IRA
Ideal!
Defined Asset Funds [SM]
The Select
S&P Industrial
Portfolio
Performance Summary
3rd Quarter o 1998
Take indexing to another level. . .
[ML Logo] Merrill Lynch
Select S&P Industrial Portfolio o
Performance Summary 3rd Quarter o 1998
Indexing--it's a strategy to mirror the returns of major indices. Why not
take a step beyond?
The S&P Industrial Portfolio takes indexing to another level.
Instead of simply replicating an index, the Select S&P Industrial Strategy
attempts to single out stocks within the index for a combination of value,
capital appreciation potential and current dividend income.
The Portfolio seeks total return through a contrarian strategy of selecting 15
stocks from the S&P Industrial Index[*] with high dividend yields and potential
value.
Past Performance of Prior Select S&P Industrial Portfolios
Past performance is no guarantee of future results.
Series From Inception Through 9/30/98
(including annual rollovers)
Inception Return
1/22/97 Series A 11.46%
2/24/97 Series B 12.56
4/21/97 Series C 20.91
6/9/97 Series D 7.64
7/21/97 Series E 4.66
9/8/97 Series F 7.74
Most Recently Completed Portfolio
Period Return
1/22/97-3/13/98 Series A 31.43%
2/24/97-4/24/98 Series B 22.96
4/21/97-5/22/98 Series C 35.59
6/9/97-7/17/98 Series D 19.39
7/21/97-8/21/98 Series E 8.25
The chart above shows average annual total returns which represent price
changes plus dividends reinvested, divided by the initial public offering
price, and reflects maximum sales charges and expenses. Returns for Series
From Inception differ from Most Recently Completed Portfolio because the
former figures reflect a reduced sales charge on annual rollovers and
different performance periods.
Hypothetical Past Performance of the Strategy (not any Portfolio)
Growth of $10,000 Invested 1/1/73 Through 9/30/98
[INSERT GRAPH]
[A mountain chart compares the hypothetical past performance of the Strategy
(1) (ochre) from 1/1/73 through 9/30/98, the Dow Jones Industrial Average
(DJIA) (pink), the S&P 500 Index (purple) and the S&P Industrial Index
(green). An ochre box in the upper left quadrant indicates the components of
the Strategy performance section of the chart ("net of sales charges and
expenses"). The horizontal (X) axis compares the cumulative annual
performance by year, from 1/1/73 through 9/30/98. The vertical (Y) axis
reflects the dollar amount value for each index from 1/1/73 through 9/30/98.
The initial value of each investment is $10,000. Throughout the
aforementioned period, increases in each investment builds towards the Y axis.
At the end of this period, the Y axis reflects the ending value of the
Strategy ($419,926), the ending value of the DJIA ($218,020), the ending value
of the S&P 500 Index ($214,880) and the ending value of the S&P Industrial
Index ($213,831).]
Since stocks in the Portfolio were chosen solely by applying the Strategy, we
analyzed the Strategy to see how it could have performed. Past performance of
the Strategy is no guarantee of future results of any Portfolio. The Strategy
would have underperformed the DJIA in 8, the S&P 500 Index in 9 and the S&P
Industrial Index in 8 of the last 25 years. There can be no assurance that any
Portfolio will outperform these indices.
Average Annual Total Returns
For Periods ending 12/31/97 3 year 5 year 10 year 15 year 20 year 25 year
Strategy(1) 26.63% 18.21% 20.34% 19.94% 19.07% 16.25%
DJIA 29.85% 21.81% 18.41% 18.21% 16.33% 13.01%
S&P 500 Index 30.82% 20.06% 17.89% 17.37% 16.41% 12.85%
S&P Industrial Index 29.16% 19.48% 17.41% 17.12% 16.25% 12.64%
Annual Total Returns
S&P S&P
500 Industrial
Year Strategy(1) DJIA Index Index
1973 -20.13% -13.12% -14.66% -14.61%
1974 -5.35 -23.14 -26.47 -26.54
1975 40.63 44.40 36.92 36.78
1976 30.89 22.72 23.53 22.59
1977 -6.53 -12.71 -7.19 -8.20
1978 6.06 2.69 6.39 7.50
1979 26.47 10.52 18.02 18.40
1980 18.23 21.41 31.50 32.98
1981 7.67 -3.40 -4.83 -6.69
1982 25.87 25.79 20.26 20.14
1983 24.72 25.68 22.27 22.79
1984 12.34 1.06 5.95 4.09
1985 29.98 32.78 31.43 30.08
1986 28.78 26.91 18.37 18.54
1987 2.52 6.02 5.67 9.13
1988 42.04 15.95 16.58 15.80
1989 35.40 31.71 31.11 29.30
1990 0.96 -0.57 -3.20 -0.84
1991 27.06 23.93 30.51 30.39
1992 11.50 7.34 7.67 5.63
1993 2.28 16.72 9.97 8.90
1994 11.41 4.95 1.30 3.75
1995 36.68 36.48 37.10 34.26
1996 12.25 28.57 22.69 22.70
1997 33.34 24.78 33.10 30.80
9/30/1998 -2.58 0.57 6.06 9.54
Average 15.62% 12.63% 12.71% 12.65%
The results shown above are hypothetical past performance of the Strategy (not
any Portfolio) and are no guarantee of future results. Returns represent price
changes plus dividends reinvested at each year end, divided by the initial
public offering price and do not reflect the deduction of any commissions or
taxes. Portfolio performance will differ from the Strategy because of
commissions, Portfolios are established and liquidated at different times
during the year, they normally purchase and sell stocks at prices different
from those used in determining Portfolio unit price, they are not fully
invested at all times and stocks may not be weighted equally.
[*] "Standard & Poor's," "S&P," "S&P 500" and the "S&P Industrial Index" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use
by Defined Assets Fund. The Portfolio is not sponsored, managed, sold or
promoted by Standard & Poor's. The name "Dow Jones Industrial Average" is the
property of Dow Jones & Company, Inc.
(1) Net of Portfolio sales charges (2.75% for the first year, 1.75% for each
subsequent year) and estimated expenses.
The Strategy
Like other Portfolios in the Select Series, the Select S&P Industrial Portfolio
employs a "buy and hold" style of investing following a disciplined strategy.
Each year, we intend to reapply the screening process to select a new
Portfolio. At the end of one year, you can reinvest in the next Portfolio, if
available, at a reduced sales charge, or you can redeem your investment. You
will defer recognition of gains and losses on stocks contributed to successor
portfolios. Although each Portfolio is a one-year investment, we recommend
you stay with the Strategy for at least three to five years for potentially
more consistent results.
The Selection Process
The Select S&P Industrial Portfolio looks for potential values in the equity
market by investing in companies in the S&P Industrial Index that may be
currently out of favor. It does this through a disciplined four-part
screening process:
1. Defining the Universe: We being with the S&P Industrial Index, a
sub-set of the S&P 500 Index [*], which includes only industrial
stocks. Defined Asset Funds then removes any stocks that are a
part of the Dow Jones Industrial Average[*] (DJIA).
2. Quality Screen: We include only stocks that Standard & Poor's
ranked A+ or A. Standard & Poor's determines these stock rankings
using a computerized system which focuses primarily on the growth
and stability of per-share earnings and dividends. It then
assigns a symbol to each stock, which ranges from A+ for the
highest ranked stock to D for those stocks which Standard & Poor's
considers to be the most speculative. These rankings are not
intended to predict stock price movements.
3. Market Capitalization: We then rank the stocks by their market
capitalization from highest to lowest, and eliminate the lowest
25%. This allows the Portfolio to avoid smaller, less liquid
issues.
4. Highest Dividend Yield: Finally, we rank the remaining stocks
according to dividend yield. From that group, we select the 15
highest-yielding stocks for the Portfolio.
Defined Assets Funds [SM]
Buy With Knowledge o Hold With Confidence
Defining Your Risks
The following are important facts to keep in mind when considering this
investment. Please read them carefully. Your financial professional will be
happy to answer any questions you may have.
o The Portfolio is designed for investors who can assume the risks
associated with equity investments, and may not be appropriate for
investors seeking capital preservation. Despite recent
volatility, U.S. equity markets are still near historically high
levels and no assurance can be given that these levels will
continue.
o There can be no assurance that the Portfolio will meet its
objective, that dividend rates will be maintained or that stock
prices will not decrease.
o The value of your investment will fluctuate with the prices of the
underlying stocks.
o These stocks may have higher yields because they or their
industries are experiencing financial difficulties, or are out of
favor. There can be no assurance that the market factors which
caused these relatively low prices and high yields will change.
o Owning units of the Portfolio may result in annual federal, state
and local taxes, only some of which can be deferred by rolling
over into the next Portfolio. Consult your tax adviser about your
personal situation.
Select Now!
You can get started with the Select S&P Industrial Portfolio for about $250.
Call your financial professional for a free prospectus containing more complete
information, including all charges, expenses and risks. Please read it
carefully before you invest.
The information in this brochure is not complete and may be changed. We may
not sell the securities of the next Portfolio until the registration statement
filed with the Securities and Exchange Commission is effective. This brochure
is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
70110SJ-10/98
[Copyright logo] 1998 Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Member SIPC.
