IRA Ideal!
Defined Asset Funds
Principled Values Portfolio[SM] o 2
A Principled Way to Invest.
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Why Socially Responsible Investing?
Investing with principles can be a personally rewarding experience. But you
also need investments that can reward you with performance. Socially
responsible investing can be practical, as well as fulfilling. Attention to
diversity and social values may lead to greater productivity and increased
profitability.
Recognizing Diversity
One of our country's greatest assets is the diversity of our people and their
combined strengths. This Portfolio highlights companies that have recognized
the value of a diverse workforce. Merrill Lynch is proud to offer the
Principled Values Portfolio.
At Merrill Lynch, we believe that many investors may be concerned about the
principles of the companies in which they invest. That's why we're proud to
offer the Defined Asset Funds[SM] Principled Values Portfolio[SM].
Invest with Principles
The Principled Values Portfolio gives you a convenient way to invest in a
socially responsible portfolio with an emphasis on diversity. The Portfolio
features stocks of companies that have made strides in promoting diversity in
the workplace and have also passed a broad range of screens for social
responsibility. These companies consider their principles and practices to be
an important part of their bottom line.
The Portfolio
The stocks included in the Principled Values Portfolio were chosen through a
unique three-part screening process. First, we examined the Domini 400 Social
Index[SM](*), an index modeled after the S&P 500 Index(*), that reflects the
financial performance of 400 companies which have passed multiple, broad-based
social screens. Then, Kinder, Lydenberg, Domini & Co. (KLD), the Consultant
for this Portfolio, applied its criteria to these stocks to identify companies
that have made efforts toward diversity in the workforce. Finally, Merrill
Lynch applied a proprietary selection process to determine investment merit.
The result is a one-year Portfolio that seeks capital appreciation.
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(*) "S&P 500" is a registered trademark of the McGraw-Hill Companies, Inc.
The "Domini 400 Social Index" is a service mark of its publisher, Kinder,
Lydenberg, Domini & Co., Inc.
The Select Strategy
Like other Portfolios in the Defined Asset Funds Select Series, the Principled
Values Portfolio employs a "buy and hold" strategy. That means it follows a
disciplined investment style of choosing stocks based on rigorous criteria, and
then holds them for a set period of time -- in this case, one year. At the
end of that period, the selection criteria will be reapplied and you can
reinvest in a new Portfolio, if available, or redeem your investment.
Although the Principled Values Portfolio is a one-year investment, we
recommend you stay with this Strategy for at least three to five years for
more consistent results.
Principled Investing
The chart below compares a leading measure of socially responsible investing --
the Domini 400 Social Index (since its inception in 1990) -- to the S&P 500
Index. This chart shows that socially responsible investing has compared well
to the S&P 500, and that practicing socially responsible investing need not
require a sacrifice of investment returns. Of course, past performance is no
guarantee of future results.
The Domini 400 Social Index vs. The S&P 500 Index
Domini 400 S&P 500
Total Return(**) Total Return(**)
5/1/90-12/31/90 1.46% 2.37%
1991 37.84% 30.55%
1992 12.09% 7.67%
1993 8.52% 9.99%
1994 0.18% 1.31%
1995 38.20% 37.43%
1996 23.70% 23.07%
1997 38.26% 33.36%
1/1/98-3/31/98 14.41% 13.95%
Average 21.27% 19.57%
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(**)The returns above represent price changes plus dividends reinvested.
While the Domini 400 Social Index is one of several screens used in choosing
stocks for the Portfolio, these other screens, as well as Portfolio sales
charges and expenses, would have materially affected results. Because of
these reasons, index performance is no indication of future Portfolio results.
The Domini 400 Social Index has not seen a down year since its inception.
About Kinder, Lydenberg, Domini & Co. (KLD)
KLD's founders are prominent authorities on social investing. Established in
1990, KLD has been providing research and analysis to its clients who integrate
social criteria into their investment decisions. KLD is also the publisher of
the Domini 400 Social Index.
A Quest for Principle and Value
Social investing is the systematic incorporation of ethical values and
objectives in the investment decision-making process. Companies chosen for
the Principled Values Portfolio had to first undergo a stringent social
investment screening applied by KLD. These screens range from simple
exclusionary policies, to subtle evaluations of corporate behavior. Once
screened by KLD, each remaining company was reviewed by Defined Asset Funds
for investment merit.
Part 1: Screening for Principle
Our universe of stocks began with the Domini 400 Social Index. This index
represents stocks that have been screened on a broad range of issues, such as
the environment, community involvement, product safety and other concerns.
Companies in the Domini 400 Social Index derive little or no revenue from the
manufacturing of tobacco or alcohol products, gambling activities or military
contracting, and have no ownership in nuclear power.
Part II: A Commitment to Diversity
Next, KLD selected companies that possessed at least one strength in areas such
as:
CEO: The company's chief executive officer is a woman or a member
of a minority group.
Promotion: The company has made notable progress in the promotion
of women and minorities.
Board of Directors: Women, minorities and/or disabled persons have
a significant presence on the board of directors.
Family Concerns: The company has outstanding employee benefits or
other programs addressing work and modern family concerns, such as
child and elder care, as well as flexible working schedules.
Women- and Minority-Owned Businesses: The company maintains at
least 5% of its subcontracts with women-or minority-owned
businesses.
Employment of the Disabled: The company has implemented innovative
hiring programs, or other creative human resource programs for
disabled persons.
A stock may be sold if the Portfolio Consultant determines that it no longer
meets the above criteria.
Part III: Investment Merit
Stocks that passed the previous screens were then reviewed using the Defined
Asset Funds proprietary selection process, which includes criteria such as
recent price performance, price to earnings ratio, and dividend yield. From
the universe of stocks meeting the criteria, 25 stocks were finally chosen for
the Portfolio.
The Principled Values Portfolio 2
Stocks Symbol
FINANCIAL SERVICES/BANKS
Washington Mutual, Inc. WAMU
Bankers Trust Corporation BT
BankBoston Corporation BKB
J.P. Morgan & Company, Inc. JPM
RETAIL-APPAREL
The Limited, Inc. LTD
The Gap, Inc. GPS
VF Corporation VFC
Nordstrom, Inc. NOBE
TELECOMMUNICATIONS
Frontier Corporation FRO
BellSouth Corporation BLS
SBC Communications, Inc. SBC
MANUFACTURING
Hasbro, Inc. HAS
Maytag Corporation MYG
The Stanley Works SWK
RESTAURANTS
McDonald's Corporation MCD
COSMETICS & TOILETRIES
Avon Products, Inc. AVP
NETWORK PRODUCTS
Cisco Systems, Inc. CSCO
FOOD RETAIL
Hannaford Brothers Co. HRD
FOOD PROCESSING
Quaker Oats Company OAT
DRUG DELIVERY SYSTEMS
ALZA Corporation AZA
CHEMICAL SPECIALTY
Nalco Chemical Company NLC
COMPUTER SOFTWARE
Computer Associates International, Inc. CA
OIL REFINING & MARKETING
Sun Company, Inc. SUN
INSURANCE
St. Paul Companies, Inc. SPC
Lincoln National Corporation LNC
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. It may not be appropriate for those seeking capital
preservation. U.S. equity markets have been at historically high levels and no
assurance can be given that these levels will continue.
o The stocks in this Portfolio were selected for social reasons and there can
be no assurance that the Portfolio will perform better or worse than stocks
selected solely on economic criteria.
o The value of your investment will fluctuate with the prices of the underlying
stocks.
Tax Reporting
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 28%. However, on rollovers to future series (if
available), investors will defer recognition of gains and losses on stocks
that are contributed in kind to the new series (and may be eligible for a 20%
maximum federal tax rate on gains from stocks that are sold).
Defining Your Costs
First-time investors pay an initial sales charge of approximately 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 ten months of the Portfolio.
As a % of Public Amount Per
Offering Price 1,000 Units
Initial Sales Charge 1.00% $10.00
Deferred Sales Charge 1.75% $17.50
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Maximum Sales Charge 2.75% $27.50
Estimated Annual Operating Expenses
(as a % of net assets) .505% $5.00
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
into a successor Portfolio, if available, the initial charge will be waived.
You will only pay the deferred sales charge and operating expenses.
Is This Portfolio Right for You?
If you're saving for a long-term goal, such as a new home, child's education or
retirement, the Principled Values Portfolio may be a smart choice. This
Portfolio is not appropriate for investors who are seeking capital
preservation, high current income or who are unable or unwilling to assume the
risks associated with equity investing.
Special Institutional Pricing
The following volume discounts have been developed to encourage socially
responsible investing while making the Portfolio especially attractive to
institutions, pension plans, foundations and other public or private investment
organizations.
INSTITUTIONAL VOLUME DISCOUNTS
Amount Total Sales Charge as a % of
Purchased Public Offering Price
Less than $50,000 2.75%
$50,000-$99,999 2.25%
$100,000-$499,999 1.75%
$500,000-$999,999 1.00%
$1,000,000-$4,999,999 0.75%
$5,000,000 or more 0.60%
Invest With Principle Today!
You can invest in the Principal Values Portfolio with as little as $250 for
regular or IRA accounts. Your Merrill Lynch Financial Consultant can provide
you with a free prospectus, which contains more complete information,
including all charges and expenses. Be sure to read it carefully before you
invest.
Information contained herein is subject to amendment. A registration statement
relating to the next Select Principled Values 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 Selected 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
Select S&P Turnaround Portfolio
The 1998 Domestic Year Ahead Portfolio
The 1998 International Year Ahead Portfolio
The Focus Series
Financial Portfolio 2
Healthcare Portfolio 3
Equity Investor Funds Concept Series
Premier American Portfolio
Premier World Portfolio
Real Estate Income Fund 2
Tele o Global Trust 3
Western Premier 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
International Bond Funds
Municipal Investment Trusts
[logo] Printed on Recycled Paper 11382BR-6/98
[Copyright]1998 Merrill Lynch, Pierce, Fenner & Smith Incorporated. Member
SIPC.
