A Unit Investment Trust (UIT), is a fixed portfolio of professionally selected securities. Investors purchase units of a Trust, which represent an undivided ownership in the entire portfolio. The portfolio of a Unit Investment Trust is fixed at the date of deposit, which gives the investor knowledge of exactly what is in the portfolio, when the Trust matures, and the income that the Trust may generate.
There are three main categories of UITs:
Equity: Portfolios that seek to provide a combination of capital appreciation and dividend income by investing in equity securities. 1 Portfolios of equity securities typically fall under one of three categories—Strategy Trusts, Sector Trusts,2 and Index Trusts2
Tax-Free Fixed Income: Portfolios of municipal bonds providing monthly or semi-annual income that is exempt from federal income taxes. 3
Taxable Fixed Income: Portfolios of U.S. Treasury, U.S. Agency, and corporate issues that are designed to provide monthly or semi-annual income.
Attractive features of UITs include:
Scheduled maturity
Daily liquidity. However, if sold prior to maturity, the Trust may be worth more or less than its original cost and any outstanding sales charges will also be deducted at redemption.
Diversification. Of course, individual securities in the UIT portfolios and the net asset value of the portfolio will fluctuate in price.
Convenience
Low minimum investment (generally $1,000)
Professional portfolio selection
Considerations of UITs:
Unit Investment Trusts are not actively managed, which means that securities in the Trust will not be sold to take advantage of changing market conditions. The Trust may continue to hold securities even though their market value and dividend yields may have changed.
Securities in a trust may depreciate, and the trust may not achieve its intended objective. In addition, each trust is subject to specific risks that vary depending on the Trust’s investment objectives and portfolio composition.
The U.S. Government guarantee applies only to the underlying securities in the Trust’s portfolio and not to the value of the Trust’s shares. Various levels of risk are associated with the different types of taxable income securities.
Unit Investment Trusts are sold by prospectus. Please consider the investment objectives, risk, charges and expenses carefully before investing. The prospectus, which contains this and other information, can be obtained by calling your financial advisor. Read it carefully before you invest.
A Wachovia Securities Financial Advisor can help you determine how UITs may fit into your overall investment plan.
1 There is no guarantee that the companies in the portfolio will pay dividends in the future. Before making any investment in the Trust, investors should consider their ability to continue investing in the successive Trust. Because of the tax consequences, including capital gains treatment, associated with investing in an equity trust, please consult with your tax advisor before making any tax-related investment decisions.
2 Because of the trust's narrow focus, it may be more volatile than a diversified portfolio.
3 Income for some investors may be subject to state and/or local taxes and may be subject to the federal Alternative Minimum Tax (AMT).
Securities and Insurance Products: Not Insured by FDIC or any Federal Government Agency; May Lose Value; Not a Deposit of or Guaranteed by a Bank or any Bank Affiliate
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/SIPC.