IRA Ideal!
Defined Asset Funds [SM]
Select Series
Standard & Poor's
Industry Turnaround Portfolio
Series 3
Another Direction for Industry Investing
[ML logo] Merrill Lynch
[logo]
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 undervalued "Dog" stocks, the Select
Industry Turnaround Strategy looks for out of favor industries, potentially
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 proprietary 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 using 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 strategy would have underperformed
the index in 9 of the 24 periods and 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)
Returns for Two-Year Periods
Strategy Returns are net of sales charges and expenses
Periods Strategy S&P 500 Index
1/1-12/31 Total Return Total Return
1973-74 -23.74% -36.01%
1974-75 27.30 -0.08
1975-76 150.45 68.01
1976-77 31.95 15.11
1977-78 -15.07 -1.50
1978-79 54.00 24.77
1979-80 56.20 53.54
1980-81 55.16 25.39
1981-82 21.03 13.53
1982-83 45.38 45.97
1983-84 -12.32 29.31
1984-85 14.08 37.46
1985-86 50.39 54.47
1986-87 21.60 25.03
1987-88 25.41 22.34
1988-89 58.02 51.44
1989-90 0.26 27.24
1990-91 26.82 24.90
1991-92 74.01 39.39
1992-93 38.82 17.81
1993-94 -4.31 11.32
1994-95 55.32 37.83
1995-96 79.98 67.53
1996-97 53.55 62.49
1997-98(**) 45.00 56.23
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%
Hypothetical Past Performance of the Industry Turnaround Strategy (not any
Portfolio) vs. the S&P 500 Index
[A bar graph compares the cumulative annual performance from 1973 through 1998
(**) of the Strategy (ochre) and the S&P 500 Index (blue). 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 1973 through
1998. The vertical (Y) axis reflects the percentage value, ranging from -40% to
160%, of each index from 1973 through 1998.]
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 two-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.
- ------------
(*) "Standard & Poor's" and "S&P 500" 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.
(**) 1/1/97 through 6/30/98
The Industry Turnaround 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. Your 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.
<TABLE>
<CAPTION>
A Defined Portfolio Symbol
<S> <C>
Footwear
Nike, Inc. NKE
Designs, develops and markets a wide variety of footwear, apparel and
accessories. Nike operates upwards of 60 retail outlets and sells to 19,700 U.S.
retail accounts and through independent distributors, licensees and subsidiaries
in 110 countries. Brands include "Nike," "Side I," "i.e. footwear for women"
and "Cole Haan."
Reebok International Ltd. RBK
Designs, markets and distributes sports, fitness and casual footwear, apparel
and equipment worldwide. Primary operating units include the Reebok
Division, The Rockport Company, Inc. and the Greg Norman Division.
Health Care (Hospital Management)
Columbia/HCA Healthcare Corporation COL
The company operates 318 general, acute care and 18 psychiatric hospitals.
Also operates 145 outpatient surgery centers and provides extensive outpatient
and ancillary services.
Tenet Healthcare Corporation THC
Tenet's subsidiaries operate 122 general hospitals serving urban and rural
communities in 18 states. The company also owns one general hospital and
ancillary health-care operations in Barcelona, Spain.
Oil (International Integrated)
Chevron Corporation CHV
Explores for, develops and produces crude oil and natural gas. Also refines
crude oil into petroleum products and markets/transports these products.
Operating in 90 countries, Chevron also manufacturers/markets chemicals and
mines for coal.
Exxon Corporation XON
Engaged in all aspects of the oil and gas business. Explores for and produces
crude oil and natural gas; manufactures petroleum products; and transports/sells
these products. Exxon also manufacturers/markets petrochemicals, and
supplies specialty rubbers and additives.
Mobil Corporation MOB
A worldwide energy company, operating through its subsidiaries in more than
140 countries. Produces oil and gas, manufactures and markets petrochemicals,
packaging films and specialty chemical products.
Royal Dutch Petroleum Company RD
A global energy company whose operations are involved in all phases of the
petroleum industry from exploration to final processing and delivery. It owns
60% of the non-operating holding company of The Royal Dutch/Shell Group of
companies.
Services (Data Processing)
Automatic Data Processing, Inc. AUD
One of the largest independent computing services companies in the world,
providing computerized transaction processing, data communications, software
and information services to virtually every industry.
Ceridian Corporation CEN
Provides transaction processing and information services to the transportation
market, outsourced payroll processing services, and radio rating and related
services for the electronic media industry.
Equifax, Inc. EFX
Provides information-based administrative services, transaction processing,
consulting and software services to the financial services, retail,
telecommunications/utilities, automotive and health-care industries.
First Data Corporation FDC
Provides payment systems, electronic commerce and information management
services to financial institutions, merchants, insurance companies, health-care
providers, public utilities and consumers worldwide.
Tobacco
Philip Morris Companies, Inc. MO
Consumer packaged goods company with five operating subsidiaries, its
products include "Marlboro," "Bull's Eye," "Breakstone," "Kraft,"
"Cambridge," "Cracker Barrel" and "Polly-O" cheeses, "Crystal Light,"
"Maxwell House," and "Miller," "Milwaukee's Best" and "Meister Brau" beer.
UST, Inc. UST
Through its subsidiaries, UST produces and markets smokeless tobacco
products such as "Copenhagen," "Skoal," and "Red Seal." UST also markets
wine, craft beers and cigars such as "Domain Ste. Michelle," "Chateau Ste.
Michelle," "Columbia Crest" and "Bert Grant's Ale."
</TABLE>
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 market 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 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. However, this Portfolio
is not appropriate for investors seeking capital preservation or current
income. 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. The value of your investment
will fluctuate with the value of the underlying stocks, and the price you
receive when you sell may be more or less than your cost. Additionally, U.S.
equity markets have been at historically high levels, and no assurance can be
given that these levels will continue.
Tax Reporting
Generally, dividends and any gains will be subject to tax each
year, whether or not reinvested. Capital gains, if any, on assets held over a
year will be taxed up to the maximum federal tax rate of 20% for non-corporate
taxpayers. However, on rollovers of 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
approximately 1% when they buy. In addition, 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 Amount Per
Public Offering Price 1,000 Units
Initial Sales Charge 1.00% $10.00
Deferred Sales Charge Year 1 1.75% $17.50
Deferred Sales Charge Year 2 1.75% $17.50
===================================
Maximum Sales Charge 4.50% $45.00
Estimated Annual Operating Expenses 0.203% $2.01
(as a % of net assets)
Estimated Organization Costs $3.49
If you sell your investment before the final deferred sales charge installment
in either year, the remaining deferred sales charges for that year will be
deducted, along with the estimated cost of selling Portfolio securities. If
you roll over into 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.
Total Sales Charge as a % of
Amount Purchased Public Offering Price
Less than $50,000 4.50%
$50,000 to $99,999 4.25%
$100,000 to $249,999 3.75%
$250,000 to $999,999 3.50%
$1,000,000 or more 2.75%
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 it carefully before you
invest.
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.
Equity Investor Funds
Other Select Series
Select Ten Portfolio
(DJIA)
United Kingdom Portfolio (Financial Times Index)
Select Growth Portfolio
Select S&P Industrial Portfolio
Select Industry Turnaround Portfolio
Select Standard & Poor's Intrinsic Value Portfolio
Concept Series
Premier American Portfolio
Premier World Portfolio
Tele-Global Trust
Utility Portfolio
Index Series
S&P 500 Index Trust
S&P MidCap Index Trust
Fixed Income Funds
Corporate Funds
Government Funds
Municipal Funds
11373BR-9/98
[Copyright logo] 1998 Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Member SIPC.
