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Unit Investment Trusts (UITs) are sold only by prospectus. You should consider the trust’s investment objectives, risks, charges and expenses carefully before investing. Contact your financial professional or visit Advisors Asset Management, Inc. online at www.aamlive.com/uit to obtain a prospectus which contains this and other information about the trust. Read it carefully before you invest or send money.
Like all financial investments, an investment in a Unit Investment Trust can carry some level of risk. As with all investments, investors can lose money investing in UITs. UITs might not perform as well as an investor expects for a number of reasons including, but not limited to, the absence of active management, market risks, volatility, interest rate fluctuations, inflation, unwillingness of a security issuer to declare or pay dividends, unwillingness or inability of an issuer to make interest payments when due, credit risk of issuers including fluctuations in credit ratings, geographic or industry concentrations, risks associated with securities issued by foreign companies and risks associated with small or mid-size companies. UITs may be subject to additional risk depending on the investment strategy and/or types of securities held by a particular UIT. Please consult the prospectus for specific risks on each trust.
Securities offered through your financial professional. Not FDIC Insured. Not Bank Guaranteed. May Lose Value.
The securities held in UITs remain relatively fixed over the life of the trust, giving investors the comfort of knowing what they own. UITs generally buy and sell securities under limited circumstances to pay expenses, to issue additional units or redeem units, in limited circumstances to protect a UIT or as otherwise permitted be a trust agreement.
What are UITs?
UNIT
INVESTMENT TRUSTS
AN INVESTOR'S
GUIDE TO
Unit Investment Trusts, known as UITs, are investment vehicles whereby investors purchase units of the trusts. Unlike actively managed open-end funds (mutual funds), UITs are a relatively fixed basket of securities that are professionally monitored and have a set termination date. Through one purchase, investors have the opportunity to own a variety of securities in one portfolio that may help them meet their investment objectives. UITs offer investors the potential for defined income, daily liquidity and a disciplined investment approach for a wide range of investment objectives and risk tolerances. Additionally, UITs can assist investors in establishing a long-term asset allocation strategy because they are generally diversified and transparent in nature. As with any investment, investing in a UIT or open-ended mutual fund involves risks. It is important to understand the risks involved in each investment but also the main differences between UITs and mutual funds including differences in costs, expenses, structures and taxes.
The Buy and Hold Philosophy
UITs employ a “buy and hold” philosophy of investing. They invest in a relatively fixed portfolio for a predetermined period of time. These defined portfolios enable the investor to own a basket of securities with one purchase. Different UITs are designed to fill a variety of investment needs such as the potential for income, capital appreciation or total return, and to satisfy a variety of risk tolerance levels.
The philosophy maintains that it is better to purchase a well chosen portfolio and hold it for a specific period of time rather than “time the market.” Holding a portfolio until termination helps to eliminate emotional investing resulting from uncontrollable market factors such as interest rates, inflation, political and economic policy changes. It also demands that an investor have patience and discipline rather than focusing on short-term performance. The buy and hold approach has the potential to reward investors over the long-term which may allow them to be less concerned with the day-to-day fluctuations of the markets.
Features of Unit Investment Trusts
Disciplined Portfolio
UITs are generally diversified across a portfolio of securities, which may help to reduce risk by offsetting potential losses from some securities with potential gains in others. This diversification may help to reduce overall risk, but does not eliminate it entirely. Many investors might find it expensive and difficult to construct a portfolio of individual securities as diversified as that of a UIT.
Diversification
The securities for UIT portfolios are professionally selected using pre-defined filtering processes of skilled research analysts. Additionally, AAM has engaged portfolio consultants such as Bahl & Gaynor Investment Counsel, Cohen & Steers, C.J. Lawrence, Hartford Investment Management Company (HIMCO) and Peroni Portfolio Advisors to select securities for certain portfolios. All AAM UIT portfolios are selected using a specific quantitative strategy and/or a discretionary selection process that meet a stated investment objective such as growth or income.
Professional Selection
UITs generally hold limited cash positions so more of your money is working in the market.
Full Investment in the Market
The fixed portfolio nature of UITs prevents dramatic style drift due to manager-driven trading. The portfolios are clearly defined by the sponsor when created.
No Management Style Drift
Units may be redeemed on any business day at the redemption price, which may be more or less than the original purchase price.
Liquidity
With one single purchase, investors can own a professionally selected portfolio of securities. It would take many investors substantial time and capital commitment to achieve this type of diversification alone.
Ease of Ownership
From conservative to aggressive, UITs invest in a wide range of securities including:
Direct Asset Classes
Business Development Companies
Closed-End Fund (CEFs) Shares
Convertible and Senior Variable Notes
Equities and Dividend Paying Equities
Securities Issued by Government Agencies
Unlike many packaged products, UITs are not actively traded which means they generally will not pay taxes on capital gains until the UIT’s termination date if units are held to termination. UITs are generally structured to have long-term holding periods, generally longer than 12-months. Investors who hold units of their trusts from the UITs initial offering period to the termination date of the portfolio may receive more long-term capital gains treatment.
Tax Treatment
International Investments
Master Limited
Partnerships (MLPs)
Municipal Securities
Real Estate Investment
Trusts (REITs)
Today’s investors are more informed and more sophisticated than ever. They understand the potential negative impacts that cash, market timing, embedded capital gains and portfolio turnover can have on their investment results. AAM’s Unit Investment Trusts, or UITs, are designed to help address these factors and put the control back into the investors portfolio.
The characteristics defined above represent general attributes of typical investments of the type indicated. Specific investments may have different characteristics. Depending on the type of mutual fund purchased, some of the comparative features between mutual funds and UITs may be more similar. You should consult the prospectus and your financial professional for more details about a particular investment.
1 Individual securities and ETFs may be purchased and sold throughout each business day while mutual fund shares and UIT units may be purchased and redeemed based on prices determined as of the close of business each day.
2 Certain stocks and ETFs may offer dividend reinvestment plans.
