Unit Investment Trusts (UITs)

A unit investment trust, also known as a defined portfolio, is an SEC-registered investment company that is composed of an unmanaged portfolio in which the investor has an undivided
ownership in the underlying securities. The portfolio is professionally selected by the trust sponsor and remains fixed until the termination of the trust, usually ranging from 13
months to five years. Some UITs composed of fixed income securities may have longer maturities. Although the securities within the trust remain fixed and are not managed, the
sponsor may remove a security from the trust under limited circumstances.

The portfolio is designed to follow an investment objective over a specified time period, although there is no guarantee that the objective will be met. UITs are created by a trust
sponsor who enters into agreement with a trustee. When the trust is created, several investment terms are set forth, such as the trust objective, what securities are placed in the
trust, when the trust will end, what fees and expenses will be charged, etc. A full accounting of the terms of the trust will be listed in the prospectus.

UITs generally buy and hold a fixed portfolio of stock, bonds, or other securities, often concentrated in a particular industry or sector. This is in marked contrast to mutual funds, which are required to adhere to certain rules of diversification and must hold a minimum number of different securities. UITs are not subject to those requirements, and so can own shares of stock in just a few companies.Mutual funds can sell and buy shares frequently as long as those transactions meet the funds objectives stated in its prospectus. UITs cannot

Another difference between a trust and a mutual fund is that a trust doesn't generally generate capital gains to distribute to shareholders. Because the number of shares available in a UIT is fixed when the trust is created, investors who purchase shares in a UIT after its initial offering buy them from other investors, and not from the sponsor, similar to a stock or closed-end fund.
Because of the fixed number of shares of any particular UIT available in the market, buying and selling shares among investors does not carry tax consequences for other shareholders.purchase or sell securities except in limited circumstances.

Fees and Expenses:
UITs are affordable—investors can purchase a trust’s portfolio of several stocks or bonds with one transaction and at one purchase price. Generally, there is a $1,000 minimum investment for UITs, although the amount can usually be lowered if purchased for Individual Retirement Accounts (IRAs).
UIT investors generally pay a sales charge, or load, at the time of initial purchase, and often pay deferred sales charges. The offering price, which is the price paid to purchase units, ref lects the current NAV plus the initial sales charge. Sales charge discounts may be available for large purchases.
UITs pay an annual fee to cover operating expenses and often to reimburse the trust sponsor for its supervisory activities, organization costs, and a creation and development fee. Since
UITs offer a fixed portfolio, there are no investment management fees and, because the buying and selling of portfolio securities is limited, transaction costs are minimal. Further, there are no
ongoing marketing fees charged to the trust, as most UITs do not continually market their units to the public.

Taxes:
Generally, unitholders must pay income taxes on the interest, dividends, and/or capital gains distributed to them, although in retirement accounts such as IRAs taxes are deferred until
distributions are taken from the account. UITs provide IRS Form 1099 to their unitholders annually to summarize the trust’s distributions. Also, when an investor sells units, he or she will
realize either a taxable gain or a loss that should be reported on income tax returns. Certain UITs provide income that is free from federal and/or state taxation.