IRA Ideal!
Defined Asset Funds (SM)
The Select S&P Industrial Portfolio
Performance Summary
4th Quarter o 1998
Take
Indexing
to another
level
[ML Logo] Merrill Lynch
Select S&P Industrial Portfolio o Performance Summary 4th Quarter o 1998
Indexing-it's a strategy to mirror the returns of major indices. Why not take a
step beyond?
The Defined Asset Funds(SM) Select S&P Industrial Portfolio can help.
Instead of simply replicating an index, the Select S&P Industrial Portfolio
singles out stocks within the S&P Industrial 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 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 12/31/98
(including annual rollovers)
- -------------------------------------------------------------------------------
Inception Return
1/22/97 Series A 18.20%
2/24/97 Series B 19.65
4/21/97 Series C 26.03
6/9/97 Series D 16.12
7/21/97 Series E 14.56
9/8/97 Series F 18.07
10/20/97 Series G 10.31
12/2/97 Series H 11.52
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
9/8/97-10/2/98 Series F 9.95
10/20/97-12/4/98 Series G 14.22
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)
[A mountain chart compares the hypothetical past performance of the Strategy
(ochre) from 1/1/73 through 12/31/98, 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)1. The
horizontal (X) axis compares the cumulative annual performance by year, from
1/1/73 through 12/31/98. The vertical (Y) axis reflects the dollar amount value
- --------
1 Net of Portfolio sales charges (2.75% for the first year, 1.75% for
each subsequent year) and estimated expenses.
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for each index from 1/1/73 through 12/31/98. 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 ($496,125), the ending value of the
DJIA ($250,890), the ending value of the S&P 500 Index ($263,820) and the ending
value of the S&P Industrial Index ($261,743).]
For the 25 years ending 12/31/98, these figures would have been: Strategy
$614,575, DJIA $288,778, S&P 500 Index $309,140 and S&P Industrial Index
$306,527.
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
(with Portfolio sales charges and expenses deducted) would have underperformed
the DJIA in 9, the S&P 500 Index* in 10 and the S&P Industrial Index in 9 of the
last 26 years. There can be no assurance that any Portfolio will outperform
these indices.
Average Annual Total Returns
<TABLE>
for periods
ending
12/31/98 3year 5year 10year 15year 20year 25year
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Strategy+ 19.52% 21.06% 17.83% 19.29% 19.57% 17.91%
DIJA 23.38% 21.85% 18.53% 17.63% 17.08% 14.40%
S&P 500 27.62% 23.58% 18.94% 17.67% 17.45% 14.71%
Index
S&P 28.54% 24.19% 18.99% 17.70% 17.46% 14.67%
Industrial
Index
</TABLE>
Returns shown represent price changes plus dividends reinvested at year ends,
divided by the initial public offering price and do not reflect 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 Index" and the "S&P Industrial
Index" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Defined Asset Funds. 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.
+ Net of Portfolio sales charges (2.75% for the first year, 1.75% for
each subsequent year) and estimated expenses.
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Annual Total Returns
<TABLE>
S&P
S&P 500 Industrial
Year Strategy+ DJIA Index Index
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
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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
1998 15.10 18.00 28.34 33.43
Average 16.20% 13.19% 13.41% 13.38%
</TABLE>
The Strategy
The Select S&P Industrial Portfolio employs a disciplined "buy and hold"
strategy. Each year, we intend to reapply the screening process to select a new
Portfolio. You can reinvest in the next Portfolio, if available, at a reduced
sales charge, or you can redeem your investment. 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 begin 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 are ranked A+ or A by
Standard & Poor's*. 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 stocks to D
for those stocks which Standard & Poor's considers to be the most
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<PAGE>
speculative. These rankings differ from credit-worthiness rankings of
bonds and are not intended to predict stock price movements.
3. Market Capitalization; We then rank the stocks by 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 whose prices may be undervalued.
Defined Assets Funds(SM)
Buy with Knowledge o Hold With Confidence
Defining Your Risks
Please keep in mind the following factors when considering this investment. 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.
o There can be no assurance that the Portfolio will meet its objective,
that dividend rates will be maintained, that stock prices will not
decrease or that the Portfolio will outperform the indices.
o The value of your investment will fluctuate with the prices of the
underlying stocks. Stock prices can be volatile.
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. Please consult your tax advisor.
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
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information, including sales charges, expenses and risks. Please read it
carefully before you invest or send money.
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 their offer or sale is not permitted.
[Logo] Printed on Recycled Paper 70110SJ-1/99
(C)1999 Merrill Lynch, Pierce, Fenner & Smith Incorporated, Member SIPC.
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