<PAGE>
FILED PURSUANT TO RULE NO. 424(B)(4)
REGISTRATION NO. 333-92161
REGISTRATION NO. 333-95805
PROSPECTUS
[LOGO OF PHARMACEUTICAL HOLDRs SM]
1,000,000,000 Depositary Receipts
Pharmaceutical HOLDRs SM Trust
The Pharmaceutical HOLDRsSM Trust will issue Depositary Receipts called
Pharmaceutical HOLDRsSM 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 pharmaceutical industry. The Bank of New
York will be the trustee. You only may acquire, hold or transfer
Pharmaceutical HOLDRs in a round-lot amount of 100 Pharmaceutical HOLDRs or
round-lot multiples. Pharmaceutical HOLDRs are separate from the underlying
deposited common stocks that are represented by the Pharmaceutical HOLDRs. For
a list of the names and the number of shares of the companies that make up a
Pharmaceutical HOLDR, see "Highlights of Pharmaceutical HOLDRs--The
Pharmaceutical HOLDRs" starting on page 9. Merrill Lynch, Pierce, Fenner &
Smith Incorporated has sold 6,812,000 Pharmaceutical HOLDRs in the initial
distribution. The trust will issue the additional Pharmaceutical HOLDRs on a
continuous basis after the initial distribution.
Investing in Pharmaceutical HOLDRs involves significant risks. See "Risk
factors" starting on page 4.
The initial public offering price for a round-lot of 100 Pharmaceutical
HOLDRs will equal the sum of the closing market price on the primary trading
market on January 31, 2000 for each deposited share multiplied by the share
amount specified in this prospectus, plus an underwriting fee.
Pharmaceutical 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
Pharmaceutical HOLDRs. The Pharmaceutical HOLDRs have been approved for
listing on the American Stock Exchange under the symbol "PPH", subject to
official notice of issuance.
---------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
<TABLE>
<CAPTION>
Initial Price Underwriting
to Public* Fee
------------- ------------
<S> <C> <C>
Per Pharmaceutical HOLDR........................ $93.72 2%
</TABLE>
-------
* Includes underwriting fee.
For purchases of Pharmaceutical HOLDRs in excess of 10,000 Pharmaceutical
HOLDRs, the underwriting fee will be 1.5%.
---------------
Merrill Lynch & Co.
---------------
The date of this prospectus is January 31, 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 Pharmaceutical HOLDRs........................................ 9
The Trust.................................................................. 15
Description of Pharmaceutical HOLDRs....................................... 15
Description of the Underlying Securities................................... 16
Description of the Depositary Trust Agreement.............................. 18
Federal Income Tax Consequences............................................ 21
ERISA Considerations....................................................... 22
Plan of Distribution....................................................... 22
Legal Matters.............................................................. 23
Where You Can Find More Information........................................ 23
</TABLE>
----------------
This prospectus contains information you should consider when making your
investment decision. With respect to information about Pharmaceutical 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 Pharmaceutical HOLDRs in any
jurisdiction where the offer or sale is not permitted.
2
<PAGE>
SUMMARY
The Pharmaceutical HOLDRs trust will be formed under the depositary trust
agreement, dated as of January 24, 2000 among The Bank of New York, as
trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors
and the owners of the Pharmaceutical 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
pharmaceutical industry. The number of shares of each common stock held by the
trust with respect to each round-lot of Pharmaceutical HOLDRs is specified
under "Highlights of Pharmaceutical HOLDRs-The Pharmaceutical 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 Pharmaceutical HOLDRs that represent your undivided
beneficial ownership interest in the shares of common stock held by the trust
on your behalf. The Pharmaceutical HOLDRs are separate from the underlying
common stocks that are represented by the Pharmaceutical HOLDRs.
3
<PAGE>
RISK FACTORS
An investment in Pharmaceutical HOLDRs involves risks similar to
investing in each of the underlying securities outside of the Pharmaceutical
HOLDRs, including the risks associated with concentrated investments in the
pharmaceutical industry.
General Risk Factors
. Loss of investment. Because the value of Pharmaceutical HOLDRs
directly relates to the value of the underlying securities, you
may lose all or a substantial portion of your investment in the
Pharmaceutical HOLDRs if the underlying securities decline in
value.
. Discount trading price. Pharmaceutical HOLDRs may trade at a
discount to the aggregate value of the underlying securities.
. Not necessarily representative of the pharmaceutical
industry. While the underlying securities are common stocks of
companies generally considered to be involved in various segments
of the pharmaceutical industry, the underlying securities and the
Pharmaceutical HOLDRs may not necessarily follow the price
movements of the entire pharmaceutical industry generally. If the
underlying securities decline in value, your investment in the
Pharmaceutical HOLDRs will decline in value even if common stock
prices in the pharmaceutical 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
pharmaceutical industry. In this case, the Pharmaceutical HOLDRs
may no longer consist of securities issued only by companies
involved in the pharmaceutical industry.
. No investigation of underlying securities. The underlying
securities included in the Pharmaceutical 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 pharmaceutical industry, without regard for
the value, price performance, volatility or investment merit of
the underlying securities. The Pharmaceutical 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, Pharmaceutical HOLDRs may not necessarily
continue to be a diversified investment in the pharmaceutical
industry. As a result of market fluctuation and/or reconstitution
events, Pharmaceutical 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 Pharmaceutical HOLDRs and
receive delivery of each of the underlying securities. The
cancellation of your Pharmaceutical HOLDRs will allow you to sell
individual underlying securities or to deliver individual
underlying securities in a tender offer. If you choose not to
cancel your Pharmaceutical HOLDRs you cannot participate in a
tender offer relating to an underlying security. The cancellation
of Pharmaceutical HOLDRs will involve payment of a cancellation
fee to the trustee.
4
<PAGE>
Currently some of the underlying securities of the Pharmaceutical
HOLDRs are the subject of, or are involved in, a tender offer. For
example: (1) Pfizer Inc. filed on November 15, 1999 a registration
statement on Form S-4 in an effort to acquire the outstanding
shares of common stock of Warner-Lambert Company and (2) American
Home Products Corporation has entered into an Agreement and Plan
of Merger with Warner-Lambert Company and on December 20, 1999,
filed a registration statement on Form S-4 whereby each
outstanding share of Warner-Lambert common stock will convert into
shares of AmericanWarner common stock. There are no assurances
that either of these tender offers will be completed. For more
detail on the underlying securities mentioned above, see "Annex
A." In addition, it is likely that other tender offers for some of
the underlying securities of the Pharmaceutical HOLDRs will be
made in the future.
. Trading halts. Trading in Pharmaceutical 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 Pharmaceutical HOLDRs
even though there is trading in some of the underlying securities,
however, you will be able to cancel your Pharmaceutical 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
Pharmaceutical HOLDRs. If the Pharmaceutical HOLDRs are delisted
by the American Stock Exchange, a termination event will result if
the Pharmaceutical HOLDRs are not listed for trading on another
national securities exchange or through NASDAQ within five
business days from the date the Pharmaceutical 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 Pharmaceutical HOLDRs,
the selection of the pharmaceutical industry, Merrill Lynch's
activity in the secondary market in the underlying securities, and
the creation and cancellation of Pharmaceutical 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 Pharmaceutical HOLDRs, particularly in connection with
the initial issuance of Pharmaceutical 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 Pharmaceutical HOLDRs.
5
<PAGE>
Risk Factors Specific to the Pharmaceutical Industry
. Pharmaceutical company stock prices have been and will likely
continue to be extremely volatile. Pharmaceutical companies stock
prices could be subject to wide fluctuations in response to a
variety of factors, including:
. announcements of technological innovations or new commercial
products;
. developments in patent or proprietary rights;
. government regulatory initiatives;
. public concern as to the safety or other implications of
pharmaceutical products;
. fluctuations in quarterly and annual financial results; and
. market conditions.
. Pharmaceutical companies face uncertainty with respect to pricing
and third party reimbursement. The ability of many pharmaceutical
companies to commercialize current and any future products depends
in part on the extent to which reimbursement for the cost of such
products and related treatments are available from government
health agencies, private health insurers and other third-party
payors. Third-party payors are increasingly challenging the price
and cost-effectiveness of medical products. Significant
uncertainty exists as to the reimbursement status of health care
products, and there can be no assurance that adequate third-party
coverage will be available for pharmaceutical companies to obtain
satisfactory price levels for their products. Government and other
third-party payors are increasingly attempting to contain health
care costs by a variety of means, including limiting both the
degree of coverage and the level of reimbursement for new
therapeutic products. If pharmaceutical companies do not obtain
adequate coverage and reimbursement levels from government and
third-party payors for use of existing and potential products, the
costs and market acceptance of their products could be adversely
affected.
. Protection of patent and proprietary rights of pharmaceutical
companies is difficult and costly. The success of many
pharmaceutical companies is highly dependent on their ability to
obtain patents, to defend their existing patents and trade secrets
and to operate in a manner that does not infringe the proprietary
rights of other pharmaceutical companies. Patent disputes are
frequent and can preclude the successful commercial introduction
of products and technologies. As a result, there is significant
litigation in the pharmaceutical industry regarding patent and
other intellectual property rights. Litigation is costly, diverts
resources and can subject a pharmaceutical company to significant
liabilities to third parties. In addition, a pharmaceutical
company could be forced to obtain costly third-party licenses or
cease using the technology or product in dispute.
. Many pharmaceutical companies face intense competition from new
products and less costly generic products. The pharmaceutical
industry is highly competitive and rapidly changing. Many
pharmaceutical companies are major international corporations with
substantial resources for research and development, production and
marketing. Proprietary pharmaceutical products, which are products
under patent protection, face intense competition from other
competitors' similar proprietary products and many pharmaceutical
companies also face increasing competition from similar generic
products. Generic pharmaceutical competitors generally are able to
obtain regulatory approval for drugs no longer covered by patents
without investing in costly and time-consuming clinical trials,
and need only demonstrate that their product is equivalent to the
drug they wish to copy. As a result of their substantially reduced
developments costs, generic pharmaceutical products are sold at
lower prices than the original proprietary product. The
introduction of a generic product can significantly reduce
revenues received from a patented pharmaceutical product.
6
<PAGE>
. Research and development efforts may not result in successful
products. A pharmaceutical company's success depends on its
ability to commit substantial resources to research and
development and to obtain regulatory approval to market new
pharmaceutical products. Development of a product requires
substantial technical, financial and human resources and the
research and development process often takes 10 or more years from
discovery to commercial product launch. This process is conducted
in various stages, and during each stage there is a substantial
risk that a pharmaceutical company will not achieve its goals and
will have to abandon a product in which it has invested
substantial amounts. A pharmaceutical company may choose product
candidates that are unsuccessful, unable to be developed in a
timely manner or that require excessive resources to bring to
market. Delays or unanticipated increases in costs of development
at any stage of development, or failure to obtain regulatory
approval or market acceptance of products could adversely affect a
pharmaceutical company's results and financial condition.
. Pharmaceutical companies must keep pace with rapid technological
change to remain competitive. The pharmaceutical industry is
highly competitive and is subject to rapid and significant
technological change. The success of a pharmaceutical company will
depend in large part on its ability to maintain a competitive
position, measured largely by the effectiveness and marketing of
its products. Any technological advancement, product or process
that these companies develop may become obsolete before research
and development expenses are recovered.
. Pharmaceutical companies are subject to extensive government
regulation. Pharmaceutical products offered by pharmaceutical
companies are subject to strict regulation by governmental
regulatory authorities in countries throughout the world. Products
require extensive pre-clinical testing and other testing, clinical
trials, government review and final approval before any marketing
of the products will be permitted. This procedure could take a
number of years and involves the expenditure of substantial
resources. The success of a pharmaceutical company's products will
depend, in part, upon obtaining and maintaining regulatory
approval to market products and, once approved, complying with the
continued review by regulatory agencies. For instance, the Food
and Drug Administration (FDA), the agency which regulates and
investigates drugs in the United States, can take as long as eight
to nine years after an application is originally filed to approve
a new drug application. The manufacturing process for
pharmaceutical products is also highly regulated and
pharmaceutical companies are subjected to periodic inspection of
manufacturing facilities by regulatory agencies in many countries.
Regulatory agencies may shut down manufacturing facilities that
they find do not comply with regulations. The failure to obtain
necessary government approvals, the restriction of existing
approvals, loss of or changes to previously obtained approvals or
the failure to comply with regulatory requirements could result in
fines, unanticipated expenditures, product delays, non-approval or
recall, interruption of production and even criminal prosecution.
. Pharmaceutical companies may be exposed to extensive product
liability costs. Product liability is a significant commercial
risk for many pharmaceutical companies. Substantial damage awards
have been granted in several jurisdiction against pharmaceutical
companies based upon claims for injuries allegedly caused by the
use of their products. Many pharmaceutical companies obtain
product liability insurance; however, a single product liability
claim could exceed the coverage limits of a pharmaceutical
company. Further, there can be no assurance that a pharmaceutical
company will be able to obtain or maintain its product liability
insurance, that it will continue to be able to obtain adequate
product liability insurance on reasonable terms or that any
product liability insurance obtained will provide adequate
coverage against potential liabilities. The business, financial
condition and results of operations of a pharmaceutical company
could be materially and adversely affected by one or more
successful product liability claims.
7
<PAGE>
. Many pharmaceutical companies are dependent on key personnel for
success. The success of many pharmaceutical companies is highly
dependent on the experience, abilities, and continued services of
key executive officers and key scientific and technical personnel.
If these companies lose the services of any of these officers or
key scientific and technical personnel, their future success could
be undermined. The success of many pharmaceutical companies also
depends upon their ability to attract and retain other highly
qualified scientific, technical, sales and manufacturing personnel
and their ability to develop and maintain relationships with
qualified clinical researchers. Competition for such personnel and
relationships is intense and many of these companies compete with
each other and with universities and non-profit research
organizations. There is no certainty that any of these
pharmaceutical companies will be able to continue to attract and
retain qualified personnel or develop and maintain relationships
with clinical researchers.
8
<PAGE>
HIGHLIGHTS OF PHARMACEUTICAL HOLDRs
This discussion highlights information regarding Pharmaceutical HOLDRs;
we present certain information more fully in the rest of this prospectus. You
should read the entire prospectus carefully before you purchase Pharmaceutical
HOLDRs.
Issuer....................... Pharmaceutical HOLDRs Trust.
The trust.................... The Pharmaceutical HOLDRs Trust will be formed
under the depositary trust agreement, dated as
of January 24, 2000 among The Bank of New York,
as trustee, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, other depositors and the
owners of the Pharmaceutical 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 Pharmaceutical
HOLDRs...................... Pharmaceutical HOLDRs are designed to achieve
the following:
Diversification. Pharmaceutical HOLDRs are
designed to allow you to diversify your
investment in the pharmaceutical industry
through a single, exchange-listed instrument
representing your undivided beneficial
ownership of the underlying securities.
Flexibility. The beneficial owners of
Pharmaceutical HOLDRs have undivided beneficial
ownership interests in each of the underlying
securities represented by the Pharmaceutical
HOLDRs, and can cancel their Pharmaceutical
HOLDRs to receive each of the underlying
securities represented by the Pharmaceutical
HOLDRs.
Transaction costs. The expenses associated with
trading Pharmaceutical 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
pharmaceutical 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 Pharmaceutical 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.
9
<PAGE>
The Pharmaceutical HOLDRs....
The trust will issue Pharmaceutical 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
Pharmaceutical HOLDRs themselves are separate
from the underlying securities that are
represented by the Pharmaceutical HOLDRs.
The specific share amounts for each round-lot
of 100 Pharmaceutical 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
Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical
HOLDRs,
. stock ticker symbols,
. share amounts represented by a round-lot of
100 Pharmaceutical HOLDRs,
. initial weightings as of December 15, 1999
and
. principal market on which the shares of
common stock of the selected companies are
traded.
<TABLE>
<CAPTION>
Primary
Share Initial Trading
Name of Company Ticker Amounts Weighting Market
-------------------------- ------ ------- --------- -------
<S> <C> <C> <C> <C>
Merck & Co., Inc. MRK 22 17.50% NYSE
Pfizer Inc. PFE 36 13.75% NYSE
Johnson & Johnson JNJ 13 13.72% NYSE
Bristol-Myers Squibb
Company BMY 18 13.37% NYSE
Eli Lilly & Company LLY 10 7.63% NYSE
Warner-Lambert Company WLA 8 7.56% NYSE
Schering-Plough
Corporation SGP 14 7.04% NYSE
American Home Products
Corporation AHP 12 6.38% NYSE
Abbott Laboratories ABT 14 5.45% NYSE
Pharmacia & Upjohn, Inc. PNU 5 3.02% NYSE
Biovail Corporation
International BVF 2 0.83% NYSE
King Pharmaceuticals, Inc. KING 1 0.61% NASDAQ
Forest Laboratories, Inc. FRX 1 0.60% NYSE
Andrx Corporation ADRX 1 0.48% NASDAQ
Allergan, Inc. AGN 1 0.47% NYSE
Jones Pharma Inc. JMED 1 0.45% NASDAQ
Watson Pharmaceuticals,
Inc. WPI 1 0.40% NYSE
ICN Pharmaceuticals, Inc. ICN 1 0.27% NYSE
Mylan Laboratories, Inc. MYL 1 0.25% NYSE
IVAX Corporation(/1/) IVX 1 0.22% AMEX
</TABLE>
--------
(/1/) On February 23, 2000, as a result of a 3-
for-2 stock split, the share amount of
IVAX Corporation, represented by a round-
lot of 100 Pharmaceutical HOLDRs, will be
1.5. Please see the description of IVAX
in Annex A.
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
pharmaceutical 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,
Pharmaceutical HOLDRs in a round-lot of 100
Pharmaceutical HOLDRs and round-lot multiples.
The trust will only issue Pharmaceutical HOLDRs
upon the deposit of the whole shares
represented by a round-lot of 100
Pharmaceutical HOLDRs. In the event that a
fractional share comes to be represented by a
round-lot of Pharmaceutical HOLDRs, the trust
may require a minimum of more than one round-
lot of 100 Pharmaceutical HOLDRs for an
issuance so that the trust will always receive
whole share amounts for issuance of
Pharmaceutical HOLDRs.
The number of outstanding Pharmaceutical 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 Pharmaceutical 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
Pharmaceutical HOLDRs will equal the sum of the
closing market price on the primary trading
market on January 31, 2000, 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
Pharmaceutical 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 Pharmaceutical 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 10,000 Pharmaceutical
HOLDRs or fewer, 2%.
. For purchases in excess of 10,000
Pharmaceutical HOLDRs, 1.5%.
You will not be charged any issuance fee or
other sales commission in connection with
purchases of Pharmaceutical HOLDRs made in the
initial public offering.
11
<PAGE>
Issuance and cancellation
fees........................ After the initial offering, if you wish to
create Pharmaceutical HOLDRs by delivering to
the trust the requisite shares of common stock
represented by a round-lot of 100
Pharmaceutical 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
Pharmaceutical HOLDRs. If you wish to cancel
your Pharmaceutical 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
Pharmaceutical HOLDRs.
Commissions.................. If you choose to deposit underlying securities
in order to receive Pharmaceutical 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
Pharmaceutical 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
Pharmaceutical 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
Pharmaceutical 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
Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical HOLDRs themselves
will not have voting rights.
Rights relating to the
underlying securities....... You have the right to:
. Receive all shareholder disclosure
materials, including annual and quarterly
reports, distributed by the issuers of the
underlying securities.
12
<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
Pharmaceutical 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
Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical HOLDRs, unless the merger,
consolidation or other corporate combination
is between companies that are already
included in the Pharmaceutical 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 the Pharmaceutical 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.
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<PAGE>
Termination events...........
A. The Pharmaceutical 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
Pharmaceutical 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
Pharmaceutical HOLDRs vote to dissolve and
liquidate the trust.
If a termination event occurs, the trustee will
distribute the underlying securities to you as
promptly as practicable after the termination
event.
Federal income tax The federal income tax laws will treat a U.S.
consequences................ holder of Pharmaceutical HOLDRs as directly
owning the underlying securities. The
Pharmaceutical HOLDRs themselves will not
result in any federal tax consequences separate
from the tax consequences associated with
ownership of the underlying securities.
Listing......................
The Pharmaceutical HOLDRs have been approved
for listing on the American Stock Exchange
under the symbol "PPH", subject to official
notice of issuance. Trading will take place
only in round-lots of 100 Pharmaceutical HOLDRs
and round-lot multiples. A minimum of 150,000
Pharmaceutical 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
Pharmaceutical HOLDRs. Bid and ask prices,
however, will be quoted per single
Pharmaceutical HOLDRs.
Clearance and settlement.....
The trust will issue Pharmaceutical HOLDRs in
book-entry form. Pharmaceutical HOLDRs will be
evidenced by one or more global certificates
that the trustee will deposit with The
Depository 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
Pharmaceutical HOLDRs."
14
<PAGE>
THE TRUST
General. This discussion highlights information about the Pharmaceutical
HOLDRs trust. You should read this information, information about the
depositary trust agreement as well as the depositary trust agreement before you
purchase Pharmaceutical HOLDRs. The material terms of the depositary trust
agreement are described in this prospectus under the heading "Description of
the depositary trust agreement."
The Pharmaceutical HOLDRs trust. The trust will be formed pursuant to the
depositary trust agreement, dated as of January 24, 2000. The Bank of New York
will be the trustee. The Pharmaceutical HOLDRs trust is not a registered
investment company under the Investment Company Act of 1940.
The Pharmaceutical HOLDRs trust is intended to hold deposited shares for
the benefit of owners of Pharmaceutical 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 PHARMACEUTICAL HOLDRs
The trust will issue Pharmaceutical 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 Pharmaceutical HOLDRs on a continuous basis when an investor
deposits the requisite underlying securities with the trustee.
You may only acquire, hold, trade and surrender Pharmaceutical HOLDRs in
a round-lot of 100 Pharmaceutical HOLDRs and round-lot multiples. The trust
will only issue Pharmaceutical HOLDRs upon the deposit of the whole shares of
underlying securities that are represented by a round-lot of 100 Pharmaceutical
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 Pharmaceutical HOLDRs,
the trust may require a minimum of more than one round-lot of 100
Pharmaceutical HOLDRs for an issuance so that the trust will always receive
whole share amounts for issuance of Pharmaceutical HOLDRs.
Pharmaceutical 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 Pharmaceutical HOLDRs--The
Pharmaceutical HOLDRs."
Beneficial owners of Pharmaceutical 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 Pharmaceutical HOLDRs to receive the underlying securities. See
"Description of the depositary trust agreement." Pharmaceutical 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. Pharmaceutical 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
Pharmaceutical HOLDRs wishes to realize the dollar value of the underlying
securities, that owner will have to cancel the Pharmaceutical 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>
Pharmaceutical 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. Pharmaceutical HOLDRs will be available only in
book-entry form. Owners of Pharmaceutical HOLDRs may hold their Pharmaceutical
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
pharmaceutical 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 pharmaceutical 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 $950 million;
. Average daily trading volume of at least 270,000 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 $7.5 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 Pharmaceutical 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 Pharmaceutical
industry. In this case, the Pharmaceutical HOLDRs may no longer consist of
securities issued by companies involved in the pharmaceutical industry. Merrill
Lynch, Pierce, Fenner & Smith Incorporated will determine, in its sole
discretion, whether the issuer of a particular underlying security remains in
the pharmaceutical industry and will undertake to make adequate disclosure when
necessary.
Underlying securities. For a list of the underlying securities
represented by Pharmaceutical HOLDRs, please refer to "Highlights of
Pharmaceutical HOLDRs--The Pharmaceutical 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 Pharmaceutical 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
16
<PAGE>
investment recommendation of that company by the trust, the trustee, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, and any of their affiliates.
General background and historical information. For a brief description of
the business of each of the issuers of the underlying securities and monthly
pricing information showing the historical performance of each underlying
issuer's securities see "Annex A."
The following table sets forth the composite performance of all of the
underlying securities represented by a single Pharmaceutical HOLDR, measured at
the close of each business day from June 25, 1998, the first date when all of
the underlying securities were publicly traded, and thereafter as of the end of
each month to December 15, 1999. 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>
Pharmaceutical
HOLDRs
--------------
<S> <C>
June 25, 1998........... 83.44
June 1998............... 83.29
July 1998............... 83.53
August 1998............. 75.13
September 1998.......... 84.95
October 1998............ 87.75
November 1998........... 93.12
December 1998........... 96.47
January 1999............ 96.55
February 1999........... 98.39
</TABLE>
<TABLE>
<CAPTION>
Pharmaceutical
HOLDRs
--------------
<S> <C>
March 1999.............. 100.35
April 1999.............. 92.96
May 1999................ 89.88
June 1999............... 94.63
July 1999............... 88.14
August 1999............. 91.85
September 1999.......... 85.15
October 1999............ 97.50
November 1999........... 96.89
December 15, 1999....... 89.87
</TABLE>
[LINE GRAPH]
17
<PAGE>
DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT
General. The depositary trust agreement, dated as of January 24, 2000,
among Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York,
as trustee, other depositors and the owners of the Pharmaceutical HOLDRs,
provides that Pharmaceutical 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 Pharmaceutical HOLDRs. You may create
and cancel Pharmaceutical HOLDRs only in round-lots of 100 Pharmaceutical
HOLDRs. You may create Pharmaceutical HOLDRs by delivering to the trustee the
requisite underlying securities. The trust will only issue Pharmaceutical
HOLDRs upon the deposit of the whole shares represented by a round-lot of 100
Pharmaceutical HOLDRs. In the event that a fractional share comes to be
represented by a round-lot of Pharmaceutical HOLDRs, the trust may require a
minimum of more than one round-lot of 100 Pharmaceutical HOLDRs for an issuance
so that the trust will always receive whole share amounts for issuance of
Pharmaceutical HOLDRs. Similarly, you must surrender Pharmaceutical HOLDRs in
integral multiples of 100 Pharmaceutical 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 Pharmaceutical 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
Pharmaceutical HOLDRs, other than Merrill Lynch, Pierce, Fenner & Smith
Incorporated owning Pharmaceutical 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
Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical
HOLDR, the trustee will waive that portion of the fee which exceeds the total
cash dividends and other cash distributions received, or to be received, and
payable with respect to such calendar year.
Record dates. With respect to dividend payments and voting instructions,
the trustee expects to fix the trust's record dates as close as possible to the
record date fixed by the issuer of the underlying securities.
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<PAGE>
Shareholder communications. The trustee promptly will forward to you all
shareholder communications that it receives from issuers of the underlying
securities.
Withdrawal of underlying securities. You may surrender your
Pharmaceutical 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 Pharmaceutical 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
Pharmaceutical HOLDRs.
Further issuances of Pharmaceutical HOLDRs. The depositary trust
agreement provides for further issuances of Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical HOLDRs, unless the merger, consolidation or
other corporate combination is between companies that are already
included in the Pharmaceutical 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 the Pharmaceutical 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 Pharmaceutical HOLDRs will surrender their Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical
HOLDRs are delisted. Finally, the trust will terminate if 75% of the owners of
outstanding Pharmaceutical HOLDRs other than Merrill Lynch, Pierce, Fenner &
Smith Incorporated vote to dissolve and liquidate the trust.
19
<PAGE>
If a termination event occurs, the trustee will distribute the underlying
securities to you as promptly as practicable after the termination event
occurs.
Amendment of the depositary trust agreement. The trustee and 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 Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical HOLDRs will not
become effective until 30 days after notice of the amendment is given to the
owners of Pharmaceutical HOLDRs.
Issuance and cancellation fees. After the initial public offering, the
trust expects to issue more Pharmaceutical HOLDRs. If you wish to create
Pharmaceutical 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 Pharmaceutical HOLDRs. If you wish to cancel your
Pharmaceutical 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
Pharmaceutical 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 Pharmaceutical 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
Pharmaceutical 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 Pharmaceutical
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 Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical HOLDRs
A receipt holder purchasing and owning Pharmaceutical HOLDRs will be
treated, for U.S. federal income tax purposes, as directly owning a
proportionate share of the underlying securities represented by Pharmaceutical
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 Pharmaceutical
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 Pharmaceutical
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
Pharmaceutical HOLDRs. Similarly, with respect to sales of Pharmaceutical
HOLDRs for cash in the secondary market, the amount realized with respect to a
sale of Pharmaceutical 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
Pharmaceutical 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 Pharmaceutical
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 Pharmaceutical
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 Pharmaceutical 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 Pharmaceutical HOLDRs. Merrill Lynch & Co., as underwriter, proposes to
offer the Pharmaceutical 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 Pharmaceutical HOLDRs against deposit of
the underlying securities in New York, New York on February 3, 2000. After the
initial offering, the public offering price, concession and discount may be
changed. The trust will continue to issue Pharmaceutical 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
Pharmaceutical 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 Pharmaceutical 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.
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<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 Pharmaceutical HOLDRs. Should a court determine not to enforce
the indemnification provision, Merrill Lynch, Pierce, Fenner & Smith
Incorporated also has agreed to contribute to payments the trustee may be
required to make with respect to such liabilities.
LEGAL MATTERS
Legal matters, including the validity of the Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical
HOLDRs. While this prospectus is a part of the registration statement, it does
not contain all the exhibits filed as part of the registration statement. You
should consider reviewing the full text of those exhibits.
The registration statement is available over the Internet at the SEC's
web site at http://www.sec.gov. You also may read and copy the registration
statement at the SEC's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more
information on the public reference rooms and their copy charges. Merrill
Lynch, Pierce, Fenner & Smith Incorporated will not and the trust may not be
subject to the requirements of the Exchange Act and accordingly may not file
periodic reports.
Because the common stock of the issuers of the underlying securities is
registered under the Exchange Act, the issuers of the underlying securities are
required to file periodically financial and other information specified by the
SEC. For more information about the issuers of the underlying securities,
information provided to or filed with the SEC by the issuers of the underlying
securities with respect to their registered securities can be inspected at the
SEC's public reference facilities or accessed through the SEC's web site
referenced above. In addition, information regarding the issuers of the
underlying securities may be obtained from other sources including, but not
limited to, press releases, newspaper articles and other publicly disseminated
information.
The trust and Merrill Lynch, Pierce, Fenner & Smith Incorporated and its
affiliates are not affiliated with the issuers of the underlying securities,
and the issuers of the underlying securities have no obligations with respect
to Pharmaceutical HOLDRs. This prospectus relates only to Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical HOLDRs, have been publicly disclosed.
23
<PAGE>
ANNEX A
This annex forms an integral part of the prospectus.
The following tables provide a brief description of the business of each
of the issuers of the underlying securities and set forth the split-adjusted
closing market prices, as reported on the applicable primary trading market, of
each of the underlying securities in each month during 1995, 1996, 1997, 1998,
1999 and 2000 through January 2000. All market prices in excess of one dollar
are rounded to the nearest one sixty-fourth 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.
ABBOTT LABORATORIES
Abbott Laboratories develops, manufactures and sells a broad and
diversified line of health care products and services. Abbott's products
include pharmaceuticals, diagnostic, hospital, nutritional, chemical and
agricultural products. Abbott markets its products worldwide through affiliates
and distributors to retailers, wholesalers and hospitals.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 17 11/16 January 21 1/4 January 27 1/4 January 35 13/32 January 46 7/16 January 32 5/8
February 17 3/4 February 20 7/8 February 28 1/8 February 37 13/32 February 46 5/16
March 17 7/8 March 20 3/8 March 28 1/16 March 37 21/32 March 46 13/16
April 19 11/16 April 20 5/16 April 30 1/2 April 36 9/16 April 48 3/8
May 20 May 21 9/16 May 31 1/2 May 37 3/32 May 45 3/16
June 20 1/4 June 21 3/4 June 33 3/8 June 41 June 45 3/8
July 20 July 21 15/16 July 32 23/32 July 41 5/8 July 42 15/16
August 19 3/8 August 22 1/2 August 29 31/32 August 38 1/2 August 43 3/8
September 21 5/16 September 24 5/8 September 31 31/32 September 43 7/16 September 36 11/16
October 19 7/8 October 25 3/8 October 30 21/32 October 47 October 40 3/8
November 20 5/16 November 27 13/16 November 32 9/16 November 48 November 38
December 20 13/16 December 25 3/8 December 32 3/4 December 49 December 36 5/16
</TABLE>
The closing price on January 31, 2000 was 32 5/8.
ALLERGAN, INC.
Allergan, Inc. develops, manufactures and markets a broad range of eye
care specialty pharmaceutical products and ophthalmic surgical products.
Allergan's eye care products treat a variety of diseases and disorders of the
eye and include consumer contact lens products. Its speciality pharmaceutical
products include therapeutic and cosmetic skin care products and products used
for the treatment of neuromuscular disorders. Allergan's surgical products are
primarily used in cataract surgery. Allergan's eye products are marketed and
sold through a global marketing and regional sales force system. Its speciality
pharmaceutical products are sold to drug wholesalers and retail chains.
Allergan effected a 2-for-1 stock split on its common stock in the form of a
stock dividend to shareholders of record on November 18, 1999. The shares of
common stock began trading on a split-adjusted basis on December 9, 1999. The
following table is adjusted to account for this stock split.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 14 1/2 January 16 5/8 January 17 11/16 January 17 January 38 7/16 January 57
February 14 7/16 February 18 5/8 February 17 February 17 1/2 February 40 3/4
March 14 3/4 March 18 7/16 March 14 9/16 March 19 March 43 15/16
April 13 9/16 April 17 11/16 April 13 3/8 April 20 25/32 April 44 15/16
May 13 5/16 May 19 1/4 May 14 13/16 May 21 May 46 1/2
June 13 9/16 June 19 3/4 June 15 29/32 June 23 3/16 June 55 1/2
July 15 1/8 July 20 3/8 July 15 31/32 July 26 1/8 July 47 1/4
August 15 3/16 August 19 7/16 August 16 3/16 August 23 5/8 August 49 15/16
September 16 11/16 September 19 1/16 September 18 3/32 September 29 3/16 September 55
October 14 11/16 October 15 3/16 October 16 15/32 October 31 7/32 October 53 11/16
November 15 1/2 November 16 1/16 November 16 15/16 November 30 7/16 November 49 3/16
December 16 1/4 December 17 13/16 December 16 25/32 December 32 3/8 December 49 3/4
</TABLE>
The closing price on January 31, 2000 was 57.
A-1
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION
American Home Products Corporation researches, develops, manufactures and
markets a diversified line of products in three primary business segments:
pharmaceuticals, consumer health care and agricultural products. The
pharmaceutical segment manufactures and sells branded and generic ethical
pharmaceuticals, and animal biologicals and pharmaceuticals. The consumer
healthcare segment manufactures and distributes cold and allergy remedies and
nutritional products including Advil, Robitussin, Dimetapp and Centrum Silver
vitamins. The agricultural products segment manufactures and distributes crop
protection and pest control products. American Home Products agreed on November
4, 1999 to merge with Warner-Lambert Company, but this merger agreement is
being presently challenged by Pfizer Inc. Pfizer's challenge is scheduled to be
heard by a Delaware court on February 14, 2000.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 17 17/32 January 25 1/2 January 31 11/16 January 47 23/32 January 58 11/16 January 47 1/16
February 17 7/8 February 24 21/32 February 32 February 46 7/8 February 59 1/2
March 17 13/16 March 27 3/32 March 30 March 47 11/16 March 65 1/4
April 19 5/16 April 26 3/8 April 33 1/16 April 46 9/16 April 61
May 18 7/16 May 26 3/4 May 38 May 48 5/16 May 57 5/8
June 19 11/32 June 30 1/16 June 38 1/4 June 51 3/4 June 57 3/8
July 19 3/4 July 28 3/8 July 41 7/32 July 51 1/2 July 51
August 19 1/4 August 29 5/8 August 36 August 50 1/8 August 41 1/2
September 21 7/32 September 31 7/8 September 36 1/2 September 52 5/8 September 41 1/2
October 22 5/32 October 30 5/8 October 37 1/16 October 48 15/16 October 52 1/4
November 22 13/16 November 32 3/16 November 34 29/32 November 53 3/8 November 52
December 24 1/4 December 29 5/16 December 38 1/4 December 56 3/8 December 39 1/4
</TABLE>
The closing price on January 31, 2000 was 47 1/16.
ANDRX CORPORATION
Andrx Corporation formulates and commercializes oral controlled-release
pharmaceuticals using proprietary drug delivery technologies. Andrx develops
generic versions of selected high sales volume controlled-release brand name
pharmaceuticals and develops its own brand name formulations of certain
existing drugs available only in immediate-release form. Andrx focuses on
pharmaceutical products with high sales volumes and patents that will expire in
a time frame that allows Andrx to complete development prior to expiration.
Products include a variety of treatments for hypertension, angina, ulcers and
inflammation.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January 9 1/2 January 17 1/8 January 28 5/164 January 70 1/4
February * February * February 9 3/4 February 15 17/32 February 33 15/16
March * March * March 12 1/2 March 13 15/16 March 45 9/16
April * April * April 10 5/8 April 18 3/4 April 39 3/8
May * May * May 11 7/8 May 16 3/4 May 50 7/164
June * June 7 9/16 June 19 1/8 June 18 3/8 June 77 1/8
July * July 6 5/8 July 16 5/8 July 17 7/8 July 67 1/16
August * August 7 1/4 August 19 5/8 August 14 21/32 August 71 7/8
September * September 6 5/8 September 22 3/4 September 18 3/8 September 58 17/32
October * October 7 1/8 October 19 1/4 October 19 1/2 October 47 3/4
November * November 7 November 19 7/16 November 19 3/4 November 51 1/2
December * December 8 1/16 December 17 1/8 December 25 5/8 December 42 5/16
</TABLE>
The closing price on January 31, 2000 was 70 1/4.
A-2
<PAGE>
BIOVAIL CORPORATION INTERNATIONAL
Biovail Corporation International is a global integrated pharmaceutical
company which specializes in the development of oral controlled-release drugs.
Controlled-release products are formulations which release active drug
compounds in the body gradually and predictably over a 12 to 24 hour period.
Biovail formulates, clinically tests, registers, manufactures and out-licenses
its own drug products. Biovail markets it products through its own sales force
and through licensees. Biovail effected a 2-for-1 stock split on its common
stock to shareholders of record on January 12, 2000. The stock began trading on
a split-adjusted basis on January 20, 2000. The following table is adjusted to
account for this stock split.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 1 3/8 January 12 15/16 January 14 7/16 January 18 January 21 1/8 January 49 7/8
February 1 3/4 February 14 3/16 February 12 1/16 February 21 25/32 February 19 3/32
March 2 1/8 March 14 3/16 March 11 5/8 March 24 1/8 March 19 1/4
April 2 13/16 April 14 1/8 April 12 1/2 April 20 7/16 April 17 17/32
May 2 5/8 May 17 1/16 May 14 13/16 May 16 31/32 May 19 3/32
June 3 2/16 June 15 5/8 June 15 3/32 June 16 June 25 17/32
July 4 July 13 1/4 July 13 3/8 July 16 7/16 July 28 3/32
August 4 3/16 August 15 August 14 7/32 August 14 1/32 August 28 29/32
September 5 3/4 September 17 3/4 September 14 17/32 September 13 15/32 September 25 3/8
October 6 7/16 October 14 5/8 October 14 7/16 October 15 19/32 October 27 19/32
November 8 3/4 November 14 1/4 November 15 7/16 November 17 November 34 7/8
December 12 7/8 December 12 13/16 December 19 17/32 December 18 29/32 December 46 7/8
</TABLE>
The closing price on January 31, 2000 was 49 7/8.
BRISTOL-MYERS SQUIBB COMPANY
Bristol-Myers Squibb Company is a diversified health and personal care
company that focuses on the manufacture and sales of a broad range of
pharmaceutical and related products. These products include: cardiovascular,
anti-cancer, anti-infective and central nervous system prescription
pharmaceuticals; consumer medicines, such as analgesics; personal care, such as
skin and hair care products, cold remedies and deodorants; nutritional
products; medical devices; and beauty care products. Bristol-Myers markets its
products internationally to the retail and wholesale markets and some of its
products are sold directly to other pharmaceutical companies, hospitals and
healthcare professionals.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 15 3/8 January 22 1/8 January 31 11/16 January 49 27/32 January 64 1/8 January 66
February 15 15/32 February 21 9/32 February 32 5/8 February 50 3/32 February 62 31/32
March 15 23/32 March 21 13/32 March 29 1/2 March 52 5/32 March 64 1/8
April 16 19/32 April 20 9/16 April 32 3/4 April 52 15/16 April 63 9/16
May 16 9/32 May 21 11/32 May 36 11/16 May 53 3/4 May 68 3/4
June 17 1/32 June 22 1/2 June 40 1/2 June 57 15/32 June 70 7/16
July 17 5/16 July 21 21/32 July 39 5/32 July 56 31/32 July 66 1/2
August 17 3/16 August 21 15/16 August 38 August 48 15/16 August 70 3/8
September 18 7/32 September 2 3/8 September 41 3/8 September 51 15/16 September 67 1/2
October 19 1/16 October 26 7/16 October 43 15/16 October 55 11/32 October 76 13/16
November 20 1/16 November 28 7/16 November 46 13/16 November 61 November 73
December 21 15/32 December 27 1/4 December 47 5/16 December 66 29/32 December 64 3/16
</TABLE>
The closing price on January 31, 2000 was 66.
A-3
<PAGE>
ELI LILLY & COMPANY
Eli Lilly & Company researches, develops, manufactures and sells
pharmaceutical products for humans and animals. Research efforts are primarily
directed toward discovering and developing products to diagnose and treat
disease in humans and animals and to increase the efficiency of animal food
production. Eli Lilly products include neuroscience products, such as Prozac,
endocrine products, cardiovascular agents, oncology products and animal health
products for cattle, poultry and swine. Eli Lilly's pharmaceutical products are
distributed primarily through independent wholesale distribution outlets and
marketed through its own sales force. The animal health products are marketed
by its own sales force to distributors and feed manufacturers.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- ------- --------- -------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 16 15/32 January 28 5/8 January 43 9/16 January 67 5/8 January 93 11/16 January 66 7/8
February 16 3/4 February 30 5/16 February 43 11/16 February 65 13/16 February 94 1/2
March 18 9/324 March 32 1/2 March 41 1/8 March 59 5/8 March 84 7/8
April 18 11/16 April 29 9/16 April 43 15/16 April 69 9/16 April 73 5/8
May 18 21/32 May 32 1/8 May 46 1/2 May 61 3/8 May 71 7/16
June 19 5/8 June 32 1/2 June 54 21/32 June 66 1/4 June 71 5/8
July 19 9/164 July 28 July 56 1/2 July 67 1/4 July 65 11/16
August 20 15/32 August 28 5/8 August 52 5/16 August 65 3/4 August 74 5/8
September 22 15/32 September 32 1/4 September 60 1/2 September 78 5/16 September 64 3/16
October 24 5/32 October 35 1/4 October 67 1/16 October 81 October 68 7/8
November 24 7/8 November 38 1/4 November 63 November 89 11/16 November 72 11/64
December 28 1/8 December 36 1/2 December 69 5/8 December 88 7/8 December 66 1/2
</TABLE>
The closing price on January 31, 2000 was 66 7/8.
FOREST LABORATORIES, INC.
Forest Laboratories, Inc. develops, manufactures, and sells branded and
generic prescription drugs and nonprescription pharmaceutical products which
are used for the treatment of a wide range of illnesses. Forest's branded
products include treatment for depression, respiratory ailments, hypertension,
angina and urinary tract infection. Forest's generic products include generic
equivalents of its branded products and certain controlled-release products.
Its products are marketed in the United States, Eastern Europe and the United
Kingdom through its own sales force and through independent distributors in
other parts of the world.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- ------- --------- -------- --------- -------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 24 3/4 January 27 January 18 7/8 January 29 11/16 January 46 3/16 January 67 1/2
February 25 3/8 February 26 February 19 1/16 February 31 9/32 February 49 9/16
March 23 13/16 March 24 3/8 March 18 13/16 March 37 1/2 March 56 3/8
April 22 1/2 April 23 1/16 April 17 1/16 April 36 3/16 April 44 1/2
May 22 1/16 May 20 5/8 May 21 1/8 May 33 May 47 5/8
June 22 3/16 June 19 5/16 June 20 23/32 June 35 3/4 June 46 1/4
July 22 3/16 July 17 1/16 July 22 3/4 July 37 1/2 July 51 1/4
August 22 3/8 August 20 9/16 August 20 23/32 August 32 3/4 August 48 1/2
September 22 1/4 September 18 1/16 September 21 1/16 September 34 3/8 September 42 1/8
October 20 11/16 October 19 1/4 October 23 1/8 October 41 13/16 October 45 7/8
November 21 1/4 November 19 3/8 November 22 3/8 November 46 5/8 November 51 3/16
December 22 5/8 December 16 3/8 December 24 21/32 December 53 3/16 December 61 7/16
</TABLE>
The closing price on January 31, 2000 was 67 1/2.
A-4
<PAGE>
ICN PHARMACEUTICALS, INC.
ICN Pharmaceuticals, Inc. develops, manufactures, distributes and sells
pharmaceutical, research and diagnostic products as well as biotechnology
research products. ICN's pharmaceutical and nutritional products treat viral
and bacterial infections, diseases of the skin, neuromuscular disorders,
cancer, cardiovascular disease, diabetes and psychiatric disorders.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 12 13/64 January 13 1/4 January 15 1/4 January 34 1/4 January 24 1/8 January 25 1/8
February 9 7/16 February 15 21/64 February 16 53/64 February 38 1/2 February 21 7/8
March 10 March 14 53/64 March 14 53/64 March 49 March 25 1/8
April 10 63/64 April 15 April 14 11/64 April 49 1/4 April 33 3/16
May 11 1/16 May 17 43/64 May 14 27/64 May 43 1/16 May 32 7/8
June 10 1/4 June 15 37/64 June 19 1/8 June 45 11/16 June 32 3/16
July 12 49/64 July 14 July 22 3/4 July 28 3/8 July 30 3/4
August 13 21/64 August 14 August 24 11/64 August 15 3/8 August 20 3/4
September 14 13/32 September 13 43/64 September 32 51/64 September 17 1/2 September 17 3/16
October 13 1/2 October 12 37/64 October 32 5/64 October 23 5/16 October 23
November 13 21/64 November 12 59/64 November 32 61/64 November 25 1/4 November 24 5/16
December 12 53/64 December 13 5/64 December 32 43/64 December 22 5/8 December 25 5/16
</TABLE>
The closing price on January 31, 2000 was 25 1/8.
IVAX CORPORATION
IVAX Corporation researches, develops, manufactures and markets
proprietary and generic pharmaceuticals in the United States and international
markets. IVAX's primary focus is on proprietary oncology and respiratory
pharmaceutical products and generic pharmaceuticals in less competitive market
segments. IVAX markets its proprietary pharmaceutical products through
licensing arrangements and its generic pharmaceutical products are sold to drug
wholesalers and retail drug store chains. On January 14, 2000, IVAX announced a
3-for-2 stock split on its common stock to shareholders of record on February
1, 2000. The shares of common stock will begin trading on a split-adjusted
basis on February 23, 2000. The following table does not take into account any
adjustments for this stock split.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- ------- --------- ------- --------- -------- --------- -------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 21 1/8 January 26 1/4 January 11 5/8 January 7 1/2 January 13 9/16 January 33 1/4
February 21 5/8 February 28 5/8 February 12 1/4 February 8 7/16 February 14 3/4
March 25 March 25 7/8 March 9 7/8 March 8 3/4 March 11 13/16
April 26 April 29 1/8 April 7 9/16 April 9 3/4 April 13 3/16
May 25 3/4 May 27 1/2 May 10 3/4 May 9 3/16 May 13 7/16
June 24 5/8 June 15 3/4 June 11 3/16 June 9 1/4 June 14 1/8
July 24 1/8 July 14 5/8 July 9 3/8 July 8 15/16 July 15 13/16
August 25 5/8 August 16 1/8 August 9 7/16 August 7 3/4 August 16 1/2
September 30 1/8 September 16 1/4 September 11 15/16 September 8 3/4 September 16 1/2
October 22 3/4 October 16 1/2 October 7 9/16 October 9 1/2 October 17 9/16
November 26 5/8 November 11 November 7 1/16 November 9 1/2 November 20 5/16
December 28 1/2 December 10 1/4 December 6 3/4 December 12 7/16 December 25 3/4
</TABLE>
The closing price on January 31, 2000 was 33 1/4.
A-5
<PAGE>
JOHNSON & JOHNSON
Johnson & Johnson manufactures and sells health care products and
provides related services in countries around the globe. Johnson & Johnson's
principal consumer segment focuses on personal care and hygienic products and
its product brands include Band-Aid, Tylenol and Stayfree sanitary products.
Johnson & Johnson's pharmaceutical segment focuses on allergy, anti-infective,
anti-fungal, contraceptives and pain management products. Johnson & Johnson's
professional segment, catering to physicians, nurses, therapists and hospitals,
focuses on diagnostic products, surgical instruments, cardiology products and
other medical equipment and devices. Johnson & Johnson markets and distributes
its products directly and through wholesalers. In a $4.9 billion stock-for-
stock exchange, Johnson & Johnson recently merged with Centocor, Inc., a
leading biopharmaceutical company.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- ------- --------- -------- --------- -------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 29 1/16 January 48 January 57 3/4 January 66 15/16 January 85 1/8 January 86 1/16
February 28 3/8 February 46 3/4 February 57 1/2 February 75 3/8 February 85 3/8
March 29 3/4 March 46 1/8 March 52 7/8 March 73 7/16 March 93 1/2
April 32 1/2 April 46 1/4 April 61 1/8 April 71 1/2 April 97 1/2
May 33 1/16 May 48 11/16 May 60 May 69 1/16 May 92 5/8
June 33 3/4 June 49 1/2 June 64 3/8 June 74 June 98
July 35 7/8 July 47 3/4 July 62 1/8 July 77 1/4 July 91 1/16
August 34 1/2 August 49 1/4 August 56 11/16 August 69 August 102 1/4
September 37 1/16 September 51 1/4 September 57 11/16 September 78 1/4 September 91 7/8
October 40 3/4 October 49 1/4 October 57 3/8 October 81 1/2 October 104 3/4
November 43 5/16 November 53 1/4 November 62 15/16 November 81 1/4 November 103 3/4
December 42 3/4 December 49 3/4 December 65 7/8 December 83 7/8 December 93 1/4
</TABLE>
The closing price on January 31, 2000 was 86 1/16.
JONES PHARMA INC.
Jones Pharma Inc. manufactures, markets, distributes and sells specialty
pharmaceutical products under its own trademarks and tradenames. Jones Pharma
seeks to build a portfolio of growing products through the acquisition of
under-promoted or promotion sensitive FDA-approved products from other
pharmaceutical companies. Jones Pharma's principal products serve the endocrine
treatment and critical care segments of the health care industry as well as the
companion animal segment of the veterinary industry. Jones Pharma markets and
promotes its products primarily through a direct sales force.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- ------- --------- -------- --------- -------- --------- -------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 2 9/64 January 11 21/64 January 25 21/64 January 23 19/64 January 21 1/4 January 58 1/16
February 2 33/64 February 13 1/16 February 20 11/64 February 24 3/4 February 18 3/4
March 2 9/16 March 17 7/64 March 16 March 24 1/8 March 23 11/64
April 2 57/64 April 23 7/32 April 23 1/2 April 19 43/64 April 21 27/64
May 2 31/32 May 23 7/16 May 23 59/64 May 20 1/2 May 23 45/64
June 3 19/64 June 22 11/64 June 31 43/64 June 22 5/64 June 26 1/4
July 4 3/16 July 23 5/64 July 19 3/4 July 21 13/64 July 28 15/16
August 4 21/64 August 26 43/64 August 19 53/64 August 13 59/64 August 27 1/16
September 5 19/64 September 32 21/64 September 21 September 19 11/64 September 32 31/32
October 5 25/32 October 29 October 20 5/64 October 21 35/64 October 31
November 6 7/32 November 26 43/64 November 22 November 24 November 34 5/8
December 7 9/64 December 24 27/64 December 25 1/2 December 24 21/64 December 43 7/16
</TABLE>
The closing price on January 31, 2000 was 58 1/16.
A-6
<PAGE>
KING PHARMACEUTICALS, INC.
King Pharmaceuticals, Inc. manufactures, markets and sells primarily
name-brand prescription pharmaceutical products. King acquires these
pharmaceutical products and seeks to increase their sales by focused promotion
and marketing, as well as by developing product line extensions and through
product life cycle management. King, through a national sales force, markets
its products to general/family practitioners and hospitals across the United
States. King also provides contract manufacturing to pharmaceutical and
biotechnology companies.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January 16 5/64 January 59
February * February * February * February * February 16 5/64
March * March * March * March * March 18 1/2
April * April * April * April * April 18 27/64
May * May * May * May * May 15 53/64
June * June * June * June 9 21/64 June 17 1/4
July * July * July * July 10 3/4 July 18 5/64
August * August * August * August 9 37/64 August 23 5/64
September * September * September * September 9 11/64 September 23 21/64
October * October * October * October 10 3/8 October 20 11/64
November * November * November * November 10 November 46 1/8
December * December * December * December 17 37/64 December 56 1/16
</TABLE>
The closing price on January 31, 2000 was 59.
MERCK & CO., INC.
Merck & Co., Inc. develops, manufactures and markets a broad range of
human and animal health products. Merck's operations are divided into a
pharmaceutical and a pharmaceutical benefit services segment. The
pharmaceutical segment creates a variety of therapeutic products including
Zocar (high cholesterol treatment), Pepcid (anti-ulcerant) and Propecia (male
baldness treatment). The pharmaceutical benefit services segment fills and
manages prescriptions and operates health management programs. Merck markets
its health products to drug retailers and wholesalers, hospitals, managed
healthcare providers and government agencies through its own representatives.
Its pharmaceutical benefit management services are marketed to corporations,
insurance companies and government agencies.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- --------- --------- -------- --------- -------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 20 1/8 January 35 1/16 January 45 5/16 January 58 11/16 January 73 3/8 January 78 13/16
February 21 3/16 February 33 1/8 February 46 1/16 February 63 25/32 February 81 1/2
March 21 5/16 March 31 1/8 March 42 1/8 March 64 3/32 March 80 1/8
April 21 7/16 April 30 1/4 April 45 3/16 April 60 1/4 April 70 3/8
May 23 1/2 May 32 5/16 May 44 15/16 May 58 1/2 May 67 5/8
June 24 9/16 June 32 5/16 June 51 5/32 June 66 7/8 June 73 5/8
July 25 13/16 July 32 1/8 July 51 15/16 July 61 25/32 July 67 5/8
August 24 15/16 August 32 13/16 August 45 29/32 August 57 31/32 August 67 3/16
September 28 September 35 3/16 September 49 31/32 September 64 25/32 September 64 13/16
October 28 3/4 October 36 15/16 October 44 5/8 October 67 17/32 October 79 9/16
November 30 15/16 November 41 1/2 November 47 13/32 November 77 9/16 November 78 11/16
December 32 13/16 December 39 13/164 December 53 December 73 3/4 December 67 3/16
</TABLE>
The closing price on January 31, 2000 was 78 13/16.
A-7
<PAGE>
MYLAN LABORATORIES, INC.
Mylan Laboratories Inc. develops, licenses, manufactures, markets and
distributes generic and branded pharmaceutical products. Mylan operates through
its generic and branded pharmaceutical segments. Its generic pharmaceutical
segment focuses on marketing a wide variety of lower cost alternatives to
branded products and investing resources in developing new drug delivery
systems. Mylan's branded pharmaceutical segment focuses on the cardiology,
neurology and dermatology areas. Mylan develops its branded pharmaceutical
segment through its own product development and product acquisitions. Mylan
markets its products to retail drug stores, wholesalers, distributors and
public and governmental agencies.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 18 43/64 January 19 January 16 3/8 January 18 January 30 1/2 January 26 5/8
February 20 53/64 February 19 1/2 February 16 3/4 February 20 3/8 February 27 5/16
March 21 11/64 March 21 March 14 3/4 March 23 March 27 7/16
April 20 1/2 April 19 1/2 April 12 April 27 1/8 April 22 11/16
May 19 5/64 May 19 May 15 1/8 May 30 May 25 3/8
June 20 1/2 June 17 3/8 June 14 3/4 June 30 1/4 June 26 1/2
July 20 July 15 July 16 7/8 July 27 3/8 July 22 7/8
August 22 7/8 August 16 3/8 August 21 1/4 August 22 7/8 August 19 13/16
September 20 1/8 September 17 1/8 September 22 7/16 September 29 1/2 September 18 3/8
October 19 1/8 October 15 1/8 October 21 7/8 October 34 7/16 October 17 15/16
November 23 3/8 November 14 3/4 November 22 3/16 November 33 3/16 November 23 9/16
December 23 1/2 December 16 5/8 December 20 15/16 December 31 1/2 December 25 3/16
The closing price on January 31, 2000 was 26 5/8.
PFIZER INC.
Pfizer Inc. develops, manufactures and markets medicines for humans and
animals. Pfizer's operations are divided into a pharmaceutical, animal health
and consumer products segments. The pharmaceutical segment includes
prescription drugs for treating cardiovascular and infectious diseases, central
nervous system disorders, diabetes, erectile dysfunction, allergies, arthritis
and other disorders. A leading Pfizer pharmaceutical product is Viagra. The
animal health segment includes antiparasitic, anti-infective and anti-
inflammatory medicines and vaccines for animals. The consumer products segment
focuses on over-the-counter medications and personal care products. Leading
Pfizer consumer products include Zyrtec, Visine and Bengay. Pfizer's
pharmaceutical products are sold principally to wholesalers. Its animal health
products are marketed and sold to animal healthcare professionals and
distributors. Pfizer's consumer products are marketed and sold by its own
representatives to retailers. Pfizer is currently engaged in a hostile takeover
bid for Warner-Lambert Company. Pfizer's challenge is scheduled to be heard by
a Delaware court on February 14, 2000.
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 6 13/16 January 11 27/64 January 15 27/64 January 27 1/4 January 42 7/8 January 36 3/8
February 6 59/64 February 10 63/64 February 15 17/64 February 29 1/2 February 43 63/64
March 7 9/64 March 11 13/64 March 14 1/64 March 33 15/64 March 46 1/4
April 7 7/32 April 11 31/64 April 16 April 37 15/16 April 38 23/64
May 7 11/32 May 11 51/64 May 17 11/64 May 34 15/16 May 35 43/64
June 7 43/64 June 11 57/64 June 19 59/64 June 36 15/64 June 36 21/64
July 8 7/16 July 11 41/64 July 19 7/8 July 36 39/64 July 33 7/8
August 8 15/64 August 11 53/64 August 18 31/64 August 31 August 37 3/4
September 8 57/64 September 13 3/16 September 20 3/64 September 35 1/4 September 35 7/8
October 9 9/16 October 13 51/64 October 23 43/64 October 35 49/64 October 39 11/16
November 9 43/64 November 14 15/16 November 24 1/4 November 37 5/16 November 36 5/8
December 10 1/2 December 13 53/64 December 24 55/64 December 41 43/64 December 32 7/16
</TABLE>
The closing price on January 31, 2000 was 36 3/8.
A-8
<PAGE>
PHARMACIA & UPJOHN, INC.
Pharmacia & Upjohn, Inc. develops, manufactures and sells pharmaceutical
and healthcare products. Pharmacia provides prescription and nonprescription
products for humans and pharmaceutical chemicals and other products for
livestock and companion animals. Its principal prescription and non-
prescription pharmaceutical products focus on the treatment of a broad range of
conditions including growth hormone deficiency, erectile dysfunction,
depression, male baldness, smoking addiction and diarrhea. Pharmacia products
include Nicorette, Rogaine and Kaopectate. Pharmacia markets its products
through its own representatives and through local distributors and licensees.
On December 19, 1999, Pharmacia announced that it had entered into a definitive
agreement to merge with Monsanto Company.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 23 3/16 January 41 5/8 January 37 1/4 January 38 9/16 January 57 1/2 January 47
February 24 5/16 February 41 7/8 February 37 February 39 27/32 February 54 1/2
March 24 9/16 March 39 7/8 March 36 5/8 March 43 3/4 March 62 3/8
April 25 April 38 1/4 April 29 7/8 April 42 1/16 April 55 5/8
May 25 3/32 May 40 7/8 May 34 5/8 May 44 3/16 May 55 7/16
June 25 61/64 June 44 3/8 June 34 3/4 June 46 1/8 June 56 13/16
July 26 35/64 July 41 1/8 July 37 3/4 July 47 5/16 July 53 13/16
August 29 7/32 August 42 August 34 1/16 August 41 11/16 August 52 1/4
September 30 25/32 September 41 1/4 September 36 1/2 September 50 3/16 September 49 5/8
October 35 October 36 October 31 3/4 October 52 7/8 October 53 15/16
November 35 7/8 November 38 5/8 November 33 3/4 November 52 1/8 November 54 11/16
December 38 3/4 December 39 5/8 December 36 5/8 December 56 5/8 December 45
The closing price on January 31, 2000 was 47.
SCHERING-PLOUGH CORPORATION
Schering-Plough Corporation researches, develops and markets new
therapies and treatment programs. Schering-Plough's core product groups include
allergy, respiratory, anti-infective, anticancer, dermatologicals, and
cardiovascular pharmaceutical products, and healthcare products, including foot
care and sun care products. Schering-Plough also develops and markets animal
health biological and pharmaceutical products. Schering-Plough's products
include Claritin (allergy), Coppertone (sun care) and Dr. Scholl's (footcare).
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 9 13/16 January 13 9/16 January 18 29/32 January 36 3/16 January 54 1/2 January 44
February 9 51/64 February 14 1/32 February 19 3/32 February 38 1/32 February 55 11/16
March 9 19/64 March 14 17/32 March 18 3/16 March 40 7/8 March 55 1/4
April 9 27/64 April 14 11/32 April 19 15/16 April 40 5/32 April 48 5/16
May 9 27/32 May 14 21/32 May 22 11/16 May 41 13/16 May 45 1/16
June 11 1/32 June 15 11/16 June 23 15/16 June 45 13/16 June 52 1/2
July 11 5/8 July 13 3/4 July 27 9/32 July 48 3/8 July 49
August 11 21/32 August 13 31/32 August 24 August 43 August 52 5/8
September 12 27/32 September 15 11/32 September 25 3/4 September 51 27/32 September 43 5/8
October 13 13/32 October 16 October 28 1/32 October 51 7/16 October 49 1/2
November 14 11/32 November 17 13/16 November 31 11/32 November 53 3/8 November 51 1/8
December 13 11/16 December 16 3/16 December 31 1/16 December 55 1/4 December 42 3/8
</TABLE>
The closing price on January 31, 2000 was 44.
A-9
<PAGE>
WARNER-LAMBERT COMPANY
Warner-Lambert Company researches, develops, manufactures and markets a
widely diversified line of health care and consumer products. Warner-Lambert's
principal business segments are: pharmaceutical products, consumer health care
products and confectionery products. Warner-Lambert's pharmaceutical products
include a variety of analgesic, anti-infective and cardiovascular
pharmaceuticals and are marketed primarily under the Parke-Davis and Goedecke
trade name directly to healthcare professionals. Warner-Lambert's consumer
healthcare products include a wide variety of products including dermatological
products, such as Lubriderm, and cold and allergy treatments, such as Benadryl
and Sudafed. Warner-Lambert's confectionary products primarily include chewing
gum, such as Trident, breath mints and cough drops. Both the consumer
healthcare and confectionary products are marketed directly to wholesalers and
retailers. Warner-Lambert agreed on November 4, 1999 to merge with American
Home Products Corporation, but that merger agreement is being contested by
Pfizer Inc., which is seeking to acquire Warner-Lambert in a hostile take-over
bid. Pfizer's challenge is scheduled to be heard by a Delaware court on
February 14, 2000.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 13 January 15 5/8 January 27 January 50 11/64 January 72 3/8 January 94 15/16
February 12 3/4 February 16 31/64 February 28 February 48 51/64 February 68 13/16
March 13 3/64 March 17 13/64 March 28 53/64 March 56 49/64 March 66 1/4
April 13 5/16 April 18 41/64 April 32 43/64 April 63 1/8 April 67 13/16
May 13 51/64 May 18 43/64 May 33 43/64 May 63 13/16 May 62
June 14 25/64 June 18 21/64 June 41 27/64 June 69 3/8 June 69 1/8
July 13 63/64 July 18 11/64 July 46 39/64 July 75 3/8 July 66
August 15 1/16 August 19 53/64 August 42 23/64 August 65 1/4 August 66 3/8
September 15 7/8 September 22 September 44 63/64 September 75 1/2 September 66 3/8
October 14 3/16 October 21 13/64 October 47 51/64 October 78 3/8 October 79 13/16
November 14 7/8 November 23 53/64 November 46 5/8 November 75 1/2 November 90
December 16 3/16 December 25 December 41 25/64 December 75 3/16 December 81 15/16
The closing price on January 31, 2000 was 94 15/16.
WATSON PHARMACEUTICALS, INC.
Watson Pharmaceuticals, Inc. develops, produces, markets, and distributes
branded and generic pharmaceutical products. Watson's products include
prescription and over-the-counter therapeutic and preventive agents used for
the treatment of human diseases and disorders in the primary care, women's
health, dermatology and neurology/psychiatry areas. Watson markets its branded
pharmaceutical products through specialty sales groups who focus on healthcare
professionals. Watson's generic pharmaceutical products are sold to drug
wholesalers, distributors and retailers, hospitals and health maintenance
organizations.
<CAPTION>
Closing Closing Closing Closing Closing Closing
1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price
- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 12 3/8 January 22 7/8 January 22 13/32 January 36 3/4 January 54 5/8 January 40 5/16
February 12 29/32 February 21 1/2 February 21 13/16 February 35 7/8 February 48 3/8
March 14 3/4 March 20 March 17 7/8 March 36 March 44 1/8
April 15 9/16 April 23 3/4 April 17 7/8 April 43 1/16 April 40 1/2
May 18 3/8 May 22 1/2 May 19 9/16 May 43 3/4 May 38 5/16
June 19 1/2 June 18 15/16 June 21 1/8 June 46 11/16 June 35 1/16
July 18 July 19 1/2 July 24 3/4 July 45 1/8 July 34 7/16
August 20 11/16 August 14 1/2 August 26 9/32 August 45 1/16 August 35 7/8
September 20 1/2 September 18 3/4 September 29 7/8 September 51 3/4 September 30 9/16
October 22 3/8 October 16 11/16 October 31 3/4 October 55 13/16 October 31 3/4
November 23 9/16 November 19 1/2 November 29 3/4 November 53 7/8 November 37 3/16
December 24 1/2 December 22 15/32 December 32 7/16 December 62 7/8 December 35 13/16
</TABLE>
The closing price on January 31, 2000 was 40 5/16.
A-10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF PHARMACEUTICAL HOLDRs SM]
1,000,000,000 Depositary Receipts
Pharmaceutical HOLDRs SM Trust
-------------------
P R O S P E C T U S
-------------------
Merrill Lynch & Co.
January 31, 2000
Until February 25, 2000 (25 days after the date of this prospectus), all
dealers effecting transactions in the offered Pharmaceutical 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
