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UIT 101 Webinar

December 12, 2012

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Today’s Presenters

• Moderator:– Suzanne Cullinane, Manager, Operations

Henderson Global

• Panelists:– Scott Anderson, Partner

Chapman and Cutler LLP – Jack Tierney, Executive Director, Unit Trust Product

Development, ResearchInvesco

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Scott Anderson

PartnerChapman & Cutler

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What is a UIT?

Investment Company Act of 1940"Unit investment trust" means an investment

company which (A) is organized under a trust indenture, contract of custodianship or agency, or similar instrument, (B) does not have a board of directors, and (C) issues only redeemable securities, each of which represents an undivided interest in a unit of specified securities

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What is a UIT?

Plain English

Investment vehicle that holds a “fixed” portfolio of investments for a defined life and offers redeemable units to investors

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What is a UIT?

Plain English

Investment vehicle that holds a “fixed” portfolio of investments for a defined life and offers redeemable units to investors

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What is a UIT?

Investment Vehicle UITs are organized as common law trusts (not

statutory or business trusts) governed by a trust agreement/indenture

No board of directors/trustees Key Parties:

– Depositor (Sponsor)– Trustee– Evaluator– Supervisor

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What is a UIT?

Plain English

Investment vehicle that holds a “fixed” portfolio of investments for a defined life and offers redeemable units to investors

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What is a UIT?

“Fixed” Portfolio Portfolio is selected at UIT inception by the Sponsor, another

investment manager or by applying a quantitative screening strategy No money manager actively buying and selling portfolio securities

during life No “investment adviser” Portfolio is “supervised” by a “Supervisor” that provides portfolio

“surveillance” Depositor can direct the Trustee to sell securities to:

– pay expenses– pay unit redemptions– in limited cases to protect the UIT (e.g., serious adverse credit factors related to an issuer)

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What is a UIT?

Plain English

Investment vehicle that holds a “fixed” portfolio of investments for a defined life and offers redeemable units to investors

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What is a UIT?Investments

• U.S. and Non-U.S. Stocks• U.S. and Non-U.S. Corporate Bonds• Municipal Bonds• Treasury and Non-U.S. Government Securities• Preferred Securities• Government Agency and GSE Securities• Open-End Fund Shares• Closed-End Fund Shares• Exchange-Traded Fund Shares• Options (including covered call strategies)• OTC Derivatives• Commodities

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What is a UIT?

Plain English

Investment vehicle that holds a “fixed” portfolio of investments for a defined life and offers redeemable units to investors

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What is a UIT?

Defined Life Equity Style

– UIT has stated Mandatory Termination Date in prospectus

– Current market is primarily 15-24 months Fixed-Income Style

– UIT terminates when last bond matures, is called, or is otherwise liquidated from portfolio

– Most maturity ranges typically offered

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What is a UIT?

Plain English

Investment vehicle that holds a “fixed” portfolio of investments for a defined life and offers redeemable units to investors

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What is a UIT?

Redeemable Units UIT units are “redeemable securities” under the

Investment Company Act of 1940 Just like open-end fund shares

– Daily redemption right like open-end funds– Forward pricing rules apply to purchases and redemptions

Daily NAV and public offering price computed by:– Trustee– Evaluator (Depositor, its RIA affiliate or third-party

company)

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Who are the Key Players?

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Comparison of “Typical” Registered Funds

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Comparison of “Typical” Registered Funds

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Life of a Sample Equity UIT

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Life of a Sample Fixed Income UIT

6-10

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Jack Tierney

Executive Director – Unit Trust ProductDevelopment, Research

Invesco

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Understanding Unit Trusts

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Unit Trusts: A Wide Variety of OfferingsQuantitative Equity Strategies “Enhanced Indexing”

Alternative Strategies Multi-Asset Class

Closed-End Strategies Alternative Income

Fixed Income Strategies Traditional Taxable and Tax-Free

International & Global Strategies Developed and Developing Markets Thematic, Specialty and Sector StrategiesFocused and Research-Based

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Unit Investment Trust Advantages • Speed to market, transparency, product innovation

• Fixed-income yield curve, credit mix opportunities.

• Tactical portfolio ideas centered around specific firm research and market shifts.

• Rollover features offer high percentage growth opportunities for FAs, sponsors, investors

• Internal expense ratio advantages over open-end funds

• Access into new investment strategies, markets by utilizing instruments such as CEFs, ETFs

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Unit Investment Trust Industry Challenges

• Pricing structure– vs. ETFs– vs. load-waived open-end funds– potential in 401k type plans

• Industry Data Reporting vs. ETF, Open-End Fund Industry

• Visibility at investor, media, analytical firm levels

• Growth Opportunities outside US

• Investor analytics/demographics

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Q & A

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Thank you for attending!