Unit Investment Trusts (UITs)

A Unit Investment Trust (UIT) is an investment company registered with the Securities and Exchange Commission (SEC) that generally purchases a portfolio of stocks, bonds, or other securities designed to provide capital appreciation and/or dividend income. A UIT will usually make a one-time public offering of a fixed number of units. Each unit typically costs $1,000. When investors purchase units they typically pay initial and deferred sales charges. A UIT typically issues redeemable units, which means that the UIT will buy back an investor’s units at the investor’s request for their approximate net asset value (NAV).

A UIT is created for a specific length of time and is a fixed portfolio, meaning that a UIT does not actively trade its investment portfolio. Securities held in a UIT’s portfolio will not be traded to take advantage of market conditions. The UIT may continue to hold securities even though their market value and dividend yields may have changed. A unit investment trust generally carries the same investment risks as the portfolio of securities within the UIT. Investors can find the portfolio securities held by the UIT listed in its prospectus. On the UIT’s maturity date, the portfolio of securities in the UIT is liquidated and the proceeds are returned to the unit holders in proportion to the amount invested.