-----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, UKHC5L6gLJL/CJ4cwaWhrDL4r9ya8BXdeUmT7Fz3fv2CzMfTsVfv3eL2L9N8Xufl k37PeREKC/z6CVjtrBcxWg== 0000947871-06-000354.txt : 20060217 0000947871-06-000354.hdr.sgml : 20060217 20060216211955 ACCESSION NUMBER: 0000947871-06-000354 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: 333-54662 FILM NUMBER: 06627079 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-retail.txt POST-EFFECTIVE AMENDMENT NO. 7 As filed with the Securities and Exchange Commission on February 17, 2006 Registration No. 333-54662 ================================================================================ 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) ---------------- Retail HOLDRS(SM) Trust [Issuer with respect to the receipts]
Delaware 6211 13-5674085 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number) incorporation or organization) Classification Code Number) ----------------
250 Vesey Street New York, New York 10281 (212) 449-1000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ---------------- Copies to:
Judith Witterschein, Esq. Andrew B. Janszky, Esq. Corporate Secretary Shearman & Sterling LLP Merrill Lynch, Pierce, Fenner & Smith Incorporated 599 Lexington Avenue 250 Vesey Street New York, New York 10022 New York, New York 10281 (212) 848-4000 (212) 449-1000 (Name, address, including zip code, and telephone number, including area code, of agent for service)
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] ================================================================================ PROSPECTUS HOLDRS(SM) Retail [GRAPHIC OMITTED] 1,000,000,000 Depositary Receipts Retail HOLDRS(SM) Trust The Retail HOLDRS(SM) Trust issues Depositary Receipts called Retail HOLDRS(SM) representing your undivided beneficial ownership in the common stock of a group of specified companies that, among other things, sell retail merchandise to consumers through traditional retail stores, the Internet, mail order catalogs and other outlets. The Bank of New York is the trustee. You only may acquire, hold or transfer Retail HOLDRS in a round-lot amount of 100 Retail HOLDRS or round-lot multiples. Retail HOLDRS are separate from the underlying common stocks that are represented by the Retail HOLDRS. For a list of the names and the number of shares of the companies that make up a Retail HOLDR, see "Highlights of Retail HOLDRS--The Retail HOLDRS" starting on page 9. The trust will issue the additional Retail HOLDRS on a continuous basis. Investing in Retail HOLDRS involves significant risks. See "Risk Factors" starting on page 4. Retail HOLDRS are neither interests in nor obligations of Merrill Lynch, Pierce, Fenner & Smith Incorporated. Retail 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 Retail HOLDRS are listed on the American Stock Exchange under the symbol "RTH". On February 15, 2006, the last reported sale price of the Retail HOLDRS on the American Stock Exchange was 98.25. -------------------- 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 RETAIL HOLDRS...................................................9 THE TRUST....................................................................16 DESCRIPTION OF RETAIL HOLDRS.................................................16 DESCRIPTION OF THE UNDERLYING SECURITIES.....................................17 DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT................................19 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES................................23 ERISA CONSIDERATIONS.........................................................28 PLAN OF DISTRIBUTION.........................................................28 LEGAL MATTERS................................................................28 WHERE YOU CAN FIND MORE INFORMATION..........................................28 --------------- This prospectus contains information you should consider when making your investment decision. With respect to information about Retail 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 Retail HOLDRS in any jurisdiction where the offer or sale is not permitted. The Retail 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 Retail HOLDRS or of the underlying securities through an investment in the Retail HOLDRS. 2 SUMMARY The Retail HOLding Company Depositary ReceiptS or HOLDRS Trust was formed under the depositary trust agreement, dated as of March 12, 2001, among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Retail 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, at the time of the initial offering, among other things, sold retail merchandise to consumers through traditional retail stores, the Internet, mail order catalogs and other outlets. The number of shares of each company's common stock held by the trust with respect to each round-lot of Retail HOLDRS is specified under "Highlights of Retail HOLDRS--The Retail HOLDRS." This group of common stocks and the securities of any company that may be added to the Retail HOLDRS are collectively referred to in this prospectus as the securities or the underlying securities. There are currently 18 companies included in the Retail HOLDRS, which may change as a result of reconstitution events, distributions of securities by the underlying issuers or other events. The Retail HOLDRS are separate from the underlying common stocks that are represented by the Retail HOLDRS. On February 14, 2006 there were 4,671,000 Retail HOLDRS outstanding. 3 RISK FACTORS An investment in Retail HOLDRS involves risks similar to investing directly in each of the underlying securities outside of the Retail HOLDRS, including the risks associated with concentrated investments in the retailing industry. General Risk Factors o Loss of investment. Because the value of Retail HOLDRS directly relates to the value of the underlying securities, you may lose a substantial portion of your investment in the Retail HOLDRS if the underlying securities decline in value. o Discount trading price. Retail 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 Retail HOLDRS or other corporate events, such as mergers, a Retail 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 Retail 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 retailing industry. At the time of the initial offering, the companies included in Retail HOLDRS were generally considered to be involved in various aspects of the retailing industry. However, the market price of the underlying securities and the Retail HOLDRS may not necessarily follow the price movements of the entire retailing industry generally. If the underlying securities decline in value, your investment in the Retail HOLDRS will decline in value even if the market price of the securities of companies in the retailing industry generally increase in value. In addition, since the time of the initial offering, the companies included in the Retail HOLDRS may not be involved in the retailing industry. In this case, the Retail HOLDRS may no longer consist of securities issued only by companies involved in the retailing industry. o Not necessarily comprised of solely retail companies. As a result of distributions of securities by companies included in the Retail HOLDRS or other corporate events, such as mergers, securities of companies that are not currently included in the Retail HOLDRS and that are not involved in the retail industry may be included in the Retail HOLDRS. The securities of a new company will only be distributed from the Retail HOLDRS if the securities have a different Standard & Poor's Corporation sector classification than any of the underlying issuers included in Retail 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 Retail HOLDRS provides no assurance that each new company included in the Retail HOLDRS will be involved in the retail industry. Currently, the underlying securities included in the Retail HOLDRS are represented in the Consumer Discretionary and Consumer Staples GICS sectors. 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 Retail HOLDRS yet not be involved in the retail industry. In addition the GICS sector classifications of securities included in the Retail HOLDRS may change over time if the companies that issued these securities change their focus of 4 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 Retail HOLDRS, which may also result in the inclusion in the Retail HOLDRS of the securities of a new company that is not involved in the retail industry. o No investigation of underlying securities. The underlying securities initially included in the Retail HOLDRS were selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated based on the market capitalization of the issuers and the market liquidity of securities in the retailing industry, without regard for the value, price performance, volatility or investment merit of the underlying securities. Consequently, the Retail 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 the issuers of the underlying securities, Retail HOLDRS may not necessarily continue to be a diversified investment in the retailing industry. In addition, reconstitution events, distributions of securities by an underlying issuer or other events, which may result in the distribution or securities from, or the inclusion of additional securities in, Retail HOLDRS may reduce diversification. Retail 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 a tender offer relating to one or more of the underlying securities, or participate in any form of stock repurchase program by an issuer of an underlying security, you will be required to cancel your Retail HOLDRS and receive delivery of each of the underlying securities. The cancellation of your Retail HOLDRS will allow you to sell individual underlying securities or to deliver individual underlying securities in a tender offer or any form of stock repurchase program. The cancellation of Retail HOLDRS will involve payment of a cancellation fee to the trustee. o Trading halts. Trading in Retail HOLDRS on the American Stock Exchange may be halted if trading in one or more of the underlying securities is halted. Trading in Retail HOLDRS may be halted even if trading continues in some or all of the underlying securities. If trading is halted in the Retail HOLDRS, you will not be able to trade Retail HOLDRS and you will only be able to trade the underlying securities if you cancel your Retail 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 Retail HOLDRS. If the Retail HOLDRS are delisted by the American Stock Exchange, a termination event will result unless the Retail HOLDRS are listed for trading on another U.S. national securities exchange or through the Nasdaq National Market System within five business days from the date the Retail HOLDRS are delisted. There are currently 18 companies whose securities are included in the Retail 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 Retail HOLDRS and may face possible conflicts of interest as Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates may engage in investment banking and other activities, and may provide services to issuers of the underlying securities in connection with its business. 5 o Delays in distributions. The depositary trust agreement provides that the trustee will use its reasonable efforts to distribute any cash or other distributions paid in respect of the underlying securities to you as soon as practicable after receipt of such distribution. However, you may receive such cash or other distributions later than you would if you owned the underlying securities outside of the Retail 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 Companies Involved in the Retailing Industry o Retail companies operate in a highly competitive industry and face intense price competition. The retailing industry is highly competitive with numerous industry participants. The companies included in the Retail HOLDRS compete with general merchandise, apparel and household merchandise retailers, Internet retailers, discount retailers, television direct marketers and mail-order catalog retailers. Some of the principal factors which retail companies must address to remain competitive include: o merchandise selection and quality; o brand recognition; o price; o convenience; o customer service; and o timely product delivery. Retail companies may also face increased pricing pressure as more retail outlets, especially electronic-commerce retailers and discount retailers, are established that are able to offer similar merchandise at reduced prices. If any of the companies included in the Retail HOLDRS fail to successfully compete and maintain customer satisfaction and market share, its stock price may decline and will negatively affect the market price of the Retail HOLDRS. o The companies in the Retail HOLDRS may be subject to seasonal and quarterly variations in the retailing industry. The apparel and general merchandise segments of the retailing industry have historically been subject to significant seasonal and quarterly variations. Many retailers derive a significant portion of their annual revenue during the months of November and December. In anticipation of increased sales activity during this period many retail companies incur significant additional expenses. If the demand during November and December is miscalculated, a retail company could have significant excess inventory, which would have an adverse affect on its financial performance. In addition, a significant shortfall in sales during November and December would have an adverse impact on the results of operations of a retail company. Any seasonal or quarterly fluctuations that a retail company reports may not match the expectations of market analysts and investors. This, along with any changes in the expectations of consumer demand, could cause the market price of the Retail HOLDRS to fluctuate significantly. o Retail companies' revenues may be adversely affected by general economic factors. General economic factors in the markets in which retail companies operate, many of which are beyond their control, may nevertheless materially adversely affect company forecasts and actual performance. These factors include: o interest rates; o difficulty in obtaining additional financing; 6 o recession; o inflation and deflation; o consumer credit availability and debt levels; o tax rates and policy; o unemployment trends; and o other matters that influence consumer confidence and spending. These factors may negatively affect consumer spending and confidence and result in reduced revenues for retail companies. As many of the companies included in the Retail HOLDRS are apparel and general merchandise retailers that rely on consumers' purchases of discretionary items for a significant portion of their sales, during periods where disposable income is lower or during periods of economic uncertainty, consumer purchases of these items may decline. As a result, retail companies may be more adversely affected by a cyclical downturn in the economy than other companies. In addition, increased volatility in financial markets may cause these factors to change with a greater degree of frequency and magnitude. o Companies whose securities are included in the Retail 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 Retail HOLDRS. Companies whose securities are included in Retail 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 Retail HOLDRS may have to forego strategic acquisitions or investments, reduce or defer their development activities, delay their introduction of new products and services or reduce or terminate their operations generally. Any of these actions may reduce the market price of stocks in the retailing industry. o Other broad market and industry factors may decrease the stock price of retail 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 retailing 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 affect on retail sales and, as a result, the financial condition and results of operations of companies whose common stocks are included in Retail HOLDRS. o Many of the companies included in the Retail HOLDRS are dependent on third party suppliers and distribution systems. Many of the companies included in the Retail HOLDRS purchase merchandise both directly from brand owners and indirectly from retailers and third party suppliers. These companies may also be dependent upon suppliers for the products used for their own brand name merchandise. Reliance on third party suppliers subjects retail companies to risks of delivery delays, price increases and receipt of non-conforming or poor quality merchandise. The purchase of merchandise from parties other than the brand owners also increases the risk that a retail company could mistakenly purchase and sell non-authentic or damaged goods, which may expose them to liability. In addition, many of the companies in the Retail HOLDRS use third party distributors and transportation providers over which they have no control to deliver and transport their merchandise. If 7 retail companies encounter problems with their suppliers or distributors, their reputation could be harmed and their operations and financial conditions could be adversely affected. o Unexpected changes in consumer trends can affect the business of retail companies. Consumer trends can change rapidly, and the retail business is sensitive to these changes. The consumer companies included in the Retail HOLDRS may not accurately anticipate shifts in consumer trends and adjust their merchandise mix to appeal to changing consumer tastes in a timely manner. If a company misjudges the market for its products or is unsuccessful in responding to changes in consumer trends or in market demand, the retail company could experience insufficient or excess inventory levels or higher markdowns, any of which would have a material adverse effect on its business, financial condition and results of operations and could adversely affect the price of the Retail HOLDRS. o Retail companies may be unable to protect their intellectual property rights and may be liable for infringing the intellectual property rights of others. Third parties may infringe or misappropriate the trademarks or other proprietary rights of the retail companies included in the Retail HOLDRS, which could have a material adverse effect on their business, results of operations or financial condition. Retail companies could also incur substantial costs in asserting and defending their intellectual property or proprietary rights. In addition, third parties may assert infringement claims against companies included in the Retail HOLDRS for infringement or misappropriation of their proprietary rights. These claims and any resulting litigation, if it occurs, could subject companies included in the Retail HOLDRS to significant liability for damages and may also result in limitations on the ability to use the intellectual property subject to the claim. 8 HIGHLIGHTS OF RETAIL HOLDRS This discussion highlights information regarding Retail 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 Retail HOLDRS. Issuer................................ Retail HOLDRS Trust. The trust............................. The Retail HOLDRS Trust was formed under the depositary trust agreement, dated as of March 12, 2001 among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Retail HOLDRS. The trust is not a registered investment company under the Investment Company Act of 1940. Initial depositor..................... Merrill Lynch, Pierce, Fenner & Smith Incorporated. Trustee............................... The Bank of New York, a New York state-chartered banking organization, 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 Retail HOLDRS representing the underlying securities issued by the trust. The trustee holds the underlying securities on behalf the holders of Retail HOLDRS. Purpose of Retail HOLDRS.............. Retail HOLDRS are designed to achieve the following: Diversification. Retail HOLDRS are designed to allow you to diversify your investments in the retailing industry through a single, exchange-listed instrument representing your undivided beneficial ownership of the underlying securities. Flexibility. The beneficial owners of Retail HOLDRS have undivided beneficial ownership interests in each of the underlying securities represented by the Retail HOLDRS, and can cancel their Retail HOLDRS to receive each of the underlying securities represented by the Retail HOLDRS. Transaction costs. The expenses associated with buying and selling Retail 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 securities issued by specified companies that, when initially selected, were in the retailing 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 18 companies included in the Retail HOLDRS. The trust's assets may increase or decrease as a result of in-kind deposits and withdrawals of the underlying securities during the life of the trust. The Retail HOLDRS..................... The trust has issued, and may continue to issue, Retail HOLDRS that represent your undivided beneficial ownership interest in the shares of 9 U.S.-traded securities held by the trust on your behalf. The Retail HOLDRS themselves are separate from the underlying securities that are represented by the Retail HOLDRS. The following table provides: - the names of the 18 issuers of the underlying securities currently represented by the Retail HOLDRS, - stock ticker symbols, - share amounts represented by a round-lot of 100 Retail HOLDRS, and - the principal U.S. market on which the underlying securities are traded. Share Primary Name of Company Ticker Amounts Trading Market - ------------------------------------ ---------- ----------- -------------- Albertson's, Inc. ABS 8 NYSE Amazon.com, Inc. AMZN 7 Nasdaq NMS Best Buy Co., Inc. BBY 9 NYSE Costco Wholesales Corporation COST 8 Nasdaq NMS CVS Corporation CVS 14 NYSE Federated Department Stores FD 5.869 NYSE Kohl's Corporation KSS 6 NYSE Lowe's Companies, Inc. LOW 14 NYSE RadioShack Corporation RSH 3 NYSE Safeway Inc. SWY 9 NYSE Target Corporation TGT 16 NYSE The Gap, Inc. GPS 16 NYSE The Home Depot, Inc. HD 40 NYSE The Kroger Co. KR 15 NYSE The Limited, Inc. LTD 8 NYSE The TJX Companies, Inc. TJX 10 NYSE Walgreen Co. WAG 19 NYSE Wal-Mart Stores, Inc. WMT 36 NYSE The companies whose common stocks were included in the Retail HOLDRS at the time Retail HOLDRS were originally issued were generally considered to be among the 20 largest and most liquid companies with U.S.-traded securities involved in the retailing industry, as measured by market capitalization and trading volume on January 24, 2001. The market capitalization of a company is determined by multiplying the market price of its common stock by the number of its outstanding shares of common stock. The trust will only issue and cancel, and you may only obtain, hold, trade or surrender Retail HOLDRS in a round-lot of 100 Retail HOLDRS and round-lot multiples. The trust will only issue Retail HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 Retail HOLDRS. In the event that a fractional share comes to be represented by a round-lot of Retail HOLDRS, the trust may require a minimum of more than one round-lot of 100 Retail 10 HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Retail HOLDRS. The number of outstanding Retail 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 Retail HOLDRS on a continuous basis when an investor deposits the required securities with the trustee. Purchases............................. You may acquire Retail HOLDRS in two ways: o through an in-kind deposit of the required number of securities of the underlying issuers with the trustee, or o through a cash purchase in the secondary trading market. Issuance and cancellation fees............................... If you wish to create Retail HOLDRS by delivering to the trust the requisite securities represented by a round-lot of 100 Retail 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 Retail HOLDRS. If you wish to cancel your Retail 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 Retail HOLDRS. Commissions........................... If you choose to deposit underlying securities in order to receive Retail 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 Retail 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 Retail HOLDR, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year. Rights relating to Retail 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 Retail 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 Retail HOLDRS would otherwise require the delivery of a fractional share, the trustee will sell the fractional share in the market and the trust, in turn, will deliver cash in lieu of the fractional share. Except with respect to the right to vote for dissolution of the trust, the Retail HOLDRS themselves will not have voting rights. 11 Rights relating to the underlying securities.............. Retail HOLDRS represents your beneficial ownership of the underlying securities. Owners of Retail HOLDRS have the same rights and privileges as if they owned the underlying securities beneficially outside of Retail 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 Retail HOLDRS and the right to surrender Retail HOLDRS to receive the underlying securities. Retail 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 Retail HOLDRS. However, due to the nature of Retail HOLDRS, you will not be able to participate in any dividend reinvestment program of an issuer of underlying securities unless you cancel your Retail HOLDRS (and pay the applicable fees) and receive all of the underlying securities. A holder of Retail HOLDRS is not a registered owner of the underlying securities. In order to become a registered owner, a holder of Retail HOLDRS would need to surrender their Retail 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 Retail HOLDRS in the same manner as if you beneficially owned your underlying securities outside of Retail 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 Retail HOLDRS at the time of the distribution. In addition, if the issuer of underlying securities offers rights to acquire additional underlying securities or other securities, the rights may be distributed to you, may be disposed of for your benefit or may lapse. There may be a delay between the time any cash or other distribution is received by the trustee with respect to the underlying securities and the time such cash or other distributions are distributed to you. In addition, you are not entitled to any interest on any distribution by reason of any delay in distribution by the trustee. If any tax or other governmental charge becomes due with respect to Retail HOLDRS or any underlying securities, you will be responsible for paying that tax or governmental charge. 12 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 Retail HOLDRS (and pay the applicable fees and expenses) and receive all of your underlying securities in exchange for your Retail HOLDRS. For specific information about obtaining your underlying securities, you should read the discussion under the caption "Description of the Depositary Trust Agreement--Withdrawal of underlying securities." Ownership rights in fractional shares in the underlying securities.............. As a result of distributions of securities by companies included in the Retail HOLDRS or other corporate events, such as mergers, a Retail 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 Retail 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 Retail HOLDRS are outstanding and each round-lot of 100 Retail HOLDRS represents 1.75 shares of an underlying security, there will be 175,001.75 votes of the underlying security represented by Retail HOLDRS. If holders of 50,000 round-lots of 100 Retail HOLDRS vote their underlying securities "yes" and holders of 50,001 round-lots of 100 Retail HOLDRS vote their underlying securities vote "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. Reconstitution events................. The depositary trust agreement provides for the automatic distribution of underlying securities from the Retail 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 Retail 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 Retail HOLDRS. C. If the underlying securities of an issuer cease to be outstanding as a result of a merger, consolidation or other corporate combination, the trustee will distribute the consideration paid by and received from the acquiring company or the securities received in exchange for the securities of the underlying issuer whose securities cease to be outstanding to the beneficial owners of Retail HOLDRS only if 13 the distributed securities have a different Standard & Poor's GICS sector classification than any of the underlying securities represented in the Retail 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 Retail 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 Retail 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 Retail 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 Retail 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 Retail HOLDRS will be distributed from the Retail HOLDRS to you. Standard & Poor's sector classification..................... 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 are given only one GICS sector classification. The securities included in the Retail HOLDRS are currently represented in the Consumer Discretionary and Consumer Staples GICS sectors. The Standard & Poor's GICS sector classifications of the securities included in the Retail 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 Retail HOLDRS are delisted from the American Stock Exchange and are not listed for trading on another U.S. national securities 14 exchange or through the Nasdaq National Market System within five business days from the date the Retail 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 Retail HOLDRS vote to dissolve and liquidate the trust. If a termination event occurs, the trustee will distribute the underlying securities to you as promptly as practicable after the termination event. 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 Retail 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 Retail HOLDRS as directly owning the underlying securities. The Retail 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 Retail HOLDRS are listed on the American Stock Exchange under the symbol "RTH." On February 15, 2006 the last reported sale price of the Retail HOLDRS on the American Stock Exchange was $98.25. Trading............................... Investors are only able to acquire, hold, transfer and surrender a round-lot of 100 Retail HOLDRS. Bid and ask prices, however, are quoted per single Retail HOLDR. Clearance and settlement.............. Retail HOLDRS have been issued in book-entry form. Retail 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 Retail HOLDRS." 15 THE TRUST General. This discussion highlights information about the Retail HOLDRS Trust. You should read this information, information about the depositary trust agreement as well as the depositary trust agreement before you purchase Retail HOLDRS. The material terms of the depositary trust agreement are described in this prospectus under the heading "Description of the Depositary Trust Agreement." The Retail HOLDRS Trust. The trust was formed pursuant to the depositary trust agreement, dated as of March 12, 2001. The Bank of New York will be the trustee. The Retail HOLDRS Trust is not a registered investment company under the Investment Company Act of 1940. The Retail HOLDRS Trust is intended to hold deposited shares for the benefit of owners of Retail HOLDRS. The trustee will perform only administrative and ministerial acts. The property of the trust will consist of the underlying securities and all monies or other property, if any, received by the trustee. The trust will terminate on December 31, 2041, or earlier if a termination event occurs. DESCRIPTION OF RETAIL HOLDRS The trust has issued Retail HOLDRS under the depositary trust agreement described in this prospectus under the heading "Description of the Depositary Trust Agreement." The trust may issue additional Retail HOLDRS on a continuous basis when an investor deposits the requisite underlying securities with the trustee. You may only acquire, hold, trade and surrender Retail HOLDRS in a round-lot of 100 Retail HOLDRS and round-lot multiples. The trust will only issue Retail HOLDRS upon the deposit of the whole shares of underlying securities that are represented by a round-lot of 100 Retail 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 Retail HOLDRS, the trust may require a minimum of more than one round-lot of 100 Retail HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Retail HOLDRS. Retail 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 Retail HOLDRS--The Retail HOLDRS." Beneficial owners of Retail 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 securities, 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, and the right to cancel Retail HOLDRS to receive the underlying securities. See "Description of the Depositary Trust Agreement." Retail 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. Retail 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 Retail HOLDRS wishes to realize the dollar value of the underlying securities, that owner will have to cancel the Retail HOLDRS. Such cancellation will require payment of fees and expenses as described in "Description of the Depositary Trust Agreement--Withdrawal of underlying securities." Retail HOLDRS are evidenced by one or more global certificates that the trustee has deposited with DTC and register in the name of Cede & Co., as nominee for DTC. Retail HOLDRS are available only in book-entry form. Owners of Retail HOLDRS may hold their Retail HOLDRS through DTC, if they are participants in DTC, or indirectly through entities that are participants in DTC. 16 DESCRIPTION OF THE UNDERLYING SECURITIES Selection criteria. The underlying securities of the Retail HOLDRS are the common stocks of a group of specified companies that, at the time of initial selection, among other things, sold merchandise to retail consumers through traditional retail stores, the Internet, mail order catalogs and other outlets and whose securities are registered under Section 12 of the Securities Exchange Act. The issuers of the underlying securities were considered to be among the largest, most liquid companies involved in the retailing industry as measured by market capitalization and trading volume. The Retail HOLDRS may no longer consist exclusively of securities issued by companies involved in the retailing industry. Merrill Lynch, Pierce, Fenner & Smith Incorporated will determine, in its sole discretion, whether the issuer of a particular underlying security remains in the retailing business and will undertake to make adequate disclosure when necessary. Underlying securities. For a list of the underlying securities represented by Retail HOLDRS, please refer to "Highlights of Retail HOLDRS--The Retail 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 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 Retail 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." 17 The following table and graph set forth the composite performance of all of the 18 underlying securities currently represented by a single Retail HOLDR, measured at the close of each month from January 30, 1998 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.
Closing Closing Closing Closing 1998 Price 1999 Price 2000 Price 2001 Price ---- ----- ---- ----- ---- ----- ---- ----- January 30................... 46.37 January 29 .......... 89.39 January 31......... 92.55 January 31......... 95.83 February 27.................. 50.97 February 26.......... 89.34 February 29........ 90.07 February 28........ 89.79 March 31..................... 54.82 March 31............. 92.50 March 31........... 103.08 March 30........... 87.70 April 30..................... 55.14 April 30............. 90.47 April 28........... 95.74 April 30........... 91.79 May 29....................... 57.74 May 28............... 84.96 May 31............. 90.88 May 31............. 92.82 June 30...................... 63.15 June 30.............. 94.23 June 30............ 89.30 June 29............ 88.07 July 31...................... 63.79 July 30.............. 89.92 July 31............ 88.78 July 31............ 92.25 August 31.................... 57.24 August 31............ 84.61 August 31.......... 82.66 August 31.......... 84.50 September 30................. 58.55 September 30......... 86.33 September 29....... 86.52 September 28....... 76.03 October 30................... 65.89 October 29........... 92.49 October 31......... 85.69 October 31......... 77.70 November 30.................. 73.37 November 30.......... 97.21 November 30........ 84.45 November 30........ 88.66 December 31.................. 84.85 December 31.......... 107.13 December 29........ 88.92 December 31........ 92.28
Closing Closing Closing Closing 2002 Price 2003 Price 2004 Price 2005 Price ---- ----- ---- ----- ---- ----- ---- ----- January 31................... 93.87 January 31........... 63.93 January 30......... 85.55 January 31......... 94.01 February 28.................. 94.11 February 28.......... 64.53 February 27........ 90.94 February 28........ 92.98 March 28..................... 95.14 March 31............. 67.99 March 31........... 90.12 March 31........... 91.82 April 30..................... 91.97 April 30............. 74.33 April 30........... 87.88 April 29........... 86.43 May 31....................... 89.99 May 30............... 76.51 May 28............. 89.12 May 31............. 92.29 June 28...................... 84.26 June 30.............. 78.46 June 30............ 88.40 June 30............ 94.79 July 31...................... 74.95 July 31.............. 80.51 July 30............ 85.32 July 29............ 101.80 August 30.................... 76.46 August 29............ 86.65 August 31.......... 85.47 August 31.......... 95.13 September 30................. 67.96 September 30......... 81.66 September 30....... 88.24 September 30....... 92.80 October 31................... 72.36 October 31........... 89.64 October 29......... 91.58 October 31......... 94.32 November 29.................. 73.54 November 28.......... 89.32 November 30........ 92.79 November 30........ 97.31 December 31.................. 67.51 December 31.......... 86.73 December 31........ 94.85 December 30........ 95.49
Closing 2006 Price ---- ----- January 31 95.73 February 14 97.10 Retail HOLDRS - RTH [GRAPHIC OMITTED] 18 DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT General. The depositary trust agreement, dated as of March 12, 2001, among Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York, as trustee, other depositors and the owners of the Retail HOLDRS, provides that Retail HOLDRS will represent an owner's undivided beneficial ownership interest in the securities of the underlying companies. The trustee. The Bank of New York serves as trustee for the Retail 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 Retail HOLDRS. You may create and cancel Retail HOLDRS only in round-lots of 100 Retail HOLDRS. You may create Retail HOLDRS by delivering to the trustee the requisite underlying securities. The trust will only issue Retail HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 Retail HOLDRS. In the event that a fractional share comes to be represented by a round-lot of Retail HOLDRS, the trust may require a minimum of more than one round-lot of 100 Retail HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Retail HOLDRS. Similarly, you must surrender Retail HOLDRS in integral multiples of 100 Retail 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 Retail HOLDRS would otherwise require the delivery of fractional shares, the trust will deliver cash in lieu of such shares. You may request withdrawal of your deposited shares during the trustee's normal business hours. The trustee expects that in most cases it will deliver your deposited shares within one business day of your withdrawal request. Voting rights. The trustee will deliver to you proxy solicitation materials provided by issuers of the underlying securities to you 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 Retail HOLDRS, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated owning Retail 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 Retail 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 distributed securities have a different Standard & Poor's GICS sector classification than any of the underlying securities represented in the Retail 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 made available 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. Otherwise, if practicable, the rights will be disposed of and the proceeds provided 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 Retail 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 Retail 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 Retail HOLDR, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year. 19 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 Retail 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 Retail 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 Retail HOLDRS. Further issuances of Retail HOLDRS. The depositary trust agreement provides for further issuances of Retail HOLDRS on a continuous basis without your consent. Reconstitution events. The depositary trust agreement provides for the automatic distribution of underlying securities to you in the following four circumstances: A. If an issuer of underlying securities no longer has a class of securities registered under section 12 of the Securities Exchange Act of 1934, then its securities will no longer be an underlying security and the trustee will distribute the shares of that company to the owners of the Retail 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 Retail 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 Retail HOLDRS only if the distributed securities have a different Standard & Poor's GICS sector classification than any of the underlying securities represented in the Retail 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 the 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 Retail 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 any of the underlying securities represented in the Retail HOLDRS at the time of distribution or exchange 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 GICS sectors, that most distributions or exchanges of securities will result in the inclusion of new securities in the Retail HOLDRS. The trustee will review the Standard & Poor's GICS sector classifications of securities to determine whether securities received as a result of a 20 distribution by an underlying issuer or as consideration for securities included in the Retail HOLDRS will be distributed from the Retail 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 are given only one GICS sector. The securities included in the Retail HOLDRS are currently represented in the Consumer Discretionary and Consumer Staples GICS sectors. The Standard & Poor's GICS sector classifications of the securities included in the Retail 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 of the trust. The trust will terminate if the trustee resigns and no successor trustee is appointed by Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, within 60 days from the date the trustee provides notice to Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, of its intent to resign. Upon termination, the beneficial owners of Retail HOLDRS will surrender their Retail 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 Retail 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 Retail HOLDRS are delisted. Finally, the trust will terminate if 75% of the owners of outstanding Retail 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 Retail 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 Retail 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 Retail HOLDRS will not become effective until 30 days after notice of the amendment is given to the owners of Retail HOLDRS. Issuance and cancellation fees. If you wish to create Retail 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 Retail HOLDRS. If you wish to cancel your Retail 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 Retail 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 or cancel Retail HOLDRS you will be responsible for paying any sales commissions associated with your purchase of the underlying securities that are charged by your broker, whether it be Merrill Lynch Pierce Fenner & Smith Incoporated or another broker, in addition to the issuance or cancellation fee, as the case may be, 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 Retail 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 Retail HOLDR, the Trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year. The trustee cannot recapture unpaid custody fees from prior years. Address of the trustee. The Bank of New York, ADR Department, 101 Barclay Street, New York, New York 10286. 21 Governing law. The depositary trust agreement and the Retail 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 Retail 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 will be liable for its own negligence or misconduct except for good faith errors in judgment so long as the trustee was not negligent in ascertaining the relevant facts. 22 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 Retail 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 Retail 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 Retail 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 Retail 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 Retail 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 Retail HOLDRS A receipt holder purchasing and owning Retail HOLDRS will be treated, for U.S. federal income tax purposes, as directly owning a proportionate share of the underlying securities represented by Retail 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. 23 Qualified dividend income received in respect of Retail 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 Retail 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 Retail 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 Retail 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 Retail HOLDRS. Similarly, with respect to sales of Retail HOLDRS for cash in the secondary market, the amount realized with respect to a sale of Retail 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 Retail 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 Retail 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: 24 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 Retail HOLDRS may be able to use these arrangements to apply for a refund of withheld taxes. In some cases, however, the holders of Retail 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 25 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 Retail 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 Retail 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, 26 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. 27 ERISA CONSIDERATIONS Any plan fiduciary which proposes to have a plan acquire Retail 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 Retail 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 Retail HOLDRS to Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch, Pierce, Fenner & Smith Incorporated has deposited the underlying securities to receive Retail HOLDRS. The trust delivered the initial distribution of Retail HOLDRS against deposit of the underlying securities in New York, New York on approximately January 17, 2001. Investors who purchase Retail 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 Retail 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 Retail 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 Retail HOLDRS, were passed upon for Merrill Lynch, Pierce, Fenner & Smith Incorporated, the initial depositor and the underwriter in connection with the initial offering of Retail 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 Retail 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 Retail HOLDRS. While this prospectus is a part of the registration statement, it does not contain all the exhibits filed as part of the registration statement. You should consider reviewing the full text of those exhibits. The registration statement is available over the Internet at the SEC's Web site at http://www.sec.gov. You also may read and copy the registration statement at the SEC's public reference rooms in Washington, D.C.. Please call the SEC at 1-800-SEC-0330 for more information on the public reference rooms and their copy charges. Merrill 28 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 Retail HOLDRS. This prospectus relates only to Retail 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 Retail 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 Retail HOLDRS have been publicly disclosed. 29 ANNEX A This annex forms an integral part of the prospectus. The following tables provide a brief description of the business of each of the issuers of the underlying securities and set forth the split-adjusted closing market prices, as reported on the applicable primary U.S. trading market, of each of the underlying securities in each month during 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. ALBERTSON'S, INC. (ABS) Albertson's, Inc., is a retail food and drug chain. These stores consist of combination food-drug stores, stand-alone drug stores, conventional supermarkets and warehouse stores. Albertson's also operates a grocery delivery website, Albertsons.com and an online drugstore, Savon.com. The company's stores offer grocery, prescription drugs and cosmetics and general merchandise, as well as seafood and meat, bakery, lobby/video, service delicatessen, liquor and floral. It also offers meal centers, party supply centers, coffee bars, in-store banks, photo processing and destination categories for beverages, snacks, pet care products, paper products and baby care merchandise. Albertson's stand-alone drugstores offers general merchandise, health and beauty care products, over-the-counter medication, greeting cards and photo processing.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 28.35 January 28.75 January 21.50 January 23.36 January 22.88 January 25.15 February 29.05 February 30.26 February 18.83 February 24.74 February 22.39 March 31.82 March 33.14 March 18.85 March 22.15 March 20.65 April 33.40 April 33.54 April 19.86 April 23.36 April 19.79 May 28.70 May 35.17 May 20.87 May 23.43 May 20.99 June 29.99 June 30.46 June 19.20 June 26.54 June 20.68 July 32.73 July 28.18 July 18.86 July 24.39 July 21.31 August 34.99 August 25.72 August 21.02 August 24.58 August 20.13 September 31.88 September 24.16 September 20.57 September 23.93 September 25.65 October 31.91 October 22.31 October 20.29 October 22.81 October 25.11 November 33.56 November 23.34 November 21.28 November 25.30 November 23.50 December 31.49 December 22.26 December 22.65 December 23.88 December 21.35
The closing price on February 14, 2006 was $25.25. A-1 AMAZON.COM, INC. (AMZN) Amazon.com, Inc. is an online retailer that directly offers a variety of products, such as books, music, videos, toys, electronics, software, video games and home improvement products for sale through the Internet. Amazon.com also offers Web-based services where buyers and sellers can enter into transactions with respect to a wide range of products. The company and its affiliates operate seven retail Web sites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca and www.joyo.com.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 17.31 January 14.19 January 21.85 January 50.40 January 43.22 January 44.82 February 10.19 February 14.10 February 22.01 February 43.01 February 35.18 March 10.23 March 14.30 March 26.03 March 43.28 March 34.27 April 15.78 April 16.69 April 28.69 April 43.60 April 32.36 May 16.69 May 18.23 May 35.89 May 48.50 May 35.51 June 14.15 June 16.25 June 36.32 June 54.40 June 33.09 July 12.49 July 14.77 July 41.64 July 38.92 July 45.15 August 8.94 August 14.94 August 46.32 August 38.14 August 42.70 September 5.97 September 15.93 September 48.43 September 40.86 September 45.30 October 6.98 October 19.36 October 54.43 October 34.13 October 39.86 November 11.32 November 23.35 November 53.97 November 39.68 November 48.46 December 10.82 December 18.89 December 52.62 December 44.29 December 47.15
The closing price on February 6, 2006 was $37.95. BEST BUY CO., INC. (BBY) Best Buy Co., Inc. is a specialty retailer of consumer electronics, home office equipment, video games, computer software, music and appliances. In addition, Best Buy sells cameras and other photographic equipment and ready-to-assemble furniture designed for use with computer and audio/video equipment. Best Buy offers its products directly to consumers through its retail stores and through the Internet under the brand names Best Buy (Bestbuy.com and BestBuyCanada.ca), Future Shop (FutureShop.ca), Magnolia Audio Video (MagnoliaAV.com) and Geek Squad (GeekSquad.com), as well as through an outlet store on eBay. It also provides in-store services, including computer set-up, repair, and software installation, as well as the installation of mobile electronics and in-home services that comprise computer set-up, repair, software installation and home networking, as well as delivery and installation of appliances and home theater systems.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 22.13 January 32.89 January 17.39 January 33.59 January 35.86 January 50.66 February 18.21 February 29.95 February 19.38 February 35.50 February 36.01 March 15.98 March 35.20 March 17.98 March 34.48 March 36.01 April 24.47 April 33.05 April 23.05 April 36.17 April 33.56 May 23.62 May 30.80 May 25.80 May 35.17 May 36.29 June 28.23 June 24.20 June 29.28 June 33.83 June 45.70 July 29.76 July 22.60 July 29.10 July 32.11 July 51.07 August 26.21 August 14.13 August 34.67 August 31.01 August 47.66 September 20.20 September 14.87 September 31.68 September 36.16 September 43.53 October 24.20 October 13.74 October 38.87 October 39.48 October 44.26 November 21.73 November 18.45 November 41.33 November 37.59 November 48.24 December 33.10 December 16.10 December 34.83 December 39.61 December 43.48
The closing price on February 14, 2006 was $52.86. A-2 COSTCO WHOLESALE CORPORATION (COST) Costco Wholesale Corporation operates membership warehouses that offer volume purchasing of nationally branded and selected private label merchandise. Costco's product offerings include food, appliances, electronics, furniture and clothing. The company offers three types of memberships: Business, Gold Star (individual) and Executive Membership. Costco buys nearly all of its merchandise directly from manufacturers. Costco's warehouse stores are located throughout the United States and Canada, and in the United Kingdom, Korea, Taiwan, Japan and Mexico. Costco also offers various products through the Internet directly to consumers.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 46.25 January 46.00 January 28.87 January 36.94 January 47.27 January 49.89 February 41.75 February 41.26 February 30.52 February 38.86 February 46.59 March 39.25 March 39.82 March 30.03 March 37.61 March 44.18 April 34.93 April 40.20 April 34.61 April 37.50 April 40.63 May 38.91 May 39.27 May 37.25 May 37.90 May 45.38 June 41.08 June 38.62 June 36.60 June 41.18 June 44.73 July 43.05 July 34.87 July 36.99 July 40.71 July 45.97 August 37.41 August 33.41 August 32.25 August 41.17 August 43.40 September 35.56 September 32.37 September 31.15 September 41.51 September 43.09 October 37.83 October 33.93 October 35.45 October 47.94 October 48.37 November 40.88 November 32.30 November 35.82 November 48.60 November 49.95 December 44.38 December 28.06 December 37.18 December 48.41 December 49.47
The closing price on February 14, 2006 was $51.18. CVS CORPORATION (CVS) CVS Corporation operates retail pharmacy stores, which sell prescription and over-the counter drugs and a variety of merchandise and services including beauty products, greeting cards, film and photo processing and convenience foods. CVS' various operations carry their own private label products as well as third party brand name products. CVS operates an online retail pharmacy, CVS.com and offers prescription drug benefit management and specialty pharmaceutical services.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 29.60 January 13.85 January 11.31 January 17.86 January 23.18 January 27.76 February 30.50 February 13.66 February 12.45 February 18.75 February 24.92 March 29.25 March 17.17 March 11.93 March 17.65 March 26.31 April 29.43 April 16.74 April 12.11 April 19.32 April 25.79 May 27.45 May 16.02 May 13.05 May 20.84 May 27.43 June 19.30 June 15.30 June 14.02 June 21.01 June 29.07 July 18.01 July 14.30 July 15.00 July 20.94 July 31.03 August 18.01 August 14.70 August 16.30 August 20.00 August 29.37 September 16.60 September 12.68 September 15.53 September 21.07 September 29.01 October 11.95 October 13.87 October 17.59 October 21.73 October 24.11 November 13.48 November 13.44 November 18.73 November 22.69 November 27.02 December 14.80 December 12.49 December 18.06 December 22.54 December 26.42
The closing price on February 14, 2006 was $28.61. A-3 FEDERATED DEPARTMENT STORES (FD) Federated Department Stores is a retail organization that operates full-line department stores in the United States. Federated's department stores include Macy's, Bloomingdale's, Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, Lord & Taylor, L.S. Ayres, Marshall Field's, Meier & Frank, Robinsons-May, Strawbridge's, The Jones Store, David's Bridal, After Hours Formalwear and Priscilla of Boston. The company also conducts direct-to-customer mail catalog and electronic commerce businesses under the names Bloomingdale's By Mail and macys.com and offers an online bridal registry to customers. These department stores sell a range of merchandise, including men's, women's and children's clothing and accessories, cosmetics, home furnishings and other consumer goods.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 44.56 January 41.62 January 26.02 January 47.48 January 56.80 January 66.63 February 48.35 February 41.91 February 25.50 February 52.37 February 56.45 March 41.55 March 40.85 March 28.02 March 54.05 March 63.64 April 42.98 April 39.75 April 30.62 April 49.00 April 57.50 May 44.80 May 41.41 May 32.50 May 47.71 May 67.45 June 42.50 June 39.70 June 36.85 June 49.10 June 73.28 July 38.60 July 37.61 July 40.01 July 47.92 July 75.87 August 36.31 August 35.90 August 43.70 August 43.40 August 68.98 September 28.20 September 29.44 September 41.90 September 45.43 September 66.87 October 31.99 October 30.70 October 47.55 October 50.45 October 61.37 November 37.00 November 32.68 November 49.09 November 54.80 November 64.43 December 40.90 December 28.76 December 47.13 December 57.79 December 66.33
The closing price on February 14, 2006 was $70.17. THE GAP, INC. (GPS) The Gap, Inc. is a global specialty retailer, which offers casual and business-casual apparel, intimate apparel, personal care and other accessories for men, women and children under a variety of brand names, including Gap, GapKids, babyGap, Banana Republic and Old Navy. The Gap offers these products directly to customers through its Web sites, catalogs and retail stores in the United States, Canada, the United Kingdom, France, Germany and Japan.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 32.60 January 14.40 January 14.63 January 18.58 January 22.01 January 18.09 February 27.24 February 11.97 February 13.04 February 20.80 February 21.33 March 23.72 March 15.04 March 14.49 March 21.92 March 21.84 April 27.71 April 14.11 April 16.63 April 22.01 April 21.35 May 31.00 May 14.57 May 17.00 May 24.15 May 21.00 June 29.00 June 14.20 June 18.76 June 24.25 June 19.75 July 27.31 July 12.15 July 17.99 July 22.70 July 21.11 August 19.65 August 11.73 August 20.89 August 18.74 August 19.01 September 11.95 September 10.85 September 17.12 September 18.65 September 17.43 October 13.07 October 11.77 October 19.08 October 19.98 October 17.28 November 13.23 November 15.89 November 21.50 November 21.85 November 17.38 December 13.94 December 15.52 December 23.21 December 21.12 December 17.64
The closing price on February 14, 2006 was $18.30. A-4 THE HOME DEPOT, INC. (HD) The Home Depot, Inc. is a home improvement retailer that operates in the United States, Canada and Mexico through its Home Depot and EXPO Design Center stores. Home Depot stores sell building materials, home improvement products and lawn and garden products. The EXPO design center stores offer various interior design products and installation services for kitchens, baths, appliances and flooring, as well as products for lighting, decorating, and storage and organization projects. These stores also provide project management and installation services. It offers its products and services to homeowners, professional remodelers, general contractors, repairmen and tradesmen. In addition, the company distributes plumbing; heating, ventilation and air conditioning appliances.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 48.20 January 50.09 January 20.90 January 35.47 January 41.26 January 40.55 February 42.50 February 50.00 February 23.45 February 36.31 February 40.02 March 43.10 March 48.61 March 24.36 March 37.36 March 38.24 April 47.10 April 46.37 April 28.13 April 35.19 April 35.37 May 49.29 May 41.69 May 32.49 May 35.92 May 39.35 June 46.55 June 36.73 June 33.12 June 35.20 June 38.90 July 50.37 July 30.88 July 31.20 July 33.72 July 43.51 August 45.95 August 32.93 August 32.16 August 36.56 August 40.32 September 38.37 September 26.10 September 31.85 September 39.20 September 38.14 October 38.23 October 28.88 October 37.07 October 41.08 October 41.04 November 46.65 November 26.40 November 36.76 November 41.75 November 41.78 December 51.01 December 24.02 December 35.49 December 42.74 December 40.48
The closing price on February 14, 2006 was $41.43. KOHL'S CORPORATION (KSS) Kohl's Corporation operates specialty department stores that primarily offer products for customers shopping for their families and homes. The product mix includes men's, women's and children's apparel, shoes and accessories, as well as housewares and soft home products such as linens. Kohl's also offers its products directly to customers online through its Website, Kohls.com.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 71.00 January 66.29 January 52.37 January 44.30 January 47.01 January 44.39 February 65.91 February 67.67 February 48.9 February 51.50 February 47.87 March 61.69 March 71.15 March 56.58 March 48.33 March 51.63 April 61.06 April 73.70 April 56.8 April 41.79 April 47.60 May 61.55 May 75.00 May 52.35 May 47.56 May 48.69 June 62.73 June 70.08 June 51.38 June 42.28 June 55.91 July 57.28 July 66.00 July 59.35 July 45.76 July 56.35 August 55.50 August 69.72 August 63.26 August 49.48 August 52.45 September 48.00 September 60.81 September 53.50 September 48.19 September 50.18 October 55.61 October 58.45 October 56.07 October 50.76 October 48.13 November 67.85 November 68.5 November 48.32 November 46.16 November 46.00 December 70.44 December 55.95 December 44.94 December 49.17 December 48.60
The closing price on February 14, 2006 was $45.52. A-5 THE KROGER CO. (KR) The Kroger Co. operates retail supermarket food and drug stores, department stores, convenience stores, supermarket fuel centers and jewelry stores, and also manufactures and processes food for sale in its own stores. Kroger's supermarkets and department stores carry a range of items including food, pharmacy, health and personal hygiene items. The company operates three formats of supermarkets: combination food and drug stores (combo stores), multi department stores and price impact warehouse stores. The combo stores primarily operate as food stores. Multi department stores offer general merchandise items, such as apparel, home fashion and furnishings. Price impact warehouse stores feature beauty care, health and grocery items. The company manufactures and processes food items under its corporate brand names, for sale in its supermarkets.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 24.55 January 20.60 January 15.09 January 18.53 January 17.10 January 18.40 February 24.24 February 22.15 February 13.22 February 19.22 February 17.99 March 25.79 March 22.16 March 13.15 March 16.64 March 16.03 April 22.59 April 22.77 April 14.30 April 17.50 April 15.77 May 24.94 May 22.35 May 16.05 May 16.69 May 16.77 June 25.00 June 19.90 June 16.68 June 18.20 June 19.03 July 26.36 July 19.48 July 16.95 July 15.80 July 19.85 August 26.62 August 18.08 August 19.21 August 16.53 August 19.74 September 24.64 September 14.10 September 17.87 September 15.52 September 20.59 October 24.46 October 14.80 October 17.49 October 15.11 October 19.90 November 25.32 November 15.73 November 18.86 November 16.18 November 19.46 December 20.87 December 15.45 December 18.51 December 17.54 December 18.88
The closing price on February 14, 2006 was $19.81. LIMITED BRANDS, INC. (LTD) Limited Brands, Inc. is principally engaged in the purchase, distribution and sale of women's and men's clothing, women's intimate apparel and personal care products through specialty retail stores, catalogs and the Internet. Limited Brands operates in three primary segments: Victoria's Secret, Bath & Body Works and Apparel. The Apparel Business includes Express, which offer women's and men's apparel, sportswear and accessories and Limited Stores, a mall-based specialty store retailer of sportswear for women.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 20.66 January 18.55 January 12.59 January 18.20 January 23.70 January 23.66 February 17.65 February 18.01 February 11.88 February 19.75 February 23.78 March 15.72 March 17.90 March 12.87 March 20.00 March 24.30 April 16.92 April 19.16 April 14.54 April 20.64 April 21.69 May 16.30 May 20.99 May 15.26 May 19.30 May 20.57 June 16.52 June 21.30 June 15.50 June 18.70 June 21.42 July 16.97 July 17.97 July 16.71 July 20.44 July 24.38 August 14.10 August 15.29 August 16.96 August 20.08 August 21.98 September 9.50 September 14.34 September 15.08 September 22.29 September 20.43 October 11.15 October 15.67 October 17.60 October 24.78 October 20.01 November 13.92 November 17.01 November 17.92 November 24.44 November 22.25 December 14.72 December 13.93 December 18.03 December 23.02 December 22.35
The closing price on February 14, 2006 was $23.81. A-6 LOWE'S COMPANIES, INC. (LOW) Lowe's Companies, Inc. operates as a home improvement retailer in the United States. It offers products and services for home improvement, home decor, home maintenance, home repair and remodeling and maintenance of commercial buildings. The company serves retail customers, commercial business customers, including repair and remodeling contractors, electricians, landscapers, painters, plumbers and commercial and residential building maintenance professionals. Lowe's Companies markets its products through television, radio, newspaper, magazine, direct mail, event sponsorships, Internet, community relations and in-store programs. The company also operates a facility to handle special order plumbing products.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 26.73 January 46.07 January 34.18 January 53.55 January 56.99 January 63.55 February 27.94 February 45.25 February 39.30 February 56.00 February 58.78 March 29.23 March 43.49 March 40.82 March 56.13 March 57.09 April 31.50 April 42.29 April 43.89 April 52.06 April 52.11 May 34.77 May 47.16 May 42.26 May 53.57 May 57.21 June 36.28 June 45.40 June 42.95 June 52.55 June 58.22 July 38.18 July 37.85 July 47.56 July 48.72 July 66.22 August 37.20 August 41.38 August 54.86 August 49.70 August 64.31 September 31.65 September 41.40 September 51.90 September 54.35 September 64.40 October 34.10 October 41.73 October 58.93 October 56.28 October 60.77 November 45.31 November 41.50 November 58.30 November 55.33 November 67.48 December 46.41 December 37.50 December 55.39 December 57.59 December 66.66
The closing price on February 14, 2006 was $65.48. RADIOSHACK CORPORATION (RSH) RadioShack Corporation primarily engages in the retail sale of consumer electronics through the RadioShack store chain and RadioShack.com. The RadioShack stores carry an assortment of its private brand and third party brand name products, including electronic parts and accessories, wireless and conventional telephones, personal computers and related products, audio and video equipment, digital satellite systems and specialized products such as scanners and weather radios. It also provides consumers access to third-party services, such as cellular and PCS phone and DTH satellite activation, satellite radio service, prepaid wireless airtime and service plans. In addition, the company offers customer support and repair services to name brand and private label products through its service centers. RadioShack offers its products and services through retail stores and online.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 55.04 January 31.52 January 19.95 January 32.58 January 33.12 January 22.20 February 42.80 February 27.44 February 19.64 February 34.56 February 29.56 March 36.69 March 30.04 March 22.29 March 33.16 March 24.50 April 30.63 April 31.20 April 23.71 April 30.76 April 24.97 May 27.23 May 34.24 May 24.10 May 30.39 May 25.16 June 30.50 June 30.06 June 26.31 June 28.63 June 23.17 July 28.23 July 25.60 July 26.57 July 27.95 July 23.47 August 23.40 August 21.79 August 30.40 August 26.94 August 25.06 September 24.25 September 20.06 September 28.41 September 28.64 September 24.80 October 24.99 October 20.90 October 29.99 October 29.93 October 22.10 November 28.96 November 23.75 November 31.15 November 31.57 November 22.81 December 30.10 December 18.74 December 30.68 December 32.88 December 21.03
The closing price on February 14, 2006 was $21.60. SAFEWAY INC. (SWY) Safeway Inc. is a food and drug retailer that operates primarily in the United States and Canada. Safeway operates a chain of grocery stores offering food and general merchandise, including baked goods, meat, delicatessen, floral and pharmaceutical products. In addition, it operates an online food store offering premium quality USDA-inspected Angus beef and specialty foods. Safeway has a strategic alliance with GroceryWorks Holdings, Inc.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price January 50.67 January 40.45 January 23.70 January 22.59 January 18.85 January 23.44 February 54.31 February 42.98 February 19.89 February 22.87 February 18.40 March 55.15 March 45.02 March 18.93 March 20.58 March 18.53 April 54.30 April 41.95 April 16.62 April 22.95 April 21.29 May 50.65 May 40.65 May 18.84 May 22.56 May 22.01 June 48.00 June 29.19 June 20.46 June 25.34 June 22.59 July 44.16 July 27.82 July 21.35 July 21.13 July 24.30 August 45.11 August 25.82 August 24.41 August 20.20 August 23.73 September 39.72 September 22.30 September 22.94 September 19.31 September 25.60 October 41.65 October 23.10 October 21.10 October 18.24 October 23.26 November 44.56 November 23.78 November 20.75 November 19.28 November 23.25 December 41.75 December 23.36 December 21.91 December 19.74 December 23.66
The closing price on February 14, 2006 was $22.79. TARGET CORPORATION (TGT) Target Corporation operates general merchandise retail stores and is a direct marketer of consumer products. Target stores offer a range of consumer products including clothing, health and beauty aids, school and office supplies, electronics, pharmacy services and home accessories, as well as books, music and movies. Target also sells various products by catalog and the Internet directly to consumers. Target also offers store-brand credit card programs.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 37.98 January 44.41 January 28.21 January 37.96 January 50.77 January 54.75 February 39.00 February 41.90 February 28.65 February 43.96 February 50.82 March 36.08 March 43.12 March 29.26 March 45.04 March 50.02 April 38.45 April 43.65 April 33.44 April 43.37 April 46.41 May 37.80 May 41.45 May 36.63 May 44.70 May 53.70 June 34.60 June 38.10 June 37.84 June 42.47 June 54.41 July 38.70 July 33.35 July 38.32 July 43.60 July 58.75 August 34.65 August 34.20 August 40.60 August 44.58 August 53.75 September 31.75 September 29.52 September 37.63 September 45.25 September 51.93 October 31.15 October 30.12 October 39.74 October 50.02 October 55.69 November 37.54 November 34.78 November 38.72 November 51.22 November 53.51 December 41.05 December 30.00 December 38.40 December 51.93 December 54.97
The closing price on February 14, 2006 was $55.43. II-1 THE TJX COMPANIES, INC. (TJX) TJX Companies, Inc. is a global off-price retailer of men's, women's and children's apparel, accessories, giftware and home products. TJX operates under various names, including HomeGoods, T.J. Maxx, Marshalls and A.J. Wright in the United States, Winners and Homesense in Canada, and T.K. Maxx in the United Kingdom, Ireland and The Netherlands.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 15.50 January 20.67 January 18.36 January 22.99 January 25.04 January 25.53 February 15.29 February 18.99 February 16.07 February 23.55 February 24.42 March 16.00 March 20.01 March 17.60 March 24.56 March 24.63 April 15.67 April 21.79 April 19.25 April 24.57 April 22.65 May 16.73 May 21.09 May 18.20 May 24.91 May 22.93 June 15.94 June 19.61 June 18.84 June 24.14 June 24.35 July 17.01 July 17.73 July 19.45 July 23.47 July 23.51 August 17.55 August 19.78 August 21.66 August 21.16 August 20.91 September 16.45 September 17.00 September 19.42 September 22.04 September 20.48 October 16.90 October 20.52 October 20.99 October 23.98 October 21.53 November 18.85 November 19.57 November 22.59 November 23.54 November 22.41 December 19.93 December 19.52 December 22.05 December 25.13 December 23.23
The closing price on February 14, 2006 was $24.61. WALGREEN CO. (WAG) Walgreen Co. is a drugstore chain that operates retail pharmacy stores throughout the United States. Walgreen's stores are engaged in the retail sale of prescription and non-prescription drugs, and carry additional product lines such as general merchandise, cosmetics, toiletries, household items, food and beverages. Customer prescription purchases can be made at Walgreen's drugstores as well as through the mail, telephone and the Walgreen's Web site.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 40.94 January 36.28 January 29.00 January 34.55 January 42.61 January 43.28 February 44.32 February 40.24 February 28.14 February 35.66 February 42.83 March 40.80 March 39.19 March 29.48 March 32.95 March 44.42 April 42.78 April 37.77 April 30.86 April 34.48 April 43.06 May 40.19 May 38.26 May 30.79 May 35.01 May 45.34 June 34.46 June 38.63 June 30.10 June 36.21 June 45.99 July 33.70 July 35.33 July 29.92 July 36.40 July 47.86 August 34.35 August 34.75 August 32.57 August 36.45 August 46.33 September 34.43 September 30.76 September 30.64 September 35.83 September 43.45 October 32.38 October 33.75 October 34.82 October 35.89 October 45.43 November 33.00 November 28.79 November 36.81 November 38.18 November 45.68 December 33.66 December 29.19 December 36.38 December 38.37 December 44.26
The closing price on February 14, 2006 was $44.83. II-2 WAL-MART STORES, INC. (WMT) Wal-Mart Stores, Inc. operates retail stores in various formats in the United States and internationally. It has two segments: The Wal-Mart Stores and The SAM'S CLUB. The Wal-Mart Stores segment includes Discount Stores, Supercenters and Neighborhood Markets in the United States, as well as Walmart.com. The Wal-Mart Stores offers, among other things, apparel, fabrics, stationery and books, shoes, house-wares, hardware, electronics and home furnishings. The Neighborhood Markets include such items as food products, pharmaceuticals, photo processing, health and beauty aids, household chemicals, paper goods, general merchandise and pet supplies departments. The SAM'S CLUB segment comprises the warehouse membership clubs in the United States and samsclub.com.
Closing Closing Closing Closing Closing Closing 2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 56.80 January 59.98 January 47.80 January 53.85 January 52.40 January 46.11 February 50.09 February 62.01 February 48.06 February 59.56 February 51.61 March 50.50 March 61.30 March 52.03 March 59.69 March 50.11 April 51.74 April 55.86 April 56.32 April 57.00 April 47.14 May 51.75 May 54.10 May 52.61 May 55.73 May 47.23 June 48.80 June 55.01 June 53.67 June 52.76 June 48.20 July 55.90 July 49.18 July 55.91 July 53.01 July 49.35 August 48.05 August 53.48 August 59.17 August 52.67 August 44.96 September 49.50 September 49.24 September 55.85 September 53.20 September 43.82 October 51.40 October 53.55 October 58.95 October 53.92 October 47.31 November 55.15 November 53.90 November 55.64 November 52.06 November 48.56 December 57.55 December 50.51 December 53.05 December 52.82 December 46.80
The closing price on February 14, 2006 was $46.45. II-3 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HOLDRS(SM) RETAIL [GRAPHIC OMITTED] 1,000,000,000 Depositary Receipts Retail HOLDRS(SM) Trust --------------------------- P R O S P E C T U S --------------------------- February 16, 2006 ================================================================================ II-4 INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Indemnification of Directors and Officers. Section 145 of the General Corporation Law of the State of Delaware, as amended, provides that under certain circumstances a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or is or was serving at its request in such capacity in another corporation or business association, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. Article XIV, Section 2 of the Restated Certificate of Incorporation of Merrill Lynch, Pierce, Fenner & Smith Incorporated provides in effect that, subject to certain limited exceptions, Merrill Lynch, Pierce, Fenner & Smith Incorporated shall indemnify its directors and officers to the full extent authorized or permitted by law. The directors and officers of Merrill Lynch, Pierce, Fenner & Smith Incorporated are insured under policies of insurance maintained by Merrill Lynch, Pierce, Fenner & Smith Incorporated, subject to the limits of the policies, against certain losses arising from any claim made against them by reason of being or having been such directors or officers. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated has entered into contracts with all of its directors providing for indemnification of such persons by Merrill Lynch, Pierce, Fenner & Smith Incorporated to the full extent authorized or permitted by law, subject to certain limited exceptions. Item 16. Exhibits. See Exhibit Index. Item 17. Undertakings. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933. (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of the prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. II-1 (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (5) For purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (6) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to Item 15 of this registration statement, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant hereby certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this Post-Effective Amendment No. 7 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, on January 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, Robert J. McCann Chairman of the Board * 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 exhibits thereto, form of Depositary Trust Agreement, form of HOLDRS and form of Amendment No. 2 to the Standard Terms for Depositary Trust Agreements, filed on February 13, 2001 as part of the registration statement filed on form S-1 for Retail HOLDRS. *5.1 Opinion of Shearman & Sterling LLP regarding the validity of the Retail HOLDRS receipts, filed on February 9, 2001 as part of the registration statement filed on form S-1 for Retail HOLDRS. *8.1 Opinion of Shearman & Sterling LLP, as special U.S. tax counsel regarding the material federal income tax consequences, filed on February 9, 2001 Amendment No. 1 to the registration statement filed on form S-1 for Retail 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 Amendment No. 5 to the registration statement filed on form S-1 for Retail HOLDRS. *24.1 Power of Attorney (included in Part II of Registration Statement), filed on January 30, 2001 as part of the registration statement filed on form S-1 for Retail HOLDRS. *24.2 Power of Attorney of John J. Fosina, George A. Schieren, E. Stanley O'Neal, Thomas H. Patrick and Dominic A. Carone. *24.3 Power of Attorney of James P. Gorman, Arshad R. Zakaria and Carlos M. Morales. *24.4 Power of Attorney of Candace E. Browning, Gregory J. Fleming, Do Woo Kim and Joseph F. Regan. 24.5 Power of Attorney of Robert J. McCann and Joseph R. Regan. - ------------------- * Previously filed A-10 EX-24.5 3 ex24-5_021306retail.txt POWER OF ATTORNEY Exhibit 24.5 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-----