By Angela McDaniels
Tacoma, Wash., Jan. 27 - eUnits 2 Year U.S. Market Participation Trust: Upside to Cap / Buffered Downside priced $26.18 million of units of beneficial interest in an initial public offering, according to a news release from Eaton Vance Corp.
Eaton Vance said eUnits are a new type of exchange-traded structured investment that seek to enable holders to participate in the returns of a specified market benchmark over a defined term, typically up to a cap, while reducing exposure to loss in the event of a decline in the benchmark.
The new issue is linked to the performance of the S&P 500 Composite Stock Price index.
The trust plans to conclude its investment activities on Jan. 24, 2014, at which time it will distribute its net assets to the unitholders.
The trust seeks to provide a return equal to any percentage increase in the index, subject to a cap of 17.85%. Unitholders will receive only the initial net asset value of the units if the index declines by 15% or less and will lose 1% for every 1% that the index declines beyond 15%.
The trust will purchase Treasuries and futures contracts on the index with tenors that are the same as the expected investment life of the trust. The contracts will be structured so that the trust will receive cash from the counterparties if the index increases over the term of the contracts. The trust will have to pay cash to the counterparties if the index decreases by more than 15%.
The trust's exposure to counterparty risk is limited to the in-the-money value of its contract positions and mitigated by the anticipated daily posting of collateral, according to the release.
"eUnits are designed to provide return profiles similar to structured notes, but without the concentrated issuer credit exposure that is an inherent feature of structured notes," Thomas E. Faust Jr., chairman and chief executive officer of Eaton Vance, said in the release.
The units began trading Friday on NYSE Amex under the symbol "ETUA."
The 2,618,389 units have an initial net asset value of $10.00 each. The price to the public is $10.00 for units placed to fee accounts and $10.20 for units placed to non-fee accounts, according to a 497 filing with the Securities and Exchange Commission.
For units placed to non-fee accounts, $0.20 of the offering price will be paid to the underwriter, Eaton Vance Distributors, Inc., as a sales load.
The units are subject to an annual management fee of 0.75%.
Eaton Vance Management is the trust's investment adviser and administrator. Parametric Risk Advisors, LLC is the subadviser responsible for providing advice on and execution of the contracts.
The trust first announced plans to issue units on Sept. 20, 2010. At the time, it was called the eUNITs 2 Year U.S. Equity Market Participation Trust: Enhanced Upside to Cap / Buffered Downside.
| Issuer: | eUnits 2 Year U.S. Market Participation Trust: Upside to Cap / Buffered Downside
|
| Issue: | Units of beneficial interest
|
| Underlying index: | S&P 500 Composite Stock Price index
|
| Amount: | $26,183,890
|
| Trust termination date: | Jan. 24, 2014
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| Price: | $10.00 for fee accounts; $10.20 for non-fee accounts
|
| Payout at termination: | Trust seeks to provide return equal to any percentage increase in index, up to cap of 17.85%; unitholders will receive only initial net asset value if index declines by 15% or less and will lose 1% for every 1% that index declines beyond 15%
|
| Pricing date: | Jan. 26
|
| Settlement date: | Jan. 31
|
| Underwriter: | Eaton Vance Distributors, Inc.
|
| Sales load: | $0.20
|
| Listing: | NYSE Amex: ETUA
|
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