Defined Asset Funds (SM)
1999 Select Series 3
Principled Values Portfolio(SM)
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 your 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
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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.
The 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 potentially more
consistent results.
The Principled Values Portfolio -- 1999 Series 3
Stocks Symbol
TECHNOLOGY
3Com Corp. COMS
Autodesk, Inc. ADSK
Ceridian Corp. CEN
Cisco Systems, Inc. CSCO
Hewlett-Packard Co. HWP
Intel Corp. INTC
Microsoft Corp. MSFT
Novell, Inc. NOVL
Solectron Corp. SLR
Texas Instruments, Inc. TXN
FINANCIAL SERVICES/BANKS
Aetna, Inc. AET
BankBoston Corp. BKB
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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.
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Bank One Corp. ONE
PNC Bank Corp. PNC
SLM Holding Corp. SLM
COSMETICS & TOILETRIES
Avon Products, Inc. AVP
MediaOne Group, Inc. UMG
RETAIL-APPAREL
The Limited, Inc. LTD
Nordstrom, Inc. NOBE
MACHINERY
Deere & Co. DE
MANUFACTURING
Maytag Corp. MYG
MULTIMEDIA
Viacom, Inc. (Class B) VIA.B
RESTAURANTS
McDonald's Corp. MCD
TELECOMMUNICATIONS
Frontier Corp. FRO
TRANSPORTATION
Southwest Airlines Co. LUV
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
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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.
Past Performance of Prior Principled Values Portfolios
Past Performance is no guarantee of future results.
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Series From Inception Through 1/8/99
(including annual rollovers)
Inception Series Return
1/8/98 Series 1 26.31%
The chart above shows average annual total returns which represent price
changes plus dividends reinvested, divided by the initial public offering
price, and relects maximum sales charges and expenses.
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%
1998 34.53% 28.58%
Average 21.50% 19.38%
About Kinder, Lydenberg, Domini & Co. (KLD)
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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.
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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.
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.
* 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.
* 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.
* The value of your investment will fluctuate with the prices of the underlying
stocks. Stock prices can be volatile.
* This Portfolio may be considered concentrated in technology stocks.
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, after the inital
offering period. Accordingly, you should not increase the tax basis in your
units by these charges.
Generally, dividends and any net capital 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 individuals. However, on rollovers of
future Portfolios, if available, investors will defer recognition of gains and
losses for
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federal tax purposes on stocks that are transferred to the new Portfolio.
Please consult your tax advisor concerning state and local taxation.
Defining Your Costs
First-time investors pay an initial sale 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) .212% $2.10
Estimated Organization Costs $2.53
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.
You will only pay the deferred sales charge.
Institutional Volume Purchase Discounts
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.
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%
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$5,000,000 or more 0.60%
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.
Invest With Principle Today!
You can invest in the Principled Values Portfolio for about $250 for regular or
IRA accounts. Call you Merrill Lynch Financial Consultant for a free prospectus
containing more complete 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.
DEFINED ASSET FUNDS
Buy with knowledge * Hold With Confidence
EQUITY INVESTOR FUNDS
Other Selected Series
Select Ten Portfolio (DJIA)
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
Merrill Lynch Research-Based Funds
1999 Year-Ahead Domestic Portfolio
1999 Year-Ahead International Portfolio
Defined Technology Portfolio(SM)
Financial Portfolio
Health Care Portfolio
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Concept Series
Health Care Trust (Pharmaceutical & Biotechnology Portfolio)
Premier American Portfolio
Premier World Portfolio
Real Estate Income Fund
Tele-Global Trust
Utility Portfolio
Western Premier Portfolio
Index Series
S&P 500 Trust
S&P MidCap Trust
FIXED-INCOME FUNDS
Corporate Funds
Government Funds
Municipal Funds
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(C)1999 Merrill Lynch, Pierce, Fenner & Smith Incorporated. Member SIPC.
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