6.3. Unit Investment Trusts

Unit investment trusts (UITs) are “pooled investments” like open- and closed-end funds. UITs are investment companies that buy and hold a fixed portfolio of securities that are put into a trust and sold in units (also known as “shares of beneficial interest” as in other trusts) to unit holders. The Investment Company Act defines UITs and states that UITs are organized under a trust indenture, contract of custodianship, agency, or similar instrument and have no board of directors. Unit investment trusts issue redeemable securities like an open-end fund. Like a closed-end fund, however, UITs offer investors a one-time offering of a fixed number of units, generally in $1,000 blocks. Because the units are issued new, they must be sold with a prospectus. UITs are not actively managed and the UIT does not employ an investment adviser, so the securities within the portfolio rarely change.

UITs have a stated termination date that varies according to the type of investments in the portfolio. A UIT in bonds generally terminates when the last bond reaches