-----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, HPmDV8kyo2ehGUvCXJ9nDZM/vC4s0hKZ3PKQpiiPuA4SdFR5R623GNPbq4n2HCnS 9d9+Jvs8FWwMX0HLLgQD+g== 0000950130-00-002595.txt : 20000508 0000950130-00-002595.hdr.sgml : 20000508 ACCESSION NUMBER: 0000950130-00-002595 CONFORMED SUBMISSION TYPE: 424B1 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20000505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH PIERCE FENNER & SMITH INC CENTRAL INDEX KEY: 0000728612 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B1 SEC ACT: SEC FILE NUMBER: 333-33362 FILM NUMBER: 620077 BUSINESS ADDRESS: STREET 1: NORTH TOWER WORLD FINANCIAL CENTER STREET 2: NORTH TOWER WORLD FINANCIAL CENTER 5TH F CITY: NEW YORK STATE: NY ZIP: 10281-1323 BUSINESS PHONE: 2124496202 MAIL ADDRESS: STREET 1: WORLD FINANCIAL CENTER STREET 2: NORTH TOWER 23RD FL CITY: NEW YORK STATE: NY ZIP: 10281-1323 424B1 1 PROSPECTUS RULE NO. 424(b)(1) REGISTRATION NO. 333-33362 PROSPECTUS [LOGO] 1,000,000,000 Depositary Receipts Semiconductor HOLDRS SM Trust The Semiconductor HOLDRS SM Trust will issue Depositary Receipts called Semiconductor HOLDRS SM representing your undivided beneficial ownership in the U.S.-traded common stock of a group of specified companies that, among other things, develop, manufacture and market integrated circuitry and other products known as semiconductors, which allow for increased speed and functionality in components used in computers and other electronic devices. The Bank of New York will be the trustee. You only may acquire, hold or transfer Semiconductor HOLDRS in a round-lot amount of 100 Semiconductor HOLDRS or round-lot multiples. Semiconductor HOLDRS are separate from the underlying deposited common stocks that are represented by the Semiconductor HOLDRS. For a list of the names and the number of shares of the companies that make up a Semiconductor HOLDR, see "Highlights of Semiconductor HOLDRS--The Semiconductor HOLDRS" starting on page 11. Merrill Lynch, Pierce, Fenner & Smith Incorporated has sold 1,500,000 Semiconductor HOLDRs in the initial distribution. The trust will issue the additional Semiconductor HOLDRS on a continuous basis. Investing in Semiconductor HOLDRS involves significant risks. See "Risk factors" starting on page 4. The initial public offering price for a round-lot of 100 Semiconductor HOLDRS will equal the sum of the closing market price on the primary trading market on May 4, 2000 for each deposited share multiplied by the share amount specified in this prospectus, plus an underwriting fee. Semiconductor HOLDRS are neither interests in nor obligations of either the initial depositor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or The Bank of New York, as trustee. Before this issuance, there has been no public market for Semiconductor HOLDRS. The Semiconductor HOLDRS have been approved for listing on the American Stock Exchange under the symbol "SMH", subject to official notice of issuance. --------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Initial Price Underwriting to Public* Fee ------------- ------------ Per Semiconductor HOLDR......................... $93.32 2%
-------- * Includes underwriting fee. --------------- Merrill Lynch & Co. A.G. Edwards & Sons, Inc. --------------- The date of this prospectus is May 4, 2000. "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 Semiconductor HOLDRS......................................... 10 The Trust.................................................................. 16 Description of Semiconductor HOLDRS........................................ 16 Description of the Underlying Securities................................... 17 Description of the Depositary Trust Agreement.............................. 19 Federal Income Tax Consequences............................................ 22 ERISA Considerations....................................................... 23 Plan of Distribution....................................................... 23 Legal Matters.............................................................. 24 Where You Can Find More Information........................................ 24
--------------- This prospectus contains information you should consider when making your investment decision. With respect to information about Semiconductor 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 Semiconductor HOLDRS in any jurisdiction where the offer or sale is not permitted. The Semiconductor HOLDRS are not registered for public sale outside of the United States. Non-U.S. receipt holders should consult their tax advisors regarding U.S. withholding and other taxes which may apply to ownership of the Semiconductor HOLDRS or of the underlying securities through an investment in the Semiconductor HOLDRS. 2 SUMMARY The Semiconductor HOLDRS trust will be formed under the depositary trust agreement, dated as of April 24, 2000 among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Semiconductor HOLDRS. The trust is not a registered investment company under the Investment Company Act of 1940. The trust will hold shares of common stock issued by 20 specified companies generally considered to be involved in various aspects of the semiconductor business. Companies involved in the semiconductor industry develop, manufacture and market integrated circuitry and other products made from semiconductors which allow for increased speed and functionality in components for computers and other electronic devices. The number of shares of each common stock held by the trust with respect to each round-lot of Semiconductor HOLDRS is specified under "Highlights of Semiconductor HOLDRS-- The "Semiconductor HOLDRS." This group of common stocks is referred to as the underlying securities. Except when a reconstitution event occurs, the underlying securities will not change. Under no circumstances will a new company be added to the group of issuers of underlying securities. The trust will issue Semiconductor HOLDRS that represent your undivided beneficial ownership interest in the shares of common stock held by the trust on your behalf. The Semiconductor HOLDRS are separate from the underlying common stocks that are represented by the Semiconductor HOLDRS. 3 RISK FACTORS An investment in Semiconductor HOLDRS involves risks similar to investing in each of the underlying securities outside of the Semiconductor HOLDRS, including the risks associated with concentrated investments in semiconductor companies. General Risk Factors . Loss of investment. Because the value of Semiconductor HOLDRS directly relates to the value of the underlying securities, you may lose all or a substantial portion of your investment in the Semiconductor HOLDRS if the underlying securities decline in value. . Discount trading price. Semiconductor HOLDRS may trade at a discount to the aggregate value of the underlying securities. . Not necessarily representative of the semiconductor business. While the underlying securities are common stocks of companies generally considered to be involved in various aspects of the semiconductor business, the underlying securities and the Semiconductor HOLDRS may not necessarily follow the price movements of the entire semiconductor business generally. If the underlying securities decline in value, your investment in the Semiconductor HOLDRS will decline in value even if common stock prices of companies involved in the semiconductor business generally increase in value. Furthermore, after the initial deposit, one or more of the issuers of the underlying securities may no longer be involved in the semiconductor business. In this case, the Semiconductor HOLDRS may no longer consist of securities issued only by companies involved in the semiconductor business. . No investigation of underlying securities. The underlying securities included in the Semiconductor HOLDRS were selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated based on the market capitalization of issuers and the market liquidity of common stocks in the semiconductor business, without regard for the value, price performance, volatility or investment merit of the underlying securities. Consequently, the Semiconductor HOLDRS trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and their affiliates, have not performed any investigation or review of the selected companies, including the public filings by the companies. Investors and market participants should not conclude that the inclusion of a company is any form of investment recommendation by the trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or their affiliates. . Loss of diversification. As a result of business developments, reorganizations, or market fluctuations affecting issuers of the underlying securities, Semiconductor HOLDRS may not necessarily continue to be a diversified investment in the semiconductor business. As a result of market fluctuation and/or reconstitution events, Semiconductor HOLDRS may represent a concentrated investment in one or more of the underlying securities which would reduce investment diversification and increase your exposure to the risks of concentrated investments. . Conflicting investment choices. In order to sell one or more of the underlying securities individually or to participate in a tender offer relating to one or more of the underlying securities, you will be required to cancel your Semiconductor HOLDRS and receive delivery of each of the underlying securities. The cancellation of your Semiconductor HOLDRS will allow you to sell individual underlying securities or to deliver individual underlying securities in a tender offer. The cancellation of Semiconductor HOLDRS will involve payment of a cancellation fee to the trustee. . Trading halts. Trading in Semiconductor HOLDRS may be halted if trading in one or more of the underlying securities is halted. If so, you will not be able to trade Semiconductor 4 HOLDRS even though there is trading in some of the underlying securities; however, you will be able to cancel your Semiconductor HOLDRS to receive the underlying securities. . Delisting from the American Stock Exchange. If the number of companies whose common stock is held in the trust falls below nine, the American Stock Exchange may consider delisting the Semiconductor HOLDRS. If the Semiconductor HOLDRS are delisted by the American Stock Exchange, a termination event will result unless the Semiconductor HOLDRS are listed for trading on another national securities exchange or through NASDAQ within five business days from the date the Semiconductor HOLDRS are delisted. . Possible conflicts of interest. Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, has selected the underlying securities and may face possible conflicts of interest in connection with its activities. For example, Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates, collectively referred to as Merrill Lynch, may engage in investment banking and other activities, may provide services to issuers of the underlying securities in connection with its business, or may make purchases or sales, including establishing long or short positions, in the underlying securities for its own account. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, will purchase, in the secondary market, the underlying securities that will be deposited into the trust. Merrill Lynch may make these purchases before the deposit into the trust, or it may borrow securities for the deposit and subsequently purchase the securities to repay to the lenders the securities previously borrowed. In either event, the purchases of the underlying securities will be made at various prices. As the initial offering price for the Semiconductor HOLDRS will be based on the closing market price of each of the underlying securities on the pricing date, Merrill Lynch may recognize a gain on its purchases of the underlying securities. Specifically, if the closing market price for the underlying securities on the pricing date is higher than the price at which Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, purchases the underlying securities then it will recognize a gain in connection with such purchases. Merrill Lynch may recognize this gain on any of the underlying securities that comprise the Semiconductor HOLDRS or on all of the underlying securities in the aggregate. The potential profit of Merrill Lynch also is affected by any hedging activities that it may engage in while it purchases the underlying securities in the secondary market for deposit into the trust. All of these activities may result in conflicts of interest with respect to the financial interest of Merrill Lynch, on the one hand, and, on the other hand, the initial selection of the underlying securities included in the Semiconductor HOLDRS, the selection of the semiconductor industry, Merrill Lynch's activity in the secondary market in the underlying securities, and the creation and cancellation of Semiconductor HOLDRS by Merrill Lynch. . Temporary price increases in the underlying securities. Purchasing activity in the secondary trading market associated with acquiring the underlying securities for deposit into the trust may temporarily increase the market price of the deposited shares, which will result in a higher initial offering price for the Semiconductor HOLDRS. Large volumes of purchasing activity, which may occur in connection with the issuance of Semiconductor HOLDRS, particularly in connection with the initial issuance of Semiconductor HOLDRS, could temporarily increase the market price of the underlying securities, resulting in a higher price on that date. This purchasing activity could create a temporary imbalance between the supply and demand of the underlying securities, thereby limiting the liquidity of the underlying securities due to a temporary increased demand for underlying securities. Temporary increases in the market price of the underlying securities may also occur as a result of the purchasing activity of other market participants. Other market participants may attempt to benefit from increases in the market price of the underlying securities that may occur as result of the increased purchasing activity in the underlying securities resulting from the 5 issuance of the Semiconductor HOLDRS. Consequently, prices for the underlying securities may decline immediately after the pricing date. If the trading prices for the underlying securities decline, the trading price of Semiconductor HOLDRS will also decline. Risk Factors Specific to Companies Involved in the Semiconductor Business . Semiconductor company stock prices have been and will likely continue to be volatile, which will directly affect the price volatility of the Semiconductor HOLDRS, and you could lose all or part of your investment. The trading prices of the common stocks of semiconductor companies have been and are likely to be volatile. Semiconductor companies' stock prices could be subject to wide fluctuations in response to a variety of factors, including the following: . actual or anticipated variations in companies' quarterly operating results; . announcements of technological innovations or new services by semiconductor companies or their competitors; . announcements by semiconductor companies or their competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; . failure to integrate or realize projected benefits from acquisitions; . manufacturing yields; . changes in government regulations; and . fluctuations in quarterly and annual operating results. Other broad market and industry factors may decrease the stock price of semiconductor companies' stocks, regardless of their operating results. Market fluctuations, as well as general political and economic conditions, such as recession or interest rate or currency rate fluctuations, also may decrease the market price of semiconductor companies' stocks. . The ability to maintain or increase market share depends on timely introduction and market acceptance of new products offered by semiconductor companies. The equipment manufacturing, data communications and storage, and telecommunications markets which semiconductor companies serve are characterized by rapidly changing technology, evolving industry standards and practices, frequent new product and service introductions and enhancements, pricing pressure and changing customer demands. It is necessary for semiconductor companies to adapt to rapidly changing technologies, adapt their services to evolving industry standards and to continually improve the price, performance, features and reliability of their products. They must quickly develop, introduce and deliver their products, or incur the risk that their competitors will introduce the same or similar products, or products which could make their products obsolete. In addition, the widespread adoption of new technologies could require substantial expenditures to modify or adapt the existing products offered by many semiconductor companies. New product research and development may be costly and time-consuming. Many semiconductor companies may not successfully introduce new products, develop and maintain a loyal customer base or achieve general market acceptance for their products, and failure to do so could have a material adverse effect on their business, results of operations and financial condition. . Some of the companies involved in the semiconductor business are also engaged in other lines of business unrelated to the semiconductor business, and they may experience problems with these lines of business which could adversely affect their operating results. Some of the companies which comprise the Semiconductor HOLDRS have lines of business that do not relate to the semiconductor business and which may present additional risks not mentioned in this prospectus. The operating results of these semiconductor companies may 6 fluctuate as a result of these additional risks and events in the industries of these other lines of business. Despite a company's possible success in the semiconductor business, there can be no assurance that the other lines of business in which these companies are engaged will not have an adverse effect on a company's business or financial condition. . The semiconductor business is highly cyclical which may cause the operating results of many semiconductor companies to vary significantly. The semiconductor business is highly cyclical and has been subject to significant economic downturns at various times. These downturns are typically characterized by diminished product demand, production overcapacity, accelerated decline of average selling prices and reduced revenues. In addition, many semiconductor companies' operating results have been harmed in the past by industry-wide fluctuations in demand for semiconductors, resulting in under-utilization of companies' manufacturing capacity. Semiconductor company's revenues depend in large part on the continued growth of various electronics industries that use semiconductors, and can fluctuate dramatically depending on the supply and demand balance within the industry. Semiconductor companies' business could be harmed in the future by cyclical conditions in the semiconductor industry or by slower growth in any of the markets for semiconductor products. . Many semiconductor companies have created new technologies for the semiconductor industry and currently rely on a limited number of customers as purchasers of their products. Several semiconductor companies rely on a limited number of customers for their semiconductor products and services. If new customers do not adopt these technologies for use in their systems, the operating results and financial condition of these semiconductor companies may be adversely affected. In addition, many semiconductor products are marketed to equipment manufacturers who may be reluctant to change suppliers and incorporate different technologies into their products due to the significant costs associated with qualifying a new supplier. As a result, semiconductor companies may experience barriers to future sales opportunities. . Many semiconductor companies rely on a single supplier or a limited number of suppliers for the parts and raw materials used in their products, and if quality parts and materials are not delivered by the suppliers on a timely basis, these companies will not be able to manufacture and deliver their products on a timely schedule which could adversely affect their financial condition. Reliance on a single supplier or limited number of suppliers subjects many semiconductor companies to risks of delivery delays, price increases, receipt of non-conforming or poor quality components and inability to obtain long-term supplies of components. Any reduction or interruption in these third parties' supply or manufacturing could adversely affect many semiconductor companies' ability to deliver their products and meet customer needs, especially since many semiconductor companies do not maintain extensive inventories of parts and materials for manufacturing. There can be no assurance that semiconductor companies will not encounter problems with suppliers which may result in harm to their reputation and adversely affect their operations and financial condition. . The manufacturing processes are highly complex, costly and potentially vulnerable to impurities and other disruptions that can significantly increase costs and delay product shipments to customers. The manufacturing processes of many semiconductor companies are highly complex, require advanced and costly equipment and are continuously being modified in an effort to improve yields and product performance. Impurities or other difficulties in the manufacturing process can lower yields, interrupt production and result in loss of customers. As system complexity has increased and technologies have become more advanced, manufacturing tolerances have been reduced and requirements for precision have become even more demanding. There can be no assurance that semiconductor companies will not experience production difficulties that cause delivery delays and quality control problems. 7 . The semiconductor business is very competitive, and a semiconductor company's failure to establish a customer base which uses its technologies would adversely affect its operating results. Semiconductor access services can be based on several different technologies, and the competition among semiconductor companies to convince a provider to select its technology can be intense. The semiconductor market is new and rapidly evolving and it is likely that competitors will expand their business to produce existing technologies as well as continue to develop new technologies which compete with, or make obsolete, the existing technologies. Failure to accurately identify emerging technological trends and demand for product features and performance characteristics could place a semiconductor company at a severe competitive disadvantage. Many semiconductor companies face significant competition from other companies which have greater market share and financial resources. These companies may be better positioned to finance research and development activities, and they may have greater resources with which to acquire other companies in the industry. . Failure to integrate acquisitions could disrupt operations and prevent the realization of intended benefits. Many semiconductor companies are active acquirers of other companies as part of their business plans. There can be no assurance that many semiconductor companies will be able to integrate these acquired companies, which may result in failure to realize expected cost savings, increases in revenue and other projected benefits from such integration. There can be no assurance that these companies will be able to develop the capabilities necessary to exploit newly acquired technologies. There can also no be no assurance that these companies will be able to attract and retain qualified personnel from acquired businesses or be successful in integrating such personnel. Furthermore, semiconductor companies may suffer material adverse short and long-term effects on operating results and financial condition as a result of such acquisitions. . The international operations of many semiconductor companies expose them to risks associated with instability and changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations and other risks inherent to international business. Many semiconductor companies have international operations and derive substantial revenue from international sales. The risks of international business that the companies are exposed to include the following: . general economic, social and political conditions; . the difficulty of enforcing intellectual property rights, agreements and collecting receivables through certain foreign legal systems; . differing tax rates, tariffs, exchange controls or other similar restrictions; . currency fluctuations; . changes in, and compliance with, domestic and foreign laws and regulations which impose a range of restrictions on operations, trade practices, foreign trade and international investment decisions; and . reduction in the number or capacity of qualified manufacturing subcontractors in international markets. . Inability to adequately protect proprietary rights may harm the competitive positions of many semiconductor companies. Many semiconductor companies rely on a combination of copyrights trademarks, service marks and trade secret law and contractual restrictions to establish and protect proprietary rights in their products and services. There can be no assurance that these companies will be able to protect their intellectual property if they are unable to enforce their rights or if they do not detect unauthorized use of their intellectual property. Furthermore, any steps taken to protect intellectual property may be inadequate, time consuming and expensive. In addition, semiconductor companies may be subject to claims that their products and services infringe the intellectual property rights of others. 8 Patent disputes are possible and can preclude the successful introduction of new products and technologies. Any claim, whether meritorious or not, could be time consuming, result in costly litigation, delay product or service introduction or require semiconductor companies to enter into royalty or licensing agreements. . Many semiconductor companies are dependent on their ability to continue to attract and retain highly-skilled technical and managerial personnel to develop and generate their business. The success of many semiconductor companies is highly dependent of the experience, abilities and continued services of key executive officers and key technical personnel. If these companies lose the services of any of these officers or key technical personnel, their future success could be undermined. Competition for personnel is intense. There is no certainty that any of these semiconductor companies will be able to continue to attract and retain qualified personnel. 9 HIGHLIGHTS OF SEMICONDUCTOR HOLDRS This discussion highlights information regarding Semiconductor HOLDRS; we present certain information more fully in the rest of this prospectus. You should read the entire prospectus carefully before you purchase Semiconductor HOLDRS. Issuer...................... Semiconductor HOLDRS Trust. The trust................... The Semiconductor HOLDRS Trust will be formed under the depositary trust agreement, dated as of April 24, 2000 among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Semiconductor HOLDRS. The trust is not a registered investment company under the Investment Company Act of 1940. Initial depositor........... Merrill Lynch, Pierce, Fenner & Smith Incorporated. Trustee..................... The Bank of New York, a New York state-chartered banking organization, will be the trustee and receive compensation as set forth in the depositary trust agreement. Purpose of Semiconductor HOLDRS..................... Semiconductor HOLDRS are designed to achieve the following: Diversification. Semiconductor HOLDRS are designed to allow you to diversify your investment in the semiconductor business through a single, exchange-listed instrument representing your undivided beneficial ownership of the underlying securities. Flexibility. The beneficial owners of Semiconductor HOLDRS have undivided beneficial ownership interests in each of the underlying securities represented by the Semiconductor HOLDRS, and can cancel their Semiconductor HOLDRS to receive each of the underlying securities represented by the Semiconductor HOLDRS. Transaction costs. The expenses associated with trading Semiconductor HOLDRS are expected to be less than trading each of the underlying securities separately. Trust assets................ The trust will hold shares of common stock issued by specified companies involved in the semiconductor business. Except when a reconstitution event occurs, the group of companies will not change. Reconstitution events are described in this prospectus under the heading "Description of the depositary trust agreement--Reconstitution events." Under no circumstances will the common stock of a new company be added to the common stocks underlying the Semiconductor HOLDRS. The trust's assets may increase or decrease as a result of in-kind deposits and withdrawals of the underlying securities during the life of the trust. 10 The Semiconductor HOLDRS.... The trust will issue Semiconductor HOLDRS that represent your undivided beneficial ownership interest in the shares of U.S.-traded common stock held by the trust on your behalf. The Semiconductor HOLDRS themselves are separate from the underlying securities that are represented by the Semiconductor HOLDRS. The specific share amounts for each round-lot of 100 Semiconductor HOLDRS are set forth in the chart below and were determined on May 4, 2000, the pricing date, so that the initial weightings of each underlying security included in the Semiconductor HOLDRS approximates the relative market capitalizations of the specified companies (based on the closing market prices of the underlying securities on the trading day immediately preceding the pricing date), subject to a maximum initial weight of 20%. The share amounts, set forth below, will not change, except for changes due to corporate events, such as stock splits or reverse stock splits on the underlying securities, or reconstitution events. However, the weightings are expected to change substantially over time because of price fluctuations. The following chart provides the . names of the 20 issuers of the underlying securities represented by the Semiconductor HOLDRS, . stock ticker symbols, . share amounts represented by a round-lot of 100 Semiconductor HOLDRS (as of May 4, 2000), . initial weightings, and . principal market on which the shares of common stock of the selected companies are traded. 11
Primary Share Initial Trading Name of Company Ticker Amounts Weightings Market ---------------- ------ ------- ---------- ------- Intel Corporation INTC 15 19.84% NASDAQ Texas Instruments, Inc. (1) TXN 11 18.37% NYSE Applied Materials, Inc. AMAT 13 13.65% NASDAQ Micron Technology, Inc. MU 9 6.24% NYSE Analog Devices, Inc. ADI 6 4.55% NYSE Broadcom Corporation BRCM 2 3.91% NASDAQ Xilinx, Inc. XLNX 5 3.71% NASDAQ Maxim Integrated Products, Inc. MXIM 5 3.56% NASDAQ Teradyne, Inc. TER 3 3.34% NYSE Altera Corporation ALTR 3 3.22% NASDAQ LSI Logic Corporation LSI 5 3.07% NYSE Linear Technology Corporation LLTC 5 2.88% NASDAQ KLA-Tencor Corporation KLAC 3 2.08% NASDAQ Atmel Corporation ATML 4 2.01% NASDAQ Vitesse Semiconductor Corporation VTSS 3 1.99% NASDAQ Advanced Micro Devices, Inc. AMD 2 1.94% NYSE National Semiconductor Corporation NSM 3 1.94% NYSE Novellus Systems, Inc. NVLS 2 1.35% NASDAQ Amkor Technology, Inc. AMKR 2 1.33% NASDAQ SanDisk Corporation SNDK 1 1.01% NASDAQ
-------- (1) On April 20, 2000, Texas Instruments, Inc. announced a 2-for-1 stock split payable to stockholders of record as of May 1, 2000. As of May 23, 2000, the share amount of Texas Instruments, represented by a round- lot of 100 Semiconductor HOLDRS, will be 22. These companies generally are considered to be 20 of the largest and most liquid companies with U.S.-traded common stock involved in the semiconductor business, as measured by market capitalization and trading volume on April 17, 2000. The market capitalization of a company is determined by multiplying the price of its common stock by the number of outstanding shares of its common stock. The trust only will issue and cancel, and you only may obtain, hold, trade or surrender, Semiconductor HOLDRS in a round-lot of 100 Semiconductor HOLDRS and round-lot multiples. The trust will only issue Semiconductor HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 Semiconductor HOLDRS. In the event that a fractional share comes to be represented by a round-lot of Semiconductor HOLDRS, the trust may require a minimum of more than one round-lot of 100 Semiconductor HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Semiconductor HOLDRS. The number of outstanding Semiconductor 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 Semiconductor HOLDRS on a continuous basis when an investor deposits the required shares of common stock with the trustee. Public offering price....... The initial public offering price for 100 Semiconductor HOLDRS will equal the sum of the closing market price on the primary trading market on May 4, 2000, the pricing date, for each underlying 12 security multiplied by the share amount to be determined on the pricing date, plus an underwriting fee. Purchases................... After the initial offering, you may acquire Semiconductor HOLDRS in two ways: . through an in-kind deposit of the required number of shares of common stock of the underlying issuers with the trustee, or . through a cash purchase in the secondary trading market. Underwriting fees........... If you purchase Semiconductor HOLDRS in the initial public offering, you will pay an underwriting fee equal to 2%. You will not be charged any issuance fee or other sales commission in connection with purchases of Semiconductor HOLDRS made in the initial public offering. Issuance and cancellation fees........................ After the initial offering, if you wish to create Semiconductor HOLDRS by delivering to the trust the requisite shares of common stock represented by a round-lot of 100 Semiconductor 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 Semiconductor HOLDRS. If you wish to cancel your Semiconductor 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 Semiconductor HOLDRS. Commissions................. If you choose to deposit underlying securities in order to receive Semiconductor HOLDRS after the conclusion of the initial public offering, you will not be charged the underwriting fee. However, in addition to the issuance fee charged by the trustee described above, you will be responsible for paying any sales commission associated with your purchase of the underlying securities that is charged by your broker, whether it be Merrill Lynch & Co., A.G. Edwards & Sons, Inc. or another broker. Custody fees................ The Bank of New York, as trustee and as custodian, will charge you a quarterly custody fee of $2.00 for each round-lot of 100 Semiconductor 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 Semiconductor 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 Semiconductor 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 Semiconductor 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 13 cancellation. The trustee will not deliver fractional shares of underlying securities. To the extent that any cancellation of Semiconductor HOLDRS would otherwise require the delivery of a fractional share, the trustee will sell such share in the market and the trust, in turn, will deliver cash in lieu of such share. Except with respect to the right to vote for dissolution of the trust, the Semiconductor HOLDRS themselves will not have voting rights. Rights relating to the underlying securities...... You have the right to: . Receive all shareholder disclosure materials, including annual and quarterly reports, distributed by the issuers of the underlying securities. . Receive all proxy materials distributed by the issuers of the underlying securities and will have the right to instruct the trustee to vote the underlying securities or may attend shareholder meetings yourself. . Receive dividends and other distributions on the underlying securities, if any are declared and paid to the trustee by an issuer of the underlying securities, net of any applicable taxes or fees. If you wish to participate in a tender offer for underlying securities, you must obtain the underlying securities by surrendering your Semiconductor HOLDRS and receiving all of your underlying securities. For specific information about obtaining your underlying securities, you should read the discussion under the caption "Description of the depositary trust agreement." Reconstitution events ...... A. If an issuer of underlying securities no longer has a class of common stock registered under section 12 of the Securities Exchange Act of 1934, then its securities will no longer be an underlying security and the trustee will distribute the shares of that company to the owners of the Semiconductor 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 Semiconductor HOLDRS. C. If the underlying securities of an issuer cease to be outstanding as a result of a merger, consolidation or other corporate combination, the trustee will distribute the consideration paid by and received from the acquiring company to the beneficial owners of Semiconductor HOLDRS, unless the merger, consolidation or other corporate combination is between companies that are already included in the Semiconductor HOLDRS and the consideration paid is additional underlying securities. In this case, the additional underlying securities will be deposited into the trust. 14 D. If an issuer's underlying securities are delisted from trading on a national securities exchange or NASDAQ and are not listed for trading on another national securities exchange or through NASDAQ within five business days from the date such securities are delisted. If a reconstitution event occurs, the trustee will deliver the underlying security to you as promptly as practicable after the date that the trustee has knowledge of the occurrence of a reconstitution event. Termination events.......... A. The Semiconductor HOLDRS are delisted from the American Stock Exchange and are not listed for trading on another national securities exchange or through NASDAQ within five business days from the date the Semiconductor HOLDRS are delisted. B. The trustee resigns and no successor trustee is appointed within 60 days from the date the trustee provides notice to Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, of its intent to resign. C. 75% of beneficial owners of outstanding Semiconductor HOLDRS vote to dissolve and liquidate the trust. If a termination event occurs, the trustee will distribute the underlying securities to you as promptly as practicable after the termination event. Federal income tax The federal income tax laws will treat a U.S. consequences ............... holder of Semiconductor HOLDRS as directly owning the underlying securities. The Semiconductor HOLDRS themselves will not result in any federal tax consequences separate from the tax consequences associated with ownership of the underlying securities. Listing..................... The Semiconductor HOLDRS have been approved for listing on the American Stock Exchange under the symbol "SMH", subject to official notice of issuance. Trading will take place only in round- lots of 100 Semiconductor HOLDRS and round-lot multiples. A minimum of 150,000 Semiconductor HOLDRS will be required to be outstanding when trading begins. Trading..................... Investors only will be able to acquire, hold, transfer and surrender a round-lot of 100 Semiconductor HOLDRS. Bid and ask prices, however, will be quoted per single Semiconductor HOLDRS. Clearance and settlement.... The trust will issue Semiconductor HOLDRS in book-entry form. Semiconductor HOLDRS will be evidenced by one or more global certificates that the trustee will deposit with The Depository Trust Company, referred to as DTC. Transfers within DTC will be in accordance with DTC's usual rules and operating procedures. For further information see "Description of Semiconductor HOLDRS." 15 THE TRUST General. This discussion highlights information about the Semiconductor HOLDRS trust. You should read this information about the depositary trust agreement as well as the depositary trust agreement before you purchase Semiconductor HOLDRS. The material terms of the depositary trust agreement are described in this prospectus under the heading "Description of the depositary trust agreement." The Semiconductor HOLDRS trust. The trust will be formed pursuant to the depositary trust agreement, dated as of April 24, 2000. The Bank of New York will be the trustee. The Semiconductor HOLDRS trust is not a registered investment company under the Investment Company Act of 1940. The Semiconductor HOLDRS trust is intended to hold deposited shares for the benefit of owners of Semiconductor HOLDRS. The trustee will perform only administrative and ministerial acts. The property of the trust will consist of the underlying securities and all monies or other property, if any, received by the trustee. The trust will terminate on December 31, 2040, or earlier if a termination event occurs. DESCRIPTION OF SEMICONDUCTOR HOLDRS The trust will issue Semiconductor HOLDRS under the depositary trust agreement described in this prospectus under the heading "Description of the depositary trust agreement." After the initial offering, the trust may issue additional Semiconductor HOLDRS on a continuous basis when an investor deposits the requisite underlying securities with the trustee. You may only acquire, hold, trade and surrender Semiconductor HOLDRS in a round-lot of 100 Semiconductor HOLDRS and round-lot multiples. The trust will only issue Semiconductor HOLDRS upon the deposit of the whole shares of underlying securities that are represented by a round-lot of 100 Semiconductor 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 Semiconductor HOLDRS, the trust may require a minimum of more than one round-lot of 100 Semiconductor HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Semiconductor HOLDRS. Semiconductor HOLDRS will represent your individual and undivided beneficial ownership interest in the common stock of the specified underlying securities. The 20 companies selected as part of this receipt program are listed above in the section entitled "Highlights of Semiconductor HOLDRS--The Semiconductor HOLDRS." Beneficial owners of Semiconductor HOLDRS will have the same rights and privileges as they would have if they beneficially owned the underlying securities outside of the trust. These include the right of investors to instruct the trustee to vote the common stock, and to receive dividends and other distributions on the underlying securities, if any are declared and paid to the trustee by an issuer of an underlying security, as well as the right to cancel Semiconductor HOLDRS to receive the underlying securities. See "Description of the depositary trust agreement." Semiconductor HOLDRS are not intended to change your beneficial ownership in the underlying securities under federal securities laws, including Sections 13(d) and 16(a) of the Securities Exchange Act of 1934. The trust will not publish or otherwise calculate the aggregate value of the underlying securities represented by a receipt. Semiconductor 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 Semiconductor HOLDRS wishes to realize the dollar value of the underlying securities, that owner will have to cancel the Semiconductor HOLDRS. Such cancellation will require payment of fees and expenses as described in "Description of the depositary trust agreement--Withdrawal of underlying securities." 16 Semiconductor HOLDRS will be evidenced by one or more global certificates that the trustee will deposit with DTC and register in the name of Cede & Co., as nominee for DTC. Semiconductor HOLDRS will be available only in book-entry form. Owners of Semiconductor HOLDRS may hold their Semiconductor HOLDRS through DTC, if they are participants in DTC, or indirectly through entities that are participants in DTC. DESCRIPTION OF THE UNDERLYING SECURITIES Selection criteria. The underlying securities are the common stocks of a group of 20 specified companies involved in various aspects of the semiconductor business and whose common stock is registered under Section 12 of the Exchange Act. The issuers of the underlying securities are considered to be 20 of the largest capitalized, most liquid companies involved in the semiconductor business as measured by market capitalization and trading volume. The following criteria were used in selecting the underlying securities on April 17, 2000: . Market capitalization equal to or greater than $5.8 billion; . Average daily trading volume of at least 1.2 million shares over the 60 trading days before April 17, 2000; . Average daily dollar volume (that is, the average daily trading volume multiplied by the average closing price over the 60 day period prior to April 17, 2000) of at least $65 million over the 60 trading days before April 17, 2000; and . A trading history of at least 90 calendar days. The market capitalization of a company is determined by multiplying the price of its common stock by the number of shares of its common stock that are held by stockholders. In determining whether a company was to be considered for inclusion in the Semiconductor HOLDRS, Merrill Lynch, Pierce, Fenner & Smith Incorporated examined available public information about the company, including analysts' reports and other independent market sources. The ultimate determination of the inclusion of the 20 specified companies, however, rested solely within the discretion of Merrill Lynch, Pierce, Fenner & Smith Incorporated. After the initial deposit, one or more of the issuers of the underlying securities may no longer be substantially involved in the semiconductor business. In this case, the Semiconductor HOLDRS may no longer consist of securities issued by companies involved in the semiconductor business. Merrill Lynch, Pierce, Fenner & Smith Incorporated will determine, in its sole discretion, whether the issuer of a particular underlying security remains in the semiconductor business and will undertake to make adequate disclosure when necessary. Underlying securities. For a list of the underlying securities represented by Semiconductor HOLDRS, please refer to "Highlights of Semiconductor HOLDRS--The Semiconductor HOLDRS." If the underlying securities change because of a reconstitution event, a revised list of underlying securities will be set forth in a prospectus supplement and will be available from the American Stock Exchange and through a widely-used electronic information dissemination system such as Bloomberg or Reuters. No investigation. In selecting the underlying securities, the trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or any affiliate of these entities, have not performed any investigation or review of the selected companies, including the public filings by the companies, other than to the extent required to determine whether the companies satisfied the program's stated selection criteria. Accordingly, before you acquire Semiconductor 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, A.G. Edwards & Sons, Inc. or any of their affiliates. 17 General background and historical information. For a brief description of the business of each of the issuers of the underlying securities and monthly pricing information showing the historical performance of each underlying issuer's securities see "Annex A." The following table and graph set forth the composite performance of all of the underlying securities represented by a single Semiconductor HOLDR based upon the share amounts set forth in the table on page 12 of this prospectus, on May 1, 1998, the first date when all of the underlying securities were publicly traded, and thereafter as of the end of each month to May 4, 2000. The performance table and graph data are adjusted for any splits that may have occurred over the measurement period. Past movements of the underlying securities are not necessarily indicative of future values.
1998 Value - ---- ----- May 1............. 22.64 May 29............ 18.61 June 30........... 18.68 July 31........... 19.98 August 31......... 15.60 September 30...... 17.95 October 30........ 21.37 November 30....... 24.60 December 31....... 28.42
1999 Value - ---- ----- January 29........ 35.10 February 26....... 29.80 March 31.......... 31.24 April 30.......... 31.51 May 28............ 31.57 June 30........... 39.04 July 30........... 41.15 August 31......... 46.03 September 30...... 44.50 October 29........ 48.89 November 30....... 52.17 December 31....... 59.95
2000 Value - ---- ------ January 31....... 66.11 February 29...... 91.88 March 31......... 98.07 April 28......... 97.01 May 4............ 91.49
18 DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT General. The depositary trust agreement, dated as of April 24, 2000, among Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York, as trustee, other depositors and the owners of the Semiconductor HOLDRS, provides that Semiconductor HOLDRS will represent an owner's undivided beneficial ownership interest in the common stock of the underlying companies. The trustee. The Bank of New York will serve as trustee. The Bank of New York, which was founded in 1784, was New York's first bank and is the oldest bank in the country still operating under its original name. The Bank is a state-chartered New York banking corporation and a member of the Federal Reserve System. The Bank conducts a national and international wholesale banking business and a retail banking business in the New York City, New Jersey and Connecticut areas, and provides a comprehensive range of corporate and personal trust, securities processing and investment services. Issuance, transfer and surrender of Semiconductor HOLDRS. You may create and cancel Semiconductor HOLDRS only in round-lots of 100 Semiconductor HOLDRS. You may create Semiconductor HOLDRS by delivering to the trustee the requisite underlying securities. The trust will only issue Semiconductor HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 Semiconductor HOLDRS. In the event that a fractional share comes to be represented by a round-lot of Semiconductor HOLDRS, the trust may require a minimum of more than one round-lot of 100 Semiconductor HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Semiconductor HOLDRS. Similarly, you must surrender Semiconductor HOLDRS in integral multiples of 100 Semiconductor HOLDRS to withdraw deposited shares from the trust. The trustee will not deliver fractional shares of underlying securities, to the extent that any cancellation of Semiconductor HOLDRS would otherwise require the delivery of fractional shares, the trust will deliver cash in lieu of such shares. You may request withdrawal of your deposited shares during the trustee's normal business hours. The trustee expects that in most cases it will deliver your deposited shares within one business day of your withdrawal request. Voting rights. The trustee will deliver you proxy soliciting materials provided by issuers of the deposited shares so as to permit you to give the trustee instructions as to how to vote on matters to be considered at any annual or special meetings held by issuers of the underlying securities. Under the depositary trust agreement, any beneficial owner of Semiconductor HOLDRS, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated owning Semiconductor HOLDRS for its own proprietary account as principal, will have the right to vote to dissolve and liquidate the trust. Distributions. You will be entitled to receive, net of trustee fees, distributions of cash, including dividends, securities or property, if any, made with respect to the underlying securities. The trustee will use its reasonable efforts to ensure that it distributes these distributions as promptly as practicable after the date on which it receives the distribution. Therefore, you may receive your distributions substantially later than you would have had you held the underlying securities directly. You will be obligated to pay any tax or other charge that may become due with respect to Semiconductor 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 Semiconductor 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 Semiconductor HOLDR, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year. Record dates. With respect to dividend payments and voting instructions, the trustee expects to fix the trust's record dates as close as possible to the record date fixed by the issuer of the underlying securities. 19 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 Semiconductor 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 Semiconductor 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 Semiconductor HOLDRS. Further issuances of Semiconductor HOLDRS. The depositary trust agreement provides for further issuances of Semiconductor HOLDRS on a continuous basis without your consent. Reconstitution events. The depositary trust agreement provides for the automatic distribution of underlying securities to you in four circumstances. A. If an issuer of underlying securities no longer has a class of common stock registered under section 12 of the Securities Exchange Act of 1934, then its securities will no longer be an underlying security and the trustee will distribute the shares of that company to the owners of the Semiconductor 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 Semiconductor HOLDRS. C. If the underlying securities of an issuer cease to be outstanding as a result of a merger, consolidation or other corporate combination, the trustee will distribute the consideration paid by and received from the acquiring company to the beneficial owners of Semiconductor HOLDRS, unless the merger, consolidation or other corporate combination is between companies that are already included in the Semiconductor HOLDRS and the consideration paid is additional underlying securities. In this case, the additional underlying securities will be deposited into the trust. D. If an issuer's underlying securities are delisted from trading on a national securities exchange or NASDAQ and are not listed for trading on another national securities exchange or through NASDAQ within 5 business days from the date such securities are delisted. If a reconstitution event occurs, the trustee will deliver the underlying security to you as promptly as practicable after the date that the trustee has knowledge of the occurrence of a reconstitution event. Termination of the trust. The trust will terminate if the trustee resigns and no successor trustee is appointed by Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, within 60 days from the date the trustee provides notice to Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, of its intent to resign. Upon termination, the beneficial owners of Semiconductor HOLDRS will surrender their Semiconductor 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 Semiconductor HOLDRS are delisted from the American Stock Exchange and are not listed for trading on another national securities exchange or through NASDAQ within 5 business days from the date the Semiconductor HOLDRS are delisted. Finally, the trust will terminate if 75% of the owners of outstanding Semiconductor 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. 20 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 Semiconductor 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 Semiconductor 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 Semiconductor HOLDRS will not become effective until 30 days after notice of the amendment is given to the owners of Semiconductor HOLDRS. Issuance and cancellation fees. After the initial public offering, the trust expects to issue more Semiconductor HOLDRS. If you wish to create Semiconductor 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 Semiconductor HOLDRS. If you wish to cancel your Semiconductor 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 Semiconductor 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 Semiconductor HOLDRS after the conclusion of the initial public offering, you will not be charged the underwriting fee. However, in addition to the issuance and cancellation fees described above, you will be responsible for paying any sales commissions associated with your purchase of the underlying securities that is charged by your broker, whether it be Merrill Lynch & Co., A.G. Edwards & Sons, Inc. or another broker. Custody fees. The Bank of New York, as trustee and as custodian, will charge you a quarterly custody fee of $2.00 for each round-lot of 100 Semiconductor 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 Semiconductor HOLDR, the Trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year. The trustee cannot recapture unpaid custody fees from prior years. Address of the trustee. The Bank of New York, ADR Department, 101 Barclay Street, New York, New York 10286. Governing law. The depositary trust agreement and Semiconductor HOLDRS will be governed by the laws of the State of New York. The trustee will provide the depositary trust agreement to any owner of the underlying securities free of charge upon written request. Duties and immunities of the trustee. The trustee will assume no responsibility or liability for, and makes no representations as to, the validity or sufficiency, or as to the accuracy of the recitals, if any, set forth in the Semiconductor HOLDRS. The trustee undertakes to perform only those duties as are specifically set forth in the depositary trust agreement. Subject to the preceding sentence, the trustee will be liable for its own negligence or misconduct except for good faith errors in judgment so long as the trustee was not negligent in ascertaining the relevant facts. 21 FEDERAL INCOME TAX CONSEQUENCES General The following is a summary of the U.S. federal income tax consequences relating to the Semiconductor HOLDRS for: . a citizen or resident of the United States; . a corporation or partnership created or organized in the United States or under the laws of the United States; . an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; . or a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust (each of the above, a "U.S. receipt holder"); and . any person other than a U.S. receipt holder (a "Non-U.S. receipt holder"). This summary is based upon laws, regulations, rulings and decisions currently in effect, all of which are subject to change, possibly on a retroactive basis. The discussion does not deal with all U.S. federal income tax consequences applicable to all categories of investors, some of which may be subject to special rules. In addition, this summary generally is limited to investors who will hold the Semiconductor HOLDRS as "capital assets" (generally, property held for investment) within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended. We suggest that you consult with your own tax advisor. Taxation of the trust The trust will provide for flow through tax consequences as it will be treated as a grantor trust or custodial arrangement for United States federal income tax purposes. Taxation of Semiconductor HOLDRS A receipt holder purchasing and owning Semiconductor HOLDRS will be treated, for U.S. federal income tax purposes, as directly owning a proportionate share of the underlying securities represented by Semiconductor HOLDRS. Consequently, if there is a taxable cash distribution on an underlying security, a holder will recognize income with respect to the distribution at the time the distribution is received by the trustee, not at the time that the holder receives the cash distribution from the trustee. A receipt holder will determine its initial tax basis in each of the underlying securities by allocating the purchase price for the Semiconductor HOLDRS among the underlying securities based on their relative fair market values at the time of purchase. Similarly, when a holder sells a receipt, it will determine the amount realized with respect to each security by allocating the sales price among the underlying securities based on their relative fair market values at the time of sale. A holder's gain or loss with respect to each security will be computed by subtracting its basis in the security from the amount realized on the security. With respect to purchases of Semiconductor 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 Semiconductor HOLDRS. Similarly, with respect to sales of Semiconductor HOLDRS for cash in the secondary market, the amount realized with respect to a sale of Semiconductor 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 Semiconductor HOLDRS, the occurrence of a reconstitution event, or a termination event will not be a taxable event. The receipt holders holding period with respect to the distributed securities will include the period that the holder held the securities through the trust. 22 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 Semiconductor HOLDRS will reduce the amount realized with respect to the underlying securities. A holder will be required to include in its income the full amount of dividends paid on the underlying securities, even though the depositary trust agreement provides that the custodian fees will be deducted directly from any dividends paid. These custodian fees will be treated as an expense incurred in connection with a holder's investment in the underlying securities and may be deductible. If a holder is an individual, estate or trust, however, the deduction of its share of custodian fees will be a miscellaneous itemized deduction that may be disallowed in whole or in part. Non-U.S. receipt holders Non-U.S. receipt holders should consult their tax advisors regarding U.S. withholding and other taxes which may apply to ownership of the Semiconductor HOLDRS or of the underlying securities through an investment in the Semiconductor HOLDRS. ERISA CONSIDERATIONS Any plan fiduciary which proposes to have a plan acquire Semiconductor HOLDRS should consult with its counsel with respect to the potential applicability of ERISA and the Internal Revenue Code to this investment and whether any exemption would be applicable and determine on its own whether all conditions have been satisfied. Moreover, each plan fiduciary should determine whether, under the general fiduciary standards of investment prudence and diversification, an acquisition of Semiconductor HOLDRS is appropriate for the plan, taking into account the overall investment policy of the plan and the composition of the plan's investment portfolio. PLAN OF DISTRIBUTION In accordance with the depositary trust agreement, the trust will issue to Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch, Pierce, Fenner & Smith Incorporated will deposit the underlying securities to receive Semiconductor HOLDRS. Merrill Lynch, Pierce, Fenner & Smith Incorporated and A.G. Edwards & Sons, Inc. propose to offer the Semiconductor HOLDRS to the public at the offering price set forth on the cover page of this prospectus which includes an underwriting fee of 2%. Merrill Lynch, Pierce, Fenner & Smith Incorporated will provide Semiconductor HOLDRS to A.G. Edwards & Sons, Inc. at the public offering price, as set forth on the cover page of this prospectus, less a concession that is not in excess of 1.5%. We expect the trust to deliver the initial distribution of Semiconductor HOLDRS against deposit of the underlying securities in New York, New York on May 9, 2000. After the initial offering, the public offering price, concession and discount may be changed. The trust will continue to issue Semiconductor HOLDRS, in connection with deposits of underlying securities. This offering is being made in compliance with Conduct Rule 2810 of the National Association of Securities Dealers, Inc. Accordingly, sales will not be made to a discretionary account without the prior written approval of a purchaser of Semiconductor HOLDRS. Merrill Lynch, Pierce, Fenner & Smith Incorporated, A.G. Edwards & Sons, Inc. and their affiliates have from time to time provided investment banking and other financial services to certain 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 counterparty in other transactions with certain of the issuers of the underlying securities. 23 Merrill Lynch, Pierce, Fenner & Smith Incorporated may use this prospectus, as updated from time to time, in connection with offers and sales related to market-making transactions in the Semiconductor HOLDRS. Merrill Lynch, Pierce, Fenner & Smith Incorporated may act as principal or agent in such transactions. Market-making sales will be made at prices related to prevailing market prices at the time of sale. Merrill Lynch, Pierce, Fenner & Smith Incorporated has agreed to indemnify the trustee against certain civil liabilities related to acts performed or not performed by the trustee in accordance with the depositary trust agreement or periodic reports filed or not filed with the SEC with respect to the Semiconductor HOLDRS. Should a court determine not to enforce the indemnification provision, Merrill Lynch, Pierce, Fenner & Smith Incorporated also has agreed to contribute to payments the trustee may be required to make with respect to such liabilities. LEGAL MATTERS Legal matters, including the validity of the Semiconductor HOLDRS will be passed upon for Merrill Lynch, Pierce, Fenner & Smith Incorporated, the initial depositor and the underwriters, by Shearman & Sterling, New York, New York. Shearman & Sterling, as special U.S. tax counsel to the trust, also will render an opinion regarding the material federal income tax consequences relating to the Semiconductor 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 Semiconductor HOLDRS. While this prospectus is a part of the registration statement, it does not contain all the exhibits filed as part of the registration statement. You should consider reviewing the full text of those exhibits. The registration statement is available over the Internet at the SEC's Web site at http://www.sec.gov. You also may read and copy the registration statement at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more information on the public reference rooms and their copy charges. Merrill Lynch, Pierce, Fenner & Smith Incorporated will not and the trust may not be subject to the requirements of the Exchange Act and accordingly may not file periodic reports. Because the common stock of the issuers of the underlying securities is registered under the Exchange Act, the issuers of the underlying securities are required to file periodically financial and other information specified by the SEC. For more information about the issuers of the underlying securities, information provided to or filed with the SEC by the issuers of the underlying securities with respect to their registered securities can be inspected at the SEC's public reference facilities or accessed through the SEC's Web site referenced above. In addition, information regarding the issuers of the underlying securities may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated information. The trust and Merrill Lynch, Pierce, Fenner & Smith Incorporated, A.G. Edwards & Sons, Inc. 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 Semiconductor HOLDRS. This prospectus relates only to Semiconductor HOLDRS and does not relate to the common stock or other securities of the issuers of the underlying securities. The information in this prospectus regarding the issuers of the underlying securities has been derived from the publicly available documents described in the preceding paragraph. We have not participated in the preparation of these documents or made any due diligence inquiries with respect to the issuers of the underlying securities in connection with Semiconductor HOLDRS. We make no representation that these publicly available documents or any other publicly available information regarding the issuers of the underlying securities are accurate or complete. Furthermore, we cannot assure you that all events occurring prior to the date of this prospectus, including events that would affect the accuracy or completeness of the publicly available documents described in the preceding paragraph, that would affect the trading price of the common stock of the issuers of the underlying securities, and therefore the offering and trading prices of the Semiconductor HOLDRS, have been publicly disclosed. 24 ANNEX A This annex forms an integral part of the prospectus. The following tables provide a brief description of the business of each of the issuers of the underlying securities and set forth the split-adjusted closing market prices, as reported on the applicable primary trading market, of each of the underlying securities in each month during 1995, 1996, 1997, 1998, 1999 and 2000 through April 2000. All market prices in excess of one dollar are rounded to the nearest one sixty-fourth of a dollar. An asterisk (*) denotes that no shares of the issuer were outstanding during that month. The historical prices of the underlying securities should not be taken as an indication of future performance. ADVANCED MICRO DEVICES, INC. (AMD) Advanced Micro Devices, Inc. is a supplier of integrated circuits for the personal and networked computer and communications markets. AMD provides Windows-compatible data processors, memory devices, and communications and networking products that enhance the power and utility of personal computers as information-processing and communications tools. AMD's silicon solutions are designed to improve connectivity, superior visual computing platforms, and faster, easier Internet access from personal computers. AMD's integrated circuits are used in product applications such as telecommunications equipment, data and network communications equipment, consumer electronics, personal computers and workstations. AMD markets and sells its products through its own direct sales force and through third-party distributors and independent representatives.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- ------- --------- ------- --------- -------- --------- -------- --------- -------- -------- ------- January 29 3/8 January 19 3/4 January 35 1/8 January 20 3/16 January 22 15/16 January 36 February 30 3/8 February 19 3/8 February 36 February 23 1/2 February 17 7/8 February 39 1/8 March 33 7/8 March 17 3/8 March 41 1/2 March 29 1/16 March 15 1/2 March 57 1/16 April 36 April 18 5/8 April 42 1/2 April 27 3/4 April 16 1/2 April 87 1/2 May 33 May 17 5/8 May 40 May 19 9/16 May 18 1/2 June 36 1/2 June 13 5/8 June 35 7/8 June 17 1/16 June 18 1/16 July 32 5/8 July 12 1/8 July 35 1/8 July 17 1/4 July 17 3/8 August 33 3/4 August 12 3/4 August 37 5/8 August 13 August 20 11/16 September 29 1/8 September 14 3/4 September 32 9/16 September 18 9/16 September 17 3/16 October 23 1/2 October 17 3/4 October 23 October 22 9/16 October 19 13/16 November 20 1/2 November 24 1/4 November 21 13/16 November 27 11/16 November 28 1/4 December 16 1/2 December 25 3/4 December 17 3/4 December 29 December 28 15/16
The closing price on May 4, 2000 was 90 7/16. A-1 ALTERA CORPORATION (ALTR) Altera Corporation designs, manufactures and markets semiconductor integrated circuits which can be programmed from its customer's personal computers. Altera on-site programmability is intended to provide quicker design cycles for customer's products to allow for increased flexibility and faster time-to-market. Altera's products are used in the telecommunications, data communications and electronic data processing industries. Altera markets and sells its products through its own direct sales force, sales representatives and distributors.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- -------- ------- January 5 9/16 January 16 15/32 January 21 5/8 January 17 1/8 January 31 7/16 January 65 3/4 February 7 7/64 February 16 5/16 February 22 11/16 February 21 9/16 February 24 5/16 February 79 3/4 March 66 63/64 March 13 31/32 March 21 1/2 March 18 7/8 March 29 3/4 March 89 1/4 April 10 7/64 April 13 3/16 April 24 25/32 April 20 1/4 April 36 1/8 April 102 1/4 May 9 47/64 May 12 3/32 May 26 1/2 May 16 13/16 May 34 13/16 June 10 13/16 June 9 1/2 June 25 1/4 June 14 25/32 June 36 13/16 July 13 63/64 July 10 1/4 July 30 3/16 July 18 15/64 July 36 1/4 August 15 21/32 August 11 August 26 5/8 August 14 9/16 August 42 1/8 September 15 19/32 September 12 21/32 September 25 5/8 September 17 9/16 September 43 3/8 October 15 1/8 October 15 1/2 October 22 3/16 October 20 13/16 October 48 5/8 November 14 1/2 November 18 7/8 November 23 13/32 November 24 17/32 November 53 7/8 December 12 7/16 December 18 11/64 December 16 9/16 December 30 7/16 December 49 9/16
The closing price on May 4, 2000 was 96. AMKOR TECHNOLOGY, INC. (AMKR) Amkor Technology, Inc. researches, develops and provides semiconductor assembly and testing services, which are designed to prepare semiconductor devices for commercial use. Amkor also provides testing and related services to verify operating standards for finished semiconductor devices. Amkor markets and sells its services through its own direct sales force.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- ------- --------- ------- --------- ------- --------- -------- --------- ------- -------- -------- January * January * January * January * January 11 9/16 January 31 3/4 February * February * February * February * February 10 1/2 February 51 15/16 March * March * March * March * March 7 7/8 March 53 1/16 April * April * April * April * April 9/ 3/4 April 61 3/16 May * May * May * May 10 3/8 May 9 1/4 June * June * June * June 9 11/32 June 10 1/4 July * July * July * July 7 13/32 July 15 3/8 August * August * August * August 4 5/8 August 17 5/8 September * September * September * September 4 7/8 September 16 1/8 October * October * October * October 4 7/8 October 20 3/16 November * November * November * November 6 5/16 November 27 December * December * December * December 10 13/16 December 28 1/4
The closing price on May 4, 2000 was 60 9/16. A-2 ANALOG DEVICES, INC. (ADI) Analog Devices, Inc. designs, manufactures and markets precision high- performance integrated circuits used in analog and digital signal processing. Analog Devices' products are incorporated by original equipment manufacturers for use in their own products in such fields as communications, computer, industrial, instrumentation, miliary/aerospace, automotive and high-performance consumer electronics applications. Analog Devices markets and sells its products through its own direct sales force, third-party distributors and independent sales representatives.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- ------- --------- -------- --------- -------- --------- -------- --------- -------- -------- -------- January 5 3/8 January 8 7/16 January 14 1/2 January 14 3/4 January 14 7/8 January 46 3/4 February 6 9/32 February 10 5/64 February 11 5/8 February 16 5/32 February 12 17/32 February 78 5/8 March 6 3/8 March 10 1/2 March 11 1/4 March 16 5/8 March 14 7/8 March 80 1/2 April 6 23/32 April 9 21/32 April 13 3/8 April 19 15/32 April 17 9/16 April 76 13/16 May 7 25/32 May 10 23/64 May 13 1/4 May 12 11/32 May 19 7/32 June 8 1/2 June 9 33/64 June 13 9/32 June 12 9/32 June 25 3/32 July 9 1/32 July 7 53/64 July 15 3/4 July 10 3/4 July 21 9/16 August 8 21/32 August 9 3/64 August 16 9/16 August 7 1/32 August 25 3/4 September 8 21/32 September 10 11/64 September 16 15/16 September 8 1/32 September 25 5/8 October 9 1/32 October 9 3/4 October 15 9/32 October 9 15/16 October 26 19/32 November 9 7/32 November 12 3/64 November 15 11/16 November 10 7/32 November 28 3/4 December 8 27/32 December 12 45/64 December 13 27/32 December 15 11/16 December 46 1/2
The closing price on May 4, 2000 was 68. APPLIED MATERIALS, INC. (AMAT) Applied Materials, Inc. develops, manufactures, markets and services semiconductor fabrication equipment and related spare parts for the semiconductor industry. Many of Applied Materials' products are used to build chips, the key component in most advanced electronic products such as computers, telecommunications devices and electronic games. Applied Materials' customers include semiconductor manufacturers and semiconductor integrated circuit or chip manufacturers, who either use Applied Materials' chips in their own products or sell them to other companies. Applied Materials markets and sells its products through its own direct sales force.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- -------- --------- January 4 13/16 January 9 1/4 January 12 11/32 January 16 13/32 January 31 19/32 January 68 5/8 February 5 49/64 February 8 15/16 February 12 21/32 February 18 13/32 February 27 13/16 February 91 15/32 March 6 57/64 March 8 23/32 March 11 19/32 March 17 21/32 March 30 27/32 March 94 1/4 April 7 45/64 April 10 April 13 23/32 April 18 1/16 April 26 13/16 April 101 13/16 May 9 5/8 May 9 5/16 May 16 5/16 May 16 May 27 1/2 June 10 53/64 June 7 5/8 June 17 45/64 June 14 3/4 June 36 15/16 July 12 15/16 July 5 31/32 July 22 31/32 July 16 3/4 July 35 31/32 August 13 August 6 1/16 August 23 19/32 August 12 9/32 August 35 17/32 September 12 25/32 September 6 29/32 September 23 13/16 September 12 5/8 September 38 27/32 October 12 17/32 October 6 39/64 October 16 11/16 October 17 11/32 October 44 29/32 November 12 5/32 November 9 17/32 November 16 1/2 November 19 3/8 November 48 23/32 December 9 27/32 December 8 63/64 December 15 1/16 December 21 11/32 December 63 11/32
The closing price on May 4, 2000 was 97 3/4. A-3 ATMEL CORPORATION (ATML) Atmel Corporation designs, manufactures and markets semiconductor integrated circuits. Atmel's circuits are designed for use in wireless and other electronic products, and enhance these products by providing additional features, smaller devices, longer battery life and increased memory capacity. Atmel also develops specialized memory devices which continue to store information even after the power source has been turned off. Atmel markets and sells its products to original equipment manufacturers primarily through manufacturer's representatives and distributors.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- -------- -------- January 7 27/32 January 14 1/4 January 23 3/16 January 8 3/32 January 8 7/8 January 31 1/16 February 8 17/32 February 13 3/8 February 18 11/16 February 8 1/8 February 8 19/32 February 49 1/2 March 9 21/32 March 12 3/4 March 11 31/32 March 7 17/32 March 7 19/32 March 51 5/8 April 11 April 20 April 12 7/16 April 10 3/32 April 9 1/8 April 48 15/16 May 11 May 17 3/4 May 14 3/8 May 7 13/32 May 9 7/8 June 13 27/32 June 15 1/16 June 14 June 6 13/16 June 13 3/32 July 17 July 13 13/16 July 17 1/16 July 5 3/16 July 14 29/32 August 15 13/16 August 12 15/16 August 17 11/16 August 3 1/64 August 19 21/32 September 16 7/8 September 15 7/16 September 18 7/32 September 4 17/32 September 16 29/32 October 15 5/8 October 12 11/16 October 12 15/16 October 5 25/32 October 19 5/16 November 15 November 16 7/16 November 11 7/32 November 6 1/16 November 22 13/32 December 11 3/16 December 16 9/16 December 9 9/32 December 7 21/32 December 29 9/16
The closing price on May 4, 2000 was 44 1/8. BROADCOM CORPORATION (BRCM) Broadcom Corporation develops and markets products designed to facilitate high-speed digital data transmission to homes and businesses using existing communications infrastructure. Broadcom designs and develops integrated circuits for several communications markets, including television cable set-top boxes, cable modems for Internet access, high-speed networking for businesses' private networks, digital broadcast of satellite and free terrestrial television signals and digital subscriber lines. Broadcom markets and sells its products through its own direct sales force, third-party distributors and representatives.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- ------- --------- ------- --------- ------- --------- -------- --------- --------- -------- --------- January * January * January * January * January 33 9/32 January 144 21/32 February * February * February * February * February 30 3/32 February 197 3/8 March * March * March * March * March 30 13/16 March 242 7/8 April * April * April * April 12 April 38 9/16 April 172 3/8 May * May * May * May 12 25/32 May 47 7/8 June * June * June * June 18 13/32 June 72 9/32 July * July * July * July 15 11/16 July 60 1/4 August * August * August * August 12 13/16 August 64 3/8 September * September * September * September 17 3/4 September 54 1/2 October * October * October * October 20 47/64 October 63 29/32 November * November * November * November 22 21/64 November 89 17/32 December * December * December * December 30 3/16 December 136 3/16
The closing price on May 4, 2000 was 175 5/16. A-4 INTEL CORPORATION (INTC) Intel Corporation designs, manufactures and markets microprocessors, chips, memory products, software and networking and communications equipment. Intel also produces semiconductor integrated circuits used to process information. Intel markets and sells its products to original equipment manufacturers of computer systems, Internet service providers, businesses and individuals though its own direct sales force.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- -------- --------- January 8 43/64 January 13 13/16 January 40 9/16 January 40 1/2 January 70 15/32 January 98 15/16 February 9 31/32 February 14 45/64 February 35 15/32 February 44 27/32 February 59 31/32 February 113 March 10 39/64 March 14 7/32 March 34 25/32 March 39 1/32 March 59 7/16 March 131 15/16 April 12 51/64 April 16 15/16 April 38 9/32 April 40 13/32 April 61 3/16 April 126 13/16 May 14 1/32 May 18 7/8 May 37 7/8 May 35 23/32 May 54 1/16 June 15 53/64 June 18 23/64 June 35 29/64 June 37 1/16 June 59 1/2 July 16 1/4 July 18 25/32 July 45 29/32 July 42 7/32 July 69 August 15 11/32 August 19 61/64 August 46 1/16 August 35 19/32 August 82 3/16 September 15 1/32 September 23 55/64 September 46 5/32 September 42 7/8 September 74 5/16 October 17 15/32 October 27 15/32 October 38 1/2 October 44 19/32 October 77 7/16 November 15 7/32 November 31 23/32 November 38 13/16 November 53 13/16 November 76 11/16 December 14 3/16 December 32 47/64 December 35 1/8 December 59 9/32 December 82 5/16
The closing price on May 4, 2000 was 119 9/16. KLA-TENCOR CORPORATION (KLAC) KLA-Tencor Corporation designs, manufactures and markets the manufacturing and monitoring systems which are used in the production of semiconductors. KLA-Tencor's systems are used to analyze product and process quality at several stages during the semiconductor manufacturing process in order to provide feedback to its customers on any production problems. KLA- Tencor's systems attempt to detect defects at any early stage in order to reduce overall manufacturing costs for its customers. KLA-Tencor markets and sells its products through its own direct sales force and third-party distributors.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- ------- --------- -------- --------- -------- --------- -------- -------- -------- January 12 1/2 January 14 3/4 January 21 5/16 January 18 3/4 January 28 7/8 January 58 5/8 February 14 1/2 February 12 February 20 27/32 February 23 5/64 February 25 29/32 February 77 15/16 March 15 13/16 March 11 5/16 March 18 1/4 March 19 1/8 March 24 9/32 March 84 1/4 April 15 1/2 April 14 7/16 April 22 1/4 April 20 5/32 April 24 13/16 April 74 7/8 May 17 7/16 May 13 1/2 May 23 25/32 May 16 7/8 May 22 3/4 June 19 5/16 June 11 5/8 June 24 3/8 June 13 27/32 June 32 7/16 July 21 11/16 July 9 7/16 July 30 9/32 July 14 15/16 July 33 7/8 August 21 3/8 August 9 7/8 August 35 7/16 August 10 5/8 August 31 13/32 September 20 1/16 September 11 1/4 September 33 25/32 September 12 7/16 September 32 1/2 October 21 3/8 October 12 1/8 October 21 31/32 October 18 7/16 October 39 19/32 November 17 1/4 November 17 3/4 November 19 3/8 November 17 1/32 November 42 9/32 December 13 1/32 December 17 3/4 December 19 5/16 December 21 11/16 December 55 11/16
The closing price on May 4, 2000 was 63. A-5 LINEAR TECHNOLOGY CORPORATION (LLTC) Linear Technology Corporation designs, manufactures and markets high- performance integrated linear circuits. Linear circuits monitor, simplify and transform analog signals and also regulate the voltage within an electronic system. Linear Technology products include amplifiers for video and data signals, voltage regulators, and circuits to transfer signals within electronic systems and data converters. Linear Technology markets and sells its products primarily through its own direct sales force, distributors and resellers.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- -------- -------- January 6 3/16 January 11 1/32 January 12 3/16 January 16 9/16 January 25 7/16 January 47 11/32 February 6 13/16 February 11 5/8 February 11 9/32 February 18 15/16 February 21 29/32 February 52 15/32 March 7 March 10 7/16 March 11 1/16 March 17 1/4 March 25 5/8 March 55 April 7 15/32 April 8 19/32 April 12 9/16 April 20 1/8 April 28 7/16 April 57 1/8 May 7 21/32 May 8 5/8 May 12 17/32 May 17 31/64 May 26 1/2 June 8 1/4 June 7 1/2 June 12 15/16 June 15 5/64 June 33 5/8 July 9 11/16 July 7 7/8 July 16 23/32 July 14 61/64 July 30 11/16 August 10 1/8 August 8 1/2 August 16 25/64 August 11 3/4 August 31 15/32 September 10 3/8 September 9 7/32 September 17 3/16 September 12 1/2 September 29 25/64 October 10 15/16 October 8 3/8 October 15 23/32 October 14 29/32 October 34 31/32 November 11 5/16 November 11 25/32 November 16 3/32 November 17 33/64 November 35 17/32 December 9 13/16 December 10 31/32 December 14 13/32 December 22 25/64 December 35 25/32
The closing price on May 4, 2000 was 53 7/8. LSI LOGIC CORPORATION (LSI) LSI Logic Corporation supplies communications chips for data transfer and networking and wireless applications. LSI also provides chips and circuit boards for network computing and supplies storage solutions for networks. LSI markets and sells its products primarily to original equipment manufacturers through its own direct sales force and through independent sales representatives and distributors.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- -------- ------- January 10 21/32 January 14 1/8 January 17 3/8 January 12 January 13 31/32 January 40 3/4 February 13 5/8 February 13 13/16 February 17 1/4 February 11 27/32 February 12 15/16 February 64 March 13 1/8 March 13 7/16 March 17 3/8 March 12 5/8 March 15 19/32 March 72 5/8 April 16 21/32 April 18 April 19 April 13 9/16 April 17 April 62 1/4 May 16 7/8 May 15 9/16 May 21 May 10 21/32 May 18 17/32 June 19 9/16 June 13 June 16 June 11 17/32 June 23 1/16 July 23 3/8 July 9 3/4 July 15 3/4 July 10 11/32 July 25 3/16 August 24 5/8 August 10 15/16 August 16 1/8 August 6 1/8 August 28 3/8 September 29 September 11 5/8 September 16 1/16 September 6 5/16 September 26 October 23 7/16 October 13 1/4 October 11 1/16 October 7 9/16 October 26 19/32 November 20 15/16 November 15 1/16 November 11 5/8 November 7 13/16 November 30 7/32 December 16 3/8 December 13 3/8 December 9 13/16 December 8 1/16 December 33 3/4
The closing price on May 4, 2000 was 55 1/2. A-6 MAXIM INTEGRATED PRODUCTS, INC. (MXIM) Maxim Integrated Products, Inc. designs, develops, and manufactures linear and mixed-signal integrated circuits which detect, measure, amplify, and convert signals such as temperature, pressure, and sound, into the digital signals necessary for computer processing. Maxim's products include microprocessor and display circuits, data converters, amplifiers, switches, voltage detectors, fiber optic products and wireless products. Maxim's products are used in personal computers and external devices attached to computers, test equipment, hand-held devices, wireless communicators and video displays. Maxim markets and sells its products through its own direct sales force and its own and other unaffiliated distribution channels.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- ------- --------- -------- --------- -------- --------- -------- --------- -------- -------- -------- January 3 5/8 January 8 7/8 January 14 1/16 January 17 5/16 January 25 23/32 January 50 1/8 February 4 7/64 February 9 1/16 February 12 13/32 February 20 3/16 February 20 27/32 February 66 13/16 March 4 9/16 March 7 3/4 March 12 3/32 March 18 7/32 March 27 1/16 March 71 1/16 April 4 17/32 April 8 9/16 April 13 7/32 April 20 3/16 April 28 April 64 13/16 May 5 47/64 May 8 1/2 May 13 7/16 May 16 11/16 May 26 23/32 June 6 3/8 June 6 53/64 June 14 7/32 June 15 27/32 June 33 1/4 July 7 25/64 July 7 1/8 July 17 9/32 July 16 July 32 1/32 August 9 17/32 August 7 43/64 August 17 9/32 August 13 3/4 August 33 21/32 September 9 1/4 September 8 27/32 September 17 55/64 September 13 15/16 September 31 35/64 October 9 11/32 October 8 3/4 October 16 9/16 October 17 27/32 October 39 15/32 November 9 3/8 November 11 19/32 November 17 9/32 November 19 5/8 November 40 5/32 December 9 5/8 December 10 13/16 December 17 1/4 December 21 27/32 December 47 3/16
The closing price on May 4, 2000 was 67 1/4. MICRON TECHNOLOGY, INC. (MU) Micron Technology, Inc. designs, develops, manufactures and markets semiconductor memory products and personal computer, or PC, systems. Micron's principal product is the DRAM, a memory component which stores digital information and provides high-speed storage and retrieval of data. Micron's PC operations develop, manufacture and market a wide range of desktop and notebook PC systems and network servers. They also sell, resell and support a variety of external computer devices, software and services. Micron markets and sells its products through its own direct sales force, independent sales representatives and distributors.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- -------- -------- January 11 1/16 January 17 1/8 January 17 3/8 January 17 9/32 January 39 January 31 3/32 February 15 1/2 February 16 February 18 7/8 February 16 19/32 February 28 13/16 February 48 1/2 March 19 1/32 March 15 13/16 March 20 3/16 March 14 17/32 March 24 3/32 March 63 April 20 5/8 April 18 3/16 April 17 5/8 April 15 17/32 April 18 5/8 April 69 21/32 May 22 5/16 May 16 1/16 May 21 1/8 May 11 25/32 May 18 15/16 June 27 1/2 June 12 15/16 June 20 June 12 13/32 June 20 1/4 July 31 3/16 July 9 7/16 July 24 1/4 July 16 21/32 July 30 13/16 August 38 7/16 August 11 3/8 August 22 1/4 August 11 3/8 August 37 7/16 September 39 11/16 September 15 1/4 September 17 11/32 September 15 7/32 September 33 1/4 October 35 1/4 October 12 1/2 October 13 7/16 October 19 October 35 21/32 November 27 1/8 November 16 9/16 November 12 7/16 November 20 21/32 November 33 17/32 December 19 13/16 December 14 9/16 December 12 31/32 December 25 9/32 December 39 1/16
The closing price on May 4, 2000 was 61 1/2. A-7 NATIONAL SEMICONDUCTOR CORPORATION (NSM) National Semiconductor Corporation develops, manufactures and markets semiconductor products, including microprocessors for personal computers and various types of integrated circuits. Integrated circuits employ analog, mixed signal and digital technologies and are used in personal computers and other data processing products, telecommunications products, networks and industrial applications. National Semiconductor markets and sells its products to original equipment manufacturers through its own direct sales force.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- ------- --------- ------- --------- -------- --------- -------- --------- -------- -------- ------- January 18 1/4 January 17 1/8 January 27 3/4 January 28 1/8 January 12 15/16 January 52 1/2 February 17 February 15 5/8 February 26 1/4 February 23 7/8 February 10 1/2 February 75 1/8 March 17 1/2 March 13 7/8 March 27 1/2 March 20 15/16 March 9 5/16 March 60 3/4 April 23 April 15 3/4 April 25 April 22 April 12 1/2 April 60 May 25 May 16 1/4 May 28 1/8 May 16 1/4 May 19 3/8 June 27 3/4 June 15 1/2 June 30 5/8 June 13 1/8 June 25 5/16 July 27 July 14 1/8 July 31 1/2 July 12 5/16 July 24 9/16 August 28 1/4 August 18 1/2 August 34 1/4 August 9 1/16 August 28 3/16 September 27 5/8 September 20 1/8 September 41 September 9 11/16 September 30 9/16 October 24 3/8 October 19 1/4 October 36 October 12 11/16 October 29 15/16 November 21 3/8 November 24 1/2 November 33 1/8 November 14 3/8 November 42 1/2 December 22 1/8 December 24 1/2 December 25 15/16 December 13 1/2 December 42 13/16
The closing price on May 4, 2000 was 57 15/16. NOVELLUS SYSTEMS, INC. (NVLS) Novellus Systems, Inc. manufactures, markets and services systems used in the production of computer chips to some of the largest semiconductor manufacturers. Novellus' products are used to provide productivity and quality control solutions to the worldwide semiconductor industry. Novellus markets and sells its products domestically through its own direct sales force and internationally through wholly owned subsidiaries.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- ------- --------- -------- --------- -------- --------- --------- -------- -------- January 7 13/64 January 8 7/8 January 13 13/64 January 12 1/64 January 24 3/8 January 49 1/8 February 8 51/64 February 8 47/64 February 13 5/8 February 15 63/64 February 19 11/16 February 59 5/16 March 10 21/64 March 7 27/64 March 11 1/2 March 14 27/64 March 18 3/8 March 56 1/8 April 10 1/8 April 9 3/64 April 9 5/8 April 15 61/64 April 15 3/4 April 66 11/16 May 10 21/64 May 8 11/64 May 13 41/64 May 12 39/64 May 16 17/64 June 11 19/64 June 6 June 14 27/64 June 11 57/64 June 22 3/4 July 13 19/64 July 6 July 17 1/2 July 13 5/64 July 21 29/64 August 12 9/32 August 6 19/64 August 19 7/64 August 8 7/8 August 17 63/64 September 11 43/64 September 7 7/64 September 21 September 8 3/4 September 22 31/64 October 11 31/64 October 6 7/8 October 14 53/64 October 12 15/16 October 25 53/64 November 10 21/64 November 9 37/64 November 12 35/64 November 16 35/64 November 27 3/8 December 9 December 9 1/32 December 10 49/64 December 16 1/2 December 40 27/32
The closing price on May 4, 2000 was 64. A-8 SANDISK CORPORATION (SNDK) SanDisk Corporation designs, manufactures and markets digital imaging and audio storage products used in a wide variety of electronic systems. SanDisk's products are used in digital cameras, portable digital music players, digital video recorders, smart phones and other consumer electronics devices. SanDisk markets and sells its products through a direct sales force and through distributors and manufacturers' representatives.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- ------- --------- ------- --------- -------- --------- -------- --------- -------- -------- --------- January * January 9 5/8 January 6 January 10 January 14 7/16 January 66 15/16 February * February 7 February 6 5/8 February 12 23/32 February 14 February 89 March * March 6 1/2 March 4 15/16 March 12 7/16 March 13 1/4 March 122 1/2 April * April 7 7/16 April 6 3/8 April 10 7/16 April 10 1/8 April 91 5/8 May * May 7 1/2 May 7 3/16 May 8 1/16 May 15 1/2 June * June 6 1/16 June 7 5/16 June 6 29/32 June 22 1/2 July * July 5 13/16 July 11 July 5 5/16 July 38 3/8 August * August 5 13/16 August 13 9/16 August 4 3/8 August 42 3/16 September * September 7 15/16 September 18 September 3 7/8 September 32 19/32 October * October 6 5/8 October 11 15/16 October 4 13/16 October 30 5/16 November 11 1/8 November 6 7/8 November 12 1/4 November 5 15/16 November 33 1/32 December 7 1/2 December 4 7/8 December 10 5/32 December 7 1/16 December 48 1/8
The closing price on May 4, 2000 was 90 1/2. TERADYNE, INC. (TER) Teradyne, Inc. manufactures product testing equipment and software for the electronics and communications industries. Teradyne's products are used by electronics and communication systems manufacturers to test semiconductors, circuits, telephone lines and networks, electrical connection systems and software. Teradyne's testing products are designed to allow its customers to measure product performance, improve product quality and shorten time to market. Teradyne markets and sells its products primarily through its own direct sales force.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- -------- ------- January 8 1/8 January 11 1/16 January 15 7/16 January 19 3/4 January 32 1/2 January 64 3/4 February 9 3/32 February 10 5/16 February 13 5/8 February 23 19/32 February 24 February 87 March 10 3/8 March 8 3/8 March 14 7/16 March 20 1/32 March 27 9/32 March 82 1/4 April 12 21/32 April 10 1/4 April 16 3/8 April 18 1/4 April 23 19/32 April 110 May 13 17/32 May 10 1/16 May 20 1/2 May 15 3/8 May 26 13/32 June 16 11/32 June 8 5/8 June 19 3/4 June 13 3/8 June 35 7/8 July 20 15/32 July 6 3/4 July 23 5/16 July 11 15/32 July 37 1/8 August 18 15/16 August 7 3/4 August 27 27/32 August 8 11/16 August 34 1/32 September 18 September 8 5/16 September 26 29/32 September 9 1/8 September 35 1/4 October 16 11/16 October 7 15/16 October 18 23/32 October 16 1/4 October 38 1/2 November 13 1/16 November 11 13/16 November 16 13/32 November 16 1/32 November 43 9/16 December 12 9/16 December 12 3/16 December 16 December 21 3/16 December 66
The closing price on May 4, 2000 was 104 15/16. A-9 TEXAS INSTRUMENTS, INC. (TXN) Texas Instruments Incorporated designs and supplies digital signal processors and analog integrated circuits, which aim to convert electronics from analog to digital. Texas Instruments' semiconductor products are used in digital cell phones, computers, printers, hard disk drives and modems. Texas Instruments also sells electronic controls and connectors, sensors, radio- frequency identification systems and educational and graphing calculators. Texas Instruments markets and sells its products through its own direct sales force and third-party distributors.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- -------- ------- January 8 5/8 January 11 19/32 January 19 19/32 January 27 5/16 January 49 7/16 January 107 3/4 February 9 27/32 February 12 15/32 February 19 9/32 February 29 February 44 19/32 February 166 1/8 March 11 1/16 March 12 23/32 March 18 23/32 March 27 1/16 March 49 5/8 March 160 April 13 1/4 April 14 1/8 April 22 5/16 April 32 1/16 April 51 1/16 April 162 7/8 May 14 29/64 May 14 1/16 May 22 7/16 May 25 23/32 May 54 11/16 June 16 47/64 June 12 15/32 June 21 1/64 June 29 5/32 June 72 July 19 17/32 July 10 13/16 July 28 3/4 July 29 11/16 July 72 August 18 21/32 August 11 11/16 August 28 13/32 August 23 11/16 August 82 1/16 September 19 31/32 September 13 25/32 September 33 1/2 September 26 1/2 September 82 1/4 October 17 1/8 October 12 1/32 October 26 43/64 October 31 31/32 October 89 3/4 November 14 15/32 November 15 15/16 November 24 13/16 November 38 3/16 November 96 1/16 December 12 7/8 December 15 15/16 December 22 1/2 December 42 13/16 December 96 5/8
The closing price on May 4, 2000 was 155 3/8. VITESSE SEMICONDUCTOR CORPORATION (VTSS) Vitesse Semiconductor Corporation designs, manufactures and markets high- performance integrated chips used by systems manufacturers in the communications and automatic test equipment market. These integrated circuits are designed to handle the increased speed and capacity requirements of local and long distance communications providers and Internet service providers. Vitesse markets and sells its products primarily through its own direct sales force and distributors.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- ------- --------- ------- --------- -------- --------- -------- --------- -------- -------- --------- January 51/64 January 2 7/64 January 9 9/64 January 10 55/64 January 25 27/32 January 43 1/2 February 55/64 February 3 13/64 February 6 63/64 February 12 45/64 February 22 31/32 February 103 13/16 March 51/64 March 3 51/64 March 6 29/32 March 11 51/64 March 25 5/16 March 96 1/4 April 1 April 4 63/64 April 7 7/8 April 14 27/64 April 23 5/32 April 68 1/16 May 1 1/8 May 4 43/64 May 8 31/32 May 12 13/16 May 27 15/32 June 1 17/64 June 4 June 8 11/64 June 15 7/16 June 33 23/32 July 1 29/64 July 4 21/64 July 12 3/32 July 16 7/16 July 31 15/16 August 1 43/64 August 5 5/16 August 11 25/32 August 13 9/16 August 34 September 2 3/8 September 6 7/16 September 12 25/64 September 11 13/16 September 42 11/16 October 1 61/64 October 5 5/16 October 10 27/32 October 16 1/8 October 45 7/8 November 1 55/64 November 7 61/64 November 11 3/16 November 17 13/16 November 45 1/16 December 2 1/8 December 7 37/64 December 9 7/16 December 22 13/16 December 52 7/16
The closing price on May 4, 2000 was 61 3/8. A-10 XILINX, INC. (XLNX) Xilinx, Inc. designs, develops and markets integrated circuits, software design tools, predefined system functions and field engineering support. Xilinx forms strategic alliances with chip manufacturers, allowing Xilinx to focus on research and development, marketing and technical support. Xilinx markets and sells its products through independent sales representative firms, franchised domestic distributors and foreign distributors.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- -------- -------- January 4 13/16 January 9 21/32 January 11 3/8 January 9 31/64 January 20 3/4 January 45 3/4 February 5 37/64 February 9 21/32 February 11 9/32 February 10 31/32 February 17 7/16 February 79 3/4 March 5 41/64 March 7 15/16 March 12 3/16 March 9 23/64 March 20 9/32 March 82 13/16 April 6 25/64 April 9 7/32 April 12 1/4 April 11 7/16 April 22 13/16 April 73 1/4 May 7 1/64 May 8 11/16 May 13 13/32 May 9 33/64 May 22 7/32 June 7 53/64 June 7 15/16 June 12 17/64 June 8 1/2 June 28 5/8 July 9 63/64 July 8 3/32 July 11 27/32 July 9 3/8 July 31 3/16 August 10 23/32 August 8 3/4 August 11 7/8 August 7 5/8 August 34 31/32 September 12 1/32 September 8 1/2 September 12 21/32 September 8 3/4 September 32 49/64 October 11 1/2 October 8 3/16 October 8 17/32 October 11 11/64 October 39 5/16 November 8 1/32 November 10 31/32 November 8 41/64 November 12 11/16 November 44 3/4 December 7 5/8 December 9 13/64 December 8 49/64 December 16 9/32 December 45 15/32
The closing price on May 4, 2000 was 66 3/4. A-11 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [LOGO OF SEMICONDUCTOR HOLDERS] 1,000,000,000 Depositary Receipts Semiconductor HOLDRSSM Trust --------------------- P R O S P E C T U S --------------------- Merrill Lynch & Co. A.G. Edwards & Sons, Inc. May 4, 2000 Until May 29, 2000 (25 days after the date of this prospectus), all dealers effecting transactions in the offered Semiconductor HOLDRS, whether or not participating in this distribution, may be required to deliver a prospectus. This requirement is in addition to the obligations of dealers to deliver a prospectus when acting as underwriters and with respect to unsold allotments or subscriptions. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----