Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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Merrill Lynch, Pierce, Fenner & Smith Incorporated
Initial Depositor
(Exact name of registrant as specified in charter)
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ABC HOLDRsSM Trust 1999-B
yet-to-be formed
[Issuer with respect to the receipts]
Delaware 6211 13-5674085
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
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250 Vesey Street
New York, New York 10281
(212) 449-1000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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Andrea L. Dulberg, Esq. Copies to:
Corporate Secretary Andrew B. Janszky
Merrill Lynch, Pierce, Fenner & Smith Incorporated Shearman & Sterling
250 Vesey Street 599 Lexington Avenue
New York, New York 10281 New York, New York 10022
(212) 449-1000 (212) 848-4000
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Be Offering Price Aggregate Offering Amount of
Securities to Be Registered Registered Per Receipt(1) Price(1) Registration Fee(2)(3)
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<S> <C> <C> <C> <C>
ABC HOLDRs................... 100,000 shares $100 $10,000,000 $2,780
=================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act.
(2) This Registration Statement also registers, where required, an
indeterminate amount of securities to be sold by Merrill Lynch, Pierce,
Fenner & Smith Incorporated in market-making transactions.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to such
Section 8(a), may determine.
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<PAGE>
PROSPECTUS
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The information in this prospectus is not complete and may be changed. We have
filed a registration statement relating to these receipts with the Securities
and Exchange Commission. We cannot sell these receipts until the registration
statement becomes effective. This prospectus is not an offer to sell these
receipts and we are not soliciting offers to buy these receipts in any state
where such offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus
dated October 20, 1999
LOGO
[ ] Depositary Receipts
ABC HOLDRs SM Trust 1999-B
The ABC HOLDRs SM Trust 1999-B will issue Depositary Receipts called ABC
HOLDRs SM representing your undivided beneficial ownership in the common stock
of a group of specified companies that are involved in various segments of the
[ ] industry. The Bank of New York will be the trustee. You only may
acquire, hold or transfer ABC HOLDRs in a round-lot amount of 100 ABC HOLDRs or
round-lot multiples. ABC HOLDRs are separate from the underlying deposited
common stocks that are represented by the ABC HOLDRs. For a list of the names
and the number of shares of the companies that make up an ABC HOLDRs, see
"Highlights of ABC HOLDRs--The ABC HOLDRs" starting on page 7. The trust will
issue the additional ABC HOLDRs on a continuous basis.
Investing in ABC HOLDRs involves significant risks. See "Risk factors"
starting on page 4.
The initial public offering price for a round-lot of 100 ABC HOLDRs
will equal the sum of the closing market price on the pricing date for each
deposited share multiplied by the share amount specified in this prospectus,
plus an underwriting fee.
ABC 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.
Prior to this issuance, there has been no public market for ABC HOLDRs.
Application has been made to list the ABC Receipts on the American Stock
Exchange under the symbol "[ ].".
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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 to Underwriting
Public* Fee
------- ---
Per ABC HOLDR.............................. 2%
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* Includes underwriting fee.
For purchases of ABC HOLDRs in excess of 10,000 ABC HOLDRs,
the underwriting fee will be 1%.
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Merrill Lynch & Co.
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The date of this prospectus is , 1999.
"ABC HOLDRs" and "HOLding Company Depositary Receipts" are service marks
of Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
----
Summary................................................................... 3
Risk factors.............................................................. 4
Highlights of ABC HOLDRs.................................................. 6
The trust................................................................. 11
Description of ABC HOLDRs................................................. 11
Description of the underlying securities.................................. 12
Description of the depositary trust agreement............................. 14
Federal income tax consequences........................................... 16
ERISA considerations...................................................... 17
Plan of distribution...................................................... 17
Year 2000................................................................. 18
Legal matters............................................................. 19
Where you can find more information....................................... 19
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This prospectus contains information you should consider when making
your investment decision. With respect to information about ABC 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 ABC HOLDRs in any jurisdiction where the
offer or sale is not permitted.
2
<PAGE>
SUMMARY
The ABC HOLDRs trust will be formed under the depositary trust
agreement, dated as of , 1999 among The Bank of New York, as trustee,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the
owners of the ABC 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 [ ] specified
companies generally considered to be involved in various segments of the [ ]
industry. The number of shares of each common stock held by the trust with
respect to each round lot of ABC HOLDRs is specified under "Highlights of ABC
HOLDRs--The ABC 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 ABC HOLDRs that represent your undivided
beneficial ownership interest in the shares of common stock held by the trust on
your behalf. The ABC HOLDRs are separate from the underlying common stocks that
are represented by the ABC HOLDRs.
3
<PAGE>
RISK FACTORS
An investment in ABC HOLDRs involves risks similar to investing in
each of the underlying securities outside of the ABC HOLDRs, including the risks
associated with concentrated investments in the [ ] industry.
General Risk Factors
o Loss of investment. Because the value of ABC HOLDRs directly
relates to the value of the underlying securities, you may lose
all or a substantial portion of your investment in the ABC HOLDRs
if the underlying securities decline in value.
o Discount trading price. ABC HOLDRs may trade at a discount to
the aggregate value of the underlying securities.
o Not necessarily representative of the [ ] industry. While
the underlying securities are common stocks of companies generally
considered to be involved in various segments of the [ ]
industry, the underlying securities and the ABC HOLDRs may not
necessarily follow the price movements of the entire [ ]
industry generally. If the underlying securities decline in value,
your investment in the ABC HOLDRs will decline in value even if
common stock prices in the [ ] industry 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 [ ] industry. In this case, the ABC HOLDRs may no
longer consist of securities issued only by companies involved in
the [ ] industry.
o No investigation of underlying securities. The underlying
securities included in the ABC 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 [ ] industry, without regard for the value,
price performance, volatility or investment merit of the
underlying securities.] Consequently, the ABC 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.
o Loss of diversification. As a result of business developments,
reorganizations, or market fluctuations affecting issuers of the
underlying securities, ABC HOLDRs may not necessarily continue to
be a diversified investment in the [ ] industry. As a result
of market fluctuation and/or reconstitution events, ABC 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.
o 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 ABC HOLDRs and receive
delivery of each of the underlying securities. The cancellation of
your ABC HOLDRs will allow you to sell individual underlying
securities or to deliver individual underlying securities in a
tender offer. The cancellation of ABC HOLDRs will involve payment
of a cancellation fee to the trustee.
o Trading halts. Trading in ABC HOLDRs may be halted in the event
trading in one or more of the underlying securities is halted. If
so, you will not be able to trade ABC HOLDRs even though there is
trading in some of the underlying securities, however, you will be
able to cancel your ABC HOLDRs to receive the underlying
securities.
o 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 ABC
HOLDRs. If the ABC HOLDRs are delisted by the American Stock
Exchange, a termination event will result if the ABC HOLDRs are
not listed for trading on another national securities exchange or
through NASDAQ within five business days from the date the ABC
HOLDRs are delisted.
4
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o 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 ABC HOLDRs, the
selection of the [ ] industry, Merrill Lynch's activity in the
secondary market in the underlying securities, and the creation
and cancellation of ABC HOLDRs by Merrill Lynch.
o 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 ABC HOLDRs, particularly in connection with the
initial issuance of ABC 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 subsequent to these purchases as the volume
of purchases subsides. This in turn is likely to have an
immediate, adverse effect on the trading price of ABC HOLDRs.
Risk Factors Specific to the [ ] Industry
5
<PAGE>
HIGHLIGHTS OF ABC HOLDRs
This discussion highlights information regarding ABC HOLDRs; we
present certain information more fully in the rest of this prospectus. You
should read the entire prospectus carefully before you purchase ABC HOLDRs.
Issuer.................................... ABC HOLDRs Trust.
The trust................................. The ABC HOLDRs Trust will be
formed under the depositary trust
agreement, dated as of , 1999
among The Bank of New York, as
trustee, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, other
depositors and the owners of the
ABC 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 ABC HOLDRs..................... ABC HOLDRs are designed to achieve
the following:
Diversification. ABC HOLDRs are
designed to allow you to diversify
your investment in the [ ]
industry through a single,
exchange-listed instrument
representing your undivided
beneficial ownership of the
underlying securities.
Flexibility. The beneficial owners
of ABC HOLDRs have undivided
beneficial ownership interests in
each of the underlying securities
represented by the ABC HOLDRs, and
can cancel their ABC HOLDRs to
receive each of the underlying
securities represented by the ABC
HOLDRs.
Transaction costs. The expenses
associated with trading ABC 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 [ ] 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 ABC 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 ABC HOLDRs............................ The trust will issue ABC HOLDRs
that represent your undivided
beneficial ownership interest in
the shares of common stock held by
the trust on your behalf. The ABC
HOLDRs themselves are separate
from the underlying securities
that are represented by the ABC
HOLDRs.
The specific share amounts for
each round-lot of 100 ABC HOLDRs
are set forth in the chart below
and were determined on ,
1999 so that the initial
weightings of each underlying
security included in the ABC
HOLDRs approximated the relative
market capitalizations of the
specified companies, subject to a
maximum weight of 20%. Because
these weightings are a function of
market prices, it is expected that
these weightings will change
substantially over time, including
during the period between
6
<PAGE>
, 1999 and the date the ABC
HOLDRs are first issued to the
public.
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.
The following chart provides the
o names of the [ ] issuers of
the underlying securities
represented by an ABC HOLDRs,
o stock ticker symbols,
o share amounts represented by a
round-lot of 100 ABC HOLDRs,
o initial weightings as of
, 1999 and
o the principal market on which
the shares of common stock of
the selected companies are
traded.
Primary
Name of Share Initial Trading
Company Ticker Amounts Weighting Market
------- ------ ------- --------- ------
These companies generally are
considered to be among the
[ ] largest and most liquid
companies involved in the
[ ] industry as measured by
[market capitalization and trading
volume on , 1999.
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, ABC
HOLDRs in a round-lot of 100 ABC
HOLDRs and round-lot multiples.
The trust will only issue ABC
HOLDRs upon the deposit of the
whole shares represented by a
round-lot of 100 ABC HOLDRs. In
the event that a fractional share
comes to be represented by a
round-lot of ABC HOLDRs, the trust
may require a minimum of more than
one round-lot of 100 ABC HOLDRs
for an issuance so that the trust
will always receive whole share
amounts for issuance of ABC
HOLDRs.
The number of outstanding ABC
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 ABC
HOLDRs on a continuous basis when
an investor deposits the required
shares of common stock with the
trustee.
7
<PAGE>
Public offering price................ The initial public offering price
for 100 ABC HOLDRs will equal the
sum of the closing market price on
the pricing date for each
underlying security multiplied by
the share amount appearing in the
above table, plus an underwriting
fee.
Purchases............................ After the initial offering, you
may acquire ABC HOLDRs in two
ways:
o through an in-kind deposit of
the required number of shares of
common stock of the underlying
issuers with the trustee, or
o through a cash purchase in the
secondary trading market.
Underwriting fees.................... If you purchase ABC 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:
o For purchases of 10,000 ABC
HOLDRs or fewer, 2%.
o For purchases in excess of
10,000 ABC HOLDRs, 1%.
You will not be charged any
issuance fee or other sales
commission in connection with
purchases of ABC HOLDRs made in
the initial public offering.
Issuance and cancellation
fees................................. After the initial offering, if you
wish to create ABC HOLDRs by
delivering to the trust the
requisite shares of common stock
represented by a round-lot of 100
ABC 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 ABC HOLDRs.
If you wish to cancel your ABC
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
ABC HOLDRs.
Commissions.......................... If you choose to deposit
underlying securities in order to
receive ABC 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 ABC
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 ABC 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
ABC 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 ABC 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
ABC 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
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<PAGE>
share. Except with respect to the
right to vote for dissolution of
the trust, the ABC HOLDRs
themselves will not have voting
rights.
Rights relating to the underlying
securities......................... You have the right to:
o Receive all shareholder
disclosure materials,
including annual and
quarterly reports,
distributed by the
issuers of the underlying
securities.
o 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.
o 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 ABC 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
ABC 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 ABC 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 ABC HOLDRs, unless
the merger, consolidation or
other corporate combination is
between companies that are
already included in the ABC
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 events................... A. The ABC HOLDRs are delisted
from the American Stock
Exchange and are not
9
<PAGE>
listed for trading on another
national securities exchange or
through NASDAQ within 5
business days from the date the
ABC HOLDRs are delisted.
B. The trustee resigns and no
successor trustee is appointed
within 60 days from the date
the trustee provides notice to
the initial depositor of its
intent to resign.
C. 75% of beneficial owners of
outstanding ABC 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 consequences................... The federal income tax laws will
treat a U.S. holder of ABC HOLDRs
as directly owning the underlying
securities. The ABC HOLDRs
themselves will not result in any
federal tax consequences separate
from the tax consequences
associated with ownership of the
underlying securities.
Listing.............................. Application has been made to list
the ABC HOLDRs on the American
Stock Exchange under the symbol
"[ ]". Trading will take
place only in round-lots of 100
ABC HOLDRs and round-lot
multiples. A minimum of 150,000
ABC 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 ABC
HOLDRs. Bid and ask prices,
however, will be quoted per single
ABC HOLDRs.
Clearance and settlement.............. The trust will issue ABC HOLDRs in
book-entry form. ABC 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 ABC HOLDRs."
10
<PAGE>
THE TRUST
General. This discussion highlights information about the ABC HOLDRs
trust. You should read this information, information about the depositary trust
agreement as well as the depositary trust agreement before you purchase ABC
HOLDRs. The material terms of the depositary trust agreement are described in
this prospectus under the heading "Description of the depositary trust
agreement."
The ABC HOLDRs trust. The trust will be formed pursuant to the
depositary trust agreement, dated as of , 1999. The Bank of New York
will be the trustee. The ABC HOLDRs trust is not a registered investment company
under the Investment Company Act of 1940.
The ABC HOLDRs trust is intended to hold deposited shares for the
benefit of owners of ABC 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, 2039], or earlier if a termination
event occurs.
DESCRIPTION OF ABC HOLDRs
The trust will issue ABC 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 ABC
HOLDRs on a continuous basis when an investor deposits the requisite underlying
securities with the trustee.
You may only acquire, hold, trade and surrender ABC HOLDRs in a
round-lot of 100 ABC HOLDRs and round-lot multiples. The trust will only issue
ABC HOLDRs upon the deposit of the whole shares of underlying securities that
are represented by a round-lot of 100 ABC 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 ABC HOLDRs, the trust may require a minimum of more than one round-lot of 100
ABC HOLDRs for an issuance so that the trust will always receive whole share
amounts for issuance of ABC HOLDRs.
ABC 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 ABC HOLDRs--The ABC HOLDRs."
Beneficial owners of ABC 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 ABC HOLDRs to receive the underlying securities. See "Description of the
depositary trust agreement." ABC 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 net asset value per
receipt. ABC 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 ABC HOLDRs wishes to realize the dollar value of the
underlying securities, that owner will have to cancel the ABC HOLDRs. Such
cancellation will require payment of fees and expenses as described in
"Description of the depositary trust agreement--Withdrawal of underlying
securities."
ABC 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. ABC HOLDRs will be available only in book-entry form. Owners of
ABC HOLDRs may hold their ABC HOLDRs through DTC, if they are participants in
DTC, or indirectly through entities that are participants in DTC.
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DESCRIPTION OF THE UNDERLYING SECURITIES
Selection criteria. The underlying securities are the common stocks of
a group of [ ] specified companies involved in various segments of the
[ ] industry and whose common stock is registered under Section 12 of the
Exchange Act. The issuers of the underlying securities are among the 20 largest
capitalized, most liquid companies in the [ ] industry [as measured by
market capitalization and trading volume]. The following criteria were used in
selecting the underlying securities on , 1999:
o Market capitalization equal to or greater than $1.0 billion;
o Average daily trading volume of at least 1.2 million shares over the
60 trading days prior to , 1999;
o Average daily dollar volume (that is, the average daily trading volume
multiplied by the closing price on , 1999) of at least $60
million over the 60 trading days prior to , 1999; and
o A trading history of at least 90 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 ABC 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 [ ] 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 [ ]
industry. In this case, the ABC HOLDRs may no longer consist of securities
issued by companies involved in the [ ] industry. Merrill Lynch, Pierce,
Fenner & Smith Incorporated will determine, in its sole discretion, whether the
issuer of a particular underlying security remains in the [ ] industry and
will undertake to make adequate disclosure when necessary.
Underlying securities. For a list of the underlying securities
represented by ABC HOLDRs, please refer to "Highlights of ABC HOLDRs--The ABC
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
program's stated selection criteria. Accordingly, before you acquire ABC 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.
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."
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The following table and graph set forth the composite performance of
all of the underlying securities represented by a single ABC HOLDR, measured at
the close of each business day from , 1999, the first date when all of the
underlying securities were publicly traded, to , 1999. 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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing
1999 Price 1999 Price 1999 Price 1999 Price 1999 Price
---- ----- ---- ----- ---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
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<PAGE>
DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT
General. The depositary trust agreement, dated as of , 1999,
among Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York,
as trustee, other depositors and the owners of the ABC HOLDRs, provides that ABC
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 ABC HOLDRs. You may create and
cancel ABC HOLDRs only in round-lots of 100 ABC HOLDRs. You may create ABC
HOLDRs by delivering to the trustee the requisite underlying securities. The
trust will only issue ABC HOLDRs upon the deposit of the whole shares
represented by a round-lot of 100 ABC HOLDRs. In the event that an issuer of
underlying securities distributes a fractional share that is represented in a
round-lot of ABC HOLDRs, the trust may require a minimum of more than one
round-lot of 100 ABC HOLDRs for an issuance so that the trust will always
receive whole share amounts for issuance of ABC HOLDRs. Similarly, you must
surrender ABC HOLDRs in integral multiples of 100 ABC 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 ABC 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 ABC
HOLDRs, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated owning ABC
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 ABC 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 ABC 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 ABC 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.
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 ABC 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 ABC 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 ABC HOLDRs.
Further issuances of ABC HOLDRs. The depositary trust agreement
provides for further issuances of ABC HOLDRs on a continuous basis without your
consent.
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<PAGE>
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 ABC 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 ABC 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 ABC HOLDRs, unless the merger, consolidation or other
corporate combination is between companies that are already
included in the ABC 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 the initial depositor within 60
days from the date the trustee provides notice to the initial depositor of its
intent to resign. Upon termination, the beneficial owners of ABC HOLDRs will
surrender their ABC 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 ABC 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
ABC HOLDRs are delisted. Finally, the trust will terminate if 75% of the owners
of outstanding ABC HOLDRs other than Merrill Lynch, Pierce, Fenner & Smith
Incorporated vote to dissolve and liquidate the trust.
If a termination event occurs, the trustee will distribute the
underlying securities to you as promptly as practicable after the termination
event occurs.
Amendment of the depositary trust agreement. The trustee and the
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 ABC
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 ABC 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 ABC HOLDRs
will not become effective until 30 days after notice of the amendment is given
to the owners of ABC HOLDRs.
Issuance and cancellation fees. After the initial public offering, the
trust expects to issue more ABC HOLDRs. If you wish to create ABC 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 ABC HOLDRs.
If you wish to cancel your ABC 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 ABC 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 ABC 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
15
<PAGE>
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 ABC 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 ABC 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 ABC 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 ABC 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.
FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of the U.S. federal income tax consequences
relating to the ABC HOLDRs for:
o 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 (a
"U.S. receipt holder"), and
o 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 ABC 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 ABC HOLDRs
A receipt holder purchasing and owning ABC HOLDRs will be
treated, for U.S. federal income tax purposes, as directly owning a
proportionate share of the underlying securities represented by ABC 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.
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<PAGE>
A receipt holder will determine its initial tax basis in each of the
underlying securities by allocating the purchase price for the ABC 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 ABC 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 ABC HOLDRs. Similarly,
with respect to sales of ABC HOLDRs for cash in the secondary market, the amount
realized with respect to a sale of ABC 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
ABC 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.
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 ABC 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 depositary trust
agreement provides that the custodian fees will be deducted directly from any
dividends paid. These custodian fees will be treated as an expense incurred in
connection with a 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 ABC HOLDRs
should consult with its counsel with respect to the potential applicability of
ERISA and the 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 ABC 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 depository 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 ABC HOLDRs. Merrill Lynch & Co., as underwriter, proposes to offer the
ABC 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 ABC HOLDRs against deposit of the underlying in New York, New
York on , 1999. After the initial offering, public offering price,
concession and discount may be changed. The trust will continue to issue ABC
HOLDRs, in connection with deposits of underlying securities.
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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 ABC 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.
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 ABC 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.
YEAR 2000
The trustee's Year 2000 compliance program consists of updating major
trustee-owned application systems, business-area supported systems, and the
trustee's proprietary customer software and evaluating the Year 2000 compliance
efforts of vendors of major vendor-supplied systems. The trustee's compliance
efforts have also considered the Year 2000 readiness of its global
sub-custodians, major service providers, correspondents, business partners, and
borrowers. The current focus is to monitor continued preparedness and
contingency planning. While contingency planning has been defined as part of the
Year 2000 compliance program, all new measures have been incorporated into the
trustee's existing Business Continuity Plans.
The trustee divided its major proprietary applications systems into
three business line groups. The applications in each group were subjected to a
phased process of assessment, renovation, certification testing, and
implementation. All critical systems have completed all phases. A program is in
place to continue to monitor critical systems to prevent Y2K problems from being
reintroduced. Major business-line products have been made available in isolated
future-dated environments for selected customers to test their interfaces and to
assure themselves of the trustee's compliance. The trustee is satisfied with the
results of testing with customers and agencies. Continued participation at the
request of the agencies and customers will continue as required.
Remediation of the trustee's proprietary customer software has been
completed. Installation on client desktop computers is substantially complete.
Customers have been advised of their obligation to assure that their
environments are compliant in order for the trustees's software to function
correctly during and after the century date change.
The trustee has substantially completed an evaluation of its
significant business partners, including other financials service providers,
correspondents, counterparties, sub-custodians, vendors and settlement agencies,
for the purpose of assessing their Year 2000 compliance. The trustee is
currently satisfied with the information it has received concerning the progress
and Year 2000 readiness programs of each significant third party. The trustee
will continue to monitor the readiness and progress of these parties throughout
1999. The trustee intends to replace service providers that are seen as not
managing the Year 2000 issue adequately.
The trustee considers Year 2000 readiness in its credit decisions and
factors this into borrower ratings. Based on a review of significant obligors,
the trustee believes that exposure to obligor Year 2000 problems does not
present a material risk to the trustee.
The trustee's personal computers considered to be critical to the
trustee's operations have been upgraded. Upgrading of physical facilities that
is considered critical to the trustee's operations to Year 2000 readiness is
expected to be completed by the end of September 1999.
The trustee's contingency plans relating to Year 2000 issues include
the identification and assessment of the impact of various worst case scenarios
on the critical operational components for each of the trustee's business units.
The trustee has reviewed the applicability of its current contingency plans,
which include creation of an information center, establishment of special rapid
response
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<PAGE>
technology teams, scheduling availability of key personnel, testing and
simulation activities, offsite data center facilities, and emergency backup
power. These plans, with minor modification, have been determined to be adequate
to mitigate Year 2000 related risks. The information center, which has been
established as a repository and focus for analysis of information, will publish
the status of the organization internally and externally during critical
periods. It is also authorized to requisition and deploy resources as needed to
address unanticipated situations.
Overall the trustee's Year 2000 compliance program is on or ahead of
schedule to meet the needs of its customers and compliance deadlines defined by
its requlators. The estimated cost of the Year 2000 project is approximately $82
million. In the first half of 1999 the trustee spent $11 million on making
computer systems Year 2000 compliant. Total expenses since 1997 have been $62
million.
A material Year 2000 problem could result in an interruption in, or a
failure of, certain normal business activities or operations. Such problems
could materially and adversely affect the trustee's results of operations,
liquidity and financial condition. Due to the general uncertainty inherent in
the year 2000 problem, resulting in part from the uncertainty of the Year 2000
readiness of suppliers, customers and other business partners, as well as
entities with which the trustee does not have direct business relations, the
trustee is unable to determine at this time whether the consequences of the Year
2000 failures will have a material impact on the trustee's results of
operations, liquidity or financial condition. The Year 2000 compliance program
is intended to significantly reduce the trustee's level of uncertainty about the
Year 2000 problem and, in particular, about the Year 2000 compliance and
readiness of its material business partners. The trustee believes that, with
completion of its Year 2000 compliance program as scheduled, the possibility of
significant interruptions of normal operations should be reduced. However,
because of the unprecedented nature of this issue, there can be no certainty as
to its impact.
LEGAL MATTERS
Legal matters, including the validity of the ABC 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 ABC 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 ABC 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
ABC HOLDRs. This prospectus
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<PAGE>
relates only to ABC 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 ABC 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 ABC
HOLDRs, have been publicly disclosed.
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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 1994,
1995, 1996, 1997, 1998 and 1999 through September 1999. All market prices in
excess of one dollar are rounded to the nearest one-sixtyfourth 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.
[COMPANY DESCRIPTIONS AND MONTHLY SHARE PRICE CHART]
A-1
<PAGE>
- --------------------------------------------------------------------------------
LOGO
1,000,000,000 Depositary Receipts
ABC HOLDRs SM Trust
-------------------
P R O S P E C T U S
-------------------
Merrill Lynch & Co.
, 1999
Until , 1999 (25 days after the date of this prospectus), all dealers
effecting transactions in the offered ABC 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.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses expected to be incurred in connection with the issuance
and distribution of the securities being registered, other than underwriting
compensation, are as set forth below. Except for the registration fee payable to
the Securities and Exchange Commission, all such expenses are estimated:
.
Securities and Exchange Commission registration fee ........$ 2,780
Printing and engraving expenses.............................
Legal fees and expenses.....................................
Rating agency fees..........................................
Miscellaneous...............................................
--------
Total....................................................$
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware,
as amended, provides that under certain circumstances a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is or was a director, officer, employee or agent of the corporation
or is or was serving at its request in such capacity in another corporation or
business association, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.
Article XIV, Section 2 of the Restated Certificate of Incorporation of
Merrill Lynch, Pierce, Fenner & Smith Incorporated provides in effect that,
subject to certain limited exceptions, Merrill Lynch, Pierce, Fenner & Smith
Incorporated shall indemnify its directors and officers to the full extent
authorized or permitted by law.
The directors and officers of Merrill Lynch, Pierce, Fenner & Smith
Incorporated are insured under policies of insurance maintained by Merrill
Lynch, Pierce, Fenner & Smith Incorporated, subject to the limits of the
policies, against certain losses arising from any claim made against them by
reason of being or having been such directors or officers. In addition, Merrill
Lynch, Pierce, Fenner & Smith Incorporated has entered into contracts with all
of its directors providing for indemnification of such persons by Merrill Lynch,
Pierce, Fenner & Smith Incorporated to the full extent authorized or permitted
by law, subject to certain limited exceptions.
Item 16. Exhibits.
See Exhibit Index.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
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(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of the prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(5) For purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(6) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to Item 15 of this
registration statement, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant hereby certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-1 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, on October 19, 1999.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: -------------------------------------
Name: Ahmass L. Fakahany
Title: Senior Vice President, Chief
Financial Officer and Controller
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints Joseph Moglia and Stephen G. Bodurtha and
each of them, with full power to act without the other, his true and lawful
attorneys-in-fact and agents with full and several power of substitution, for
him and in his name, place and stead, in any and all capacities, to sign any and
all amendments, including post-effective amendments, and supplements to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Director October 19, 1999
- ------------------------------
John L. Steffens
Director October 19, 1999
- ------------------------------
E. Stanley O'Neal
Director October 19, 1999
- ------------------------------
George A. Schieren
Senior Vice President, October 19, 1999
- ------------------------------ Chief Financial Officer
Ahmass L. Fakahany and Controller
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INDEX TO EXHIBITS
Exhibits
* 4.1 Form of Depositary Trust Agreement
* 4.2 Form of ABC Receipts
* 5.1 Opinion of Shearman & Sterling regarding the validity
of the ABC Receipts
* 8.1 Opinion of Shearman & Sterling, as special U.S. tax
counsel regarding the material federal income tax
consequences
24.1 Power of Attorney (included in Part II of Registration Statement)
- -----------------------------
* To be filed by amendment.
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