Defined
Assets Funds[SM]
THE S&P
500
TRUST 2
Merrill Lynch
Instead of comparing your investment to an index, why not make an index trust
your investment . . .
For equity investors, it's second nature to compare the performance of an
investment with a general market measure, like an index. But have you
considered that your best performance opportunity over time may not be
attempting to outperform the index, but to invest like it?
Investing in a broad representation of the market, or indexing, is a strategy
that most equity investors can use as a part of their overall financial plan;
to seek potential growth in otherwise conservative portfolios or as a companion
investment to hedge an aggressive equity strategy.
Indexing approximates market performance, such as the S&P 500.(*)
Diversification, through an indexed approach to equity investing, reduces the
risks associated with individual stock selection.
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*"S&P 500" is a trademark of the Standard & Poor's Corporation. The
Standard & Poor's Corporation has not participated in any way in the creation
of the Trust and is not affiliated with any of the Trust's sponsors.
The S&P 500 Index Trust 2
We have a way for you to seek results similar to those of the S&P 500 Index.
The objective of the Trust is to track the total return of the S&P 500. It was
created for investors, like you, who are looking for an opportunity to reflect
the performance of a major market index at a reasonable cost.
Index Investing Offers Investors
Several Benefits:
Risk Reduction through Diversification
One of the best reasons for an indexing approach to investing is
diversification. By owning units of this Trust, you participate in a broad
portfolio. Through one purchase, you are instantly diversified among hundreds
of companies in four industry sectors. In this way, your exposure to risk is
reduced, especially when compared to buying one, two or even ten of the
individual stocks.
Simplified Decision-Making
When you invest in the S&P 500 Trust 2, you don't have to select individual
stocks or market sectors. You are buying the major sectors of the stock market
represented by the index.
Trust Performance
<TABLE>
<S> <C> <C> <C>
One Year Ended Since Fund Inception
(January 1, 1996 -- December 31, (February 20, 1992 -- December 31,
1996) 1996)
o Total Return* 22.69% o Total Return* 100.88%
o Average Annualized Total 19.93% o Average Annualized Total 14.88%
Return** Return**
</TABLE>
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*Total return figures represent changes in unit price plus reinvestment of
income and principal distributions (net of all expenses) but do not reflect
sales charges.
**Average annual returns reflect deduction of maximum applicable sales
charges. Past performance is no guarantee of future results.
A three dimensional bar graph, entitled "Investment Results," shows that if you
invest $10,000 on February 20, 1992 and hold that capital through December 31,
1996, your investment will reach $19,636. The graph is captioned "If you had
invested $10,000 from inception and held throught December 31, 1996, your
investment would have achieved the following results+:" [Footnote text:
+Maximum sales charge was deducted"]: The x asis reflects dollar amounts,
starting with $0. The first increment is $8,000 and increases in $2,000
increments, until the amount reaches $20,000. The y axis reflects years,
starting with 2/20/92, then 12/31/92, 12/31/93, 12/31/94, 12/31/95 and
12/31/96. The six rectangular columns of the bar graph are placed above the
dates on the y axis; the following amounts : $10,000, $10,496, $11,522,
$11,662, $16,005 and $19,636 respectively, are listed on the top of the
columns.
You can also take advantage of benefits not available through the purchase of
individual stocks.
Index investing with Defined Funds offers additional benefits:
Increase Total Return with Lower Costs
The true test of performance is the total return - and the price you pay for
it. Low costs are essential if an index fund is going to work efficiently.
After all, an index is just a benchmark and has no expenses of any kind.
The Trust has no management fees, only a small annual supervisory fee and
operating expenses of about 0.25%. Low costs mean more of your money is
invested and working for you.
Defined Portfolio
You are investing in a known, preselected portfolio of companies.
Liquidity
Your investment may be sold at any time at the then-current market value, which
may be more or less than your original cost.
Monthly Income or Reinvestment
The Trust pays income monthly or you can elect to have dividend income and
capital gains automatically reinvested into additional units of the Trust at
net asset value. By reinvesting your income, you not only increase your
holdings but gain the important benefits that monthly compounding can have on
total return performance.
Convenience
The Trust invests in many stocks but makes it simple with only one price to
track. You can follow the price of your investment each week in Barron's.
Low Minimum Investment
The minimum investment is only $250.
About the S&P 500 Index
o A well-known measure of 500 corporations designed to be the
performance benchmark for the U.S. equity markets.
o The original index was developed in 1923 and comprised of 233
stocks. The list grew to 500 stocks in 1957. In 1976, the
index was restructured to a composite consisting of four
market sectors: industrials, utilities, financials and
transportation.
o Contains a variety of companies with diverse capitalization
in order to represent the overall market. Most of these
companies' stocks are listed on the New York Stock Exchange.
o On December 31, 1996, the Index had a market value of $5,625
trillion.
o The companies in the Index are market-value weighted which
takes into account two factors: price per share and total
number of shares outstanding. Therefore, the larger a
company's capitalization, the greater that company's effect
will be on the performance of the index.
Ten Top Weighted Companies*
Name Ticker Percentage of Total Market Value
General Electric Co. GE 2.778%
Coca-Cola Co. KO 2.441%
Exxon Corp. XON 2.052%
Intel Corp. INTC 1.998%
Microsoft Corp. MSFT 1.963%
Merck & Co. MRK 1.845%
Philip Morris Co. MO 1.782%
Royal Dutch RD 1.555%
Procter & Gamble PG 1.337%
Johnson & Johnson JNJ 1.288%
*As of 3/5/97
Volume Purchase Discounts
For larger purchases, the sales charge is substantially reduced to put a
greater percentage of your investment dollars to work for you.
Sales Charge
As a Percentage of the
Amount Purchased Public Offering Price
Less than $25,000 2.25%
$25,000 to $49,999 2.00%
$50,000 to $74,999 1.75%
$75,000 to $99,999 1.50%
$100,000 to $249,999 1.25%
$250,000 to $999,999 1.00%
$1,000,000 to $4,999,999 .75%
$5,000,000 or more .50%
Risk Factors
As with any equity investment, unit price varies. The Trust may not be
appropriate for investors seeking conservation of capital or high-current
income.
Because of sales charges, Trust expenses and commissions, as well as the fact
that the Trust may not own all of the stocks in the index or in the same
proportions, or be fully invested at all times, Trust performance will vary
somewhat from the performance of the index.
Sound Financial Planning
Your financial professional can help you design a financial plan and explain
how the S&P 500 Trust 2 may help you meet your goals. Contact your financial
professional to request a free prospectus containing more complete information
about the S&P 500 Trust 2 or any other Defined Asset Fund (including sales
charges and expenses).
Read the prospectus carefully before you invest.
