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DEFINED ASSET FUNDSSM
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MUNICIPAL INVESTMENT TRUST FUND
INTERMEDIATE TERM SERIES--235
(TARGETED MATURITIES)
TRUST C (2001-2002)
(A UNIT INVESTMENT TRUST)
O PORTFOLIO OF SHORT-INTERMEDIATE TERM MUNICIPAL
BONDS
O DESIGNED FOR INCOME FREE FROM REGULAR FEDERAL
INCOME TAX
O MONTHLY INCOME DISTRIBUTIONS
O AMT BONDS
SPONSORS:
Merrill Lynch,
Pierce, Fenner & Smith -------------------------------------------------
Incorporated The Securities and Exchange Commission has not
Salomon Smith Barney Inc. approved or disapproved these Securities or
PaineWebber Incorporated passed upon the adequacy of this prospectus. Any
Dean Witter Reynolds Inc. representation to the contrary is a criminal
Prudential Securities offense.
Incorporated Prospectus dated October 30, 1998.
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Def ined Asset FundsSM
For more than 25 years, Defined Asset FundsSM has been a leader in unit
investment trust research and product innovation. Our family of Funds helps
investors work toward their financial goals with a full range of quality
investments, including municipal, corporate and government bond portfolios, as
well as domestic and international equity portfolios.
Defined Asset Funds offer a number of advantages:
o Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
o Preselected Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
o Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
o Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, tolerance for risk or time horizon,
there's probably a Defined Asset Fund that suits your investment style. Your
financial professional can help you select a Defined Asset Fund that works best
for your investment portfolio.
THE FINANCIAL INFORMATION IN THIS PROSPECTUS IS AS OF THE EVALUATION DATE, JULY
31, 1998.
CONTENTS
PAGE
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Risk/Return Summary.................................... 3
What You Can Expect From Your Investment............... 7
Monthly Income...................................... 7
Return Figures...................................... 7
Records and Reports................................. 7
The Risks You Face..................................... 8
Interest Rate Risk.................................. 8
Call Risk........................................... 8
Reduced Diversification Risk........................ 8
Liquidity Risk...................................... 8
Bond Quality Risk................................... 8
Insurance Related Risk.............................. 8
Litigation and Legislation Risks.................... 8
Selling or Exchanging Units............................ 9
Sponsors' Secondary Market.......................... 9
Selling Units to the Trustee........................ 9
Exchange Option..................................... 10
How The Fund Works..................................... 10
Pricing............................................. 10
Evaluations......................................... 10
Income.............................................. 10
Expenses............................................ 10
Portfolio Changes................................... 11
Fund Termination.................................... 11
Certificates........................................ 11
Trust Indenture..................................... 12
Legal Opinion....................................... 12
Auditors............................................ 12
Sponsors............................................ 13
Trustee............................................. 13
Underwriters' and Sponsors' Profits................. 13
Public Distribution................................. 13
Code of Ethics...................................... 13
Year 2000 Issues.................................... 14
Taxes.................................................. 14
Supplemental Information............................... 15
Financial Statements................................... D-1
2
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RISK/RETURN SUMMARY
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks interest income that is exempt from regular
federal income taxes by investing in a fixed portfolio
consisting primarily of municipal revenue bonds with an
estimated average life of 3 years.
2. WHAT ARE MUNICIPAL REVENUE BONDS?
Municipal revenue bonds are bonds issued by states,
municipalities and public authorities to finance the cost
of buying, building or improving various projects intended
to generate revenue, such as airports, health care
facilities, housing and municipal electric, water and sewer
utilities. Generally, payments on these bonds depend solely
on the revenues generated by the projects, excise taxes or
state appropriations, and are not backed by the
government's taxing power.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
O The Fund plans to hold to maturity 16 short-intermediate
term tax-exempt municipal bonds with a current aggregate
face amount of $8,660,000. The Fund is a unit investment
trust which means that, unlike a mutual fund, the Fund's
portfolio is not managed. When the bonds were initially
deposited (August 5, 1994), they were rated A or better by
Standard & Poor's, Moody's or Duff & Phelps, or in the
opinion of the agent for the Sponsors had similar credit
quality to bonds rated A or better. The credit quality of
the bonds may currently be lower.
o Some of the bonds can be called at a premium declining over
time to par value. Some bonds may be called earlier at par
for extraordinary reasons.
o 29% of the bonds are insured by insurance companies.
Insurance guarantees timely payments of principal and
interest on the bonds (but not Fund units or the market
value of the bonds before they mature).
The Portfolio consists of municipal bonds of the following
types:
APPROXIMATE
PORTFOLIO
PERCENTAGE
o Financial Institutions 3%
o General Obligation 22%
o Hospitals/Health Care 18%
o Lease Rental Appropriation 17%
o Industrial Development Revenues 9%
o Refunded Bonds 16%
o State/Local Government Supporsted 4%
o Transportation 11%
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE FUND. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Rising interest rates, an issuer's worsening financial
condition or a drop in bond ratings can reduce the price of
your units.
o Assuming no changes in interest rates, when you sell your
units, they will generally be worth less than your cost
because your cost included a sales fee.
o The Fund will receive early returns of principal if bonds
are called or sold before they mature. If this happens your
income will decline and you may not be able to reinvest the
money you receive at as high a yield or as long a maturity.
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want monthly income free from regular federal
income tax. You will benefit from a professionally selected
and supervised portfolio whose risk is reduced by investing
in bonds of several different issuers.
The Fund is not appropriate for you if you want a
speculative investment that changes to take advantage of
market movements, if you do not want a tax-advantaged
investment, if you are subject to AMT or if you cannot
tolerate any risk.
3
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DEFINING YOUR INCOME
WHAT YOU MAY EXPECT (PAYABLE ON THE 25TH DAY OF
EACH MONTH):
Regular Monthly Income per unit $ 4.27
Annual Income per unit $ 51.30
RECORD DAY: 10th day of each month
These figures are estimates on the evaluation date; actual
payments may vary.
6. WHAT ARE THE FUND'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.
INVESTOR FEES
2.50%
Maximum Sales Fee (Load) on new purchases
(as a percentage of $1,000 invested)
Employees of some of the Sponsors and their affiliates may
be charged a reduced sales fee of no less than $5.00 per
Unit.
The maximum sales fee is reduced if you invest at least
$100,000, as follows:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
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Less than $100,000 2.50%
$100,000 to $249,999 2.25%
$250,000 to $499,999 2.00%
$500,000 to $999,999 1.75%
$1,000,000 and over 1.50%
Maximum Exchange Fee 1.50%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
AMOUNT
PER UNIT
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$ 0.67
Trustee's Fee
$ 0.44
Portfolio Supervision,
Bookkeeping and
Administrative Fees
$ 0.32
Evaluator's Fee
$ 0.24
Other Operating Expenses
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$ 1.67
TOTAL
7. IS THE FUND MANAGED?
Unlike a mutual fund, the Fund is not managed and bonds are
not sold because of market changes. Rather, experienced
Defined Asset Funds financial analysts regularly review the
bonds in the Fund. The Fund may sell a bond if certain
adverse credit or other conditions exist.
8. HOW DO I BUY UNITS?
You can buy units from any of the Sponsors and other
broker-dealers. The Sponsors are listed later in this
prospectus. Some banks may offer units for sale through
special arrangements with the Sponsors, although certain
legal restrictions may apply.
The minimum investment is $250.
UNIT PRICE PER UNIT $1,016.55
(as of July 31, 1998)
Unit price is based on the net asset value of the Fund plus
the sales fee. An amount equal to any principal cash, as
well as net accrued but undistributed interest on the unit,
is added to the unit price. An independent evaluator prices
the bonds at 3:30 p.m. Eastern time every business day.
Unit price changes every day with changes in the prices of
the bonds in the Fund.
UNIT PAR VALUE $1,000.00
Unit par value means the total amount of money you should
generally receive on each unit by the termination of the
Fund (other than interest and premium on the bonds). This
total amount assumes that all bonds in the Fund are either
paid at maturity or called by the issuer at par or are sold
by the Fund at par. If you sell your units before the Fund
terminates, you may receive more or less than the unit par
value.
4
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9. HOW DO I SELL UNITS?
You may sell your units at any time to any
Sponsor or the Trustee for the net asset
value determined at the close of business on
the date of sale, less any remaining deferred
sales fee. You will not pay any other fee
when you sell your units.
10. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income monthly. In the opinion of bond
counsel when each bond was issued, interest on the bonds in
this Fund is generally 100% exempt from regular federal
income tax.
Interest on approximately 38% of the bonds will be a
preference item for Alternative Minimum Tax. A portion of
the income may also be exempt from state and local personal
income taxes, depending on where you live.
You will also receive principal payments if bonds are sold
or called or mature, when the cash available is more than
$5.00 per unit. You will be subject to tax on any gain
realized by the Fund on the disposition of bonds.
11. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your monthly income in cash unless you
choose to compound your income by reinvesting at no sales
fee in the Municipal Fund Investment Accumulation Program,
Inc. This Program is an open-end mutual fund with a
comparable investment objective. Income from this Program
will generally be subject to state and local income taxes.
For more complete information about the Program, including
charges and fees, ask the Trustee for the Program's
prospectus. Read it carefully before you invest. The
Trustee must receive your written election to reinvest at
least 10 days before the record day of an income payment.
EXCHANGE PRIVILEGES
You may exchange units of this Fund for units of certain
other Defined Asset Funds. You may also exchange into this
Fund from certain other funds. We charge a reduced sales
fee on exchanges.
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TAX-FREE VS. TAXABLE INCOME: A COMPARISON OF TAXABLE AND TAX-FREE YIELDS
<TABLE><CAPTION>
EFFECTIVE
TAXABLE INCOME 1998* % TAX TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN BRACKET 3% 3.5% 4% 4.5% 5% 5.5% 6% 6.5%
IS EQUIVALENT TO A TAXABLE YIELD OF
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 25,350 $ 0- 42,350 15.00 3.53 4.12 4.71 5.29 5.88 6.47 7.06 7.65
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$ 25,351- 61,400 $ 42,351-102,300 28.00 4.17 4.86 5.56 6.25 6.94 7.64 8.33 9.03
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$ 61,401-128,100 $102,301-155,950 31.00 4.35 5.07 5.80 6.52 7.25 7.97 8.70 9.42
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$128,101-278,450 $155,951-278,450 36.00 4.69 5.47 6.25 7.03 7.81 8.59 9.38 10.16
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OVER $278,450 OVER $278,450 39.60 4.97 5.79 6.62 7.45 8.28 9.11 9.93 10.76
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</TABLE>
To compare the yield of a taxable security with the yield of a federally
tax-free security, find your taxable income and read across. The table
incorporates 1998 federal income tax rates and assumes that all income would
otherwise be taxed at a U.S. investor's highest tax rate. Yield figures are for
example only.
*Based upon net amount subject to federal income tax after deductions and
exemptions. This table does not reflect the possible effect of other tax
factors, such as alternative minimum tax, personal exemptions, the phase-out of
exemptions, itemized deductions, the possible partial disallowance of deductions
or state and local taxation. Consequently, investors are urged to consult their
own tax advisers in this regard.
MUNICIPAL BONDS AND THE ALTERNATIVE MINIMUM TAX
INCOME+ MAXIMUM 'PREFERENCE' INCOME
WITHOUT TRIGGERING AMT
(STATE INCOME TAX RATES)
SINGLE ++ JOINT ++ 0% 7% 11%
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$50,000 $21,000 $16,000 $14,000
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$30,000 $20,000 $16,000 $15,000
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$100,000 $25,000 $16,000 $12,000
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$55,000 $22,000 $16,000 $14,000
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$225,000 $31,000 $14,000 $5,000
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$205,000 $31,000 $15,000 $7,000
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NOTES:
+ Regular taxable income plus state income
taxes and personal exemptions.
++ Assuming no dependents.
Under federal tax law, interest income on certain municipal bonds, although
exempt from regular income tax, is treated as a 'preference' item for purposes
of AMT. The table above shows amounts of such municipal bond 'preference'
interest income, assuming no other 'preference' or similar items apply, that
individual taxpayers could receive in 1998 without becoming subject to the AMT.
The table gives information for single and joint returns of U.S. individuals
having no dependents. The table provides three income levels and three
hypothetical state income tax rates. The table further assumes that the stated
amount of municipal bond 'preference' interest income is subject to state income
taxes.
6
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WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
MONTHLY INCOME
The Fund will pay you regular monthly income. Your monthly income may vary
because of:
o elimination of one or more bonds from the Fund's portfolio because of
calls, redemptions or sales;
o a change in the Fund's expenses; or
o the failure by a bond's issuer to pay interest.
Changes in interest rates generally will not affect your monthly income because
the portfolio is fixed.
Along with your monthly income, you will receive your share of any available
bond principal.
RETURN FIGURES
We cannot predict your actual return, which will vary with unit price, how long
you hold your investment and changes in the portfolio, interest income and
expenses.
Estimated Current Return equals the estimated annual cash to be received from
the bonds in the Fund less estimated annual Fund expenses, divided by the Unit
Price (including the maximum sales fee):
Estimated Annual Estimated
Interest Income - Annual Expenses
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Unit Price
Estimated Long Term Return is a measure of the estimated return over the
estimated life of the Fund. Unlike Estimated Current Return, Estimated Long Term
Return reflects maturities, discounts and premiums of the bonds in the Fund. It
is an average of the yields to maturity (or in certain cases, to an earlier call
date) of the individual bonds in the portfolio, adjusted to reflect the Fund's
maximum sales fee and estimated expenses. We calculate the average yield for the
portfolio by weighting each bond's yield by its market value and the time
remaining to the call or maturity date.
Yields on individual bonds depend on many factors including general conditions
of the bond markets, the size of a particular offering and the maturity and
quality rating of the particular issues. Yields can vary among bonds with
similar maturities, coupons and ratings.
These return quotations are designed to be comparative rather than predictive.
RECORDS AND REPORTS
You will receive:
o a monthly statement of income payments and any principal payments;
o a notice from the Trustee when new bonds are deposited in exchange or
substitution for bonds originally deposited;
o an annual report on Fund activity; and
o annual tax information. This will also be sent to the IRS. You must report the
amount of tax-exempt interest received during the year.
You may request:
o copies of bond evaluations to enable you to comply with federal and state tax
reporting requirements; and
o audited financial statements of the Fund.
You may inspect records of Fund transactions at the Trustee's office during
regular business hours.
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THE RISKS YOU FACE
INTEREST RATE RISK
Investing involves risks, including the risk that your investment will decline
in value if interest rates rise. Generally, bonds with longer maturities will
change in value more than bonds with shorter maturities. Bonds in the Fund are
more likely to be called when interest rates decline. This would result in early
returns of principal to you and may result in early termination of the Fund. Of
course, we cannot predict how interest rates may change.
CALL RISK
Many bonds can be prepaid or 'called' by the issuer before their stated
maturity.
For example, an issuer might call its bonds if it no longer needs the money for
the original purpose or, during periods of falling interest rates, if the
issuer's bonds have a coupon higher than current market rates. If the bonds are
called, your income will decline and you may not be able to reinvest the money
you receive at as high a yield or as long a maturity. An early call at par of a
premium bond will reduce your return.
REDUCED DIVERSIFICATION RISK
If many investors sell their units, the Fund will have to sell bonds. This could
reduce the diversification of your investment and increase your share of Fund
expenses.
LIQUIDITY RISK
The bonds will generally trade in the over-the-counter market. We cannot assure
you that a liquid trading market will exist, especially since current law may
restrict the Fund from selling bonds to any Sponsor. The value of the bonds, and
of your investment, may be reduced if trading in bonds is limited or absent.
Changes to the portfolio from bond redemptions, maturities and sales may affect
the Fund's concentration over time.
BOND QUALITY RISK
A reduction in a bond's rating may decrease its value and, indirectly, the value
of your investment in the Fund.
INSURANCE RELATED RISK
Some bonds are backed by insurance companies (as shown under Defined Portfolio).
Insurance policies generally make payments only according to a bond's original
payment schedule and do not make early payments when a bond defaults or becomes
taxable. Although the federal government does not regulate the insurance
business, various state laws and federal initiatives and tax law changes could
significantly affect the insurance business. The claims-paying ability of the
insurance companies is generally rated A or better by Standard & Poor's or
another nationally recognized rating organization. The insurance company ratings
are subject to change at any time at the discretion of the rating agencies.
LITIGATION AND LEGISLATION RISKS
We do not know of any pending litigation that might have a material adverse
effect upon the Fund.
Future tax legislation could affect the value of the portfolio by:
o limiting real property taxes,
o reducing tax rates,
o imposing a flat or other form of tax, or
o exempting investment income from tax.
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SELLING OR EXCHANGING UNITS
You can sell your units at any time for a price based on net asset value. Your
net asset value is calculated each business day by:
o adding the value of the bonds, net accrued interest, cash and any other
Fund assets;
o subtracting accrued but unpaid Fund expenses, unreimbursed Trustee
advances, cash held to buy back units or for distribution to investors and
any other Fund liabilities; and
o dividing the result by the number of outstanding units.
Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the portfolio.
SPONSORS' SECONDARY MARKET
While we are not obligated to do so, we will buy back units at net asset value
without any other fee or charge other than any remaining deferred sales charge.
We may resell the units to other buyers or to the Trustee. You should consult
your financial professional for current market prices to determine if other
broker-dealers or banks are offering higher prices.
We have maintained a secondary market continuously for over 25 years, but we
could discontinue it without prior notice for any business reason.
SELLING UNITS TO THE TRUSTEE
Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at any time by sending the Trustee a letter (with any outstanding
certificates if you hold Unit certificates). You must properly endorse your
certificates (or execute a written transfer instrument with signatures
guaranteed by an eligible institution). Sometimes, additional documents are
needed such as a trust document, certificate of corporate authority, certificate
of death or appointment as executor, administrator or guardian.
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.
As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee may sell your units in the over-the-counter market for a
higher price, but it is not obligated to do so. In that case, you will receive
the net proceeds of the sale.
If the Fund does not have cash available to pay you for units you are selling,
the agent for the Sponsors will select bonds to be sold. Bonds will be selected
based on market and credit factors. These sales could be made at times when the
bonds would not otherwise be sold and may result in your receiving less than the
unit par value and also reduce the size and diversity of the Fund.
There could be a delay in paying you for your units:
o if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
o if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
bonds not reasonably practicable; and
o for any other period permitted by SEC order.
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EXCHANGE OPTION
You may exchange units of certain Defined Asset Funds for units of this Fund at
a maximum exchange fee of 1.50%. You may exchange units of this Fund for units
of certain other funds at a reduced sales fee if your investment goals change.
To exchange units, you should talk to your financial professional about what
funds are exchangeable, suitable and currently available.
Normally, an exchange is taxable and you must recognize any gain or loss on the
exchange. However, the IRS may try to disallow a loss if the portfolios of the
two funds are not materially different; you should consult your own tax adviser.
We may amend or terminate this exchange option at any time without notice.
HOW THE FUND WORKS
PRICING
The price of a unit includes interest accrued on the bonds, less expenses, from
the most recent Record Day up to, but not including, the settlement date, which
is usually three business days after the purchase date of the unit.
A portion of the price of a unit consists of cash so that the Trustee can
provide you with regular monthly income. When you sell your units you will
receive your share of this cash.
EVALUATIONS
An independent Evaluator values the bonds on each business day (excluding
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas).
Bond values are based on current bid or offer prices for the bonds or comparable
bonds. In the past, the difference between bid and offer prices of publicly
offered tax-exempt bonds has ranged from 0.5% of face amount on actively traded
issues to 3.5% on inactively traded issues; the difference has averaged between
1 and 2%.
INCOME
The Trustee credits interest to an Income Account and other receipts to a
Capital Account. The Trustee may establish a Reserve Account by withdrawing from
these accounts amounts it considers appropriate to pay any material liability.
These accounts do not bear interest.
EXPENSES
The Trustee is paid monthly. It also benefits when it holds cash for the Fund in
non-interest bearing accounts. The Trustee may also receive additional amounts:
o to reimburse the Trustee for the Fund's operating expenses;
o for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
o costs of actions taken to protect the Fund and other legal fees and
expenses;
o expenses for keeping the Fund's registration statement current; and
o Fund termination expenses and any governmental charges.
The Sponsors are currently reimbursed up to 45 cents per $1,000 face amount
annually for providing portfolio supervisory, bookkeeping and administrative
services and for any other
10
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expenses properly chargeable to the Fund. While this fee may exceed the amount
of these costs and expenses attributable to this Fund, the total of these fees
for all Series of Defined Asset Funds will not exceed the aggregate amount
attributable to all of these Series for any calendar year. The Fund also pays
the Evaluator's fees.
The Trustee's, Sponsors' and Evaluator's fees may be adjusted for inflation
without investors' approval.
The Sponsors will pay advertising and selling expenses at no charge to the Fund.
If Fund expenses exceed initial estimates, the Fund will owe the excess. The
Trustee has a lien on Fund assets to secure reimbursement of Fund expenses and
may sell bonds if cash is not available.
PORTFOLIO CHANGES
The Sponsors and Trustee are not liable for any default or defect in a bond.
Unlike a mutual fund, the portfolio is designed to remain intact and we may keep
bonds in the portfolio even if their credit quality declines or other adverse
financial circumstances occur. However, we may sell a bond in certain cases if
we believe that certain adverse credit conditions exist or if a bond becomes
taxable.
If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which will affect the size
and composition of the portfolio. Units offered in the secondary market may not
represent the same face amount of bonds that they did originally.
We decide whether or not to offer units for sale that we acquire in the
secondary market after reviewing:
o diversity of the portfolio;
o size of the Fund relative to its original size;
o ratio of Fund expenses to income;
o current and long-term returns;
o degree to which units may be selling at a premium over par; and
o cost of maintaining a current prospectus.
FUND TERMINATION
The Fund will terminate following the stated maturity or sale of the last bond
in the portfolio. The Fund may also terminate earlier with the consent of
investors holding 51% of the units or if total assets of the Fund have fallen
below 40% of the face amount of bonds deposited. We will decide whether to
terminate the Fund early based on the same factors used in deciding whether or
not to offer units in the secondary market.
When the Fund is about to terminate you will receive a notice, and you will be
unable to sell your units after that time. On or shortly before termination, we
will sell any remaining bonds, and you will receive your final distribution. Any
bond that cannot be sold at a reasonable price may continue to be held by the
Trustee in a liquidating trust pending its final sale.
You will pay your share of the expenses associated with termination, including
brokerage costs in selling bonds. This may reduce the amount you receive as your
final distribution.
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CERTIFICATES
Certificates for units are issued on request. You may transfer certificates by
complying with the requirements for redeeming certificates, described above. You
can replace lost or mutilated certificates by delivering satisfactory indemnity
and paying the associated costs.
TRUST INDENTURE
The Fund is a 'unit investment trust' governed by a Trust Indenture, a contract
among the Sponsors, the Trustee and the Evaluator, which sets forth their duties
and obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
The Sponsors and the Trustee may amend the Indenture without your consent:
o to cure ambiguities;
o to correct or supplement any defective or inconsistent provision;
o to make any amendment required by any governmental agency; or
o to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsors).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in the Fund without your written consent.
The Trustee may resign by notifying the Sponsors. The Sponsors may remove the
Trustee without your consent if:
o it fails to perform its duties and the Sponsors determine that its
replacement is in your best interest; or
o it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities.
Investors holding 51% of the units may remove the Trustee. The Evaluator may
resign or be removed by the Sponsors and the Trustee without the consent of
investors. The resignation or removal of either becomes effective when a
successor accepts appointment. The Sponsors will try to appoint a successor
promptly; however, if no successor has accepted within 30 days after notice of
resignation, the resigning Trustee or Evaluator may petition a court to appoint
a successor.
Any Sponsor may resign as long as one Sponsor with a net worth of $2 million
remains and agrees to the resignation. The remaining Sponsors and the Trustee
may appoint a replacement. If there is only one Sponsor and it fails to perform
its duties or becomes bankrupt the Trustee may:
o remove it and appoint a replacement Sponsor;
o liquidate the Fund; or
o continue to act as Trustee without a Sponsor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee, the Sponsors and the Evaluator.
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsors, has given an opinion that the units are
validly issued.
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AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statement of Condition included in this
prospectus.
SPONSORS
The Sponsors are:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051
SALOMON SMITH BARNEY INC. (an indirectly wholly-owned subsidiary of The
Travelers Inc.)
388 Greenwich Street--23rd Floor,
New York, NY 10013
DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048
PRUDENTIAL SECURITIES INCORPORATED (an indirect wholly-owned subsidiary of the
Prudential Insurance Company of America)
One New York Plaza
New York, NY 10292
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019
Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
TRUSTEE
The Chase Manhattan Bank, Unit Investement Trust Department, 4 New York
Plaza--6th Floor, New York, New York 10004, is the Trustee.
It is supervised by the Federal Deposit Insurance Corporation, the Board of
Governors of the Federal Reserve System and New York State banking authorities.
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. The Sponsors also
realized a profit or loss on the initial deposit of the bonds. Any cash made
available by you to the Sponsors before the settlement date for those units may
be used in the Sponsors' businesses to the extent permitted by federal law and
may benefit the Sponsors.
A Sponsor or Underwriter may realize profits or sustain losses on bonds in the
Fund which were acquired from underwriting syndicates of which it was a member.
In maintaining a secondary market, the Sponsors will also realize profits or
sustain losses in the amount of any difference between the prices at which they
buy units and the prices at which they resell or redeem them.
PUBLIC DISTRIBUTION
The Sponsors do not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.
13
<PAGE>
CODE OF ETHICS
Merrill Lynch, as agent for the Sponsors, has adopted a code of ethics requiring
preclearance and reporting of personal securities transactions by its employees
with access to information on portfolio transactions. The goal of the code is to
prevent fraud, deception or misconduct against the Fund and to provide
reasonable standards of conduct.
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the 'Year
2000 Problem'). We do not expect that the computer system changes necessary to
prepare for the Year 2000 will cause any major operational difficulties for the
Fund.
TAXES
The following summary describes some of the important income tax consequences of
holding units. It assumes that you are not a dealer, financial institution,
insurance company or other investor with special circumstances. You should
consult your own tax adviser about your particular circumstances.
At the date of issue of each bond, counsel for the issuer delivered an opinion
to the effect that interest on the bond is exempt from regular federal income
tax. However, interest may be subject to state and local taxes and federal
alternative minimum tax. Neither we nor our counsel have reviewed the issuance
of the bonds, related proceedings or the basis for the opinions of counsel for
the issuers. We cannot assure you that the issuer (or other users) have complied
or will comply with any requirements necessary for a bond to be tax-exempt. If
any of the bonds were determined not to be tax-exempt, you could be required to
pay income tax for current and prior years, and if the Fund were to sell the
bond, it might have to sell it at a substantial discount.
In the opinion of our counsel, under existing law:
GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT
The Fund will not be taxed as a corporation for federal income tax purposes, and
you will be considered to own directly your share of each bond in the Fund.
INCOME OR LOSS UPON DISPOSITION
When all or part of your share of a bond is disposed of (for example, when the
Fund sells, exchanges or redeems a bond or when you sell or exchange your
units), you will generally recognize capital gain or loss. Your gain, however,
will generally be ordinary income to the extent of any accrued 'market
discount'. Generally you will have market discount to the extent that your basis
in a bond when you purchase a unit is less than its stated redemption price at
maturity (or, if it is an original issue discount bond, the issue price
increased by original issue discount that has accrued on the bond before your
purchase). You should consult your tax adviser in this regard.
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain from the Fund will
14
<PAGE>
be long-term if you are considered to have held your investment on each bond for
more than one year and short-term if you held it for one year or less. If you
are an individual and sell your units after holding them for more than 12
months, you may be entitled to a 20% maximum federal tax rate on any resulting
gains. Consult your tax adviser in this regard. Because the deductibility of
capital losses is subject to limitations, you may not be able to deduct all of
your capital losses.
YOUR BASIS IN THE BONDS
Your aggregate basis in the bonds will be equal to the cost of your units,
including any sales charges and the organizational expenses you pay, adjusted to
reflect any accruals of 'original issue discount,' 'acquisition premium' and
'bond premium'. You should consult your tax adviser in this regard.
EXPENSES
If you are not a corporate investor, you will not be entitled to a deduction for
your share of fees and expenses of the Fund. Also, if you borrowed money in
order to purchase or carry your units, you will not be able to deduct the
interest on this borrowing for federal income tax purposes. The IRS may treat
your purchase of units as made with borrowed money even if the money is not
directly traceable to the purchase of units.
STATE AND LOCAL TAXES
Under the income tax laws of the State and City of New York, the Fund will not
be taxed as a corporation. If you are a New York taxpayer, your income from the
Fund will not be tax-exempt in New York except to the extent that the income is
earned on bonds that are tax-exempt for New York purposes. Depending on where
you live, your income from the Fund may be subject to state and local taxation.
You should consult your tax adviser in this regard.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Fund by calling
the Trustee. The supplemental information includes more detailed risk disclosure
about the types of bonds that may be in the Fund's portfolio, general risk
disclosure concerning any insurance securing certain bonds, and general
information about the structure and operation of the Fund. The supplemental
information is also available from the SEC.
15
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
INTERMEDIATE TERM SERIES - 235 (TARGETED MATURITIES),
DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Municipal Investment Trust Fund,
Intermediate Term Series - 235 (Targeted Maturities),
Defined Asset Funds (Trust C):
We have audited the accompanying statement of condition of
Municipal Investment Trust Fund, Intermediate Term Series -
235 (Targeted Maturities), Defined Asset Funds (Trust C),
including the portfolio, as of July 31, 1998 and the related
statements of operations and of changes in net assets for
the years ended July 31, 1998, 1997 and 1996. These
financial statements are the responsibility of the Trustee.
Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. Securities owned at July 31,
1998, as shown in such portfolio, were confirmed to us by
The Chase Manhattan Bank, the Trustee. An audit also
includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Municipal Investment Trust Fund,
Intermediate Term Series - 235 (Targeted Maturities),
Defined Asset Funds (Trust C), at July 31, 1998 and
the results of its operations and changes in its net
assets for the above-stated years in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
September 15, 1998
D - 1.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
INTERMEDIATE TERM SERIES - 235 (TARGETED MATURITIES),
DEFINED ASSET FUNDS, TRUST C (2001 - 2002)
STATEMENT OF CONDITION
As of July 31, 1998
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
at value (cost $ 8,530,135 )(Note 1)......... $ 8,972,358
Accrued interest ............................... 135,652
Prepaid Trustee's fees and expenses ............ 3,760
Cash - principal ............................... 8,751
-----------
Total trust property ......................... 9,120,521
LESS LIABILITIES:
Income advance from Trustee.....................$ 35,275
Accrued Sponsors' fees ......................... 2,409
Income payments payable ........................ 502 38,186
----------- -----------
NET ASSETS, REPRESENTED BY:
9,027 units of fractional undivided
interest outstanding (Note 3)................ 8,981,109
Undistributed net investment income ............ 101,226 $ 9,082,335
----------- ===========
UNIT VALUE ($ 9,082,335 / 9,027 units )........... $ 1,006.13
===========
</TABLE>
See Notes to Financial Statements.
D - 2.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
INTERMEDIATE TERM SERIES - 235 (TARGETED MATURITIES),
DEFINED ASSET FUNDS, TRUST C (2001 - 2002)
STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
Years Ended July 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income ........................ $ 506,079 $ 582,459 $ 644,540
Trustee's fees and expenses ............ (11,976) (12,999) (14,500)
Sponsors' fees ......................... (4,357) (4,451) (4,700)
------------------------------------------------
Net investment income .................. 489,746 565,009 625,340
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
securities sold or redeemed .......... 47,886 30,609 14,506
Unrealized appreciation (depreciation)
of investments ....................... (46,459) 254,335 34,384
------------------------------------------------
Net realized and unrealized
gain on investments ................. 1,427 284,944 48,890
------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............. $ 491,173 $ 849,953 $ 674,230
================================================
</TABLE>
See Notes to Financial Statements.
D - 3.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
INTERMEDIATE TERM SERIES - 235 (TARGETED MATURITIES),
DEFINED ASSET FUNDS, TRUST C (2001 - 2002)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
Years Ended July 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
Net investment income .................. $ 489,746 $ 565,009 $ 625,340
Realized gain on
securities sold or redeemed .......... 47,886 30,609 14,506
Unrealized appreciation (depreciation)
of investments ....................... (46,459) 254,335 34,384
------------------------------------------------
Net increase in net assets
resulting from operations ............ 491,173 849,953 674,230
------------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
Income ................................ (491,292) (567,087) (625,784)
Principal .............................. (85,409) (324,521) (354)
------------------------------------------------
Total distributions .................... (576,701) (891,608) (626,138)
------------------------------------------------
SHARE TRANSACTIONS:
Redemption amounts - income ............ (10,539) (10,589) (9,723)
Redemption amounts - principal ......... (1,047,660) (1,021,295) (921,481)
------------------------------------------------
Total share transactions ............... (1,058,199) (1,031,884) (931,204)
------------------------------------------------
NET DECREASE IN NET ASSETS ............... (1,143,727) (1,073,539) (883,112)
NET ASSETS AT BEGINNING OF YEAR .......... 10,226,062 11,299,601 12,182,713
------------------------------------------------
NET ASSETS AT END OF YEAR ................ $ 9,082,335 $10,226,062 $11,299,601
================================================
PER UNIT:
Income distributions during
year ................................. $ 51.48 $ 53.28 $ 53.57
================================================
Principal distributions during
year ................................. $ 8.92 $ 31.16 $ 0.03
================================================
Net asset value at end of
year ................................. $ 1,006.13 $ 1,014.79 $ 1,018.81
================================================
TRUST UNITS:
Redeemed during year ................... 1,050 1,014 909
Outstanding at end of year ............. 9,027 10,077 11,091
================================================
</TABLE>
See Notes to Financial Statements.
D - 4.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
INTERMEDIATE TERM SERIES - 235 (TARGETED MATURITIES),
DEFINED ASSET FUNDS, TRUST C (2001 - 2002)
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(A) Securities are stated at value as determined by the
Evaluator based on bid side evaluations for the securities
See "How to Sell Units - Trustee's Redemption of Units"
in this Prospectus, Part B.
(B) The Fund is not subject to income taxes. Accordingly, no
provision for such taxes is required.
(C) Interest income is recorded as earned.
2. DISTRIBUTIONS
A distribution of net investment income is made to Holders each month.
Receipts other than interest, after deductions for redemptions and
applicable expenses, are distributed as explained in "Income,
Distributions and Reinvestment - Distributions" in this Prospectus,
Part B.
3. NET CAPITAL
<TABLE>
<S> <C>
Cost of 9,027 units at Date of Deposit .....................$ 9,210,945
Less sales charge .......................................... 299,336
-----------
Net amount applicable to Holders ........................... 8,911,609
Redemptions of units - net cost of 2,973 units redeemed
less redemption amounts (principal)....................... (55,440)
Realized gain on securities sold or redeemed ............... 93,001
Principal distributions .................................... (410,284)
Unrealized appreciation of investments...................... 442,223
-----------
Net capital applicable to Holders ..........................$ 8,981,109
===========
</TABLE>
4. INCOME TAXES
As of July 31, 1998, unrealized appreciation of investments, based on cost
for Federal income tax purposes, aggregated $442,223, all of which related
to appreciated securities. The cost of investment securities for Federal
income tax purposes was $8,530,135 at July 31, 1998.
D - 5.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
INTERMEDIATE TERM SERIES - 235 (TARGETED MATURITIES),
DEFINED ASSET FUNDS, TRUST C (2001 - 2002)
PORTFOLIO
As of July 31, 1998
<TABLE><CAPTION>
Rating Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Kern Cnty., CA, Office of the A- $ 375,000 5.950 % 2001 None $ 375,000 $ 392,370
Superintendent of Schools, Certs. of
Part., Ser. 1994 A
295,000 5.950 2001 None 295,000 306,685
2 Tahoe Forest, CA, Hosp. Dist. Ins. A 360,000 5.650 2002 None 355,453 378,360
Hlth. Fac. Rev. Bonds, Ser. 1994
3 The City of Los Angeles, CA, Mun. Imp. A+ 120,000 5.200 2001 None 116,966 123,500
Corp., Certs. of Part. (Equip. and Real
Prop. Acquisition Prog. S)
4 The City of Los Angeles, CA, Rfdg. A- 100,000 5.600 2002 None 99,364 104,731
Certs. of Part. (Real Property
Acquisition Prog. T-Piper Technical
Ctr.)
5 District of Columbia (Washington, D. C.), AAA 1,900,000 4.650 2002 None 1,781,022 1,925,175
G. O. Rfdg. Bonds, Ser. 1994 A-2
(AMBAC Ins.) (4)
100,000 4.650 2002 None 93,738 101,796
6 Development Auth. of Gwinnett Cnty., Aa2(m) 85,000 5.850 2001 08/01/00 85,483 88,569
GA, Indl. Dev. Rev. Bonds (New Hermes, @ 103.000
Inc. Proj.), Ser. 1994 (Chase Manhattan
Bank, NY, NY-Letter of Credit) 90,000 5.950 2002 08/01/00 90,567 94,864
(AMT) (5)(6) @ 103.000
</TABLE>
D - 6.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
INTERMEDIATE TERM SERIES - 235 (TARGETED MATURITIES),
DEFINED ASSET FUNDS, TRUST C (2001 - 2002)
PORTFOLIO
As of July 31, 1998
<TABLE><CAPTION>
Rating Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
7 Illinois Hlth. Fac. Auth. Rev. Bonds A- $ 500,000 5.400 % 2002 None $ 488,550 $ 522,095
(OSF Healthcare Sys.), Ser. 1993
8 Hospital Auth. of Elkhart, IN, Hosp. A1(m) 500,000 6.300 2002 None 520,465 535,450
Rev. Bonds (Elkhart Gen. Hosp.),
Ser. 1992
9 Michigan Strategic Fund Indl. Dev. Rev. A1(m)(a) 300,000 6.000 2001 08/01/00 301,695 308,244
Bonds (Quality Wood Treating Co., Inc.) @ 103.000
(Firstar Bank, Milwaukee, WI. -
Letter of Credit) (AMT) (5)(6)
300,000 6.100 2002 08/01/00 301,878 310,929
@ 103.000
10 Washoe Cnty., NV, Hosp. Rfdg. Rev. AAA 95,000 5.350 2002 None 94,393 98,655
Bonds (Washoe Med. Ctr., Inc. Proj.),
Ser. 1994 A (AMBAC Ins.) (4)
11 New Mexico Educl. Asst.Foundation, Aaa(m) 285,000 5.800 2002 None 286,841 301,026
Stud. Loan Rev. Bonds, Senior Ser. 1994
3-A (AMT) (5)
12 New Hampshire Higher Educl. and Hlth. AAA 245,000 5.400 2001 None 244,331 251,963
Fac. Auth. Hosp. Rev. Bonds, St. Joseph
Hosp. Issue, Ser. 1994 (Connie Lee
Ins.) (4) 100,000 5.450 2002 None 99,393 103,678
13 New York City, Indl. Dev. Agy. A 965,000 5.400 2001 None 949,579 989,308
Spec. Fac. Rev. Bonds, Ser. 1994
(Terminal One Group Assoc., L.P. Proj.)
(AMT) (5)
</TABLE>
D - 7.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
INTERMEDIATE TERM SERIES - 235 (TARGETED MATURITIES),
DEFINED ASSET FUNDS, TRUST C (2001 - 2002)
PORTFOLIO
As of July 31, 1998
<TABLE><CAPTION>
Rating Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
14 Military Dept. of the State of (b) $ 265,000 6.100 % 2001 None $ 266,492 $ 275,189
Oklahoma, Certs. of Part., Ser. 1994
280,000 6.200 2002 None 281,747 293,731
15 Rhode Island Hlth. and Educl. Bldg. AA 110,000 4.900 2001 None 104,877 112,288
Corp. Rev. Bonds, Landmark Med. Ctr.
(Asset Guaranty Ins.) (4)
16 Student Loan Fin. Corp., SD, Stud. Loan A- 1,290,000 5.950 2001 None 1,297,301 1,353,752
Rev. Bonds, Ser. 1994 A (AMT) (5)
--------- --------- ---------
TOTAL $ 8,660,000 $ 8,530,135 $ 8,972,358
========= ========= =========
See Notes to Portfolios on Page D - 10.
</TABLE>
D - 8.
<PAGE>
<TABLE><CAPTION>
MUNICIPAL INVESTMENT TRUST FUND,
INTERMEDIATE TERM SERIES - 235 (TARGETED MATURITIES),
DEFINED ASSET FUNDS, TRUST C (2001 - 2002)
NOTES TO PORTFOLIO
As of July 31, 1998
<S> <C>
(1) The ratings are of the bonds themselves by Standard & Poor's Ratings Group,
or by Moody's Investors Service, Inc. if followed by "(f)"; "(a)" indicates
that it is a rating of the outstanding debt obligations of the institution
providing a letter of credit or guarantee; "(b)" indicates that while there
is no such available rating, in the opinion of Defined Asset Funds research
analysts, the bond has credit characteristics comparable to bonds rated "A"
or better; "(c)" indicates that while there is no such available rating, in
the opinion of Defined Asset Funds research analysts, the bond does not have
credit characteristics comparable to bonds rated "A" or better. Bond ratings
have been furnished by the Evaluator but not confirmed with the rating agencies.
See "Description of Ratings" in Part B of this Prospectus.
(2) See Notes to Financial Statements.
(3) Optional redemption provisions, which may be exercised in whole or in part,
are initially at prices of par plus a premium, then subsequently at prices
declining to par. Certain securities may provide for redemption at par prior
or in addition to any optional or mandatory redemption dates or maturity, for
example, through the operation of a maintenance and replacement fund, if
proceeds are not able to be used as contemplated, the project is condemned or
sold or the project is destroyed and insurance proceeds are used to redeem
the securities. Many of the securities are also subject to mandatory sinking
fund redemption commencing on dates which may be prior to the date on which
securities may be optionally redeemed. Sinking fund redemptions are at par
and redeem only part of the issue. Some of the securities have mandatory
sinking funds which contain optional provisions permitting the issuer to
increase the principal amount of securities called on a mandatory redemption
date. The sinking fund redemptions with optional provisions may, and optional
refunding redemptions generally will, occur at times when the redeemed
securities have an offering side evaluation which represents a premium over
par. To the extent that the securities were acquired at a price higher than
the redemption price, this will represent a loss of capital when compared
with the Public Offering Price of the Units when acquired. Distributions will
generally be reduced by the amount of the income which would otherwise have
been paid with respect to redeemed securities and there will be distributed
to Holders any principal amount and premium received on such redemption after
satisfying any redemption requests for Units received by the Fund. The
estimated current return may be affected by redemptions. The tax effect on
Holders of redemptions and related distributions is described under "Taxes"
in this Prospectus, Part B.
(4) Insured by the indicated municipal bond insurance company. See "Risk
Factors - Bonds Backed by Letters of Credit or Insurance" in this
Prospectus, Part B.
(5) Securities that are tax preference items for purposes of the Alternative
Minimum Tax are indicated by "(AMT)". See "Taxes" in this Prospectus, Part B.
(6) Certain bonds are covered by letters of credit which may expire prior to
the maturity dates of the bonds. Upon expiration of a letter of credit, the
issuer of the bond is obligated to obtain a replacement letter of credit or
call the bond.
</TABLE>
D - 9.
<PAGE>
Defined
Asset FundsSM
HAVE QUESTIONS ? MUNICIPAL INVESTMENT TRUST FUND
Request the most recent free INTERMEDIATE TERM SERIES--235
Information Supplement (A Unit Investment Trust)
that gives more details about ---------------------------------------
the Fund, by calling: This Prospectus does not contain
The Chase Manhattan Bank complete information about the
1-800-323-1508 investment company filed with the
Securities and Exchange Commission in
Washington, D.C. under the:
o Securities Act of 1933 (file no.
33-54255) and
o Investment Company Act of 1940 (file
no. 811-1777).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington,
D.C. 20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
---------------------------------------
No person is authorized to give any
information or representations about
this Fund not contained in this
Prospectus or the Information
Supplement, and you should not rely on
any other information.
---------------------------------------
When units of this Fund are no longer
available, this Prospectus may be used
as a preliminary prospectus for a
future series, but some of the
information in this Prospectus will be
changed for that series.
Units of any future series may not be
sold nor may offers to buy be accepted
until that series has become effective
with the Securities and Exchange
Commission. No units can be sold in any
State where a sale would be illegal.
14892--10/98
