UNIT INVESTMENT TRUSTS SUPPLEMENTAL PRINCIPAL PAYDOWN REPORT What Is A UIT Sponsors may not add bonds to a portfolio once it is closed. However, they may advise Principal Paydown? the trustee to dispose of certain bonds under Unit Investment Trusts (UIT’s) are a specialized special circumstances that might adversely kind of investment company which assembles affect the value of the trust. These conditions a fixed portfolio of securities (usually tax include potential or actual default of principal exempt municipal bonds) and then offers or interest, institution of domestic lawsuits interest in that portfolio to the public. The against an issuer, a decline in projected minimum investment usually ranges from income pledged for debt service on revenue $1,000 to $5,000. The issues are purchased bonds, advance refunding (calls) and ex- with the intent of holding them until maturity, changes in a refunding offer. usually twenty years or more. No new issues The proceeds from any sale of redemption can be added to the trust. Therefore, the return of bonds may not be reinvested in the trust. on the investment remains the same until Instead, they are distributed to the unit holders portfolio bonds mature, are called or are sold. as distributions of principal. The distribution The firm that organizes the Unit Trust is of these principal amounts results in a known as its “sponsor”. The sponsor buys a corresponding decrease in the assets of the fixed amount of bonds for the trust and then trust and a reduction in the value per unit. closes the fund. The bonds are then deposited Since these distributions are received as cash with the trustee, usually a bank, which provides payments and since the asset value per unit services including issuance of certificates of is decreased for the distribution amount, it ownership, safekeeping of the securities, is necessary to include the values of these interest collection and principal receipts for distributions in estate valuations for matured or called shares, and check process- IRS 706 purposes. ing for the distribution of interest and prin- cipal payments. Evaluation Services, Inc. Developers of Appraise & CostBasis.Info 180 Old Tappan Road, Bldg. #4, Old Tappan, New Jersey 07675 Telephone: 201-784-8500 Fax: 201-784-9685 Visit our web site at http://www.appraisenj.com Shown below is the alternate valuation for a • Price volatility within the portfolio portfolio containing a UIT issue. On the Date • Principal paydowns of $9.6302 per unit. of Death, this issue was priced at $23.52 per unit. On the Alternate Date, the price was The unit investment trust principal paydown $13.82 per unit. This price decrease is due report shows the detail of the principal pay- to two factors: downs for this issue. Date of Death Valuation Alternate Date Valuation.