IRA Ideal!
Defined Asset Funds
SELECT SERIES
Standard & Poor's
Industry Turnaround
Portfolio
SERIES 2
A New Direction
For Industry Investing
[LOGO]Merrill Lynch
[Picture logo of fund]STANDARD & POOR'S
INDUSTRY
TURNAROUND
PORTFOLIO
Teaching an Old "Dog" a New Trick
The well-known "Dog" investment strategies seek out undervalued stocks of
major indices, buy them and then hold them for a set period of time. The
Select Industry Turnaround Portfolio applies a similar contrarian strategy.
Instead of seeking out potentially undervalued "Dog" stocks, the Select
Industry Turnaround Strategy looks for out of favor industries, ready for a
comeback. It then goes on to identify promising stocks from within these
industry groups.
A Defined Contrarian Approach
Some of the best investments may be found in industries no one else wants to
buy. The challenge is to find an industry just as it turns the corner of
recovery...and once you've found it, look within to find promising stocks.
Our Select Series - Standard & Poor's Industry Turnaround Portfolio puts this
contrarian approach into action through a unique two - part screening process.
The Power of the Turnaround Strategy
Since the Industry Turnaround Portfolio is based on our back - testing of the
Turnaround Strategy, we looked at what could have been earned with a
hypothetical investment in the Strategy. The following figures illustrate how
well the Strategy could have performed over two - year rolling periods, when
compared to the S&P 500 Index.* While this hypothetical past performance is no
guarantee of future results of any Portfolio, these figures show the potential
of following the Industry Turnaround Strategy.
Hypothetical Strategy Performance (not any Portfolio)
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Returns for 2-Year Periods
Strategy Returns are net of sales charges and expenses
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Periods Strategy S&P 500 Index
1/1-12/31 Total Return Total Return
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1973-1974 -23.74% -36.01%
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1974-1975 27.30 -0.08
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1975-1976 150.45 68.01
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1976-1977 31.95 15.11
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1977-1978 -15.07 -1.50
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1978-1979 54.00 24.77
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1979-1980 56.20 53.54
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1980-1981 55.16 25.39
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1981-1982 21.03 13.53
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1982-1983 45.38 45.97
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1983-1984 -12.32 29.31
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1984-1985 14.08 37.46
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1985-1986 50.39 54.47
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1986-1987 21.60 25.03
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1987-1988 25.41 22.34
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1988-1989 58.02 51.44
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1989-1990 0.26 27.24
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1990-1991 26.82 24.90
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1991-1992 74.01 39.39
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1992-1993 38.82 17.81
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1993-1994 -4.31 11.32
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1994-1995 55.32 37.83
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1995-1996 79.98 67.53
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1996-1997 53.55 62.49
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1997-1998** 43.21 51.34
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1998*** 3.16% 13.92%
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*"Standard & Poor's" and "S&P 500" are trademarks of The McGraw-Hill Companies
and have been licensed for use by Defined Asset Funds. The Portfolio is not
sponsored, managed, sold or promoted by Standard & Poor's.
** 1/1/97 through 3/31/98
*** 1/1/98 through 3/31/98
Average Annual Total Returns for Period Ending 12/31/97
3 Years 5 Years 10 Years 15 Years 20 Years 25 Years
Strategy 28.37% 17.08% 19.00% 14.19% 17.20% 15.08%
S&P 500 30.82% 20.06% 17.89% 17.37% 16.41% 12.85%
A Hypothetical Investment in the Industry Turnaround Strategy vs. the S&P 500
Index
[A bar graph comparing the hypothetical performance of the Industry Turnaround
Strategy (ochre) and the S&P 500 Index (purple) in terms of price changes plus
dividends reinvested at the end of each 2 year holding period. An ochre box in
the left quadrant indicates the components of the Strategy performance section
of the bar graph. The horizontal or (Y) axis compares the annual performance
each YEAR from 1973 to 1997, 1/1/97 through 3/31/98 and 1/1/98 through 3/31/98
The vertical axis or (X) axis reflects the performance of the Portfolios. ]
The table and chart above compare the hypothetical performance of the
Turnaround Strategy (not any actual Portfolio) with the performance of the S&P
500. Returns shown represent price changes plus dividends (reinvested at the
end of each two-year holding period, in average figures), and do not reflect
commissions or taxes. Only the Strategy figures reflect the deduction of
Portfolio sales charges (4.50% for the first 2 two-year periods, 3.50% for
each subsequent 2 year period) and estimated expenses. Portfolio performance
will differ from the Strategy because Portfolios are established and
liquidated at different times during the year, they normally purchase and sell
stocks at prices different from the closing prices used in determining
Portfolio unit price, Portfolios are not fully invested at all times, and
stocks may not be weighted equally.
The Select Strategy
Like other Select Portfolios in the Defined Asset Funds Select Series, the
Industry Turnaround Portfolio employs a contrarian "buy and hold" strategy.
That means it follows a disciplined investment style of choosing stocks from
industries that are currently out of favor, and then holds them for a set
period of time - in this case, two years. At the end of that period, the
screening process is reapplied. You can reinvest in the new Portfolio, if
available, or you can redeem your investment. Although the Industry
Turnaround Portfolio is a two - year investment, we recommend you stay with
this Strategy for at least four to six years for potentially more consistent
results.
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A Defined Portfolio Symbol
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Container Industry
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Ball Corporation BLL
With operations in North America and Asia, Ball manufactures
metal and plastic containers for the beverage and food industries.
It also provides aerospace systems and professional services to
government and commercial customers
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Crown Cork & Seal Company, Incorporated CCK
Operating 282 plants located in 59 countries, Crown
manufactures packaging products for consumer goods. Its
products include metal cans and metal and plastic packaging
products, as well as metal and specialty promotional packaging
products
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Owens-Illinois, Incorporated OI
An international manufacturer of packaging products, including
glass bottles, plastic containers and closures, as well as tumblers,
stemware, pharmaceutical packaging and laboratory ware.
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Engineering and Construction
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Fluor Corporation FLR
Through its world - wide subsidiaries, Fluor provides design,
engineering, procurement, construction, maintenance, and other
diversified services. The company serves industrial and
commercial clients, as well as governmental clients.
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Foster Wheeler Corporation FWC
Foster Wheeler Corporation provides design, engineering,
construction, manufacturing, and project development and
management services to its clients around the globe. The
Company also offers research, plant operations, and
environmental services.
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Mc Dermott International, Incorporated MDR
A world-wide energy services company that manufactures
steam-generating equipment, environmental equipment and
products for the U.S. government. It also provides engineering
and other services for the utility and shipping industries, and
hydrocarbon processing facilities.
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Gaming Lottery and Parimutuel
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Harrah's Entertainment, Incorporated HET
Operates casinos in Nevada, New Jersey and New Zealand.
Also operates river boat and dockside casinos.
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Mirage Resorts, Incorporated MIR
Owns and operates casino-based entertainment resorts in Las
Vegas and Laughlin, Nevada
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Health Care
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Columbia/HCA Healthcare Corporation COL
Provides a variety of health care services. Columbia operates
318 acute-care hospitals, 18 psychiatric hospitals and 145
outpatient surgery centers.
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Tenet Healthcare Corporation THC
Through its subsidiaries, Tenet owns or operates 129 acute - care
hospitals and related health care businesses in 22 states. Its
hospitals serve as the anchors for its regional health care
delivery networks.
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Restaurants
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Darden Restaurants, Incorporated DRI
Through its three chains - Red Lobster, Bahama Breeze and The
Olive Garden - Darden operates more than 1,200 restaurants in
North America.
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McDonald's Corporation MCD
Operates 21,000 fast - food restaurants, both in the U.S. and in
102 other countries worldwide.
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Wendy's International, Incorporated WEN
Operates or franchises 5,133 "Wendy's" and "Tim Hortons"
restaurants in the U.S. and 33 other countries and territories
around the world.
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Tricon Global Restaurants, Incorporated YUM
Owns and franchises 30,000 quick service restaurants in 95
countries. The company's restaurants include Pizza Hut, KFC
and Taco Bell.
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A Dual Screening Process
1. Industry Direction
Turnaround Industries
Analyze approximately 100 industries of the S&P 500 Index, and target those
industries that have underperformed the index over the past 12 months. Select
those industries that have broken above their nine-month average of relative
annual returns. We believe these industries may have the momentum to turn
around.
The Contrarian Advantage
Rank the remaining industries in order of their 12-month relative price
performance, as compared to the S&P 500. The five industries with the weakest
relative performance are then selected for the Select Series Standard & Poor's
Industry Turnaround Portfolio.
2. Stock Selection
Rank for Quality
Within each of the five chosen Industries, list all companies in order of their
respective Standard & Poor's Quality Ranking.
Finding Large-Cap Quality Stocks
Select either the four companies with the highest S&P Quality Rankings or, if
the industry has four or fewer stocks, select all the stocks. In the event of
a tie, the stock with the larger marker capitalization is selected.
About Standard & Poor's
STANDARD & POOR'S is a leading financial information, analysis and investment
research company. Since 1860, it has provided investors and financial
institutions with financial research, benchmarks and market data. Its most
notable benchmark, the S&P 500 Composite Stock Price Index, features utility,
financial, transportation and industrial stocks. Standard & Poor's is the
Portfolio Consultant for the Select Industry Turnaround Portfolio.
Is This Investment Right For You?
If you're an equity investor who is saving for a goal such as a new home, a
child's education or retirement, the Select Standard & Poor's Industry
Turnaround Portfolio may be a smart choice. It is important to note that this
investment is designed for investors able and willing to assume the risks
generally associated with equity investments, and with an investment in stocks
from industries that are currently depressed. There can be no assurance that
the prices of these stocks (and therefore the Portfolio price) will increase
or not decline further, during the Portfolio's two-year life. Additionally,
U.S. equity markets have been at historically high levels, and no assurance
can be given that these levels will continue.
A Tax-Efficient Structure
By holding this two-year Portfolio until the end, you can benefit from
favorable tax treatment on any capital gains. Gains on assets held for more
than 18 months are now taxed at the maximum federal tax rate of 20% for
individuals.
Defining Your Costs
First-time investors pay an initial sales charge of approximately 1% when they
buy. All investors pay a deferred sales charge of seven monthly payments of
$2.50 per 1,000 units, deducted from the Portfolio's net asset value in each
year of the Portfolio's two-year life.
As a % of Public Amount Per 1,000
Offering Price Units
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Initial Sales Charge 1.00% $10.00
Annual Deferred Sales 1.75% $17.50
Charge (per year x 2 years)
=======================================
Maximum Sales Charge 4.50% $45.00
Estimated Annual Operating 0.265% $2.62
Expenses (as a % of net
assets)
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If you sell your investment before the final deferred sales charge installment
in either the first or second year, the remaining deferred sales charges for
that year will be deducted, along with the estimated cost of selling Portfolio
stocks. If you roll over into a successor Portfolio, if available, the
initial charge will be waived. You will only pay the deferred sales charge
and operating expenses.
Change Your Direction Toward Industry Investing!
You can get started with the Equity Investor Fund - Select Standard & Poor's
Industry Turnaround Portfolio with as little as $250. Call your financial
professional for a free prospectus containing more complete information,
including all charges and expenses. Please read the prospectus carefully
before investing.
Information contained herein is subject to amendment. A registration statement
relating to the next Select Standard & Poor's Industry Turnaround Portfolio has
been filed with the Securities and Exchange Commission, but is not yet
effective. These securities may not be sold, nor may offers to buy be
accepted prior to the time the registration statement becomes effective. This
brochure shall not constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of those 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 any such state.
Defined Asset Funds
Buy With Knowledge o Hold With Confidence
Other Select Series
Select Ten Portfolio
(DJIA)
Hong Kong Portfolio
(Hang Seng Index)
Japan Portfolio
(Nikkei Index)
United Kingdom Portfolio
(Financial Times Index)
Select Growth Portfolio
Select S&P Industrial Portfolio
Select S&P Intrinsic Value Portfolio
Equity Investor Funds
Concept Series
Premier American Portfolio
Premier World Portfolio
Real Estate Income Fund 2
TeleGlobal Trust 3
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
International Bond Funds
Municipal Investment Trusts
