<PAGE>
RULE NO. 424(b)(3)
REGISTRATION NO. 333-78575
PROSPECTUS SUPPLEMENT No. 2
(To Prospectus dated September 22, 1999)
[LOGO] INTERNET HOLDRs
1,000,000,000 Depositary Receipts
Internet HOLDRsSM Trust
This prospectus supplement amends and supplements certain information
contained in the prospectus dated September 22, 1999 relating to the sale of
up to 1,000,000,000 depositary receipts by Internet HOLDRsSM Trust.
The share amounts specified in the table on page 8 of the base prospectus
shall be replaced with the following:
<TABLE>
<CAPTION>
Primary
Share Trading
Name of Company Ticker Amounts Market
------------------------------- ------ ------- -------
<S> <C> <C> <C>
America Online Inc. AOL 42* NYSE
Yahoo Inc. YHOO 13 NASDAQ
Amazon.com Inc. AMZN 18 NASDAQ
eBay Inc. EBAY 6 NASDAQ
At Home Corp. ATHM 17 NASDAQ
Priceline.Com Inc. PCLN 7 NASDAQ
CMGI Inc. (1) CMGI 5 NASDAQ
Inktomi Corporation (2) INKT 3 NASDAQ
RealNetworks, Inc. RNWK 4 NASDAQ
Exodus Communications, Inc. (3) EXDS 8 NASDAQ
E*TRADE Group Inc. EGRP 12 NASDAQ
DoubleClick Inc. (4) DCLK 2 NASDAQ
Ameritrade Holding Corp. AMTD 9 NASDAQ
Lycos, Inc. LCOS 4 NASDAQ
CNET, Inc. CNET 4 NASDAQ
PSINet, Inc. PSIX 3 NASDAQ
Network Associates, Inc. NETA 7 NASDAQ
EarthLink Network, Inc. ELNK 2 NASDAQ
MindSpring Enterprises, Inc. MSPG 3 NASDAQ
Go2Net, Inc. GNET 1 NASDAQ
</TABLE>
- -------
* Reflects previous stock split.
(1) On December 15, 1999, CMGI, Inc. declared a two-for-one stock split on
its common stock, to be effected by means of a stock dividend to
shareholders of record on December 28, 1999. The shares of common stock
will begin trading on a split-adjusted basis on January 11, 2000. At such
date, the share amount of CMGI, Inc. represented by a round-lot of 100
Internet HOLDRs SM will be 10.
(2) On December 3, 1999, Inktomi Corporation declared a two-for-one stock
split on its common stock, to be effected by means of a stock dividend to
shareholders of record on December 14, 1999. The shares of common stock
will begin trading on a split-adjusted basis on December 30, 1999. At
such date, the share amount of Inktomi Corporation represented by a
round-lot of 100 Internet HOLDRs SM will be 6.
(3) On November 19, 1999, Exodus Communications, Inc., effected a two-for-one
stock split on its common stock by means of a stock dividend. On December
14, 1999, shareholders received one additional share for every share they
owned of record on November 20, 1999. The share amount of Exodus
Communications, Inc. represented by a round-lot of 100 Internet HOLDRs SM
is 8.
(4) On December 20, 1999, DoubleClick Inc. declared a two-for-one stock split
on its common stock to be effected by means of a stock dividend to
shareholders of record on December 31, 1999. The shares of common stock
will begin trading on a split-adjusted basis on January 10, 2000. At such
date, the share amount of DoubleClick Inc. represented by a round-lot of
100 Internet HOLDRs SM will be 4.
The stock prices in the tables set forth in Annex A of the accompanying
prospectus have not been and will not be, adjusted to account for any stock
splits.
The date of this prospectus supplement is December 23, 1999.
