-----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, Hbkib8IrOT5e+DVbAZYOhjRt3EBj73L9fQaDJHpbPVspfIfWsN0G6IzC/wrJr3E+ zwVVOOyPYuMSEQ5rr/Zaqg== 0000947871-06-000343.txt : 20060217 0000947871-06-000343.hdr.sgml : 20060217 20060216203924 ACCESSION NUMBER: 0000947871-06-000343 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20060217 DATE AS OF CHANGE: 20060216 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: 333-96069 FILM NUMBER: 06627032 BUSINESS ADDRESS: STREET 1: 4 WORLD FINANCIAL CENTER STREET 2: NORTH TOWER CITY: NEW YORK STATE: NY ZIP: 10080 BUSINESS PHONE: 2126702273 MAIL ADDRESS: STREET 1: 4 WORLD FINANCIAL CENTER STREET 2: NORTH TOWER CITY: NEW YORK STATE: NY ZIP: 10080 POS AM 1 posam_021306-internetinfrast.txt POST-EFFECTIVE AMENDMENT #7 As filed with the Securities and Exchange Commission on February 17, 2006 Registration No. 333-96069 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- POST-EFFECTIVE AMENDMENT NO. 7 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) --------------- Internet Infrastructure HOLDRS(SM) Trust [Issuer with respect to the receipts]
Delaware 6211 13-5674085 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or organization) Classification Code Number) Identification 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 599 Lexington Avenue Incorporated New York, New York 10022 250 Vesey Street (212) 848-4000 New York, New York 10281 (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. [ ] ================================================================================ PROSPECTUS [GRAPHIC OMITTED] 1,000,000,000 Depositary Receipts Internet Infrastructure HOLDRS(SM) Trust The Internet Infrastructure HOLDRS(SM) Trust issues Depositary Receipts called Internet Infrastructure HOLDRS(SM) representing your undivided beneficial ownership in the common stock of a group of specified companies that, among other things, provide software and related services, which allow Internet companies to better manage their Web sites and improve online communications. The Bank of New York is the trustee. You only may acquire, hold or transfer Internet Infrastructure HOLDRS in a round-lot amount of 100 Internet Infrastructure HOLDRS or round-lot multiples. Internet Infrastructure HOLDRS are separate from the underlying deposited common stocks that are represented by the Internet Infrastructure HOLDRS. For a list of the names and the number of shares of the companies that make up an Internet Infrastructure HOLDR, see "Highlights of Internet Infrastructure HOLDRS--The Internet Infrastructure HOLDRS" starting on page 11. The Internet Infrastructure HOLDRS trust issues Internet Infrastructure HOLDRS on a continuous basis. Investing in Internet Infrastructure HOLDRS involves significant risks. See "Risk Factors" starting on page 4. Internet Infrastructure HOLDRS are neither interests in nor obligations of Merrill Lynch, Pierce, Fenner & Smith Incorporated. Internet Infrastructure 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 more complete description of the duties and responsibilities of the trustee, including the obligation of the trustee to act without negligence or bad faith. The Internet Infrastructure HOLDRS are listed on the American Stock Exchange under the symbol "IIH." On February 15, 2006, the last reported sale price of the Internet Infrastructure HOLDRS on the American Stock Exchange was $4.41. --------------- 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 February 16, 2006. "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 Internet Infrastructure HOLDRS.................................11 The Trust....................................................................19 Description of Internet Infrastructure HOLDRS................................19 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..........................................31 --------------- This prospectus contains information you should consider when making your investment decision. With respect to information about Internet Infrastructure 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 Internet Infrastructure HOLDRS in any jurisdiction where the offer or sale is not permitted. The Internet Infrastructure 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 Internet Infrastructure HOLDRS or of the underlying securities through an investment in the Internet Infrastructure HOLDRS. 2 SUMMARY The Internet Infrastructure HOLding Company Depositary ReceiptS or HOLDRS trust was formed under the depositary trust agreement, dated as of February 18, 2000 among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Internet Infrastructure 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 aspects of the Internet infrastructure segment of the Internet industry. The Internet infrastructure segment of the Internet industry consists of companies that, among other things, provide software and related services, which allow Internet companies to better manage their Web sites and improve online communications. The number of shares of each company's common stock currently held by the trust with respect to each round-lot of Internet Infrastructure HOLDRS is specified under "Highlights of Internet Infrastructure HOLDRS--The Internet Infrastructure HOLDRS." This group of common stocks, and the securities of any company that may be added to the Internet Infrastructure HOLDRS, are collectively referred to in this prospectus as the underlying securities. There are currently 11 companies included in the Internet Infrastructure HOLDRS, which may change as a result of reconstitution events, distributions of securities by underlying issuers or other events. The Internet Infrastructure HOLDRS are separate from the underlying common stocks that are represented by the Internet Infrastructure HOLDRS. On February 14, 2006 there were 6,458,000 Internet Infrastructure HOLDRS outstanding. 3 RISK FACTORS An investment in Internet Infrastructure HOLDRS involves risks similar to investing directly in each of the underlying securities outside of the Internet Infrastructure HOLDRS, including the risks associated with a concentrated investment in Internet infrastructure companies. General Risk Factors o Loss of investment. Because the value of Internet Infrastructure HOLDRS directly relates to the value of the underlying securities, you may lose a substantial portion of your investment in the Internet Infrastructure HOLDRS if the underlying securities decline in value. o Discount trading price. Internet Infrastructure 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 Internet Infrastructure HOLDRS or other corporate events, such as mergers, an Internet Infrastructure 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 Internet Infrastructure 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 Internet infrastructure segment of the Internet industry. At the time of the initial offering, the companies included in the Internet Infrastructure HOLDRS were generally considered to be involved in various aspects of the Internet infrastructure segment of the Internet industry, however, the underlying securities and the Internet Infrastructure HOLDRS may not necessarily follow the price movements of the entire Internet infrastructure segment. If the underlying securities decline in value, your investment in the Internet Infrastructure HOLDRS will decline in value, even if common stock prices of companies in the Internet infrastructure segment of the Internet industry generally increase in value. In addition, since the time of the initial offering, the companies included in the Internet Infrastructure HOLDRS may not be involved in the Internet infrastructure segment of the Internet industry. In this case, the Internet Infrastructure HOLDRS may not consist of securities issued only by companies involved in the Internet infrastructure segment of the Internet industry. o Not necessarily comprised of solely Internet infrastructure companies. As a result of distributions of securities by companies included in the Internet Infrastructure HOLDRS or other corporate events, such as mergers, securities of companies that are not currently included in the Internet Infrastructure HOLDRS and that are not involved in the Internet infrastructure segment of the Internet industry may be included in the Internet Infrastructure HOLDRS. The securities of a new company will only be distributed from the Internet Infrastructure HOLDRS if the securities have a different Standard & Poor's Corporation sector classification than any of the underlying issuers included in Internet Infrastructure 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 Internet Infrastructure HOLDRS provides no assurance that each new company included in the Internet Infrastructure HOLDRS will be involved in the Internet infrastructure segment of the Internet industry. 4 Currently, the underlying securities included in the Internet Infrastructure HOLDRS are represented in the Information Technology 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 Internet Infrastructure HOLDRS yet not be involved in the Internet infrastructure segment of the Internet industry. In addition the GICS sector classifications of securities included in the Internet Infrastructure 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 Internet Infrastructure HOLDRS, which may also result in the inclusion in the Internet Infrastructure HOLDRS of the securities of a new company that is not involved in the Internet infrastructure segment of the Internet industry. o No investigation of underlying securities. The underlying securities initially included in the Internet Infrastructure 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 Internet infrastructure segment of the Internet industry, without regard for the value, price performance, volatility or investment merit of the underlying securities. The Internet Infrastructure 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, Internet Infrastructure HOLDRS may not necessarily be a diversified investment in the Internet infrastructure segment of the Internet 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 Internet Infrastructure HOLDRS, may also reduce diversification. Internet Infrastructure 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 Internet Infrastructure HOLDRS and receive delivery of each of the underlying securities. The cancellation of your Internet Infrastructure HOLDRS will allow you to sell the individual underlying securities or to deliver the individual underlying securities in a tender offer or any form of stock repurchase program. The cancellation of Internet Infrastructure HOLDRS will involve payment of a cancellation fee to the trustee. o Trading halts. Trading in Internet Infrastructure HOLDRS on the American Stock Exchange may be halted if trading in one or more of the underlying securities is halted. Trading in Internet Infrastructure HOLDRS may be halted even if trading continues in some or all of the underlying securities. If trading is halted in Internet Infrastructure HOLDRS, you will not be able to trade Internet Infrastructure HOLDRS and you will only be able to trade the underlying securities if you cancel your Internet Infrastructure 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 Internet Infrastructure HOLDRS. If the Internet Infrastructure HOLDRS are delisted by the American Stock Exchange, a termination event will result unless the Internet Infrastructure HOLDRS are listed for trading on another U.S. national securities exchange or through the 5 Nasdaq National Market System within five business days from the date the Internet Infrastructure HOLDRS are delisted. There are currently 11 companies whose securities are included in the Internet Infrastructure 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 Internet Infrastructure 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 distribution 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 Internet Infrastructure HOLDRS. In addition, you will not be entitled to any interest on any distribution by reason of any delay in distribution by the depositary. Risk Factors Specific to the Internet Infrastructure Segment of the Internet Industry o The stock prices of companies involved in the Internet infrastructure segment of the Internet industry have been and will likely continue to be extremely volatile, which will directly affect the price volatility of the Internet Infrastructure HOLDRS, and you could lose a substantial part of your investment. The trading prices of the stocks of Internet infrastructure companies have been extremely volatile. These stock prices could be subject to wide fluctuations in response to a variety of factors, including the following: o general market fluctuations; o actual or anticipated variations in companies' quarterly operating results; o announcements of technological innovations by competitors of the companies included in the Internet Infrastructure HOLDRS; o changes in financial estimates by securities analysts; o conditions or trends in the Internet and online commerce industries; o conditions or trends in online securities trading; o changes in the market valuations of Internet infrastructure companies; o developments in Internet regulations; o legal or regulatory developments affecting companies included in the Internet Infrastructure HOLDRS or in the Internet infrastructure segment of the Internet industry; o announcements by Internet infrastructure companies or their competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; o unscheduled system downtime; o additions or departures of key personnel; 6 o sales of Internet infrastructure companies' common stock or other securities in the open market; and o difficulty in obtaining additional financing. In addition, the trading prices of Internet infrastructure stocks in general have experienced extreme price and volume fluctuations in recent months. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. The valuations of many Internet infrastructure stocks are high when measured by conventional valuation standards such as price to earrings and price to sales ratios. Some of the companies do not or in the future might not have earnings. As a result, these tracing prices may decline substantially and valuations may not be sustained. Any negative change in the public's perception of the prospects of Internet infrastructure companies, generally, could depress the stock prices of an Internet infrastructure company regardless of Internet infrastructure companies' results. The sharp decline in the market price of many Internet-related companies since early 2000 is an example of this effect. Other broad market and industry factors may decrease the stock price of Internet infrastructure 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 Internet infrastructure stocks. Current economic conditions have adversely affected employment and other significant elements of the economy that drive productivity and the financial strength of businesses. These economic conditions could have a material adverse effect on the financial condition and results of operations of companies whose common stocks are included in Internet Infrastructure HOLDRS. Companies whose common stocks are included in Internet Infrastructure HOLDRS results of operations and financial condition could be adversely impacted if those events and other related events cause further disruptions in the economy. As a result of fluctuations in the trading prices of the companies included in the Internet Infrastructure HOLDRS, the trading price of an Internet Infrastructure HOLDR has fluctuated significantly. The initial offering price of an Internet Infrastructure HOLDR, on February 24, 2000, was $96.67 and during 2005 the price of an Internet Infrastructure HOLDR reached a high of $4.47 and a low of $3.37. o Internet infrastructure companies must keep pace with rapid technological change to remain competitive. The Internet market is characterized by rapidly changing technology, evolving industry standards and practices, frequent new product and service introductions and enhancements and changing customer demands. These market characteristics are heightened by the emerging nature of the Internet and the apparent need of companies from a multitude of industries to offer Web-based products and services. Internet companies' success therefore will depend on their ability to adapt to rapidly changing technologies, to adapt their services to evolving industry standards and to continually improve the performance, features and reliability of their service. Failure to adapt to such changes would harm their business. In addition, the widespread adoption of new Internet, networking or telecommunications technologies or other technological changes could require substantial expenditures to modify or adapt their services or infrastructure. o New laws and regulations with respect to the Internet could impede its commercial development and adversely affect the business of many Internet infrastructure companies. Due to the increasing popularity and use of the Internet and other online services, it is possible that a number of laws and regulations may be adopted with respect to the Internet or other online services covering issues such as user privacy, pricing, content, copyrights, distribution and characteristics and quality of products and services. Furthermore, the growth and development of the market for online interaction and commerce may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies conducting business online. The adoption of any additional laws or regulations may impede the growth of the Internet or other online services 7 which could have a material adverse effect on the business, results of operations and financial condition of Internet infrastructure companies. o If Internet infrastructure companies fail to increase market awareness of their brands they will lose revenue opportunities and their sales will suffer. Failure of many Internet infrastructure companies to promote their respective brand names or the incurrence of significant expenses promoting and maintaining brand names could have a material adverse effect on the business, results of operations and financial condition of many Internet infrastructure companies. Due in part to the emerging nature of the market for Internet management solutions offered by Internet infrastructure companies, there may be a time-limited opportunity to achieve and maintain a significant market share. Therefore, market awareness of the brand names of many of these companies is critical to achieving widespread acceptance of their products and services. There can be no assurance that Internet infrastructure companies will be successful in increasing market awareness of their brands. o The ability of many Internet infrastructure companies to offer their products and services depends on their ability to manage rapid growth, which if inefficiently managed, could adversely affect their revenues. Many Internet infrastructure companies are, or plan to, rapidly expand their operations. Success of the marketing strategies of many of these companies will place extraordinary demands on their network infrastructure and technical support. This expansion has placed and will continue to place a significant strain on the management, financial controls, operations systems, personnel and other resources of many Internet infrastructure companies. There can be no assurance that these companies will complete the necessary improvements to their systems, procedures and controls necessary to support their future operations in a timely manner or that management will be able to hire, train, retain and manage required personnel to manage such rapid growth. o Inability to adequately protect proprietary rights may harm the competitive positions of many Internet infrastructure companies. Many Internet infrastructure companies rely on a combination of copyrights, trademarks, service marks and trade secret laws and contractual restrictions to establish and protect proprietary rights in their products and services. There can be no assurance that these companies will be able to protect their intellectual property if they are unable to enforce their rights or if they do not detect unauthorized use of their intellectual property. Furthermore, any steps taken to protect intellectual property may be inadequate, time consuming and expensive. In addition, Internet infrastructure companies may be subject to claims that their products and services infringe the intellectual property rights of others. Any claim, whether meritorious or not, could be time consuming, result in costly litigation, delay product or service introduction or require Internet infrastructure companies to enter into royalty or licensing agreements. Legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in Internet-related industries are uncertain and still evolving, and the future viability or value of any of the intellectual property rights of Internet infrastructure companies is uncertain. o Many Internet infrastructure companies are developing strategies to generate additional revenues for their products and services outside the United Sates and if these strategies fail it could result in slower revenue growth and losses. Many Internet infrastructure companies believe that they must expand their international sales activities to be successful as usage of the Internet increases globally. The expansion to international markets will require significant management attention and financial resources to develop and expand international sales and marketing activities. However, many Internet infrastructure companies cannot be certain that investments in establishing facilities in other companies will produce anticipated revenues as they have limited experience developing localized versions of their products and services and marketing products and services internationally. o Many companies included in the Internet Infrastructure HOLDRS have a limited operating history which makes financial forecasting difficult. Many companies included in the Internet 8 Infrastructure HOLDRS are not able to forecast operating expenses based on their historical results. Accordingly, they base their forecast for expenses in part on future revenue projections. Most expenses are fixed in the short term and it may not be possible to quickly reduce spending if revenues are lower than projected. An Internet infrastructure company's ability to forecast accurately its quarterly revenue is limited because its software products have a long sales cycle that makes it difficult to predict the quarter in which it can recognize revenue, and because of the variability of client demand for its professional services. The business, operating results and financial condition of Internet infrastructure companies may be materially adversely affected if their revenues do not meet their projections. o System failures, interruptions or shutdowns may cause loss of customers. The success of many Internet infrastructure companies depends upon the efficient and uninterrupted operation of their computer and communications systems and the Internet. The recent and rapid growth in Internet traffic has caused frequent periods of decreased performance and if Internet usage continues to grow as anticipated, the infrastructure may not be able to support the level of usage and its performance and reliability may decline. If outages or delays on the Internet increase, overall Internet usage could grow more slowly or decline. Due to capacity limits on technology, transaction processing systems and network hardware and software, some Internet infrastructure companies will be required to expand and upgrade their systems and technology. It may be difficult for these companies to project the increased usage and upgrade systems in a timely manner. Any prolonged failure, interruption, or period of decreased performance could seriously damage the reputation of these Internet infrastructure companies, result in a loss of customers and negatively affect results of operations. o Many Internet infrastructure companies are dependent on their ability to continue to retain and attract highly skilled technical and managerial personnel to develop and operate their businesses. The success of many Internet infrastructure companies is highly dependent on the experience, abilities and continued services of key executive officers and key technical personnel. If these companies lose the services of any of these key officers or key technical personnel, their future success could be undermined. Competition for personnel is intense. There is no certainty that any of these Internet infrastructure companies will be able to continue to attract and retain qualified personnel. o Many Internet infrastructure companies have a history of incurring losses which may make it difficult for these companies to fund their future operations. Many Internet infrastructure companies have incurred significant losses since their inception and they may continue to incur losses for the foreseeable future. Many of these Internet infrastructure companies will also continue to incur losses as additional costs are incurred to develop new technology, products and services, expand marketing and sales operations in existing and new markets and develop administrative facilities. If Internet infrastructure companies do not achieve and sustain profitability, their ability to respond effectively to market conditions, to make capital expenditures and to take advantage of business opportunities could be adversely affected. o Companies whose securities are included in the Internet Infrastructure 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 Internet Infrastructure HOLDRS. Companies whose securities are included in Internet Infrastructure 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 Internet Infrastructure HOLDRS may have to forego strategic acquisitions or investments, reduce or defer their development activities, delay their introduction 9 of new products and services or terminate operations completely. Any of these actions may reduce the market price of stocks in the Internet infrastructure segment of the internet industry. 10 HIGHLIGHTS OF INTERNET INFRASTRUCTURE HOLDRS This discussion highlights information regarding Internet Infrastructure HOLding Company Depositary ReceiptS. We present certain information more fully in the rest of this prospectus. You should read the entire prospectus carefully before you purchase Internet Infrastructure HOLDRS. Issuer........................... Internet Infrastructure HOLDRS Trust The trust........................ The Internet Infrastructure HOLDRS Trust was formed under the depositary trust agreement, dated as of February 18, 2000 among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Internet Infrastructure 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 Internet Infrastructure HOLDRS representing the underlying securities issued by the trust. The trustee holds the underlying securities on behalf of the holders of Internet Infrastructure HOLDRS. Purpose of Internet Infrastructure HOLDRS........................... Internet Infrastructure HOLDRS are designed to achieve the following: Diversification. Internet Infrastructure HOLDRS are designed to allow you to diversify your investment in the Internet infrastructure segment of the Internet industry through a single, exchange-listed instrument representing your undivided beneficial ownership of the underlying securities. Flexibility. The beneficial owners of Internet Infrastructure HOLDRS have undivided beneficial ownership interests in each of the underlying securities represented by the Internet Infrastructure HOLDRS, and can cancel their Internet Infrastructure HOLDRS to receive each of the underlying securities represented by the Internet Infrastructure HOLDRS. Transaction costs. The expenses associated with buying and selling Internet Infrastructure 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 Internet infrastructure segment of the Internet 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 11 companies included in the Internet Infrastructure 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. 11 The Internet Infrastructure HOLDRS........................... The trust has issued, and may continue to issue, Internet Infrastructure HOLDRS that represent an undivided beneficial ownership interest in the shares of U.S.-traded common stock that are held by the trust on your behalf. The Internet Infrastructure HOLDRS themselves are separate from the underlying securities that are represented by the Internet Infrastructure HOLDRS. The following chart provides: o the names of the 11 issuers of the underlying securities currently represented by an Internet Infrastructure HOLDRS, o the stock ticker symbols, o the share amounts currently represented by a round-lot of 100 Internet Infrastructure HOLDRS, and o the principal U.S. market on which the common stock of the selected companies are traded.
Share Primary Name of Company(1)(2) Ticker Amounts Trading Market ----------------------- ------- ---------- -------------- Akamai Technologies Inc. AKAM 3 NASDAQ BEA Systems, Inc. BEAS 10 NASDAQ Broadvision Inc. BVSN 1 NASDAQ InterNAP Network Services Corporation IIP 5 AMEX InfoSpace Inc. INSP 0.8 NASDAQ NaviSite, Inc. NAVI 0.1333 NASDAQ Openwave Systems Inc. OPWV 1.0736 NASDAQ RealNetworks, Inc. RNWK 6 NASDAQ VeriSign, Inc. VRSN 6.15 NASDAQ Vignette Corporation VIGN 0.6 NASDAQ Vitria Technology, Inc. VITR 1 NASDAQ
(1) Effective as of business October 17, 2005, Kana Software Inc (NASDAQ: "KANAE"), a component of the Internet Infrastructure HOLDRS Trust, was delisted from trading on NASDAQ. The Bank of New York distributed shares of Kana Software at the rate of distribution of 0.002 Kana Software Inc shares per Internet Infrastructure HOLDRS. (2) The merger of E.Piphany, Inc (NASDAQ: "EPNY") and SSA Global Technologies, Inc. became effective on September 29, 2005. As a result of the above event E.Piphany, Inc. will no longer be an underlying constituent of the Internet Infrastructure HOLDRS Trust. For the 1.5 shares of E. Piphany, Inc per 100 shares round lot of Internet Infrastructure HOLDRS, The Bank of New York will receive $3.105. The companies whose common stocks were included in the Internet Infrastructure HOLDRS at the time Internet Infrastructure HOLDRS were originally issued were generally considered to be among the 20 largest and most liquid companies involved in the Internet infrastructure segment of the Internet industry, as measured by market capitalization and trading volume on February 7, 2000. The market capitalization of a company was determined by multiplying the market price of its common stock by the number of outstanding shares of its common stock. The trust will only issue and cancel, and you may only obtain, hold, trade or surrender, Internet Infrastructure HOLDRS in a round-lot of 100 Internet Infrastructure HOLDRS and round-lot multiples. The trust will only issue 12 Internet Infrastructure HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 Internet Infrastructure HOLDRS. In the event that a fractional share comes to be represented by a round-lot of Internet Infrastructure HOLDRS, the trust may require a minimum of more than one round-lot of 100 Internet Infrastructure HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Internet Infrastructure HOLDRS. The number of outstanding Internet Infrastructure 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 Internet Infrastructure HOLDRS on a continuous basis when an investor deposits the required number of shares of common stock with the trustee. Purchases........................ You may acquire Internet Infrastructure 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 Internet Infrastructure HOLDRS by delivering to the trust the requisite shares of common stock represented by a round-lot of 100 Internet Infrastructure 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 Internet Infrastructure HOLDRS. If you wish to cancel your Internet Infrastructure 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 Internet Infrastructure HOLDRS. Commissions...................... If you choose to deposit underlying securities in order to receive Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year. Rights relating to Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS would otherwise require the delivery of a fractional share, the trustee will sell the fractional share in the market and the trust, in 13 turn, will deliver cash in lieu of such fractional share. Except with respect to the right to vote for dissolution of the trust, the Internet Infrastructure HOLDRS themselves will not have voting rights. Rights relating to the underlying securities....................... Internet Infrastructure HOLDRS represents your beneficial ownership of the underlying securities. Owners of Internet Infrastructure HOLDRS have the same rights and privileges as if they owned the underlying securities beneficially outside of Internet Infrastructure 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 Internet Infrastructure HOLDRS and the right to surrender Internet Infrastructure HOLDRS to receive the underlying securities. Internet Infrastructure 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 Internet Infrastructure HOLDRS. However, due to the nature of Internet Infrastructure HOLDRS, you will not be able to participate in any dividend reinvestment program of an issuer of underlying securities unless you cancel your Internet Infrastructure HOLDRS (and pay the applicable fees) and receive all of the underlying securities. A holder of Internet Infrastructure HOLDRS is not a registered owner of the underlying securities. In order to become a registered owner, a holder of Internet Infrastructure HOLDRS would need to surrender their Internet Infrastructure 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 Internet Infrastructure HOLDRS in the same manner as if you beneficially owned your underlying securities outside of Internet Infrastructure 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 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 Internet Infrastructure 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 14 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS (and pay the applicable fees and expenses) and receive all of your underlying securities in exchange for your Internet Infrastructure 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 underlying securities....................... As a result of distributions of securities by companies included in the Internet Infrastructure HOLDRS or other corporate events, such as mergers, an Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS are outstanding and each round-lot of 100 Internet Infrastructure HOLDRS represents 1.75 shares of an underlying security, there will be 175,001.75 votes of the underlying security represented by Internet Infrastructure HOLDRS. If holders of 50,000 round-lots of 100 Internet Infrastructure HOLDRS vote their underlying securities "yes" and holders of 50,001 round-lots of 100 Internet Infrastructure 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. 15 Reconstitution events............ The depositary trust agreement provides for the automatic distribution of underlying securities from the Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS, only if the distributed securities have a different Standard & Poor's GICS sector classification than any of the underlying securities represented in the Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS, as a result of a distribution of securities by an underlying issuer, 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 Internet Infrastructure 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 inclusion of new securities in Internet Infrastructure 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 Internet 16 Infrastructure 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 Internet Infrastructure HOLDRS are currently represented in the Information Technology GICS sector. The Standard & Poor's GICS sector classifications of the securities included in the Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS surrendered, along with any taxes or other governmental charges, if any. United States Federal income tax consequences..................... The United States federal income tax laws will treat a U.S. holder of Internet Infrastructure HOLDRS as directly owning the underlying securities. The Internet Infrastructure 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 Internet Infrastructure HOLDRS are listed on the American Stock Exchange under the symbol "IIH." On February 15, 2006, the last reported sale price of the Internet Infrastructure HOLDRS on the American Stock Exchange was $4.41. Trading.......................... Investors are only able to acquire, hold, transfer and surrender a round-lot of 100 Internet Infrastructure HOLDRS. Bid and ask prices, however, are 17 quoted per single Internet Infrastructure HOLDRS. Clearance and settlement......... Internet Infrastructure HOLDRS have been issued only in book-entry form. Internet Infrastructure 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 Internet Infrastructure HOLDRS." 18 THE TRUST General. This discussion highlights information about the Internet Infrastructure 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 Internet Infrastructure HOLDRS. The material terms of the depositary trust agreement are described in this prospectus under the heading "Description of the Depositary Trust Agreement." The Internet Infrastructure HOLDRS trust. The trust was formed pursuant to the depositary trust agreement, dated as of February 18, 2000. The depositary trust agreement was amended on November 22, 2000. The Bank of New York is the trustee. The Internet Infrastructure HOLDRS trust is not a registered investment company under the Investment Company Act of 1940. The Internet Infrastructure HOLDRS trust is intended to hold deposited shares for the benefit of owners of Internet Infrastructure 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 INTERNET INFRASTRUCTURE HOLDRS The trust has issued Internet Infrastructure HOLDRS under the depositary trust agreement described in this prospectus under the heading "Description of the Depositary Trust Agreement." The trust may issue additional Internet Infrastructure HOLDRS on a continuous basis when an investor deposits the requisite underlying securities with the trustee. You may only acquire, hold, trade and surrender Internet Infrastructure HOLDRS in a round-lot of 100 Internet Infrastructure HOLDRS and round-lot multiples. The trust will only issue Internet Infrastructure HOLDRS upon the deposit of the whole shares of underlying securities that are represented by a round-lot of 100 Internet Infrastructure 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 Internet Infrastructure HOLDRS, the trust may require a minimum of more than one round-lot of 100 Internet Infrastructure HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Internet Infrastructure HOLDRS. Internet Infrastructure HOLDRS will represent your individual and undivided beneficial ownership interest in the specified underlying securities. The companies selected as part of this receipt program are listed above in the section entitled "Highlights of Internet Infrastructure HOLDRS--The Internet Infrastructure HOLDRS." Beneficial owners of Internet Infrastructure 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 Internet Infrastructure HOLDRS to receive the underlying securities. See "Description of the Depositary Trust Agreement." Internet Infrastructure 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, referred to herein as the Exchange Act. The trust will not publish or otherwise calculate the aggregate value of the underlying securities represented by a receipt. Internet Infrastructure 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 Internet Infrastructure HOLDRS wishes to realize the dollar value of the underlying securities, that owner will have to cancel the Internet Infrastructure HOLDRS. Such cancellation will require payment of fees and expenses as described in "Description of the Depositary Trust Agreement--Withdrawal of underlying securities." 19 Internet Infrastructure 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. Internet Infrastructure HOLDRS are available only in book-entry form. Owners of Internet Infrastructure HOLDRS hold their Internet Infrastructure HOLDRS through DTC, if they are participants in DTC, or indirectly through entities that are participants in DTC. DESCRIPTION OF THE UNDERLYING SECURITIES Selection criteria. The underlying securities are the common stocks of a group of specified companies that, at the time of initial selection, were involved in various segments of the Internet infrastructure segment of the Internet industry and whose common stock is registered under section 12 of the Securities Exchange Act. The issuers of the underlying securities were, as of the time of initial selection, among the largest capitalized and most liquid companies involved in the Internet infrastructure segment of the Internet industry as measured by market capitalization and trading volume. The Internet Infrastructure HOLDRS may no longer consist exclusively of securities issued by companies involved in the Internet infrastructure segment. Merrill Lynch, Pierce, Fenner & Smith incorporated will determine, in its sole discretion, whether the issuer of a particular underlying security remains in the Internet infrastructure segment of the Internet industry and will undertake to make adequate disclosure when necessary. Underlying securities. For a list of the underlying securities represented by Internet Infrastructure HOLDRS, please refer to "Highlights of Internet Infrastructure HOLDRS--The Internet Infrastructure 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, 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 Internet Infrastructure 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 or any of their respective 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 and graph set forth the composite performance of all of the 11 underlying securities currently represented by a single Internet Infrastructure HOLDRS, measured at the close of the business day on October 29, 1999, and thereafter as of the end of each month to February 14, 2006. 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.
1999 Price 2000 Price 2001 Price 2002 Price 2003 Price 2004 Price - ----------- ----- ------------ ----- ----------- ----- ----------- ----- ---------- ----- ----------- ------ October 29 24.21 January 31 48.83 January 31 17.75 January 31 5.36 January 31 2.22 January 30 3.89 November 30 34.46 February 29 69.75 February 28 10.63 February 28 4.02 February 28 2.06 February 27 4.09 December 31 52.68 March 31 44.90 March 30 7.76 March 28 4.46 March 31 2.15 March 31 3.84 April 28 38.82 April 30 10.88 April 30 2.78 April 30 2.59 April 30 3.46 May 31 30.39 May 31 11.01 May 31 2.77 May 30 3.10 May 28 3.44 June 30 41.93 June 29 10.47 June 28 2.09 June 30 2.94 June 30 3.67 July 31 33.92 July 31 8.24 July 31 1.45 July 31 3.17 July 30 3.12 August 31 40.32 August 31 6.01 August 30 1.57 August 29 3.36 August 31 2.99 September 29 38.38 September 28 4.87 September 30 1.23 September 30 3.15 September 30 3.27 October 31 29.18 October 31 5.04 October 31 1.77 October 31 3.67 Octover 29 3.88 November 30 19.34 November 30 5.91 November 29 2.47 November 28 3.73 November 30 4.26 December 29 17.55 December 31 5.78 December 31 2.21 December 31 3.58 December 31 4.49
2005 Price 2006 Price - ------------- ----- ---------- ----- January 30 3.90 January 31 4.22 February 28 3.85 February 14 4.38 March 31 3.91 April 29 3.56 May 31 4.13 June 30 3.92 July 29 3.84 August 31 3.50 September 30 3.58 Octover 31 3.88 November 30 3.91 December 30 3.90 [GRAPHIC OMITTED] 21 DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT General. The depositary trust agreement, dated as of February 18, 2000, among Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York, as trustee, other depositors and the owners of the Internet Infrastructure HOLDRS, provides that Internet Infrastructure 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, as described below. The trustee. The Bank of New York serves as trustee for the Internet Infrastructure 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 Internet Infrastructure HOLDRS. You may create and cancel Internet Infrastructure HOLDRS only in round-lots of 100 Internet Infrastructure HOLDRS. You may create Internet Infrastructure HOLDRS by delivering to the trustee the requisite underlying securities. The trust will only issue Internet Infrastructure HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 Internet Infrastructure HOLDRS. In the event that a fractional share comes to be represented by a round-lot of Internet Infrastructure HOLDRS, the trust may require a minimum of more than one round-lot of 100 Internet Infrastructure HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Internet Infrastructure HOLDRS. Similarly, you must surrender Internet Infrastructure HOLDRS in integral multiples of 100 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated owning Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 22 Internet Infrastructure HOLDRS, 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS, only if the distributed securities have a different Standard & Poor's GICS sector classification than any of the underlying securities represented in the Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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. 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS will be distributed from the Internet Infrastructure 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 GICS sector. The securities included in the Internet Infrastructure HOLDRS are currently represented in the Information Technology GICS sector. The Standard & Poor's GICS sector classifications of the securities included 23 in the Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS. Further issuances of Internet Infrastructure HOLDRS. The depositary trust agreement provides for further issuances of Internet Infrastructure 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 Internet Infrastructure HOLDRS will surrender their Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS are delisted. Finally, the trust will terminate if 750 of the owners of outstanding Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS will not become effective until 30 days after notice of the amendment is given to the owners of Internet Infrastructure HOLDRS. Issuance and cancellation fees. If you wish to create Internet Infrastructure 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 Internet Infrastructure HOLDRS. If you wish to cancel your Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS, 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 Internet Infrastructure 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 Internet Infrastructure 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 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 Internet Infrastructure 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 thereon 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 individual, corporation, estate or trust that is not 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Europe 2001 held by a partnership or other flow through entity. 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. Taxation of the trust The trust will provide for flow through tax consequences as it will be treated as a grantor trust or custodial arrangement for U.S. federal income tax purposes. Taxation of Internet Infrastructure HOLDRS A receipt holder purchasing and owning Internet Infrastructure HOLDRS will be treated, for U.S. federal income tax purposes, as directly owning a proportionate share of the underlying securities represented by Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS. Similarly, with respect to sales of Internet Infrastructure HOLDRS for cash in the secondary market, the amount realized with respect to a sale of Internet Infrastructure 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 Internet Infrastructure 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. 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 Internet Infrastructure HOLDRS will reduce the amount realized with respect to the underlying securities. A holder will be required to include in its income the full amount of dividends paid on the underlying securities, even though the depositary trust agreement provides that the custodian fees will be deducted directly from any dividends paid. These custodian fees will be treated as an expense incurred in connection with a holder's investment in the underlying securities and may be deductible. If a holder is an individual, estate or trust, however, the deduction of its share of custodian fees will be a miscellaneous itemized deduction that may be disallowed in whole or in part. Special considerations with respect to underlying securities of foreign issuers 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, 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). The foreign personal holding company rules and the foreign investment company rules have generally been repealed for taxable years of foreign corporations beginning after December 31, 2004. 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 taxable years beginning after December 31, 2006, the number of specific classes of income for which a separate limitation on foreign taxes eligible for the U.S. foreign tax credit is calculated will be reduced to two types of income, "passive income" and "general income." In addition, dividends distributed by a foreign issuer that constitutes "financial services income" with respect to a U.S. Holder will be treated as constituting "general 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 or global shares can apply for a refund of withheld taxes. With respect to these issuers, holders of Internet Infrastructure HOLDRS may be able to use these arrangements to apply for a refund of withheld taxes. In some cases, however, the holders of Internet Infrastructure HOLDRS may have to independently apply to a foreign tax authority 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 28 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 Internet Infrastructure HOLDRS or of the underlying securities or upon the receipt of "excess distributions." To avoid the interest charge provisions described in the preceding sentence, a U.S. receipt holder can make one 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. 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 a 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 corporate 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 Internet Infrastructure 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, 29 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. It is expected that the underlying securities are currently "regularly traded on an established securities market" although no assurances can be made that the securities will continue to be so traded. Effectively connected or attributable gains generally will be subject to U.S. federal income taxation at the same graduated rates applicable to U.S. persons, and may, in the case of a corporate non-U.S. receipt holder, also be subject to the branch profits tax. We recommend that non-U.S. receipt holders consult their own tax advisors to determine whether any applicable tax treaties provide for different rules. 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 Internet Infrastructure 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 Internet Infrastructure 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 Internet Infrastructure HOLDRS to Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch, Pierce, Fenner & Smith Incorporated has deposited the underlying securities to receive Internet Infrastructure HOLDRS. The trust delivered the initial distribution of Internet Infrastructure HOLDRS against deposit of the underlying securities in New York, New York on approximately January 17, 2001. Investors who purchase Internet Infrastructure HOLDRS through a fee-based brokerage account will pay fees charged by the brokerage account. We recommend that investors review the terms of their brokerage accounts for details on applicable charges. Members of the selling group have from time to time provided investment banking and other financial services to some of the issuers of the underlying securities and expect in the future to provide these services, for which they have received and will receive customary fees and commissions. They also may have served as counterparties in other transactions with some of the issuers of the underlying securities. 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 Internet Infrastructure HOLDRS. Merrill Lynch, Pierce, Fenner & Smith Incorporated may act as principal or agent in these transactions. Market-making sales will be made at prices related to prevailing market prices at the time of sale. Merrill Lynch, Pierce, Fenner & Smith Incorporated has agreed to indemnify the trustee against some civil liabilities related to acts performed or not performed by the trustee in accordance with the depositary trust agreement or periodic reports filed or not filed with the SEC with respect to the Internet Infrastructure 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 Internet Infrastructure HOLDRS, were passed upon for Merrill Lynch, Pierce, Fenner & Smith Incorporated, the initial depositor and the underwriter in connection with the initial offering of Internet Infrastructure 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 Internet Infrastructure HOLDRS. WHERE YOU CAN FIND MORE INFORMATION Merrill Lynch, Pierce, Fenner & Smith Incorporated has filed a registration statement on Form S-1 with the SEC covering the Internet Infrastructure 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 31 call the SEC at 1-800-SEC-0330 for more information on the public reference rooms and their copy charges. Merrill Lynch, Pierce, Fenner & Smith Incorporated will not file any reports pursuant to the Exchange Act. The trust will file modified reports pursuant to the Securities Exchange Act of 1934. Since the securities of the issuers of the underlying securities are 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. However, some of the issuers of the underlying securities may be considered foreign issuers. The requirements for filing periodic financial and other information for foreign issuers differ from that of domestic issuers. In particular, foreign issuers are not required to file quarterly reports with the SEC and are not required to file periodic financial and other information on EDGAR. Therefore, this information may not be accessible through the SEC's Web site. Information regarding the issuers of the underlying securities may also be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated information. The trust and the selling group and their affiliates are not affiliated with the issuers of the underlying securities, and the issuers of the underlying securities have no obligations with respect to Internet Infrastructure HOLDRS. This prospectus relates only to Internet Infrastructure HOLDRS and does not relate to the other securities of the issuers of the underlying securities. The information in this prospectus regarding the issuers of the underlying securities has been derived from the publicly available documents described in the preceding paragraph. We have not participated in the preparation of these documents or made any due diligence inquiries with respect to the issuers of the underlying securities in connection with Internet Infrastructure 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 securities of the issuers of the underlying securities, and therefore the offering and trading prices of the Internet Infrastructure 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 2001, 2002, 2003, 2004 and 2005, through February 14, 2006. The historical prices of the underlying securities should not be taken as an indication of future performance. AKAMAI TECHNOLOGIES, INC. (AKAM) Akamai Technologies, Inc. primarily provides e-business infrastructure services and solutions designed to make the Internet predictable, scalable and secure for customers seeking to conduct business over the Internet. Businesses can use Akamai's Edge Platform with a range of Akami Solutions to extend Web operations and improve the management of applications and content. The company offers solutions for the delivery, load balancing and storage of the applications and Web content. In addition, it provides application performance services to enhance the performance of content common on corporate extranets and wide area networks and custom soluations. Akamai also combines its technology with that of other providers to create solutions for specific customers and support for applications that rely on the Internet and intranets. Akamai sells its services and software domestically and internationally through its direct sales and services organization, as well as through resellers.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price - --------- ------- --------- ------- -------- ------- --------- ------- ---------- ------- -------- -------- January 29.06 January 4.61 January 1.33 January 12.95 January 13.10 January 21.88 February 16.94 February 3.11 February 1.53 February 15.08 February 11.01 March 8.56 March 4.001 March 1.41 March 13.14 March 12.73 April 9.45 April 2.29 April 2.42 April 11.84 April 11.81 May 10.33 May 2.00 May 3.66 May 14.86 May 14.04 June 9.18 June 1.30 June 4.78 June 17.95 June 13.13 July 7.75 July 1.06 July 4.58 July 14.93 July 15.27 August 4.21 August 0.95 August 4.16 August 13.45 August 13.84 September 2.91 September 0.83 September 4.29 September 14.05 September 15.95 October 3.16 October 0.97 October 7.9 October 13.85 October 17.34 November 5.76 November 2.06 November 13.4 November 12.95 November 19.96 December 5.94 December 1.73 December 10.76 December 13.03 December 19.93
The closing price on February 14, 2006 was $25.10. A-1 BEA SYSTEMS, INC. (BEAS) BEA Systems, Inc. is a provider of application infrastructure software and related services that help companies build distributed systems that extend investments in existing computer systems and provide the foundation for running an integrated business. BEA's products have applications in a variety of industries, including telecommunications, commercial and investment banking, securities trading, government, manufacturing, retail, airlines, pharmaceuticals, package delivery and insurance. The company's WebLogic Enterprise Platform automates customers' processes, eases their new service launches and automates their supplier and distributor relationships. This platform consists of BEA WebLogic Server, BEA WebLogic Integration, BEA WebLogic Portal, BEA Liquid Data for WebLogic, BEA WebLogic Workshop, BEA Web logic Jrockit, BEA WebLogic Enterprise Security and BEA Tuxedo. The company sells its products through distributors, value added resellers, and partnerships with independent software vendors, application service providers, hardware original equipment manufacturers and systems integrators, as well as directly through a network of sales offices and Web sites.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price - ---------- ------- --------- ------- --------- -------- --------- ------- -------- -------- -------- -------- January 65.94 January 18.13 January 11.46 January 12.59 January 8.52 January 10.37 February 38.38 February 12.71 February 9.72 February 13.76 February 8.30 March 29.38 March 13.71 March 10.14 March 12.72 March 7.97 April 40.85 April 10.72 April 10.70 April 11.42 April 6.90 May 35.88 May 10.76 May 10.85 May 8.63 May 8.43 June 30.71 June 9.51 June 10.89 June 8.22 June 8.78 July 22.05 July 5.55 July 13.20 July 6.49 July 9.07 August 16.17 August 6.11 August 13.51 August 6.65 August 8.82 September 9.59 September 5.18 September 12.04 September 6.91 September 8.99 October 12.14 October 8.089 October 13.90 October 8.12 October 8.82 November 16.79 November 11.06 November 12.66 November 8.08 November 8.77 December 15.40 December 11.47 December 12.30 December 8.86 December 9.40
The closing price on February 14, 2006 was $10.46. BROADVISION, INC. (BVSN) BroadVision, Inc. develops, markets and supports personalized, self-service Web applications that enable organizations to conduct both interactions and transactions with employees, partners and customers. The Company's integrated suite of process, commerce, portal and content solutions unify an organization's e-business infrastructure. The company's products comprise of BroadVision Process, BroadVision Commerce, BroadVision Portal and BroadVision Content. It deploys its software in various industries, including financial services, government, healthcare, manufacturing, retail and telecommunications.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price - ---------- ------- --------- ------- --------- ------- ------- ------- --------- -------- ------- -------- January 130.50 January 20.43 January 4.04 January 6.62 January 2.44 January 0.48 February 65.25 February 17.19 February 3.93 February 8.11 February 2.18 March 48.09 March 15.57 March 3.80 March 6.14 March 1.70 April 57.51 April 9.18 April 3.99 April 3.49 April 1.25 May 56.79 May 7.29 May 7.69 May 3.46 May 1.40 June 45.00 June 2.79 June 5.55 June 4.20 June 1.22 July 30.78 July 2.47 July 5.10 July 2.68 July 0.86 August 11.61 August 2.47 August 4.84 August 2.62 August 0.84 September 8.19 September 1.23 September 4.90 September 2.93 September 0.82 October 18.36 October 2.19 October 5.03 October 2.39 October 0.58 November 27.09 November 5.16 November 4.70 November 2.30 November 0.70 December 24.66 December 3.41 December 4.26 December 2.75 December 0.49
The closing price on February 14, 2006 was $0.45. A-2 INFOSPACE, INC. (INSP) Infospace, Inc. is a diversified technology and services company that consists of two principal businesses: Search and Directory and Mobile. Search and Directory unit markets Web search and online directory products that enable users to find information and directory services including online yellow and white pages services. This segment offers its services through its branded Web sites, InfoSpace.com, Dogpile.com, Switchboard.com, Webcrawler.com and MetaCrawler.com, as well as through the Web properties of distribution partners. Mobile unit provides mobile media products and content to mobile operators across multiple devices, and portal and infrastructure services that enable mobile carriers to deliver content and programming to their subscribers.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price - ---------- ------- --------- ------- -------- ------- --------- ------- --------- -------- -------- -------- January 52.80 January 20.70 January 11.00 January 34.15 January 47.21 January 23.61 February 38.10 February 13.50 February 11.60 February 36.35 February 41.46 March 22.20 March 15.20 March 10.83 March 38.87 March 40.83 April 44.00 April 11.70 April 12.49 April 32.91 April 30.99 May 38.90 May 8.20 May 14.60 May 36.58 May 33.92 June 38.40 June 4.10 June 13.59 June 38.04 June 32.93 July 20.90 July 4.50 July 16.01 July 37.46 July 24.14 August 12.00 August 5.20 August 15.80 August 38.00 August 24.96 September 14.40 September 4.60 September 20.41 September 47.39 September 23.87 October 15.80 October 8.11 October 26.05 October 52.50 October 25.12 November 20.40 November 11.34 November 26.25 November 44.30 November 26.36 December 20.50 December 8.44 December 23.05 December 47.55 December 25.82
The closing price on February 14, 2006 was $23.50. INTERNAP NETWORK SERVICES CORPORATION (IIP) InterNAP Network Services Corporation is a provider of high-performance Internet connectivity services targeted at businesses. Its products and services include route-optimized Internet connectivity for data transfers and customer premises-based hardware and software route optimization platforms and solutions. The company also provides managed router services, including server management and installation and monitoring services to support routing. InterNAP offers its products and services to customers in the financial services, government, travel/hospitality, manufacturing, media/entertainment, technology and retail industries.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price - --------- ------- --------- ------- -------- -------- -------- -------- -------- -------- --------- -------- January 8.09 January 1.11 January 0.46 January 2.29 January 0.67 January 0.51 February 3.75 February 1.01 February 0.44 February 1.88 February 0.57 March 1.94 March 0.77 March 0.40 March 1.72 March 0.59 April 2.70 April 0.58 April 0.44 April 1.68 April 0.42 May 2.76 May 0.42 May 0.84 May 1.50 May 0.46 June 3.27 June 0.23 June 1.02 June 1.21 June 0.47 July 1.89 July 0.16 July 1.27 July 0.88 July 0.49 August 1.00 August 0.27 August 1.17 August 0.52 August 0.47 September 1.00 September 0.21 September 1.23 September 0.67 September 0.48 October 0.82 October 0.21 October 1.11 October 0.77 October 0.48 November 1.12 November 0.64 November 2.24 November 0.66 November 0.41 December 1.16 December 0.37 December 2.45 December 0.93 December 0.43
The closing price on February 14, 2006 was $0.47. A-3 NAVISITE, INC. (NAVI) NaviSite, Inc. provides outsourced hosting and managed application services for mid-sized enterprises, divisions of large multi-national companies, government agencies and other businesses conducting mission-critical business on the Internet. The company delivers flexible solutions that provide responsive and predictable levels of service for its clients' businesses. Its hosting services include managed services, which comprise of business continuity and disaster recovery, connectivity, content distribution, database administration and performance tuning, desktop support, hardware management, monitoring, network and security management, server and operating system management and storage management and application management services. The company's professional services comprise pf planning, implementation, maintenance, optimization, and compliance services. Its customers primarily include financial services, healthcare, manufacturing and distribution, publishing, media and communications and business services companies.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price - --------- ------- -------- ------- --------- ------ -------- ------- -------- ------- -------- -------- January 53.44 January 3.90 January 1.92 January 5.41 January 2.01 January 1.51 February 28.59 February 3.75 February 1.31 February 4.69 February 2.24 March 22.50 March 4.35 March 1.38 March 5.87 March 1.68 April 27.30 April 3.75 April 1.30 April 4.81 April 1.31 May 27.90 May 3.00 May 2.89 May 4.51 May 1.54 June 21.75 June 2.25 June 2.75 June 3.91 June 1.76 July 11.25 July 1.80 July 2.96 July 2.02 July 1.91 August 6.00 August 2.55 August 3.36 August 1.48 August 1.59 September 2.85 September 2.40 September 3.41 September 2.61 September 1.26 October 6.15 October 2.55 October 4.30 October 2.07 October 1.33 November 5.85 November 3.90 November 8.99 November 2.26 November 1.25 December 5.40 December 2.25 December 6.57 December 2.63 December 1.25
The closing price on February 14, 2006 was $1.47. OPENWAVE SYSTEMS, INC. (OPWV) Openwave Systems Inc. is an independent provider of open standards software products and services for the communications industry. Openwave's product portfolio includes client software for mass-market mobile phones, mobile infrastructure products and messaging application products for the communications industry. Its client software products include Mobile Browser, Instant Messaging, Phone Suite Version 7, which provides browsing and messaging clients with a standards-based graphical application framework and Mobile Email Client, which is designed for mass market mobile handsets and delivers email messaging capabilities. Its server software products comprise of Mobile Access Gateway, which is a carrier-class infrastructure software for exchanging data between the wireline Internet and wireless mobile phones, Location Manager for e91, Email Mx for its messaging solutions and Multimedia Messaging Services Center, which enables operators to offer multimedia services, such as integrated photo and text messaging.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price - ----------- ------- --------- ------- -------- ------- --------- -------- -------- ------- ------- ------- January 207.75 January 19.41 January 3.69 January 14.83 January 13.62 January 21.55 February 110.53 February 16.77 February 4.29 February 15.16 February 12.76 March 59.52 March 19.08 March 4.26 March 13.34 March 12.19 April 103.83 April 17.16 April 5.22 April 8.61 April 13.38 May 114.99 May 18.03 May 7.26 May 11.17 May 15.55 June 104.10 June 16.83 June 6.00 June 12.70 June 16.40 July 76.68 July 3.03 July 11.34 July 11.37 July 18.55 August 48.12 August 3.00 August 14.79 August 9.32 August 17.21 September 38.25 September 1.86 September 12.63 September 8.82 September 17.98 October 23.19 October 3.27 October 13.01 October 11.77 October 17.87 November 32.85 November 9.03 November 12.03 November 13.18 November 16.61 December 29.37 December 6.00 December 11.00 December 15.46 December 17.47
The closing price on February 14, 2006 was $22.19. A-4 REALNETWORKS, INC. (RNWK) RealNetworks, Inc. develops and markets digital media services and software for individuals and businesses. The company primarily offers its products under two categories, Consumer Products and Services (CPS) and Business Products and Services (BPS). The CPS category offers digital music products and services. RealNetworks also owns and operates a digital games service that includes downloadable games products and subscription services. The BPS category develops and provides software products, which enable media content creators, Web site owners and wireline and wireless network operators to create, secure and distribute digital media content to personal computers (PC) and nonPC devices.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price - ---------- ------- --------- ------- -------- ------- -------- ------- -------- ------- -------- -------- January 10.19 January 6.51 January 3.56 January 5.59 January 6.07 January 8.05 February 7.19 February 5.45 February 4.15 February 5.69 February 6.26 March 7.06 March 7.02 March 4.13 March 6.00 March 5.78 April 9.20 April 7.03 April 5.13 April 5.69 April 6.16 May 11.01 May 8.50 May 7.96 May 6.01 May 5.11 June 11.75 June 4.07 June 6.76 June 6.84 June 4.96 July 7.02 July 4.10 July 5.75 July 5.64 July 4.97 August 7.22 August 4.58 August 6.32 August 4.97 August 5.39 September 4.86 September 3.61 September 6.48 September 4.66 September 5.71 October 5.67 October 3.51 October 6.65 October 4.85 October 7.80 November 6.58 November 3.86 November 5.97 November 6.30 November 8.65 December 5.94 December 3.81 December 5.71 December 6.62 December 7.76
The closing price on February 14, 2006 was $8.53. A-5 VERISIGN, INC. (VRSN) VeriSign, Inc. is a provider of critical infrastructure services that is organized into two service-based lines of business: the Internet Services Group and the Communications Services Group. The Internet Services Group consists of the Security Services business and the Naming and Directory Services business. The Security Services business provides products and services that enable enterprises and organizations to establish and deliver secure Internet-based services to customers and business partners, and the Naming and Directory Services business acts as the exclusive registry of domain names in the .com and ..net generic top-level domains and certain country code top-level domains. The Communications Services Group provides network connectivity and interoperability services, intelligent database and directory services, application services and billing and payment services to wireline and wireless telecommunications carriers.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price - ---------- ------- -------- -------- -------- ------- -------- -------- --------- ------- ------- -------- January 73.50 January 30.86 January 8.25 January 17.48 January 25.84 January 23.75 February 47.69 February 23.73 February 7.71 February 17.41 February 27.42 March 35.44 March 27.00 March 8.74 March 16.59 March 28.70 April 51.28 April 9.25 April 12.41 April 16.21 April 26.45 May 56.50 May 9.68 May 14.98 May 18.14 May 32.22 June 60.01 June 7.19 June 13.79 June 19.90 June 28.76 July 54.61 July 6.40 July 13.36 July 17.51 July 26.31 August 41.05 August 7.18 August 14.98 August 17.36 August 21.80 September 41.90 September 5.05 September 13.46 September 19.88 September 21.37 October 38.71 October 8.05 October 15.90 October 26.83 October 23.63 November 37.36 November 10.51 November 16.21 November 32.90 November 22.23 December 38.04 December 8.02 December 16.30 December 33.60 December 21.90
The closing price on February 14, 2006 was $24.31. A-5 VIGNETTE CORPORATION (VIGN) Vignette Corporation provides software and expertise used by businesses to improve efficiency through the use of the information and the World Wide Web. Its application services include Vignette Content Services, which provides the ability to access and manage all types of content created by various authors and Vignette Portal Services, which enables secure and personalized online access to various types of services, applications and content drawn from multiple sources within an organization. The company's application services also include Vignette Integration Services, which provides the ability to integrate structured and unstructured content from disparate sources and applications through prepackaged integration modules and technology adapters. Vignette serves the entertainment, financial services, government, healthcare, high technology, higher education, life sciences, manufacturing, new media and publishing, retail, telecom and travel industries.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price - --------- ------- ---------- ------- --------- ------- -------- ------- --------- ------- -------- -------- January 83.13 January 37.20 January 15.70 January 23.80 January 13.10 January 16.94 February 61.56 February 28.00 February 15.20 February 22.60 February 11.90 March 64.38 March 34.40 March 15.20 March 20.70 March 13.10 April 67.00 April 25.70 April 20.60 April 17.40 April 11.70 May 81.80 May 21.00 May 24.00 May 16.50 May 11.60 June 88.70 June 19.70 June 19.70 June 16.60 June 11.25 July 79.40 July 14.20 July 21.20 July 14.30 July 15.77 August 68.30 August 8.90 August 22.70 August 12.10 August 15.19 September 35.40 September 8.00 September 23.00 September 13.30 September 15.91 October 46.80 October 10.60 October 25.10 October 11.10 October 16.61 November 54.10 November 16.80 November 23.20 November 12.70 November 17.71 December 53.70 December 12.20 December 22.70 December 13.90 December 16.31
The closing price on February 14, 2006 was $16.13. VITRIA TECHNOLOGY, INC. (VITR) Vitria Technology, Inc. provides business process integration software and services for corporations in healthcare, telecommunications, finance, manufacturing and other markets. Vitria develops and delivers the Vitria BusinessWare business process integration software platform together with packaged applications and best practices content. These applications and content enable the solving of industry-specific business problems, such as healthcare claims lifecycle management, straight-through processing in capital markets and order management for telecommunications and manufacturing. The Vitria BusinessWare integration platform uses graphically modeled business process logic for orchestrating complex interactions between dissimilar software applications, Web services, individuals and trading partners over corporate networks and the Internet. In addition, the company provides consulting services in the areas of project planning, architecture design, implementation, operational management and performance management. It offers its products and services through its direct sales organization, system integrators and other strategic partners.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price - ---------- ------- -------- ------ ------- ------- -------- ------- -------- ------- ------- -------- January 32.76 January 26.12 January 2.44 January 7.34 January 4.10 January 2.82 February 18.76 February 18.80 February 2.80 February 7.96 February 3.45 March 15.24 March 15.80 March 2.72 March 5.88 March 3.46 April 19.20 April 9.00 April 3.32 April 3.60 April 2.72 May 20.12 May 4.92 May 4.65 May 2.84 May 3.20 June 13.76 June 3.84 June 5.04 June 3.07 June 3.50 July 14.28 July 3.80 July 4.99 July 2.56 July 3.65 August 11.04 August 4.16 August 4.71 August 2.86 August 3.42 September 8.20 September 3.12 September 5.05 September 3.11 September 3.35 October 12.16 October 3.04 October 5.93 October 3.25 October 2.95 November 19.60 November 4.44 November 5.68 November 3.45 November 2.78 December 25.56 December 3.00 December 7.10 December 4.21 December 2.66
The closing price on February 14, 2006 was $2.64. A-6 ================================================================================ [GRAPHIC OMITTED] 1,000,000,000 Depositary Receipts Internet Infrastructure HOLDRS(SM) Trust ----------------- P R 0 S P E C T U S ----------------- February 16, 2006 ================================================================================ 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 attorney's 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. II-1 (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (5) For purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (6) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to Item 14 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. 7 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, on February 16, 2006. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: * ---------------------------------- Name: Joseph F. Regan Title: First Vice President, Chief Financial Officer and Controller Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 7 to the Registration Statement has been signed by the following persons in the capacities indicated below on February 16, 2006. Signature Title * Chief Executive Officer, --------------------------- Chairman of the Board Robert J. McCann * Director --------------------------- Do Woo Kim * Director --------------------------- Carlos M. Morales * Director --------------------------- Candace E. Browning * Director --------------------------- Gregory J. Fleming * Chief Financial Officer and --------------------------- 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 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 February 10, 2000 as an exhibit to Amendment No. 1 to the registration statement filed on Form S-1 for Internet Infrastructure HOLDRS. *4.2 Amendment No. 2 to the Standard Terms for Depositary Trust Agreements, dated as of November 22, 2000, filed on November 28, 2000 as an exhibit to post-effective Amendment No. 1 to the registration statement on Form S-1 for Internet Infrastructure HOLDRS. *5.1 Opinion of Shearman & Sterling LLP regarding the validity of the Internet Infrastructure HOLDRS Receipts, filed on February 10, 2000 as an exhibit to Amendment No. 1 to the registration statement filed on Form S-1 for Internet Infrastructure HOLDRS. *8.1 Opinion of Shearman & Sterling LLP, as special U.S. tax counsel, regarding the material federal income tax consequences, filed on February 10, 2000 as an exhibit to Amendment No. 1 to the registration statement filed on Form S-1 for Internet Infrastructure HOLDRS. *8.2 Opinion of Shearman & Sterling LLP, as special U.S. tax counsel, regarding the material federal income tax consequences, filed on July 9, 2003 as an exhibit to Amendment No. 5 to the registration statement filed on Form S-1 for Internet Infrastructure HOLDRS. *24.1 Power of Attorney (included in Part II of Registration Statement), filed on February 3, 2000 as an exhibit to the registration statement filed on Form S-1 for Internet Infrastructure 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 on Form S-1 for Internet Infrastructure HOLDRS. *24.3 Power of Attorney of John J. Fosina, E. Stanley O'Neal, George A. Schieren, Thomas H. Patrick and Dominic A. Carone. *24.4 Power of Attorney of James P. Gorman, Arshad R. Zakaria and Carlos M. Morales *24.5 Power of Attorney of Candace E. Browning, Gregory J. Fleming, Do Woo Kim and Joseph F. Regan. 24.6 Power of Attorney of Robert J. McCann and Joseph F. Regan. - ------------------ * Previously filed. II-4 EX-24.6 3 ex24-6_021306internetinfrast.txt POWER OF ATTORNEY Exhibit 24.6 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. Dated: February 14, 2006 Signature Title - --------- ----- Chairman of the Board & /s/ Robert J. McCann Chief Executive Officer - --------------------------------- Name: Robert J. McCann First Vice President, Chief Financial /s/ Joseph F. Regan Officer & Controller - --------------------------------- Name: Joseph F. Regan -----END PRIVACY-ENHANCED MESSAGE-----