Unit Investment Trusts FAQs Flyer

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What exactly are UITs?

UITs are fixed baskets of investments — most often stocks or corporate or municipal bonds — with finite lives that are designed to provide unitholders with targeted exposure to specific investment themes, sectors or segments of the marketplace.

The investment mix of the basket typically doesn’t change for the duration of the trust. UITs have a set life span, commonly 15 or 24 months for equity UITs, after which they terminate.

At the end of the trust’s term, investors can do one or more of the following:

  • Roll all or a portion of their money into a new UIT, when available, at a reduced sales charge (within 30 days of termination).
  • Take all or a portion of their money outright.
  • Under certain circumstances, take their pro rata portion of the underlying securities in an in-kind distribution. Each UIT’s prospectus will give details about notice period and other requirements for in-kind distributions, if available.

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What are some features of UITs?

UITs may provide investors with a convenient approach to investing. Features include:

  • Transparency. Known portfolio so investors are clear on which securities are held in the trust.
  • Professional selection and supervision. Selected and monitored by experienced professionals.
  • Disciplined “buy and hold” strategy. Once the portfolio is selected, the underlining securities do not generally change.
  • No style drift. Managers can’t overreact to market conditions and take the portfolio off course from its strategy.
  • Limited trading costs. No rebalancing, no additional capital added.
  • Daily liquidity. Redeemable on any business day at the liquidation price.
  • Income potential. Possible monthly income from dividends or fixed income distributions.
  • Fully invested portfolio. UITs do not typically hold cash.

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Do UITs pay distributions?

It depends on the terms of the trust and its underlying investments. Distributions paid from dividends, if any, are paid either monthly, quarterly, semiannually or annually, depending on the provisions of each trust’s prospectus.

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Is there a minimum investment for Eaton Vance UITs?

The minimum purchase is 100 units (25 units for retirement accounts) but may vary by selling firm. Certain broker-dealers or selling firms may charge an order handling fee for processing unit purchases. Read the prospectus for more information.

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How do investors redeem units of a UIT?

Investors will receive a redemption price of NAV less, if any, the remaining deferred sales charge. Unit prices are available daily. The sale price of units is often referred to as the liquidation price. Investors pay any remaining deferred sales charge when they sell or redeem units. Certain broker-dealers may charge a transaction fee for processing unit redemptions or sale requests. Units, when redeemed, may be worth more or less than their original purchase.

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What are the options
when a trust terminates?

Option No. 1: At a reduced sales charge, investors may roll over into a new series of the same trust, if available, or any other Eaton Vance UIT then in its primary offering period. Note that rollovers are considered taxable events. Each trust’s prospectus will contain complete rollover option information. Investors should be aware that there is a time limit (at Eaton Vance it’s 30 days) to notify the trustee of the rollover.

UITs are part of a long-term strategy and investors should consider their ability to invest in successive portfolios, if available, at the applicable sales charge. Investors should consult an attorney or tax advisor regarding tax consequences associated with an investment from one series to the next, if available, and with the purchase or sale of units.

Option No. 2: Termination
Investors may do nothing and allow the portfolio units to terminate. The trust will liquidate at the end of its term, and investors will then receive a cash distribution of the trust’s proceeds, if any.

Option No. 3: In-kind distribution
Investors may generally request an in-kind distribution of the underlying stocks within the UIT, if certain requirements are met. Read the prospectus for details and requirements.

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Do UITs have a sales charge?

Yes. Refer to prospectus for more details about Eaton Vance’s sales structure.

There are three components of the UIT maximum sales charge:

  • Up-front sales charge
  • Deferred sales charge (DSC)
  • Creation and development (C&D) fee

Early redemption of units will still require payment of the deferred sales charge. Read the prospectus for complete sales charge information.

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Are there additional fees?

There are two additional fees: organizational costs and annual operating expenses.

  • Organizational costs are a separate line item in the prospectus, above and beyond the maximum sales charge. Organizational costs vary by UIT though typically range between 20 and 50 basis points. Organizational costs are the cost incurred by the sponsor, Eaton Vance Distributors, Inc., to construct the UIT.
  • Annual operating expenses can include trustee fee, bookkeeping, recordkeeping, evaluator fee and supervisor fee. This annual expense amount varies by UIT though it is generally 20–25 basis points.

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Why do UITs have
4 different CUSIPs?

When purchasing mutual funds, investors choose between share classes by ticker to determine their clients fee structures. While UITs do have ticker symbols, the main identifier to be aware of are the UIT’s CUSIPs. Each UIT will have 4 different CUSIPs: commission cash, commission reinvest, fee/wrap cash and fee/wrap reinvest. The commission and fee/wrap structures represent different pricing points while the cash and reinvest options represent how the client prefers to receive the distributions from the UIT.

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Are breakpoints and householding offered?

Breakpoints are offered for UITs, and they work differently than in mutual funds. The amount purchased drives breakpoint eligibility in UITs. UITs typically offer sales charge discounts when you purchase large amounts on the same day with the same sponsor, per household.

Householding generally includes the person’s spouse and children under age 21. Please note that UITs do not allow rights of accumulation or letter-of-intent breakpoints. See prospectus or contact a financial advisor for details.

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How are individual securities chosen
for a trust?

The selection process used for each UIT differs from one strategy to the next, and Eaton Vance generally uses proprietary research to choose securities believed to possess the ability to achieve each individual portfolio’s investment objectives.

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Can a security held
in a UIT be removed at any time?

In rare instances, a security held in a UIT may be removed, though typically not replaced, for a specific reason such as a significant decline in credit rating, fraud, bankruptcy or other corporate action. Otherwise, securities in a UIT typically remain fixed for the life of the trust.

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How are trust units purchased during the primary offering period?

Investors can buy units at the public offering price on any business day through participating dealers. The public offering price may be more or less than the original offering price. Public offering prices of units of any Eaton Vance UIT are available daily on the trust’s site.

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How are trust units purchased during the secondary phase?

When a UIT's primary offering period ends, a new UIT of that particular strategy may be deposited such that there is always a primary offering of that strategy available to be purchased. UITs typically have 3 month primary offering periods.

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Are UITs suitable
for retirement accounts?

Certain types of UITs may be suited for purchase by individual retirement accounts (IRAs) or other qualified retirement plans. Please discuss product suitability with your financial advisor.

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What types of UITs
does Eaton Vance offer?

Eaton Vance’s product lineup of UITs will be carefully chosen to provide investment options that make sense given the market environment at any given time. Eaton Vance will launch a series of equity UITs first, and over time will add additional strategies to the UIT product lineup.

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About Risk

Unit investment trusts are unmanaged portfolios and the underlying securities are not intended to change throughout a life of a portfolio. The market value of the underlying securities will fluctuate and subsequent market value of a portfolio will reflect such daily pricing. Accordingly, investors in a portfolio may lose money and, units, when redeemed, may be worth more or less than their initial investment. An investment in a portfolio should be made with an understanding of the risks associated with an investment in common stocks including the risk that the financial condition of the issuers of the securities or the general condition of the stock market may worsen. The value of the securities held by a portfolio may be subject to steep declines or increased volatility due to changes in performance or perception of the issuers. Dividends are not ensured. Dividends are only paid when declared and will vary over time. A portfolio concentrated in one or more sectors will be more impacted by developments in such sectors and may be more highly susceptible to any economic, political or regulatory occurrences affecting these sectors than a more broadly diversified portfolio. Diversification does not constitute a guarantee of profit or eliminate risk of loss. Consider the tax consequences associated with rolling your investment in successive portfolios, if available.

Other investment vehicles and unit investment trusts are purchased and sold differently and have different costs and expenses. These differences, among others, may result in significant disparity in performance. For further information, please review the relevant prospectuses.