Concept Series Income & Growth
1999 Fundamental
Defined Asset Funds(R) B Research
IRA Ideal!
Utility
Portfolio
A Defensive Strategy
to Generate Income
Merrill Lynch
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The power of electric utilities in one convenient portfolio
from Defined Asset Funds(R)-----
Utility Portfolio
For years, utility stocks have provided a dependable stream of dividend income.
They are also an attractive defensive income investment -- since utility usage
is traditionally steady, stock prices generally are not significantly affected
by adverse changes in general economic conditions. What's more, industry
deregulation and restructuring have improved cost containment and cash flow.
Likewise, many utilities are reinventing themselves through consolidation,
divestiture and the creation of new businesses.
Financial Power
We all want it. The key is attaining it. One approach is through an investment
that seeks current dividend income and potential dividend increases, as well as
capital appreciation.
The Portfolio
The Utility Portfolio seeks to provide monthly income and an opportunity for
rising income and capital appreciation by investing in electric utility common
stocks believed to have the potential to increase future dividends.* It is
powered by the 15 highest dividend-yielding stocks from a list of
professionally selected electric utility stocks.
The Selection Process
The Utility Portfolio stocks have been selected based on the following
criteria:
o 50-year history of uninterrupted dividend payments.
o No dividend cuts over the past ten years.
o Record of rising dividends during the past ten years.
o Potential for future dividend increases.
o Average or better investment risk ratings.
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* The value of common stocks fluctuates, and dividends are subject to
declaration by the issuers.
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o Bond agency rating of "A" or better.
The result is a portfolio diversified within the electric utility sector.
Buy with Knowledge -- Hold With Confidence
This Defined Asset Fund is a convenient way to invest in a diversified
portfolio of utility companies. The Portfolio follows a "buy and hold"
investment strategy of selecting stocks and holding them for a two-year period.
However, each stock is reviewed regularly and can be sold in the event of a
significant adverse development. At the end of two years, we intend to reapply
the screening process to create a new Portfolio. You can choose to roll your
proceeds to a new Portfolio, if available, or redeem your investment.
Defined Advantages
o 15 electric utility industry stocks.
o A defined two-year term.
o Monthly income -- not quarterly like the stocks themselves.
o Option to reinvest income distributions at a reduced sales charge.
o Minimum investment of $250.
o Liquidity (at a price based on the then-current net asset value which may
be more or less than your original cost).
*The value of common stocks fluctuates, and dividends are subject to declaration
by the issuers.
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A DEFINED PORTFOLIO
Company Symbol
- ------- ------
Allegheny Energy, Inc. AYE
This electric utility holding company serves portions of Pennsylvania,
Maryland, W. Virginia, Virginia and Ohio. As one of the lowest-cost power
suppliers in the eastern U.S., we believe Allegheny should remain
competitive in deregulated markets. Cancellation of the merger with DQE,
Inc. makes this company an attractive merger candidate.
American Electric Power Company, Inc. AEP
One of the largest electric utility companies in the U.S., this company
serves parts of seven midwestern states while attempting to establish
itself as a national electricity brand name. A proposed merger with
Central and SouthWest will extend its service area from Canada to Mexico.
Carolina Power & Light Company CPL
This company supplies electricity to the fast-growing areas of
Raleigh/Wilmington, N. Carolina and Florence/Sumter, S. Carolina. Its
non-regulated businesses include energy services and an Internet-based
services provider. With the acquisition of North Carolina Natural Gas in
1999 and the pending acquisition of Florida Progress, we believe growth
should continue.
Consolidated Edison, Inc. ED
As one of the nation's largest energy companies, Con Ed provides electric
service to more than eight million people. Its restructuring has allowed
the company to improve its cash position through the sale of fossil
generating units. A recent merger with Orange and Rockland Utilities and a
pending Northeast Utilities acquisition should make it a meaningful
regional utility. Con Ed has increased its dividend for 20 consecutive
years.
Constellation Energy Group CEG
This holding company for Baltimore Gas and Electric Company provides gas
and electric utility services to Baltimore and parts of central Maryland.
Its subsidiaries are involved in power generation projects, financial
investments and real estate. Dividends have increased for eight
consecutive years.
DPL, Inc. DPL
DPL, the holding company for Dayton Power & Light Company, sells
electricity and natural gas to residential, commercial and government
customers in West Central Ohio. We believe DPL is well-positioned for
competition, with above-average dividend yield and a strong cash flow.
Dominion Resources, Inc. D
This utility holding company's primary service territory is most of
Virginia. It also invests in 27 independent non-utility electric power
generation projects in six states. Because of reasonable rates, this
company's competitive position is above average.
IDACORP, Inc. IDA
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Company Symbol
- ------- ------
This holding company for Idaho Power has the lowest generation cost in the
entire country, due to its extensive hydro-generated power. The company
has one of the highest customer growth rates in the country.
LG&E Energy Corporation LGE
LG&E is the holding company for Louisville Gas & Electric and Kentucky
Utilities. It also owns independent power projects and Argentine gas
assets. With 44 years of dividend growth, it has been a small but
meaningful player in the industry.
Minnesota Power, Inc. MPL
Minnesota Power is a public utility with operations in four business
areas: electric utility, water utility, automobile auctions (including a
finance and an auto transport company) and investments. Non-utility
operations now account for 43% of revenue.
New Century Energies, Inc. NCE
This holding company was formed in August 1997 with the merger of Public
Service Company of Colorado and Southwestern Public Service Company. New
Century is a non-nuclear low-cost producer of electricity, with retail
rates well below both regional and national averages. The pending merger
with Northern States Power will create a large regional utility.
Northern States Power Company NSP
This company and its wholly owned subsidiary, Northern States Power
Company-Wisconsin, provide electric and gas service to customers in
Minnesota, Wisconsin, North Dakota, South Dakota and Michigan. Its non-
utility operation, NRG Energy, develops, builds, acquires, owns and
operates several non-regulated energy-related businesses. The pending
merger with New Century Energies will create a large regional utility.
TECO Energy, Inc. TE
TECO is a diversified energy holding company with utility operations that
serve the growing Florida west coast. Its diverse businesses include water
transportation, natural gas production, coal mining, international
electric distribution and independent power generation. The company has
increased its dividend for 39 consecutive years.
Wisconsin Energy Corporation WEC
Wisconsin Energy is the holding company for Wisconsin Electric Power and
Wisconsin Natural Gas Co. This company is a low-cost power generator with
a long history of supportive regulation with below-industry debt levels
and a healthy service territory. Its non-utility subsidiaries develop and
invest in real estate projects within Wisconsin Electric's service
territories.
WPS Resources Corporation WPS
WPS is the holding company for Wisconsin Public Service Corporation and
WPS Energy Services. Based in Green Bay, Wisconsin, its companies provide
electricity, natural gas, alternative fuel products, risk management
consulting services, real-time energy management services and project
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management. The company has increased its dividends for 40 consecutive
years.
Defined Asset Funds - Our Philosophy
At Defined Asset Funds, we are ever mindful that behind every investment dollar
lies something infinitely more important - your investment goal. This is why we
offer a full range of defined investments designed to meet a variety of
objectives.
We are committed to providing our investors with some of today's most
attractive equity and fixed-income investments, within the convenient "buy and
hold" structure of a Unit Investment Trust. For income, for growth or for total
return, we believe that time in the market can be an effective strategy for
growing your portfolio.
At Defined Asset Funds, we set the foundation for all of our portfolios in this
way, because we too have an important goal in mind - yours.
Turn on the Power of Electric Utilities!
You can get started today with the Utility Portfolio for about $250. Call your
financial professional for a free prospectus containing more complete
information, including sales charges, expenses and risks. Please read it
carefully before you invest or send money.
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.
o The Portfolio is designed for investors who can assume the risks
associated with equity investments. It may not be appropriate for
investors seeking preservation of capital.
o The Portfolio is concentrated in common stocks of issuers in the
domestic electric utility industry.
o There can be no assurance that the Portfolio will meet its objective,
that dividend rates will be maintained or that stock prices will not
decrease.
o The value of your investment will fluctuate with the prices of the
underlying stocks.
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o These stocks may have higher yields because they are experiencing
financial difficulties or are out of favor. There can be no assurance
that the market factors that caused these relatively low prices and
high yields will change.
A Tax-Efficient Structure
When seeking capital appreciation, managing tax liability on capital gains can
be vital to your overall return.
Generally, dividends and any gains will be subject to tax each year, whether or
not reinvested. By holding this Fund for more than one year, individuals may be
eligible for favorable federal tax rates on net long-term capital gains
(currently no more than 20%) for individuals. However on rollovers to future
Portfolios, if available, investors will defer recognition of capital gains and
losses for federal income tax purposes on stocks transferred to the new
Portfolio. Please consult your tax advisor concerning state and local taxation.
Defining Your Costs
You will pay an initial sales charge of about 1% the first time you buy. In
addition, you'll pay a deferred sales charge in 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 ($35.00 total).
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As a % of Amount Per
Public Offering Price 1,000 Units
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Initial Sales Charge 1.00% $10.00
Deferred Sales Charge Year 1 1.75% $17.50
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Deferred Sales Charge Year 2 1.75% $17.50
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Maximum Sales Charge 4.50% $45.00
Estimated Annual Expenses
(as a % of net assets) 0.201% $ 1.99
Estimated Organization Costs $ 2.37
If you sell your units before the final deferred sales charge payment in either
year, the remaining deferred sales charge for that year will be deducted, along
with the estimated costs of selling Portfolio securities, from the proceeds you
receive. You will only pay the deferred sales charge.
Volume Purchase Discounts
For larger purchases, the overall sales charges are reduced to put more of your
investment dollars to work for you.
Amount Total Two-Year Sales Charge as a %
Purchased of Public Offering Price
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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%
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32709BR-12/99
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(c) 1999 Merrill Lynch, Pierce, Fenner & Smith Incorporated. Member SIPC.
Defined Asset Funds is a registered service mark of Merrill Lynch & Co., Inc.
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