<PAGE>
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.
<TABLE>
<CAPTION>
Initial Price Underwriting
to Public* Fee
------------- ------------
<S> <C> <C>
Per B2B Internet HOLDR.......................... $95.09 2%
</TABLE>
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* Includes underwriting fee.
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Merrill Lynch & Co.
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The date of this prospectus is February 23, 2000.
"HOLDRS" and "HOLding Company Depositary ReceiptS" are service marks of Merrill
Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
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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.
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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.
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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
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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;
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. 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
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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
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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.
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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.
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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.
<TABLE>
<CAPTION>
Primary
Share Initial Trading
Name of Company Ticker Amounts Weightings Market
------------------------ ------ ------- ---------- -------
<S> <C> <C> <C> <C>
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
</TABLE>
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(/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.
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(/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%.
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<PAGE>
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.
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<PAGE>
. 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.
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<PAGE>
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."
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<PAGE>
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."
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<PAGE>
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.
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<PAGE>
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.
<TABLE>
<CAPTION>
B2B B2B B2B
Internet Internet Internet
1999 HOLDRS 2000 HOLDRS 2000 HOLDRS
---- -------- ---- -------- ---- --------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
[Graph]
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<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The closing price on February 23, 2000 was 153 1/4.
A-1
<PAGE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The closing price on February 23, 2000 was 75 7/8.
A-2
<PAGE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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."
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The closing price on February 23, 2000 was 200 1/2.
A-3
<PAGE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The closing price on February 23, 2000 was 203 15/16.
A-4
<PAGE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The closing price on February 23, 2000 was 23.
A-5
<PAGE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The closing price on February 23, 2000 was 21 3/16.
A-6
<PAGE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The closing price on February 23, 2000 was 124.
A-7
<PAGE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The closing price on February 23, 2000 was 56 1/8.
A-8
<PAGE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The closing price on February 23, 2000 was 82 9/16.
A-9
<PAGE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The closing price on February 23, 2000 was 43 3/4.
A-10
<PAGE>
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.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The closing price on February 23, 2000 was 212 7/8.
A-11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
