As filed with the Securities and Exchange Commission on December 15, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Initial Depositor
(Exact name of registrant as specified in charter)
----------------------
ABC HOLDRSSM Trust 2000-L
yet-to-be formed
[Issuer with respect to the receipts]
Delaware 6211 13-5674085
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number)
----------------------
250 Vesey Street
New York, New York 10281
(212) 449-1000
(Address, including zip code, and telephone number, including
area code, or registrant's principal executive offices)
----------------------
Copies to:
Andrea L. Dulberg, Esq. Andrew B. Janszky
Corporate Secretary Shearman & Sterling
Merrill Lynch, Pierce, Fenner & Smith Incorporated 599 Lexington Avenue
250 Vesey Street New York, New York 10022
New York, New York 10281 (212) 848-4000
(212) 449-1000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434 under the Securities Act, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Be Offering Price Aggregate Offering Amount of
Securities to Be Registered Registered Per Receipt(1) Price (1) Registration Fee(2)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ABC HOLDRS............... 100,000 $100 $10,000,000 $2,640
receipts
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act.
(2) This Registration Statement also registers, where required, an
indeterminate amount of securities to be sold by Merrill Lynch, Pierce,
Fanner & Smith Incorporated in market-making transactions.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to such
Section 8(a), may determine.
================================================================================
<PAGE>
PROSPECTUS
----------
Subject to Completion
Preliminary Prospectus dated , 2000
LOGO
[ ] Depositary Receipts
ABC HOLDRSSM Trust 2000-L
The ABC HOLDRSSM Trust 2000-L will issue Depositary Receipts called ABC
HOLDRSSM representing your undivided beneficial ownership in the common stock or
American depositary shares of a group of specified companies that are involved
in the [ ] industry. The Bank of New York will be the trustee. You only may
acquire, hold or transfer ABC HOLDRS in a round-lot amount of 100 ABC HOLDRS or
round-lot multiples. ABC HOLDRS are separate from the underlying deposited
common stocks or American depositary shares that are represented by the ABC
HOLDRS. For a list of the names and the number of shares of the companies that
make up an ABC HOLDR, see "Highlights of ABC HOLDRS--The ABC HOLDRS" starting on
page 6. The trust will issue the additional ABC HOLDRS on a continuous basis.
Investing in ABC HOLDRS involves significant risks. See "Risk Factors"
starting on page 4.
The initial public offering price for a round-lot of 100 ABC HOLDRS
will equal the sum of the closing market price on the primary U.S. trading
market on the pricing date for each deposited share multiplied by the share
amount specified in this prospectus, plus an underwriting fee.
ABC HOLDRS are neither interests in nor obligations of either the
initial depositor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or The
Bank of New York, as trustee.
Before this issuance, there has been no public market for ABC HOLDRS.
Application has been made to list the ABC HOLDRS on the American Stock Exchange
under the symbol "[ ]".
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Initial Price Underwriting
To Public* Fee
---------- ---
Per ABC HOLDR........................... 2%
* Includes underwriting fee.
For purchases of ABC HOLDRS in excess of ABC HOLDRS, the
underwriting fee will be %.
----------
Merrill Lynch & Co. [ ]
----------
The date of this prospectus is ,2000.
"HOLDRS" and "HOLding Company Depositary ReceiptS" are service marks of Merrill
Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
----
Summary............................................................... 3
Risk Factors.......................................................... 4
Highlights of ABC HOLDRS.............................................. 6
The Trust............................................................. 12
Description of ABC HOLDRS............................................. 12
Description of the Underlying Securities.............................. 13
Description of the Depositary Trust Agreement......................... 16
Federal Income Tax Consequences....................................... 18
ERISA Considerations.................................................. 21
Plan of Distribution.................................................. 21
Legal Matters......................................................... 23
Where You Can Find More Information................................... 23
This prospectus contains information you should consider when making
your investment decision. With respect to information about ABC HOLDRS, you
should rely only on the information contained in this prospectus. We have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not making an offer to sell ABC HOLDRS in any jurisdiction where the
offer or sale is not permitted.
The ABC HOLDRS are not registered for public sale outside of the United
States. Non-U.S. receipt holders should refer to "Federal Income Tax
Consequences - Non-U.S. receipt holders" and we recommend that non-U.S. receipt
holders consult their tax advisors regarding U.S. withholding and other taxes
which may apply to ownership of the ABC HOLDRS or of the underlying securities
through an investment in the ABC HOLDRS.
<PAGE>
SUMMARY
The ABC HOLDRS Trust will be formed under the depositary trust
agreement, dated as of ____________, 2000 among The Bank of New York, as
trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors
and the owners of the ABC HOLDRS. The trust is not a registered investment
company under the Investment Company Act of 1940.
The trust will hold shares of common stock or American depositary
shares issued by [ ] specified companies generally considered to be involved in
the [ ] industry. The number of shares of each company's securities or American
depositary shares held by the trust with respect to each round-lot of ABC HOLDRS
is specified under "Highlights of ABC HOLDRS--The ABC HOLDRS." This group of
common stocks or American depositary shares are collectively referred to in this
prospectus as the securities or the underlying securities. Except when a
reconstitution event occurs, the underlying securities will not change. Under no
circumstances will a new company be added to the group of issuers of underlying
securities.
The trust will issue ABC HOLDRS that represent your undivided
beneficial ownership interest in the securities held by the trust on your
behalf. The ABC HOLDRS are separate from the underlying securities that are
represented by the ABC HOLDRS.
3
<PAGE>
RISK FACTORS
An investment in ABC HOLDRS involves risks similar to investing in each
of the underlying securities outside of the ABC HOLDRS, including the risks
associated with concentrated investments in the [ ] industry.
General Risk Factors
o Loss of investment. Because the value of ABC HOLDRS directly
relates to the value of the underlying securities, you may lose a
substantial portion of your investment in the ABC HOLDRS if the
underlying securities decline in value.
o Discount trading price. ABC HOLDRS may trade at a discount to the
aggregate value of the underlying securities.
o Not necessarily representative of the [ ] industry.
While the underlying securities are common stocks of companies
generally considered to be involved in various aspects of the
[ ] industry, the underlying securities and the ABC
HOLDRS may not necessarily follow the price movements of the
entire [ ] industry generally. If the underlying
securities decline in value, your investment in the ABC HOLDRS
will decline in value even if the securities prices of companies
in the [ ] industry generally increase in value.
Furthermore, after the initial deposit, one or more of the
issuers of the securities that are or may be included in the ABC
HOLDRS may not be involved in the [ ] industry. In this
case, the ABC HOLDRS may no longer consist of securities issued
only by companies involved in the [ ] industry.
o No investigation of underlying securities. The underlying
securities included in the ABC HOLDRS were selected by Merrill
Lynch, Pierce, Fenner & Smith Incorporated based on the market
capitalization of issuers and the market liquidity of securities
in the [ ] industry, without regard for the value, price
performance, volatility or investment merit of the underlying
securities. Consequently, the ABC HOLDRS Trust, the trustee,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, and their
affiliates, have not performed any investigation or review of the
selected companies, including the public filings by the
companies. Investors and market participants should not conclude
that the inclusion of a company is any form of investment
recommendation by the trust, the trustee, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, or their affiliates.
o Loss of diversification. As a result of industry developments,
reorganizations, or market fluctuations affecting issuers of the
underlying securities, ABC HOLDRS may not necessarily continue to
be a diversified investment in the [ ] industry. As a result of
market fluctuations and/or reconstitution events, ABC HOLDRS may
represent a concentrated investment in one or more of the
underlying securities which would reduce investment
diversification and increase your exposure to the risks of
concentrated investments.
o Conflicting investment choices. In order to sell one or more of
the underlying securities individually or to participate in a
tender offer relating to one or more of the underlying
securities, you will be required to cancel your ABC HOLDRS and
receive delivery of each of the underlying securities. The
cancellation of your ABC HOLDRS will allow you to sell individual
underlying securities or to deliver individual underlying
securities in a tender offer. The cancellation of ABC HOLDRS will
involve payment of a cancellation fee to the trustee.
o Trading halts. Trading in ABC HOLDRS on the American Stock
Exchange may be halted if trading in one or more of the
underlying securities is halted. Trading in ABC HOLDRS may be
halted even if trading continues in some or all of the underlying
securities. If trading is halted in the ABC HOLDRS, you will not
be able to trade ABC HOLDRS and you will only be able to
4
<PAGE>
trade the underlying securities if you cancel your ABC HOLDRS and
receive each of the underlying securities.
o Delisting from the American Stock Exchange. If the number of
companies whose securities are held in the trust falls below
nine, the American Stock Exchange may consider delisting the ABC
HOLDRS. If the ABC HOLDRS are delisted by the American Stock
Exchange, a termination event will result unless the ABC HOLDRS
are listed for trading on another U.S. national securities
exchange or through Nasdaq NMS within five business days from the
date the ABC HOLDRS are delisted.
o Possible conflicts of interest. Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as initial depositor, has selected the
underlying securities and may face possible conflicts of interest
in connection with its activities. For example, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and its affiliates,
collectively referred to as Merrill Lynch, may engage in
investment banking and other activities, may provide services to
issuers of the underlying securities in connection with its
business, or may make purchases or sales, including establishing
long or short positions, in the underlying securities for its own
account. In addition, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as initial depositor, will purchase, in the
secondary market, the underlying securities that will be
deposited into the trust. Merrill Lynch may make these purchases
before the deposit into the trust, or it may borrow securities
for the deposit and subsequently purchase the securities to repay
to the lenders the securities previously borrowed. In either
event, the purchases of the underlying securities will be made at
various prices. As the initial offering price for the ABC HOLDRS
will be based on the closing market price of each of the
underlying securities on the pricing date, Merrill Lynch may
recognize a gain on its purchases of the underlying securities.
Specifically, if the closing market price for the underlying
securities on the pricing date is higher than the price at which
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial
depositor, purchases the underlying securities then it will
recognize a gain in connection with such purchases. Merrill Lynch
may recognize this gain on any of the underlying securities that
comprise the ABC HOLDRS or on all of the underlying securities in
the aggregate. The potential profit of Merrill Lynch also is
affected by any hedging activities that it may engage in while it
purchases the underlying securities in the secondary market for
deposit into the trust. All of these activities may result in
conflicts of interest with respect to the financial interest of
Merrill Lynch, on the one hand, and, on the other hand, the
initial selection of the underlying securities included in the
ABC HOLDRS, the selection of the [ ] industry, Merrill Lynch's
activity in the secondary market in the underlying securities,
and the creation and cancellation of ABC HOLDRS by Merrill Lynch.
o Temporary price increases in the underlying securities.
Purchasing activity in the secondary trading market associated
with acquiring the underlying securities for deposit into the
trust may temporarily increase the market price of the deposited
shares, which will result in a higher initial offering price for
the ABC HOLDRS. Large volumes of purchasing activity, which may
occur in connection with the issuance of ABC HOLDRS, particularly
in connection with the initial issuance of ABC HOLDRS, could
temporarily increase the market price of the underlying
securities, resulting in a higher price on that date. This
purchasing activity could create a temporary imbalance between
the supply and demand of the underlying securities, thereby
limiting the liquidity of the underlying securities due to a
temporary increased demand for underlying securities. Temporary
increases in the market price of the underlying securities may
also occur as a result of the purchasing activity of other market
participants. Other market participants may attempt to benefit
from increases in the market price of the underlying securities
that may occur as a result of the increased purchasing activity
in the underlying securities resulting from the issuance of the
ABC HOLDRS. Consequently, prices for the underlying securities
may decline immediately after the pricing date. If the trading
prices for the underlying securities decline, the trading price
of ABC HOLDRS will also decline.
5
<PAGE>
Risk Factors Specific to Companies Involved in the [ ] Industry
6
<PAGE>
HIGHLIGHTS OF ABC HOLDRS
This discussion highlights information regarding ABC HOLDRS. We present
certain information more fully in the rest of this prospectus. You should read
the entire prospectus carefully before you purchase ABC HOLDRS.
Issuer................................. ABC HOLDRS Trust.
The trust.............................. The ABC HOLDRS Trust will be formed
under the depositary trust
agreement, dated as of ,
2000 among The Bank of New York, as
trustee, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, other
depositors and the owners of the
ABC HOLDRS. The trust is not a
registered investment company under
the Investment Company Act of 1940.
Initial depositor...................... Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
Trustee................................ The Bank of New York, a New York
state-chartered banking
organization, will be the trustee
and receive compensation as set
forth in the depositary trust
agreement.
Purpose of ABC HOLDRS.................. ABC HOLDRS are designed to achieve
the following:
Diversification. ABC HOLDRS are
designed to allow you to diversify
your investment in the [ ]
industry through a single,
exchange-listed instrument
representing your undivided
beneficial ownership of the
underlying securities.
Flexibility. The beneficial owners
of ABC HOLDRS have undivided
beneficial ownership interests in
each of the underlying securities
represented by the ABC HOLDRS, and
can cancel their ABC HOLDRS to
receive each of the underlying
securities represented by the ABC
HOLDRS.
Transaction costs. The expenses
associated with trading ABC HOLDRS
are expected to be less than
trading each of the underlying
securities separately in a
traditional brokerage account.
Trust assets........................... The trust will hold securities
issued by specified companies in
the [ ] industry. Except when a
reconstitution event occurs, the
group of companies will not change.
Reconstitution events are described
in this prospectus under the
heading "Description of the
depositary trust
agreement--Reconstitution events."
Under no circumstances will the
common stock of a new company be
added to the common stocks
underlying the ABC HOLDRS.
The trust's assets may increase or
decrease as a result of in-kind
deposits and withdrawals of the
underlying securities during the
life of the trust.
The ABC HOLDRS......................... The trust will issue ABC HOLDRS
that represent your undivided
beneficial ownership interest in
the shares of U.S.-traded
securities
7
<PAGE>
held by the trust on your behalf.
The ABC HOLDRS themselves are
separate from the underlying
securities that are represented by
the ABC HOLDRS.
The specific share amounts for each
round-lot of 100 ABC HOLDRS will be
determined on the pricing date so
that the initial issue price will
be approximately $90-$100 per ABC
HOLDR and the initial weightings of
each underlying security included
in the ABC HOLDRS approximates the
relative market capitalizations of
the specified companies (based on
the market capitalizations of the
underlying securities on the
trading day immediately preceding
the pricing date), subject to a
maximum initial weight of [ ]%. For
purposes of this preliminary
prospectus, the indicative share
amounts and the indicative
weightings of each underlying
security, based on market
capitalizations as of [ ] are set
forth in the table below; however,
such share amounts and weightings
are expected to change during the
period between [ ] and the pricing
date.
After the pricing date, the share
amounts will not change, except for
changes due to corporate events,
such as stock splits or reverse
stock splits on the underlying
securities, or reconstitution
events. However, the weightings are
expected to change substantially
over time because of price
fluctuations.
The following chart provides the
o of the [ ] issuers of the
underlying securities
represented by the ABC HOLDRS,
o stock ticker symbols,
o indicative share amounts
represented by a round-lot of
100 ABC HOLDRS as of [ ],
o indicative weightings as of
[ ], and
o principal U.S. market on which
the underlying securities of
the selected companies are
traded.
<TABLE>
<CAPTION>
Indicative Primary
Share Indicative Trading
Name of Company Ticker Amounts Weightings Market
--------------- ------ ------- ---------- ------
<S> <C> <C> <C> <C> <C>
</TABLE>
8
<PAGE>
The actual share amounts and
weightings will be determined on
the pricing date and will appear in
the final prospectus delivered in
connection with sales of the ABC
HOLDRS. These companies generally
are considered to be [ ] of the
largest and most liquid companies
with U.S.-traded securities
involved in the [ ] industry as
measured by market capitalization
and trading volume on ___________,
2000. The market capitalization of
a company is determined by
multiplying the market price of its
securities by the number of its
outstanding securities.
The trust only will issue and
cancel, and you only may obtain,
hold, trade or surrender, ABC
HOLDRS in a round-lot of 100 ABC
HOLDRS and round-lot multiples. The
trust will only issue ABC HOLDRS
upon the deposit of the whole
shares represented by a round-lot
of 100 ABC HOLDRS. In the event
that a fractional share comes to be
represented by a round-lot of ABC
HOLDRS, the trust may require a
minimum of more than one round-lot
of 100 ABC HOLDRS for an issuance
so that the trust will always
receive whole share amounts for
issuance of ABC HOLDRS.
The number of outstanding ABC
HOLDRS will increase and decrease
as a result of in-kind deposits and
withdrawals of the underlying
securities. The trust will stand
ready to issue additional ABC
HOLDRS on a continuous basis when
an investor deposits the required
securities with the trustee.
Public offering price.................. The initial public offering price
for 100 ABC HOLDRS will equal the
sum of the closing market price on
the primary U.S. trading market on
the pricing date for each
underlying security multiplied by
the share amount to be determined
on the pricing date, plus an
underwriting fee. It is expected
that the initial public offering
price will be approximately
$90-$100 per ABC HOLDR.
Purchases.............................. After the initial offering, you may
acquire ABC HOLDRS in two ways:
o through an in-kind deposit of
the required number of
securities of the
underlying issuers with the
trustee, or
o through a cash purchase in the
secondary trading market.
Underwriting fees...................... If you purchase ABC HOLDRS in the
initial public offering, you will
pay an underwriting fee equal to:
o For purchases of [ ]
ABC HOLDRS or fewer, 2%.
o For purchases in excess
of [ ] ABC HOLDRS, %.
You will not be charged any
issuance fee or other sales
commission in connection with
purchases of ABC HOLDRS made in the
initial public offering.
Issuance and cancellation fees......... After the initial offering, if you
wish to create ABC HOLDRS by
9
<PAGE>
delivering to the trust the
requisite securities represented by
a round-lot of 100 ABC HOLDRS, The
Bank of New York as trustee will
charge you an issuance fee of up to
$10.00 for each round-lot of 100
ABC HOLDRS. If you wish to cancel
your ABC HOLDRS and withdraw your
underlying securities, The Bank of
New York as trustee will charge you
a cancellation fee of up to $10.00
for each round-lot of 100 ABC
HOLDRS.
Commissions............................ If you choose to deposit underlying
securities in order to receive ABC
HOLDRS after the conclusion of the
initial public offering, you will
not be charged the underwriting
fee. However, in addition to the
issuance fee charged by the trustee
described above, you will be
responsible for paying any sales
commission associated with your
purchase of the underlying
securities that is charged by your
broker.
Custody fees........................... The Bank of New York, as trustee
and as custodian, will charge you a
quarterly custody fee of $2.00 for
each round-lot of 100 ABC HOLDRS,
to be deducted from any cash
dividend or other cash
distributions on underlying
securities received by the trust.
With respect to the aggregate
custody fee payable in any calendar
year for each ABC HOLDR, the
trustee will waive that portion of
the fee which exceeds the total
cash dividends and other cash
distributions received, or to be
received, and payable with respect
to such calendar year.
Rights relating to ABC HOLDRS.......... You have the right to withdraw the
underlying securities upon request
by delivering a round-lot or
integral multiple of a round-lot of
ABC HOLDRS to the trustee, during
the trustee's business hours, and
paying the cancellation fees,
taxes, and other charges. You
should receive the underlying
securities no later than the
business day after the trustee
receives a proper notice of
cancellation. The trustee will not
deliver fractional shares of
underlying securities. To the
extent that any cancellation of ABC
HOLDRS would otherwise require the
delivery of a fractional share, the
trustee will sell such share in the
market and the trust, in turn, will
deliver cash in lieu of such share.
Except with respect to the right to
vote for dissolution of the trust,
the ABC HOLDRS themselves will not
have voting rights.
Rights relating to the underlying
securities.......................... You have the right to:
o Receive all shareholder
disclosure materials, including
annual and quarterly reports,
distributed by the issuers of
the underlying securities.
o Receive all proxy materials
distributed by the issuers of
the underlying securities and
will have the right to instruct
the trustee to vote the
underlying securities or may
attend shareholder meetings
yourself.
o Receive dividends and other
distributions on the underlying
securities, if any are declared
and paid to the trustee by an
issuer of the underlying
securities, net of any
applicable taxes or fees.
10
<PAGE>
If you wish to participate in a
tender offer for underlying
securities, you must obtain the
underlying securities by
surrendering your ABC HOLDRS and
receiving all of your underlying
securities. For specific
information about obtaining your
underlying securities, you should
read the discussion under the
caption "Description of the
depositary trust agreement."
Reconstitution events.................. The depositary trust agreement
provides for the automatic
distribution of underlying
securities to you in the following
four circumstances:
A. If an issuer of underlying
securities no longer has a class
of securities registered under
section 12 of the Securities
Exchange Act of 1934, then its
securities will no longer be an
underlying security and the
trustee will distribute the
shares of that company to the
owners of the ABC HOLDRS.
B. If the SEC finds that an issuer
of underlying securities should
be registered as an investment
company under the Investment
Company Act of 1940, and the
trustee has actual knowledge of
the SEC finding, then the
trustee will distribute the
shares of that company to the
owners of the ABC HOLDRS.
C. If the underlying securities of
an issuer cease to be
outstanding as a result of a
merger, consolidation or other
corporate combination, the
trustee will distribute the
consideration paid by and
received from the acquiring
company to the beneficial owners
of ABC HOLDRS, unless the
merger, consolidation or other
corporate combination is between
companies that are already
included in the ABC HOLDRS and
the consideration received 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 U.S. national
securities exchange or through
Nasdaq NMS and are not listed
for trading on another U.S.
national securities exchange or
through Nasdaq NMS within five
business days from the date the
securities are delisted.
If a reconstitution event occurs,
the trustee will deliver the
underlying security to you as
promptly as practicable after the
date that the trustee has knowledge
of the occurrence of a
reconstitution event.
Termination events..................... A. The ABC HOLDRS are delisted from
the American Stock Exchange and
are not listed for trading on
another U.S. national securities
exchange or through Nasdaq NMS
within five business days from
the date the ABC HOLDRS are
delisted.
B. The trustee resigns and no
successor trustee is appointed
within 60 days from the date the
trustee provides notice to
Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as initial
depositor, of its intent to
resign.
11
<PAGE>
C. 75% of beneficial owners of
outstanding ABC HOLDRS vote to
dissolve and liquidate the
trust.
If a termination event occurs, the
trustee will distribute the
underlying securities to you as
promptly as practicable after the
termination event.
Federal income
tax consequences.................... The federal income tax laws will
treat a U.S. holder of ABC HOLDRS
as directly owning the underlying
securities. The ABC HOLDRS
themselves will not result in any
federal tax consequences separate
from the tax consequences
associated with ownership of the
underlying securities.
Listing................................ Application has been made to list
the ABC HOLDRS on the American
Stock Exchange under the symbol
"[ ]". Trading will take
place only in round-lots of 100 ABC
HOLDRS and round-lot multiples. A
minimum of 150,000 ABC HOLDRS will
be required to be outstanding when
trading begins.
Trading................................ Investors only will be able to
acquire, hold, transfer and
surrender a round-lot of 100 ABC
HOLDRS. Bid and ask prices,
however, will be quoted per single
ABC HOLDR.
Clearance and settlement............... The trust will issue ABC HOLDRS in
book-entry form. ABC HOLDRS will be
evidenced by one or more global
certificates that the trustee will
deposit with The 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 ABC HOLDRS."
12
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THE TRUST
General. This discussion highlights information about the ABC HOLDRS
Trust. You should read this information, information about the depositary trust
agreement as well as the depositary trust agreement before you purchase ABC
HOLDRS. The material terms of the depositary trust agreement are described in
this prospectus under the heading "Description of the depositary trust
agreement."
The ABC HOLDRS Trust. The trust will be formed pursuant to the
depositary trust agreement, dated as of ___________, 2000. The Bank of New York
will be the trustee. The ABC HOLDRS Trust is not a registered investment company
under the Investment Company Act of 1940.
The ABC HOLDRS Trust is intended to hold deposited shares for the
benefit of owners of ABC HOLDRS. The trustee will perform only administrative
and ministerial acts. The property of the trust will consist of the underlying
securities and all monies or other property, if any, received by the trustee.
The trust will terminate on December 31, 2040, or earlier if a termination event
occurs.
DESCRIPTION OF ABC HOLDRS
The trust will issue ABC HOLDRS under the depositary trust agreement
described in this prospectus under the heading "Description of the depositary
trust agreement." After the initial offering, the trust may issue additional ABC
HOLDRS on a continuous basis when an investor deposits the requisite underlying
securities with the trustee.
You may only acquire, hold, trade and surrender ABC HOLDRS in a
round-lot of 100 ABC HOLDRS and round-lot multiples. The trust will only issue
ABC HOLDRS upon the deposit of the whole shares of underlying securities that
are represented by a round-lot of 100 ABC HOLDRS. In the event of a stock split,
reverse stock split, or other distribution by the issuer of an underlying
security that results in a fractional share becoming represented by a round-lot
of ABC HOLDRS, the trust may require a minimum of more than one round-lot of 100
ABC HOLDRS for an issuance so that the trust will always receive whole share
amounts for issuance of ABC HOLDRS.
ABC HOLDRS will represent your individual and undivided beneficial
ownership interest in the specified underlying securities. The [ ] companies
selected as part of this receipt program are listed above in the section
entitled "Highlights of ABC HOLDRS--The ABC HOLDRS."
Beneficial owners of ABC HOLDRS will have the same rights and
privileges as they would have if they beneficially owned the underlying
securities outside of the trust. These include the right of investors to
instruct the trustee to vote the securities, and to receive dividends and other
distributions on the underlying securities, if any are declared and paid to the
trustee by an issuer of an underlying security, as well as the right to cancel
ABC HOLDRS to receive the underlying securities. See "Description of the
depositary trust agreement." ABC HOLDRS are not intended to change your
beneficial ownership in the underlying securities under federal securities laws,
including sections 13(d) and 16(a) of the Securities Exchange Act of 1934.
The trust will not publish or otherwise calculate the aggregate value
of the underlying securities represented by a receipt. ABC HOLDRS may trade in
the secondary market at prices that are lower than the aggregate value of the
corresponding underlying securities. If, in such case, an owner of ABC HOLDRS
wishes to realize the dollar value of the underlying securities, that owner will
have to cancel the ABC HOLDRS. Such cancellation will require payment of fees
and expenses as described in "Description of the depositary trust
agreement--Withdrawal of underlying securities."
ABC HOLDRS will be evidenced by one or more global certificates that
the trustee will deposit with DTC and register in the name of Cede & Co., as
nominee for DTC. ABC HOLDRS will be available only in book-entry form. Owners of
ABC HOLDRS may hold their ABC HOLDRS through DTC, if they are participants in
DTC, or indirectly through entities that are participants in DTC.
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<PAGE>
DESCRIPTION OF THE UNDERLYING SECURITIES
Selection criteria. The underlying securities are the common stock or
American depositary shares of a group of [ ] specified companies involved in
various aspects of the [ ] industry and whose securities are registered under
section 12 of the Exchange Act. The issuers of the underlying securities are
considered to be [ ] of the largest capitalized, most liquid companies
involved in the [ ] industry as measured by market capitalization and trading
volume. The companies included in the ABC HOLDRS also meet the following minimum
selection criteria as of [ ]:
o Market capitalization equal to or greater than $ ;
o Average daily trading volume of at least shares over the 60
trading days before , 2000;
o Average daily dollar volume (that is, the average daily trading
volume multiplied by the average closing price over the 60 day
period prior to ) of at least $ over the 60 trading
days before , 2000; and
o A trading history of at least 90 calendar days.
The market capitalization of a company is determined by multiplying the
market price of its securities by the number of its outstanding securities. In
determining whether a company was to be considered for inclusion in the ABC
HOLDRS, Merrill Lynch, Pierce, Fenner & Smith Incorporated examined available
public information about the company, including analysts' reports and other
independent market sources. The ultimate determination of the inclusion of the
[ ] specified companies, however, rested solely within the discretion of
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
After the initial deposit, one or more of the issuers of the underlying
securities may no longer be substantially involved in the [ ] industry. In
this case, the ABC HOLDRS may no longer consist of securities issued by
companies involved in the [ ] industry. Merrill Lynch, Pierce, Fenner & Smith
Incorporated will determine, in its sole discretion, whether the issuer of a
particular underlying security remains in the [ ] industry and will undertake
to make adequate disclosure when necessary.
Underlying securities. For a list of the underlying securities
represented by ABC HOLDRS, please refer to "Highlights of ABC HOLDRS--The ABC
HOLDRS." If the underlying securities change because of a reconstitution event,
a revised list of underlying securities will be set forth in a prospectus
supplement and will be available from the American Stock Exchange and through a
widely used electronic information dissemination system such as Bloomberg or
Reuters.
No investigation. In selecting the underlying securities, the trust,
the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and any
affiliate of these entities, have not performed any investigation or review of
the selected companies, including the public filings by the companies, other
than to the extent required to determine whether the companies satisfied the
program's stated selection criteria. Accordingly, before you acquire ABC HOLDRS,
you should consider publicly available financial and other information about the
issuers of the underlying securities. See "Risk Factors" and "Where you can find
more information." Investors and market participants should not conclude that
the inclusion of a company in the list is any form of investment recommendation
of that company by the trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, the selling group or any of their affiliates.
General background and historical information. For a brief description
of the business of each of the issuers of the underlying securities and monthly
pricing information showing the historical performance of each underlying
issuer's securities see "Annex A."
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<PAGE>
The following table and graph set forth the composite performance of
all of the underlying securities represented by a single ABC HOLDR based upon
the indicative share amounts set forth in the table on page 10 of this
preliminary prospectus, measured at the close of each business day from
__________, 1999, the first date when all of the underlying securities were
publicly traded, and thereafter as of the end of each month to _______, 2000.
The performance table and graph data are adjusted for any splits that may have
occurred over the measurement period. Past movements of the underlying
securities are not necessarily indicative of future values. The actual share
amounts will be determined on the pricing date and may differ from the
indicative share amounts.
<TABLE>
<CAPTION>
1999 Value 1999 Value 2000 Value 2000 Value 2000 Value
---- ----- ---- ----- ---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
[GRAPH]
15
<PAGE>
DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT
General. The depositary trust agreement, dated as of , 2000, among
Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York, as
trustee, other depositors and the owners of the ABC HOLDRS, provides that ABC
HOLDRS will represent an owner's undivided beneficial ownership interest in the
securities of the underlying companies.
The trustee. The Bank of New York will serve as trustee. The Bank of
New York, which was founded in 1784, was New York's first bank and is the oldest
bank in the country still operating under its original name. The Bank is a
state-chartered New York banking corporation and a member of the Federal Reserve
System. The Bank conducts a national and international wholesale banking
business and a retail banking business in the New York City, New Jersey and
Connecticut areas, and provides a comprehensive range of corporate and personal
trust, securities processing and investment services.
Issuance, transfer and surrender of ABC HOLDRS. You may create and
cancel ABC HOLDRS only in round-lots of 100 ABC HOLDRS. You may create ABC
HOLDRS by delivering to the trustee the requisite underlying securities. The
trust will only issue ABC HOLDRS upon the deposit of the whole shares
represented by a round-lot of 100 ABC HOLDRS. In the event that a fractional
share comes to be represented by a round-lot of ABC HOLDRS, the trust may
require a minimum of more than one round-lot of 100 ABC HOLDRS for an issuance
so that the trust will always receive whole share amounts for issuance of ABC
HOLDRS. Similarly, you must surrender ABC HOLDRS in integral multiples of 100
ABC HOLDRS to withdraw deposited shares from the trust. The trustee will not
deliver fractional shares of underlying securities, and to the extent that any
cancellation of ABC HOLDRS would otherwise require the delivery of fractional
shares, the trust will deliver cash in lieu of such shares. You may request
withdrawal of your deposited shares during the trustee's normal business hours.
The trustee expects that in most cases it will deliver your deposited shares
within one business day of your withdrawal request.
Voting rights. The trustee will deliver you proxy soliciting materials
provided by issuers of the deposited shares so as to permit you to give the
trustee instructions as to how to vote on matters to be considered at any annual
or special meetings held by issuers of the underlying securities.
Under the depositary trust agreement, any beneficial owner of ABC
HOLDRS, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated, owning
ABC HOLDRS for its own proprietary account as principal, will have the right to
vote to dissolve and liquidate the trust.
Distributions. You will be entitled to receive, net of trustee fees,
distributions of cash, including dividends, securities or property, if any, made
with respect to the underlying securities. The trustee will use its reasonable
efforts to ensure that it distributes these distributions as promptly as
practicable after the date on which it receives the distribution. Therefore, you
may receive your distributions substantially later than you would have had you
held the underlying securities directly. You will be obligated to pay any tax or
other charge that may become due with respect to ABC HOLDRS. The trustee may
deduct the amount of any tax or other governmental charge from a distribution
before making payment to you. In addition, the trustee will deduct its quarterly
custody fee of $2.00 for each round-lot of 100 ABC HOLDRS from quarterly
dividends, if any, paid to the trustee by the issuers of the underlying
securities. With respect to the aggregate custody fee payable in any calendar
year for each ABC HOLDR, the trustee will waive that portion of the fee which
exceeds the total cash dividends and other cash distributions received, or to be
received, and payable with respect to such calendar year.
Record dates. With respect to dividend payments and voting
instructions, the trustee expects to fix the trust's record dates as close as
possible to the record date fixed by the issuer of the underlying securities.
Shareholder communications. The trustee promptly will forward to you
all shareholder communications that it receives from issuers of the underlying
securities.
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<PAGE>
Withdrawal of underlying securities. You may surrender your ABC HOLDRS
and receive underlying securities during the trustee's normal business hours and
upon the payment of applicable fees, taxes or governmental charges, if any. You
should receive your underlying securities no later than the business day after
the trustee receives your request. If you surrender ABC HOLDRS in order to
receive underlying securities, you will pay to the trustee a cancellation fee of
up to $10.00 per round-lot of 100 ABC HOLDRS.
Further issuances of ABC HOLDRS. The depositary trust agreement
provides for further issuances of ABC HOLDRS on a continuous basis without your
consent.
Reconstitution events. The depositary trust agreement provides for the
automatic distribution of underlying securities to you in the following four
circumstances:
A. If an issuer of underlying securities no longer has a class of
securities registered under section 12 of the Securities Exchange
Act of 1934, then its securities will no longer be an underlying
security and the trustee will distribute the shares of that
company to the owners of the ABC HOLDRS.
B. If the SEC finds that an issuer of underlying securities should
be registered as an investment company under the Investment
Company Act of 1940, and the trustee has actual knowledge of the
SEC finding, then the trustee will distribute the shares of that
company to the owners of the ABC HOLDRS.
C. If the underlying securities of an issuer cease to be outstanding
as a result of a merger, consolidation or other corporate
combination, the trustee will distribute the consideration paid
by and received from the acquiring company to the beneficial
owners of ABC HOLDRS, unless the merger, consolidation or other
corporate combination is between companies that are already
included in the ABC HOLDRS and the consideration received 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 U.S. national securities exchange or through Nasdaq NMS and are
not listed for trading on another U.S. national securities
exchange or through Nasdaq NMS within 5 business days from the
date the securities are delisted.
If a reconstitution event occurs, the trustee will deliver the
underlying security to you as promptly as practicable after the date that the
trustee has knowledge of the occurrence of a reconstitution event.
Termination of the trust. The trust will terminate if the trustee
resigns and no successor trustee is appointed by Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as initial depositor, within 60 days from the date the
trustee provides notice to Merrill Lynch, Pierce, Fenner & Smith Incorporated,
as initial depositor, of its intent to resign. Upon termination, the beneficial
owners of ABC HOLDRS will surrender their ABC HOLDRS as provided in the
depositary trust agreement, including payment of any fees of the trustee or
applicable taxes or governmental charges due in connection with delivery to the
owners of the underlying securities. The trust also will terminate if ABC HOLDRS
are delisted from the American Stock Exchange and are not listed for trading on
another U.S. national securities exchange or through Nasdaq NMS within 5
business days from the date the ABC HOLDRS are delisted. Finally, the trust will
terminate if 75% of the owners of outstanding ABC HOLDRS other than Merrill
Lynch, Pierce, Fenner & Smith Incorporated vote to dissolve and liquidate the
trust.
If a termination event occurs, the trustee will distribute the
underlying securities to you as promptly as practicable after the termination
event occurs.
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<PAGE>
Amendment of the depositary trust agreement. The trustee and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, may amend any
provisions of the depositary trust agreement without the consent of any other
depositor or any of the owners of the ABC HOLDRS. Promptly after the execution
of any amendment to the agreement, the trustee must furnish or cause to be
furnished written notification of the substance of the amendment to each owner
of ABC HOLDRS. Any amendment that imposes or increases any fees or charges,
subject to exceptions, or that otherwise prejudices any substantial existing
right of the owners of ABC HOLDRS will not become effective until 30 days after
notice of the amendment is given to the owners of ABC HOLDRS.
Issuance and cancellation fees. After the initial public offering, the
trust expects to issue more ABC HOLDRS. If you wish to create ABC HOLDRS by
delivering to the trust the requisite underlying securities, the trustee will
charge you an issuance fee of up to $10.00 for each round-lot of 100 ABC HOLDRS.
If you wish to cancel your ABC HOLDRS and withdraw your underlying securities,
the trustee will charge you a cancellation fee of up to $10.00 for each
round-lot of 100 ABC HOLDRS issued. The trustee may negotiate either of these
fees depending on the volume, frequency and size of the issuance or cancellation
transactions.
Commissions. If you choose to create ABC HOLDRS after the conclusion of
the initial public offering, you will not be charged the underwriting fee.
However, in addition to the issuance and cancellation fees described above, you
will be responsible for paying any sales commissions associated with your
purchase of the underlying securities that are charged by your broker, whether
it be any of the members of the selling group or another broker.
Custody fees. The Bank of New York, as trustee and as custodian, will
charge you a quarterly custody fee of $2.00 for each round-lot of 100 ABC HOLDRS
to be deducted from any dividend payments or other cash distributions on
underlying securities received by the trustee. With respect to the aggregate
custody fee payable in any calendar year for each ABC HOLDR, the Trustee will
waive that portion of the fee which exceeds the total cash dividends and other
cash distributions received, or to be received, and payable with respect to such
calendar year. The trustee cannot recapture unpaid custody fees from prior
years.
Address of the trustee. The Bank of New York, ADR Department, 101
Barclay Street, New York, New York 10286.
Governing law. The depositary trust agreement and ABC HOLDRS will be
governed by the laws of the State of New York. The trustee will provide the
depositary trust agreement to any owner of the underlying securities free of
charge upon written request.
Duties and immunities of the trustee. The trustee will assume no
responsibility or liability for, and makes no representations as to, the
validity or sufficiency, or as to the accuracy of the recitals, if any, set
forth in the ABC HOLDRS.
The trustee undertakes to perform only those duties as are specifically
set forth in the depositary trust agreement. Subject to the preceding sentence,
the trustee will be liable for its own negligence or misconduct except for good
faith errors in judgment so long as the trustee was not negligent in
ascertaining the relevant facts.
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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of the U.S. federal income tax consequences
relating to the ABC HOLDRS for:
o a citizen or resident of the United States;
o a corporation or partnership created or organized in the United
States or under the laws of the United States;
o an estate, the income of which is includible in gross income for
U.S. federal income tax purposes regardless of its source;
o 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
o any person other than a U.S. receipt holder (a "non-U.S. receipt
holder").
This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly on a
retroactive basis. The discussion does not deal with all U.S. federal income tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. In addition, this summary generally is limited to
investors who will hold the ABC HOLDRS as "capital assets" (generally, property
held for investment) within the meaning of section 1221 of the Internal Revenue
Code of 1986, as amended. We recommend 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 U.S. federal income tax
purposes.
Taxation of ABC HOLDRS
A receipt holder purchasing and owning ABC HOLDRS will be treated, for
U.S. federal income tax purposes, as directly owning a proportionate share of
the underlying securities represented by ABC HOLDRS. Consequently, if there is a
taxable cash distribution on an underlying security, a holder will recognize
income with respect to the distribution at the time the distribution is received
by the trustee, not at the time that the holder receives the cash distribution
from the trustee.
A receipt holder will determine its initial tax basis in each of the
underlying securities by allocating the purchase price for the ABC HOLDRS among
the underlying securities based on their relative fair market values at the time
of purchase. Similarly, when a holder sells a receipt, it will determine the
amount realized with respect to each security by allocating the sales price
among the underlying securities based on their relative fair market values at
the time of sale. A holder's gain or loss with respect to each security will be
computed by subtracting its adjusted basis in the security from the amount
realized on the security. With respect to purchases of ABC HOLDRS for cash in
the secondary market, a receipt holder's aggregate tax basis in each of the
underlying securities will be equal to the purchase price of the ABC HOLDRS.
Similarly, with respect to sales of ABC HOLDRS for cash in the secondary market,
the amount realized with respect to a sale of ABC HOLDRS will be equal to the
aggregate amount realized with respect to each of the underlying securities.
The distribution of any securities by the trust upon the surrender of
ABC HOLDRS, the occurrence of a reconstitution event, or a termination event
will not be a taxable event, except to the extent that cash is distributed in
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<PAGE>
lieu of fractional shares. The receipt holder's holding period with respect to
the distributed securities will include the period that the holder held the
securities through the trust.
Brokerage fees and custodian fees
The brokerage fee incurred in purchasing a receipt will be treated as
part of the cost of the underlying securities. Accordingly, a holder includes
this fee in its tax basis in the underlying securities. A holder will allocate
the brokerage fee among the underlying securities using either a fair market
value allocation or pro rata based on the number of shares of each underlying
security. Similarly, the brokerage fee incurred in selling ABC HOLDRS will
reduce the amount realized with respect to the underlying securities.
A holder will be required to include in its income the full amount of
dividends paid on the underlying securities, even though the depositary trust
agreement provides that the custodian fees will be deducted directly from any
dividends paid. These custodian fees will be treated as an expense incurred in
connection with a holder's investment in the underlying securities and may be
deductible. If a holder is an individual, estate or trust, however, the
deduction of its share of custodian fees will be a miscellaneous itemized
deduction that may be disallowed in whole or in part.
Special considerations with respect to underlying securities of foreign issuers
With respect to underlying securities of foreign issuers, the gross
amount of any taxable cash distribution will not be eligible for the dividends
received deduction generally allowed to corporate U.S. receipt holders.
If a foreign issuer pays a dividend in a currency other than in U.S.
dollars, the amount of the dividend for U.S. federal income tax purposes will be
the U.S. dollar value (determined at the spot rate on the date of the payment)
regardless of whether the payment is later converted into U.S. dollars. In this
case, the U.S. receipt holder may recognize ordinary income or loss as a result
of currency fluctuations between the date on which the dividend is paid and the
date the dividend amount is converted into U.S. dollars.
Subject to conditions and limitations, any foreign tax withheld on
dividends may be deducted from taxable income or credited against a U.S. receipt
holder's U.S. federal income tax liability. The limitation on foreign taxes
eligible for the U.S. foreign tax credit is calculated separately with respect
to specific classes of income. For this purpose, dividends distributed by a
foreign issuer generally will constitute "passive income" or, in the case of
some U.S. holders, "financial services income." For purposes of the U.S. foreign
tax credit limitation, dividends received by a U.S. receipt holder with respect
to an underlying security of a foreign issuer generally will be treated as
foreign source income while any gain or loss recognized from the sale of such
security generally will be treated as from sources within the United States. The
rules relating to the determination of the foreign tax credit are complex and we
recommend that U.S. receipt holders consult their own tax advisors to determine
whether and to what extent a credit would be available.
Dividends and distributions made by a foreign issuer may be subject to
a withholding tax. Some foreign issuers have made arrangements through which
holders of their American depositary shares can apply for a refund of withheld
taxes. It is expected that holders of ABC HOLDRS will be able to use these
arrangements to apply for a refund of withheld taxes.
Additionally, special U.S. federal income tax rules apply to U.S.
persons owning shares of a "passive foreign investment company" (a "PFIC"). We
do not believe that any of the foreign issuers of the underlying securities is
currently a PFIC and do not anticipate that any issuer will become a PFIC in the
future, although no assurances can be made that the applicable tax law or other
relevant circumstances will not change in a manner which affects the PFIC
determination. A foreign corporation generally will be classified as a PFIC for
U.S. federal income tax purposes in any taxable year in which, after applying
relevant look-through rules, either:
o at least 75 % of its gross income is "passive income"; or
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<PAGE>
o on average at least 50% of the gross value of its assets is
attributable to assets that produce "passive income" or are held
for the production of passive income.
Passive income for this purpose generally includes dividends, interest,
royalties, rents, and gains from commodities and securities transactions.
If a corporation were classified as a PFIC, a U.S. receipt holder could
be subject to increased tax liability, possibly including an interest charge,
upon the sale or other disposition of the ABC HOLDRS or of the underlying
securities or upon the receipt of "excess distributions", unless the U.S.
receipt holder elected to be taxed currently on its pro rata portion of the
corporation's income, whether or not the income was distributed in the form of
dividends or otherwise.
Non-U.S. receipt holders
A non-U.S. receipt holder generally will be subject to U.S. withholding
tax at a rate of 30% or a lower rate as may be specified by an applicable tax
treaty with respect to dividends received on underlying securities of U.S.
issuers. However, if that income is effectively connected with a U.S. trade or
business conducted by the holder or, where a tax treaty applies, is attributable
to a permanent establishment maintained in the United States by the holder, then
those dividends will be exempt from withholding tax, provided the holder
complies with applicable certification and disclosure requirements.
A non-U.S. receipt holder generally will not be subject to U.S. federal
income or withholding tax with respect to dividends received on underlying
securities of foreign issuers, unless that income is effectively connected with
a U.S. trade or business conducted by the holder or, where a tax treaty applies,
is attributable to a permanent establishment maintained in the United States by
the holder.
With respect to dividends of both U.S. and foreign issuers, a non-U.S.
receipt holder's dividends that are effectively connected with a U.S. trade or
business or dividends attributable to a permanent establishment, net of relevant
deductions and credits, will be subject to U.S. federal income taxation at the
same graduated rates applicable to U.S. persons. In addition to this graduated
tax, effectively connected dividends or dividends attributable to a permanent
establishment received by a corporate non-U.S. receipt holder may also be
subject to a branch profits tax at a rate of 30% or such lower rate as may be
specified by an applicable tax treaty. Under some circumstances, a non-U.S.
receipt holder whose dividends are so effectively connected or attributable
shall be entitled to a dividends received deduction equal to 70% or 80% of the
amount of the dividend.
A non-U.S. receipt holder that is eligible for a reduced rate of
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the Internal
Revenue Service.
A non-U.S. receipt holder generally will not be subject to U.S. federal
income or withholding tax with respect to gain recognized upon the sale or other
disposition of ABC HOLDRS or of the underlying securities unless:
o that gain is effectively connected with a U.S. trade or business
conducted by the holder or, where a tax treaty applies, is
attributable to a permanent establishment maintained in the
United States by the holder,
o in the case of any gain realized by an individual Non-U.S.
receipt holder, the holder is present in the United States for
183 days or more in the taxable year of the sale or other
disposition and certain other conditions are met, or
o the underlying securities issuer is or has been a U.S. real
property holding corporation for U.S. federal income tax purposes
at any time during the shorter of the five-year period ending on
the
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date of the disposition or the period during which the
non-U.S. receipt holder held the common stock of such issuer and
(a) the common stock is not considered to be "regularly traded on
an established securities market" or (b) the non-U.S. receipt
holder owned, actually or constructively, at any time during the
shorter of the periods described above, more than 5% of the
common stock of such issuer.
Effectively connected or attributable gains generally will be subject
to U.S. federal income taxation at the same graduated rates applicable to U.S.
persons, and may, in the case of a corporate non-U.S. receipt holder, also be
subject to the branch profits tax. We recommend that non-U.S. receipt holders
consult their own tax advisors to determine whether any applicable tax treaties
provide for different rules.
The preceding discussion does not address all aspects of U.S. federal
income taxation that may be relevant in light of a non-U.S. receipt holder's or
an issuer's particular facts and circumstances. We recommend that investors
consult their own tax advisors.
Backup withholding tax, withholding tax and information reporting requirements
Final U.S. Treasury Regulations relating to backup withholding,
withholding and information reporting have been issued that modify certain rules
with respect to payments made after December 31, 2000. Investors are urged to
consult their own tax advisors regarding the application of the backup
withholding, withholding and information reporting requirements, including the
new regulations, with respect to their particular circumstances.
ERISA CONSIDERATIONS
Any plan fiduciary which proposes to have a plan acquire ABC HOLDRS
should consult with its counsel with respect to the potential applicability of
ERISA and the 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 ABC HOLDRS is appropriate for the plan, taking into account the
overall investment policy of the plan and the composition of the plan's
investment portfolio.
PLAN OF DISTRIBUTION
In accordance with the 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 ABC HOLDRS. [ ], the selling group, propose to offer the ABC
HOLDRS to the public at the offering price set forth on the cover page of this
prospectus which includes an underwriting fee of 2%. Merrill Lynch, Pierce,
Fenner & Smith Incorporated will provide ABC HOLDRS to [ ] at the public
offering price, as set forth on the cover page of this prospectus, less a
concession that is not in excess of [ ]%. The selling group may allow to certain
dealers, and the dealers may reallow, a discount on sales of ABC HOLDRS not in
excess of [ ]% of the public offering price, as set forth on the cover page of
this prospectus. We expect the trust to deliver the initial distribution of ABC
HOLDRS against deposit of the underlying securities in New York, New York on ,
2000. After the initial offering, the public offering price, concession and
discount may be changed. The trust will continue to issue ABC 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, sales will not be made to a discretionary account
without the prior written approval of a purchaser of ABC HOLDRS.
Members of the selling group and their affiliates have from time to
time provided investment banking and other financial services to some of the
issuers of the underlying securities and expect in the future to provide these
services, for which they have received and will receive customary fees and
commissions. They also may have served as counterparties in other transactions
with some of the issuers of the underlying securities.
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Merrill Lynch, Pierce, Fenner & Smith Incorporated may use this
prospectus, as updated from time to time, in connection with offers and sales
related to market-making transactions in the ABC HOLDRS. Merrill Lynch, Pierce,
Fenner & Smith Incorporated may act as principal or agent in these transactions.
Market-making sales will be made at prices related to prevailing market prices
at the time of sale.
Merrill Lynch, Pierce, Fenner & Smith Incorporated has agreed to
indemnify the trustee against some civil liabilities related to acts performed
or not performed by the trustee in accordance with the depositary trust
agreement or periodic reports filed or not filed with the SEC with respect to
the ABC HOLDRS. Should a court determine not to enforce the indemnification
provision, Merrill Lynch, Pierce, Fenner & Smith Incorporated also has agreed to
contribute to payments the trustee may be required to make with respect to these
liabilities.
LEGAL MATTERS
Legal matters, including the validity of the ABC HOLDRS, will be passed
upon for Merrill Lynch, Pierce, Fenner & Smith Incorporated, the initial
depositor and the underwriters, by Shearman & Sterling, New York, New York.
Shearman & Sterling, as special U.S. tax counsel to the trust, also will render
an opinion regarding the material federal income tax consequences relating to
the ABC HOLDRS.
WHERE YOU CAN FIND MORE INFORMATION
Merrill Lynch, Pierce, Fenner & Smith Incorporated has filed a
registration statement on Form S-1 with the SEC covering the ABC HOLDRS. While
this prospectus is a part of the registration statement, it does not contain all
the exhibits filed as part of the registration statement. You should consider
reviewing the full text of those exhibits.
The registration statement is available over the Internet at the SEC's
Web site at http://www.sec.gov. You also may read and copy the registration
statement at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more
information on the public reference rooms and their copy charges. Merrill Lynch,
Pierce, Fenner & Smith Incorporated will not file any reports pursuant to the
Exchange Act. The trust will file modified reports pursuant to the Exchange Act.
Because the securities of the issuers of the underlying securities are
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. However, some of the issuers of the underlying securities are
considered foreign issuers. The requirements for filing periodic financial and
other information for foreign issuers differ from that of domestic issuers. In
particular, foreign issuers are not required to file quarterly reports with the
SEC and are not required to file periodic financial and other information on
EDGAR. Therefore, this information may not be accessible through the SEC's Web
site. 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 the selling group and their affiliates are not affiliated
with the issuers of the underlying securities, and the issuers of the underlying
securities have no obligations with respect to ABC HOLDRS. This prospectus
relates only to ABC HOLDRS and does not relate to the other securities of the
issuers of the underlying securities. The information in this prospectus
regarding the issuers of the underlying securities has been derived from the
publicly available documents described in the preceding paragraph. We have not
participated in the preparation of these documents or made any due diligence
inquiries with respect to the issuers of the underlying securities in connection
with ABC HOLDRS. We make no representation that these publicly available
documents or any other publicly available information regarding the issuers of
the underlying securities are accurate or
23
<PAGE>
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 securities of the issuers
of the underlying securities, and therefore the offering and trading prices of
the ABC HOLDRS have been publicly disclosed.
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<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 U.S.
trading market, of each of the underlying securities in each month during 1995,
1996, 1997, 1998, 1999 and 2000 through [ ] 2000. All market prices in excess of
one dollar are rounded to the nearest one sixty-fourth of a dollar. A table
outlining the primary U.S. stock market on which the securities of the issuers
are listed can be found on page 10. The primary foreign stock market on which
the securities of the foreign issuers included in the ABC HOLDRS are listed is
described below. An asterisk (*) denotes that no shares of the issuer were
trading on a U.S. stock market during that month. The historical prices of the
underlying securities should not be taken as an indication of future
performance.
25
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================================================================================
LOGO
[ ] Depositary Receipts
ABC HOLDRS SM Trust
-----------------------------------
P R O S P E C T U S
-----------------------------------
Merrill Lynch & Co.
[ ]
, 2000
Until , 2000 (25 days after the date of this prospectus), all dealers
effecting transactions in the offered ABC HOLDRS, whether or not participating
in this distribution, may be required to deliver a prospectus. This requirement
is in addition to the obligations of dealers to deliver a prospectus when acting
as underwriters and with respect to unsold allotments or subscriptions.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses expected to be incurred in connection with the issuance
and distribution of the securities being registered, other than underwriting
compensation, are as set forth below. Except for the registration fee payable to
the Securities and Exchange Commission, all such expenses are estimated:
Securities and Exchange Commission registration fee..............$2,640
Printing and engraving expenses..................................
Legal fees and expenses..........................................
Miscellaneous....................................................
------
Total......................................................$
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, provides that under certain circumstances a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or is
or was serving at its request in such capacity in another corporation or
business association, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.
Article XIV, Section 2 of the Restated Certificate of Incorporation of
Merrill Lynch, Pierce, Fenner & Smith Incorporated provides in effect that,
subject to certain limited exceptions, Merrill Lynch, Pierce, Fenner & Smith
Incorporated shall indemnify its directors and officers to the full extent
authorized or permitted by law.
The directors and officers of Merrill Lynch, Pierce, Fenner & Smith
Incorporated are insured under policies of insurance maintained by Merrill
Lynch, Pierce, Fenner & Smith Incorporated, subject to the limits of the
policies, against certain losses arising from any claim made against them by
reason of being or having been such directors or officers. In addition, Merrill
Lynch, Pierce, Fenner & Smith Incorporated has entered into contracts with all
of its directors providing for indemnification of such persons by Merrill Lynch,
Pierce, Fenner & Smith Incorporated to the full extent authorized or permitted
by law, subject to certain limited exceptions.
Item 16. Exhibits.
See Exhibit Index.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
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(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of the prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(5) For purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to Item 15 of this
registration statement, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant hereby certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-1 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, on December 15, 2000.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Ahmass L. Fakahany
----------------------------------
Ahmass L. Fakahany
Senior Vice President and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Joseph Moglia and Stephen G. Bodurtha and each of
them, with full power to act without the other, his true and lawful
attorneys-in-fact and agents with full and several power of substitution, for
him and in his name, place and stead, in any and all capacities, to sign any and
all amendments, including post-effective amendments, and supplements to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 15, 2000.
Signature Title
--------- -----
/s/ John L. Steffens
---------------------------------
John L. Steffens Chief Executive Officer,
Chairman of the Board
and Director
/s/ E. Stanley O'Neal
---------------------------------
E. Stanley O'Neal Director
/s/ George A. Schieren
---------------------------------
George A. Schieren Director
/s/ Thomas H. Patrick
---------------------------------
Thomas H. Patrick Director
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/s/ Ahmass L. Fakahany
---------------------------------
Ahmass L. Fakahany Senior Vice President
and Chief Financial
Officer
/s/ Dominic Carone
---------------------------------
Dominic Carone First Vice President
and Controller
II-4
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INDEX TO EXHIBITS
Exhibits
*4.1 Standard Terms for Depositary Trust Agreements between Merrill
Lynch, Pierce, Fenner & Smith Incorporated and The Bank of New York, as
Trustee dated as of September 2, 1999, and included as exhibits
thereto, form of Depositary Trust Agreement and form of HOLDRS
*5.1 Opinion of Shearman & Sterling regarding the validity of the ABC HOLDRS
Receipts
*8.1 Opinion of Shearman & Sterling, as special U.S. tax counsel regarding
the material federal income tax consequences
24.1 Power of Attorney (included in Part II of Registration Statement)
-------------------------
* To be filed by amendment.
