-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GuLvs1cksmBUCWg3lRFlVJS1R7UMBVItyF/jEIX6RbPdAz79LUlgU28KR8Jw56cH Cj6f1LNhEQspZuy/HK+EzQ== 0000947871-04-002404.txt : 20041025 0000947871-04-002404.hdr.sgml : 20041025 20041025165622 ACCESSION NUMBER: 0000947871-04-002404 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20041025 DATE AS OF CHANGE: 20041025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH PIERCE FENNER & SMITH INC CENTRAL INDEX KEY: 0000728612 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 333-92161 FILM NUMBER: 041094478 BUSINESS ADDRESS: STREET 1: 4 WORLD FINANCIAL CENTER STREET 2: NORTH TOWER FL 12 CITY: NEW YORK STATE: NY ZIP: 10080 BUSINESS PHONE: 2124496202 MAIL ADDRESS: STREET 1: 4 WORLD FINANCIAL CENTER STREET 2: NORTH TOWER FL 12 CITY: NEW YORK STATE: NY ZIP: 10080 POS AM 1 posam_101904-pharmaceutical.txt POST EFFECTIVE AMENDMENT NO. 6 TO S-1 As filed with the Securities and Exchange Commission on October 25, 2004 Registration No. 333-92161 333-95805 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- POST-EFFECTIVE AMENDMENT NO. 6 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated Initial Depositor (Exact name of registrant as specified in charter) ---------------- Pharmaceutical HOLDRS(SM) Trust [Issuer with respect to the receipts]
Delaware 6211 13-5674085 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification incorporation or organization) Classification Code Number) Number)
---------------- 250 Vesey Street New York, New York 10281 (212) 449-1000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ---------------- Copies to: Judith Witterschein, Esq. Andrew B. Janszky, Esq. Corporate Secretary Shearman & Sterling LLP 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) 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. [_] ================================================================================ PROSPECTUS [Graphic Omitted] 1,000,000,000 Depositary Receipts Pharmaceutical HOLDRS(SM) Trust The Pharmaceutical HOLDRS(SM) Trust issues Depositary Receipts called Pharmaceutical HOLDRS(SM) representing your undivided beneficial ownership in the U.S.-traded common stock of a group of specified companies that are involved in various segments of the pharmaceutical industry. The Bank of New York is 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 10. The Pharmaceutical HOLDRS trust will issue Pharmaceutical HOLDRS on a continuous basis. Investing in Pharmaceutical HOLDRS involves significant risks. See "Risk Factors" starting on page 4. Pharmaceutical HOLDRS are neither interests in nor obligations of Merrill Lynch, Pierce, Fenner & Smith Incorporated. Pharmaceutical HOLDRS are not interests in The Bank of New York, as trustee. Please see "Description of the Depositary Trust Agreement" in this prospectus for a move complete description of the duties and responsibilities of the trustee, including the obligation of the trustee to act without negligence or bad faith. The Pharmaceutical HOLDRS are listed on the American Stock Exchange under the symbol "PPH". On October 20, 2003 the last reported sale price of the Pharmaceutical HOLDRS on the American Stock Exchange was $68.63. --------------- 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. --------------- The date of this prospectus is October 25, 2004. "HOLDRS" and "HOLding Company Depositary ReceiptS" are service marks of Merrill Lynch & Co., Inc. TABLE OF CONTENTS Page ---- SUMMARY.....................................................................3 RISK FACTORS................................................................4 HIGHLIGHTS OF PHARMACEUTICAL HOLDRS........................................10 THE TRUST..................................................................18 DESCRIPTION OF PHARMACEUTICAL HOLDRS.......................................18 DESCRIPTION OF THE UNDERLYING SECURITIES...................................20 DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT..............................22 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES..............................26 ERISA CONSIDERATIONS.......................................................31 PLAN OF DISTRIBUTION.......................................................31 LEGAL MATTERS..............................................................31 WHERE YOU CAN FIND MORE INFORMATION........................................32 --------------- 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. The Pharmaceutical HOLDRS are not registered for public sale outside of the United States. Non-U.S. receipt holders should refer to "United States 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 Pharmaceutical HOLDRS or of the underlying securities through an investment in the Pharmaceutical HOLDRS. 2 SUMMARY The Pharmaceutical HOLDRS trust was 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 currently holds shares of common stock issued by a group of specified companies that were, at the time of the initial offering, generally considered to be involved in various segments of the pharmaceutical industry. The number of shares of each company's common stock currently 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, and the securities of any company that may be added to the Pharmaceutical HOLDRS, are collectively referred to in this prospectus as the underlying securities. There are currently 22 companies included in the Pharmaceutical HOLDRS, which may change as a result of reconstitution events, distributions of securities by underlying issuers or other events. The Pharmaceutical HOLDRS are separate from the underlying securities that are represented by the Pharmaceutical HOLDRS. On October 20, 2004 there were 10,497,400 Pharmaceutical HOLDRS outstanding. 3 RISK FACTORS An investment in Pharmaceutical HOLDRS involves risks similar to investing directly in each of the underlying securities outside of the Pharmaceutical HOLDRS, including the risks associated with a concentrated investment in the pharmaceutical industry. General Risk Factors o Loss of investment. Because the value of Pharmaceutical HOLDRS directly relates to the value of the underlying securities, you may lose a substantial portion of your investment in the Pharmaceutical HOLDRS if the underlying securities decline in value. o Discount trading price. Pharmaceutical HOLDRS may trade at a discount to the aggregate value of the underlying securities. o Ownership of only fractional shares in the underlying securities. As a result of distributions of securities by companies included in the Pharmaceutical HOLDRS or other corporate events, such as mergers, a Pharmaceutical HOLDR may represent an interest in a fractional share of an underlying security. You will only be entitled to voting, distribution and other beneficial ownership rights in the underlying securities in which you own only fractional shares to the extent that the depositary aggregates your fractional shares with the other shares of such underlying securities and passes on beneficial ownership rights, including distribution and voting rights, to you based on your proportional, fractional shares in the underlying securities. In addition, if you surrender your Pharmaceutical HOLDRS to receive the underlying securities you will receive cash in lieu of your fractional shares. You will not be entitled to any securities if your interest in an underlying security is only a fraction of a share. o Not necessarily representative of the pharmaceutical industry. At the time of the initial offering, the companies included in the Pharmaceutical HOLDRS were generally considered to be involved in various segments of the pharmaceutical industry, however, the market price of the underlying securities and the Pharmaceutical HOLDRS may not necessarily follow the price movements of the entire pharmaceutical industry. If the underlying securities decline in value, your investment in the Pharmaceutical HOLDRS will decline in value, even if common stock prices of companies in the pharmaceutical industry generally increase in value. In addition, since the time of the initial offering, the companies included in the Pharmaceutical HOLDRS, may not be involved in the pharmaceutical industry. In this case, the Pharmaceutical HOLDRS may not consist of securities issued only by companies involved in the pharmaceutical industry. o Not necessarily comprised of solely pharmaceutical companies. As a result of distributions of securities by companies included in the Pharmaceutical HOLDRS or other corporate events, such as mergers, securities of companies that are not currently included in the Pharmaceutical HOLDRS and that are not involved in the pharmaceutical industry may be included in the Pharmaceutical HOLDRS. The securities of a new company will only be distributed from the Pharmaceutical HOLDRS if the securities have a different Standard & Poor's Corporation sector classification than any of the underlying issuers included in Pharmaceutical HOLDRS at the time of the distribution or the corporate event or if the securities are not listed for trading on a U.S. national securities exchange or through the Nasdaq National Market System. As of January 2, 2002, Standard & Poor's Corporation sector classifications are based upon the Standard & Poor's Global Industry Classification Standard ("GICS") sectors. As there are only 10 broadly defined GICS sector classifications, the use of GICS sectors to determine whether a new company will be included in the Pharmaceutical HOLDRS provides no assurance that each new company included in the Pharmaceutical HOLDRS will be involved in the pharmaceutical industry. Currently, the underlying securities included in the Pharmaceutical HOLDRS are represented in the Health Care GICS sector. As each Standard & Poor's GICS sector is defined so broadly, the securities of a new company could have the same GICS sector classification as a company currently included in the Pharmaceutical HOLDRS yet not be involved in the pharmaceutical industry. In addition the GICS sector classifications of securities included in the Pharmaceutical HOLDRS may change over time if the companies that issued these securities change their focus of operations or if Standard & Poor's alters the criteria it uses to determine GICS sectors, or both. Therefore, additional GICS sectors may be represented in the Pharmaceutical HOLDRS, 4 which may also result in the inclusion in the Pharmaceutical HOLDRS of the securities of a new company that is not involved in the pharmaceutical industry. o No investigation of underlying securities. The underlying securities initially included in the Pharmaceutical HOLDRS were selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated based on the market capitalization of the 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 each of their respective 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 respective affiliates. o Loss of diversification. As a result of industry developments, reorganizations or market fluctuations affecting issuers of the underlying securities, Pharmaceutical HOLDRS may not necessarily be a diversified investment in the pharmaceutical industry. In addition, reconstitution events, distributions of securities by an underlying issuer or other events, which may result in the distribution of securities from, or the inclusion of additional securities in, the Pharmaceutical HOLDRS, may also reduce diversification. 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. o Conflicting investment choices. In order to sell one or more of the underlying securities individually, participate in any form of stock repurchase program by an issuer of an underlying security or 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 or any form of stock repurchase program. If you choose not to cancel your Pharmaceutical HOLDRS you cannot participate in a tender offer or any form of stock repurchase program relating to an underlying security. The cancellation of Pharmaceutical HOLDRS will involve payment of a cancellation fee to the trustee. o Trading halts. Trading in Pharmaceutical HOLDRS on the American Stock Exchange may be halted if trading in one or more of the underlying securities is halted. Trading in Pharmaceutical HOLDRS may be halted even if trading continues in some or all of the underlying securities. If trading is halted in Pharmaceutical HOLDRS, you will not be able to trade Pharmaceutical HOLDRS and will only be able to trade the underlying securities if you cancel your Pharmaceutical 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 Pharmaceutical HOLDRS. If the Pharmaceutical HOLDRS are delisted by the American Stock Exchange, a termination event will result unless the Pharmaceutical HOLDRS are listed for trading on another U.S. national securities exchange or through the Nasdaq National Market System within five business days from the date the Pharmaceutical HOLDRS are delisted. There are currently 21 companies whose securities are included in the Pharmaceutical HOLDRS. o Possible conflicts of interest. Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, selected the underlying securities that were originally included in the Pharmaceutical HOLDRS and may face possible conflicts of interest as Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates may engage in investment banking or may provide other services for issuers of the underlying securities. o Delays in distributions. The depositary trust agreement provides that the trustee will use its reasonable efforts to distribute any cash or other distributions paid in respect of the underlying securities to you as soon as practicable after receipt of such distribution. However, you may receive such cash or other distributions later than you would if you owned the underlying securities outside of the Pharmaceutical HOLDRS. In addition, you will not be entitled to any interest on any distribution by reason of any delay in distribution by the depositary. 5 Risk Factors Specific to the Pharmaceutical Industry o 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: o announcements of technological innovations or new commercial products; o developments in patent or proprietary rights; o government regulatory initiatives; o public concern as to the safety or other implications of pharmaceutical products; o fluctuations in quarterly and annual financial results; o market conditions; and o difficulty in obtaining additional financing. In addition, the trading prices of some pharmaceutical stocks in general have experienced extreme price and volume fluctuations recently. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. The valuations of many pharmaceutical stocks are high when measured by conventional valuation standards, such as price to earnings and price to sales ratios. Some of the companies do not, or in the future might not, have earnings. As a result, these trading prices may decline substantially and valuations may not be sustained. Any negative change in the public's perception of the prospects of pharmaceutical companies, generally, could depress the stock prices of a pharmaceutical company regardless of pharmaceutical companies' results. Other broad market and industry factors may decrease the stock price of pharmaceutical stocks, regardless of their operating results. Market fluctuations, as well as general political and economic conditions, such as recession, war or interest rate or currency rate fluctuations, also may decrease the market price of pharmaceutical stocks. As a result of fluctuations in trading prices of the companies included in the Pharmaceutical HOLDRS, the trading price of Pharmaceutical HOLDRS has fluctuated significantly. The initial offering price of a Pharmaceutical HOLDR, on September 26, 2000 was $98.21, and during 2003, the price of a Pharmaceutical HOLDR reached a high of $85.06 and a low of $69.01. o 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. o 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 6 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. o 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. o 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. o 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. o 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. o The international operations of many pharmaceutical companies expose them to risks associated with instability and changes in economic and political conditions, foreign currency fluctuations, changes in foreign 7 regulations and other risks inherent to international business. Many pharmaceutical companies have international operations and derive substantial revenue from international sales. The risks of international business that the companies are exposed to include the following: o general economic, social, and political conditions; o the difficulty of enforcing intellectual property rights; agreements and collecting receivables through certain foreign legal systems; o differing tax rates, tariffs, exchange controls, or other similar restrictions; o volatility of currency markets and value of worldwide financial markets; and o changes in, and compliance with, domestic and foreign laws and regulations which impose a range of restrictions on operations, trade practices, foreign trade and international investment decisions. o 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. o 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. o Companies whose securities are included in the Pharmaceutical HOLDRS may need additional financing, which may be difficult to obtain. Failure to obtain necessary financing or doing so on unattractive terms could adversely affect development and marketing efforts and other operations of companies whose securities are included in the Pharmaceutical HOLDRS. Companies whose securities are included in Pharmaceutical HOLDRS may need to raise additional capital in order to fund the continued development and marketing of their products or to fund strategic acquisitions or investments. Their ability to obtain additional financing will depend on a number of factors, including market conditions, operating performance and investor interest. These factors may make the timing, amount, terms and conditions of any financing unattractive. If adequate funds are not available or are not available on acceptable terms, companies whose securities are included in the Pharmaceutical HOLDRS may have to forego strategic acquisitions or investments, reduce or defer their development activities, or delay their introduction of new products and services. Any of these actions may reduce the market price of stocks in the pharmaceutical industry. o One company currently included in the Pharmaceutical HOLDRS, Andrx Corporation Andrx Group is a tracking stock and is therefore subject to additional risks relating to an investment in a tracking stock. The risks associated with tracking stocks include the following: 8 o Stockholders of a tracking stock remain invested in the entire company issuing the tracking stock, even though the tracking stock is intended to reflect the operating performance of specific operations of a company's business. As a result, the performance and financial results of the operations of Andrx Corporation that are not tracked by the Andrx Group tracking stock could negatively affect the market price of the Andrx Group tracking stock and the Pharmaceutical HOLDRS and the market price of the Andrx Group tracking stock may not reflect the performance of the operations the tracking stock is intended to reflect. o A holder of tracking stock does not have any direct voting rights to elect the management of the operations represented by the tracking stock or to make fundamental decisions affecting the tracked operations. The holders of tracking stock have voting rights that are similar to that of common shareholders of the company that issued the tracking stock, and would, along with the other shareholders, be limited to electing the management of the entire company rather than the management of the tracked operations. In addition, all of the shareholders of the company may be entitled to vote on fundamental decisions affecting the tracked operations. Consequently, the management of the company may make operational, financial and other decisions that may not be in the best interests of the holders of the Andrx Group tracking stock or that favor the other shareholders to the detriment of the Andrx Group tracking stock. For example, management of the company may decide to sell assets or discontinue operations relating to the operations tracked by the Andrx Group tracking stock without the consent of the holders of the tracking stock and the consideration received on any sale of assets may be less than what would be received if the tracked operations were a separate company. In addition, management of the company could adversely change the terms of the tracking stock without seeking the approval of a majority of the holders of the tracking stock affected by the change. o In the event of a dissolution of Andrx Corporation, the holders of the Andrx Group tracking stock will not have preferential rights to the respective assets of the tracked operations and these assets may become subject to liabilities attributable to the rest of Andrx Corporation. In addition, any payment to the holders of the tracking stock as a result of a dissolution may be allocated by a specified formula regardless of the Andrx Group tracking stock's relative contribution to the company as a whole. o On each additional issuance of any class of stock by Andrx Corporation, the voting rights, rights on dissolution and rights to dividends on Andrx Group tracking stock will be diluted. In addition, any additional issuances of Andrx Group tracking stock could dilute the value of the Andrx Group tracking stock and the proceeds received on any additional issuance may not be allocated to the operations represented by the tracking stock. Generally, the terms of a tracking stock differ from those of the common stock of the same company. Please see the public filings of Andrx Corporation for more information on the Andrx Group tracking stock. For information on where you can access Andrx Corporation's public filings, please see "Where You Can Find More Information." 9 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 was 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 and was amended on November 22, 2000. 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, is the trustee and receives compensation as set forth in the depositary trust agreement. The trustee is responsible for receiving deposits of underlying securities and delivering Pharmaceutical HOLDRS representing the underlying securities issued by the trust. The Trustee holds the underlying securities on behalf of the holders of Pharmaceutical HOLDRS. 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 buying and selling Pharmaceutical HOLDRS in the secondary market are expected to be less than separately buying and selling each of the underlying securities in a traditional brokerage account with transaction-based charges. Trust assets.......................... The trust holds shares of common stock issued by specified companies that, when initially selected, were involved in the pharmaceutical industry. Except when a reconstitution event, distribution of securities by an underlying issuer or other 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-- Distributions" and "--Reconstitution events." There are currently 21 companies included in 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. 10 The Pharmaceutical HOLDRS............. The trust has issued, and may continue to issue, Pharmaceutical HOLDRS that represent an undivided beneficial ownership interest in the shares of common stock that are held by the trust. The Pharmaceutical HOLDRS themselves are separate from the underlying securities that are represented by the Pharmaceutical HOLDRS. The following chart provides: o the names of the 21 issuers of the underlying securities currently represented by a Pharmaceutical HOLDR, o the stock ticker symbols, o the share amounts currently represented by a round-lot of 100 Pharmaceutical HOLDRS, and o the principal U.S. market on which the common stock of the selected companies are traded.
Primary Share Trading Name of Company Ticker Amounts Market --------------- ------ ------- ------- Abbott Laboratories ABT 14 NYSE Allergan, Inc. AGN 1 NYSE Andrx Corporation-Andrx ADRX 2 NASDAQ Group Advanced Medical Optics, Inc. AVO 0.2222 NYSE Biovail Coporation BVF 4 NYSE Bristol-Myers Squibb Company BMY 18 NYSE Eli Lilly & Company LLY 10 NYSE Forest Laboratories, Inc. FRX 4 NYSE Hospira, Inc. HSP 1.4 NYSE IVAX Corporation IVX 2.3438 AMEX Johnson & Johnson JNJ 26 NYSE King Phamaceuticals, Inc. KG 4.25 NYSE Medco Health Solutions MHS 2.653 NYSE Merck & Co., Inc. MRK 22 NYSE Mylan Laboratories, Inc. MYL 2.25 NYSE Pfizer Inc. PFE 58 NYSE Schering-Plough Corporation SGP 14 NYSE Valeant Pharmaceuticals VRX 1 NYSE Watson Pharmaceuticals, Inc. WPI 1 NYSE Wyeth WYE 12 NYSE Zimmer Holdings, Inc. ZMH 1.8 NYSE
The companies whose common stocks were included in the Pharmaceutical HOLDRS at the time the Pharmaceutical HOLDRS were originally issued generally were 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 market 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 11 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. Purchases............................. You may acquire Pharmaceutical HOLDRS in two ways: o through an in-kind deposit of the required number of shares of common stock of the underlying issuers with the trustee, or o through a cash purchase in the secondary trading market. Issuance and cancellation fees........ 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, you will be responsible for paying any sales commission associated with your purchase of the underlying securities that is charged by your broker, in addition to the issuance fee charged by the trustee described above. 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. 12 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 the fractional share in the market and the trust, in turn, will deliver cash in lieu of such fractional 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........................ Pharmaceutical HOLDRS represents your beneficial ownership of the underlying securities. Owners of Pharmaceutical HOLDRS have the same rights and privileges as if they owned the underlying securities beneficially outside of Pharmaceutical HOLDRS. These include the right to instruct the trustee to vote the underlying securities or you may attend shareholder meetings yourself, the right to receive any dividends and other distributions on the underlying securities that are declared and paid to the trustee by an issuer of an underlying security, the right to pledge Pharmaceutical HOLDRS and the right to surrender Pharmaceutical HOLDRS to receive the underlying securities. Pharmaceutical HOLDRS does not change your beneficial ownership in the underlying securities under United States federal securities laws, including sections 13(d) and 16(a) of the Securities Exchange Act of 1934. As a result, you have the same obligations to file insider trading reports that you would have if you held the underlying securities outside of Pharmaceutical HOLDRS. However, due to the nature of Pharmaceutical HOLDRS, you will not be able to participate in any dividend reinvestment program of an issuer of underlying securities unless you cancel your Pharmaceutical HOLDRS (and pay the applicable fees) and receive all of the underlying securities. A holder of Pharmaceutical HOLDRS is not a registered owner of the underlying securities. In order to become a registered owner, a holder of Pharmaceutical HOLDRS would need to surrender their Pharmaceutical HOLDRS, pay the applicable fees and expenses, receive all of the underlying securities and follow the procedures established by the issuers of the underlying securities for registering their securities in the name of such holder. You retain the right to receive any reports and communications that the issuers of underlying securities are required to send to beneficial owners of their securities. As such, you will receive such reports and communications from the broker through which you hold your Pharmaceutical HOLDRS in the same manner as if you beneficially owned your underlying securities outside of Pharmaceutical HOLDRS in "street name" through a brokerage account. The trustee will not attempt to exercise the right to vote that attaches to, or give a proxy with respect to, the underlying securities other than in accordance with your instructions. The depositary trust agreement entitles you to receive, subject to certain limitations and net of any fees and expenses of the trustee, any distributions of cash (including dividends), securities or property made with respect to 13 the underlying securities. However, any distribution of securities by an issuer of underlying securities will be deposited into the trust and will become part of the underlying securities unless the distributed securities are not listed for trading on a U.S. national securities exchange or through the Nasdaq National Market System or the distributed securities have a Standard & Poor's GICS sector classification that is different from the GICS sector classifications represented in the Pharmaceutical HOLDRS at the time of the distribution. In addition, if the issuer of underlying securities offers rights to acquire additional underlying securities or other securities, the rights may be distributed to you, may be disposed of for your benefit or may lapse. There may be a delay between the time any cash or other distribution is received by the trustee with respect to the underlying securities and the time such cash or other distributions are distributed to you. In addition, you are not entitled to any interest on any distribution by reason of any delay in distribution by the trustee. If any tax or other governmental charge becomes due with respect to Pharmaceutical HOLDRS or any underlying securities, you will be responsible for paying that tax or governmental charge. If you wish to participate in a tender offer for any of the underlying securities, or any form of stock repurchase program by an issuer of an underlying security, you must surrender your Pharmaceutical HOLDRS (and pay the applicable fees and expenses) and receive all of your underlying securities in exchange for your Pharmaceutical HOLDRS. For specific information about obtaining your underlying securities, you should read the discussion under the caption "Description of the Depositary Trust Agreement--Withdrawal of underlying securities." Ownership rights in fractional shares in the underlying securities... As a result of distributions of securities by companies included in the Pharmaceutical HOLDRS or other corporate events, such as mergers, a Pharmaceutical HOLDR may represent an interest in a fractional share of an underlying security. You are entitled to receive distributions proportionate to your fractional shares. In addition, you are entitled to receive proxy materials and other shareholder communications and you are entitled to exercise voting rights proportionate to your fractional shares. The trustee will aggregate the votes of all of the share fractions represented by Pharmaceutical HOLDRS and will vote the largest possible number of whole shares. If, after aggregation, there is a fractional remainder, this fraction will be ignored, because the issuer will only recognize whole share votes. For example, if 100,001 round-lots of 100 Pharmaceutical HOLDRS are outstanding and each round-lot of 100 Pharmaceutical HOLDRS represents 1.75 shares of an underlying security, there will be 175,001.75 votes of the underlying security represented by Pharmaceutical HOLDRS. If holders of 50,000 round-lots of 100 Pharmaceutical HOLDRS vote their underlying securities "yes" and holders of 50,001 round-lots of 100 Pharmaceutical HOLDRS vote their underlying securities "no", there will be 87,500 affirmative votes and 87,501.75 negative votes. The trustee will ignore the .75 negative votes and will deliver to the issuer 87,500 affirmative votes and 87,501 negative votes. 14 Reconstitution events................ The depositary trust agreement provides for the automatic distribution of underlying securities from the Pharmaceutical HOLDRS 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 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 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. C. If the underlying securities of an issuer cease to be outstanding as a result of a merger, consolidation, or other corporate combination or other event, the trustee will distribute the consideration paid by and received from the acquiring company or the securities received in exchange for the securities of the underlying issuer whose securities cease to be outstanding to the beneficial owners of Pharmaceutical HOLDRS, only if the distributed securities have a different Standard & Poor's GICS sector classification than any of the underlying securities represented in the Pharmaceutical HOLDRS at the time of the distribution or exchange or if the securities received are not listed for trading on a U.S. national securities exchange or through the Nasdaq National Market System. In any other case, the additional securities received 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 the Nasdaq National Market System and are not listed for trading on another U.S. national securities exchange or through the Nasdaq National Market System within five business days from the date the securities are delisted. To the extent a distribution of underlying securities from the Pharmaceutical HOLDRS is required as a result of a reconstitution event, 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. In addition, securities of a new company will be added to the Pharmaceutical HOLDRS, as a result of a distribution of securities by an underlying issuer or where a corporate event occurs, or where the securities of an underlying issuer are exchanged for the securities of another company, unless the securities received have a Standard & Poor's GICS sector classification that is different from the GICS sector classification of any other security then included in the Pharmaceutical HOLDRS or are not listed for trading on a U.S. national securities exchange or through the Nasdaq National Market System. It is anticipated, as a result of the broadly defined Standard & Poor's GICS sectors, that most distributions or exchanges of securities will result in the 15 inclusion of new securities in Pharmaceutical HOLDRS. The trustee will review the Standard & Poor's GICS sector classifications of securities to determine whether securities received as a result of a distribution by an underlying issuer or as consideration for securities included in the Pharmaceutical HOLDRS or distributed to you. Standard & Poor's sector classifications...................... Standard & Poor's Corporation is an independent source of market information that, among other things, maintains the Global Industry Classification Standard, referred to herein as "GICS," which classifies the securities of public companies into various sector classifications based upon GICS sectors, which are derived from its own criteria. The GICS classification standards were exclusively effective as of January 2, 2002. There are 10 Standard & Poor's GICS sectors and each class of publicly traded securities of a company is given only one GICS sector classification. The securities included in the Pharmaceutical HOLDRS are currently represented in the Health Care GICS sector. The Standard & Poor's GICS sector classifications of the securities included in the Pharmaceutical HOLDRS may change over time if the companies that issued these securities change their focus of operations or if Standard & Poor's alters the criteria it uses to determine GICS sectors, or both. Termination events................... A. The Pharmaceutical HOLDRS are delisted from the American Stock Exchange and are not listed for trading on another U.S. national securities exchange or through the Nasdaq National Market System within five 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. Beneficial owners of at least 75% of outstanding Pharmaceutical HOLDRS vote to dissolve and liquidate the trust. If a termination event occurs, the trustee will distribute the underlying securities as promptly as practicable after the termination event. Upon termination of the depositary trust agreement and prior to distributing the underlying securities to you, the trustee will charge you a cancellation fee of up to $10.00 per round-lot of 100 Pharmaceutical HOLDRS surrendered, along with any taxes or other governmental changes, if any. United States Federal income tax consequences....................... The United States federal income tax laws will treat a U.S. holder of Pharmaceutical HOLDRS as directly owning the underlying securities. The Pharmaceutical HOLDRS themselves will not result in any United States federal income tax consequences separate from the tax consequences associated with ownership of the underlying securities. Listing.............................. The Pharmaceutical HOLDRS are listed on the American Stock Exchange under the symbol "PPH". On October 20, 2004, the last reported sale price of Pharmaceutical HOLDRS on the American Stock Exchange was $68.63. 16 Trading.............................. Investors are only able to acquire, hold, transfer and surrender a round-lot of 100 Pharmaceutical HOLDRS. Bid and ask prices, however, are quoted per single Pharmaceutical HOLDRS. Clearance and settlement.............. Pharmaceutical HOLDRS have been issued only in book-entry form. Pharmaceutical HOLDRS are evidenced by one or more global certificates that the trustee has deposited 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." 17 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 and the amendment to 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 was formed pursuant to the depositary trust agreement, dated as of January 24, 2000. The depositary trust agreement was amended on November 22, 2000. The Bank of New York is 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 consists 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 has issued Pharmaceutical HOLDRS under the depositary trust agreement described in this prospectus under the heading "Description of the Depositary Trust Agreement." 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 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 in "street name" 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." Pharmaceutical HOLDRS are evidenced by one or more global certificates that the trustee has deposited with DTC and registered in the name of Cede & Co., as nominee for DTC. Pharmaceutical HOLDRS are available 18 only in book-entry form. Owners of Pharmaceutical HOLDRS hold their Pharmaceutical HOLDRS through DTC, if they are participants in DTC, or indirectly through entities that are participants in DTC. 19 DESCRIPTION OF THE UNDERLYING SECURITIES Selection criteria. The underlying securities are the common stocks of a group of specified companies that, at the time of selection, were involved in various segments of the pharmaceutical industry and whose common stock is registered under section 12 of the Securities Exchange Act. The issuers of the underlying securities were, at the time of selection, among the largest capitalized and most liquid companies in the pharmaceutical industry as measured by market capitalization and trading volume. The Pharmaceutical HOLDRS may no longer consist exclusively 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 disclosures 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 distribution of securities by an underlying issuer or other event, a revised list of underlying securities will be set forth in a prospectus supplement and filed with the SEC on a periodic basis. No investigation. The trust, the trustee and 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. 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 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." 20 The following table sets forth the composite performance of all of the 21 underlying securities represented by a single Pharmaceutical HOLDR, measured at the close of the business day on June 25, 1998, the first date when all of the underlying securities were publicly traded, and thereafter as of the end of each month through August 2004. 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.
Closing Closing Closing Closing 1998 Price 2000 Price 2002 Price 2004 Price ---- ----- ---- ----- ---- ----- ---- ----- June 25....... 83.97 January 31..... 89.93 January 31.. 97.02 January 30.. 80.89 June 30....... 83.29 February 29.... 78.17 February 28. 97.45 February 27. 81.53 July 31....... 83.09 March 31....... 82.69 March 28.... 95.46 March 31.... 76.30 August 31..... 74.62 April 28....... 91.23 April 30.... 87.23 April 30.... 79.86 September 30.. 84.06 May 31......... 96.80 May 31...... 84.81 May 28...... 79.42 October 30.... 86.60 June 30........ 105.94 June 28..... 76.56 June 30..... 78.25 November 30... 92.55 July 31........ 97.61 July 31..... 73.71 July 30..... 74.08 December 31... 96.74 August 31...... 94.94 August 30... 74.81 August 31... 75.43 September 29... 101.50 September 30 69.22 October 31..... 107.63 October 31.. 74.89 November 30.... 111.94 November 29. 78.56 December 29.... 114.21 December 31. 74.23
Closing Closing Closing 1999 Price 2001 Price 2003 Price ---- ----- ---- ----- ----- ----- January 29.... 97.28 January 31..... 104.01 January 31.. 73.11 February 26... 99.83 February 28.... 104.11 February 28. 71.06 March 31...... 102.08 March 30....... 96.11 March 31.... 74.11 April 30...... 93.19 April 30....... 99.47 April 30.... 76.77 May 28........ 89.94 May 31......... 101.28 May 30...... 76.74 June 30....... 94.18 June 29........ 95.15 June 30..... 80.70 July 30....... 87.53 July 31........ 101.65 July 31..... 77.25 August 31..... 92.22 August 31...... 96.71 August 29... 73.74 September 30.. 85.19 September 28... 98.92 September 30 74.22 October 29.... 97.06 October 31..... 99.07 October 31.. 74.03 November 30... 95.11 November 30.... 102.47 November 28. 74.57 December 31... 84.43 December 31.... 98.42 December 31. 79.49
[GRAPHIC OMITTED] 21 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 depositary trust agreement was amended on November 22, 2000 to modify the reconstitution events, described below. The trustee. The Bank of New York serves as trustee for the Pharmaceutical HOLDRS. 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, and 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. You will receive 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 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. Any distributions of securities by an issuer of underlying securities will be deposited into the trust and will become part of the Pharmaceutical HOLDRS unless such securities are not listed for trading on a U.S. national securities exchange or through the Nasdaq National Market System or such securities have a different Standard & Poor's GICS sector classification than any of the underlying securities in the Pharmaceutical HOLDRS at the time of the distribution of such securities. In addition, if the issuer of underlying securities offers rights to acquire additional underlying securities or other securities, the rights will be distributed to you through the trustee, if practicable, and if the rights and the securities that those rights relate to are exempt from registration or are registered under the Securities Act of 1933. Otherwise, if practicable, the rights will be disposed of and the net proceeds distributed to you by the trustee. In all other cases, the rights will lapse. 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, 22 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. Reconstitution events. The depositary trust agreement provides for the automatic distribution of underlying securities from the Pharmaceutical HOLDRS to you in the following 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, corporate combination or other event, the trustee will distribute the consideration paid by and received from the acquiring company to the beneficial owners of Pharmaceutical HOLDRS, only if the distributed securities have a different Standard & Poor's GICS sector classification than any of the underlying securities represented in the Pharmaceutical HOLDRS at the time of the distribution or exchange or if the securities received are not listed for trading on a U.S. national securities exchange or through the NASDAQ National Market System. In any other case, the additional securities received as consideration 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 the Nasdaq National Market System and are not listed for trading on another U.S. national securities exchange or through the Nasdaq National Market System within five business days from the date such securities are delisted. To the extent a distribution of underlying securities is required as a result of a reconstitution event, 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. As provided in the depositary trust agreement, securities of a new company will be added to the Pharmaceutical HOLDRS, as a result of a distribution of securities by an underlying issuer or where an event occurs, such as a merger, where the securities of an underlying issuer are exchanged for the securities of another company, unless the securities received have a different Standard & Poor's GICS sector classification than the underlying securities represented in the Pharmaceutical HOLDRS or if the securities received are not listed for trading on a U.S. national securities exchange or through the Nasdaq National Market System. This will also apply if ANDRX Corporation converts the Cybear Group tracking stock into another class of securities of ANDRX Corporation or one of its subsidiaries. It is anticipated, as a result of the broadly defined GICS sectors, that most distributions or exchanges of securities will result in the inclusion of new securities in the Pharmaceutical HOLDRS. The trustee will review the Standard & Poor's GICS sector classifications of securities to determine whether securities received as a result of a distribution by an underlying issuer or as consideration for securities included in the Pharmaceutical HOLDRS will be distributed from the Pharmaceutical HOLDRS to you. Standard & Poor's sector classifications. Standard & Poor's Corporation is an independent source of market information that, among other things, maintains the Global Industry Classification Standard, which classifies the securities of public companies into various sector classifications based upon GICS sectors, which are derived from its own criteria. The GICS classification standards were exclusively effective on January 2, 2002. There are 10 Standard & Poor's GICS sectors and each class of publicly traded securities of a company is given only one 23 GICS sector. The securities included in the Pharmaceutical HOLDRS are currently represented in the Health Care GICS sector. The Standard & Poor's GICS sector classifications of the securities included in the Pharmaceutical HOLDRS may change over time if the companies that issued these securities change their focus of operations or if Standard & Poor's alters the criteria it uses to determine GICS sectors, or both. Record dates. With respect to dividend payments and voting instructions, the trustee expects to fix the trust's record dates as close as possible to the record date fixed by the issuer of the underlying securities. Shareholder communications. The trustee promptly will forward to you all shareholder communications that it receives from issuers of the underlying securities. Withdrawal of underlying securities. You may surrender your 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. 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 the 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 U.S. national securities exchange or through the Nasdaq National Market System within five 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. 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. 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, 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, in addition to the issuance fee described above. 24 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 the Pharmaceutical HOLDRS are 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 assumes 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 has undertaken to perform only those duties as are specifically set forth in the depositary trust agreement. Subject to the preceding sentence, the trustee is liable for its own negligence or misconduct except for good faith errors in judgment so long as the trustee is not negligent in ascertaining the relevant facts. 25 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES A. General The following discussion represents the opinion of Shearman & Sterling LLP, our special U.S. federal income tax counsel, as to the principal U.S. federal income tax consequences relating to the Pharmaceutical HOLDRS for: o an individual who is a citizen or resident of the United States; o a corporation (or an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any state thereof or the District of Columbia; 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 either (i) it is subject to the primary supervision of a U.S. court and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person (a "U.S. receipt holder"); and o any person other than a U.S. receipt holder (a "non-U.S. receipt holder"). If a partnership (or an entity treated as a partnership for U.S. federal income tax purposes) holds Pharmaceuticals HOLDRS, the tax treatment of the partnership and each partner will generally depend on the status of the partner and the activities of the partnership. Partnerships acquiring Pharmaceuticals HOLDRS, and partners in such partnerships, should consult their tax advisors. This discussion is based upon laws, regulations, rulings and decisions currently in effect, all of which are subject to change or differing interpretations, 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, such as (without limitation) tax-exempt entities, banks, dealers in securities, U.S. receipt holders whose functional currency is not the U.S. dollar, investors who acquire or hold any Pharmaceutical HOLDRS as part of a conversion, straddle or other hedging transaction, certain former citizens and residents of the United States and persons subject to the alternative minimum tax. In addition, this discussion 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 (the "Code"). Moreover, this discussion does not address Pharmaceutical HOLDRS held by a partnership or other flow through entities. We recommend that you consult with your own tax advisor with regard to the application of the U.S. federal income tax laws to your particular situation as well as any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction. B. 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. C. 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. 26 Qualified dividend income received in respect of Pharmaceutical HOLDRS by U.S. receipt holders who are individuals, trusts and estates will be eligible for U.S. federal income taxation at preferential rates. Qualified dividend income includes dividends received from domestic corporations and "qualified foreign corporations," as such term is defined below under "Special considerations with respect to underlying securities of foreign issuers." In order for such dividends to qualify for the preferential rates, specific minimum holding period requirements must be met, and for this purpose, a U.S. receipt holder's holding period with respect to an underlying security may be tolled for any period in which such holder has diminished its risk of loss in respect of such security by (for example) entering into a hedging transaction. Special rules apply to a U.S. receipt holder who leverages its investment in Pharmaceutical HOLDRS. U.S. receipt holders that are corporations may be eligible for a dividend-received deduction in respect of dividends received from domestic corporations. 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 adjusted 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, except to the extent that cash is distributed in lieu of fractional shares. Gain or loss with respect to fractional shares shall be computed by allocating a portion of the aggregate tax basis of the distributed securities to such fractional shares. The receipt holder's aggregate tax basis with respect to the distributed securities will be the same as when held through the trust, less any tax basis allocated to 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. D. 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. E. Special considerations with respect to underlying securities of foreign issuers If any of the underlying securities are 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. As discussed above, dividends received by certain U.S. receipt holders from an issuer of underlying securities that is a "qualified foreign corporation" will be eligible for U.S. federal income taxation at preferential rates. A qualified foreign corporation includes: 27 o a foreign corporation that is eligible for the benefits of a comprehensive U.S. income tax treaty, which the Secretary of the Treasury determines to be satisfactory and that includes an exchange of information program, and o a foreign corporation if the stock to which the dividend is paid is readily tradable on an established market in the United States, and o a corporation that is incorporated in a possession of the United States, but will not include: o a passive foreign investment company (as defined below), o a foreign personal holding company (as specially defined in the Code), or o a foreign investment company (as specially defined in the Code). 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 certain 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 foreign withholding tax. Some foreign issuers may make arrangements through which holders of their American depositary shares can apply for a refund of withheld taxes. If any of the underlying securities are securities of a foreign issuer holders of Pharmaceutical HOLDRS may 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"). The Initial Depositor is not aware that any of the foreign issuers of the underlying securities is currently a PFIC, 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. The Initial Depositor will notify the trustee, who in turn will notify the receipt holders, if it becomes aware that any of the foreign issuers is a PFIC. 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 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 Pharmaceutical HOLDRS or of the underlying securities or upon the receipt of "excess distributions," unless the U.S. receipt holder has made one 28 of certain elections (to the extent available under specific rules) including an election 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. F. 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. A non-U.S. receipt holder who wishes to claim an exemption from, or reduction in, withholding under the benefit of an applicable tax treaty must comply with certification requirements. 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 any underlying securities of a foreign issuer, 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 U.S. and any 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 a 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 timely 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 Pharmaceutical 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 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 29 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. Backup withholding and information reporting Information returns will be filed with the Internal Revenue Service in connection with dividend payments made with respect to the underlying securities, or the proceeds of the sale or other disposition of the receipts (or the underlying securities). If you are a non-corporate U.S. receipt holder, you will be subject to U.S. backup withholding tax at the applicable rate on these payments unless you provide your taxpayer identification number to the paying agent and comply with certain certification procedures. If you are a non-U.S. receipt holder, you may have to comply with certification procedures to establish that you are not a U.S. person in order to avoid the information reporting and backup withholding tax requirements. However, payments of dividends to non-U.S. receipt holders will be reported on Internal Revenue Service Form 1042-S even if such payments are not otherwise subject to the information reporting requirements. The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is furnished to the Internal Revenue Service on a timely basis. 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. 30 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 the prohibited transaction provisions 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 issued Pharmaceutical HOLDRS to Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch, Pierce, Fenner & Smith Incorporated has deposited the underlying securities to receive Pharmaceutical HOLDRS. The trust delivered the initial distribution of Pharmaceutical HOLDRS against deposit of the underlying securities in New York, New York on approximately February 11, 2001. Investors who purchase Pharmaceutical HOLDRS through a fee-based brokerage account will pay fees charged by the brokerage account. We recommend that investors review the details of their brokerage accounts for details on applicable charges. Merrill Lynch, Pierce, Fenner & Smith Incorporated 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 they have received and will receive customary fees and commissions. Merrill Lynch, Pierce, Fenner & Smith Incorporated also may have served as counterparty in other transactions with certain of the issuers of the underlying securities. Merrill Lynch, Pierce, Fenner & Smith Incorporated has used and may continue to 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 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 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 these liabilities. LEGAL MATTERS Legal matters, including the validity of the Pharmaceutical HOLDRS, were passed upon for Merrill Lynch, Pierce, Fenner & Smith Incorporated, the initial depositor and the underwriter in connection with the initial offering of the Pharmaceutical HOLDRS, by Shearman & Sterling LLP, New York, New York. Shearman & Sterling LLP, as special U.S. tax counsel to the trust, also rendered an opinion regarding the material U.S. federal income tax consequences relating to the Pharmaceutical HOLDRS. 31 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. 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 Securities Exchange Act of 1934. The trust will file modified reports pursuant to the Securities Exchange Act of 1934. Because the common stock of the issuers of the underlying securities is registered under the Securities Exchange Act of 1934, 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. 32 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 1999, 2000, 2001, 2002 and 2003, through September 2004. As a result of the conversion to decimal reporting of trading prices by the markets on which the underlying securities trade, all market prices beginning from January 2001 provided in the following tables are given in decimal form. All historical market prices provided in fractions 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 (ABT) Abbott Laboratories develops, manufactures and sells a broad and diversified line of health care products and services. The Company's Pharmaceutical Products segment produces adult and pediatric pharmaceuticals sold primarily on the prescription or recommendation of physicians, while the Diagnostic Products segment produces diagnostic systems and tests for blood banks, hospitals, commercial laboratories, alternate care testing sites, and consumers. The Hospital Products segment offers drugs and drug delivery systems, perioperative and intensive care products, among others. Ross Products include adult and pediatric nutritionals, and the International Segment includes hospital, pharmaceutical, and adult and pediatric nutritional products marketed and primarily manufactured outside the United States. Abbott markets its products worldwide through affiliates and distributors to retailers, wholesalers, hospitals, health care facilities, physicians offices, laboratories, and government agencies around the world.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 46 7/16 January 3 29/16 January 44.86 January 57.70 January 38.12 January 43.08 February 46 5/16 February 33 February 48.99 February 56.55 February 35.62 February 42.80 March 46 13/16 March 35 3/16 March 47.19 March 52.60 March 37.61 March 41.00 April 48 3/8 April 38 7/16 April 46.38 April 53.95 April 40.63 April 44.02 May 45 3/16 May 40 11/16 May 51.98 May 47.50 May 44.55 May 41.21 June 45 3/8 June 44 9/16 June 48.00 June 37.65 June 43.76 June 40.76 July 42 15/16 July 41 5/8 July 53.59 July 41.41 July 39.25 July 39.35 August 43 3/8 August 43 49/64 August 49.70 August 40.03 August 40.30 August 41.69 September 36 11/16 September 47 9/16 September 51.85 September 40.40 September 42.55 September 42.36 October 40 3/8 October 52 13/16 October 52.98 October 41.87 October 42.62 November 38 November 55 1/16 November 55.00 November 43.78 November 44.20 December 36 5/16 December 48 7/16 December 55.75 December 40.00 December 46.60
The closing price on October 20, 2004 was $41.40. A-1 ALLERGAN, INC. (AGN) Allergan, Inc. develops, manufactures and markets a broad range of specialty pharmaceutical products for the ophthalmic, neurological, dermatological and other specialty markets. Its speciality pharmaceutical products include products for glaucoma, retinal disease, dry eye, psoriasis, acne and movement disorders. Its specialty pharmaceutical products are sold to drug wholesalers and retail chains.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 38 7/16 January 57 January 81.75 January 66.75 January 60.67 January 82.85 February 40 3/4 February 50 5/16 February 86.95 February 64.84 February 64.20 February 87.54 March 43 15/16 March 50 March 74.15 March 64.65 March 68.21 March 84.16 April 44 15/16 April 58 7/8 April 76.00 April 65.91 April 70.25 April 88.05 May 46 1/2 May 68 11/16 May 89.70 May 63.10 May 72.11 May 88.90 June 55 1/2 June 74 1/2 June 84.03 June 66.75 June 77.10 June 89.52 July 47 1/4 July 66 15/16 July 75.29 July 60.49 July 80.48 July 75.64 August 49 15/16 August 73 9/64 August 72.25 August 58.72 August 79.46 August 74.65 September 55 September 84 13/32 September 66.30 September 54.40 September 78.73 September 72.55 October 53 11/16 October 84 1/16 October 71.79 October 54.45 October 75.62 November 49 3/16 November 92 13/16 November 75.49 November 58.79 November 74.73 December 49 3/4 December 96 13/16 December 75.05 December 57.62 December 76.81
The closing price on October 20, 2004 was $69.37. ADVANCED MEDICAL OPTICS, INC. (AVO) Advanced Medical Optics, Inc. develops, manufactures and markets medical devices for the eye and eye care products. Advanced Medical Optics' products in the ophthalmic surgical market include products for the cataract and refractive surgery markets. Advanced Medical Optics' products also target the eye care market and focus on three segments of the cataract surgery market. Advanced Medical Optics also develops, manufactures and markets a range of products for use with contact lenses.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January * January * January * January * January 12.48 January 22.89 February * February * February * February * February 11.55 February 23.00 March * March * March * March * March 13.45 March 24.40 April * April * April * April * April 14.03 April 31.54 May * May * May * May * May 15.05 May 35.10 June * June * June * June * June 17.05 June 42.57 July * July * July * July 10.20 July 16.70 July 38.05 August * August * August * August 8.86 August 16.59 August 37.22 September * September * September * September 9.51 September 17.96 September 39.57 October * October * October * October 9.70 October 20.17 November * November * November * November 11.20 November 19.71 December * December * December * December 11.97 December 19.65
The closing price on October 20, 2004 was $37.00. A-2 ANDRX CORPORATION--ANDRYX GROUP (ADRX) Andrx Corporation's Andrx Group is a pharmaceutical company that develops and commercializes generic versions of controlled-release brand name pharmaceuticals, using its proprietary controlled-release drug delivery technologies and generic versions of niche and immediate-release pharmaceutical products, including oral contraceptives. The Company also distributes pharmaceuticals, primarily generics, manufactured by others, as well as its own products, to independent pharmacies, pharmacy chains, pharmacy buying groups and physicians' offices. Products include a variety of treatments for hypertension, angina, ulcers and inflammation. On September 7, 2000, Andrx Corporation reclassified its publicly traded common stock into Andrx Group tracking stock, which tracks the performance of the Andrx Group, and the Cybear Group tracking stock, which develops Internet applications to improve the efficiency of day-to-day administrative and communications tasks for participants in the healthcare industry. Owning either stock does not represent a direct legal interest in the assets or liabilities of the Andrx Group or the Cybear Group. Rather, shareholders remain invested in the Andrx Corporation. Some of the terms of the Andrx Group tracking stock include: Voting. Holders of Andrx Group tracking stock do not have direct voting rights in the Andrx Group. On all matters as to which both classes of Andrx common stock would vote together as a single class, each share of Andrx Group tracking stock has one vote. Sale of Cybear Group. Upon a sale or other disposition by Andrx Corporation of all or substantially all of the properties and assets attributed to the Cybear Group, Andrx Corporation is required to pay a dividend on the outstanding shares of Cybear Group Common Stock, redeem some or all of the outstanding shares of Cybear Group Common Stock or convert outstanding shares of Cybear Group Common Stock into shares of Andrx Group Common Stock, subject to some exceptions. Dividends. Andrx is not required to pay dividends on the shares of the Andrx Group tracking stock. Dividends on Andrx Group tracking stock are limited to the lesser of the amount that would be legally available for the payment of dividends if the Andrx Group was a stand-alone corporation and an amount equal to the funds legally available for the payment of dividends for Andrx Corporation. Andrx may choose to pay dividends on either the Andrx Group or the Cybear Group of tracking stocks in equal or unequal amounts. Dissolution. In the event of a dissolution of Andrx, the holders of Andrx Group tracking stock do not have a preferential right to the assets attributed to the Andrx Group. Each share of Andrx Group tracking stock will be entitled to receive a portion of the assets, if any, of Andrx Corporation remaining for distribution. The rights or dissolution of holders of Andrx Group tracking stock may not bear any relationship to the relative market values or relative voting rights of the two classes. Please see Andrx' public filings for more information on its tracking stock. For information on where you can access Andrx' filings, please see "Where You Can Find More Information."
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 14 5/32 January 35 1/8 January 65.87 January 58.74 January 14.36 January 24.95 February 16 31/32 February 48 1/32 February 57.36 February 33.45 February 11.65 February 29.96 March 22 25/32 March 57 3/4 March 49.00 March 37.94 March 11.80 March 27.20 April 19 11/16 April 51 3/16 April 59.00 April 45.22 April 16.15 April 22.84 46 1/2 25 7/32 68 59 5/8 May 67.68 May 43.27 May 19.25 May 27.48 June 38 9/16 June 63 59/64 June 77.00 June 26.97 June 19.95 June 27.93 July 33 17/32 July 78 1/16 July 67.89 July 22.19 July 22.88 July 25.94 August 35 15/16 August 87 August 70.29 August 24.63 August 18.00 August 20.16 September 29 17/64 September 93 3/8 September 64.92 September 22.15 September 18.66 September 22.36 October 23 7/8 October 72 October 64.93 October 15.45 October 19.83 November 25 3/4 November 71 23/64 November 73.82 November 14.50 November 21.96 December 21 5/32 December 57 7/8 December 70.41 December 14.67 December 24.04
The closing price on October 20, 2004 was $21.28. A-3 BIOVAIL CORPORATION (BVF) Biovail Corporation is an integrated pharmaceutical company which specializes in the development, manufacturing, sale and marketing of pharmaceutical products for the treatment of chronic medical conditions primarily in North America. Biovail formulates, clinically tests, registers, manufactures and out-licenses its own drug products, with a primary focus on therapeutic areas, such as cardiovascular disease, central nervous system disorders and pain management. Biovail markets it products through its own sales force and through licensees.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 10 9/16 January 24 15/16 January 43.25 January 46.98 January 29.05 January 22.20 February 9 35/64 February 32 15/16 February 46.15 February 47.50 February 37.20 February 20.46 March 9 5/8 March 22 1/8 March 36.13 March 49.98 March 39.87 March 15.60 April 8 49/64 April 23 27/32 April 39.28 April 37.77 April 36.15 April 19.00 May 9 35/64 May 23 5/8 May 39.13 May 32.37 May 46.64 May 17.57 June 12 49/64 June 27 23/32 June 43.50 June 28.96 June 47.06 June 18.98 July 14 3/64 July 29 July 47.06 July 23.98 July 38.39 July 15.65 August 14 29/64 August 32 1/32 August 46.10 August 26.84 August 41.53 August 15.16 September 12 11/16 September 40 23/32 September 46.40 September 24.69 September 37.15 September 17.30 October 13 51/64 October 42 1/16 October 47.26 October 31.65 October 24.05 November 17 7/16 November 32 3/4 November 54.71 November 33.00 November 18.75 December 23 7/16 December 38 27/32 December 56.25 December 26.41 December 21.49
The closing price on October 20, 2004 was $19.00. BRISTOL-MYERS SQUIBB COMPANY (BMY) Bristol-Myers Squibb Company is a diversified health and personal care company engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of pharmaceuticals and other healthcare-related products. Bristol-Myers Squibb has four business segments: Pharmaceuticals, Oncology Therapeutics Network (OTN), Nutritionals and Other Healthcare. Bristol-Myers Squibb products include: cardiovascular, anti-cancer, anti-infective and central nervous system prescription pharmaceuticals; over-the-counter medicines; nutritional products; medical devices; ostomy care and wound care. Bristol-Myers markets and sells 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.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 64 1/8 January 66 1/4 January 61.89 January 45.37 January 23.59 January 28.05 February 62 31/32 February 57 1/4 February 63.41 February 47.00 February 23.30 February 27.82 March 64 1/8 March 58 March 59.40 March 40.49 March 21.13 March 24.23 April 63 9/16 April 52 7/16 April 56.00 April 28.80 April 25.54 April 25.10 46 1/2 68 3/4 68 55 1/16 May 54.24 May 31.12 May 25.60 May 25.27 June 70 7/16 June 58 1/4 June 52.30 June 25.70 June 27.15 June 24.50 July 66 1/2 July 49 3/8 July 59.14 July 23.43 July 26.20 July 22.90 August 70 3/8 August 53 1/64 August 56.14 August 24.95 August 25.37 August 23.73 September 67 1/2 September 57 1/2 September 55.56 September 23.80 September 25.66 September 23.67 October 76 13/16 October 60 15/16 October 53.45 October 24.61 October 25.37 November 73 November 69 5/16 November 53.76 November 26.50 November 26.35 December 64 3/16 December 73 15/16 December 51.00 December 23.15 December 28.60
The closing price on October 20, 2004 was $23.35. A-4 ELI LILLY & COMPANY (LLY) 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 Zyprexa, Prozac, Strattera and Permax, endocrine products, cardiovascular agents, oncology products and animal health products for cattle, poultry and swine. Eli Lilly's products are distributed through wholesalers that serve pharmacies, physicians and other healthcare professionals, and hospitals.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 93 11/16 January 66 7/8 January 78.80 January 75.10 January 60.24 January 68.04 February 94 1/2 February 59 7/16 February 79.46 February 75.73 February 56.56 February 73.94 March 84 7/8 March 62 5/8 March 76.66 March 76.20 March 57.15 March 66.90 April 73 5/8 April 77 1/8 April 85.00 April 66.05 April 63.82 April 73.81 May 71 7/16 May 76 1/8 May 84.70 May 64.70 May 58.77 May 73.67 June 71 5/8 June 99 7/8 June 74.00 June 56.40 June 68.97 June 69.91 July 65 11/16 July 103 7/8 July 79.28 July 58.42 July 65.84 July 63.72 August 74 5/8 August 73 1/64 August 77.63 August 58.05 August 66.53 August 63.45 September 64 3/16 September 81 1/8 September 80.70 September 55.34 September 59.40 September 60.05 October 68 7/8 October 89 3/8 October 76.50 October 55.50 October 66.62 November 71 3/4 November 93 11/16 November 82.67 November 68.30 November 68.80 December 66 1/2 December 93 1/16 December 78.54 December 63.50 December 70.33
The closing price on October 20, 2004 was $55.10. FOREST LABORATORIES, INC. (FRX) Forest Laboratories, Inc. develops, manufactures, and sells branded and generic forms of ethical drug products, including 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 respiratory distress syndrome in premature infants. Forest's generic products include generic equivalents of its branded products and certain controlled-release products.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 11.55 January 16.88 January 33.48 January 41.45 January 51.75 January 74.49 February 12.39 February 17.08 February 34.76 February 39.76 February 49.80 February 75.48 March 14.10 March 21.12 March 29.62 March 40.85 March 53.97 March 71.62 April 11.12 April 21.01 April 30.58 April 38.57 April 51.72 April 64.48 May 11.91 May 22.12 May 37.03 May 36.92 May 50.50 May 63.39 June 11.56 June 25.26 June 35.50 June 35.40 June 54.75 June 56.63 July 12.81 July 26.75 July 39.28 July 38.74 July 47.88 July 50.29 August 12.12 August 24.47 August 36.51 August 36.50 August 47.00 August 45.85 September 10.53 September 28.67 September 36.07 September 41.01 September 51.45 September 44.96 October 11.47 October 33.12 October 37.19 October 48.99 October 50.01 November 12.80 November 33.88 November 35.40 November 53.67 November 54.64 December 15.36 December 33.22 December 40.97 December 49.11 December 61.80
The closing price on October 20, 2004 was $43.88. A-5 HOSPIRA INC. (HSP) Hospira, Inc. is a specialty pharmaceuticals and medication delivery company that develops, manufactures and markets products that help improve the safety and effectiveness of patient care. Its three business groups are medication delivery systems and critical care devices, specialty injectable pharmaceuticals, and injectable pharmaceutical custom manufacturing services. Medication delivery systems include electronic drug delivery pumps for intravenous drug delivery and patient-controlled analgesia for pain management, and infusion therapy solutions and supplies. The Company's critical care devices are used in intensive care and critical care units to measure cardiac output and blood flow. Hospira's specialty injectable pharmaceuticals offer injectable products in a variety of dosages and formulations.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January * January * January * January * January * January * February * February * February * February * February * February * March * March * March * March * March * March * April * April * April * April * April * April * May * May * May * May * May * May 25.64 June * June * June * June * June * June 27.60 July * July * July * July * July * July 25.91 August * August * August * August * August * August 27.70 September * September * September * September * September * September 30.60 October * October * October * October * October * November * November * November * November * November * December * December * December * December * December *
The closing price on October 20, 2004 was $30.25. IVAX CORPORATION (IVX) IVAX Corporation researches, develops, manufactures and markets proprietary branded and generic pharmaceuticals in the United States, Europe and Latin America. IVAX manufactures and markets several brand name pharmaceutical products and a wide variety of generic and over-the-counter products. IVAX's primary focus is on respiratory drugs, primarily for asthma, delivered by metered-dose and dry-powder inhalers. IVAX markets its proprietary pharmaceutical products through licensing arrangements and its generic pharmaceutical products are sold to drug wholesalers and retail drug store chains.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 7.23 January 17.73 January 27.76 January 19.50 January 11.65 January 20.00 February 7.87 February 18.20 February 30.00 February 17.00 February 11.29 February 17.81 March 6.30 March 21.80 March 25.20 March 16.05 March 12.25 March 18.22 April 7.03 April 21.90 April 32.04 April 11.80 April 16.07 April 17.04 May 7.17 May 30.10 May 33.70 May 13.80 May 17.31 May 19.48 June 7.53 June 33.20 June 39.00 June 10.80 June 17.85 June 19.19 July 8.43 July 39.40 July 34.00 July 13.50 July 13.72 July 19.08 August 8.80 August 27.70 August 33.66 August 13.70 August 15.84 August 19.36 September 8.80 September 36.80 September 22.17 September 12.27 September 15.68 September 19.15 October 9.37 October 35.00 October 20.55 October 12.55 October 15.41 November 10.83 November 32.80 November 20.60 November 13.51 November 17.16 December 13.73 December 30.64 December 20.14 December 12.13 December 19.10
The closing price on October 20, 2004 was $18.61. A-6 JOHNSON & JOHNSON (JNJ) Johnson & Johnson manufactures and sells a broad range of products related to human health and well-being. Johnson & Johnson's business is divided into the consumer, pharmaceutical, and medical devices and diagnostics segments. Johnson & Johnson's consumer segment focuses on personal care and hygienic products and its product brands include Band-Aid, Tylenol and Stayfree sanitary products. The pharmaceutical segment's principal worldwide franchises are in the anti-fungal, anti-infective, cardiovascular, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, psychotropic and urology fields. Johnson & Johnson's medical devices and diagnostics segment, catering to physicians, nurses, therapists, hospitals, diagnostic laboratories and clinics, focuses on suture and mechanical wound closure products, surgical equipment and devices, wound management and infection prevention products, interventional and diagnostic cardiology products, diagnostic equipment and supplies, joint replacements and disposable contact lenses.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 42.56 January 43.03 January 46.57 January 57.51 January 53.61 January 53.42 February 42.69 February 36.00 February 48.67 February 60.90 February 52.45 February 53.91 March 46.75 March 35.13 March 43.74 March 64.95 March 57.87 March 50.72 April 48.75 April 41.25 April 48.24 April 63.86 April 56.36 April 54.03 May 46.31 May 44.75 May 48.48 May 61.35 May 54.35 May 55.71 June 49.00 June 50.94 June 50.00 June 52.26 June 51.70 June 55.70 July 45.53 July 46.53 July 54.10 July 52.60 July 51.79 July 55.27 August 51.13 August 45.97 August 52.71 August 54.31 August 49.58 August 58.10 September 45.94 September 46.97 September 55.40 September 54.08 September 49.52 September 56.33 October 52.38 October 46.08 October 57.91 October 58.75 October 50.33 November 51.88 November 50.00 November 58.25 November 57.02 November 49.30 December 46.63 December 52.53 December 59.10 December 53.71 December 51.66
The closing price on October 20, 2004 was $57.50. KING PHARMACEUTICALS, INC. (KG) King Pharmaceuticals, Inc. manufactures, markets and sells primarily branded 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. The Company's products can be divided into the therapeutic areas, including cardiovascular, endocrinology/women's health, neuroscience, critical care, anti-infectives and respiratory. King Pharmaceuticals markets its branded pharmaceutical products to general/family practitioners, internal medicine physicians, cardiologists, endocrinologists, neurologists, psychiatrists, obstetricians/gynecologists, as well as to hospitals across the United States and Puerto Rico.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 8.04 January 29.50 January 33.98 January 36.40 January 14.68 January 16.68 February 8.04 February 23.84 February 34.43 February 31.06 February 16.75 February 19.27 March 9.25 March 15.75 March 30.56 March 35.01 March 11.93 March 16.84 April 9.21 April 24.69 April 31.60 April 31.34 April 12.61 April 17.25 May 7.92 May 27.38 May 37.94 May 27.05 May 14.31 May 13.36 June 8.63 June 32.91 June 40.31 June 22.25 June 14.76 June 11.45 July 9.04 July 22.59 July 45.20 July 21.21 July 15.06 July 11.29 August 11.54 August 24.08 August 43.25 August 21.31 August 14.05 August 12.46 September 11.67 September 25.08 September 41.95 September 18.17 September 15.15 September 11.94 October 10.08 October 33.61 October 38.99 October 15.35 October 13.40 November 23.06 November 36.56 November 39.84 November 18.98 November 12.91 December 28.03 December 38.77 December 42.13 December 17.19 December 15.26
The closing price on October 20, 2004 was $11.95. A-7 MEDCO HEALTH SOLUTIONS. (MHS) Medco Health Solutions, Inc. provides prescription benefit management (PBM) services through its national networks of retail pharmacies and its own mail-order pharmacies. Medco has a number of clients in various industry categories, including Blue Cross/Blue Shield plans; managed care organizations; insurance carriers; third-party benefit plan administrators; employers; federal, state and local government agencies, and union-sponsored benefit plans.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January * January * January * January * January * January 36.85 February * February * February * February * February * February 32.66 March * March * March * March * March * March 34.00 April * April * April * April * April * April 35.40 May * May * May * May * May * May 35.03 June * June * June * June * June * June 37.50 July * July * July * July * July * July 30.30 August * August * August * August * August 26.70 August 31.23 September * September * September * September * September 25.93 September 30.90 October * October * October * October * October 33.20 November * November * November * November * November 36.43 December * December * December * December * December 33.99
The closing price on October 20, 2004 was $31.63. MERCK & CO., INC. (MRK) Merck & Co., Inc. is a research-driven pharmaceutical products company that discovers, develops, manufactures and markets a range of products to improve human and animal health, directly and through its joint ventures. Merck's products include therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders and animal health supplies. Merck markets its health products primarily to drug wholesalers and retailers, hospitals, clinics, government agencies and managed healthcare providers such as health maintenance organizations and other institutions.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 73 3/8 January 78 5/8 January 82.18 January 59.18 January 55.39 January 47.60 February 81 1/2 February 61 9/16 February 80.20 February 61.33 February 52.75 February 48.08 March 80 1/8 March 62 1/8 March 75.90 March 57.58 March 54.78 March 44.19 April 70 3/8 April 69 1/2 April 75.97 April 54.34 April 58.18 April 47.00 May 67 5/8 May 74 5/8 May 72.99 May 57.10 May 55.58 May 47.30 June 73 5/8 June 76 5/8 June 63.91 June 50.64 June 60.55 June 47.50 July 67 5/8 July 71 21/32 July 67.98 July 49.60 July 55.28 July 45.35 August 67 3/16 August 69 7/8 August 65.10 August 50.52 August 50.32 August 44.97 September 64 13/16 September 74 7/16 September 66.60 September 45.71 September 50.62 September 33.00 October 79 9/16 October 89 15/16 October 63.81 October 54.24 October 44.25 November 78 11/16 November 92 1/16 November 67.75 November 59.41 November 40.60 December 67 3/16 December 93 5/8 December 58.80 December 56.61 December 46.20
The closing price on October 20, 2004 was $31.40. A-8 MYLAN LABORATORIES, INC. (MYL) Mylan Laboratories Inc. develops, licenses, manufactures, markets and distributes generic and branded pharmaceutical products. Mylan operates through its generic and branded pharmaceutical segments. 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 within the United States.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 20.33 January 17.75 January 15.57 January 22.46 January 26.72 January 24.39 February 18.21 February 15.33 February 15.60 February 20.25 February 28.55 February 23.50 March 18.29 March 18.33 March 17.23 March 19.64 March 28.75 March 22.73 April 15.13 April 18.92 April 17.83 April 17.65 April 28.27 April 22.91 May 16.92 May 17.88 May 21.21 May 20.63 May 28.88 May 22.31 June 17.67 June 12.17 June 18.75 June 20.90 June 34.77 June 20.25 July 15.25 July 14.17 July 22.50 July 21.63 July 22.51 July 14.82 August 13.21 August 17.71 August 21.99 August 21.77 August 24.27 August 17.42 September 12.25 September 17.96 September 21.75 September 21.83 September 25.77 September 18.00 October 11.96 October 18.67 October 24.58 October 20.98 October 24.15 November 15.71 November 15.96 November 22.99 November 22.49 November 25.32 December 16.79 December 16.79 December 25.00 December 23.27 December 25.26
The closing price on October 20, 2004 was $17.62. PFIZER INC. (PFE) Pfizer Inc. a research-based, global pharmaceutical company that discovers, develops, manufactures and markets prescription medicines for humans and animals, as well as consumer healthcare products. Pfizer's operations are divided into pharmaceutical, consumer healthcare and animal health segments. The pharmaceutical segment includes treatments for cardiovascular and metabolic diseases, central nervous system disorders, arthritis and pain, infectious and respiratory diseases, urogenital conditions, cancer, eye disease, endocrine disorders and allergies. The consumer healthcare segment includes self medications for oral care, upper respiratory health, tobacco dependence, gastrointestinal health, skin care, eye care and hair growth. The animal health segment includes treatments for diseases in livestock and companion animals.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 42 7/8 January 36 3/16 January 45.15 January 41.67 January 30.36 January 36.63 February 43 63/64 February 32 1/8 February 45.00 February 40.96 February 29.82 February 36.65 March 46 1/4 March 36 9/16 March 40.95 March 39.74 March 31.16 March 35.05 April 38 23/64 April 42 1/8 April 43.30 April 36.35 April 30.75 April 35.76 May 35 43/64 May 44 1/2 May 42.89 May 34.60 May 31.02 May 35.34 June 36 21/64 June 48 June 40.05 June 35.00 June 34.15 June 34.28 July 33 7/8 July 43 3/8 July 41.22 July 32.35 July 33.36 July 31.96 August 37 3/4 August 43 9/64 August 38.31 August 33.08 August 29.92 August 32.67 September 35 7/8 September 44 29/32 September 40.10 September 29.02 September 30.38 September 30.60 October 39 11/16 October 43 3/16 October 41.90 October 31.77 October 31.60 November 36 1/4 November 44 5/16 November 43.31 November 31.53 November 33.57 December 32 7/16 December 46 December 39.85 December 30.57 December 35.33
The closing price on October 20, 2004 was $28.30. A-9 SCHERING-PLOUGH CORPORATION (SGP) Schering-Plough Corporation discovers, develops and markets pharmaceutical products worldwide. The Company has three business segments: Prescription Pharmaceuticals, Consumer Health Care and Animal Health segments. 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 and animal health biological and pharmaceutical products. Schering-Plough's foot care, OTC and sun care products are sold through wholesale and retail drug, food chain and mass merchandiser outlets.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 54 1/2 January 43 7/8 January 50.40 January 32.38 January 18.11 January 17.54 February 55 11/16 February 35 February 41.10 February 34.49 February 18.02 February 17.96 March 55 1/4 March 37 1/8 March 36.53 March 31.30 March 17.83 March 16.22 April 48 5/16 April 40 5/16 April 38.54 April 27.30 April 18.10 April 16.73 May 45 1/16 May 48 May 41.95 May 26.45 May 18.45 May 16.90 June 52 1/2 June 50 1/2 June 36.24 June 24.60 June 18.60 June 18.48 July 49 July 43 3/16 July 39.05 July 25.50 July 16.98 July 19.46 August 52 5/8 August 40 9/64 August 38.13 August 23.08 August 15.19 August 18.46 September 43 5/8 September 46 9/16 September 37.10 September 21.32 September 15.24 September 19.06 October 49 1/2 October 51 11/16 October 37.18 October 21.35 October 15.27 November 51 1/8 November 56 1/16 November 35.72 November 22.66 November 16.18 December 42 3/8 December 56 3/4 December 35.81 December 22.20 December 17.39
The closing price on October 20, 2004 was $16.72. VALEANT PHARMACEUTICALS (VRX) Valeant Pharmaceuticals International, formerly ICN Pharmaceuticals, Inc., is a global, research-based specialty pharmaceutical company that discovers, develops, manufactures and markets a range of pharmaceutical products. Valeant Pharmaceuticals International operates in two principal business areas, the pharmaceutical business and the biomedical business. Valeant Pharmaceuticals' pharmaceutical and nutritional products treat viral and bacterial infections, diseases of the skin, neuromuscular disorders, cancer, cardiovascular disease, diabetes and psychiatric disorders. The biomedical business consists of research chemicals, diagnostic and other biomedical products.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 24 1/8 January 25 January 26.60 January 32.02 January 11.16 January 23.48 February 21 7/8 February 19 7/8 February 26.56 February 27.85 February 9.62 February 21.93 March 25 1/8 March 27 1/4 March 25.43 March 31.75 March 8.91 March 23.87 April 33 3/16 April 25 3/16 April 25.62 April 27.66 April 8.75 April 23.10 46 1/2 32 7/8 68 34 13/16 May 30.23 May 28.03 May 15.00 May 18.28 June 32 3/16 June 27 13/16 June 31.72 June 24.21 June 16.76 June 20.00 July 30 3/4 July 23 13/16 July 30.75 July 10.49 July 15.61 July 17.51 August 20 3/4 August 28 5/16 August 29.45 August 10.16 August 17.50 August 23.46 September 17 3/16 September 33 3/38 September 26.35 September 9.06 September 17.16 September 24.12 October 23 October 38 1/16 October 24.21 October 8.35 October 19.31 November 24 5/16 November 33 11/16 November 29.78 November 11.75 November 23.91 December 25 5/16 December 30 11/16 December 33.50 December 10.91 December 25.15
The closing price on October 20, 2004 was $23.67. A-10 WATSON PHARMACEUTICALS, INC. (WPI) Watson Pharmaceuticals, Inc. is engaged in the development, manufacture, marketing, sale and distribution of branded and off-patent (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 also develops advanced drug delivery systems designed to enhance the therapeutic benefits of existing drug forms. 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.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 54 5/8 January 40 5/16 January 52.06 January 29.30 January 30.28 January 46.51 February 48 3/8 February 40 February 55.50 February 29.28 February 30.93 February 45.92 March 44 1/8 March 39 11/16 March 52.60 March 27.09 March 28.77 March 42.79 April 40 1/2 April 44 15/16 April 49.80 April 24.60 April 29.07 April 35.61 May 38 5/16 May 44 5/16 May 60.10 May 26.00 May 37.02 May 37.35 June 35 1/16 June 53 23/32 June 61.64 June 25.27 June 40.37 June 26.90 July 34 7/16 July 55 1/4 July 65.85 July 21.07 July 39.94 July 25.21 August 35 7/8 August 61 21/32 August 56.10 August 23.32 August 41.10 August 27.54 September 30 9/16 September 64 7/8 September 54.71 September 24.51 September 41.69 September 29.46 October 31 3/4 October 62 9/16 October 47.68 October 27.49 October 39.27 November 37 3/16 November 46 November 29.93 November 29.99 November 47.14 December 35 13/16 December 51 3/16 December 31.39 December 28.27 December 46.00
The closing price on October 20, 2004 was $26.50. WYETH (WYE) Wyeth is engaged in the discovery, development, manufacture, distribution and sale of a diversified line of products in three primary businesses: Wyeth Pharmaceuticals, Wyeth Consumer Healthcare and Fort Dodge Animal Health. The pharmaceutical business manufactures and sells branded and generic human ethical pharmaceuticals, nutritionals and animal biologicals and pharmaceuticals. The consumer healthcare business manufactures and distributes cold and allergy remedies and nutritional products including Advil, Robitussin, Dimetapp and Centrum Silver vitamins. The Animal Health business sells products that include vaccines, pharmaceuticals, parasite control and growth implants.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January 58 11/16 January 47 1/16 January 59.10 January 64.66 January 39.03 January 40.95 February 59 1/2 February 43 1/2 February 61.77 February 63.55 February 35.25 February 39.50 March 65 1/4 March 53 3/4 March 58.75 March 65.65 March 37.82 March 37.55 April 61 April 56 1/4 April 57.75 April 57.00 April 43.53 April 38.07 May 57 5/8 May 53 7/8 May 63.30 May 55.50 May 43.85 May 36.00 June 57 3/8 June 58 3/4 June 58.75 June 51.20 June 45.55 June 36.16 July 51 July 53 1/16 July 60.31 July 39.90 July 45.58 July 35.40 August 41 1/2 August 54 13/64 August 56.00 August 42.80 August 42.85 August 36.57 September 41 1/2 September 56 7/16 September 58.25 September 31.80 September 46.10 September 37.40 October 52 1/4 October 63 1/2 October 55.83 October 33.50 October 44.14 November 52 November 60 1/8 November 60.10 November 38.43 November 39.40 December 39 1/4 December 63 35/64 December 61.36 December 37.40 December 42.45
The closing price on October 20, 2004 was $37.23. A-11 ZIMMER HOLDINGS, INC. (ZMH) Zimmer Holdings, Inc., designs, develops, manufactures and markets reconstructive orthopedic implants, including joint, dental and spinal implants, trauma products and related orthopedic surgical products. Zimmer Holdings also makes fracture management products that are used primarily to reattach or stabilize damaged bone and tissue to support the body's natural healing process. Zimmer Holdings also manufactures and markets other products relating to orthopedic and general surgery. Zimmer's primary customers include musculoskeletal surgeons, neurosurgeons, oral surgeons, dentists, hospitals, distributors, healthcare dealers and, in their capacity as agents, healthcare purchasing organizations or buying groups.
Closing Closing Closing Closing Closing Closing 1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - --------- ------ ------- ------- ------- ------ ------- ----- ------- ------ ------- ------ January * January * January * January 32.53 January 41.00 January 76.50 February * February * February * February 35.76 February 44.39 February 75.64 March * March * March * March 34.05 March 48.63 March 73.78 April * April * April * April 34.71 April 46.90 April 79.85 May * May * May * May 34.98 May 44.86 May 85.35 June * June * June * June 35.66 June 45.50 June 88.20 July * July * July * July 37.23 July 47.81 July 76.31 August * August * August 27.20 August 36.90 August 51.74 August 71.30 September * September * September 27.75 September 38.34 September 55.10 September 79.04 October * October * October 30.91 October 41.22 October 63.81 November * November * November 32.26 November 37.64 November 65.92 December * December * December 30.54 December 41.52 December 70.40
The closing price on October 20, 2004 was $71.00. A-12 =============================================================================== [GRAPHIC OMITTED] 1,000,000,000 Depositary Receipts Pharmaceutical HOLDRS(SM) Trust --------------------- P R O S P E C T U S --------------------- October 25, 2004 =============================================================================== PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Indemnification of Directors and Officers. Section 145 of the General Corporation Law of the State of Delaware, as amended, provides that under certain circumstances a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or is or was serving at its request in such capacity in another corporation or business association, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. Article XIV, Section 2 of the Restated Certificate of Incorporation of Merrill Lynch, Pierce, Fenner & Smith Incorporated provides in effect that, subject to certain limited exceptions, Merrill Lynch, Pierce, Fenner & Smith Incorporated shall indemnify its directors and officers to the full extent authorized or permitted by law. The directors and officers of Merrill Lynch, Pierce, Fenner & Smith Incorporated are insured under policies of insurance maintained by Merrill Lynch, Pierce, Fenner & Smith Incorporated, subject to the limits of the policies, against certain losses arising from any claim made against them by reason of being or having been such directors or officers. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated has entered into contracts with all of its directors providing for indemnification of such persons by Merrill Lynch, Pierce, Fenner & Smith Incorporated to the full extent authorized or permitted by law, subject to certain limited exceptions. Item 16. Exhibits. See Exhibit Index. Item 17. Undertakings. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3)of the Securities Act of 1933. (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. II-1 (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. II-2 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 Post-Effective Amendment No. 6 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, on October 25, 2004. Merrill Lynch, Pierce, Fenner & Smith Incorporated By: * ----------------------------------- Name: John J. Fosina Title: Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 6 to the Registration Statement has been signed by the following persons in the capacities indicated on October 25, 2004. Signature Title * Chief Executive Officer, - ------------------------------------- Chairman of the Board James P. Gorman * - ------------------------------------- Director Do Woo Kim * - ------------------------------------- Director Carlos M. Morales * - ------------------------------------- Director Candace E. Browning * - ------------------------------------- Chief Financial Officer John J. Fosina * - ------------------------------------- Controller Joseph F. Regan *By: /s/ Mitchell M. Cox ---------------------------------- Attorney-in-Fact Mitchell M. Cox II-3 INDEX TO EXHIBITS Exhibits - -------- *4.1 Standard Terms for Depositary Trust Agreements between Merrill Lynch, Pierce, Fenner & Smith Incorporated and The Bank of 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, filed on December 21, 1999 as an exhibit to Amendment No. 1 to the registration statement filed on form S-1 for Pharmaceutical HOLDRS. *4.2 Form of Amendment No. 2 to the Standard Terms for Depositary Trust Agreements, filed on November 28, 2000 as an exhibit to post-effective Amendment No. 1 to the registration statement filed on form S-1 for Pharmaceutical HOLDRS. *5.1 Opinion of Shearman & Sterling LLP regarding the validity of the Pharmaceutical HOLDRS Receipts, filed on December 21, 1999 as an exhibit to Amendment No. 1 to the registration statement filed on form S-1 for Pharmaceutical HOLDRS. *8.1 Opinion of Shearman & Sterling LLP, as special U.S. tax counsel regarding the material federal income tax consequences, filed on December 21, 1999 as an exhibit to Amendment No. 1 to the registration statement filed on form S-1 for Pharmaceutical HOLDRS. *8.2 Opinion of Shearman & Sterling LLP, as special U.S. Tax Counsel regarding the material federal income tax consequences, filed on [July 10], 2003 as an exhibit to Amendment No. 5 to the registration statement filed on form S-1 for Pharmaceutical HOLDRS. *24.1 Power of Attorney (included in Part II of Registration Statement), filed on May 14, 1999 as part of the registration statement filed on form S-1 for Pharmaceutical HOLDRS. *24.2 Power of Attorney of Dominic A. Carone filed on November 28, 2000 as an exhibit to post-effective Amendment No. 1 to the registration statement filed on form S-1 for Pharmaceutical HOLDRS. *24.3 Power of Attorney of John J. Fosina, E. Stanley O'Neal, Thomas H. Patrick and Dominic A. Carone 24.4 Power of Attorney of Candace E. Browning, Gregory J. Fleming, Do Woo Kim and John F. Regan. - --------- * Previously filed. II-4 EX-24.4 2 ex24-4_101904pharmaceutical.txt POWER OF ATTORNEY EXHIBIT 24.4 ------------ POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Mitchell M. Cox and Stephen G. Bodhurta and each of them, with full power to act without the other, her and his, respectively, true and lawful attorneys-in-fact and agents with full and several power of substitution, for her and him and in her and his name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, and supplements to the Registration Statements for each of the Biotech HOLDRS(SM) Trust, B2B Internet HOLDRS(SM) Trust, Broadband HOLDRS(SM) Trust, Europe 2001 HOLDRS(SM) Trust, Internet HOLDRS(SM) Trust, Internet Architecture HOLDRS(SM) Trust, Internet Infrastructure HOLDRS(SM) Trust, Market 2000+ HOLDRS(SM) Trust, Oil Service HOLDRS(SM) Trust, Pharmaceutical HOLDRS(SM) Trust, Regional Bank HOLDRS(SM) Trust, Semiconductor HOLDRS(SM) Trust, Software HOLDRS(SM) Trust, Telecom HOLDRS(SM) Trust, Wireless HOLDRS(SM) Trust, Utilities HOLDRS(SM) Trust and Retail HOLDRS(SM) Trust, 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 she or he might or could do in person, hereby ratifying and conforming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Signature Title ----------- ----- /s/ Candace M. Browning ------------------------------ Director Candace M. Browning /s/ Gregory J. Fleming ------------------------------ Director Gregory J. Fleming /s/ Do Woo Kim ------------------------------ Director Do Woo Kim /s/ Joseph F. Regan ------------------------------ Controller /s/ Joseph F. Regan -----END PRIVACY-ENHANCED MESSAGE-----