<PAGE>
As filed with the Securities and Exchange Commission on January 18, 2000.
Registration No. 333-92163
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Initial Depositor
(Exact name of registrant as specified in charter)
--------------
Telecom HOLDRs SM Trust
yet-to-be formed
[Issuer with respect to the receipts]
Delaware 6211 13-5674085
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification Number)
of incorporation or Classification Code
organization) Number)
--------------
250 Vesey Street
New York, New York 10281
(212) 449-1000
(Address, including zip code, and telephone number, including area code, of
registrant's
principal executive offices)
--------------
Andrea L. Dulberg, Esq. Copies to:
Corporate Secretary Andrew B. Janszky
Merrill Lynch, Pierce, Fenner & Smith Shearman & Sterling
Incorporated 599 Lexington Avenue
250 Vesey Street New York, New York 10022
New York, New York 10281 (212) 848-4000
(212) 449-1000
(Name, address, including zip code,
and
telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed
Proposed Maximum
Maximum Aggregate Amount of
Title of Each Class of Amount to Be Offering Price Offering Registration
Securities to Be Registered Registered Per Receipt(1) Price(1) Fee(2)(3)
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<S> <C> <C> <C> <C>
Telecom HOLDRs........................ 1,000,000,000 receipts $100 $299,800,000 $79,148
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act. 2,000,000 receipts are
estimated to be offered in the initial offering at $100 per receipt and
998,000,000 receipts are estimated to be offered continuously after the
initial offering at $0.10 per receipt.
(2) This Registration Statement also registers, where required, an
indeterminate amount of securities to be sold by Merrill Lynch, Pierce,
Fenner & Smith Incorporated in market-making transactions.
(3) Merrill Lynch, Pierce, Fenner & Smith Incorporated previously paid on
December 6, 1999 and on December 21, 1999, $2,640 and $76,508 of this
registration fee, respectively.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the Commission,
acting pursuant to such Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We +
+have filed a registration statement relating to these receipts with the +
+Securities and Exchange Commission. We cannot sell these receipts until the +
+registration statement becomes effective. This prospectus is not an offer to +
+sell these receipts and we are not soliciting offers to buy these receipts in +
+any state where such offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated January 18, 2000
PROSPECTUS
TELECOM HOLDERS LOGO
1,000,000,000 Depositary Receipts
Telecom HOLDRs SM Trust
The Telecom HOLDRs SM Trust will issue Depositary Receipts called Telecom
HOLDRs SM representing your undivided beneficial ownership in the U.S.-traded
common stock of a group of 20 specified companies that are involved in various
segments of the telecommunications industry. The Bank of New York will be the
trustee. You only may acquire, hold or transfer Telecom HOLDRs in a round-lot
amount of 100 Telecom HOLDRs or round-lot multiples. Telecom HOLDRs are
separate from the underlying deposited common stocks that are represented by
the Telecom HOLDRs. For a list of the names and the number of shares of the
companies that make up a Telecom HOLDR, see "Highlights of Telecom HOLDRs--The
Telecom HOLDRs" starting on page 9. The trust will issue the additional Telecom
HOLDRs on a continuous basis after the initial distribution.
Investing in Telecom HOLDRs involves significant risks. See "Risk factors"
starting on page 4.
The initial public offering price for a round-lot of 100 Telecom HOLDRs
will equal the sum of the closing market price on the primary trading market on
the pricing date for each deposited share multiplied by the share amount
specified in this prospectus, plus an underwriting fee.
Telecom HOLDRs are neither interests in nor obligations of either the
initial depositor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or The
Bank of New York, as trustee.
Prior to this issuance, there has been no public market for Telecom HOLDRs.
Application has been made to list the Telecom HOLDRs on the American Stock
Exchange under the symbol "TTH".
-----------
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 to Underwriting
Public* Fee
-------- ------------
<S> <C> <C>
Per Telecom HOLDR................................ 2%
</TABLE>
-----
* Includes underwriting fee.
For purchases of Telecom HOLDRs in excess of Telecom HOLDRs, the
underwriting fee will be %.
-----------
Merrill Lynch & Co.
-----------
The date of this prospectus is , 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 Telecom HOLDRs............................................... 9
The Trust.................................................................. 15
Description of Telecom 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
Year 2000.................................................................. 23
Legal Matters.............................................................. 24
Where You Can Find More Information........................................ 24
</TABLE>
----------------
This prospectus contains information you should consider when making your
investment decision. With respect to information about Telecom 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 Telecom HOLDRs in any
jurisdiction where the offer or sale is not permitted.
2
<PAGE>
SUMMARY
The Telecom HOLDRs trust will be formed under the depositary trust
agreement, dated as of January , 2000 among The Bank of New York, as trustee,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the
owners of the Telecom 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 segments of the
telecommunications industry. The number of shares of each common stock held by
the trust with respect to each round-lot of Telecom HOLDRs is specified under
"Highlights of Telecom HOLDRs--The Telecom 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 Telecom HOLDRs that represent your undivided
beneficial ownership interest in the shares of common stock held by the trust
on your behalf. The Telecom HOLDRs are separate from the underlying common
stocks that are represented by the Telecom HOLDRs.
3
<PAGE>
RISK FACTORS
An investment in Telecom HOLDRs involves risks similar to investing in
each of the underlying securities outside of the Telecom HOLDRs, including the
risks associated with concentrated investments in the telecommunications
industry.
General Risk Factors
. Loss of investment. Because the value of Telecom HOLDRs directly
relates to the value of the underlying securities, you may lose
all or a substantial portion of your investment in the Telecom
HOLDRs if the underlying securities decline in value.
. Discount trading price. Telecom HOLDRs may trade at a discount to
the aggregate value of the underlying securities.
. Not necessarily representative of the telecommunications
industry. While the underlying securities are common stocks of
companies generally considered to be involved in various segments
of the telecommunications industry, the underlying securities and
the Telecom HOLDRs may not necessarily follow the price movements
of the entire telecommunications industry generally. If the
underlying securities decline in value, your investment in the
Telecom HOLDRs will decline in value even if common stock prices
in the telecommunications industry generally increase in value.
Furthermore, after the initial deposit, one or more of the issuers
of the underlying securities may no longer be involved in the
telecommunications industry. In this case, the Telecom HOLDRs may
no longer consist of securities issued only by companies involved
in the telecommunications industry.
. No investigation of underlying securities. The underlying
securities included in the Telecom 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 telecommunications industry, without regard for the
value, price performance, volatility or investment merit of the
underlying securities. The Telecom 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, Telecom HOLDRs may not necessarily continue
to be a diversified investment in the telecommunications industry.
As a result of market fluctuation and/or reconstitution events,
Telecom 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 Telecom HOLDRs and receive
delivery of each of the underlying securities. The cancellation of
your Telecom HOLDRs will allow you to sell individual underlying
securities or to deliver individual underlying securities in a
tender offer. The cancellation of Telecom HOLDRs will involve
payment of a cancellation fee to the trustee.
. Trading halts. Trading in Telecom HOLDRs may be halted in the
event trading in one or more of the underlying securities is
halted. If so, you will not be able to trade Telecom
4
<PAGE>
HOLDRs even though there is trading in some of the underlying
securities, however, you will be able to cancel your Telecom
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
Telecom HOLDRs. If the Telecom HOLDRs are delisted by the American
Stock Exchange, a termination event will result if the Telecom
HOLDRs are not listed for trading on another national securities
exchange or through NASDAQ within five business days from the date
the Telecom 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 Telecom HOLDRs, the
selection of the telecommunications industry, Merrill Lynch's
activity in the secondary market in the underlying securities, and
the creation and cancellation of Telecom 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 Telecom HOLDRs, particularly in connection with the
initial issuance of Telecom 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 subsides. This in turn is likely to have an immediate,
adverse effect on the trading price of Telecom HOLDRs.
Risk Factors Specific to the Telecommunications Industry
. Telecommunications companies' stock prices have been and will
likely continue to be extremely volatile which will affect the
price volatility of the Telecom HOLDRs. Telecommunications
companies' stock prices could be subject to wide fluctuations in
response to a variety of factors, including:
. failure to integrate or realize projected benefits from
acquisitions;
. acquisition-related announcements;
. announcements of new contracts, technological innovations or
new products;
. changes in government regulations;
. fluctuations in quarterly and annual operating results; and
. general market conditions.
. Many telecommunications companies are highly leveraged and must
raise additional capital to implement their business
strategies. The business strategies of many telecommunications
companies are focused on acquisitions and extensive capital
expenditures. Implementing such
5
<PAGE>
strategies has resulted in the incurrence of substantial debt
obligations and the regular need to incur additional debt. As a
result of high levels of debt, these telecommunications companies
will need significant cash to service existing debt obligations,
which could reduce funds available to implement their business
strategies. Telecommunications companies may not be able to obtain
additional financing or may not be able to obtain it on a timely
basis or on favorable terms. There can be no assurance that
telecommunications companies will be able to service their debt,
refinance existing debt or raise additional financing necessary to
implement key aspects of their business strategies.
. Failure to integrate acquisitions could disrupt operations and
prevent the realization of intended benefits. Many
telecommunications companies are active acquirors of other
companies as part of their business plans. There can be no
assurance that telecommunications companies will be able to
integrate these acquired companies, which may result in failure to
realize expected cost savings, increases in revenue and other
projected benefits from such integration. There can be no
assurance that telecommunications companies will be able to
attract and retain qualified personnel from acquired businesses or
be successful in integrating such personnel. Further,
telecommunications companies may suffer material adverse short and
long-term effects on operating results and financial condition as
a result of such acquisitions.
. Inability to manage rapid growth could adversely affect financial
reporting, customer service and revenues. Many telecommunications
companies are rapidly expanding their networks and operations.
This expansion has placed and will continue to place significant
demands on the operating, financial control and billing systems,
customer support, sales and marketing and administrative resources
and network infrastructure of many telecommunications companies.
This growth will require many telecommunications companies to
enhance management, financial and information systems and to
effectively develop and train their employee base.
. Changes in the regulatory environments in which telecommunications
companies operate could affect their ability to offer products and
services. Communications services and products are subject to
significant regulation at the federal, state, local and
international levels. Delays in receiving required regulatory
approvals and licenses or the enactment of new and adverse
regulatory requirements may have a material adverse effect upon
the ability of telecommunications companies to continue to offer
existing and new products and services. In addition legislative,
judicial, and regulatory agency actions could negatively affect
the ability of many telecommunications companies to maintain
required licenses or renew licenses upon their expiration.
. If telecommunications companies do not adapt to the rapid changes
in the industry, they could lose customers or market share. The
telecommunications industry is changing rapidly due to, among
other factors, deregulation initiatives in many countries,
privatization of monopoly government telecommunications providers,
technological improvements, expansion of telecommunications
infrastructure and the globalization of the worlds's economies and
trade. This period of rapid technological evolution is marked by
the introduction of new products and services and increased
availability of transmission capacity, as well as the increasing
utilization of Internet-based technologies for voice and data
transmission. The success of telecommunications companies will
depend substantially on their ability to predict which of the many
possible networks, products and services will be important to
finance, establish and maintain. In particular, as
telecommunications companies expand and develop their network
further, they will become increasingly exposed to the risks
associated with the relative effectiveness of their technology and
equipment. The cost of implementation of technologies could be
significant, and there can be no assurances that a
telecommunications company will select appropriate technology and
equipment or that it will obtain appropriate
6
<PAGE>
new technology on a timely basis or on satisfactory terms. The
failure to obtain effective technology and equipment may adversely
affect a telecommunications company ability to offer competitive
products and services and the viability of its operations.
. Virtually every aspect of the telecommunications industry is
extremely competitive which could adversely affect the business,
results of operations and financial conditions of many
telecommunications companies. Many telecommunications companies
face significant competition from other telecommunications
companies with greater or equal market share and financial
resources. Many telecommunications companies compete domestically
and internationally with incumbent telecommunications providers,
some of which have special regulatory status and exclusive rights
to provide certain services, and all which have historically
dominated local telecommunications. Many telecommunications
companies also compete with long distance carriers for the
provision of long distance services. Sometimes the incumbent
telecommunications provider offers both local and long distance
services. A continuing trend toward business combinations and
alliances in the telecommunications industry may create
significant new and larger competitors.
. Inability to offer long distance on a profitable basis could
adversely affect the revenues of many telecommunications
companies. Many telecommunications companies offer domestic and
international long distance services. The long distance market is
extremely competitive. The risks associated with this market
include the following:
. the need to engage in significant price competition and
discounting to attract and retain customers;
. high average customer turnover rates;
. reliance on other carriers for a portion of transmission and
termination services; and
. difficulty in estimating future supply and demand.
Inability to predict traffic volume could adversely affect the
revenues of many telecommunications companies. Some
telecommunications companies offering long distance services enter
into long-term agreements for leased capacity on the land based or
undersea cable and switches of other telecommunications companies.
If capacity is leased in anticipation of traffic volumes that do
not reach expected levels, telecommunications companies will have
to pay for transmission capacity without corresponding revenues.
Also, additional fees are often charged when a telecommunications
company under-utilizes the capacity it leases. Conversely, if a
telecommunications company underestimates its need for capacity,
it often must obtain additional transmission capacity through more
expensive sources.
. System failures, interruptions or shutdowns may cause loss of
customers. The success of many telecommunications companies
depends upon their ability to deliver reliable, high-speed
telecommunications service over their networks. The companies'
networks are vulnerable to damage or cessation of operations from
fire, earthquakes, severe storms, power loss and similar events,
particularly if such events occur within a high traffic location
of the network. As many of telecommunications companies increase
both their capacity and reach, and as traffic volume continues to
increase, they will be faced with increasing demands and
challenges in managing circuit capacity and traffic management
systems. Any prolonged failure of communications networks or other
systems or hardware that causes interruptions to operations could
seriously damage the reputation of such telecommunications
companies and result in customer attrition and financial losses.
. Many telecommunications companies may not be able to implement
billing and customer information systems effectively and on
schedule which could adversely affect their growth and ability to
bill and receive payments from customers. Sophisticated billing
and information systems are vital to the growth of many
telecommunications companies and their ability to bill and receive
payments from customers, reduce credit exposure and monitor
7
<PAGE>
costs. If these systems are not effectively implemented or are
delayed, call details may not be accurately recorded and customer
bills may not be generated promptly or accurately. This would
adversely affect the business of these telecommunications
companies since they would not be able to promptly collect on
customer balances due them.
. Telecommunications companies may be affected by the Year 2000
issue which could disrupt their business and operations. The Year
2000 issue is the result of computer programs using 2 digits
rather than 4 to define the applicable year. As a result of this
programming convention, software or hardware may recognize a date
using "00" as the year 1900 rather than the year 2000. This could
result in system failures, miscalculations or errors causing
disruptions of operations or other business problems, including,
among others, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities during
and after the year 2000. The failures that may occur in the
systems of telecommunications companies could result in litigation
brought by its customers for service interruption.
. The international operations and investments of many
telecommunications companies are exposed to risks. The risks that
telecommunications companies' international operations and
investments are exposed to include:
. general economic, social and political conditions;
. the difficulty of enforcing agreements and collecting
receivables through certain foreign legal systems;
. differing tax rates, tariffs, exchange controls or other
similar restrictions;
. currency fluctuations; and
. changes in and compliance with domestic and foreign laws and
regulations which impose a range of restrictions on operations,
trade practices, foreign trade and international investment
decisions.
. Many telecommunications companies are dependent on key personnel
for success. The success of many telecommunications 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 officers or key
technical personnel, their future success could be undermined.
Competition for such personnel and relationships is intense,
especially in emerging markets. There is no certainty that any of
these telecommunications companies will be able to continue to
attract and retain qualified personnel.
8
<PAGE>
HIGHLIGHTS OF TELECOM HOLDRs
This discussion highlights information regarding Telecom HOLDRs; we
present certain information more fully in the rest of this prospectus. You
should read the entire prospectus carefully before you purchase Telecom HOLDRs.
Issuer....................... Telecom HOLDRs Trust.
The trust.................... The Telecom HOLDRs Trust will be formed under
the depositary trust agreement, dated as of
January , 2000 among The Bank of New York, as
trustee, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, other depositors and the owners
of the Telecom 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 Telecom HOLDRs....
Telecom HOLDRs are designed to achieve the
following:
Diversification. Telecom HOLDRs are designed to
allow you to diversify your investment in the
telecommunications industry through a single,
exchange-listed instrument representing your
undivided beneficial ownership of the
underlying securities.
Flexibility. The beneficial owners of Telecom
HOLDRs have undivided beneficial ownership
interests in each of the underlying securities
represented by the Telecom HOLDRs, and can
cancel their Telecom HOLDRs to receive each of
the underlying securities represented by the
Telecom HOLDRs.
Transaction costs. The expenses associated with
trading Telecom 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 20 specified companies in the
telecommunications 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 Telecom 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 Telecom HOLDRs...........
The trust will issue Telecom 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
Telecom
9
<PAGE>
HOLDRs themselves are separate from the
underlying securities that are represented by
the Telecom HOLDRs.
The specific share amounts for each round-lot
of 100 Telecom HOLDRs are set forth in the
chart below and were determined on December 15,
1999 so that the initial weightings of each
underlying security included in the Telecom
HOLDRs approximated the relative market
capitalizations of the specified companies,
subject to a maximum weight of 20%. Because
these weightings are a function of market
prices, it is expected that these weightings
will change substantially over time, including
during the period between December 15, 1999 and
the date the Telecom HOLDRs are first issued to
the public.
The share amounts set forth below will not
change, except for changes due to corporate
events such as stock splits or reverse stock
splits on the underlying securities or
reconstitution events.
The following chart provides the
. names of the 20 issuers of the underlying
securities represented by the Telecom
HOLDRs,
. stock ticker symbols,
. share amounts represented by a round-lot of
100 Telecom HOLDRs,
. initial weightings as of December 15, 1999
and
. the 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 Weighting Market
----------------------- ------ ------- --------- -------
<S> <C> <C> <C> <C>
SBC Communications Inc. SBC 27 15.66% NYSE
AT & T Corp. T 25 15.06% NYSE
MCI WorldCom Inc. WCOM 22 12.28% NASDAQ
Bell Atlantic Corp. BEL 12 8.66% NYSE
BellSouth Corp. BLS 15 7.91% NYSE
GTE Corp. GTE 8 6.60% NYSE
BCE Inc. BCE 5 4.35% NYSE
Sprint Corporation (FON
Group) FON 6 4.29% NYSE
Sprint Corporation (PCS
Group) PCS 3 3.77% NYSE
Global Crossing Ltd. GBLX 6 3.33% NASDAQ
Nextel Communications,
Inc. NXTL 3 3.31% NASDAQ
US WEST, Inc. USW 4 3.08% NYSE
Qwest Communications,
International Inc. Q 6 2.76% NYSE
Level 3 Communications,
Inc. LVLT 3 2.59% NASDAQ
ALLTEL Corp. AT 2 1.94% NYSE
Telephone and Data
Systems, Inc. TDS 1 1.42% AMEX
NTL Incorporated NTLI 1 1.18% NASDAQ
Broadwing Inc. BRW 2 0.67% NYSE
McLeodUSA Inc. MCLD 1 0.61% NASDAQ
Century Telephone
Enterprises, Inc. CTL 1 0.52% NYSE
</TABLE>
10
<PAGE>
These companies generally are considered to be
among the 20 largest and most liquid companies
with U.S.-traded common stock involved in the
telecommunications industry as measured by
market capitalization and trading volume on
December 15, 1999. The market capitalization of
a company is determined by multiplying the
price of its common stock by the number of
outstanding shares of its common stock.
The trust only will issue and cancel, and you
only may obtain, hold, trade or surrender,
Telecom HOLDRs in a round-lot of 100 Telecom
HOLDRs and round-lot multiples. The trust will
only issue Telecom HOLDRs upon the deposit of
the whole shares represented by a round-lot of
100 Telecom HOLDRs. In the event that a
fractional share comes to be represented by a
round-lot of Telecom HOLDRs, the trust may
require a minimum of more than one round-lot of
100 Telecom HOLDRs for an issuance so that the
trust will always receive whole share amounts
for issuance of Telecom HOLDRs.
The number of outstanding Telecom 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 Telecom 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
Telecom HOLDRs will equal the sum of the
closing market price on the primary trading
market on the pricing date for each underlying
security multiplied by the share amount
appearing in the above table, plus an
underwriting fee.
Purchases.................... After the initial offering, you may acquire
Telecom 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 Telecom 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:
. For purchases of Telecom HOLDRs or
fewer, 2%.
. For purchases in excess of Telecom
HOLDRs, %.
You will not be charged any issuance fee or
other sales commission in connection with
purchases of Telecom HOLDRs made in the initial
public offering.
11
<PAGE>
Issuance and cancellation
fees......................... After the initial offering, if you wish to
create Telecom HOLDRs by delivering to the
trust the requisite shares of common stock
represented by a round-lot of 100 Telecom
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 Telecom HOLDRs. If you
wish to cancel your Telecom 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
Telecom HOLDRs.
Commissions.................. If you choose to deposit underlying securities
in order to receive Telecom 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 Telecom
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 Telecom 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 Telecom
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
Telecom 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 Telecom 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
Telecom HOLDRs themselves will not have voting
rights.
Rights relating to the
underlying You have the right to:
securities..................
. Receive all shareholder disclosure
materials, including annual and quarterly
reports, distributed by the issuers of the
underlying securities.
12
<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
Telecom 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
Telecom 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 Telecom 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 Telecom HOLDRs, unless the merger,
consolidation or other corporate combination
is between companies that are already
included in the Telecom 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, then the trustee
will distribute the shares of that company
to the owners of Telecom HOLDRs.
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.
13
<PAGE>
Termination events...........
A. The Telecom 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 Telecom HOLDRs are
delisted.
B. The trustee resigns and no successor trustee
is appointed within 60 days from the date
the trustee provides notice to Merrill
Lynch, Pierce, Fenner & Smith Incorporated,
as initial depositor, of its intent to
resign.
C. 75% of beneficial owners of outstanding
Telecom HOLDRs vote to dissolve and
liquidate the trust.
If a termination event occurs, the trustee will
distribute the underlying securities to you as
promptly as practicable after the termination
event.
Federal income tax
consequences................ The federal income tax laws will treat a U.S.
holder of Telecom HOLDRs as directly owning the
underlying securities. The Telecom HOLDRs
themselves will not result in any federal tax
consequences separate from the tax consequences
associated with ownership of the underlying
securities.
Listing...................... Application has been made to list the Telecom
HOLDRs on the American Stock Exchange under the
symbol "TTH". Trading will take place only in
round-lots of 100 Telecom HOLDRs and round-lot
multiples. A minimum of 150,000 Telecom 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
Telecom HOLDRs. Bid and ask prices, however,
will be quoted per single Telecom HOLDRs.
Clearance and settlement..... The trust will issue Telecom HOLDRs in book-
entry form. Telecom 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 Telecom
HOLDRs."
14
<PAGE>
THE TRUST
General. This discussion highlights information about the Telecom HOLDRs
trust. You should read this information, information about the depositary trust
agreement as well as the depositary trust agreement before you purchase Telecom
HOLDRs. The material terms of the depositary trust agreement are described in
this prospectus under the heading "Description of the depositary trust
agreement."
The Telecom HOLDRs trust. The trust will be formed pursuant to the
depositary trust agreement, dated as of January , 2000. The Bank of New York
will be the trustee. The Telecom HOLDRs trust is not a registered investment
company under the Investment Company Act of 1940.
The Telecom HOLDRs trust is intended to hold deposited shares for the
benefit of owners of Telecom 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 TELECOM HOLDRs
The trust will issue Telecom 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
Telecom HOLDRs on a continuous basis when an investor deposits the requisite
underlying securities with the trustee.
You may only acquire, hold, trade and surrender Telecom HOLDRs in a
round-lot of 100 Telecom HOLDRs and round-lot multiples. The trust will only
issue Telecom HOLDRs upon the deposit of the whole shares of underlying
securities that are represented by a round-lot of 100 Telecom 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 Telecom HOLDRs, the trust may require a minimum
of more than one round-lot of 100 Telecom HOLDRs for an issuance so that the
trust will always receive whole share amounts for issuance of Telecom HOLDRs.
Telecom 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 Telecom HOLDRs--The Telecom HOLDRs."
Beneficial owners of Telecom 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 Telecom HOLDRs to receive the underlying securities. See "Description of
the depositary trust agreement." Telecom 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. Telecom 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 Telecom
HOLDRs wishes to realize the dollar value of the underlying securities, that
owner will have to cancel the Telecom HOLDRs. Such cancellation will require
payment of fees and expenses as described in "Description of the depositary
trust agreement--Withdrawal of underlying securities."
15
<PAGE>
Telecom 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. Telecom HOLDRs will be available only in book-entry form.
Owners of Telecom HOLDRs may hold their Telecom 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 segments of the
telecommunications industry and whose common stock is registered under Section
12 of the Exchange Act. The issuers of the underlying securities are among the
20 largest capitalized, most liquid companies in the telecommunications
industry as measured by market capitalization and trading volume. The following
criteria were used in selecting the underlying securities on December 15, 1999:
.Market capitalization equal to or greater than $5 billion;
. Average daily trading volume of at least 225,000 shares over the 60
trading days prior to and including December 15, 1999;
. Average daily dollar volume (that is, the average daily trading
volume multiplied by the closing price on December 15, 1999) of at
least $17 million over the 60 trading days prior to and including
December 15, 1999; and
. A trading history of at least 90 calendar days.
The market capitalization of a company is determined by multiplying the price
of its common stock by the number of shares of its common stock that are held
by stockholders. In determining whether a company met the above-stated criteria
for inclusion in the Telecom HOLDRs, Merrill Lynch, Pierce, Fenner & Smith
Incorporated examined available public information about the company. 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 telecommunications
industry. In this case, the Telecom HOLDRs may no longer consist of securities
issued by companies involved in the telecommunications industry. Merrill Lynch,
Pierce, Fenner & Smith Incorporated will determine, in its sole discretion,
whether the issuer of a particular underlying security remains in the
telecommunications industry and will undertake to make adequate disclosure when
necessary.
Underlying securities. For a list of the underlying securities
represented by Telecom HOLDRs, please refer to "Highlights of Telecom HOLDRs--
The Telecom 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 Telecom 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
16
<PAGE>
recommendation of that company by the trust, the trustee, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, and any of their affiliates.
General background and historical information. For a brief description of
the business of each of the issuers of the underlying securities and monthly
pricing information showing the historical performance of each underlying
issuer's securities see "Annex A."
The following table sets forth the composite performance of all of the
underlying securities represented by a single Telecom HOLDR, measured at the
close of each business day on November 17, 1998, the first date when all of the
underlying securities were publicly traded, and thereafter as of the end of
each month to January 13, 2000. The following graph sets forth such performance
at the close of each business day during the same period. 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>
Telecom
HOLDRs
-------
<S> <C>
November 17, 1998....... 63.13
November 1998........... 64.17
December 1998........... 72.80
January 1999............ 78.34
February 1999........... 76.35
March 1999.............. 76.59
April 1999.............. 80.83
May 1999................ 81.10
</TABLE>
<TABLE>
<CAPTION>
Telecom
HOLDRs
-------
<S> <C>
June 1999............... 84.62
July 1999............... 82.66
August 1999............. 74.64
September 1999.......... 77.70
October 1999............ 84.70
November 1999........... 88.35
December 1999........... 89.19
January 13, 2000........ 84.14
</TABLE>
17
<PAGE>
DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT
General. The depositary trust agreement, dated as of January , 2000,
among Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York,
as trustee, other depositors and the owners of the Telecom HOLDRs, provides
that Telecom 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 Telecom HOLDRs. You may create and
cancel Telecom HOLDRs only in round-lots of 100 Telecom HOLDRs. You may create
Telecom HOLDRs by delivering to the trustee the requisite underlying
securities. The trust will only issue Telecom HOLDRs upon the deposit of the
whole shares represented by a round-lot of 100 Telecom HOLDRs. In the event
that a fractional share comes to be represented by a round-lot of Telecom
HOLDRs, the trust may require a minimum of more than one round-lot of 100
Telecom HOLDRs for an issuance so that the trust will always receive whole
share amounts for issuance of Telecom HOLDRs. Similarly, you must surrender
Telecom HOLDRs in integral multiples of 100 Telecom 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 Telecom 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 Telecom
HOLDRs, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated owning
Telecom 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
Telecom 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 Telecom 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 Telecom HOLDR, the
trustee will waive that portion of the fee which exceeds the total cash
dividends and other cash distributions received, or to be received, and payable
with respect to such calendar year.
Record dates. With respect to dividend payments and voting instructions,
the trustee expects to fix the trust's record dates as close as possible to the
record date fixed by the issuer of the underlying securities.
18
<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 Telecom
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 Telecom
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 Telecom HOLDRs.
Further issuances of Telecom HOLDRs. The depositary trust agreement
provides for further issuances of Telecom 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 Telecom 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
Telecom 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 Telecom HOLDRs, unless
the merger, consolidation or other corporate combination is between
companies that are already included in the Telecom 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, then the
trustee will distribute the shares of that company to owners of Telecom
HOLDRs.
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 Telecom HOLDRs will surrender their Telecom 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 Telecom
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 Telecom HOLDRs are delisted. Finally, the trust
will terminate if 75% of the owners of outstanding Telecom HOLDRs other than
Merrill Lynch, Pierce, Fenner & Smith Incorporated vote to dissolve and
liquidate the trust.
If a termination event occurs, the trustee will distribute the underlying
securities to you as promptly as practicable after the termination event
occurs.
19
<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 Telecom 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 Telecom 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 Telecom HOLDRs will not become effective until
30 days after notice of the amendment is given to the owners of Telecom HOLDRs.
Issuance and cancellation fees. After the initial public offering, the
trust expects to issue more Telecom HOLDRs. If you wish to create Telecom
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 Telecom HOLDRs. If you wish to cancel your Telecom 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 Telecom 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 Telecom 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 Telecom
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 Telecom 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 Telecom 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 Telecom 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 Telecom 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 Telecom 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 Telecom HOLDRs
A receipt holder purchasing and owning Telecom HOLDRs will be treated,
for U.S. federal income tax purposes, as directly owning a proportionate share
of the underlying securities represented by Telecom 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 Telecom 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 Telecom 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
Telecom HOLDRs. Similarly, with respect to sales of Telecom HOLDRs for cash in
the secondary market, the amount realized with respect to a sale of Telecom
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
Telecom 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 Telecom HOLDRs will
reduce the amount realized with respect to the underlying securities.
A holder will be required to include in its income the full amount of
dividends paid on the underlying securities, even though the depositary trust
agreement provides that the custodian fees will be deducted directly from any
dividends paid. These custodian fees will be treated as an expense incurred in
connection with a holder's investment in the underlying securities and may be
deductible. If a holder is an individual, estate or trust, however, the
deduction of its share of custodian fees will be a miscellaneous itemized
deduction that may be disallowed in whole or in part.
Non-U.S. receipt holders
Non-U.S. receipt holders should consult their tax advisors regarding U.S.
withholding and other taxes which may apply to an investment in the underlying
securities.
ERISA CONSIDERATIONS
Any plan fiduciary which proposes to have a plan acquire Telecom 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 Telecom 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 Telecom HOLDRs. Merrill Lynch & Co., as underwriter, proposes to offer
the Telecom 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 Telecom HOLDRs against deposit of the underlying securities in
New York, New York on January , 2000. After the initial offering, the public
offering price, concession and discount may be changed. The trust will continue
to issue Telecom 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 Telecom 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 Telecom 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 Telecom HOLDRs. Should a court determine not to enforce the
indemnification provision, Merrill Lynch, Pierce, Fenner & Smith Incorporated
also has agreed to contribute to payments the trustee may be required to make
with respect to such liabilities.
YEAR 2000
The trustee's Year 2000 compliance program consists of updating major
trustee-owned application systems, business-area supported systems, and the
trustee's proprietary customer software and evaluating the Year 2000 compliance
efforts of vendors of major vendor-supplied systems. The trustee's compliance
efforts have also considered the Year 2000 readiness of its global sub-
custodians, major service providers, correspondents, business partners, and
borrowers. The current focus is to monitor continued preparedness and
contingency planning. While contingency planning has been defined as part of
the Year 2000 compliance program, all new measures have been incorporated into
the trustee's existing Business Continuity Plans.
The trustee divided its major proprietary applications systems into three
business line groups. The applications in each group were subjected to a phased
process of assessment, renovation, certification testing, and implementation.
All critical systems have completed all phases. A program is in place to
continue to monitor critical systems to prevent Year 2000 problems from being
reintroduced. Major business-line products have been made available in isolated
future-dated environments for selected customers to test their interfaces and
to assure themselves of the trustee's compliance. The trustee is satisfied with
the results of testing with customers and agencies. Continued participation at
the request of the agencies and customers will continue as required.
Remediation of the trustee's proprietary customer software has been
completed. Installation on client desktop computers is substantially complete.
Customers have been advised of their obligation to assure that their
environments are compliant in order for the trustees's software to function
correctly during and after the century date change.
The trustee has substantially completed an evaluation of its significant
business partners, including other financial services providers,
correspondents, counterparties, sub-custodians, vendors and settlement
agencies, for the purpose of assessing their Year 2000 compliance. The trustee
is currently satisfied with the information it has received concerning the
progress and Year 2000 readiness programs of each significant third party. The
trustee will continue to monitor the readiness and progress of these parties
throughout 1999. The trustee has replaced certain service providers that were
seen as not managing the Year 2000 issue adequately.
The trustee considers Year 2000 readiness in its credit decisions and
factors this into borrower ratings. Based on a review of significant obligors,
the trustee believes that exposure to obligor Year 2000 problems does not
present a material risk to the trustee.
The trustee's personal computers considered to be critical to the
trustee's operations have been upgraded. Upgrading of physical facilities that
is considered critical to the trustee's operations to Year 2000 readiness was
expected to be completed by the end of November 1999.
The trustee's contingency plans relating to Year 2000 issues include the
identification and assessment of the impact of various worst case scenarios on
the critical operational components for each of the trustee's business units.
The trustee has reviewed the applicability of its current contingency plans,
which include creation of an information center, establishment of special rapid
response technology teams, scheduling availability of key personnel, testing
and simulation activities, offsite data center facilities, and emergency
23
<PAGE>
backup power. These plans, with minor modification, have been determined to be
adequate to mitigate Year 2000 related risks. The information center, which has
been established as a repository and focus for analysis of information, will
publish the status of the organization internally and externally during
critical periods. It is also authorized to requisition and deploy resources as
needed to address unanticipated situations.
Overall, the trustee's Year 2000 compliance program is on or ahead of
schedule to meet the needs of its customers and compliance deadlines defined by
its regulators. The estimated cost of the Year 2000 project is approximately
$82 million. In the first nine months of 1999 the trustee spent $16 million on
making computer systems Year 2000 compliant. Total expenses since 1997 have
been $67 million.
A material Year 2000 problem could result in an interruption in, or a
failure of, certain normal business activities or operations. Such problems
could materially and adversely affect the trustee's results of operations,
liquidity and financial condition. Due to the general uncertainty inherent in
the year 2000 problem, resulting in part from the uncertainty of the Year 2000
readiness of suppliers, customers and other business partners, as well as
entities with which the trustee does not have direct business relations, the
trustee is unable to determine at this time whether the consequences of the
Year 2000 failures will have a material impact on the trustee's results of
operations, liquidity or financial condition. The Year 2000 compliance program
is intended to significantly reduce the trustee's level of uncertainty about
the Year 2000 problem and, in particular, about the Year 2000 compliance and
readiness of its material business partners. The trustee believes that, with
completion of its Year 2000 compliance program as scheduled, the possibility of
significant interruptions of normal operations should be reduced. However,
because of the unprecedented nature of this issue, there can be no certainty as
to its impact.
LEGAL MATTERS
Legal matters, including the validity of the Telecom 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 Telecom 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 Telecom 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.
24
<PAGE>
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 Telecom HOLDRs. This prospectus relates only to Telecom 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 Telecom 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 Telecom HOLDRs, have been publicly
disclosed.
25
<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 1994, 1995, 1996, 1997,
1998 and 1999 through December 1999. All market prices in excess of one dollar
are rounded to the nearest one sixty-fourth of a 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.
ALLTEL CORP.
ALLTEL Corp. provides services in two business segments: the
telecommunications services segment which operates in the southeastern and
eastern United States and the information services segment which offers its
services to customers throughout the world. The communications services segment
offers wireline, wireless, long distance, long distance paging, Internet access
services for residential and business customers, and telephone directory
publishing. The information services segment provides a wide range of services
primarily to the financial services and telecommunications industries and also
develops and markets software to financial services and telecommunications
companies who offer their own information services. ALLTEL markets most of its
products and service offerings through its retail operations and maintains its
own sales force.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- ------- --------- ------- --------- ------- --------- ------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 27 7/8 January 28 3/8 January 31 3/8 January 32 1/8 January 42 3/4 January 64 9/16
February 27 1/4 February 28 5/8 February 33 1/4 February 35 3/8 February 45 11/16 February 59 7/8
March 25 5/8 March 28 3/4 March 30 7/8 March 32 1/2 March 43 11/16 March 62 3/8
April 26 7/8 April 24 3/4 April 32 7/8 April 31 1/2 April 42 3/4 April 67 7/16
May 26 1/8 May 24 5/8 May 31 1/2 May 32 7/8 May 39 7/16 May 71 11/16
June 25 1/8 June 25 3/8 June 30 3/4 June 33 7/16 June 46 1/2 June 71 1/2
July 27 July 26 3/8 July 27 3/8 July 32 7/8 July 41 15/16 July 71 13/16
August 28 August 28 1/4 August 28 1/4 August 31 5/8 August 44 7/8 August 67 5/8
September 27 September 29 7/8 September 27 7/8 September 34 1/2 September 47 1/8 September 70 3/8
October 25 7/8 October 30 5/8 October 30 1/2 October 35 3/8 October 46 13/16 October 83 1/4
November 28 1/8 November 29 1/2 November 31 7/8 November 39 3/4 November 53 November 86 1/2
December 30 1/8 December 29 1/2 December 31 3/8 December 41 1/16 December 59 13/16 December 82 11/16
</TABLE>
The closing price on , 2000 was .
A-1
<PAGE>
AT&T CORP.
AT&T Corp. provides voice, data, and video communications services to
residential consumers, large and small businesses and government entities in
the United States. AT&T has also entered into alliances with international
telecommunications services providers throughout the world to broaden the
geographic range of its service offerings. AT&T provides domestic and
international long distance, regional, local and wireless telecommunications
services, cable television and Internet communications transmission services
and professional consulting services which provide clients with recommendations
for future investments in new telecommunications-related technologies and
assist with implementation of such technologies. AT&T also provides billing,
directory and calling card services to support its communications business.
AT&T markets many of its services through it own sales representatives and by
means of television advertising, direct mail solicitations and customer care
telephone solicitations, as well as through brand awareness.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 27 1/16 January 23 25/32 January 31 57/64 January 26 1/4 January 41 3/4 January 60 1/2
February 25 3/64 February 24 5/8 February 30 11/32 February 26 37/64 February 40 43/64 February 54 3/4
March 24 7/16 March 24 11/16 March 29 5/32 March 23 1/4 March 43 53/64 March 53 13/64
April 24 7/16 April 24 13/64 April 29 7/32 April 22 21/64 April 40 5/64 April 50 1/2
May 26 3/64 May 24 13/64 May 29 3/4 May 24 1/2 May 40 37/64 May 55 1/2
June 25 15/16 June 25 9/32 June 29 37/64 June 23 3/8 June 38 5/64 June 55 13/16
July 26 3/64 July 25 5/32 July 24 59/64 July 24 35/64 July 40 37/64 July 52 1/8
August 26 3/64 August 27 1/64 August 25 3/64 August 26 August 33 27/64 August 45
September 25 3/4 September 31 23/64 September 24 59/64 September 29 1/2 September 38 61/64 September 43 1/2
October 26 15/64 October 30 17/32 October 23 21/64 October 32 37/64 October 41 43/64 October 46 3/4
November 23 7/16 November 31 27/64 November 26 11/64 November 37 1/4 November 41 29/64 November 55 7/8
December 23 31/32 December 30 57/64 December 28 59/64 December 40 7/8 December 50 1/2 December
</TABLE>
50
13/16
The closing price on , 2000 was .
BELL ATLANTIC CORP.
Bell Atlantic Corp. is a telecommunications company that operates
predominantly in the east coast region of the United States, stretching from
Maine to Virginia. Bell Atlantic focuses on four distinct areas of operations:
domestic wireline services providing local telephone services, including voice
and data transport; wireless telecommunications services in 24 states in the
United States and foreign wireless investments servicing customers in Latin
America, Europe and the Pacific Rim; domestic and international publishing
businesses, including print directories and Internet-based shopping guides,
website creation and web hosting, which is a means of hosting the web-server
application on a computer system through which electronic content on the
Internet is readily available to any web-browser client; and other businesses
such as international wireline telecommunications investments in Europe and the
Pacific Rim and lease financing.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 28 3/8 January 27 1/8 January 34 7/16 January 33 5/8 January 46 9/32 January 60
February 27 3/8 February 26 13/16 February 33 1/16 February 34 9/16 February 44 7/8 February 57 5/8
March 25 7/8 March 26 7/16 March 30 15/16 March 30 3/8 March 51 1/8 March 51 11/16
April 25 7/8 April 27 5/16 April 32 1/2 April 33 7/8 April 46 25/32 April 57 5/8
May 26 11/16 May 27 3/4 May 31 3/16 May 35 May 45 13/16 May 54 3/4
June 28 June 28 June 31 7/8 June 37 15/16 June 45 5/8 June 65 3/8
July 28 5/16 July 28 5/8 July 29 9/16 July 36 9/32 July 45 11/32 July 64
August 27 3/8 August 29 3/4 August 28 1/8 August 36 3/16 August 44 1/8 August 61 5/16
September 26 1/2 September 30 11/16 September 29 15/16 September 40 7/32 September 48 7/16 September 67 5/16
October 26 3/16 October 31 3/4 October 30 1/8 October 40 October 53 3/16 October 64 15/16
November 25 1/16 November 31 1/2 November 31 7/16 November 44 5/8 November 55 5/8 November 63 5/16
December 24 7/8 December 33 7/16 December 32 3/8 December 45 1/2 December 54 December 61 9/16
</TABLE>
The closing price on , 2000 was .
A-2
<PAGE>
BCE INC.
BCE provides residence and business customers in Canada with wireline and
wireless telecommunications products and applications, satellite communications
and direct-to-home television services, systems integration expertise,
electronic commerce solutions, Internet access and high-speed data services and
directories. BCE provides communications services in Asia and Latin America and
has an international presence through its ownership in Nortel Networks, a
designer and builder of communications networks, and through its ownership in
Teleglobe, an international telecommunications carrier.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- ------- --------- ------- --------- ------- --------- --------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 36 1/4 January 30 January 36 1/8 January 50 1/4 January 31 1/4 January 44 5/8
February 36 1/8 February 30 7/8 February 34 3/4 February 48 1/2 February 35 9/16 February 40 7/16
March 36 1/8 March 30 7/8 March 35 3/8 March 46 March 41 3/4 March 44 5/16
April 35 3/4 April 31 3/4 April 39 3/8 April 46 3/4 April 42 9/16 April 45 11/16
May 35 3/8 May 31 3/8 May 39 3/4 May 26 1/2 May 46 1/16 May 46 1/16
June 32 3/8 June 32 1/8 June 39 1/2 June 28 June 42 11/16 June 49 5/16
July 33 July 31 1/8 July 39 7/8 July 30 7/16 July 40 5/16 July 49 11/16
August 35 August 32 1/4 August 39 3/8 August 28 / 5/16 August 32 3/16 August 46 3/4
September 35 7/8 September 33 3/8 September 42 3/4 September 29 7/8 September 27 15/16 September 49 13/16
October 35 October 33 5/8 October 46 October 27 7/8 October 34 1/16 October 60 1/4
November 33 3/8 November 33 1/2 November 50 1/8 November 30 5/16 November 35 9/16 November 67 5/8
December 32 1/8 December 34 1/2 December 47 3/4 December 33 5/16 December 37 15/16 December 90 3/16
</TABLE>
The closing price on , 2000 was .
BELLSOUTH CORP.
BellSouth Corp. provides a broad range of telecommunications services in
the United States and international wireless telecommunications services.
BellSouth's operations are divided into a wireline communications, domestic
wireless, international wireless and advertising and publishing operating
segments. Its wireline communications segment offers local exchange, network
access, long distance and data services in the southeastern United States and
its domestic wireless segment offers a broad range of cellular services in a
similar service area. BellSouth, through its international wireless segment,
has entered into ventures in India, Israel and throughout Central and South
America to provide cellular services and technology. The advertising and
publishing segment prints and sells advertising in telephone directories.
BellSouth markets its products primarily through its own sales representatives
and promotes its brand name and services by advertising in connection with
major sports and cultural events, such as the Olympics and through its
affiliation with several professional and collegiate sports organizations.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 15 3/8 January 14 13/16 January 21 7/16 January 22 3/16 January 30 9/32 January 44 5/8
February 13 15/16 February 14 23/32 February 19 15/16 February 23 7/16 February 30 15/32 February 46 1/2
March 14 15/32 March 14 7/8 March 18 1/2 March 21 1/16 March 33 23/32 March 40 1/16
April 15 7/32 April 15 9/32 April 20 April 22 1/4 April 32 3/32 April 44 1/2
May 14 7/8 May 15 9/32 May 20 5/16 May 22 11/16 May 32 1/4 May 47 3/16
June 15 7/16 June 15 7/8 June 21 June 23 3/16 June 33 9/16 June 46 1/8
July 15 5/8 July 16 15/16 July 20 1/2 July 23 11/16 July 34 3/8 July 48 1/16
August 14 27/32 August 17 3/16 August 18 1/8 August 22 August 34 9/32 August 45 1/4
September 13 15/16 September 18 9/32 September 18 1/2 September 23 1/8 September 37 5/8 September 45
October 13 5/16 October 19 1/8 October 20 3/8 October 23 21/32 October 39 25/32 October 45
November 12 31/32 November 19 7/16 November 20 3/16 November 27 3/8 November 43 5/8 November 46 1/16
December 13 17/32 December 21 3/4 December 20 1/4 December 28 5/32 December 49 7/8 December 46 13/16
</TABLE>
The closing price on , 2000 was .
A-3
<PAGE>
BROADWING INC.
Formed by the merger of Cincinnati Bell, a local communications provider,
and IXC Communications, a fiber network carrier, Broadwing Inc. is an
integrated communications company delivering voice, data, wireless and Internet
solutions to a variety of customers across the United States. Broadwing
provides Internet access and hosting, local and long distance services, high
bandwidth data transport, such as frame relay (high-speed data transfer over
telephone lines), and managed services, such as information technology
consulting.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- ------- --------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 9 January 9 5/8 January 16 1/4 January 30 15/16 January 35 13/16 January 20 5/16
February 8 1/4 February 10 1/2 February 16 3/8 February 31 February 32 February 19 3/4
March 7 15/16 March 10 3/4 March 26 March 28 1/4 March 35 5/8 March 22 7/16
April 8 5/16 April 12 April 24 5/8 April 28 April 38 1/4 April 22 11/16
May 8 1/8 May 12 7/16 May 26 9/16 May 30 3/4 May 31 13/16 May 24 3/16
June 8 3/16 June 12 5/8 June 26 1/16 June 31 1/2 June 28 5/8 June 24 15/16
July 8 15/16 July 13 5/16 July 24 5/16 July 30 July 32 1/8 July 21 1/4
August 9 7/16 August 13 5/8 August 23 7/8 August 26 15/16 August 23 1/2 August 18 1/2
September 9 1/4 September 13 1/2 September 26 1/2 September 28 1/4 September 26 September 19 7/16
October 9 3/16 October 14 11/16 October 24 11/16 October 27 October 25 15/16 October 20 13/16
November 8 5/8 November 14 15/16 November 29 13/16 November 29 1/2 November 31 1/2 November 29
December 8 1/2 December 17 3/8 December 30 13/16 December 31 December 37 13/16 December 36 7/8
</TABLE>
The closing price on , 2000 was .
CENTURY TELEPHONE ENTERPRISES, INC.
Century Telephone Enterprises, Inc. is a regional diversified
communications company engaged primarily in providing local exchange telephone
services and cellular telephone services in 21 states in the United States.
CenturyTel local telephone operations offers its services primarily in rural
and smaller suburban areas in its coverage area. It also provides long
distance, cable television and home and business security and monitoring
services in certain local and regional markets. CenturyTel markets many of its
services through several distribution channels, including its own direct sales
force and retail outlets and through independent agents.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 12 7/64 January 14 January 15 1/16 January 13 15/16 January 23 7/16 January 45 21/64
February 11 9/16 February 13 25/32 February 14 15/16 February 13 39/64 February 27 7/64 February 41 11/64
March 10 9/32 March 13 1/2 March 14 7/64 March 13 7/64 March 27 11/64 March 46 53/64
April 11 7/32 April 13 7/32 April 14 9/16 April 13 9/32 April 28 3/8 April 40 1/4
May 11 39/64 May 13 1/16 May 14 7/16 May 13 7/16 May 29 35/64 May 38 5/16
June 11 1/2 June 12 39/64 June 14 11/64 June 14 31/32 June 30 37/64 June 39 3/4
July 11 9/16 July 12 43/64 July 14 11/64 July 16 21/64 July 33 11/64 July 42 3/4
August 13 25/64 August 12 25/64 August 15 1/16 August 16 9/64 August 30 1/4 August 39 5/16
September 12 53/64 September 13 1/2 September 15 9/32 September 19 9/16 September 31 1/2 September 40 5/8
October 13 21/64 October 12 57/64 October 14 9/32 October 18 55/64 October 37 7/8 October 40 7/16
November 13 7/32 November 13 57/74 November 14 11/64 November 20 15/32 November 38 November 46
December 13 7/64 December 14 7/64 December 13 23/32 December 22 .9/64 December 45 December 47 3/8
</TABLE>
The closing price on , 2000 was .
A-4
<PAGE>
GLOBAL CROSSING LTD.
Global Crossing Ltd. is a global provider of Internet and long distance
telecommunication facilities and related services utilizing a network of
undersea and terrestrial digital fiber optic cable systems. Global Crossing is
building and offering services over a global fiber optic network serving five
continents, 24 countries and 200 major cities. Global Crossing markets capacity
on its systems to telecommunications providers, including Internet services
providers and established and emerging telecommunications companies. Global
Crossing is in the process of establishing regional sales and marketing
companies in the United States, the United Kingdom and Asia to facilitate sales
of capacity on its systems.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- ------- --------- ------- --------- ------- --------- ------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January 26 7/16
February * February * February * February * February * February 29 1/2
March * March * March * March * March * March 46 1/4
April * April * April * April * April * April 54
May * May * May * May * May * May 47 7/16
June * June * June * June * June * June 42 5/8
July * July * July * July * July * July 41 1/2
August * August * August * August * August 8 7/16 August 25 7/8
September * September * September * September * September 10 7/16 September 26 1/2
October * October * October * October * October 14 3/8 October 34 5/8
November * November * November * November * November 18 15/16 November 43 5/8
December * December * December * December * December 22 9/16 December 50
</TABLE>
The closing price on , 2000 was .
GTE CORPORATION
GTE Corporation is a telecommunications company that provides local
telephone and wireless services in 29 states in the United States and long-
distance service and Internet access throughout the United States. GTE's
national and international operations serve approximately 30 million telephone
access lines in the United States, Canada, Dominican Republic and Venezuela.
GTE provides government and defense communications systems and equipment,
aircraft passenger telecommunications and directories and telecommunications-
based information services. Outside the United States, GTE operates wireless
networks serving approximately 2.8 million customers. GTE also participates in
a venture which operates a paging network in China.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- ------- --------- ------- --------- ------- --------- ------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 34 1/2 January 33 7/8 January 46 January 47 January 54 1/2 January 67 1/2
February 32 5/8 February 33 3/8 February 42 7/8 February 46 7/8 February 54 1/8 February 64 7/8
March 31 March 33 1/4 March 43 3/4 March 46 5/8 March 59 7/8 March 60 1/2
April 31 3/4 April 33 7/8 April 43 3/8 April 45 3/4 April 58 7/16 April 66 15/16
May 31 May 33 3/8 May 42 3/4 May 44 1/8 May 58 5/16 May 63 1/16
June 31 June 34 1/8 June 44 3/4 June 43 7/8 June 55 5/8 June 75 1/2
July 31 7/8 July 35 1/2 July 41 1/8 July 46 7/16 July 54 3/8 July 73 3/4
August 31 3/4 August 36 5/8 August 39 3/8 August 44 9/16 August 50 1/16 August 69 5/16
September 30 3/8 September 39 1/8 September 38 1/2 September 45 3/8 September 55 September 76 7/8
October 31 October 41 1/8 October 42 1/8 October 42 9/16 October 58 11/16 October 75 1/4
November 30 1/2 November 42 5/8 November 44 7/8 November 50 9/16 November 61 13/16 November 73
December 30 3/8 December 43 7/8 December 45 3/8 December 52 1/4 December 65 December 70 9/16
</TABLE>
The closing price on , 2000 was .
A-5
<PAGE>
LEVEL 3 COMMUNICATIONS, INC.
Level 3 Communications, Inc. provides, primarily in the United States, a
broad range of integrated communications services through technology and
equipment that it owns or leases. Level 3 is currently building an advanced
international Internet technology-based network consisting of both local and
long distance networks which it expects to complete within the next six years.
Level 3 currently offers computer operations outsourcing, Internet access and
related services, which allow its customers to utilize its facilities network
and support services rather than investing in their own. Level 3 markets its
products and service offerings through a combination of its own direct sales
force and agents, resellers and wholesalers.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January 19 15/16 January 52 3/8
February * February * February * February * February 24 3/4 February 56
March * March * March * March * March 35 13/16 March 72 13/16
April * April * April * April * April 31 April 90 1/16
May * May * May * May * May 25 1/32 May 78 1/2
June * June * June * June * June 37 June 60 1/16
July * July * July * July * July 41 1/4 July 53
August * August * August * August * August 29 25/32 August 59 3/4
September * September * September * September * September 31 15/16 September 52 7/32
October * October * October * October 7 October 32 9/16 October 68 3/8
November * November * November * November 10 45/64 November 34 1/2 November 67 13/16
December * December * December * December 14 51/64 December 43 1/8 December 81 7/8
</TABLE>
The closing price on , 2000 was .
MCI WORLDCOM INC.
MCI WorldCom, Inc. provides fully integrated local, long distance,
international and Internet services through its own network of fiber optic
cables, digital microwave (transmission in the high giga (billions) hertz range
used mainly for data transmission over short (20-40 miles) distances) and fixed
and transportable satellite stations on land. MCI WorldCom offers switched
(routing of incoming signals to proper outgoing lines) and dedicated (pre-
assigned to a specific user) long distance and local products, dedicated and
dial-up Internet access, wireless services, toll free services, calling cards,
private lines, debit cards, conference calling, messaging and mobility
services. MCI WorldCom operates a "local-to-global-to-local" network with
facilities throughout North America, Latin America, Europe and the Asia-Pacific
region which reduces its reliance on capacity provided by local public
telecommunications operators. MCI WorldCom markets its services mainly through
its own sales force which it targets at specific geographic markets. MCI
WorldCom agreed on October 5, 1999 to merge with Sprint Corporation. This
merger is subject to federal regulatory approval. MCI WorldCom effected a 3-
for-2 stock split on its common stock to shareholders of record on December 15,
1999. The shares of common stock began trading on a split-adjusted basis on
December 31, 1999. The following table is adjusted to account for this stock
split.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- ------- --------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 9 11/64 January 7 1/4 January 12 13/64 January 16 3/4 January 23 7/8 January 53 11/64
February 9 3/64 February 7 13/16 February 13 1/8 February 17 3/4 February 25 29/64 February 55
March 8 March 7 51/64 March 15 21/64 March 14 43/64 March 28 45/64 March 59 3/64
April 7 53/64 April 8 April 15 43/64 April 16 April 28 33/64 April 54 51/64
May 6 1/8 May 8 43/64 May 16 19/64 May 19 3/4 May 30 21/64 May 57 37/64
June 5 53/64 June 9 June 18 29/64 June 21 21/64 June 32 19/64 June 57 3/8
July 6 1/2 July 9 61/64 July 17 1/4 July 23 19/64 July 35 1/4 July 55
August 7 3/4 August 11 15/64 August 14 August 19 61/64 August 27 19/64 August 50 1/2
September 7 23/64 September 10 45/64 September 14 1/4 September 23 37/64 September 32 37/64 September 47 59/64
October 7 53/64 October 10 7/8 October 16 1/4 October 22 27/64 October 36 53/64 October 57 13/64
November 6 45/64 November 10 53/64 November 15 27/64 November 21 21/64 November 39 21/64 November 55 1/8
December 6 31/64 December 11 3/4 December 17 3/8 December 20 11/64 December 47 53/64 December 53 1/16
</TABLE>
The closing price on , 2000 was .
A-6
<PAGE>
McLEODUSA INC.
McLeodUSA Inc. provides communications services to business and
residential customers in the midwest and western regions of the United States.
McLeodUSA offers local, long distance, data, voice mail, paging and Internet
access services. McLeodUSA also sells advertising space in telephone
directories, offers special access, private line and data services,
communications network maintenance services, video services and telemarketing
services. McLeodUSA offers a single bill format through which all of its
services provided to a customer are aggregated in one statement. McLeodUSA
markets its services to business customers through direct sales personnel and
to residential customers through telemarketers.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January 11 1/2 January 17 7/32 January 20 25/32
February * February * February * February 8 15/16 February 19 31/64 February 19 1/4
March * March * March * March 8 7/8 March 21 1/8 March 21
April * April * April * April 9 3/16 April 23 April 28 1/32
May * May * May * May 11 7/8 May 20 3/4 May 26 3/4
June * June * June 12 June 16 7/8 June 19 7/16 June 27 1/2
July * July * July 12 5/8 July 17 3/16 July 18 11/16 July 29 13/16
August * August * August 14 7/16 August 16 15/16 August 14 1/2 August 33 3/8
September * September * September 16 1/2 September 19 23/32 September 10 15/16 September 42 9/16
October * October * October 16 1/4 October 18 9/16 October 18 9/32 October 44 5/8
November * November * November 14 1/4 November 18 1/2 November 15 15/32 November 43
December * December * December 12 3/4 December 16 December 15 5/8 December 58 7/8
</TABLE>
The closing price on , 2000 was .
NEXTEL COMMUNICATIONS, INC.
Nextel Communications, Inc. provides digital and analog wireless
communications services to its customers in the United States. Nextel's network
offers an integrated wireless communications system with digital cellular, text
and numeric paging capabilities and a digital two-way radio feature that allows
users to instantly contact other users. In addition to Nextel's extensive
operations in the United States, Nextel has ownership interests in
international wireless companies operating in Latin America, Asia and Canada.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- -------- --------- ------- --------- ------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 42 January 9 5/8 January 13 3/4 January 15 3/8 January 27 5/16 January 32
February 44 1/4 February 12 1/8 February 15 1/8 February 14 1/4 February 29 9/16 February 30 1/16
March 39 1/4 March 13 5/8 March 18 7/8 March 13 3/8 March 33 3/4 March 36 5/8
April 35 1/2 April 16 1/8 April 18 1/8 April 13 3/16 April 28 11/16 April 40 15/16
May 37 1/2 May 13 1/2 May 20 3/4 May 14 3/4 May 23 9/16 May 36 7/8
June 30 1/4 June 14 1/8 June 19 1/16 June 18 15/16 June 24 7/8 June 50 3/16
July 27 7/8 July 19 3/8 July 15 1/8 July 24 1/8 July 26 25/32 July 53 9/16
August 26 1/8 August 17 7/8 August 16 3/8 August 25 1/16 August 18 1/16 August 57 13/16
September 21 1/8 September 16 7/8 September 18 1/2 September 28 7/8 September 20 3/16 September 67 13/16
October 20 15/16 October 13 7/8 October 16 October 26 1/4 October 18 1/8 October 86 3/16
November 17 3/4 November 15 3/8 November 15 November 25 1/4 November 21 1/2 November 99 1/8
December 14 3/8 December 14 3/4 December 13 1/16 December 26 December 23 5/8 December 103 1/8
</TABLE>
The closing price on , 2000 was .
A-7
<PAGE>
NTL INCORPORATED
NTL Incorporated is a communications company in the United Kingdom that
provides residential, business and wholesale customers with telephone, cable
television and Internet access services. NTL also offers broadcast transmission
and telecommunication services. NTL provides these services over local,
national and international network infrastructure.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 12 January 16 51/64 January 18 1/2 January 18 29/32 January 25 19/32 January 66 1/2
February 12 February 19 13/64 February 20 February 15 1/2 February 26 19/32 February 62 5/32
March 13 13/64 March 17 27/32 March 24 3/32 March 17 13/64 March 34 19/32 March 65 3/32
April 13 3/64 April 17 45/64 April 23 13/32 April 15 19/32 April 31 13/64 April 61
May 11 35/64 May 19 13/64 May 25 3/32 May 18 19/64 May 32 1/2 May 75 35/64
June 12 19/32 June 19 1/2 June 23 19/32 June 19 29/32 June 42 51/64 June 68 61/64
July 12 29/32 July 20 15/32 July 19 29/32 July 17 13/64 July 43 13/32 July 83 3/32
August 16 21/32 August 21 19/32 August 19 13/32 August 17 45/64 August 31 61/64 August 78 35/64
September 19 13/64 September 22 13/32 September 20 1/2 September 21 3/32 September 34 13/32 September 76 7/8
October 18 19/32 October 21 13/64 October 19 October 21 45/64 October 38 11/32 October 75 3/8
November 17 35/64 November 20 45/64 November 20 November 22 1/2 November 44 35/64 November 91 3/16
December 16 21/32 December 19 19/32 December 20 13/64 December 22 19/64 December 45 5/32 December 124 3/4
</TABLE>
The closing price on , 2000 was .
QWEST COMMUNICATIONS INTERNATIONAL INC.
Qwest Communications International Inc. is a telecommunications services
and infrastructure provider. Its operations are divided into a communications
services and construction services segments. Qwest's communications services
segment includes Internet and multimedia services, as well as traditional voice
communications services. Qwest's construction services segment builds and
installs fiberoptic systems for its own network and other telecommunications
providers. Through a joint venture in Europe, Qwest is involved in building a
network that will connect together 40 cities Europe and the United States. In
the Pacific region, Qwest is involved in building a cable to connect California
with Japan and the Pacific Rim. On January 3, 2000, Qwest moved to the New York
Stock Exchange from the Nasdaq National Market and trades under the stock
symbol "Q".
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January 17 23/32 January 29 31/32
February * February * February * February * February 17 9/16 February 30 23/32
March * March * March * March * March 19 7/16 March 36 3/64
April * April * April * April * April 19 9/32 April 42 23/32
May * May * May * May * May 16 17/32 May 42 5/8
June * June * June * June 6 13/16 June 17 7/16 June 33 1/16
July * July * July * July 7 25/32 July 20 3/16 July 29 1/2
August * August * August * August 10 3/16 August 12 1/2 August 28 3/4
September * September * September * September 11 17/32 September 15 21/32 September 29 9/16
October * October * October * October 15 7/16 October 19 9/16 October 36
November * November * November * November 13 21/32 November 20 November 34 3/16
December * December * December * December 14 7/8 December 25 December 43
</TABLE>
The closing price on , 2000 was .
A-8
<PAGE>
SBC COMMUNICATIONS INC.
SBC Communications Inc. provides communications services in the United
States, with a focus on Texas and California, and other countries, including
France, Mexico, Taiwan and Israel. SBC provides local and long distance phone
services, wireless and data communications, paging, Internet services and
messaging, cable and satellite television, security services and
telecommunications equipment. SBC operations are conducted through its
subsidiaries, which include large regional and national operators such as
Ameritech, Pacific Bell, Southwestern Bell, Cellular One and SNET. SBC also
provides directory advertising and publishing services.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 20 15/16 January 21 5/16 January 28 5/16 January 27 1/2 January 38 7/8 January 54
February 19 9/16 February 20 13/16 February 27 7/16 February 28 3/4 February 37 13/16 February 52 7/8
March 20 3/16 March 21 March 26 5/16 March 26 1/4 March 43 3/8 March 47 3/16
April 20 3/4 April 22 1/16 April 25 1/16 April 27 3/4 April 41 7/16 April 55 3/4
May 20 9/16 May 22 1/2 May 24 11/16 May 29 1/4 May 38 7/8 May 51 1/8
June 21 3/4 June 23 13/16 June 24 5/8 June 30 15/16 June 40 June 58
July 21 July 24 1/16 July 24 7/16 July 29 19/32 July 40 15/16 July 57 1/8
August 20 11/16 August 25 5/16 August 23 5/16 August 27 3/16 August 38 1/16 August 48 1/16
September 21 1/4 September 27 1/2 September 24 1/16 September 30 23/32 September 44 3/8 September 51 1/16
October 20 15/16 October 27 15/16 October 24 5/16 October 31 13/16 October 46 5/16 October 53
November 20 11/16 November 27 1/16 November 26 5/16 November 36 5/16 November 47 15/16 November 51 7/8
December 20 3/16 December 28 5/8 December 25 15/16 December 36 5/8 December 53 5/8 December 48 3/4
</TABLE>
The closing price on , 2000 was .
SPRINT CORPORATION (FON GROUP)
Sprint Corporation's Fon Group provides domestic and international long
distance communications, local exchange communications, product distribution
and directory publishing activities. The Fon Group's long distance division
operates a digital network in the United States and provides voice, data and
video communication services throughout the world. The local division provides
local telephone services in the United States. The product distribution
division provides wholesale distribution services of telecommunications
products and the directory publishing division publishes and markets phone
directories. MCI WorldCom agreed on October 5, 1999 to merge with Sprint
Corporation. This merger is subject to federal regulatory approval. In November
1998, Sprint Corporation reclassified its publicly traded common shares into
one share of FON stock and half a share of PCS stock. Since both the FON and
PCS stocks are tracking stocks, owning either stock does not represent a direct
legal interest in the assets and liabilities of the FON and PCS Groups. Rather,
shareholders remain invested in Sprint Corporation. The historical stock prices
listed below beginning in November 1998 reflect the performance of the FON
tracking stock. The stock prices prior to November 1998 reflect the performance
of Sprint Corporation before the reclassification of its stock.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 13 23/64 January 10 1/2 January 15 57/64 January 18 1/4 January 26 43/64 January 41 15/16
February 13 5/8 February 10 25/32 February 15 51/64 February 20 3/8 February 29 9/16 February 42 29/32
March 12 5/8 March 11 9/64 March 17 1/64 March 20 21/64 March 30 5/16 March 49 1/16
April 13 35/64 April 12 5/32 April 18 7/8 April 19 21/32 April 30 19/32 April 51 9/32
May 14 May 12 11/32 May 18 63/64 May 21 57/64 May 32 3/16 May 56 3/8
June 12 27/32 June 12 25/64 June 18 13/16 June 23 13/32 June 31 37/64 June 53
July 13 1/2 July 12 5/8 July 16 13/32 July 22 11/64 July 31 23/64 July 51 11/16
August 14 19/32 August 13 11/64 August 18 1/4 August 21 3/64 August 30 1/32 August 44 3/8
September 14 3/64 September 12 57/64 September 17 13/32 September 22 25/64 September 32 1/4 September 54 1/4
October 12 7/64 October 14 3/16 October 17 37/64 October 23 19/64 October 34 3/8 October 74 9/16
November 11 November 14 47/64 November 18 3/4 November 26 15/64 November 36 7/16 November 69 3/8
December 10 11/64 December 14 19/32 December 17 55/64 December 26 17/64 December 42 1/16 December 67 5/16
</TABLE>
The closing price on , 2000 was .
A-9
<PAGE>
SPRINT CORPORATION (PCS GROUP)
Sprint Corporation's PCS Group includes all of Sprint's domestic wireless
mobile phone services. The PCS Group operates a fully digital wireless network
in the United States with licenses to provide nationwide service using a single
frequency and technology. The PCS Group currently serves many of the largest
metropolitan markets in the United States and Puerto Rico and the United States
Virgin Islands. MCI WorldCom agreed on October 5, 1999 to merge with Sprint
Corporation. This merger is subject to federal regulatory approval. On December
14, 1999, Sprint Corporation declared a 2-for-1 stock split on its PCS tracking
stock, to be effected by means of a stock dividend to shareholders of record on
January 14, 2000. The shares of PCS stock will begin trading on a split-
adjusted basis on February 4, 2000. In November 1998, Sprint Corporation
reclassified its publicly traded common shares into one share of FON stock and
half a share of PCS stock. Since both the FON and PCS stocks are tracking
stocks, owning either stock does not represent a direct legal interest in the
assets and liabilities of the FON and PCS Groups. Rather, shareholders remain
invested in Sprint Corporation. The historical stock prices listed below
reflect the performance of the PCS tracking stock. For historical stock prices
of Sprint Corporation prior to the reclassification in November 1998, see the
immediately preceding table.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- ------- --------- ------- --------- ------- --------- ------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January 31 3/4
February * February * February * February * February * February 32
March * March * March * March * March * March 44 5/16
April * April * April * April * April * April 42 1/4
May * May * May * May * May * May 45
June * June * June * June * June * June 57
July * July * July * July * July * July 60 5/8
August * August * August * August * August * August 59 3/4
September * September * September * September * September * September 74 9/16
October * October * October * October * October * October 82 15/16
November * November * November * November * November 15 15/16 November 91 3/4
December * December * December * December * December 23 1/8 December 102 1/2
</TABLE>
The closing price on , 2000 was .
TELEPHONE AND DATA SYSTEMS, INC.
Telephone and Data Systems, Inc. is a diversified telecommunications
company with operations primarily in the cellular telephone, local telephone
and personal communications services segments. Telephone and Data System's
distribution channels include direct sales personnel, agents and retail service
centers in the majority of its markets.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 49 3/8 January 43 3/4 January 40 5/8 January 38 1/8 January 44 January 53 1/4
February 45 3/8 February 45 5/8 February 46 1/8 February 40 February 43 9/16 February 50 1/4
March 37 3/4 March 39 1/2 March 46 1/4 March 38 3/8 March 47 1/2 March 56 3/8
April 38 April 37 1/4 April 46 1/2 April 37 April 47 1/2 April 59 7/8
May 41 May 37 3/4 May 43 5/8 May 38 13/16 May 43 3/4 May 67 5/16
June 37 June 36 3/8 June 45 June 37 15/16 June 39 3/8 June 73 1/8
July 40 3/4 July 38 3/4 July 38 5/8 July 38 3/8 July 40 July 74 3/8
August 43 1/2 August 41 August 42 5/8 August 39 1/2 August 33 1/8 August 69 5/8
September 46 September 42 September 40 1/4 September 45 September 34 7/8 September 88 13/16
October 49 1/2 October 40 October 35 October 42 1/2 October 39 7/8 October 115 1/4
November 43 3/8 November 38 1/8 November 37 3/8 November 43 15/16 November 42 3/4 November 133 3/16
December 46 1/8 December 39 1/2 December 36 1/4 December 46 9/16 December 44 15/16 December 126
</TABLE>
The closing price on , 2000 was .
A-10
<PAGE>
US WEST, INC.
US WEST, Inc. provides a full range of telecommunications services
primarily in 14 states in the western region of the United States. US WEST's
operations are divided into a communications and directory services segment.
The communications segment offers local exchange telephone services, local
phone interconnections to long distance service providers, long distance
services within certain areas, wireless services and high speed data and
Internet services. US WEST's directory services segment publishes approximately
270 white pages and yellow pages in its regions of operations in the United
States.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- --------- -------- --------- -------- --------- ------- --------- -------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 26 17/64 January 23 1/2 January 35 1/8 January 32 7/8 January 48 1/8 January 61 3/4
February 24 5/8 February 23 17/64 February 32 5/8 February 35 7/8 February 52 1/16 February 53 5/16
March 24 15/32 March 24 3/32 March 32 3/8 March 33 7/8 March 54 5/8 March 55 1/16
April 24 15/32 April 24 49/64 April 32 5/8 April 35 1/8 April 52 3/4 April 52 5/16
May 24 3/32 May 24 49/64 May 32 5/8 May 36 1/2 May 50 3/4 May 54 1/16
June 25 9/64 June 25 June 32 June 37 11/16 June 46 13/16 June 58 3/4
July 24 1/4 July 25 3/4 July 30 3/8 July 36 9/16 July 53 3/8 July 57 5/16
August 24 1/4 August 26 1/8 August 29 5/8 August 35 13/16 August 51 11/16 August 52 1/4
September 23 17/64 September 28 19/64 September 29 7/8 September 38 1/2 September 52 1/2 September 57 1/16
October 22 19/32 October 28 3/4 October 30 3/8 October 39 13/16 October 57 3/8 October 61 1/16
November 21 3/32 November 31 1/4 November 31 1/4 November 45 3/16 November 62 1/4 November 62 1/16
December 21 25/64 December 35 5/8 December 32 1/4 December 45 1/8 December 64 5/8 December 72
</TABLE>
The closing price on , 2000 was .
A-11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF TELECOM HOLDRs]
1,000,000,000 Depositary Receipts
Telecom HOLDRs SM Trust
--------------------
PROSPECTUS
--------------------
Merrill Lynch & Co.
, 2000
Until , 2000 (25 days after the date of this prospectus), all
dealers effecting transactions in the offered Telecom HOLDRs, whether or not
participating in this distribution, may be required to deliver a prospectus.
This requirement is in addition to the obligations of dealers to deliver a
prospectus when acting as underwriters and with respect to unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are as set forth below. Except for the registration fee payable
to the Securities and Exchange Commission, all such expenses are estimated:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 79,148
Printing and engraving expenses................................. $150,000
Legal fees and expenses......................................... $200,000
Rating agency fees.............................................. $ 0
Miscellaneous................................................... $ 20,852
--------
Total......................................................... $450,000
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, provides that under certain circumstances a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or
is or was serving at its request in such capacity in another corporation or
business association, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.
Article XIV, Section 2 of the Restated Certificate of Incorporation of
Merrill Lynch, Pierce, Fenner & Smith Incorporated provides in effect that,
subject to certain limited exceptions, Merrill Lynch, Pierce, Fenner & Smith
Incorporated shall indemnify its directors and officers to the full extent
authorized or permitted by law.
The directors and officers of Merrill Lynch, Pierce, Fenner & Smith
Incorporated are insured under policies of insurance maintained by Merrill
Lynch, Pierce, Fenner & Smith Incorporated, subject to the limits of the
policies, against certain losses arising from any claim made against them by
reason of being or having been such directors or officers. In addition, Merrill
Lynch, Pierce, Fenner & Smith Incorporated has entered into contracts with all
of its directors providing for indemnification of such persons by Merrill
Lynch, Pierce, Fenner & Smith Incorporated to the full extent authorized or
permitted by law, subject to certain limited exceptions.
Item 16. Exhibits.
See Exhibit Index.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933.
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<PAGE>
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of the prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(5) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to Item 15 of this
registration statement, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person
of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant hereby certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-1 and has duly caused this
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, on January 18,
2000.
Merrill Lynch, Pierce, Fenner &
Smith
Incorporated
By: *
-----------------------------------
Name: Ahmass L. Fakahany
Title: Senior Vice President,
Chief Financial Officer and
Controller
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed by the following
persons in the capacities indicated on January 18, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Chief Executive Officer,
___________________________________________ Chairman of the Board and
John L. Steffens Director
* Director
___________________________________________
E. Stanley O'Neal
* Director
___________________________________________
George A. Schieren
* Senior Vice President,
___________________________________________ Chief Financial Officer
Ahmass L. Fakahany and Controller
</TABLE>
*By: /s/ Stephen G. Bodurtha Attorney-in-Fact
----------------------------------
Stephen G. Bodurtha
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<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibits
--------
<C> <S>
*4.1 Standard Terms for Depositary Trust Agreements between Merrill Lynch,
Pierce, Fenner & Smith Incorporated and The Bank of New York, as
Trustee, dated as of September 2, 1999, and included as exhibits
thereto, form of Depositary Trust Agreement and form of HOLDRs
*5.1 Opinion of Shearman & Sterling regarding the validity of the Telecom
HOLDRs Receipts
*8.1 Opinion of Shearman & Sterling, as special U.S. tax counsel regarding
the material federal income tax consequences
*24.1 Power of Attorney (included in Part II of Registration Statement)
</TABLE>
- --------
* Previously filed.
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