Unit Investment Trusts (UITs) are one of three kinds of investment companies. The issuance of these securities is similar to mutual funds because investors can buy and sell units at their net asset value (NAV). UITs yield one public offering of a certain amount of units, and create a secondary market that allows the unit owners to sell their portion and other investors to purchase them.

Unlike mutual funds, a UIT is created with an expiration date. The time at which the security expires varies. For example, a UIT that invests in bonds may terminate when the bond matures. At the time of termination, all units that are in the portfolio are sold. The profits of this sale are distributed to unit owners. There are some instances when a unit cannot be sold once it is purchased. UITs are controlled by a fund manager, but lack an investment adviser, board of directors, and corporate officers.

Generally speaking, there are three kinds of UITs:

--        Fixed income (taxable) – Portfolios that invest in securities, such as those issued by the U.S. government, that distribute income on a monthly, quarterly, or semi-annual basis.

--        Fixed income (tax-free) – Portfolios that include municipal bonds and distribute income on a monthly or semi-annual basis.

--        Equity – Portfolios of equity securities that offer the possibility for capital appreciation and/or income.

Investing is not an exact science. A strong performance record one year does not necessarily indicate the same for the next. Web sites such as www.sec.gov/answers/uit.htm provide information on issues related to performance and other characteristics of a UIT.