IRA Ideal!
Defined Asset Funds[SM]
Select Series
Standard & Poor's
Intrinsic Value Portfolio
1998
Series B
A Value Approach
to Selecting
Mid to Large Cap
Growth Stocks
VALUE
[ML Logo] Merrill Lynch
A Value Approach to Selecting
Mid to Large Cap Growth Stocks
At one time, it was thought that intrinsic value and "book" or liquidation
value were the same. Intrinsic Value, however, goes beyond these traditional
measurements in search of real earnings value. The screening process asks what
is the company's business worth? What is its future earnings potential?
Standard & Poor's,* our Portfolio Consultant, seeks to determine if the
current market price justifies the purchase of a stock. The goal is to
identify those stocks whose intrinsic value is higher than the current market
price.
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* Standard & Poor's is a trademark of The McGraw-Hill Companies, Inc.
and has been licensed for use by Defined Asset Funds. The Portfolio is not
sponsored, managed, sold or promoted by Standard & Poor's.
Determining Intrinsic Value
Standard & Poor's has developed a proprietary analytical process using a
combination of fundamental and valuation measurements which seeks to identify
stocks with growth potential. This process uses a quantitative analysis and a
series of screens to select the stocks that are eligible for inclusion in the
Intrinsic Value Portfolio.
The Standard & Poor's Intrinsic Value Portfolio
The Portfolio seeks capital appreciation by investing, for about one year, in
stocks believed to have potential for growth based on a combination of
fundamental and valuation measurements. After one year, you may roll your
investment into a new Portfolio, if available. Although this is a one year
investment, we recommend staying with the Strategy for at least three to five
years for potentially more consistent results.
Is this right for you?
This Portfolio is designed for investors who seek capital appreciation and are
willing and able to withstand above average price volatility associated with
growth stocks.
Intrinsic Value Portfolio - The Screening Process
Compustat Database 10,156 stocks
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Free Cash Flow greater than $20 million
1,574 Stocks
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Net Margins of 15% or more
253 Stocks
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Return on Equity of 15% or more
103 Stocks
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Market Acceptance
58 Stocks
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Eliminate Overpriced Stocks
Defined Funds Liquidity Screen
39 Stocks
[INSERT Graphics]
Intrinsic Value Portfolio
Companies with High Free Cash Flow
Free Cash Flow of more than $20 million for the last year. This measure is
calculated by adding a company's net income, depreciation and amortization, and
then subtracting its capital expenditures. This is intended to identify
companies with high positive cash flows.
Profitability
Net Profit Margins of 15% or more for the last year. This represents net
income, divided by sales. It measures a company's franchise value.
Return on Equity of more than 15% for the last three fiscal years and the last
four quarters. Return on equity is net income as a percentage of common
equity. This is intended to measure how efficiently the company is using its
capital.
Market Acceptance
Good value of reinvested earnings. To pass this screen, growth in market
capitalization must exceed the growth in retained earnings of the company over
the last five years. This screen selects companies that have been able to add
more than a dollar of market value for every additional dollar of earnings
retained. This measures market acceptance and momentum.
Eliminate Overpriced Stocks
Stocks trades below Intrinsic Value. Only stocks whose current price is below
the present value of their estimated free cash flow, as calculated by Standard
& Poor's, will be included.
Liquidity
Defined Assets Funds[SM] reviews the remaining stocks for market
capitalization, liquidity and other factors. Only the stocks that pass all of
the screens are included in the Intrinsic Value Portfolio.
Past Performance of Prior Standard & Poor's Intrinsic Value Portfolios
The chart below shows average annual total returns for the following Series,
which assume annual "rollovers" into the next Portfolio. We've also included
the returns for the most recently completed Portfolio of each Series:
<TABLE>
Series From Inception Through 6/30/98 Most Recently Completed Portfolio
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Inception Series Return Inception Series Return
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<S> <C> <C> <C> <C> <C>
11/21/96 C 17.02% 11/21/96- C 7.08%
12/19/97
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4/2/97 A 24.87 4/2/97- A 32.93
5/15/98
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</TABLE>
Past performance is no guarantee of future results. Average annual total
returns represent price changes plus dividends reinvested, divided by the
initial public offering price, and reflect maximum sales charges and expenses.
Returns for Series from Inception differ from Most Recently Completed
Portfolio because they reflect a reduced sales charge on rollovers and
different performance periods.
SELECT S&P INTRINSIC VALUE PORTFOLIO - 1998 SERIES B
Company Symbol Description % of Portfolio
ELECTRONIC COMPONENTS/SEMICONDUCTORS 18%
<TABLE>
<CAPTION>
<S> <C> <C>
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Altera Corporation ALTR Designs, manufactures and markets programmable logic
devices and developmental tools.
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Applied Materials, AMAT Develops, manufactures, markets and services wafer
Inc. fabrication equipment and related spare parts for the
semiconductor industry worldwide.
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Gentex Corporation GNTX Designs, develops, manufactures and markets products
using electro-optic technology.
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Intel Corporation INTC Worldwide manufacturer and vendor or micro-computer
components and related products.
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Linear Technology LLTC Designs, manufacturers and markets linear integrated
Corporation circuits for telecommunications applications.
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Maxim Integrated MXIM Manufactures and sells linear and mixed-signal integrated
Products, Inc. circuits. Provides key technology for communications
and portable electronic markets.
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Xilinx, Inc. XLNX Largest supplier of programmable logic devices and
computer chips that can be custom-programmed by the
user.
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FINANCIAL SERVICES 15%
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CMAC Investment CMT The holding company for Commonwealth Mortgage
Corporation Assurance Company, CMAC provides private mortgage
insurance coverage.
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Franklin Resources, BEN Franklin specializes in mutual fund operations, insurance
Inc. products, and also manages real estate.
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Imperial Credit ICII This diversified company offers a wide variety of
Industries, Inc. financial services and investment products through its
subsidiaries.
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MGIC Investment MTG One of the leading providers of mortgage insurance to
Corporation lenders.
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Price (T. Rowe) TROW An investment adviser to T. Rowe Price Mutual Funds,
Associates other sponsored investment products and private accounts.
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SLM Holding SLM Provides financial services, processing capabilities and
Corporation information technology for educational institutions,
lenders, students and others.
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INSURANCE 10%
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Exel Limited(1) XL Provides property and casualty insurance to industrial,
commercial and professional service firms and other
enterprises on a worldwide basis.
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HSB Group, Inc. HSB This holding company provides insurance against losses
from accidents to boilers, pressure vessels and
mechanical/electrical equipment.
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Mercury General MCY A speciality writer of auto insurance for all risk
Corporation classifications, Mercury operates primarily in California.
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Mutual Risk MM Provides risk-management services for clients who need
Management, Ltd.(1) an alternative to commercial insurance for their risk
exposure.
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(1) This is a Bermuda corporation. The current annual dividends per
share, if any, will not be subject to withholding tax.
MEDICAL/HEALTH CARE 10%
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Ballard Medical BMP Manufactures and markets specialized medical products
Products which are sold to hospitals and medical facilities in 66
countries.
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Biomet, Inc. BMET Designs, develops, produces and markets products used
primarily for orthopedic surgical and non-surgical
therapy.
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Johnson & Johnson JNJ Manufactures and sells a variety of health care and other
products including surgical instruments and non-
prescription drugs.
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Lincare Holdings, Inc. LNCR Operating over 260 centers, Lincare supplies oxygen and
other vital respiratory therapy services to in-home
patients.
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AIRLINES 5%
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ASA Holdings, Inc. ASAI Operates Atlantic Southeast Airlines, Inc. This regional
air carrier offers service to 21 cities.
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Comair Holdings, Inc. COMR The holding company for Comair, Inc., a regional air
carrier that serves approximately 80 cities.
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TELECOMMUNICATIONS 5%
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Ameritech AIT Provides a variety of communication services including
Corporation local and long distance telephone, paging and on-line
services.
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Tellabs, Inc. TLAB Designs, manufactures, markets and services date, video and
voice signals.
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INDUSTRIAL AUTOMATION/ROBOTICS 3%
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Cognex Corporation CGNX Designs, develops, manufactures and markets machine
vision systems which automate the manufacturing of a wide
range of items.
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NETWORKING PRODUCTS 3%
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Adaptec, Inc. ADPT Supplies management solutions that increase data transfer
rates between personal computers, servers, peripherals and
networks.
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BROADCAST SERVICES 3%
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King World KWP Produces and distributes syndicated TV programs including
Productions Inc. "The Oprah Winfrey Show".
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COMPUTER MEMORY DEVICES 3%
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EMC Corporation EMC Develops and markets new computer memory devices for
information storage and retrieval.
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METAL PROCESSORS 3%
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Kaydon Corporation KDN Designs, manufactures and sells custom-engineered products
including filters, shaft seals, bearing systems and
components.
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PRINTING/RELATED PRODUCTS 3%
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Zebra Technologies ZBRA A globally distributed manufacturer of thermal transfer
Corporation demand label printers used in bar code applications, related
supplies and software.
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MEDICAL/DRUGS 3%
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American Home AHP Discovers, develops, manufactures, distributes and sells
Products Corporation health care and agricultural products.
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MULTIMEDIA 3%
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Gannett Co., Inc. GCI Owns/operates 87 daily newspapers including USA Today,
as well as 20 major market television stations and a cable
division serving five states.
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COSMETICS/TOILETRIES 3%
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International Flavors IFF Produces flavors and fragrances that are sold worldwide to
& Fragrances, Inc. manufacturers of soaps, cosmetics, perfumes, soft drinks
and other products.
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COLLECTIBLES/GIFTS 2%
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Department 56, Inc. DFS Designs, imports and distributes collectibles and other
giftware products.
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COMPUTER SOFTWARE 2%
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Cognos, Inc.(2) COGNF Supplies business intelligence software and develops
software tools for application development.
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(2) This is a Canadian corporation. The current annual dividends per
share, if any, will be subject to withholding tax.
BUILDING PRODUCTS 2%
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Long Star Industries, LCE Produces cement, concrete, sand, gravel and precast
Inc. concrete products.
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PUBLISHING/NEWSPAPERS 2%
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Washington Post WPO Diversified media organization whose principal operations
(Class B) include newspaper/magazine publishing, broadcasting and
cable TV systems.
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AUTO MANUFACTURING 2%
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Ford Motor F Manufactures and sells cars, trucks and related parts and
Company accessories worldwide.
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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 willing and able to assume
the risks generally associated with equity investments with
above-average price volatility.
o The Portfolio is not appropriate for investors seeking
preservation of capital or current income.
o U.S. equity markets are at historic highs. There can be no
assurance that these levels will continue, that the Portfolio will
meet its objectives or that it will outperform general stock
indexes, especially during periods of sharply rising stock prices.
o The value of your investment will fluctuate with the prices of the
underlying stocks. There can be no assurance that these prices
will not decrease.
Tax Reporting
The proceeds received when you sell this investment will reflect the deduction
of the deferred sales charge and, after the initial offering period, the
charge for organization costs. In addition, the annual statement and the
relevant tax reporting forms you receive at year end will be based on the
amount paid to you, net of the deferred sales charge and the charge for
organization costs. Accordingly, you should not increase the tax basis in
your units by the deferred sales charge or the charge for organization costs.
Generally, dividends and any gains will be subject to tax each year. Capital
gains, if any, on assets held over a year will be taxed up to the maximum
federal tax rate of 20% for the non-corporate tax payers.
However, on rollovers to future Portfolios, if available, investors will defer
recognition of gains and losses on stocks that are transferred to the new
Portfolio.
Defining Your Costs
First-time investors pay an initial sales charge of about 1% when they buy.
In addition, all investors pay a deferred sales charge of $17.50 per 1,000
units, about 1.75%, deducted over the last 10 months of the Portfolio.
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As a % of Public Amount Per
Offering Price 1,000 Units
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Initial Sales Charge 1.00% $10.00
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Deferred Sales Charge 1.75% $17.50
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Maximum Sales Charge 2.75% $27.50
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Estimated Annual Operating Expenses
(as of % of net assets) 0.18% $1.78
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Estimated Organization Costs $2.66
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If you sell your units before termination, the remaining balance of your
deferred sales charge will be deducted, along with the estimated costs of
selling Portfolio securities from the proceeds you receive. If you roll over
to a successor Portfolio, if available, the initial charge will be waived.
Volume Purchase Discounts
For larger purchases, the overall sales charges are reduced to put more of your
investment dollars to work for you.
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Amount Purchased Total Sales Charge as a % of
Public Offering Price
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Less than $50,000 2.75%
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$50,000 to $99,999 2.50%
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$100,000 to $249,999 2.00%
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$250,000 to $999,999 1.75%
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$1,000,000 or more 1.00%
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Defined Asset Funds
Buy with Knowledge o Hold with Confidence
Other Select Series
Select Ten Portfolio (DJIA)
Select Growth Portfolio
Select S&P Industrial Portfolio
Select S&P Industry Turnaround Portfolio
United Kingdom Portfolio (Financial Times Index)
Equity Investor Funds Concept Series
Premier American Portfolio
Premier World Portfolio
Tele-Global Trust 4
Utility Portfolio
Equity Investor Funds Index Series
S&P 500 Index Trust 2
S&P MidCap Index Trust
Other Defined Asset Funds
Corporate Income Funds
Government Securities Income Funds
Municipal Investment Trusts
Don't Delay
Call your financial professional for a free prospectus containing more complete
information, including all charges and expenses. Read the prospectus carefully
before you invest.
Units of the next Series are not yet available. Information herein is subject
to amendment. A registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These securities may not
be sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This document shall not constitute an offer to
buy nor shall there be any sale of these securities in any state in which such
an offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of such state.
[LOGO] Printed on Recycled Paper 11571BR-8/98
[Copyright logo] 1998 Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Member SIPC.
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