-----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, FSqZg3NTPYVCIl5KI45crSz4gL2yxpi0LJzsX0UACX8aWdJVt+DMkqTdUFfml2HT Sp4nK1sTMPo2fLrtHZebNA== 0000950130-00-000846.txt : 20000225 0000950130-00-000846.hdr.sgml : 20000225 ACCESSION NUMBER: 0000950130-00-000846 CONFORMED SUBMISSION TYPE: 424B4 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20000224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH PIERCE FENNER & SMITH INC CENTRAL INDEX KEY: 0000728612 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B4 SEC ACT: SEC FILE NUMBER: 333-96063 FILM NUMBER: 552151 BUSINESS ADDRESS: STREET 1: NORTH TOWER WORLD FINANCIAL CENTER STREET 2: NORTH TOWER WORLD FINANCIAL CENTER 5TH F CITY: NEW YORK STATE: NY ZIP: 10281-1323 BUSINESS PHONE: 2124496202 MAIL ADDRESS: STREET 1: WORLD FINANCIAL CENTER STREET 2: NORTH TOWER 23RD FL CITY: NEW YORK STATE: NY ZIP: 10281-1323 424B4 1 FINAL PROSPECTUS RULE NO. 424(b)(4) REGISTRATION NO. 333-96063 PROSPECTUS [LOGO] HOLDRS 1,000,000,000 Depositary Receipts B2B Internet HOLDRS SM Trust The B2B Internet HOLDRSSM Trust will issue Depositary Receipts called B2B Internet HOLDRSSM representing your undivided beneficial ownership in the U.S.- traded common stock of a group of specified business to business, or B2B, Internet companies whose products and services are developed for and marketed to companies who conduct business and electronic commerce on the Internet with other companies. The Bank of New York will be the trustee. You only may acquire, hold or transfer B2B Internet HOLDRS in a round-lot amount of 100 B2B Internet HOLDRS or round-lot multiples. B2B Internet HOLDRS are separate from the underlying deposited common stocks that are represented by the B2B Internet HOLDRS. For a list of the names and the number of shares of the companies that make up an B2B Internet HOLDR, see "Highlights of B2B Internet HOLDRS--The B2B Internet HOLDRS" starting on page 9. Merrill Lynch, Pierce, Fenner & Smith Incorporated has sold 3,500,000 B2B Internet HOLDRS in the initial distribution. The trust will issue the additional B2B Internet HOLDRS on a continuous basis. Investing in B2B Internet HOLDRS involves significant risks. See "Risk factors" starting on page 4. The initial public offering price for a round-lot of 100 B2B Internet HOLDRS will equal the sum of the closing market price on the primary trading market on February 23, 2000 for each deposited share multiplied by the share amount specified in this prospectus, plus an underwriting fee. B2B Internet HOLDRS are neither interests in nor obligations of either the initial depositor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or The Bank of New York, as trustee. Before this issuance, there has been no public market for B2B Internet HOLDRS. The B2B Internet HOLDRS have been approved for listing on the American Stock Exchange under the symbol "BHH", subject to official notice of issuance. ---------------- 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.
Initial Price Underwriting to Public* Fee ------------- ------------ Per B2B Internet HOLDR.......................... $95.09 2%
-------- * Includes underwriting fee. ---------------- Merrill Lynch & Co. ---------------- The date of this prospectus is February 23, 2000. "HOLDRS" and "HOLding Company Depositary ReceiptS" are service marks of Merrill Lynch & Co., Inc. TABLE OF CONTENTS
Page ---- Summary.................................................................... 3 Risk Factors............................................................... 4 Highlights of B2B Internet HOLDRS.......................................... 9 The Trust.................................................................. 15 Description of B2B Internet HOLDRS......................................... 15 Description of the Underlying Securities................................... 16 Description of the Depositary Trust Agreement.............................. 18 Federal Income Tax Consequences............................................ 21 ERISA Considerations....................................................... 22 Plan of Distribution....................................................... 22 Legal Matters.............................................................. 23 Where You Can Find More Information........................................ 23
---------------- This prospectus contains information you should consider when making your investment decision. With respect to information about B2B 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 B2B Internet HOLDRS in any jurisdiction where the offer or sale is not permitted. 2 SUMMARY The B2B Internet HOLDRS trust will be formed under the depositary trust agreement, dated as of February 18, 2000 among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the B2B Internet HOLDRS. The trust is not a registered investment company under the Investment Company Act of 1940. The trust will hold shares of common stock issued by 20 specified companies generally considered to be involved in various aspects of the B2B segment of the Internet industry. The B2B, or business to business, segment of the Internet industry, consists of Internet companies whose products and services are developed for and marketed to companies who conduct business and electronic commerce on the Internet with other companies. The number of shares of each common stock held by the trust with respect to each round-lot of B2B Internet HOLDRS is specified under "Highlights of B2B Internet HOLDRS--The B2B Internet HOLDRS." This group of common stocks is referred to as the underlying securities. Except when a reconstitution event occurs, the underlying securities will not change. Under no circumstances will a new company be added to the group of issuers of underlying securities. The trust will issue B2B Internet HOLDRS that represent your undivided beneficial ownership interest in the shares of common stock held by the trust on your behalf. The B2B Internet HOLDRS are separate from the underlying common stocks that are represented by the B2B Internet HOLDRS. 3 RISK FACTORS An investment in B2B Internet HOLDRS involves risks similar to investing in each of the underlying securities outside of the B2B Internet HOLDRS, including the risks associated with concentrated investments in the B2B Internet companies. General Risk Factors . Loss of investment. Because the value of B2B Internet HOLDRS directly relates to the value of the underlying securities, you may lose all or a substantial portion of your investment in the B2B Internet HOLDRS if the underlying securities decline in value. . Discount trading price. B2B Internet HOLDRS may trade at a discount to the aggregate value of the underlying securities. . Not necessarily representative of the B2B segment of the Internet industry. While the underlying securities are common stocks of companies generally considered to be involved in various aspects of the B2B segment of the Internet industry, the underlying securities and the B2B Internet HOLDRS may not necessarily follow the price movements of the entire B2B segment generally. If the underlying securities decline in value, your investment in the B2B Internet HOLDRS will decline in value even if common stock prices in the B2B segment generally increase in value. Furthermore, after the initial deposit, one or more of the issuers of the underlying securities may no longer be involved in the B2B segment. In this case, the B2B Internet HOLDRS may no longer consist of securities issued only by companies involved in the B2B segment of the Internet industry. . No investigation of underlying securities. The underlying securities included in the B2B Internet HOLDRS were selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated based on the market capitalization of issuers and the market liquidity of common stocks in the B2B segment of the Internet industry, without regard for the value, price performance, volatility or investment merit of the underlying securities. Consequently, the B2B Internet HOLDRS trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and their affiliates, have not performed 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 affiliates. . Loss of diversification. As a result of business developments, reorganizations, or market fluctuations affecting issuers of the underlying securities, B2B Internet HOLDRS may not necessarily continue to be a diversified investment in the B2B segment of the Internet industry. As a result of market fluctuation and/or reconstitution events, B2B 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 or to participate in a tender offer relating to one or more of the underlying securities, you will be required to cancel your B2B Internet HOLDRS and receive delivery of each of the underlying securities. The cancellation of your B2B Internet HOLDRS will allow you to sell individual underlying securities or to deliver individual underlying securities in a tender offer. The cancellation of B2B Internet HOLDRS will involve payment of a cancellation fee to the trustee. . Trading halts. Trading in B2B Internet HOLDRS may be halted if trading in one or more of the underlying securities is halted. If so, you will not be able to trade B2B Internet HOLDRS 4 even though there is trading in some of the underlying securities; however, you will be able to cancel your B2B Internet HOLDRS to receive the underlying securities. . Delisting from the American Stock Exchange. If the number of companies whose common stock is held in the trust falls below nine, the American Stock Exchange may consider delisting the B2B Internet HOLDRS. If the B2B Internet HOLDRS are delisted by the American Stock Exchange, a termination event will result unless the B2B Internet HOLDRS are listed for trading on another national securities exchange or through NASDAQ within five business days from the date the B2B Internet HOLDRS are delisted. . Possible conflicts of interest. Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, has selected the underlying securities and may face possible conflicts of interest in connection with its activities. For example, Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates, collectively referred to as Merrill Lynch, may engage in investment banking and other activities, may provide services to issuers of the underlying securities in connection with its business, or may trade in the underlying securities for its own account. All of these activities may result in conflicts of interest with respect to the financial interest of Merrill Lynch, on the one hand, and, on the other hand, the initial selection of the underlying securities included in the B2B Internet HOLDRS, the selection of the B2B segment of the Internet industry, Merrill Lynch's activity in the secondary market in the underlying securities, and the creation and cancellation of B2B Internet HOLDRS by Merrill Lynch. . Temporary price increases in the underlying securities. Purchasing activity in the secondary trading market associated with acquiring the underlying securities for deposit into the trust may affect the market price of the deposited shares. Large volumes of purchasing activity, which may occur in connection with the issuance of B2B Internet HOLDRS, particularly in connection with the initial issuance of B2B Internet HOLDRS, could temporarily increase the market price of the underlying securities, resulting in a higher price on that date. This purchasing activity could create a temporary imbalance between the supply and demand of the underlying securities, thereby limiting the liquidity of the underlying securities due to a temporary increased demand for underlying securities. Consequently, prices for the underlying securities may decline after these purchases as the volume of purchases decreases. This in turn is likely to have an immediate, adverse effect on the trading price of B2B Internet HOLDRS. Risk Factors Specific to the B2B Segment of the Internet Industry . B2B Internet company stock prices have been and will likely continue to be extremely volatile, which will directly affect the price volatility of the B2B Internet HOLDRS, and you could lose all or part of your investment. The trading prices of the common stocks of B2B Internet companies have been and are likely to be extremely volatile. B2B Internet companies' stock prices could be subject to wide fluctuations in response to a variety of factors, including the following: . actual or anticipated variations in companies' quarterly operating results; . announcements of technological innovations or new services by Internet companies or their competitors; . changes in financial estimates by securities analysts; . conditions or trends in the Internet online service companies; . conditions or trends in the online securities trading; . changes in the market valuations of the Internet or online service companies; 5 . developments in Internet regulations; . announcements by B2B Internet companies or their competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; . unscheduled system downtime; . additions or departures of key personnel; and . sales of B2B Internet companies' common stock or other securities in the open market. In addition, the trading prices of B2B Internet stocks in general have experienced extreme price and volume fluctuations in recent months. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. The valuations of many B2B Internet stocks are extraordinarily 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. These trading prices and valuations may not be sustained. Also, any negative change in the public's perception of the prospects of B2B Internet or e-commerce companies could depress the stock prices of a B2B Internet company regardless of its operating results. Other broad market and industry factors may also decrease the market price of B2B Internet stocks, regardless of their operating results. Market fluctuations, as well as general political and economic conditions, such as recession or interest rate or currency rate fluctuations, also may decrease the market price of B2B Internet stocks. . If Internet use fails to grow and be accepted as a medium for online commerce demand for the products and services of B2B Internet companies will decline. Future revenues and any future profits of B2B Internet companies substantially depend upon the widespread acceptance and use of the Internet and other online services by businesses for communication and commerce. Rapid growth in the use of and interest in the Internet and other online services is a relatively recent phenomenon. Demand and market acceptance for recently introduced services and products over the Internet are subject to a high level of uncertainty and few proven services and products exist. There is no assurance that acceptance and use will continue to develop or that a sufficiently broad base of businesses will adopt, and continue to use, the Internet and other online services as a medium of communication and commerce. For many B2B Internet companies to continue as ongoing concerns, both their customers and business and consumer end-users, generally, must accept and use new ways of conducting business over the Internet. . B2B 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. These market characteristics are heightened by the emerging nature of the Internet and the apparent need of companies from a multitude of industries to offer Web-based products and services. 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 service. Failure to adapt to such changes would harm their business. 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 electronic commerce market is new, rapidly evolving and intensely competitive, which competition is expected to intensify in the future. Barriers to entry are minimal, and current and new competitors can launch new sites and services at a relatively low cost. . New laws and regulations with respect to the Internet could impede its commercial development and adversely affect the business of many B2B Internet companies. Due to the 6 increasing popularity and use of the Internet and other online services, it is possible that a number of laws and regulations may be adopted 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. 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, result of operations and financial condition of B2B Internet companies. . If B2B Internet companies fail to increase market awareness of their brands they will lose revenue opportunities and their sales will suffer. Failure of many B2B Internet companies to promote their respective brand names or the incurrence of significant expenses promoting and maintaining brand names could have a material adverse effect on the business, results of operations and financial condition of many B2B Internet companies. Due in part to the emerging nature of the market for Internet management solutions offered by B2B Internet companies, there may be a time- limited opportunity to achieve and maintain a significant market share. Therefore, market awareness of the brand names of many of these companies is critical to achieving widespread acceptance of their products and services. There can be no assurance that B2B Internet companies will be successful in increasing market awareness of their brands. . The ability of many B2B Internet companies to offer their products and services depends on their ability to manage rapid growth, which if inefficiently managed could adversely affect their revenues. Many B2B Internet companies are, or plan to, rapidly expand 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 management, financial controls, operations systems, personnel and other resources of many B2B 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. . Inability to adequately protect proprietary rights may harm the competitive positions of many B2B Internet companies. Many B2B Internet companies rely on a combination of copyrights, trademark, service mark and trade secret laws and contractual restrictions to establish and protect proprietary rights in their products and services. There can be no assurance that these companies will be able to protect their intellectual property if they are unable to enforce their rights or if they do not detect unauthorized use of their intellectual property. Furthermore, any steps taken to protect intellectual property may be inadequate, time consuming and expensive. In addition, B2B Internet companies may be subject to claims that their products and services infringe the intellectual property rights of others. Any claim, whether meritorious or not, could be time consuming, result in costly litigation, delay product or service introduction or require B2B Internet companies to enter to royalty or licensing agreements. Legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in Internet-related industries are uncertain and still evolving, and the future viability or value of any of the intellectual property rights of B2B Internet companies is uncertain. . Many B2B Internet companies could fail to develop strategies which generate additional revenues for their products and services outside the United States, which could result in slower revenue growth and losses. Many B2B Internet companies believe that they must expand their international sales activities to be successful as usage of the Internet 7 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, there cannot be any assurance that B2B Internet companies who invest in establishing facilities in other countries will produce anticipated revenues because many B2B Internet Companies have limited experience developing localized versions of their products and services and marketing products and services internationally. . Many B2B Internet companies depend on one or only a few product offerings and related services to generate revenues. The reliance of many B2B Internet companies on the revenues from one or a few products and related services subject these companies to material harm should the price or demand for their products decline. In addition, many B2B Internet companies rely on only a few customers for a significant portion of their revenues and loss of one or more of these customers or failure of these products to achieve broad market acceptance could result in significant losses for many B2B companies. . Many B2B Internet companies could be subject to potential product liability claims and third party liability claims related to their products and services. The customers of B2B Internet companies use these companies products and services to manage their operating resources. Any errors, defects or other performance problems could result in financial or other damages to these customers. A product liability claim brought against a B2B Internet company, even if not successful, would likely be time consuming and costly and could seriously harm its business including negative publicity. . Many B2B Internet Companies have a limited operating history which makes financial forecasting difficult. Many B2B Internet companies cannot forecast operating expenses based on their historical results. Accordingly, they base their forecasts for expenses, in part, on future revenue projections. Most of their expenses are fixed in the short term and it may not be possible to quickly reduce spending if revenues are lower than projected. B2B Internet companies' ability to forecast accurately their quarterly revenue is limited because their software products have a long sales cycle that makes it difficult to predict the quarter in which they can recognize revenue. In addition, the variability of client demand for professional services makes forecasting revenue especially difficult. The business, operating results and financial condition of many B2B Internet companies could be materially adversely affected if their revenues do not meet their projections and net losses in a given quarter are greater than expected. . Many B2B Internet companies are dependent on their ability to continue to retain and attract highly skilled technical and managerial personnel to develop and operate their businesses. The success of many B2B Internet companies is 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 key officers or key technical personnel, their future success could be undermined. Competition for such personnel and relationships is intense. There is no certainty that any of these B2B Internet companies will be able to continue to attract and retain qualified personnel. . Many B2B Internet companies have a history of incurring losses which may make it difficult for these companies to fund their future operations. Many B2B Internet companies have incurred significant losses since their inception and they may continue to incur losses for the foreseeable future. Many of these B2B Internet companies will also continue to incur losses as additional costs are incurred to develop new technology, products and services, and expand marketing and sales operations in existing and new markets and develop administrative facilities. If B2B Internet companies do not achieve and sustain profitability, their ability to respond effectively to market conditions, to make capital expenditures and to take advantage of business opportunities could be negatively affected. 8 HIGHLIGHTS OF B2B INTERNET HOLDRS This discussion highlights information regarding B2B Internet HOLDRS; we present certain information more fully in the rest of this prospectus. You should read the entire prospectus carefully before you purchase B2B Internet HOLDRS. Issuer...................... B2B Internet HOLDRS Trust. The trust................... The B2B Internet HOLDRS Trust will be formed under the depositary trust agreement, dated as of February 18, 2000 among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the B2B Internet HOLDRS. 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, a New York state-chartered banking organization, will be the trustee and receive compensation as set forth in the depositary trust agreement. Purpose of B2B Internet B2B Internet HOLDRS are designed to achieve the HOLDRS...................... following: Diversification. B2B Internet HOLDRS are designed to allow you to diversify your investment in the B2B segment of the Internet industry through a single, exchange-listed instrument representing your undivided beneficial ownership of the underlying securities. Flexibility. The beneficial owners of B2B Internet HOLDRS have undivided beneficial ownership interests in each of the underlying securities represented by the B2B Internet HOLDRS, and can cancel their B2B Internet HOLDRS to receive each of the underlying securities represented by the B2B Internet HOLDRS. Transaction costs. The expenses associated with trading B2B Internet HOLDRS are expected to be less than trading each of the underlying securities separately. Trust assets................ The trust will hold shares of common stock issued by specified companies in the B2B segment of the Internet industry. Except when a reconstitution event occurs, the group of companies will not change. Reconstitution events are described in this prospectus under the heading "Description of the depositary trust agreement--Reconstitution events." Under no circumstances will the common stock of a new company be added to the common stocks underlying the B2B Internet HOLDRS. The trust's assets may increase or decrease as a result of in-kind deposits and withdrawals of the underlying securities during the life of the trust. The B2B Internet HOLDRS..... The trust will issue B2B Internet HOLDRS that represent your undivided beneficial ownership interest in the shares of U.S.-traded common stock held by the trust on your behalf. The B2B Internet HOLDRS themselves are separate from the underlying securities that are represented by the B2B Internet HOLDRS. 9 The specific share amounts for each round-lot of 100 B2B Internet HOLDRS are set forth in the chart below and were determined on February 23, 2000, the pricing date, so that the initial weightings of each underlying security included in the B2B Internet HOLDRS approximates the relative market capitalizations of the specified companies (based on the closing market prices of the underlying securities on the trading day immediately preceding the pricing date), subject to a maximum initial weight of 20%. The share amounts, set forth below, will not change, except for changes due to corporate events, such as stock splits or reverse stock splits on the underlying securities, or reconstitution events. However, the weightings are expected to change substantially over time because of price fluctuations. The following chart provides the . names of the 20 issuers of the underlying securities represented by the B2B Internet HOLDRS, . stock ticker symbols, . share amounts represented by a round-lot of 100 B2B Internet HOLDRS (as of February 22, 2000), . initial weightings as of February 22, 2000, and . principal market on which the shares of common stock of the selected companies are traded.
Primary Share Initial Trading Name of Company Ticker Amounts Weightings Market ------------------------ ------ ------- ---------- ------- INTERNET CAPITAL GROUP, INC. ICGE 15 19.22% NASDAQ ARIBA, INC. ARBA 7 18.75% NASDAQ COMMERCE ONE, INC. CMRC 6 11.87% NASDAQ VERTICALNET, INC.(/1/) VERT 3 6.72% NASDAQ FREEMARKETS, INC. FMKT 3 6.51% NASDAQ CAREINSITE, INC. CARI 6 4.77% NASDAQ SCIENT CORPORATION SCNT 5 4.52% NASDAQ CHECKFREE HOLDINGS CORPORATION CKFR 4 3.96% NASDAQ CHEMDEX CORPORATION(/2/) CMDX 2 3.55% NASDAQ AGILE SOFTWARE CORPORATION(/3/) AGIL 2 3.34% NASDAQ STERLING COMMERCE, INC. SE 6 2.99% NYSE PURCHASEPRO.COM, INC. PPRO 2 2.63% NASDAQ SILKNET SOFTWARE, INC. SILK 1 2.34% NASDAQ SCIQUEST.COM, INC. SQST 3 2.34% NASDAQ PROXICOM, INC.(/4/) PXCM 2 1.92% NASDAQ RETEK, INC. RETK 3 1.87% NASDAQ QRS CORPORATION QRSI 1 0.98% NASDAQ HARBINGER CORPORATION HRBC 3 0.97% NASDAQ PEGASUS SYSTEMS, INC. PEGS 2 0.49% NASDAQ IMAGEX.COM, INC. IMGX 1 0.26% NASDAQ
---------------- (/1/)On April 3, 2000, as a result of a 2-for-1 stock split, the share amount of Verticalnet, Inc., represented by a round- lot of 100 B2B Internet HOLDRS, will be 6. Please see the description of Verticalnet in Annex A. 10 (/2/)On February 21, 2000, Chemdex Corporation announced that it is changing its name to Ventro Corporation. Effective March 1, 2000, Chemdex stock will trade on NASDAQ under the symbol "VNTR". (/3/)On March 17, 2000, as a result of a 2-for-1 stock split, the share amount of Agile Software Corporation, represented by a round-lot of 100 B2B Internet HOLDRS, will be 4. Please see the description of Agile in Annex A. (/4/)On February 25, 2000, as a result of a 2- for-1 stock split, the share amount of Proxicom, Inc., represented by a round-lot of 100 B2B Internet HOLDRS, will be 4. Please see the description of Proxicom in Annex A. These companies generally are considered to be 20 of the largest and most liquid companies with U.S.-traded common stock involved in the B2B segment of the Internet industry as measured by market capitalization and trading volume on February 22, 2000. The market capitalization of a company is determined by multiplying the price of its common stock by the number of outstanding shares of its common stock. The trust only will issue and cancel, and you only may obtain, hold, trade or surrender, B2B Internet HOLDRS in a round-lot of 100 B2B Internet HOLDRS and round-lot multiples. The trust will only issue B2B Internet HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 B2B Internet HOLDRS. In the event that a fractional share comes to be represented by a round-lot of B2B Internet HOLDRS, the trust may require a minimum of more than one round-lot of 100 B2B Internet HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of B2B Internet HOLDRS. The number of outstanding B2B 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 B2B Internet HOLDRS on a continuous basis when an investor deposits the required shares of common stock with the trustee. Public offering price....... The initial public offering price for 100 B2B Internet HOLDRS will equal the sum of the closing market price on the primary trading market on February 23, 2000, the pricing date, for each underlying security multiplied by the share amount to be determined on the pricing date, plus an underwriting fee. Purchases................... After the initial offering, you may acquire B2B 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. Underwriting fees........... If you purchase B2B Internet HOLDRS in the initial public offering, you will pay Merrill Lynch, Pierce, Fenner & Smith Incorporated, in its role as underwriter, an underwriting fee equal to 2%. 11 You will not be charged any issuance fee or other sales commission in connection with purchases of B2B Internet HOLDRS made in the initial public offering. Issuance and cancellation After the initial offering, if you wish to fees........................ create B2B Internet HOLDRS by delivering to the trust the requisite shares of common stock represented by a round-lot of 100 B2B Internet HOLDRS, The Bank of New York as trustee will charge you an issuance fee of up to $10.00 for each round-lot of 100 B2B Internet HOLDRS. If you wish to cancel your B2B Internet HOLDRS and withdraw your underlying securities, The Bank of New York as trustee will charge you a cancellation fee of up to $10.00 for each round- lot of 100 B2B Internet HOLDRS. Commissions................. If you choose to deposit underlying securities in order to receive B2B Internet HOLDRS after the conclusion of the initial public offering, you will not be charged the underwriting fee. However, in addition to the issuance fee charged by the trustee described above, you will be responsible for paying any sales commission 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. Custody fees................ The Bank of New York, as trustee and as custodian, will charge you a quarterly custody fee of $2.00 for each round-lot of 100 B2B 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 B2B 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 B2B 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 B2B 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 that any cancellation of B2B Internet HOLDRS would otherwise require the delivery of a fractional share, the trustee will sell such share in the market and the trust, in turn, will deliver cash in lieu of such share. Except with respect to the right to vote for dissolution of the trust, the B2B Internet HOLDRS themselves will not have voting rights. Rights relating to the underlying securities...... You have the right to: . Receive all shareholder disclosure materials, including annual and quarterly reports, distributed by the issuers of the underlying securities. 12 . Receive all proxy materials distributed by the issuers of the underlying securities and will have the right to instruct the trustee to vote the underlying securities or may attend shareholder meetings yourself. . Receive dividends and other distributions on the underlying securities, if any are declared and paid to the trustee by an issuer of the underlying securities, net of any applicable taxes or fees. If you wish to participate in a tender offer for underlying securities, you must obtain the underlying securities by surrendering your B2B Internet HOLDRS and receiving all of your underlying securities. For specific information about obtaining your underlying securities, you should read the discussion under the caption "Description of the Depositary Trust Agreement." Reconstitution events....... A. If an issuer of underlying securities no longer has a class of common stock registered under section 12 of the Securities Exchange Act of 1934, 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 B2B 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 B2B Internet HOLDRS. C. If the underlying securities of an issuer cease to be outstanding as a result of a merger, consolidation or other corporate combination, the trustee will distribute the consideration paid by and received from the acquiring company to the beneficial owners of B2B Internet HOLDRS, unless the merger, consolidation or other corporate combination is between companies that are already included in the B2B Internet HOLDRS and the consideration paid is additional underlying securities. In this case, the additional underlying securities will be deposited into the trust. D. If an issuer's underlying securities are delisted from trading on a national securities exchange or NASDAQ and are not listed for trading on another national securities exchange or through NASDAQ within five business days from the date such securities are delisted. If a reconstitution event occurs, 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. Termination events.......... A. The B2B Internet HOLDRS are delisted from the American Stock Exchange and are not listed for trading on another national securities exchange or through NASDAQ within five business days from the date the B2B Internet HOLDRS are delisted. 13 B. The trustee resigns and no successor trustee is appointed within 60 days from the date the trustee provides notice to the Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, of its intent to resign. C. 75% of beneficial owners of outstanding B2B Internet HOLDRS 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. Federal income tax The federal income tax laws will treat a U.S. consequences............... holder of B2B Internet HOLDRS as directly owning the underlying securities. The B2B Internet HOLDRS themselves will not result in any federal tax consequences separate from the tax consequences associated with ownership of the underlying securities. Listing..................... The B2B Internet HOLDRS have been approved for listing on the American Stock Exchange under the symbol "BHH". Trading will take place only in round-lots of 100 B2B Internet HOLDRS and round- lot multiples. A minimum of 150,000 B2B Internet HOLDRS will be required to be outstanding when trading begins. Trading..................... Investors only will be able to acquire, hold, transfer and surrender a round-lot of 100 B2B Internet HOLDRS. Bid and ask prices, however, will be quoted per single B2B Internet HOLDRS. Clearance and settlement.... The trust will issue B2B Internet HOLDRS in book-entry form. B2B Internet HOLDRS will be evidenced by one or more global certificates that the trustee will deposit with The Depositary 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 "Description of B2B Internet HOLDRS." 14 THE TRUST General. This discussion highlights information about the B2B Internet HOLDRS trust. You should read this information, information about the depositary trust agreement as well as the depositary trust agreement before you purchase B2B 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 B2B Internet HOLDRS trust. The trust will be formed pursuant to the depositary trust agreement, dated as of February 18, 2000. The Bank of New York will be the trustee. The B2B Internet HOLDRS trust is not a registered investment company under the Investment Company Act of 1940. The B2B Internet HOLDRS trust is intended to hold deposited shares for the benefit of owners of B2B Internet HOLDRS. The trustee will perform only administrative and ministerial acts. The property of the trust will consist of the underlying securities and all monies or other property, if any, received by the trustee. The trust will terminate on December 31, 2040, or earlier if a termination event occurs. DESCRIPTION OF B2B INTERNET HOLDRS The trust will issue B2B Internet HOLDRS under the depositary trust agreement described in this prospectus under the heading "Description of the depositary trust agreement." After the initial offering, the trust may issue additional B2B 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 B2B Internet HOLDRS in a round-lot of 100 B2B Internet HOLDRS and round-lot multiples. The trust will only issue B2B Internet HOLDRS upon the deposit of the whole shares of underlying securities that are represented by a round-lot of 100 B2B 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 B2B Internet HOLDRS, the trust may require a minimum of more than one round-lot of 100 B2B Internet HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of B2B Internet HOLDRS. B2B Internet HOLDRS will represent your individual and undivided beneficial ownership interest in the common stock of the specified underlying securities. The 20 companies selected as part of this receipt program are listed above in the section entitled "Highlights of B2B Internet HOLDRS--The B2B Internet HOLDRS." Beneficial owners of B2B Internet HOLDRS will have the same rights and privileges as they would have if they beneficially owned the underlying securities outside of the trust. These include the right of investors to instruct the trustee to vote the 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 B2B Internet HOLDRS to receive the underlying securities. See "Description of the depositary trust agreement." B2B 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 Securities Exchange Act of 1934. The trust will not publish or otherwise calculate the aggregate value of the underlying securities represented by a receipt. B2B 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 B2B Internet HOLDRS wishes to realize the dollar value of the underlying securities, that owner will have to cancel the B2B Internet HOLDRS. Such cancellation will require payment of fees and expenses as described in "Description of the depositary trust agreement--Withdrawal of underlying securities." 15 B2B Internet HOLDRS will be evidenced by one or more global certificates that the trustee will deposit with DTC and register in the name of Cede & Co., as nominee for DTC. B2B Internet HOLDRS will be available only in book-entry form. Owners of B2B Internet HOLDRS may hold their B2B Internet HOLDRS through DTC, if they are participants in DTC, or indirectly through entities that are participants in DTC. DESCRIPTION OF THE UNDERLYING SECURITIES Selection criteria. The underlying securities are the common stocks of a group of 20 specified companies involved in various aspects of the B2B segment of the Internet industry and whose common stock is registered under Section 12 of the Exchange Act. The issuers of the underlying securities are considered to be 20 of the largest capitalized, most liquid companies in the B2B segment as measured by market capitalization and trading volume. The following criteria were used in selecting the underlying securities on February 7, 2000: . Market capitalization equal to or greater than $450,000,000; . Average daily trading volume of at least 110,000 shares over the 60 trading days before February 7, 2000; . Average daily dollar volume (that is, the average daily trading volume multiplied by the average closing price over the 60 day period prior to February 7, 2000) of at least $5.25 million over the 60 trading days prior to February 7, 2000; and . A trading history of at least 60 calendar days. The market capitalization of a company is determined by multiplying the price of its common stock by the number of shares of its common stock that are held by stockholders. In determining whether a company was to be considered for inclusion in the B2B Internet HOLDRS, Merrill Lynch, Pierce, Fenner & Smith Incorporated examined available public information about the company, including analysts' reports and other independent market sources. The ultimate determination of the inclusion of the 20 specified companies, however, rested solely within the discretion of Merrill Lynch, Pierce, Fenner & Smith Incorporated. After the initial deposit, one or more of the issuers of the underlying securities may no longer be substantially involved in the B2B segment of the Internet industry. In this case, the B2B Internet HOLDRS may no longer consist of securities issued by companies involved in the B2B segment. Merrill Lynch, Pierce, Fenner & Smith Incorporated will determine, in its sole discretion, whether the issuer of a particular underlying security remains in the B2B segment of the Internet industry and will undertake to make adequate disclosure when necessary. Underlying securities. For a list of the underlying securities represented by B2B Internet HOLDRS, please refer to "Highlights of B2B Internet HOLDRS--The B2B Internet HOLDRS." If the underlying securities change because of a reconstitution event, a revised list of underlying securities will be set forth in a prospectus supplement and will be available from the American Stock Exchange and through a widely-used electronic information dissemination system such as Bloomberg or Reuters. No investigation. In selecting the underlying securities, 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, other than to the extent required to determine whether the companies satisfied the stated selection criteria. Accordingly, before you acquire B2B 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 affiliates. 16 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 represented by a single B2B Internet HOLDRS based upon the share amounts set forth in the table on page 10 of this prospectus, measured at the close of each business day from December 10, 1999, the first date when all of the underlying securities were publicly traded, to February 7, 2000. The performance table and graph data are adjusted for any splits that may have occurred over the measurement period. Past movements of the underlying securities are not necessarily indicative of future values.
B2B B2B B2B Internet Internet Internet 1999 HOLDRS 2000 HOLDRS 2000 HOLDRS ---- -------- ---- -------- ---- -------- December 10..... 77.05 January 3....... 107.57 February 1...... 81.35 December 13..... 81.56 January 4....... 98.89 February 2...... 80.07 December 14..... 77.42 January 5....... 94.38 February 3...... 83.75 December 15..... 72.89 January 6....... 86.69 February 4...... 83.60 December 16..... 76.05 January 7....... 91.43 February 7...... 86.27 December 17..... 78.81 January 10...... 94.27 December 20..... 82.90 January 11...... 88.10 December 21..... 94.00 January 12...... 81.33 December 22..... 96.96 January 13...... 84.02 December 23..... 98.36 January 14...... 82.53 December 27..... 102.93 January 18...... 84.71 December 28..... 104.54 January 19...... 89.87 December 29..... 100.81 January 20...... 91.15 December 30..... 99.40 January 21...... 96.74 December 31..... 101.57 January 24...... 93.33 January 25...... 92.11 January 26...... 90.82 January 27...... 91.09 January 28...... 86.94 January 31...... 81.40
[Graph] 17 DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT General. The depositary trust agreement, dated as of February 18, 2000, among Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York, as trustee, other depositors and the owners of the B2B Internet HOLDRS, provides that B2B Internet HOLDRS will represent an owner's undivided beneficial ownership interest in the common stock of the underlying companies. The trustee. The Bank of New York will serve as trustee. The Bank of New York, which was founded in 1784, was New York's first bank and is the oldest bank in the country still operating under its original name. The Bank is a state-chartered New York banking corporation and a member of the Federal Reserve System. The Bank conducts a national and international wholesale banking business and a retail banking business in the New York City, New Jersey and Connecticut areas, and provides a comprehensive range of corporate and personal trust, securities processing and investment services. Issuance, transfer and surrender of B2B Internet HOLDRS. You may create and cancel B2B Internet HOLDRS only in round-lots of 100 B2B Internet HOLDRS. You may create B2B Internet HOLDRS by delivering to the trustee the requisite underlying securities. The trust will only issue B2B Internet HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 B2B Internet HOLDRS. In the event that a fractional share comes to be represented by a round-lot of B2B Internet HOLDRS, the trust may require a minimum of more than one round-lot of 100 B2B Internet HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of B2B Internet HOLDRS. Similarly, you must surrender B2B Internet HOLDRS in integral multiples of 100 B2B Internet HOLDRS to withdraw deposited shares from the trust. The trustee will not deliver fractional shares of underlying securities, to the extent that any cancellation of B2B 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. The trustee will deliver you 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, the beneficial owners of B2B Internet HOLDRS, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated owning B2B 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. You will be obligated to pay any tax or other charge that may become due with respect to B2B 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 B2B 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 B2B 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. 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. 18 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 B2B 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 B2B 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 B2B Internet HOLDRS. Further issuances of B2B Internet HOLDRS. The depositary trust agreement provides for further issuances of B2B Internet HOLDRS on a continuous basis without your consent. Reconstitution events. The depositary trust agreement provides for the automatic distribution of underlying securities to you in four circumstances. A. If an issuer of underlying securities no longer has a class of common stock registered under section 12 of the Securities Exchange Act of 1934, 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 B2B 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 B2B Internet HOLDRS. C. If the underlying securities of an issuer cease to be outstanding as a result of a merger, consolidation or other corporate combination, the trustee will distribute the consideration paid by and received from the acquiring company to the beneficial owners of B2B Internet HOLDRS, unless the merger, consolidation or other corporate combination is between companies that are already included in the B2B Internet HOLDRS and the consideration paid is additional underlying securities. In this case, the additional underlying securities will be deposited into the trust. D. If an issuer's underlying securities are delisted from trading on a national securities exchange or NASDAQ and are not listed for trading on another national securities exchange or through NASDAQ within 5 business days from the date such securities are delisted. If a reconstitution event occurs, 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. 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 Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, of its intent to resign. Upon termination, the beneficial owners of B2B Internet HOLDRS will surrender their B2B 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 B2B Internet HOLDRS are delisted from the American Stock Exchange and are not listed for trading on another national securities exchange or through NASDAQ within 5 business days from the date the B2B Internet HOLDRS are delisted. Finally, the trust will terminate if 75% of the owners of outstanding B2B 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. 19 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 B2B 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 B2B 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 B2B Internet HOLDRS will not become effective until 30 days after notice of the amendment is given to the owners of B2B Internet HOLDRS. Issuance and cancellation fees. After the initial public offering, the trust expects to issue more B2B Internet HOLDRS. If you wish to create B2B 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 B2B Internet HOLDRS. If you wish to cancel your B2B 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 B2B 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 B2B Internet HOLDRS after the conclusion of the initial public offering, you will not be charged the underwriting fee. However, in addition to the issuance and cancellation fees described above, 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. Custody fees. The Bank of New York, as trustee and as custodian, will charge you a quarterly custody fee of $2.00 for each round-lot of 100 B2B 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 B2B 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, ADR Department, 101 Barclay Street, New York, New York 10286. Governing law. The depositary trust agreement and B2B Internet HOLDRS will be 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. Duties and immunities of the trustee. The trustee will assume 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 B2B Internet HOLDRS. The trustee undertakes 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. 20 FEDERAL INCOME TAX CONSEQUENCES General The following is a summary of the U.S. federal income tax consequences relating to the B2B Internet HOLDRS for: . a citizen or resident of the United States; . a corporation or partnership created or organized in the United States or under the laws of the United States; . 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 a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust (each of the above, a "U.S. receipt holder");and . any person other than a U.S. receipt holder (a "Non-U.S. receipt holder"). This summary is based upon laws, regulations, rulings and decisions currently in effect, all of which are subject to change, 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. In addition, this summary generally is limited to investors who will hold the B2B 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. We suggest that you consult with your own tax advisor. 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 United States federal income tax purposes. Taxation of B2B Internet HOLDRS A receipt holder purchasing and owning B2B Internet HOLDRS will be treated, for U.S. federal income tax purposes, as directly owning a proportionate share of the underlying securities represented by B2B Internet HOLDRS. Consequently, if there is a taxable cash distribution on an underlying security, a 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 holder receives the cash distribution from the trustee. A receipt holder will determine its initial tax basis in each of the underlying securities by allocating the purchase price for the B2B Internet HOLDRS among the underlying securities based on their relative fair market values at the time of purchase. Similarly, when a holder sells a receipt, 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 holder's gain or loss with respect to each security will be computed by subtracting its basis in the security from the amount realized on the security. With respect to purchases of B2B Internet HOLDRS for cash in the secondary market, a receipt holder's aggregate tax basis in each of the underlying securities will be equal to the purchase price of the B2B Internet HOLDRS. Similarly, with respect to sales of B2B Internet HOLDRS for cash in the secondary market, the amount realized with respect to a sale of B2B 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 B2B Internet HOLDRS, the occurrence of a reconstitution event, or a termination event will not be a taxable event. The receipt holders holding period with respect to the distributed securities will include the period that the holder held the securities through the trust. 21 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 holder includes this fee in its tax basis in the underlying securities. A 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 B2B Internet HOLDRS will reduce the amount realized with respect to the underlying securities. A holder will be required to include in its income the full amount of dividends paid on the underlying securities, even though the depository 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 holder's investment in the underlying securities and may be deductible. If a 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. Non-U.S. receipt holders Non-U.S. receipt holders should consult their tax advisors regarding U.S. withholding and other taxes which may apply to an investment in the underlying securities. ERISA CONSIDERATIONS Any plan fiduciary which proposes to have a plan acquire B2B Internet HOLDRS should consult with its counsel with respect to the potential applicability 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 B2B 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 will issue to Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch, Pierce, Fenner & Smith Incorporated will deposit the underlying securities to receive B2B Internet HOLDRS. Merrill Lynch & Co., as underwriter, proposes to offer the B2B Internet HOLDRS to the public at the offering price set forth on the cover page of this prospectus. Merrill Lynch expects the trust to deliver the initial distribution of B2B Internet HOLDRS against deposit of the underlying securities in New York, New York on February 28, 2000. After the initial offering, the public offering price, concession and discount may be changed. The trust will continue to issue B2B Internet HOLDRS, in connection with deposits of underlying securities. This offering is being made in compliance with Conduct Rule 2810 of the National Association of Securities Dealers, Inc. Accordingly, Merrill Lynch will not make any sales to a discretionary account without the prior written approval of a purchaser of B2B Internet HOLDRS. Merrill Lynch has from time to time provided investment banking and other financial services to certain of the issuers of the underlying securities and expects in the future to provide these services, for which it has received and will receive customary fees and commissions. It also may have served as counterparty in other transactions with certain of the issuers of the underlying securities. Merrill Lynch, Pierce, Fenner & Smith Incorporated may use this prospectus, as updated from time to time, in connection with offers and sales related to market-making transactions in the B2B Internet HOLDRS. Merrill Lynch, Pierce, Fenner & Smith Incorporated may act as principal or agent in such transactions. Market-making sales will be made at prices related to prevailing market prices at the time of sale. 22 Merrill Lynch, Pierce, Fenner & Smith Incorporated has agreed to indemnify the trustee against certain 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 B2B 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 such liabilities. LEGAL MATTERS Legal matters, including the validity of the B2B Internet HOLDRS will be passed upon for Merrill Lynch, Pierce, Fenner & Smith Incorporated, the initial depositor and the underwriter, by Shearman & Sterling, New York, New York. Shearman & Sterling, as special U.S. tax counsel to the trust, also will render an opinion regarding the material federal income tax consequences relating to the B2B 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 B2B 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 in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more information on the public reference rooms and their copy charges. Merrill Lynch, Pierce, Fenner & Smith Incorporated will not and the trust may not be subject to the requirements of the Exchange Act and accordingly may not file periodic reports. Because the common stock of the issuers of the underlying securities is 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. In addition, information regarding the issuers of the underlying securities may 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 B2B Internet HOLDRS. This prospectus relates only to B2B Internet HOLDRS and does not relate to the common stock or 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 B2B 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 common stock of the issuers of the underlying securities, and therefore the offering and trading prices of the B2B Internet HOLDRS, have been publicly disclosed. 23 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 1995, 1996, 1997, 1998, 1999 and 2000 through January 2000. All market prices in excess of one dollar are rounded to the nearest one-sixty-fourth dollar. An asterisk (*) denotes that no shares of the issuer were outstanding during that month. The historical prices of the underlying securities should not be taken as an indication of future performance. AGILE SOFTWARE CORPORATION (AGIL) Agile Software Corporation develops and markets information management software which enables manufacturing and supply companies to communicate and collaborate over the Internet. Agile software permits all members of the manufacturing supply chain to immediately exchange any type of new or changing information about the manufacture, source or supply of products or components over the Internet. Agile markets their products through its own direct sales force and, to a lesser extent, through direct telephone sales. On February 17, 2000, Agile announced a 2-for-1 stock split on its common stock to shareholders of record on March 3, 2000. The shares of common stock will begin trading on a split-adjusted basis on March 17, 2000. The following table does not take into account any adjustments for this stock split.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 147 1/2 February * February * February * February * February * March * March * March * March * March * 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 49 3/4 September * September * September * September * September 64 October * October * October * October * October 98 November * November * November * November * November 106 9/16 December * December * December * December * December 217 1/4
The closing price on February 23, 2000 was 153 1/4. A-1 ARIBA, INC. (ARBA) Ariba Inc. develops and markets electronic commerce technology products and services that enable buyers and suppliers of operating resources to automate transactions over the Internet. Operating resources include information technology and telecommunications equipment, office equipment and office supplies. Ariba's network technology creates an online application form that allows groups and individuals within an organization to order its operating resources through the same system, which Ariba believes will reduce processing costs and channeling all of an organization's purchases through one system to the same preferred suppliers to obtain volume discounts. Suppliers of operating resources benefit from Ariba's technology by maintaining direct access to a customer's purchasing cycle and through the reduction of processing costs by automated ordering. Ariba markets its products through its own direct sales organization.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 162 5/8 February * February * February * February * February * March * March * March * March * March * April * April * April * April * April * May * May * May * May * May * June * June * June * June * June 48 5/8 July * July * July * July * July 44 51/64 August * August * August * August * August 69 1/2 September * September * September * September * September 72 1/4 October * October * October * October * October 77 1/2 November * November * November * November * November 90 9/32 December * December * December * December * December 177 3/8
The closing price on February 23, 2000 was 239. CAREINSITE, INC. (CARI) CareInsite, Inc. provides an Internet-based, healthcare electronic commerce network for interactive use by physicians, third party payors, such as health maintenance organizations, suppliers and patients. CareInsite's electronic commerce network is comprised primarily of software and applications that use the Internet to allow participants in the healthcare industry to conduct healthcare-related transactions. CareInsite's healthcare commerce services include prescription communication services, laboratory communication services and managed care communication services. CareInsite markets its product through Medical Manager Corporation, its controlling shareholder. CareInsite announced on February 13, 2000, that it agreed to merge with Healtheon/WebMD Corporation, a company that develops and markets Internet-based information and transaction systems and software to assist communication among participants in the healthcare industry. Each CareInsite common share will be exchanged for 1.3 shares of Healtheon/WebMD common stock. For further information on the effect of this transaction on the B2B Internet HOLDRS, please see "Highlights of B2B Internet HOLDRS--Reconstitution events". This transaction remains subject to shareholder approval and other customary closing conditions.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 73 1/32 February * February * February * February * February * March * March * March * March * March * April * April * April * April * April * May * May * May * May * May * June * June * June * June * June 47 1/4 July * July * July * July * July 43 1/8 August * August * August * August * August 47 3/4 September * September * September * September * September 50 5/8 October * October * October * October * October 43 3/4 November * November * November * November * November 52 3/8 December * December * December * December * December 80 1/2
The closing price on February 23, 2000 was 75 7/8. A-2 CHECKFREE HOLDINGS CORPORATION (CKFR) CheckFree Holdings Corporation, through its operating subsidiary, CheckFree Corporation, provides electronic billing and payment services permitting clients to receive electronic bills through the Internet, pay a variety of different types of bills and perform customary banking transactions, including balance inquiries, transfers between accounts and online statement reconciliations. CheckFree also provides portfolio management and information services for fee-based money managers and financial planners within investment advisory firms, brokerage firms, banks and insurance companies and electronic commerce and financial applications software and services for businesses and financial institutions. CheckFree markets and supports its services both directly and indirectly through a direct sales and technical sales support staff.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January 25 January 14 1/4 January 24 3/4 January 40 1/2 January 59 February * February 20 1/4 February 15 1/2 February 21 1/2 February 34 1/4 March * March 17 1/2 March 12 1/8 March 22 1/8 March 42 9/16 April * April 19 1/4 April 13 7/8 April 25 3/4 April 48 May * May 22 3/8 May 17 1/2 May 22 11/16 May 47 1/16 June * June 19 7/8 June 17 5/8 June 29 7/16 June 27 9/16 July * July 11 1/4 July 18 July 24 3/4 July 29 9/16 August * August 16 5/8 August 19 1/4 August 8 9/16 August 29 1/4 September 20 September 20 September 21 1/8 September 9 7/8 September 41 1/8 October 21 1/8 October 18 1/4 October 27 October 15 23/32 October 37 3/8 November 25 November 17 November 26 3/16 November 16 1/4 November 65 11/16 December 21 1/2 December 17 1/8 December 27 December 23 3/8 December 104 1/2
The closing price on February 23, 2000 was 89 3/4. CHEMDEX CORPORATION (CMDX) Chemdex Corporation has developed an electronic catalog and ordering system, called the Chemdex Marketplace, for the life sciences industry which is predominantly comprised of biotechnology and pharmaceutical companies and organizations and the life sciences academic community. The Chemdex Marketplace allows its users to identify, locate, buy and sell research products over the Internet through an advanced search engine and software that searches a database of laboratory research products. Chemdex's revenues are derived primarily from transaction fees that are charged each time an order is processed. Chemdex markets its service by entering into strategic alliances with large supply and distribution companies. On February 21, 2000, Chemdex announced that it is changing its name to Ventro Corporation. Effective March 1, 2000, Chemdex stock will trade under the symbol "VNTR."
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 97 1/2 February * February * February * February * February * March * March * March * March * March * April * April * April * April * April * May * May * May * May * May * June * June * June * June * June * July * July * July * July * July 30 August * August * August * August * August 27 September * September * September * September * September 30 13/16 October * October * October * October * October 38 1/8 November * November * November * November * November 64 7/8 December * December * December * December * December 111
The closing price on February 23, 2000 was 200 1/2. A-3 COMMERCE ONE, INC. (CMRC) Commerce One, Inc. links buyers and suppliers of goods and services to online electronic marketplaces over the Internet. Commerce One offers software that enables buyers to order and purchase goods through a Commerce One Web site where suppliers offer their goods. Commerce One offers suppliers the ability to offer their products on the Commerce One Web site and ensures the accuracy of all catalog content, pricing and product availability information. Commerce One also offers software and services for electronic commerce service providers to create and operate their own electronic marketplace Web sites for specific geographic regions and for specific industry segments that allow users to buy and sell products and services over the Internet. Commerce One markets its products and services through its own direct sales force and through strategic relationships with other companies.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 172 1/4 February * February * February * February * February * March * March * March * March * March * April * April * April * April * April * May * May * May * May * May * June * June * June * June * June * July * July * July * July * July 16 37/64 August * August * August * August * August 14 61/64 September * September * September * September * September 32 37/64 October * October * October * October * October 57 5/64 November * November * November * November * November 109 3/4 December * December * December * December * December 196 1/2
The closing price on February 23, 2000 was 181 5/8. FREEMARKETS, INC. (FMKT) FreeMarkets, Inc. creates online auctions for buyers and sellers of industrial parts, raw materials and commodities, such as plastic parts, commercial machinings, metal fabrications, chemicals, printed circuit boards, corrugated packaging and coal. In a FreeMarkets online auction, buyers from around the world submit bids in a real-time, interactive competition. FreeMarkets generates revenues under service agreements with buyer clients for the use of FreeMarkets technology and for its staff used in conducting the online bidding process. FreeMarkets sells its services through its own direct sales organization.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 229 February * February * February * February * February * March * March * March * March * March * 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 * December * December * December * December * December 341 5/16
The closing price on February 23, 2000 was 203 15/16. A-4 HARBINGER CORPORATION (HRBC) Harbinger Corporation develops and markets electronic commerce software products and services to assist businesses in creating systems for the purchase and sale of their goods and services over the Internet. Harbinger builds and manages online trading marketplaces for its customers that permit them to electronically communicate with their own customers. Harbinger markets its products and services through direct selling operations in North America, Europe and Mexico and through referral partners and distributors who operate predominantly in South America, Asia and the Pacific.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January 8 7/64 January 17 57/64 January 16 1/2 January 5 1/2 January 21 5/8 February * February 8 25/32 February 16 21/64 February 22 February 6 1/2 March * March 7 57/64 March 14 43/64 March 25 11/64 March 6 3/4 April * April 9 9/16 April 13 21/64 April 24 1/4 April 10 15/16 May * May 10 43/64 May 20 43/64 May 23 9/32 May 11 3/32 June * June 12 21/64 June 18 43/64 June 24 3/16 June 12 1/2 July * July 10 21/64 July 21 37/64 July 8 21/32 July 13 1/2 August 6 7/16 August 11 7/16 August 23 21/64 August 6 7/8 August 12 September 6 7/64 September 11 7/64 September 24 1/4 September 7 1/4 September 16 7/8 October 6 7/32 October 12 October 19 53/64 October 6 5/8 October 15 15/16 November 11 11/64 November 11 39/64 November 20 November 8 5/8 November 17 9/16 December 10 7/32 December 11 43/64 December 18 3/4 December 8 December 31 13/16
The closing price on February 23, 2000 was 30 1/6. IMAGEX.COM, INC. (IMGX) ImageX.com, Inc. provides Internet business services to the commercial printing industry. ImageX's Web-based services include the Corporate Online Printing Center which permits businesses to access a customized and secure Web site that contains a digital catalog of all of that company's printed business materials. ImageX's Small Business Printing Center provides Internet access to personalized printed business materials. ImageX developed and operates PrintBid.com, an online bidding system for print buyers and printers, and PaperDeals.com, an online auction site for commercial paper stock. ImageX markets its services through its own direct sales force.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 35 February * February * February * February * February * March * March * March * March * March * 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 11 1/2 September * September * September * September * September 11 3/16 October * October * October * October * October 11 5/8 November * November * November * November * November 24 7/8 December * December * December * December * December 41 7/8
The closing price on February 23, 2000 was 23. A-5 INTERNET CAPITAL GROUP, INC. (ICGE) Internet Capital Group, Inc., an Internet holding company, is actively engaged in purchasing significant interests in business-to-business electronic commerce companies. These companies are then incorporated into Internet Capital's network of companies. Internet Capital provides strategic guidance and operational support and promotes collaboration among its network of companies in order to increase the profitability of these companies.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 119 February * February * February * February * February * March * March * March * March * March * 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 37 1/2 September * September * September * September * September 43 15/16 October * October * October * October * October 58 3/16 November * November * November * November * November 84 December * December * December * December * December 170
The closing price on February 23, 2000 was 119 1/4. PEGASUS SYSTEMS, INC. (PEGS) Pegasus Systems, Inc. develops and markets electronic commerce and transaction processing services to the hotel and hospitality industry. Pegasus offers its customers the ability to electronically communicate information relating to hotel reservations which allow travel agents and individual travelers to access hotel room inventory information and make reservations over the Internet. Pegasus also offers processing services for commissions of participating hotels and travel agencies. It also provides database marketing and consulting services. Pegasus markets its services through its own direct sales force.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January 10 1/4 January 21 27/64 January 27 February * February * February * February 14 53/64 February 25 March * March * March * March 17 11/64 March 26 37/64 April * April * April * April 17 53/64 April 31 11/64 May * May * May * May 16 53/64 May 23 1/4 June * June * June * June 17 53/64 June 24 61/64 July * July * July * July 12 61/64 July 22 1/2 August * August * August 11 59/64 August 10 21/64 August 24 5/64 September * September * September 12 5/64 September 8 35/64 September 25 October * October * October 10 21/64 October 11 37/64 October 28 1/2 November * November * November 11 53/64 November 14 53/64 November 34 December * December * December 9 59/64 December 24 December 40 13/64
The closing price on February 23, 2000 was 21 3/16. A-6 PROXICOM, INC. (PXCM) Proxicom, Inc. offers business strategy, technology and design services to assist multinational companies and large organizations in developing electronic commerce Web sites, business-to-business electronic commerce extranets, which are internal networks that are partially accessible by authorized outsiders, and networks for companies to be accessed internally only by that company's employees. Proxicom focuses the development of its technology on select industries, which include energy and telecommunications, financial services, retail and manufacturing, and the service industry. Proxicom markets its services through its own direct sales force. On January 26, 2000, Proxicom declared a 2-for-1 stock split on its common stock to shareholders of record on February 9, 2000. The shares of common stock will begin trading on a split- adjusted basis on February 25, 2000. The following table does not take into account any adjustments for this stock split.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 101 February * February * February * February * February * March * March * March * March * March * April * April * April * April * April 22 7/16 May * May * May * May * May 20 3/4 June * June * June * June * June 25 11/16 July * July * July * July * July 34 3/4 August * August * August * August * August 45 1/2 September * September * September * September * September 58 1/2 October * October * October * October * October 76 3/4 November * November * November * November * November 69 December * December * December * December * December 124 5/16
The closing price on February 23, 2000 was 83 1/2. PURCHASEPRO.COM, INC. (PPRO) PurchasePro.com, Inc. develops and markets both public and private electronic marketplaces over the Internet. PurchasePro customers interact and buy and sell a wide range of products and services related primarily to the hospitality industry, using a standard Internet connection and Web browser. PurchasePro generates revenues from monthly membership subscription fees for access to the PurchasePro marketplace, transaction fees, license fees and advertising. PurchasePro markets its services through its own direct sales force, with a focus on large organizations in the hospitality industry and other industries with similar purchasing characteristics, such as colleges and universities.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 82 7/8 February * February * February * February * February * March * March * March * March * March * 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 23 11/64 October * October * October * October * October 27 1/4 November * November * November * November * November 96 43/64 December * December * December * December * December 137 1/2
The closing price on February 23, 2000 was 124. A-7 QRS CORPORATION (QRSI) QRS Corporation markets and develops electronic commerce merchandising products and services that attempt to improve the flow of information and goods and services throughout the retail industry chain. QRS' retail management products and services track sales of products, manage inventory and product ordering and analyze and forecast consumer demand. QRS also offers professional services that provide education and consulting services. QRS markets its products and services through its own sales force.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January 8 37/64 January 13 11/64 January 22 11/64 January 24 19/64 January 33 21/64 January 72 1/4 February 10 43/64 February 16 21/64 February 18 21/64 February 28 59/64 February 33 13/64 March 12 53/64 March 17 11/64 March 17 37/64 March 35 43/64 March 41 45/64 April 12 53/64 April 19 1/2 April 18 April 31 21/64 April 36 43/64 May 13 21/64 May 22 21/64 May 25 11/64 May 23 41/64 May 49 21/64 June 15 43/64 June 19 11/64 June 24 11/64 June 25 5/64 June 52 July 14 21/64 July 18 43/64 July 23 43/64 July 21 July 54 August 15 21/64 August 21 11/64 August 23 21/64 August 18 5/64 August 48 1/8 September 17 21/64 September 24 53/64 September 22 53/64 September 21 1/4 September 64 1/8 October 16 43/64 October 24 3/4 October 21 43/64 October 25 21/64 October 55 5/8 November 17 11/64 November 20 43/64 November 23 27/64 November 28 5/64 November 58 1/8 December 12 1/4 December 19 December 24 43/64 December 32 December 105
The closing price on February 23, 2000 was 91 31/32. RETEK, INC. (RETK) Retek, Inc. provides Web-based software for retailers and their trading partners enabling retailers to use the Internet to communicate with the participants that make up the global retail supply chain, which includes suppliers, distributors, wholesalers, brokers, transportation companies, consolidators and manufacturers. Retek software is designed to assist retail organizations in predicting customer demand and behavior. Retek markets its software through both direct and indirect sales channels primarily to retailers.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 53 1/8 February * February * February * February * February * March * March * March * March * March * 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 67 13/16 December * December * December * December * December 75 1/4
The closing price on February 23, 2000 was 56 1/8. A-8 SCIENT CORPORATION (SCNT) Scient Corporation provides consulting services and helps companies use new technology to develop their business on the Internet capabilities or to expand their existing Internet business capabilities. Scient services include the development and building of software and technology infrastructure that support a wide range of Internet-related business functions. Scient markets its services through its own direct sales force and marketing organization.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 75 5/8 February * February * February * February * February * March * March * March * March * March * April * April * April * April * April * May * May * May * May * May 25 1/16 June * June * June * June * June 23 25/32 July * July * July * July * July 25 August * August * August * August * August 31 9/16 September * September * September * September * September 32 October * October * October * October * October 61 15/16 November * November * November * November * November 72 1/2 December * December * December * December * December 86 7/16
The closing price on February 23, 2000 was 88 3/4. SCIQUEST.COM, INC. (SQST) SciQuest.com, Inc. is a Web-based, interactive catalog and ordering site for scientific and laboratory products used by pharmaceutical, clinical, biotechnology, chemical, industrial and educational organizations. SciQuest provides an electronic marketplace that allows buyers of scientific products to search and purchase products from a variety of suppliers over the Internet. In addition to electronic commerce offerings, SciQuest offers an online guide which provides a database of product information from suppliers and service providers, a Web-based auction that allows customers to buy and sell used and refurbished equipment and a service for the sale of surplus scientific products at discount prices. SciQuest markets and sells its portfolio of solutions through direct sales, traditional and Internet marketing initiatives and co- marketing relationships.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 56 5/8 February * February * February * February * February * March * March * March * March * March * 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 33 December * December * December * December * December 79 1/2
The closing price on February 23, 2000 was 82 9/16. A-9 SILKNET SOFTWARE, INC. (SILK) Silknet Software, Inc. develops and markets software that allows companies to offer their customers personalized marketing, sales, electronic commerce and customer support services through a single Web site tailored to each individual client. Silknet products are designed to allow a company to coordinate its interactions with customers by integrating information received from the company's Web site and from e-mail and telephone communications to provide a single profile of a customer. Silknet sells its products primarily through its own direct sales force and through relationships with systems integrators and resellers. On February 7, 2000, Silknet agreed to be acquired by Kana Communications Inc., a company which develops and markets a variety of software products for conducting business and managing information on the Internet. Each Silknet common share will be exchanged for 0.8 shares of Kana common stock. For further information on the effect of this transaction on the B2B Internet HOLDRS, please see "Highlights of B2B Internet HOLDRS-- Reconstitution events". This transaction remains subject to shareholder approval and other customary closing conditions.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 147 5/8 February * February * February * February * February * March * March * March * March * March * April * April * April * April * April * May * May * May * May * May 37 1/2 June * June * June * June * June 40 1/2 July * July * July * July * July 32 13/64 August * August * August * August * August 33 7/8 September * September * September * September * September 46 1/8 October * October * October * October * October 80 November * November * November * November * November 88 1/4 December * December * December * December * December 165 3/4
The closing price on February 23, 2000 was 214. STERLING COMMERCE, INC. (SE) Sterling Commerce, Inc. develops, markets and supports electronic commerce software products and services that enable businesses to engage in communications and transactions over the Internet. Sterling's products and services attempt to enable companies to securely transmit information over networks, to organize, manage and share electronic business information and to build, manage and service their electronic-business Web sites. Sterling also provides consulting, implementation, education and outsourcing services to support their products and services. Sterling markets its products and services through its own direct sales force and through distributors and resellers, telesales and telemarketing. On February 22, 2000, SBC Communications, Inc., the largest U.S. local telephone company, announced that it was initiating a tender offer to acquire Sterling. This tender offer is currently pending.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January 33 7/8 January 36 5/16 January 42 15/16 January 28 1/16 February * February * February 29 February 45 5/8 February 26 March * March 30 3/4 March 29 March 46 3/8 March 30 3/4 April * April 35 April 25 7/8 April 42 9/16 April 31 5/16 May * May 43 7/8 May 33 1/4 May 39 11/16 May 38 7/8 June * June 37 1/8 June 32 7/8 June 48 1/2 June 36 1/2 July * July 31 5/8 July 37 11/16 July 39 9/16 July 26 1/4 August * August 31 August 33 1/16 August 33 August 19 1/8 September * September 29 1/2 September 35 15/16 September 34 5/8 September 18 9/16 October * October 28 1/8 October 33 3/16 October 35 1/4 October 23 7/16 November * November 31 1/2 November 34 3/4 November 36 1/4 November 25 3/4 December * December 35 1/4 December 38 7/16 December 45 December 34 1/16
The closing price on February 23, 2000 was 43 3/4. A-10 VERTICALNET, INC. (VERT) VerticalNet, Inc. owns and operates industry-specific Web sites, each designed as online business-to-business Web sites, known as "trade communities" which act as comprehensive sources of information and interaction and allow for the buying and selling of goods and services over the Internet. Each VerticalNet trade community covers one business sector and caters to individuals with similar professional interests. VerticalNet's revenues are based on a fee charged for each transaction, a percentage of sales revenue or through minimum guaranteed payments. VerticalNet markets its products through its own direct sales force and reseller arrangements with advertising agencies. On February 1, 2000, VerticalNet declared a 2-for-1 stock split on its common stock to shareholders of record on March 17, 2000. The stock will begin trading on a split-adjusted basis on April 3, 2000. The following table does not take into account any adjustments for this stock split.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- January * January * January * January * January * January 238 1/4 February * February * February * February * February 20 5/8 March * March * March * March * March 51 15/16 April * April * April * April * April 56 3/4 May * May * May * May * May 40 June * June * June * June * June 52 1/2 July * July * July * July * July 43 15/16 August * August * August * August * August 34 1/2 September * September * September * September * September 37 October * October * October * October * October 56 November * November * November * November * November 87 5/8 December * December * December * December * December 164
The closing price on February 23, 2000 was 212 7/8. A-11 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- H O L D R S /SM/ B2B INTERNET 1,000,000,000 Depositary Receipts B2B Internet HOLDRS SM Trust ---------------------- P R O S P E C T U S ---------------------- Merrill Lynch & Co. February 23, 2000 Until March 20, 2000 (25 days after the date of this prospectus), all dealers effecting transactions in the offered B2B Internet HOLDRS, whether or not participating in this distribution, may be required to deliver a prospectus. This requirement is in addition to the obligations of dealers to deliver a prospectus when acting as underwriters and with respect to unsold allotments or subscriptions. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----