor trustee is appointed within 60 days from the date the trustee provides notice to Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, of its intent to resign.
     
 
C.
Beneficial owners of at least 75% of outstanding Internet HOLDRS vote to dissolve and liquidate the trust.
 
 
If a termination event occurs, the trustee will distribute the underlying securities as promptly as practicable after the termination event.
   
 
Upon termination of the depositary trust agreement and prior to distributing the underlying securities to you, the trustee will charge you a cancellation fee of up to $10.00 per round-lot of 100 Internet HOLDRS surrendered, along with any taxes or other governmental charges, if any.
   
U.S. federal income tax consequences
The U.S. federal income tax laws will treat a U.S. holder of Internet HOLDRS as directly owning the underlying securities.  The Internet HOLDRS themselves will not result in any U.S. federal tax consequences separate from the tax consequences associated with ownership of the underlying securities.  See “U.S. Federal Income Tax Consequences.”
   
Listing
The Internet HOLDRS are listed on the NYSE Arca under the symbol “HHH.”
   
Trading
Investors are only able to acquire, hold, transfer and surrender a round-lot of 100 Internet HOLDRS.  Bid and ask prices, however, are quoted per single Internet HOLDR.
   
Clearance and settlement
Internet HOLDRS have been issued only in book-entry form.  Internet HOLDRS are evidenced by one or more global certificates that the trustee has deposited with The Depository Trust Company, referred to as DTC.  Transfers within DTC will be in accordance with DTC’s usual rules and operating procedures.  For further information see
 
15

 
  “Description of Internet HOLDRS.”
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16

 
THE TRUST
 
General.  This discussion highlights information about the Internet HOLDRS Trust.  You should read this information, information about the depositary trust agreement, the depositary trust agreement and the amendment to the depositary trust agreement, in addition to other information included in this prospectus and the publicly available information about the issuers of the underlying securities, before you purchase Internet HOLDRS.  The material terms of the depositary trust agreement are described in this prospectus under the heading “Description of the Depositary Trust Agreement.”
 
The Internet HOLDRS Trust.  The trust was formed pursuant to the depositary trust agreement, dated as of September 2, 1999.  The depositary trust agreement was amended on November 22, 2000.  The Bank of New York Mellon is the trustee.  The Internet HOLDRS Trust is not a registered investment company under the Investment Company Act of 1940.
 
The Internet HOLDRS Trust is intended to hold deposited shares for the benefit of owners of Internet HOLDRS.  The trustee will perform only administrative and ministerial acts.  The property of the trust consists of the underlying securities and all monies or other property, if any, received by the trustee.  The trust will terminate on December 31, 2039, or earlier if a termination event occurs.
 
DESCRIPTION OF INTERNET HOLDRS
 
The trust has issued Internet HOLDRS under the depositary trust agreement described in this prospectus under the heading “Description of the Depositary Trust Agreement.” The trust may issue additional Internet HOLDRS on a continuous basis when an investor deposits the requisite underlying securities with the trustee.
 
You may only acquire, hold, trade and surrender Internet HOLDRS in a round-lot of 100 Internet HOLDRS and round-lot multiples.  The trust will only issue Internet HOLDRS upon the deposit of the whole shares of underlying securities that are represented by a round-lot of 100 Internet HOLDRS.  In the event of a stock split, reverse stock split or other distribution by the issuer of an underlying security that results in a fractional share becoming represented by a round-lot of Internet HOLDRS, the trust may require a minimum of more than one round-lot of 100 Internet HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Internet HOLDRS.
 
Internet HOLDRS will represent your individual and undivided beneficial ownership interest in the specified underlying securities.  The companies selected as part of this receipt program are listed above in the section entitled “Highlights of Internet HOLDRS—The Internet HOLDRS.”
 
Beneficial owners of Internet HOLDRS will have the same rights and privileges as they would have if they beneficially owned the underlying securities in “street name” outside of the trust.  These include the right of investors to instruct the trustee to vote the underlying common stock, and to receive dividends and other distributions on the underlying securities, if any are declared and paid to the trustee by an issuer of an underlying security, as well as the right to cancel Internet HOLDRS to receive the underlying securities.  See “Description of the Depositary Trust Agreement.” Internet HOLDRS are not intended to change your beneficial ownership in the underlying securities under federal securities laws, including sections 13(d) and 16(a) of the Exchange Act.
 
The trust will not publish or otherwise calculate the aggregate value of the underlying securities represented by a receipt.  Internet HOLDRS may trade in the secondary market at prices that are lower than the aggregate value of the corresponding underlying securities.  If, in such case, an owner of Internet HOLDRS wishes to realize the dollar value of the underlying securities, that owner will have to cancel the Internet HOLDRS.  Such cancellation will require payment of fees and expenses as described in “Description of the Depositary Trust Agreement—Withdrawal of underlying securities.”
 
Internet HOLDRS are evidenced by one or more global certificates that the trustee has deposited with DTC and registered in the name of Cede & Co., as nominee for DTC.  Internet HOLDRS are available only in book-entry form.  Owners of Internet HOLDRS may hold their Internet HOLDRS through DTC, if they are participants in DTC, or indirectly through entities that are participants in DTC.
 
17

 
DESCRIPTION OF THE UNDERLYING SECURITIES
 
Selection criteria.  The underlying securities initially included in the Internet HOLDRS were the shares of common stock of a group of specified companies that, at the time of initial selection, were involved in various segments of the Internet industry and whose common stock was registered under section 12 of the Exchange Act.  The issuers of the underlying securities were, as of the time of initial selection, among the largest capitalized and most liquid companies involved in the Internet industry as measured by market capitalization and trading volume.  As a result of a reconstitution event, a distribution of securities by an underlying issuer or other event, the companies whose common stock is included in the Internet HOLDRS may no longer meet the initial selection criteria and may no longer consist exclusively of securities issued by companies involved in the Internet industry.
 
Underlying securities.  For a list of the underlying securities represented by Internet HOLDRS, please refer to “Highlights of Internet HOLDRS—The Internet HOLDRS.”  The underlying securities may change as a result of a reconstitution event, a distribution of securities by an underlying issuer or other event.
 
No investigation.  The trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated and any affiliate of these entities, have not performed any investigation or review of the selected companies, including the public filings by the companies.  Accordingly, before you acquire Internet HOLDRS, you should consider publicly available financial and other information about the issuers of the underlying securities.  See “Risk Factors” and “Where You Can Find More Information.”  Investors and market participants should not conclude that the inclusion of a company in the list is any form of investment recommendation of that company by the trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and any of their respective affiliates.
 
General background and historical information.  For a brief description of the business of each of the issuers of the underlying securities and monthly pricing information showing the historical performance of each underlying issuer’s securities see “Annex A.”
 
The following table and graph set forth the composite performance of all of the underlying securities currently represented by a single Internet HOLDR, measured at the close of the business day as of the end of each month from March 31, 1999 to March 31, 2010.  The performance table and graph data are adjusted for any splits that may have occurred over the measurement period.  Past performance of the underlying securities are not necessarily indicative of future values.

1999
 
Closing
Price
 
2000
 
Closing
Price
 
2001
 
Closing
Price
 
2002
 
Closing
Price
March 31     89.87  
January 31
    107.98  
January 31
    39.20  
January 31
    27.17
April 30
    108.35  
February 29
    110.37  
February 28
    29.35  
February 28
    24.24
May 28
    85.01  
March 31
    117.06  
March 30
    25.52  
March 28
    26.11
June 30
    86.94  
April 28
    93.10  
April 30
    33.31  
April 30
    22.84
July 30
    68.48  
May 31
    76.73  
May 31
    35.24  
May 31
    23.50
August 31
    71.17  
June 30
    77.24  
June 29
    36.39  
June 28
    21.81
September 30
    82.58  
July 31
    74.18  
July 31
    32.41  
July 31
    18.62
October 29
    84.06  
August 31
    80.14  
August 31
    26.63  
August 30
    18.53
November 30
    100.60  
September 29
    66.85  
September 28
    22.11  
September 30
    17.45
December 31
    129.96  
October 31
    51.17  
October 31
    23.85  
October 31
    22.15
 
       
November 30
    35.79  
November 30
    29.39  
November 29
    25.34
         
December 29
    28.10  
December 31
    29.24  
December 31
    22.65

2003
 
Closing
Price
 
2004
 
Closing
Price
 
2005
 
Closing
Price
 
2006
 
Closing
Price
January 31
    23.93  
January 30
    48.28  
January 31
    57.04  
January 31
    59.76
February 28
    24.88  
February 27
    46.68  
February 28
    54.32  
February 28
    55.97
March 31
    27.11  
March 31
    47.73  
March 31
    52.21  
March 31
    55.43
April 30
    29.71  
April 30
    50.10  
April 29
    49.12  
April 28
    53.21
May 30
    34.77  
May 28
    56.12  
May 31
    55.40  
May 31
    51.25
June 30
    36.19  
June 30
    61.20  
June 30
    51.23  
June 30
    50.82
July 31
    37.17  
July 30
    51.70  
July 29
    57.72  
July 31
    42.72
August 29
    39.70  
August 31
    52.39  
August 31
    56.94  
August 31
    46.54
September 30
    39.79  
September 30
    56.97  
September 30
    58.52  
September 29
    45.93
October 31
    44.07  
October 29
    59.02  
October 31
    58.47  
October 31
    49.99
November 28
    43.88  
November 30
    65.33  
November 30
    64.59  
November 30
    51.09
December 31
    47.19  
December 31
    67.98  
December 30
    62.93  
December 29
    49.21
 
18

 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January 31
    56.32  
January 31
    50.98  
January 30
    31.90  
January 29
    54.45
February 28
    56.63  
February 29
    52.94  
February 27
    32.59  
February 26
    54.21
March 30
    56.83  
March 31
    55.62  
March 31
    34.57  
March 31
    61.25
April 30
    60.15  
April 30
    57.79  
April 30
    39.88          
May 31
    62.68  
May 30
    58.31  
May 29
    41.34          
June 29
    61.11  
June 30
    51.04  
June 30
    42.58          
July 31
    59.54  
July 31
    50.32  
July 31
    45.03          
August 31
    60.03  
August 29
    51.45  
August 31
    45.17          
September 28
    66.07  
September 30
    45.22  
September 30
    50.54          
October 31
    66.09  
October 31
    34.41  
October 30
    53.21          
November 30
    61.38  
November 28
    29.78  
November 30
    57.46          
December 31
    59.64  
December 31
    32.88  
December 31
    58.02          
 
 
 
 
 


 
 

 
19


DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT

General.  The depositary trust agreement, dated as of September 2, 1999, among Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York Mellon, as trustee, other depositors and the owners of the Internet HOLDRS, provides that Internet HOLDRS will represent an owner’s undivided beneficial ownership interest in the common stock of the underlying companies.  The depositary trust agreement was amended on November 22, 2000 to modify the reconstitution events, as described below.
 
The trustee.  The Bank of New York Mellon serves as trustee for Internet HOLDRS.  On July 1, 2007, the Bank of New York Company, Inc. and Mellon Financial Corporation merged into The Bank of New York Mellon Corporation or The Bank of New York Mellon.  The Bank of New York Mellon, a New York state-chartered banking organization, is a provider of financial services for institutions, corporations and high net-worth individuals, providing asset and wealth management, asset servicing, issuer services, clearing and execution services and treasury services.
 
Issuance, transfer and surrender of Internet HOLDRS.  You may create and cancel Internet HOLDRS only in round-lots of 100 Internet HOLDRS.  You may create Internet HOLDRS by delivering to the trustee the requisite underlying securities.  The trust will only issue Internet HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 Internet HOLDRS.  In the event that a fractional share comes to be represented by a round-lot of Internet HOLDRS, the trust may require a minimum of more than one round-lot of 100 Internet HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Internet HOLDRS.  Similarly, you must surrender Internet HOLDRS in integral multiples of 100 Internet HOLDRS to withdraw deposited shares from the trust.  The trustee will not deliver fractional shares of underlying securities, and to the extent that any cancellation of Internet HOLDRS would otherwise require the delivery of fractional shares, the trust will deliver cash in lieu of such shares.  You may request withdrawal of your deposited shares during the trustee’s normal business hours.  The trustee expects that in most cases it will deliver your deposited shares within one business day of your withdrawal request.
 
Voting rights.  You will receive proxy soliciting materials provided by issuers of the deposited shares so as to permit you to give the trustee instructions as to how to vote on matters to be considered at any annual or special meetings held by issuers of the underlying securities.
 
Under the depositary trust agreement, any beneficial owner of Internet HOLDRS, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated, owning Internet HOLDRS for its own proprietary account as principal, will have the right to vote to dissolve and liquidate the trust.
 
Distributions.  You will be entitled to receive, net of trustee fees, distributions of cash, including dividends, securities or property, if any, made with respect to the underlying securities.  The trustee will use its reasonable efforts to ensure that it distributes these distributions as promptly as practicable after the date on which it receives the distribution.  Therefore, you may receive your distributions substantially later than you would have had you held the underlying securities directly.  Any distributions of securities by an issuer of underlying securities will be deposited into the trust and will become part of the Internet HOLDRS unless such securities are not listed for trading on a U.S. national securities exchange or such securities have a different Standard & Poor’s GICS sector classification than any of the underlying securities in the Internet HOLDRS at the time of the distribution of such securities.  In addition, if the issuer of underlying securities offers rights to acquire additional underlying securities or other securities, the rights will be distributed to you through the trustee, if practicable, and if the rights and the securities that those rights relate to are exempt from registration or are registered under the Securities Act of 1933, as amended (the “Securities Act”).  Otherwise, if practicable, the rights will be disposed of and the net proceeds distributed to you by the trustee.  In all other cases, the rights will lapse.
 
You will be obligated to pay any tax or other charge that may become due with respect to Internet HOLDRS.  The trustee may deduct the amount of any tax or other governmental charge from a distribution before making payment to you.  In addition, the trustee will deduct its quarterly custody fee of $2.00 for each round-lot of 100 Internet HOLDRS from quarterly dividends, if any, paid to the trustee by the issuers of the underlying securities.  With respect to the aggregate custody fee payable in any calendar year for each Internet HOLDR, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year.
 
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Record dates.  With respect to dividend payments and voting instructions, the trustee expects to fix the trust’s record dates as close as possible to the record date fixed by the issuer of the underlying securities.
 
Shareholder communications.  The trustee promptly will forward to you all shareholder communications that it receives from issuers of the underlying securities.
 
Withdrawal of underlying securities.  You may surrender your Internet HOLDRS and receive underlying securities during the trustee’s normal business hours and upon the payment of applicable fees, taxes or governmental charges, if any.  You should receive your underlying securities no later than the business day after the trustee receives your request.  If you surrender Internet HOLDRS in order to receive underlying securities, you will pay to the trustee a cancellation fee of up to $10.00 per round-lot of 100 Internet HOLDRS.
 
Further issuances of Internet HOLDRS.  The depositary trust agreement provides for further issuances of Internet HOLDRS on a continuous basis without your consent.
 
Reconstitution events.  The depositary trust agreement provides for the automatic distribution of underlying securities from Internet HOLDRS to you in the following four circumstances:
 
 
A.
If an issuer of underlying securities no longer has a class of common stock registered under section 12 of the Exchange Act, then its securities will no longer be an underlying security and the trustee will distribute the shares of that company to the owners of the Internet HOLDRS.
 
 
B.
If the SEC finds that an issuer of underlying securities should be registered as an investment company under the Investment Company Act of 1940, and the trustee has actual knowledge of the SEC finding, then the trustee will distribute the shares of that company to the owners of the Internet HOLDRS.
 
 
C.
If the underlying securities of an issuer cease to be outstanding as a result of a merger, consolidation, corporate combination or other event, the trustee will distribute the consideration paid by and received from the acquiring company to the beneficial owners of Internet HOLDRS; provided that any securities received as consideration will be distributed only if the distributed securities have a different Standard & Poor’s GICS sector classification than any of the underlying securities represented in the Internet HOLDRS at the time of the distribution or exchange or if the securities received are not listed for trading on a U.S. national securities exchange. In any other case, the additional securities received as consideration will be deposited into the trust.
 
 
D.
If an issuer’s underlying securities are delisted from trading on a U.S. national securities exchange  and are not listed for trading on another U.S. national securities exchange within five business days from the date such securities are delisted.
 
To the extent a distribution of underlying securities is required as a result of a reconstitution event, the trustee will deliver the underlying security to you as promptly as practicable after the date that the trustee has knowledge of the occurrence of a reconstitution event.
 
As provided in the depositary trust agreement, securities of a new company will be added to the Internet HOLDRS, as a result of a distribution of securities by an underlying issuer, where a corporate event occurs, such as a merger, or where the securities of an underlying issuer are exchanged for the securities of another company, unless the securities received have a different Standard & Poor’s GICS sector classification than any of the underlying securities represented in the Internet HOLDRS or if the securities received are not listed for trading on a U.S. national securities exchange.
It is anticipated that, as a result of the broadly defined Standard & Poor’s GICS sectors, most distributions or exchanges of securities will result in the inclusion of new securities in the Internet HOLDRS.  The trustee will review the Standard & Poor’s GICS sector classifications of securities to determine whether securities received as a result of a distribution by an underlying issuer or as consideration for securities will be included in the Internet HOLDRS or distributed from the Internet HOLDRS to you.
 
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Standard & Poor’s sector classifications.  Standard & Poor’s Corporation is an independent source of market information that, among other things, maintains the Global Industry Classification Standard, which classifies the securities of public companies into various sector classifications based upon GICS sectors, which are derived from its own criteria.  There are 10 Standard & Poor’s GICS sector classifications and each class of publicly traded securities of a company is given only one GICS sector classification.  The securities included in the Internet HOLDRS are currently represented in the Consumer Cyclicals, Consumer Staples, Financials and Technology sectors.  The Standard & Poor’s GICS sector classifications of the securities included in the Internet HOLDRS may change over time if the companies that issued these securities change their focus of operations or if Standard & Poor’s alters the criteria it uses to determine GICS sectors, or both.
 
Termination of the trust.  The trust will terminate if the trustee resigns and no successor trustee is appointed by Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, within 60 days from the date the trustee provides notice to the initial depositor of its intent to resign.  Upon termination, the beneficial owners of Internet HOLDRS will surrender their Internet HOLDRS as provided in the depositary trust agreement, including payment of any fees of the trustee or applicable taxes or governmental charges due in connection with delivery to the owners of the underlying securities.  The trust also will terminate if Internet HOLDRS are delisted from the NYSE Arca and are not listed for trading on another U.S. national securities exchange within five business days from the date the Internet HOLDRS are delisted.  Finally, the trust will terminate if 75% of the owners of outstanding Internet HOLDRS, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated, vote to dissolve and liquidate the trust.
 
If a termination event occurs, the trustee will distribute the underlying securities to you as promptly as practicable after the termination event occurs.
 
Amendment of the depositary trust agreement.  The trustee and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, may amend any provisions of the depositary trust agreement without the consent of any other depositor or any of the owners of the Internet HOLDRS.  Promptly after the execution of any amendment to the agreement, the trustee must furnish or cause to be furnished written notification of the substance of the amendment to each owner of Internet HOLDRS.  Any amendment that imposes or increases any fees or charges, subject to exceptions, or that otherwise prejudices any substantial existing right of the owners of Internet HOLDRS will not become effective until 30 days after notice of the amendment is given to the owners of Internet HOLDRS.
 
Issuance and cancellation fees.  If you wish to create Internet HOLDRS by delivering to the trust the requisite underlying securities, the trustee will charge you an issuance fee of up to $10.00 for each round-lot of 100 Internet HOLDRS.  If you wish to cancel your Internet HOLDRS and withdraw your underlying securities, the trustee will charge you a cancellation fee of up to $10.00 for each round-lot of 100 Internet HOLDRS issued.  The trustee may negotiate either of these fees depending on the volume, frequency and size of the issuance or cancellation transactions.
 
Commissions.  If you choose to create Internet HOLDRS you will be responsible for paying any sales commissions associated with your purchase of the underlying securities that is charged by your broker, whether it be Merrill Lynch, Pierce, Fenner & Smith Incorporated or another broker, in addition to the issuance fee described above.
 
Custody fees.  The Bank of New York Mellon, as trustee and as custodian, will charge you a quarterly custody fee of $2.00 for each round-lot of 100 Internet HOLDRS to be deducted from any dividend payments or other cash distributions on underlying securities received by the trustee.  With respect to the aggregate custody fee payable in any calendar year for each Internet HOLDR, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year.  The trustee cannot recapture unpaid custody fees from prior years.
 
Address of the trustee.  The Bank of New York Mellon, ADR Division, 101 Barclay Street, New York, New York 10286.
 
Governing law.  The depositary trust agreement and the Internet HOLDRS are governed by the laws of the State of New York.  The trustee will provide the depositary trust agreement to any owner of the underlying securities free of charge upon written request.
 
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Duties and immunities of the trustee.  The trustee assumes no responsibility or liability for, and makes no representations as to, the validity or sufficiency, or as to the accuracy of the recitals, if any, set forth in the Internet HOLDRS.
 
The trustee has undertaken to perform only those duties as are specifically set forth in the depositary trust agreement.  Subject to the preceding sentence, the trustee will be liable for its own negligence or misconduct except for good faith errors in judgment so long as the trustee was not negligent in ascertaining the relevant facts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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U.S. FEDERAL INCOME TAX CONSEQUENCES
 
 General
 
The following discussion represents the opinion of Shearman & Sterling LLP, our special U.S. federal income tax counsel, as to the principal U.S. federal income tax consequences relating to the Internet HOLDRS for receipt holders.  A “U.S. receipt holder” is a receipt holder that is:
 
 
·
an individual who is a citizen or resident of the United States;
 
 
·
a corporation (or an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
 
 
·
an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
 
 
·
a trust if either (i) it is subject to the primary supervision of a U.S. court and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
 
A “non-U.S. receipt holder” is a receipt holder that is an individual, a corporation, an estate or a trust that is neither a U.S. receipt holder nor a partnership (or entity treated as a partnership) for U.S. federal income tax purposes.
 
If a partnership (or an entity treated as a partnership for U.S. federal income tax purposes) holds Internet HOLDRS, the tax treatment of the partnership and each partner will generally depend on the status of the partner and the activities of the partnership.  Partnerships acquiring Internet HOLDRS, and partners in such partnerships, should consult their tax advisors.
 
This discussion is based upon laws, regulations, rulings and decisions currently in effect, all of which are subject to change or differing interpretations, possibly on a retroactive basis.  The discussion does not deal with all U.S. federal income tax consequences applicable to all categories of investors, some of which may be subject to special rules, such as (without limitation) tax-exempt entities, banks, U.S. receipt holders that directly or indirectly own 10% or more of the voting stock of an issuer of the underlying securities, dealers in securities, U.S. receipt holders whose functional currency is not the U.S. dollar, investors who acquire or hold any Internet HOLDRS as part of a conversion transaction, straddle, hedging or other integrated transaction, certain former citizens and residents of the United States and persons subject to U.S. estate, gift or alternative minimum tax.  In addition, this discussion generally is limited to investors who will hold the Internet HOLDRS as “capital assets” (generally, property held for investment) within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”).  Moreover, this discussion does not address Internet HOLDRS held by a partnership or other flow through entity for U.S. federal income tax purposes.  We recommend that you consult with your own tax advisor with regard to the application of the U.S. federal income tax laws to your particular situation as well as any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction.
 
 Taxation of the trust
 
The trust will provide for flow through tax consequences as it will be treated as a grantor trust or custodial arrangement for U.S. federal income tax purposes.
 
 Taxation of Internet HOLDRS
 
A U.S. receipt holder purchasing and owning Internet HOLDRS will be treated, for U.S. federal income tax purposes, as directly owning a proportionate share of the underlying securities represented by Internet HOLDRS.  Consequently, if there is a taxable cash distribution on an underlying security, a U.S. receipt holder will recognize income with respect to the distribution at the time the distribution is received by the trustee, not at the time that the U.S. receipt holder receives the cash distribution from the trustee.
 
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Qualified dividend income received in respect of Internet HOLDRS by U.S. receipt holders who are individuals, trusts and estates will be eligible for U.S. federal income taxation at preferential rates, which are currently scheduled to expire on December 31, 2010.  Qualified dividend income includes dividends received from domestic corporations and “qualified foreign corporations,” as such term is defined below under “Special considerations with respect to underlying securities of foreign issuers.”  In order for such dividends to qualify for the preferential rates, specific minimum holding period requirements must be met, and for this purpose, a U.S. receipt holder’s holding period with respect to an underlying security may be tolled for any period in which such U.S. receipt holder has diminished its risk of loss in respect of such security by, for example, entering into a hedging transaction.  Special rules apply to a U.S. receipt holder who leverages its investment in Internet HOLDRS.  U.S. receipt holders that are corporations may be eligible for a dividends-received deduction in respect of dividends received from domestic corporations.
 
A U.S. receipt holder will determine its initial tax basis in each of the underlying securities by allocating the purchase price for the Internet HOLDRS among the underlying securities based on their relative fair market values at the time of purchase.  Similarly, when a U.S. receipt holder sells Internet HOLDRS, it will determine the amount realized with respect to each security by allocating the sales price among the underlying securities based on their relative fair market values at the time of sale.  A U.S. receipt holder’s gain or loss with respect to each security will be computed by subtracting its adjusted basis in the security from the amount realized on the security.  With respect to purchases of Internet HOLDRS for cash in the secondary market, a U.S. receipt holder’s aggregate tax basis in each of the underlying securities will be equal to the purchase price of the Internet HOLDRS.  Similarly, with respect to sales of Internet HOLDRS for cash in the secondary market, the amount realized with respect to a sale of Internet HOLDRS will be equal to the aggregate amount realized with respect to each of the underlying securities.
 
The distribution of any securities by the trust upon the surrender of Internet HOLDRS, the occurrence of a reconstitution event or a termination event will not be a taxable event, except to the extent that cash is distributed in lieu of fractional shares.  Gain or loss with respect to fractional shares shall be computed by allocating a portion of the aggregate tax basis of the distributed securities to such fractional shares.  The U.S. receipt holder’s aggregate tax basis with respect to the distributed securities will be the same as when held through the trust, less any tax basis allocated to fractional shares.  The U.S. receipt holder’s holding period with respect to the distributed securities will include the period that the U.S. receipt holder held the securities through the trust.
 
 Brokerage fees and custodian fees
 
The brokerage fee incurred in purchasing a receipt will be treated as part of the cost of the underlying securities.  Accordingly, a U.S. receipt holder includes this fee in its tax basis in the underlying securities.  A U.S. receipt holder will allocate the brokerage fee among the underlying securities using either a fair market value allocation or pro rata based on the number of shares of each underlying security.  Similarly, the brokerage fee incurred in selling Internet HOLDRS will reduce the amount realized with respect to the underlying securities.
 
A U.S. receipt holder will be required to include in its income the full amount of dividends paid on the underlying securities, even though the depositary trust agreement provides that the custodian fees will be deducted directly from any dividends paid.  These custodian fees will be treated as an expense incurred in connection with a U.S. receipt holder’s investment in the underlying securities and may be deductible.  If a U.S. receipt holder is an individual, estate or trust, however, the deduction of its share of custodian fees will be a miscellaneous itemized deduction that may be disallowed in whole or in part.
 
 Special considerations with respect to underlying securities of foreign issuers
 
If any of the underlying securities are securities of foreign issuers, the gross amount of any taxable cash distribution generally will not be eligible for the dividends-received deduction provided to corporations.
 
Dividends received by certain U.S. receipt holders from an issuer of underlying securities that is a “qualified foreign corporation” will be eligible for U.S. federal income taxation at the preferential rates for dividends mentioned above.  A qualified foreign corporation includes:
 
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·
a foreign corporation that is eligible for the benefits of a comprehensive U.S. income tax treaty, which the Secretary of the Treasury determines to be satisfactory and that includes an exchange of information program;
 
 
·
a foreign corporation if the stock to which the dividend is paid is readily tradable on an established market in the United States; and
 
 
·
a corporation that is incorporated in a possession of the United States;
 
but will not include a passive foreign investment company (a “PFIC”).
 
If a foreign issuer pays a dividend in a currency other than in U.S. dollars, the amount of the dividend for U.S. federal income tax purposes will be the U.S. dollar value of the dividend (determined at the spot rate on the date of the payment) regardless of whether the payment is later converted into U.S. dollars.  In this case, the U.S. receipt holder may recognize ordinary income or loss as a result of currency fluctuations between the date on which the dividend is paid and the date the dividend amount is converted into U.S. dollars.
 
Subject to certain conditions and limitations, any foreign income tax withheld on dividends may be deducted from taxable income (provided the U.S. receipt holder does not elect to claim a credit for any foreign income taxes paid or accrued during that taxable year) or credited against a U.S. receipt holder’s U.S. federal income tax liability.  The limitation on foreign income taxes eligible for the U.S. foreign tax credit is calculated separately with respect to specific classes of income.  For this purpose, dividends distributed by a foreign issuer generally will constitute “passive category income.” For purposes of the U.S. foreign tax credit limitation, dividends received by a U.S. receipt holder with respect to an underlying security of a foreign issuer generally will be treated as foreign-source income while any gain or loss recognized from the sale of such security generally will be treated as from sources within the United States.  Accordingly, if any foreign income taxes are withheld upon the sale of an underlying security of a foreign issuer, the availability of foreign tax credits with respect to such taxes may be limited unless the U.S. receipt holder has other foreign-source income.  The rules relating to the determination of the foreign tax credit are complex and we recommend that U.S. receipt holders consult their own tax advisors to determine whether and to what extent a credit would be available.
 
Dividends and distributions made by a foreign issuer may be subject to a foreign withholding tax.  Some foreign issuers may make arrangements through which holders of their American depositary shares or global shares can apply for a refund of withheld taxes.  With respect to these issuers, U.S. receipt holders of Internet HOLDRS may be able to use these arrangements to apply for a refund of withheld taxes.  In some cases, however, the U.S. receipt holders of Internet HOLDRS may have to apply independently to a foreign tax authority for a refund of withheld taxes.
 
Furthermore, special U.S. federal income tax rules apply to U.S. persons owning shares of a PFIC.  The initial depositor and the trustee do not undertake to review, periodically or otherwise, or make inquiries regarding the PFIC status of the underlying issuers or to notify the U.S. receipt holders of such status, and no assurances can be made that the applicable tax law or other relevant circumstances will not change in a manner that affects the PFIC determination.  A foreign corporation generally will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying relevant look-through rules, either:
 
 
·
at least 75% of its gross income is “passive income;” or
 
 
·
on average at least 50% of the gross value of its assets is attributable to assets that produce “passive income” or are held for the production of passive income.
 
Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents and gains from commodities and securities transactions.
 
If a corporation were classified as a PFIC, a U.S. receipt holder could be subject to increased tax liability, possibly including an interest charge, upon the sale or other disposition of the Internet HOLDRS or of the underlying securities or upon the receipt of “excess distributions.”  To avoid the interest charge provisions described in the preceding sentence, a U.S. receipt holder may be able to make one of certain elections (to the extent available
 
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under specific rules and, if applicable, the underlying issuer provides certain requisite information) including an election to be taxed currently on its pro rata portion of the corporation’s income.  If such an election were made, a U.S. receipt holder would be required to include its pro rata share of the corporation’s income whether or not the income was distributed in the form of dividends or otherwise.
 
We recommend that U.S. receipt holders consult their independent tax advisors regarding the application of the PFIC rules to their purchase, ownership and disposition of the Internet HOLDRS, including the advisability and feasibility of making any elections thereunder.
 
U.S. receipt holders also generally would be required to file Internal Revenue Service (“IRS”) Form 8621 in any year in which at least one of the underlying issuers is classified as a PFIC.
 
 Non-U.S. receipt holders
 
A non-U.S. receipt holder generally will be subject to U.S. withholding tax at a rate of 30% or a lower rate as may be specified by an applicable tax treaty with respect to dividends received on underlying securities of U.S. issuers.  A non-U.S. receipt holder who wishes to claim a reduction in withholding under the benefit of an applicable tax treaty must comply with certification requirements.  However, if that income is effectively connected with a U.S. trade or business conducted by the non-U.S. receipt holder or, where a tax treaty applies, is attributable to a permanent establishment maintained in the United States by the non-U.S. receipt holder, then those dividends will be exempt from withholding tax, provided the non-U.S. receipt holder complies with applicable certification requirements.
 
A non-U.S. receipt holder generally will not be subject to U.S. federal income or withholding tax with respect to dividends received on any underlying securities of a foreign issuer, unless that income is effectively connected with a U.S. trade or business conducted by the non-U.S. receipt holder or, where a tax treaty applies, is attributable to a permanent establishment maintained in the United States by the non-U.S. receipt holder.
 
With respect to dividends of U.S. and any foreign issuers, a non-U.S. receipt holder’s dividends that are effectively connected with a U.S. trade or business or, where a tax treaty applies, dividends attributable to a U.S. permanent establishment generally will be subject to U.S. federal income taxation on a net income basis at the same graduated rates applicable to U.S. persons.  In addition to this graduated tax, effectively connected dividends or, where a tax treaty applies, dividends attributable to a U.S. permanent establishment received by a corporate non-U.S. receipt holder may also be subject to a branch profits tax at a rate of 30% or a lower rate as may be specified by an applicable tax treaty.  Under some circumstances, a corporate non-U.S. receipt holder whose dividends are effectively connected or attributable to a U.S. permanent establishment may be entitled to a dividends-received deduction equal to 70% or 80% of the amount of the dividend.
 
A non-U.S. receipt holder that is eligible for a reduced rate of withholding tax pursuant to a tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
 
A non-U.S. receipt holder generally will not be subject to U.S. federal income or withholding tax with respect to gain recognized upon the sale or other disposition of Internet HOLDRS or of the underlying securities unless:
 
 
·
in the case of any gain realized by an individual non-U.S. receipt holder, the non-U.S. receipt holder is present in the United States for 183 days or more in the taxable year of the sale or other disposition and certain other conditions are met;
 
 
·
that gain is effectively connected with a U.S. trade or business conducted by the non-U.S. receipt holder or, where a tax treaty applies, is attributable to a permanent establishment maintained in the United States by the non-U.S. receipt holder; or
 
 
·
the underlying securities issuer is or has been a U.S. real property holding corporation for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the disposition or the period during which the non-U.S. receipt holder held the common stock of such issuer and (a) the common stock is not considered to be “regularly traded on an established securities
 
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market” or (b) the non-U.S. receipt holder owned, actually or constructively, at any time during the shorter of the periods described above, more than five percent of the common stock of such issuer.
 
It is expected that the underlying securities are currently “regularly traded on an established securities market” although no assurances can be made that the securities will continue to be so traded.
 
A non-U.S. receipt holder described in the first bullet point above will be subject to U.S. federal income tax with respect to such gain at a rate of 30% (or lower applicable treaty rate), which gain may be offset by certain losses.  A non-U.S. receipt holder described in the second or third bullet points above will be subject to U.S. federal income tax with respect to such gain on a net income basis at the applicable graduated individual or corporate rates (and, in the case of a corporate non-U.S. receipt holder, may also be subject to a 30% branch profits tax, subject to reduction by an applicable income tax treaty).
 
 Backup withholding and information reporting
 
Information returns will be filed with the IRS in connection with dividend payments made with respect to the underlying securities, or the proceeds of the sale or other disposition of the Internet HOLDRS (or the underlying securities).  If you are a U.S. receipt holder, you will be subject to U.S. backup withholding tax at the applicable rate on these payments unless you are an exempt holder (such as a corporation or tax exempt entity) or provide your taxpayer identification number to the paying agent and comply with certain certification procedures.  If you are a non-U.S. receipt holder, you may have to comply with certification procedures to establish that you are not a U.S. person in order to avoid the information reporting and backup withholding tax requirements.  However, payments of dividends to non-U.S. receipt holders will be reported to the IRS even if such payments are not otherwise subject to the information reporting requirements.
 
The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is furnished to the IRS on a timely basis.
 
The preceding discussion does not address all aspects of U.S. federal income taxation that may be relevant in light of a non-U.S. receipt holder’s or an issuer’s particular facts and circumstances.  We recommend that investors consult their own tax advisors.
 
 
 
 
 
 
 
 
 
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ERISA CONSIDERATIONS
 
Any plan fiduciary which proposes to have a plan acquire Internet HOLDRS should consult with its counsel with respect to the potential applicability of the prohibited transaction provisions of ERISA and the Internal Revenue Code to this investment, and whether any exemption would be applicable and determine on its own whether all conditions have been satisfied.  Moreover, each plan fiduciary should determine whether, under the general fiduciary standards of investment prudence and diversification, an acquisition of Internet HOLDRS is appropriate for the plan, taking into account the overall investment policy of the plan and the composition of the plan’s investment portfolio.
 
PLAN OF DISTRIBUTION
 
In accordance with the depositary trust agreement, the trust issued Internet HOLDRS to Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch, Pierce, Fenner & Smith Incorporated has deposited the underlying securities to receive Internet HOLDRS.  The trust delivered the initial distribution of Internet HOLDRS against deposit of the underlying securities in New York, New York on approximately February 11, 2001.
 
Investors who purchase Internet HOLDRS through a fee-based brokerage account will pay fees charged by the brokerage account.  We recommend that investors review the terms of their brokerage accounts for details on applicable charges.
 
Merrill Lynch, Pierce, Fenner & Smith Incorporated has from time to time provided investment banking and other financial services to some of the issuers of the underlying securities and expects in the future to provide these services, for which they have received and will receive customary fees and commissions.  Merrill Lynch, Pierce, Fenner & Smith Incorporated also may have served as counterparty in other transactions with some of the issuers of the underlying securities.
 
Merrill Lynch, Pierce, Fenner & Smith Incorporated has used and may continue to use this prospectus, as updated from time to time, in connection with offers and sales related to market-making transactions in the Internet HOLDRS.  Merrill Lynch, Pierce, Fenner & Smith Incorporated may act as principal or agent in these transactions.  Market-making sales will be made at prices related to prevailing market prices at the time of sale.
 
Merrill Lynch, Pierce, Fenner & Smith Incorporated has agreed to indemnify the trustee against some civil liabilities related to acts performed or not performed by the trustee in accordance with the depositary trust agreement or periodic reports filed or not filed with the SEC with respect to the Internet HOLDRS.  Should a court determine not to enforce the indemnification provision, Merrill Lynch, Pierce, Fenner & Smith Incorporated also has agreed to contribute to payments the trustee may be required to make with respect to these liabilities.
 
LEGAL MATTERS
 
Legal matters, including the validity of the Internet HOLDRS, were passed upon for Merrill Lynch, Pierce, Fenner & Smith Incorporated, the initial depositor and the underwriter in connection with the initial offering of Internet HOLDRS, by Shearman & Sterling LLP, New York, New York.  Shearman & Sterling LLP, as special U.S. tax counsel to the trust, also rendered an opinion regarding the material U.S. federal income tax consequences relating to the Internet HOLDRS.
 
WHERE YOU CAN FIND MORE INFORMATION
 
Merrill Lynch, Pierce, Fenner & Smith Incorporated has filed a registration statement on Form S-1 with the SEC covering the Internet HOLDRS.  While this prospectus is a part of the registration statement, it does not contain all the exhibits filed as part of the registration statement.  You should consider reviewing the full text of those exhibits.
 
The registration statement is available over the Internet at the SEC’s Web site at http://www.sec.gov.  You also may read and copy the registration statement at the SEC’s public reference rooms at 100 F Street, N.E., Washington, D.C. 20549.  Please call the SEC at 1-800-SEC-0330 for more information on the public reference
 
29

 
rooms and their copy charges.  Merrill Lynch, Pierce, Fenner & Smith Incorporated will not file any reports pursuant to the Exchange Act.  The trust will file modified reports pursuant to the Exchange Act.
 
Since the securities of the issuers of the underlying securities are registered under the Exchange Act, the issuers of the underlying securities are required to file periodically financial and other information specified by the SEC.
 
For more information about the issuers of the underlying securities, information provided to or filed with the SEC by the issuers of the underlying securities with respect to their registered securities can be inspected at the SEC’s public reference facilities or accessed through the SEC’s Web site referenced above.  However, some of the issuers of the underlying securities may be considered foreign issuers.  The requirements for filing periodic financial and other information for foreign issuers differ from that of domestic issuers.  In particular, foreign issuers are not required to file quarterly reports with the SEC and are not required to file periodic financial and other information on EDGAR.  Therefore, this information may not be accessible through the SEC’s Web site.  Information regarding the issuers of the underlying securities may also be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated information.
 
The trust and Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates are not affiliated with the issuers of the underlying securities, and the issuers of the underlying securities have no obligations with respect to Internet HOLDRS.  This prospectus relates only to Internet HOLDRS and does not relate to the other securities of the issuers of the underlying securities.  The information in this prospectus regarding the issuers of the underlying securities has been derived from the publicly available documents described in the preceding paragraph.  We have not participated in the preparation of these documents or made any due diligence inquiries with respect to the issuers of the underlying securities in connection with Internet HOLDRS.  We make no representation that these publicly available documents or any other publicly available information regarding the issuers of the underlying securities are accurate or complete.  Furthermore, we cannot assure you that all events occurring prior to the date of this prospectus, including events that would affect the accuracy or completeness of the publicly available documents described in the preceding paragraph, that would affect the trading price of the securities of the issuers of the underlying securities, and therefore the offering and trading prices of the Internet HOLDRS have been publicly disclosed.
 
 
 
 

 
30


ANNEX A
 
This annex forms an integral part of the prospectus.
 
The following tables provide a brief description of the business of each of the issuers of the underlying securities and set forth the split-adjusted closing market prices, as reported on the applicable primary trading market, of each of the underlying securities in each month during 2005, 2006, 2007, 2008 and 2009, through March 31, 2010.  The historical prices of the underlying securities should not be taken as an indication of future performance.
 
AMAZON.COM, INC. (AMZN)
 
Amazon.com, Inc. operates as an online retailer in North America and internationally.  The company operates various retail Web sites.  Its product categories include books; movies, music, and games; digital downloads; electronics and computers; home and garden; toys, kids, and baby; grocery; apparel, shoes, and jewelry; health and beauty; sports and outdoors; and tools, auto, and industrial.  The company serves its consumer customers through its retail Websites and focuses on selection, price, and convenience.  It also offers programs that enable seller customers to sell their products on its Websites and their own branded Websites.  In addition, the company serves developer customers through Amazon Web Services, which provides access to technology infrastructure for developers.  Further, it manufactures and sells the kindle e-reader.  Additionally, the company offers co-branded credit card programs, fulfillment, and other marketing and promotional services, such as online advertising.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    43.22  
January
    44.82  
January
    37.67  
January
    77.70  
January
    58.82  
January
    125.41
February
    35.18  
February
    37.44  
February
    39.14  
February
    64.47  
February
    64.79  
February
    118.40
March
    34.27  
March
    36.53  
March
    39.79  
March
    71.30  
March
    73.44  
March
    135.77
April
    32.36  
April
    35.21  
April
    61.33  
April
    78.63  
April
    80.52          
May
    35.51  
May
    34.61  
May
    69.14  
May
    81.62  
May
    77.99          
June
    33.09  
June
    38.68  
June
    68.41  
June
    73.33  
June
    83.66          
July
    45.15  
July
    26.89  
July
    78.54  
July
    76.34  
July
    85.76          
August
    42.70  
August
    30.83  
August
    79.91  
August
    80.81  
August
    81.19          
September
    45.30  
September
    32.12  
September
    93.15  
September
    72.76  
September
    93.36          
October
    39.86  
October
    38.09  
October
    89.15  
October
    57.24  
October
    118.81          
November
    48.46  
November
    40.34  
November
    90.56  
November
    42.70  
November
    135.91          
December
    47.15  
December
    39.46  
December
    92.64  
December
    51.28  
December
    134.52          
 
 
 
 
A-1

 
AOL INC. (AOL)
AOL Inc. operates as a Web services company that offers a variety of service offerings ..  Its business spans online content, products, and services for consumers, publishers, and advertisers.  The company produces digital content and sells premium display advertising.  AOL Inc. operates approximately 80 premium branded and niche content sites.  Its content brands primarily include AOL.com, Moviefone, FanHouse, ParentDish, Asylum, Spinner, DailyFinance, BlackVoices, AOL Latino, PoliticsDaily, Engadget, WalletPop, and Patch.  The company also operates an advertising network in the United States, which focuses on building content for its consumers, as well as on providing products and services for its advertising and publishing partners.  The company provides its online advertising services on its owned and operated properties, as well as on third-party Web sites.  In addition, AOL Inc. offers Internet subscription access services, which serve as a distribution channel for the companys consumer offerings in the United States.  The company was formerly known as America Online, Inc. and changed its name to AOL Inc. in 2006.  AOL Inc. operates independently of Time Warner Inc. as of December 4, 2009.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    *  
January
    *  
January
    *  
January
    *  
January
    *  
January
    23.97
February
    *  
February
    *  
February
    *  
February
    *  
February
    *  
February
    24.78
March
    *  
March
    *  
March
    *  
March
    *  
March
    *  
March
    25.28
April
    *  
April
    *  
April
    *  
April
    *  
April
    *          
May
    *  
May
    *  
May
    *  
May
    *  
May
    *          
June
    *  
June
    *  
June
    *  
June
    *  
June
    *          
July
    *  
July
    *  
July
    *  
July
    *  
July
    *          
August
    *  
August
    *  
August
    *  
August
    *  
August
    *          
September
    *  
September
    *  
September
    *  
September
    *  
September
    *          
October
    *  
October
    *  
October
    *  
October
    *  
October
    *          
November
    *  
November
    *  
November
    *  
November
    *  
November
    24.60          
December
    *  
December
    *  
December
    *  
December
    *  
December
    23.28          

E*TRADE FINANCIAL CORPORATION (ETFC)
E*TRADE Financial Corporation, through its subsidiaries, provides online brokerage and related products and services primarily to individual retail investors, under the brand name of E*TRADE Financial worldwide.  It offers various brokerage products and services, including automated order placement and execution of trades for U.S. and international equities, currencies, futures, options, exchange-traded funds, mutual funds, and bonds.  The company also provides quick transfer, wireless account access, extended hours trading, quotes, research, and advanced planning tools.  Its banking products and services include checking, savings, sweep, money market, and certificates of deposit products.  E*TRADE Financial primarily provides its services through its Web site at etrade.com, as well as through its network of customer service representatives, relationship managers and investment advisors.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    13.75  
January
    23.79  
January
    24.38  
January
    4.97  
January
    1.14  
January
    1.52
February
    13.27  
February
    25.58  
February
    23.09  
February
    4.27  
February
    0.80  
February
    1.61
March
    12.00  
March
    26.98  
March
    21.22  
March
    3.86  
March
    1.24  
March
    1.65
April
    11.11  
April
    24.88  
April
    22.08  
April
    3.98  
April
    1.43          
May
    12.35  
May
    24.27  
May
    23.95  
May
    4.10  
May
    1.44          
June
    13.99  
June
    22.82  
June
    22.09  
June
    3.14  
June
    1.29          
July
    15.51  
July
    23.31  
July
    18.52  
July
    3.02  
July
    1.50          
August
    16.00  
August
    23.59  
August
    15.58  
August
    3.20  
August
    1.76          
September
    17.60  
September
    23.92  
September
    13.05  
September
    2.80  
September
    1.75          
October
    18.55  
October
    23.28  
October
    11.14  
October
    1.82  
October
    1.46          
November
    19.52  
November
    24.07  
November
    4.60  
November
    1.35  
November
    1.64          
December
    20.86  
December
    22.42  
December
    3.55  
December
    1.15  
December
    1.76          
 
A-2

 
EARTHLINK, INC. (ELNK)
 
EarthLink, Inc. operates as an Internet service provider, providing Internet access and related value-added services to individual and business customers in the United States.  The company operates through two segments, Consumer Services and Business Services.  The Consumer Services segment offers narrowband access comprising premium dial-up Internet access and value dial-up Internet access; broadband access that provides a high speed, always on Internet connection, which uses a modem to supply an Internet connection across an existing home phone line or cable connection; voice-over-Internet protocol that offers voicemail, call waiting, caller ID, call forwarding, and E911 service under various plans; and advertising and other value-added services portfolio, including products for protection, communication, and performance, such as security, Web acceleration, Internet call waiting, mail storage, and home networking.  The Business Services segment provides virtual private networks; Internet access, which offers high-speed and dial-up Internet access for business customers; and wholesale network services to businesses and communications carriers.  It also leases server space and provides Web hosting services to have an Internet or electronic commerce presence, including domain names, storage, mailboxes, software tools to build Web sites, e-commerce applications and customer support.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    10.03  
January
    11.42  
January
    7.31  
January
    6.81  
January
    7.53  
January
    8.11
February
    8.73  
February
    9.92  
February
    7.12  
February
    7.23  
February
    6.30  
February
    8.34
March
    9.00  
March
    9.55  
March
    7.35  
March
    7.55  
March
    6.57  
March
    8.54
April
    9.18  
April
    9.09  
April
    7.66  
April
    9.13  
April
    7.58          
May
    10.58  
May
    8.33  
May
    8.28  
May
    9.60  
May
    7.84          
June
    8.66  
June
    8.66  
June
    7.47  
June
    8.65  
June
    7.41          
July
    9.53  
July
    7.21  
July
    6.95  
July
    9.00  
July
    8.45          
August
    9.76  
August
    7.35  
August
    7.62  
August
    9.32  
August
    8.32          
September
    10.70  
September
    7.28  
September
    7.92  
September
    8.50  
September
    8.41          
October
    11.01  
October
    7.02  
October
    7.91  
October
    6.90  
October
    8.10          
November
    11.38  
November
    6.51  
November
    6.79  
November
    6.66  
November
    8.23          
December
    11.11  
December
    7.10  
December
    7.07  
December
    6.76  
December
    8.31          
 
 
 
 
 
 
 
 
 
 
A-3

 
eBAY INC. (EBAY)
 
eBay Inc. and its subsidiaries provide online marketplaces for the sale of goods and services, online payments services, and online communication offerings to individuals and businesses in the United States and internationally.  It operates in three segments: Marketplaces, Payments, and Communications.  The Marketplaces segment provides online commerce platforms that enable buyers and sellers to interact and trade with one another.  It enables online commerce through various platforms, including the traditional eBay.com platform and other online platforms, such as StubHub, Kijiji, Den Bla Avis, Gumtree.com, LoQUo.com, OpusForum, Marktplaats.nl, and mobile.de, as well as Half.com, Rent.com, and Shopping.com.  This segment also provides various services, including feedback forum, safe harbor program, verified rights owner program, loyalty programs, customer support, and services.  The Payments segment offers PayPal, a payments platform that enables individuals or businesses with an email address to send and receive payments online.  Its services include joining the network, verification of its PayPal’s account holders, withdrawing money, and trust and safety programs, including PayPal’s seller protection and buyer protection programs.  This segment also provides Bill Me Later, a payment solution, which offers transactional credit at the point of sale for the U.S. online consumers.  The Communications segment consists of Skype, an Internet communication product, which enables voice over Internet protocol communications between Skype users, as well as provides Skype users connectivity to traditional fixed-line and mobile telephones.  This segment offers its software in approximately 28 languages.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    40.75  
January
    43.10  
January
    32.39  
January
    26.89  
January
    12.02  
January
    23.02
February
    42.84  
February
    40.06  
February
    32.06  
February
    26.36  
February
    10.87  
February
    23.02
March
    37.26  
March
    39.00  
March
    33.15  
March
    29.84  
March
    12.56  
March
    26.97
April
    31.71  
April
    34.41  
April
    33.94  
April
    31.29  
April
    16.47          
May
    38.00  
May
    32.81  
May
    32.56  
May
    30.01  
May
    17.62          
June
    33.01  
June
    29.29  
June
    32.18  
June
    27.33  
June
    17.13          
July
    41.78  
July
    24.07  
July
    32.40  
July
    25.17  
July
    21.25          
August
    40.49  
August
    27.82  
August
    34.10  
August
    24.93  
August
    22.14          
September
    41.20  
September
    28.36  
September
    39.02  
September
    22.38  
September
    23.60          
October
    39.61  
October
    32.13  
October
    36.10  
October
    15.27  
October
    22.27          
November
    44.81  
November
    32.34  
November
    33.53  
November
    13.13  
November
    24.47          
December
    43.22  
December
    30.07  
December
    33.19  
December
    13.96  
December
    23.53          
 
 
 
 
 
 
 
 
 
 
A-4

 
McAFEE, INC. (MFE)
 
McAfee, Inc. operates as a security technology company that secures systems and networks from threats worldwide. The company’s system security offerings include endpoint protection that encompasses security solutions for consumer and corporate computer systems; data protection solutions to safeguard vital information residing on various devices; and mobile security solutions to protect mobile operators and their users by safeguarding mobile terminals, applications, and content. Its network security offerings comprise firewall, intrusion detection and prevention, Web, email, and data loss protection security appliances; McAfee SiteAdvisor to protect Internet users from a range of security threats, including spyware and other malicious downloads, spam, and identity theft scams, as well as provides customers a search tool bar that eliminates red-rated sites on search engine results; and McAfee SECURE standard, an aggregate of industry best practice designed to provide a level of security that an online merchant would reasonably achieve to help provide consumers with protection when interacting with Web sites and shopping online. McAfee’s vulnerability and risk management offerings enable companies to meet security compliance objectives across entire organization, including identification of security risks, enforcement of security policies, and compliance audits for industry and government security regulations. The company’s McAfee NAC supports internal security policies by preventing non compliant personal computers from connecting to the internal network.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    25.85  
January
    23.19  
January
    29.26  
January
    33.65  
January
    30.49  
January
    37.70
February
    23.13  
February
    23.26  
February
    30.12  
February
    33.27  
February
    27.95  
February
    39.69
March
    22.56  
March
    24.33  
March
    29.08  
March
    33.09  
March
    33.50  
March
    40.13
April
    20.91  
April
    26.09  
April
    32.49  
April
    33.25  
April
    37.54          
May
    28.68  
May
    23.65  
May
    36.76  
May
    36.25  
May
    39.23          
June
    26.18  
June
    24.27  
June
    35.20  
June
    34.03  
June
    42.19          
July
    31.40  
July
    21.55  
July
    35.86  
July
    32.75  
July
    44.58          
August
    30.65  
August
    22.76  
August
    35.75  
August
    39.56  
August
    39.78          
September
    31.42  
September
    24.46  
September
    34.87  
September
    33.96  
September
    43.79          
October
    30.03  
October
    28.93  
October
    41.35  
October
    32.55  
October
    41.88          
November
    27.81  
November
    29.21  
November
    38.95  
November
    30.33  
November
    38.15          
December
    27.13  
December
    28.38  
December
    37.50  
December
    34.57  
December
    40.57          
 
 
 
 
 
 
 
 

 
A-5

 
MODUSLINK GLOBAL SOLUTIONS, INC. (MLNK)
 
ModusLink Global Solutions, Inc., through its subsidiaries, provides supply chain business process management solutions worldwide.  The company’s services include sourcing and supply base management, manufacturing and product configuration, fulfillment and distribution, e-business, and aftermarket services, such as reverse management and asset disposition.  Its clients include hardware manufacturers, software publishers, telecommunications carriers, broadband and wireless service providers, and consumer electronics companies.  In addition, ModusLink Global Solutions, through its venture capital group, invests in early-stage technology companies.  The company was formerly known as CMGI, Inc.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    18.90  
January
    15.00  
January
    12.70  
January
    12.90  
January
    2.33  
January
    10.15
February
    19.30  
February
    14.60  
February
    15.40  
February
    11.49  
February
    1.90  
February
    9.90
March
    20.50  
March
    14.80  
March
    21.20  
March
    13.26  
March
    2.59  
March
    8.43
April
    17.60  
April
    14.40  
April
    21.00  
April
    13.83  
April
    3.70          
May
    21.80  
May
    13.20  
May
    25.00  
May
    14.98  
May
    4.25          
June
    18.90  
June
    12.00  
June
    19.50  
June
    10.60  
June
    6.86          
July
    19.00  
July
    10.40  
July
    15.80  
July
    12.24  
July
    7.13          
August
    16.90  
August
    11.00  
August
    15.60  
August
    11.79  
August
    7.18          
September
    16.70  
September
    10.60  
September
    13.60  
September
    9.61  
September
    8.09          
October
    15.80  
October
    14.00  
October
    14.10  
October
    5.56  
October
    8.22          
November
    17.40  
November
    13.50  
November
    10.37  
November
    4.44  
November
    8.08          
December
    15.09  
December
    13.40  
December
    13.09  
December
    2.89  
December
    9.41          

PRICELINE.COM INCORPORATED (PCLN)
 
priceline.com Incorporated operates as an online travel company principally in the United States, Europe, and Asia.  It provides various travel services, including airline tickets, hotel rooms, car rentals, vacation packages, cruises, and reservation services.  The company also provides destination services, such as parking, event tickets, ground transfers, tours, and other services available at their travel destinations; and travel insurance package that provides coverage for trip cancellation, trip interruption, medical expenses, and emergency evacuation, as well as for the loss of baggage, property, and travel documents.  In the United States, it offers its customers a choice that gives the ability to purchase travel services in a traditional, price-disclosed manner or the opportunity to use its Name Your Own Price service, which allows the customers to make offers for travel services at discounted prices.  The company offers its products and services under priceline.com, Booking.com, Active Hotels, Agoda, Lowestfare.com, Rentalcars.com, Breezenet.com, MyTravelGuide.com and Travelweb brands.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    22.59  
January
    22.05  
January
    42.62  
January
    108.52  
January
    67.09  
January
    195.35
February
    22.47  
February
    24.55  
February
    52.41  
February
    114.02  
February
    84.86  
February
    226.71
March
    25.20  
March
    24.84  
March
    53.26  
March
    120.86  
March
    78.78  
March
    255.00
April
    25.36  
April
    24.44  
April
    55.64  
April
    127.64  
April
    97.09          
May
    23.95  
May
    31.10  
May
    61.84  
May
    134.53  
May
    110.11          
June
    23.33  
June
    29.86  
June
    68.74  
June
    115.46  
June
    111.55          
July
    24.84  
July
    26.88  
July
    63.80  
July
    114.95  
July
    129.62          
August
    21.49  
August
    33.40  
August
    82.98  
August
    92.98  
August
    153.98          
September
    19.32  
September
    36.79  
September
    88.75  
September
    68.43  
September
    165.82          
October
    18.97  
October
    40.29  
October
    93.10  
October
    52.63  
October
    157.79          
November
    24.02  
November
    39.49  
November
    113.80  
November
    69.00  
November
    214.12          
December
    22.32  
December
    43.61  
December
    114.86  
December
    73.65  
December
    218.41          
 
A-6

 
REALNETWORKS, INC. (RNWK)
 
RealNetworks, Inc. provides digital media services and software.  The company’s Music segment owns and manages digital music products and services designed to provide consumers with access to digital music.  It offers Rhapsody, a subscription and advertising-supported music service that offers conditional downloads and on demand streaming services; Rhapsody.com, a Web-based version of digital music service; Rhapsody MP3 music store, which enables consumers to purchase and permanently download individual digital music tracks; RadioPass, an Internet radio subscription service; and RealMusic that offers Internet radio and other music content.  Its Consumer segment owns and operates digital games service that includes downloadable and online games products and subscription services focused on casual games for PC and other platforms.  This segment distributes games in North America, Europe, Latin America, and Japan through its Websites operated under the RealArcade, GameHouse, Zylom, and Atrativa brands, and through Websites owned or managed by third parties.  This segment also offers media software and services products, including RealPlayer media player software that enable consumers to discover, play, and manage audio and video programming on the Internet, as well as distributes third-party software products.  The company’s Technology Products and Solutions segment consists of application service provider services, which include ringback tones, music-on-demand, video-on-demand and messaging services, system software license sales, and intellectual property licensing.  The company markets its products through games distribution network; broadband service providers, retailers, other partners, and mobile carriers; home entertainment hardware providers and MP3 manufacturers; Web sites; and hardware server companies, content aggregators, Internet service providers, and other hosting providers.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    6.07  
January
    8.05  
January
    10.67  
January
    5.83  
January
    2.82  
January
    4.22
February
    6.26  
February
    7.86  
February
    8.16  
February
    5.85  
February
    2.30  
February
    4.60
March
    5.78  
March
    8.25  
March
    7.85  
March
    5.73  
March
    2.33  
March
    4.83
April
    6.16  
April
    10.02  
April
    7.55  
April
    6.16  
April
    2.46          
May
    5.11  
May
    9.46  
May
    8.47  
May
    7.30  
May
    2.56          
June
    4.96  
June
    10.70  
June
    8.17  
June
    6.60  
June
    2.99          
July
    4.97  
July
    10.00  
July
    7.12  
July
    6.87  
July
    2.90          
August
    5.39  
August
    11.03  
August
    6.23  
August
    6.63  
August
    3.54          
September
    5.71  
September
    10.61  
September
    6.78  
September
    5.08  
September
    3.72          
October
    7.80  
October
    10.98  
October
    7.26  
October
    4.28  
October
    3.57          
November
    8.65  
November
    11.51  
November
    6.17  
November
    3.80  
November
    3.27          
December
    7.76  
December
    10.94  
December
    6.09  
December
    3.53  
December
    3.71          
 
 
 
 
 
 
 
 
 
 
 
 
A-7

 
TD AMERITRADE HOLDING CORPORATION (AMTD)
TD AMERITRADE Holding Corporation, through its subsidiaries, provides securities brokerage services and technology-based financial services in the United States. The company offers common and preferred stock, American depository receipts, exchange traded funds, option trades, futures and foreign exchange trades, trading on mutual funds and fixed income securities, margin lending, and cash management services. Its client offerings comprise TD AMERITRADE for self-directed retail investors; TD AMERITRADE Institutional that provides brokerage and custody services; trading platforms that enables research and analysis; a suite of education products and services for stock, option, foreign exchange, futures, mutual fund, and fixed-income investors; Amerivest, an online advisory service that develops portfolios of exchange-traded funds to help long-term investors pursue their financial goals; and TD AMERITRADE Corporate Services, which offers self-directed brokerage services to employees and executives of corporations. The company also provides services, such as trade execution, clearing, trustee, and trust-related services; and cash sweep products through third-party banking relationships. TD AMERITRADE Holding offers its products and services to retail investors, traders, financial planners, and institutions through the Internet, a network of retail branches, wireless telephone or personal digital assistant, interactive voice response, and independent registered advisors via telephone.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    12.93  
January
    20.24  
January
    17.69  
January
    18.76  
January
    11.24  
January
    17.76
February
    10.63  
February
    21.72  
February
    16.00  
February
    18.30  
February
    11.87  
February
    17.49
March
    10.21  
March
    20.87  
March
    14.88  
March
    16.51  
March
    13.81  
March
    19.06
April
    10.48  
April
    18.56  
April
    17.05  
April
    18.10  
April
    15.91          
May
    14.86  
May
    17.00  
May
    20.53  
May
    18.11  
May
    17.04          
June
    18.61  
June
    14.81  
June
    20.00  
June
    18.09  
June
    17.55          
July
    19.53  
July
    16.38  
July
    16.95  
July
    19.91  
July
    18.54          
August
    19.90  
August
    17.52  
August
    18.15  
August
    20.43  
August
    19.24          
September
    21.47  
September
    18.85  
September
    18.22  
September
    16.67  
September
    19.63          
October
    21.03  
October
    16.47  
October
    19.14  
October
    13.29  
October
    19.30          
November
    23.33  
November
    17.56  
November
    18.69  
November
    13.30  
November
    19.64          
December
    24.00  
December
    16.18  
December
    20.06  
December
    14.25  
December
    19.38          

TIME WARNER CABLE INC. (TWC)
Time Warner Cable Inc. provides video, data, and voice service to residential and commercial customers in the United States.  The company offers video service through analog transmissions; a combination of digital and analog transmissions; or in systems, as well as video service via digital transmissions.  It provides on-demand services, enhanced television services, high-definition television, and set-top boxes equipped with digital video recorders.  Time Warner Cable also offers video programming; data services, including Internet access, Web site hosting, and managed security; and Business Class Phone, a business-grade phone service geared to small- and medium-sized businesses, as well as commercial networking and transport services.  Time Warner Cable Inc.  operates independently of Time Warner Inc. as of March 12, 2009.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    *  
January
    *  
January
    *  
January
    *  
January
    *  
January
    43.59
February
    *  
February
    *  
February
    *  
February
    *  
February
    *  
February
    46.69
March
    *  
March
    *  
March
    *  
March
    *  
March
    *  
March
    53.31
April
    *  
April
    *  
April
    *  
April
    *  
April
    31.31          
May
    *  
May
    *  
May
    *  
May
    *  
May
    30.79          
June
    *  
June
    *  
June
    *  
June
    *  
June
    31.67          
July
    *  
July
    *  
July
    *  
July
    *  
July
    33.06          
August
    *  
August
    *  
August
    *  
August
    *  
August
    36.75          
September
    *  
September
    *  
September
    *  
September
    *  
September
    43.09          
October
    *  
October
    *  
October
    *  
October
    *  
October
    39.44          
November
    *  
November
    *  
November
    *  
November
    *  
November
    41.89          
December
    *  
December
    *  
December
    *  
December
    *  
December
    41.39          
 
A-8

 
TIME WARNER INC. (TWX)
 
Time Warner Inc. operates as a media and entertainment company in the United States and internationally.  It operates in three segments: Networks, Filmed Entertainment, and Publishing.  The Networks segment provides domestic and international networks and pay television programming services, which consist of the multi-channel HBO and Cinemax pay television programming services.  The Filmed Entertainment segment produces and distributes theatrical motion pictures, television shows, and animation and other programming; and distributes home video products, and licenses rights to its feature films, television programming, and characters.  The Publishing segment publishes magazines; and operates various Web sites, as well as involves in direct-marketing and direct-selling businesses.  It publishes magazines on celebrities; sports; lifestyle, beauty, and fashion; life, home, body, and soul; news and events; economic and business developments; and consumer.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    37.16  
January
    36.19  
January
    45.15  
January
    32.39  
January
    19.26  
January
    27.45
February
    35.57  
February
    35.73  
February
    41.99  
February
    32.22  
February
    15.75  
February
    29.04
March
    36.23  
March
    34.66  
March
    40.71  
March
    28.94  
March
    17.98  
March
    31.27
April
    34.70  
April
    35.92  
April
    42.59  
April
    30.65  
April
    20.33          
May
    35.92  
May
    35.53  
May
    44.11  
May
    32.78  
May
    21.81          
June
    34.49  
June
    35.71  
June
    43.43  
June
    30.55  
June
    23.46          
July
    35.13  
July
    34.06  
July
    39.76  
July
    29.56  
July
    24.83          
August
    36.99  
August
    34.31  
August
    39.18  
August
    33.79  
August
    26.00          
September
    37.38  
September
    37.63  
September
    37.90  
September
    27.06  
September
    26.81          
October
    36.81  
October
    41.31  
October
    37.69  
October
    20.83  
October
    28.05          
November
    37.12  
November
    41.57  
November
    35.63  
November
    18.68  
November
    28.61          
December
    36.00  
December
    44.96  
December
    34.08  
December
    20.77  
December
    29.14          

YAHOO! INC. (YHOO)
 
Yahoo! Inc. provides Internet services to users, advertisers, publishers, and developers worldwide.  The company owns and operates online properties and services, and provides its advertising offerings and access to Internet users through its distribution network of third-party entities, as well as offers marketing services to advertisers and publishers.  Its Front Doors offerings include Yahoo! Front Page, My Yahoo!, and Yahoo! Toolbar; Communities offerings consist of Yahoo! Groups, Yahoo! Answers, and Flickr to organize into groups and share knowledge and photos; and Search products comprise Yahoo! Search, Yahoo! Local, Yahoo! Yellow Pages, and Yahoo! Maps to navigate through the Internet and search for information.  It also offers Communications offerings comprising Yahoo! Mail, Zimbra Mail, and Yahoo! Messenger that provide communication services to users and small businesses through its broadband Internet access partners.  In addition, the company’s Audience offerings include Yahoo! News, Yahoo! Finance, and Yahoo! Sports, as well as Yahoo! Autos, Yahoo! Food, Yahoo! Games, Yahoo! Health, Yahoo! Kids, Yahoo! Movies, Yahoo! Music, Yahoo! Personals, Yahoo! Real Estate, Shine, Yahoo! Shopping, Yahoo! Tech, Yahoo! Travel, Yahoo! TV, and omg!.  Further, its Connected Life business includes Yahoo! Mobile and Yahoo! Connected TV that offer services designed to provide users with access to the open Internet and their Yahoo! content and communities across various Internet-enabled devices, including mobile devices and television.  The company also offers Yahoo! HotJobs, which provides comprehensive solutions for employers, staffing firms, and job seekers; and Yahoo! Small Business that offers a comprehensive and integrated suite of fee-based online services, including Yahoo! Domains, Yahoo! Web Hosting, and Yahoo! Business Mail, as well as e-commerce platform called Yahoo! Merchant Solutions.
2005
 
Closing
Price
 
2006
 
Closing
Price
 
2007
 
Closing
Price
 
2008
 
Closing
Price
 
2009
 
Closing
Price
 
2010
 
Closing
Price
January
    35.21  
January
    34.38  
January
    28.31  
January
    19.18  
January
    11.73  
January
    15.01
February
    32.27  
February
    32.06  
February
    30.86  
February
    27.78  
February
    13.23  
February
    15.31
March
    33.90  
March
    32.26  
March
    31.29  
March
    28.93  
March
    12.81  
March
    16.53
April
    34.50  
April
    32.78  
April
    28.04  
April
    27.41  
April
    14.29          
May
    37.20  
May
    31.59  
May
    28.70  
May
    26.76  
May
    15.84          
June
    34.65  
June
    33.00  
June
    27.13  
June
    20.66  
June
    15.66          
July
    33.34  
July
    27.14  
July
    23.25  
July
    19.89  
July
    14.32          
August
    33.32  
August
    28.83  
August
    22.73  
August
    19.38  
August
    14.61          
September
    33.84  
September
    25.28  
September
    26.84  
September
    17.30  
September
    17.81          
October
    36.97  
October
    26.34  
October
    31.10  
October
    12.82  
October
    15.90          
November
    40.23  
November
    27.01  
November
    26.81  
November
    11.51  
November
    14.97          
December
    39.18  
December
    25.54  
December
    23.26  
December
    12.20  
December
    16.78          



A-9

 



 
 
 
 
 
 
1,000,000,000 Depositary Receipts
 
Internet HOLDRSSM Trust
 
 
 
 
 

 
PROSPECTUS
 


 
 
 
April 15, 2010
 

 



PART II
 
INFORMATION NOT REQUIRED IN PROSPECTUS
 
Item 14.  Indemnification of Directors and Officers.
 
Section 145 of the General Corporation Law of the State of Delaware, as amended, provides that under certain circumstances a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or is or was serving at its request in such capacity in another corporation or business association, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful.
 
Article XIV, Section 2 of the Restated Certificate of Incorporation of Merrill Lynch, Pierce, Fenner & Smith Incorporated provides in effect that, subject to certain limited exceptions, Merrill Lynch, Pierce, Fenner & Smith Incorporated shall indemnify its directors and officers to the full extent authorized or permitted by law.
 
The directors and officers of Merrill Lynch, Pierce, Fenner & Smith Incorporated are insured under policies of insurance maintained by Merrill Lynch, Pierce, Fenner & Smith Incorporated, subject to the limits of the policies, against certain losses arising from any claim made against them by reason of being or having been such directors or officers.  In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated has entered into contracts with all of its directors providing for indemnification of such persons by Merrill Lynch, Pierce, Fenner & Smith Incorporated to the full extent authorized or permitted by law, subject to certain limited exceptions.
 
Item 16.  Exhibits.
 
See Index to Exhibits.
 
Item 17.  Undertakings.
 
The undersigned Registrant hereby undertakes:
 
(1)          To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
 
(i)           To include any prospectus required by Section 10(a)(3) of the Securities Act.
 
(ii)           To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.  Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of the prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
 
(iii)           To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
 
(2)          That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered
 

 
therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
(3)           To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
 
(4)           For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
 
(5)           For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
(6)           Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to Item 14 of this registration statement, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
 
 
 
 
 
 
 

 
SIGNATURES
 
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Post-Effective Amendment No. 12 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, on April 15, 2010.
 
  Merrill Lynch, Pierce, Fenner & Smith Incorporated  
   
 
       
  By:
*
 
  Name:  Sallie L. Krawcheck  
  Title:  Co-Chief Executive Officer  
    Executive Vice President and Director  
 
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 12 to the Registration Statement has been signed by the following persons in the capacities indicated below on April 15, 2010.
 
Signature
 
Title
     
*
 
Co-Chief Executive Officer, Executive Vice
President and Director
Sallie L. Krawcheck
 
(Principal Executive Officer)
     
*
 
Co-Chief Executive Officer, Executive Vice
President and Director
Thomas K. Montag
 
 
(Principal Executive Officer)
     
*
 
Chief Financial Officer and Senior Vice President
Robert Qutub
 
(Principal Financial Officer and Principal Accounting
Officer)
     
*
 
Executive Vice President and Director
Bruce R. Thompson
 
   
*By:
   
/s/ Liam B. O’Neil
 
Attorney-in-Fact
Liam B. O’Neil
 
   

 
 
 
 

 
INDEX TO EXHIBITS
 
Exhibits
 
*4.1
Form of Depositary Trust Agreement and form of HOLDRS, filed on May 14, 1999 as part of the registration statement filed on form S-1 for Internet HOLDRS.
 
*4.2
Form of Internet HOLDRS Receipts, filed on May 14, 1999 as part of the registration statement filed on form S-1 for Internet HOLDRS.
 
*4.3
Standard Terms for Depositary Trust Agreements between Merrill Lynch, Pierce, Fenner & Smith Incorporated and The Bank of New York Mellon (formerly known as The Bank of New York), as Trustee dated as of September 22, 1999, filed on November 28, 2000 as part of post-effective Amendment No. 3 to the registration statement filed on form S-1 for Internet HOLDRS.
 
*4.4
Form of Amendment No. 2 to the Standard Terms for Depositary Trust Agreements, filed on May 14, 1999 as part of the registration statement filed on form S-1 for Internet HOLDRS.
 
*5.1
Opinion of Shearman & Sterling LLP regarding the validity of the Internet HOLDRS, filed on May 14, 1999 as part of the registration statement filed on form S-1 for Internet HOLDRS.
 
*8.1
Opinion of Shearman & Sterling LLP, as special U.S. tax counsel regarding the material federal income tax consequences, filed on May 14, 1999 as part of the registration statement filed on form S-1 for Internet HOLDRS.
 
*8.2
Opinion of Shearman & Sterling LLP, as special U.S. Tax Counsel regarding the material federal income tax consequences, filed on July 9, 2003 as an exhibit to Amendment No. 7 to the registration statement filed on form S-1 for Internet HOLDRS.
 
*24.1
Power of Attorney (included in Part II of Registration Statement), filed on May 14, 1999 as part of the registration statement filed on form S-1 for Internet HOLDRS.
 
*24.2
Power of Attorney of Ahmass L. Fakahany, filed on November 28, 2000 as part of post-effective Amendment No. 3 to the registration statement filed on form S-1 for Internet HOLDRS.
 
*24.3
Power of Attorney of Dominic Carone, filed on November 28, 2000 as part of post-effective Amendment No. 3 to the registration statement filed on form S-1 for Internet HOLDRS.
 
*24.4
Power of Attorney of Thomas H. Patrick, filed on November 28, 2000 as part of post-effective Amendment No. 3 to the registration statement filed on form S-1 for Internet HOLDRS.
 
*24.5
Power of Attorney of John J. Fosina, E. Stanley O’Neal, Thomas H. Patrick and Dominic A. Carone.
 
*24.6
Power of Attorney of Candace E. Browning, Gregory J. Fleming, Do Woo Kim and Joseph F. Regan.
 
*24.7
Power of Attorney of Robert J. McCann and Joseph F. Regan.
 
*24.8
Power of Attorney of Daniel C. Sontag.
 
*24.9
Power of Attorney of Thomas K. Montag.
 
  24.10
Power of Attorney of Sallie L. Krawcheck, Thomas K. Montag, Robert Qutub and Bruce R. Thompson.
 
_________________
*  Previously filed.
 
 
 

EX-24.10 2 ss87928_ex2410.htm POWER OF ATTORNEY
Exhibit 24.10
 
POWER OF ATTORNEY

 
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned, being a director or officer, or both, of Merrill Lynch, Pierce, Fenner & Smith Incorporated hereby constitutes and appoints Liam B. O’Neil, Kirstin N. Hill and Katherine H. Zrike, jointly and severally, his or her true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign one or more Registration Statements on Form S-1 under the provisions of the Securities Act of 1933, as amended, any and all amendments thereto (including post-effective amendments) and supplements to the Registration Statements for each of the Biotech HOLDRSSM Trust, B2B Internet HOLDRSSM Trust, Broadband HOLDRSSM Trust, Europe 2001 HOLDRSSM Trust, Internet HOLDRSSM Trust, Internet Architecture HOLDRSSM Trust, Internet Infrastructure HOLDRSSM Trust, Market 2000+ HOLDRSSM Trust, Oil Service HOLDRSSM Trust, Pharmaceutical HOLDRSSM Trust, Regional Bank HOLDRSSM Trust, Semiconductor HOLDRSSM Trust, Software HOLDRSSM Trust, Telecom HOLDRSSM Trust, Wireless HOLDRSSM Trust, Utilities HOLDRSSM Trust and Retail HOLDRSSM Trust, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact full power and authority to do and perform each and every act and thing requisite and necessary to be done and hereby ratifying and confirming all that said attorneys-in-fact or any of them, or his or her substitute or their substitutes, may lawfully do or cause to be done by virtue thereof.

This Power of Attorney may be executed in counterparts and all such duly executed counterparts shall together constitute the same instrument. This Power of Attorney shall not revoke any powers of attorney previously executed by the undersigned. This Power of Attorney shall not be revoked by any subsequent power of attorney that the undersigned may execute, unless such subsequent power of attorney expressly provides that it revokes this Power of Attorney by referring to the date of the undersigned’s execution of this Power of Attorney and subject hereof.

New York State General Obligations Law requires the “CAUTION TO THE PRINCIPAL” and “IMPORTANT INFORMATION FOR THE AGENT” statements set forth on the next page to be contained in this Power of Attorney.  Notwithstanding anything to the contrary contained in those statements, this Power of Attorney is limited to the powers granted as described above and DOES NOT grant the attorneys-in-fact and agents the power or authority to spend the undersigned's money or sell or dispose of the undersigned's property, or the power or authority to act in any other capacity other than as described above.

THE FOLLOWING STATEMENTS ARE REQUIRED TO BE INCLUDED IN THIS POWER OF ATTORNEY UNDER THE NEW YORK STATE GENERAL OBLIGATIONS LAW:

CAUTION TO THE PRINCIPAL:
 
Your Power of Attorney is an important document. As the “principal,” you give the person whom you choose (your “agent”) authority to spend your money and sell or dispose of your property during your lifetime without telling you. You do not lose your authority to act even though you have given your agent similar authority.  When your agent exercises this authority, he or she must act according to any instructions you have provided, or, where there are no specific instructions, in your best interest. “Important Information for the Agent” at the end of this document describes your agent’s responsibilities.  Your agent can act on your behalf only after signing the Power of Attorney before a notary public.  You can request information from your agent at any time.  If you are revoking a prior Power of Attorney by executing this Power of Attorney, you should provide written notice of the revocation to your prior agent(s) and to the financial institutions where your accounts are located.  You can revoke or terminate your Power of Attorney at any time for any reason as long as you are of sound mind. If you are no longer of sound mind, a court can remove an agent for acting improperly.  Your agent cannot make health care decisions for you. You may execute a “Health Care Proxy” to do this.  The law governing Powers of Attorney is contained in the New York General Obligations Law, Article 5, Title 15. This law is available at a law library, or online through the New York State Senate or Assembly
 

 
websites, www.senate.state.ny.us or www.assembly.state.ny.us.  If there is anything about this document that you do not understand, you should ask a lawyer of your own choosing to explain it to you.

IMPORTANT INFORMATION FOR THE AGENT:
 
When you accept the authority granted under this Power of Attorney, a special legal relationship is created between you and the principal. This relationship imposes on you legal responsibilities that continue until you resign or the Power of Attorney is terminated or revoked. You must:
 
 
(1)
act according to any instructions from the principal, or, where there are no instructions, in the principal’s best interest;
 
(2)
avoid conflicts that would impair your ability to act in the principal’s best interest;
 
(3)
keep the principal’s property separate and distinct from any assets you own or control, unless otherwise permitted by law;
 
(4)
keep a record of all receipts, payments, and transactions conducted for the principal; and
 
(5)
disclose your identity as an agent whenever you act for the principal by writing or printing the principal’s name and signing your own name as “agent” in either of the following manner: (Principal’s Name) by (Your Signature) as Agent, or (Your signature) as Agent for (Principal’s Name).
 
You may not use the principal’s assets to benefit yourself or give gifts to yourself or anyone else unless the principal has specifically granted you that authority in this Power of Attorney or in a Statutory Major Gifts Rider attached to this Power of Attorney.  If you have that authority, you must act according to any instructions of the principal or, where there are no such instructions, in the principal’s best interest. You may resign by giving written notice to the principal and to any co-agent, successor agent, monitor if one has been named in this document, or the principal’s guardian if one has been appointed.  If there is anything about this document or your responsibilities that you do not understand, you should seek legal advice.

Liability of agent:

The meaning of the authority given to you is defined in New York’s General Obligations Law, Article 5, Title 15. If it is found that you have violated the law or acted outside the authority granted to you in the Power of Attorney, you may be liable under the law for your violation.



[REMAINDER OF PAGE LEFT BLANK]
 

 
IN WITNESS WHEREOF, the undersigned principal has executed this Power of Attorney on the date indicated opposite her name.

 
/s/ Sallie L. Krawcheck
Co-Chief Executive Officer, Executive
Vice President and Director
March 23, 2010
 
   
 Sallie L. Krawcheck    
 

 
State of New York
)
   
County of New York
) ss.:
 
On the 23rd day of March in the year 2010 before me, the undersigned, personally appeared Sallie L. Krawcheck, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her capacity, and that by her signature on the instrument, the individual, or the person upon behalf of which the individuals acted, executed the instrument.
 

 /s/ Maria A. Cedeno
 
   
Notary Public
 


MARIA A. CEDENO
NOTARY PUBLIC-STATE OF NEW YORK
No: 01CE6183838
Qualified in Queens County
My Commission Expires March 31, 2012




[REMAINDER OF PAGE LEFT BLANK]
 

 
IN WITNESS WHEREOF, the undersigned principal has executed this Power of Attorney on the date indicated opposite his name.
 
/s/ Thomas K. Montag
Co-Chief Executive Officer,
Executive Vice President and
March 15, 2010
      Director  
Thomas K. Montag
   


 
State of New York
)
   
County of New York
) ss.:
 
On the 15th day of March in the year 2010 before me, the undersigned, personally appeared Thomas K. Montag, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individuals acted, executed the instrument.
 

 
/s/ Robin Anne Engelman
 
Notary Public
 


ROBIN ANNE ENGELMAN
Notary Public, State of New York
No. 24-4721378
Qualified in Kings County
Commission Expires February 28, 2011






[REMAINDER OF PAGE LEFT BLANK]
 

 
IN WITNESS WHEREOF, the undersigned principal has executed this Power of Attorney on the date indicated opposite his name.

 
/s/ Robert Qutub
Chief Financial Officer and
Senior Vice President
March 15, 2010
     
Robert Qutub
   


 
State of North Carolina
)
   
County of Mecklenburg
) ss.:
 
On the 15th day of March in the year 2010 before me, the undersigned, personally appeared Robert Qutub, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individuals acted, executed the instrument.
 

 
/s/ Margaret Kruse
 
Notary Public
 


MARGARET KRUSE
NOTARY PUBLIC
MECKLENBURG COUNTY, NC
My commission expires 10-24-2014






[REMAINDER OF PAGE LEFT BLANK]
 

 
IN WITNESS WHEREOF, the undersigned principal has executed in Charlotte, North Carolina this Power of Attorney on the date indicated opposite his name.
 

/s/ Bruce R. Thompson
 
Executive Vice President and Director
March 15th, 2010
     
Bruce R. Thompson
   

 
 
State of North Carolina
)
   
County of Mecklenburg
) ss.:
 
On the 15th day of March in the year 2010 before me, the undersigned, personally appeared Bruce R. Thompson, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individuals acted, executed the instrument.
 

 
/s/ Nancy D. Dry
 
Notary Public
 

My commission expires 1-21-15.







[REMAINDER OF PAGE LEFT BLANK]
 

 
IN WITNESS WHEREOF, the undersigned agent has executed this Power of Attorney on the date indicated opposite his name.

 
/s/ Liam B. O’Neil
Agent and Attorney-in-Fact
April 14, 2010
     
Liam B. O’Neil
   

 
State of New York
)
   
County of New York
) ss.:

On the 14th day of April in the year 2010 before me, the undersigned, personally appeared Liam B. O’Neil, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individuals acted, executed the instrument. 

 
  /s/ Leonore E. McKean  
Notary Public
 

LEONORE E. MCKEAN
Notary Public, State of New York
No. O1MC6046528
Qualified in Suffolk County
Commission Expires 08/14/2010
 





 [REMAINDER OF PAGE LEFT BLANK]
 

 
IN WITNESS WHEREOF, the undersigned agent has executed this Power of Attorney on the date indicated opposite her name.

 
/s/ Kirstin N. Hill
Agent and Attorney-in-Fact
April 14, 2010
     
Kirstin N. Hill
   

 
State of New York
)
   
County of New York
) ss.:
 

On the 14th day of April in the year 2010 before me, the undersigned, personally appeared Kirstin N. Hill, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her capacity, and that by her signature on the instrument, the individual, or the person upon behalf of which the individuals acted, executed the instrument. 

 
  /s/ Leonore E. McKean  
Notary Public
 

LEONORE E. MCKEAN
Notary Public, State of New York
No. O1MC6046528
Qualified in Suffolk County
Commission Expires 08/14/2010
 





 [REMAINDER OF PAGE LEFT BLANK]
 

 
IN WITNESS WHEREOF, the undersigned agent has executed this Power of Attorney on the date indicated opposite her name.

/s/ Katherine H. Zrike
 
Agent and Attorney-in-Fact
 
 
April 14, 2010
     
Katherine H. Zrike
   

 
State of New York
)
   
County of New York
) ss.:
 

On the 14th day of April in the year 2010 before me, the undersigned, personally appeared Katherine H. Zrike, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her capacity, and that by her signature on the instrument, the individual, or the person upon behalf of which the individuals acted, executed the instrument. 

 
  /s/ Leonore E. McKean  
Notary Public
 

LEONORE E. MCKEAN
Notary Public, State of New York
No. O1MC6046528
Qualified in Suffolk County
Commission Expires 08/14/2010
 





 [REMAINDER OF PAGE LEFT BLANK]


 
 
 
 
 

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