Statement of Assets and Liabilities
|
|
|
|
|
Assets
|
|
January 30, 2013
|
|
Investments, at value (identified cost, $26,069,293)
|
|
$
|
26,083,216
|
|
Structured options, at value
|
|
|
2,670,237
|
|
Net premiums receivable from structured options
|
|
|
286,495
|
|
Cash
|
|
|
140,779
|
|
Restricted cash*
|
|
|
740,000
|
|
Interest receivable
|
|
|
11,437
|
|
Total assets
|
|
$
|
29,932,164
|
|
|
|
Liabilities
|
|
|
|
|
Cash collateral for structured options
|
|
$
|
740,000
|
|
Payable to affiliate for investment adviser fee
|
|
|
82,092
|
|
Total liabilities
|
|
$
|
822,092
|
|
Net Assets
|
|
$
|
29,110,072
|
|
|
|
Sources of Net Assets
|
|
|
|
|
Units, $0.01 par value, unlimited number of Units authorized, 2,628,389 Units issued and outstanding
|
|
$
|
26,284
|
|
Additional paid-in capital
|
|
|
26,124,755
|
|
Accumulated net investment loss
|
|
|
(11,622
|
)
|
Net unrealized appreciation
|
|
|
2,970,655
|
|
Net Assets
|
|
$
|
29,110,072
|
|
|
|
Net Asset Value
|
|
|
|
|
($29,110,072 ÷ 2,628,389 Units issued and outstanding)
|
|
$
|
11.08
|
|
*
|
Represents restricted cash pledged for the benefit of the Trust for open financial contracts.
|
|
|
|
|
|
|
|
6
|
|
See Notes to Financial Statements.
|
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Statement of Operations
|
|
|
|
|
Investment Income
|
|
Period Ended
January 30, 2013
(1)
|
|
Interest
|
|
$
|
55,896
|
|
Total investment income
|
|
$
|
55,896
|
|
|
|
Expenses
|
|
|
|
|
Investment adviser fee
|
|
$
|
200,369
|
|
Total expenses
|
|
$
|
200,369
|
|
|
|
Net investment loss
|
|
$
|
(144,473
|
)
|
|
|
Realized and Unrealized Gain (Loss)
|
|
|
|
|
Change in unrealized appreciation (depreciation)
|
|
|
|
|
Investments
|
|
$
|
13,923
|
|
Structured options
|
|
|
2,956,732
|
|
Net change in unrealized appreciation (depreciation)
|
|
$
|
2,970,655
|
|
|
|
Net realized and unrealized gain
|
|
$
|
2,970,655
|
|
|
|
Net increase in net assets from operations
|
|
$
|
2,826,182
|
|
(1)
|
For the period from the start of business on January 26, 2012 to January 30, 2013.
|
|
|
|
|
|
|
|
7
|
|
See Notes to Financial Statements.
|
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Statement of Changes in Net Assets
|
|
|
|
|
Increase (Decrease) in Net Assets
|
|
Period Ended
January 30, 2013
(1)
|
|
From operations
|
|
|
|
|
Net investment loss
|
|
$
|
(144,473
|
)
|
Net change in unrealized appreciation (depreciation) from investments and structured
options
|
|
|
2,970,655
|
|
Net increase in net assets from operations
|
|
$
|
2,826,182
|
|
Unit transactions
|
|
|
|
|
Proceeds from sale of Units
|
|
$
|
26,183,890
|
|
Net increase in net assets from Unit transactions
|
|
$
|
26,183,890
|
|
|
|
Net increase in net assets
|
|
$
|
29,010,072
|
|
|
|
Net Assets
|
|
|
|
|
At beginning of period
|
|
$
|
100,000
|
|
At end of period
|
|
$
|
29,110,072
|
|
|
|
Accumulated net investment loss
included in net assets
|
|
|
|
|
At end of period
|
|
$
|
(11,622
|
)
|
(1)
|
For the period from the start of business on January 26, 2012 to January 30, 2013.
|
|
|
|
|
|
|
|
8
|
|
See Notes to Financial Statements.
|
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Financial Highlights
|
|
|
|
|
|
|
Period Ended
January 30, 2013
(1)
|
|
Net asset value Beginning of period
|
|
$
|
10.000
|
|
|
|
Income (Loss) From Operations
|
|
|
|
|
Net investment loss
(2)
|
|
$
|
(0.055
|
)
|
Net realized and unrealized gain
|
|
|
1.135
|
|
|
|
Total income from operations
|
|
$
|
1.080
|
|
|
|
Net asset value End of period
|
|
$
|
11.080
|
|
|
|
Market value End of period
|
|
$
|
10.390
|
|
|
|
Total Investment Return on Net Asset Value
(3)
|
|
|
10.80
|
%
(4)
|
|
|
Total Investment Return on Market Value
(3)
|
|
|
3.90
|
%
(4)
|
|
|
Ratios/Supplemental Data
|
|
|
|
|
Net assets, end of period (000s omitted)
|
|
$
|
29,110
|
|
Ratios (as a percentage of average daily net assets):
|
|
|
|
|
Expenses
|
|
|
0.73
|
%
|
Net investment loss
|
|
|
(0.53
|
)%
|
Portfolio Turnover
|
|
|
0
|
%
|
(1)
|
For the period from the start of business on January 26, 2012 to January 30, 2013.
|
(2)
|
Computed using average Units outstanding.
|
(3)
|
Returns are historical and are calculated by determining the percentage change in net
asset value with all distributions, if any, reinvested.
|
(4)
|
Units sold to certain Unit holders were subject to a $0.20 per Unit sales load. Total investment returns on net asset value and on market value exclude the sales
load and would have been lower if such sales load was included.
|
|
|
|
|
|
|
|
9
|
|
See Notes to Financial Statements.
|
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Notes to Financial Statements
1 Significant Accounting Policies
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside (the Trust) is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, closed-end management investment company. The Trust was organized on
November 12, 2009 and remained inactive until January 26, 2012 except for matters relating to its organization and initial sale of 10,000 units of beneficial interest to Eaton Vance Management (EVM), the Trusts investment adviser and
administrator, for $100,000. The Trust issued 2,618,389 units of beneficial interest ($10.00 per unit) in connection with its initial public offering on January 26, 2012. The Trusts units of beneficial interest are hereinafter referred to
as Units. The Trust seeks to provide returns based on the price performance of the S&P 500 Composite Stock Price Index (the Index) by entering into over-the-counter private derivative contracts. If the Index appreciates over the
investment life of the Trust, the Trust seeks to provide a return on the initial net asset value of the Units equal to the percentage change in the price of the Index, up to a maximum return of 17.85%. If the Index depreciates over the investment
life of the Trust by 15% or less, the Trust seeks to return the initial net asset value of the Units. If the Index depreciates by more than 15% over the investment life of the Trust, the Trust seeks to outperform the Index price change by 15% of the
initial Index value. The Trust anticipates concluding its investment activities on or about January 24, 2014 (the Termination Date) and making a liquidating cash distribution to Unit holders within seven business days thereafter. The
Trusts fiscal year is based upon a 52-53 week, ending on the last Wednesday of each January.
The following is a summary of significant accounting
policies of the Trust. The policies are in conformity with accounting principles generally accepted in the United States of America.
A Investment Valuation
U.S. Treasury obligations are generally valued on the basis of valuations provided by third party
pricing services, as derived from such services pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices and yields of other U.S. Treasury obligations. Over-the-counter options
are valued by a third party pricing service using techniques that consider factors including the value of the underlying instrument, the volatility of the underlying instrument and the period of time until option expiration.
B Investment Transactions
Investment transactions for financial statement purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.
C Income
Interest income is recorded on the basis of interest accrued, adjusted
for amortization of premium or accretion of discount.
D Federal Taxes
The Trusts policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to Unit holders each year substantially all of its net
investment income, and all or substantially all of its net realized capital gains. Accordingly, no provision for federal income or excise tax is necessary.
At January 30, 2013, the Trust had a late year ordinary loss of $11,622, which it has elected to defer to the following taxable year pursuant to income tax regulations. Late year ordinary losses represent certain
specified losses realized in that portion of a taxable year after October 31 that are treated as ordinary for tax purposes plus ordinary losses attributable to that portion of a taxable year after December 31.
As of January 30, 2013, the Trust had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Trust
files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.
E Organization and Offering Costs
Costs incurred in connection with the
organization of the Trust and the offering of its Units (other than the sales load) were borne directly by EVM.
F Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
G Indemnifications
Under the
Trusts organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Trust. Under Massachusetts law, if certain conditions prevail, Unit
holders of a Massachusetts business trust (such as the Trust) could be deemed to have personal liability for the obligations of the Trust. However, the Trusts Declaration of Trust contains an express disclaimer of liability on the part of
Trust Unit holders and the By-laws provide that the Trust shall assume the defense on behalf of any Trust Unit holders. Moreover, the By-laws also provide for indemnification out of Trust property of any Unit holder held personally liable solely by
reason of being or having been a Unit holder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Trust enters into agreements with service providers that may contain indemnification clauses. The
Trusts maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred.
H Structured Options
The Trust entered into structured option contracts,
based on the underlying Index, that provide for the Trust to pay or receive cash at the expiration date of the contracts. Such payments that may be received by the Trust, excluding the additional payout noted below, are capped at a maximum return of
17.85% if the price of the underlying Index increases by 17.85% or more over the term of the contracts. The Trust will be obligated to pay cash to the counterparties at the expiration date of the contracts if the price of the underlying Index
decreases by more than 15% over the term of the
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Notes to Financial Statements continued
contracts. If the price of the Index is unchanged or declines by 15% or less over the term of the contracts, the Trust is not expected to make or receive any payments upon settlement of the
contracts.
Each over-the-counter structured option contract consists of two call options and one put option. The values of the structured options are
marked-to-market daily in accordance with the Trusts policies on investment valuations discussed above. Changes in the values are recorded as unrealized gains or losses by the Trust. Gains (losses) are realized upon the expiration of the
structured options.
The option contracts were structured to include an additional payout to the Trust by the counterparties at the expiration date of
the contracts. The additional payout is reflected as net premium receivable in the Statement of Assets and Liabilities and is recorded as unrealized appreciation until the expiration date of the contracts when the amount will be realized. The net
premium receivable amount at January 30, 2013 approximated its fair value. If measured at fair value, the amount would have been considered as Level 2 in the fair value hierarchy (see Note 8) at January 30, 2013.
2 Distributions to Unit Holders
The
Trust intends to distribute at least annually the amount of its net investment income and net realized capital gains, if any. Distributions are recorded on the ex-dividend date. The Trust distinguishes between distributions on a tax basis and a
financial reporting basis. Accounting principles generally accepted in the United States of America require that only distributions in excess of tax basis earnings and profits be reported in the financial statements as a return of capital. Permanent
differences between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions from short-term capital gains are considered to be from ordinary income.
During the period ended January 30, 2013, accumulated net investment loss was decreased by $132,851 and paid-in capital was decreased by $132,851 due to
differences between book and tax accounting, primarily for net operating losses. These reclassifications had no effect on the net assets or net asset value per share of the Trust.
As of January 30, 2013, the components of distributable earnings (accumulated losses) and unrealized appreciation (depreciation) on a tax basis were as follows:
|
|
|
|
|
Late year ordinary losses
|
|
$
|
(11,622
|
)
|
Net unrealized appreciation
|
|
$
|
2,970,655
|
|
3 Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by EVM as compensation for investment advisory services rendered to the Trust. The fee is computed at an annual rate of 0.75%
of the Trusts initial net assets and is payable monthly to the extent of the Trusts available cash. EVM pays all of the normal operating expenses of the Trust, including custody, transfer agent, audit, and printing and postage expenses.
For the period from the start of business on January 26, 2012 to January 30, 2013, the investment adviser fee amounted to $200,369. Pursuant to a sub-advisory agreement between EVM and Parametric Risk Advisors LLC (PRA), an indirect
affiliate of EVM, EVM pays PRA a portion of its fee received, after deduction of all its costs incurred, for investment advisory services related to the Trusts options strategy. EVM also serves as the administrator of the Trust, but receives
no compensation.
Eaton Vance Distributors, Inc. (EVD), an affiliate of EVM, is the sole underwriter of the Trusts Units. EVD received a sales load
of $0.20 per Unit (2% of the initial net asset value) with respect to certain Units sold. The sales load amounted to approximately $389,000, none of which was retained by EVD.
Trustees and officers of the Trust who are members of EVMs organization receive remuneration for their services to the Trust out of the investment adviser fee. Certain officers and Trustees of the Trust are
officers of EVM.
4 Purchases and Sales of Investments
Purchases of long-term investments (all U.S. Government securities) aggregated $26,272,210 for the period from the start of business on January 26, 2012 to January 30, 2013. There were no sales of
long-term investments during such period.
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Notes to Financial Statements continued
5 Federal Income Tax Basis of Investments
The cost and unrealized appreciation
(depreciation) of investments of the Trust at January 30, 2013, as determined on a federal income tax basis, were as follows:
|
|
|
|
|
|
|
Aggregate cost
|
|
$
|
26,069,293
|
|
|
|
Gross unrealized appreciation
|
|
$
|
13,923
|
|
Gross unrealized depreciation
|
|
|
|
|
|
|
Net unrealized appreciation
|
|
$
|
13,923
|
|
6 Units of Beneficial Interest
The Agreement and Declaration of Trust permits the Trust to issue an unlimited number of full and fractional Units of beneficial interest, $0.01 par value per Unit. Transactions in Units were as follows:
|
|
|
|
|
|
|
Period
Ended
January 30, 2013
(1)
|
|
|
|
Sales (initial public offering)
|
|
|
2,618,389
|
|
|
|
|
|
|
2,618,389
|
|
(1)
|
For the period from the start of business on January 26, 2012 to January 30, 2013.
|
7 Financial Instruments
The Trust is
subject to equity price risk in the normal course of pursuing its investment objective. To achieve its investment objective, the Trust invests substantially all its net assets in U.S. Treasury obligations that mature on or shortly prior to the
Termination Date and in structured option contracts that provide for the Trust to pay or receive cash at the contracts settlement, which are scheduled to conclude on the Termination Date. The price performance of the Index imbedded in the
structured option contracts corresponds to the price performance that the Trust seeks in accordance with its investment objective as previously described. The Trusts commitments under the structured option contracts are collateralized by its
investment in U.S. Treasuries.
The over-the-counter structured options in which the Trust invests are subject to the risk that the counterparty to the
contract fails to perform its obligations under the contract. At January 30, 2013, the maximum amount of loss the Trust would incur due to counterparty risk was $2,956,732, with the highest amount from any one counterparty being $993,817. To
mitigate this risk, the Trust has entered into master netting agreements with all its derivative counterparties, which allows it and a counterparty to aggregate amounts owed by each of them for derivative transactions under the agreement into a
single net amount payable by either the Trust or the counterparty. Counterparties are required to pledge collateral in the form of cash or U.S. Treasuries for the benefit of the Trust if the net amount due from the counterparty with respect to a
derivative contract exceeds a certain threshold. The amount of collateral posted by the counterparties with respect to such contracts would also reduce the amount of any loss incurred. Collateral pledged for the benefit of the Trust is held in a
segregated account by the Trusts custodian. The portion of such collateral representing cash is reflected as restricted cash with a corresponding liability on the Statement of Assets and Liabilities. The carrying amount of the liability at
January 30, 2013 approximated its fair value. If measured at fair value, the liability for collateral for structured options would have been considered as Level 2 in the fair value hierarchy (see Note 8) at January 30, 2013.
In addition, if a counterparty fails to meet its obligation to pay the net premium receivable due upon expiration of a structured option contract, EVM will not
collect the remaining portion of its investment adviser fee attributable to such contract.
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Notes to Financial Statements continued
A summary of open financial instruments at January 30, 2013 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-The-Counter Structured Options
|
|
|
|
|
|
|
|
Description
|
|
Counterparty
|
|
Notional
Amount
|
|
|
Expiration
Date
|
|
|
Market
Value
|
|
|
Net
Unrealized
Appreciation
|
|
|
|
|
|
|
|
Long Call Spread plus Short Put Single Pay Contract
(1)
|
|
Barclays Bank PLC
|
|
$
|
8,727,967
|
|
|
|
1/24/2014
|
|
|
$
|
884,460
|
|
|
$
|
979,595
|
|
|
|
|
|
|
|
Long Call Spread plus Short Put Single Pay Contract
(2)
|
|
Credit Suisse International
|
|
|
8,727,967
|
|
|
|
1/24/2014
|
|
|
|
888,185
|
|
|
|
983,320
|
|
|
|
|
|
|
|
Long Call Spread plus Short Put Single Pay Contract
(3)
|
|
Morgan Stanley & Co. International PLC
|
|
|
8,827,956
|
|
|
|
1/24/2014
|
|
|
|
897,592
|
|
|
|
993,817
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,283,890
|
|
|
|
|
|
|
$
|
2,670,237
|
|
|
$
|
2,956,732
|
|
(1)
|
Contract represents 3 embedded options on the S&P 500 Index consisting of 1) a
purchased call option with a strike price of $1,318.43, 2) a written call option with a strike price of $1,553.77 and 3) a written put option with a strike price of $1,120.67.
|
(2)
|
Contract represents 3 embedded options on the S&P 500 Index consisting of 1) a
purchased call option with a strike price of $1,318.43, 2) a written call option with a strike price of $1,555.09 and 3) a written put option with a strike price of $1,120.67.
|
(3)
|
Contract represents 3 embedded options on the S&P 500 Index consisting of 1) a
purchased call option with a strike price of $1,318.43, 2) a written call option with a strike price of $1,554.82 and 3) a written put option with a strike price of $1,120.67.
|
The fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) and whose primary underlying risk
exposure is equity price risk at January 30, 2013 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Derivative
|
|
Asset Derivative
|
|
|
Liability Derivative
|
|
|
|
|
Over-The-Counter Structured Options
|
|
$
|
2,670,237
|
(1)
|
|
$
|
|
|
(1)
|
Statement of Assets and Liabilities location: Structured options, at value.
|
The effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) on the Statement of Operations and whose primary underlying risk exposure is equity price risk for
the period from the start of business on January 26, 2012 to January 30, 2013 was as follows:
|
|
|
|
|
|
|
|
|
Derivative
|
|
Realized Gain (Loss)
on Derivatives Recognized
in Income
|
|
|
Change in Unrealized
Appreciation (Depreciation) on
Derivatives Recognized in
Income
|
|
|
|
|
Over-The-Counter Structured Options
|
|
$
|
|
|
|
$
|
2,956,732
|
(1)
|
(1)
|
Statement of Operations location: Change in unrealized appreciation (depreciation) Structured options.
|
The over-the-counter structured options outstanding at January 30, 2013 are representative of the volume of this derivative type for the period from the start
of business on January 26, 2012 to January 30, 2013.
8 Fair Value Measurements
Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in
valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
|
|
Level 1 quoted prices in active markets for identical investments
|
|
|
Level 2 other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
|
|
|
Level 3 significant unobservable inputs (including a funds own assumptions in determining the fair value of investments)
|
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Notes to Financial Statements continued
In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value
measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
At January 30, 2013, the hierarchy of inputs used in valuing the Trusts investments and open derivative instruments, which are carried at value, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
U.S. Treasury Obligations
|
|
$
|
|
|
|
$
|
26,083,216
|
|
|
$
|
|
|
|
$
|
26,083,216
|
|
|
|
|
|
|
Total Investments
|
|
$
|
|
|
|
$
|
26,083,216
|
|
|
$
|
|
|
|
$
|
26,083,216
|
|
|
|
|
|
|
Structured Options
|
|
$
|
|
|
|
$
|
2,670,237
|
|
|
$
|
|
|
|
$
|
2,670,237
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
28,753,453
|
|
|
$
|
|
|
|
$
|
28,753,453
|
|
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Report of Independent Registered Public Accounting
Firm
To the Trustees and Shareholders of eUnits
2 Year U.S. Market
Participation Trust: Upside to Cap / Buffered Downside
We have audited the accompanying statement of assets and liabilities of
eUnits
2 Year U.S. Market Participation Trust: Upside to Cap / Buffered Downside (the Trust), including the portfolio of investments, as of January 30,
2013, and the related statements of operations, changes in net assets and the financial highlights for the period from the start of business, January 26, 2012, to January 30, 2013. These financial statements and financial highlights are
the responsibility of the Trusts management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trusts internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of January 30, 2013, by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of eUnits
2 Year U.S. Market Participation Trust: Upside to Cap / Buffered Downside as of January 30, 2013, and the results of its operations, the changes in its net
assets, and the financial highlights for the period from the start of business, January 26, 2012, to January 30, 2013, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 19, 2013
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Annual Meeting of Unit holders
The Fund held its Annual Meeting of Unit holders on November 16, 2012. The following action was taken by the Unit holders:
Item 1:
The election of Scott E. Eston, Benjamin C. Esty, Thomas E. Faust Jr. and Allen R. Freedman as Class I Trustees of the Fund for a three-year term expiring in 2015.
|
|
|
|
|
|
|
|
|
Nominee for Trustee
Elected by All Unit holders
|
|
Number of Units
|
|
|
For
|
|
|
Withheld
|
|
Scott E. Eston
|
|
|
2,558,123
|
|
|
|
55,209
|
|
Benjamin C. Esty
|
|
|
2,558,123
|
|
|
|
55,209
|
|
Thomas E. Faust Jr.
|
|
|
2,558,123
|
|
|
|
55,209
|
|
Allen R. Freedman
|
|
|
2,558,123
|
|
|
|
55,209
|
|
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Management and Organization
Fund Management.
The Trustees of eUnits
TM
2 Year U.S. Market Participation Trust: Upside to
Cap / Buffered Downside (the Trust) are responsible for the overall management and supervision of the Trusts affairs. The Trustees and officers of the Trust are listed below. Except as indicated, each individual has held the office shown or
other offices in the same company for the last five years. The noninterested Trustees consist of those Trustees who are not interested persons of the Trust, as that term is defined under the 1940 Act. The business address of
each Trustee and officer is Two International Place, Boston, Massachusetts 02110. As used below, EVC refers to Eaton Vance Corp., EV refers to Eaton Vance, Inc., EVM refers to Eaton Vance Management,
BMR refers to Boston Management and Research and EVD refers to Eaton Vance Distributors, Inc. EVC and EV are the corporate parent and trustee, respectively, of EVM and BMR. EVD is a wholly-owned subsidiary of EVC. Each
officer affiliated with Eaton Vance may hold a position with other Eaton Vance affiliates that is comparable to his or her position with EVM listed below. Each Trustee oversees 183 portfolios in the Eaton Vance Complex (including all master and
feeder funds in a master feeder structure). Each officer serves as an officer of certain other Eaton Vance funds. Each Trustee serves for a three year term. Each officer serves until his or her successor is elected.
|
|
|
|
|
|
|
Name and Year of Birth
|
|
Position(s)
with the
Trust
|
|
Term of Office;
Length of
Service
|
|
Principal Occupation(s) and Directorships
During Past Five Years and Other Relevant Experience
|
Interested Trustee
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Faust Jr.
1958
|
|
Class I
Trustee
|
|
Until 2015.
3 years.
Trustee since 2010.
|
|
Chairman, Chief Executive Officer and President of EVC, Director and President of EV, Chief Executive Officer and President of EVM and BMR, and
Director of EVD. Trustee and/or officer of 188 registered investment companies. Mr. Faust is an interested person because of his positions with EVM, BMR, EVD, EVC and EV, which are affiliates of the Trust.
Directorships in the Last Five Years.
(
1)
Director of EVC and Hexavest Inc.
|
|
|
|
|
|
|
|
|
|
|
|
Noninterested Trustees
|
|
|
|
|
|
|
|
|
|
|
Scott E. Eston
1956
|
|
Class I
Trustee
|
|
Until 2015.
3 years.
Trustee since 2011.
|
|
Private investor. Formerly held various positions at Grantham, Mayo, Van Otterloo and Co., L.L.C. (investment management firm) (1997-2009),
including Chief Operating Officer (2002-2009), Chief Financial Officer (1997-2009) and Chairman of the Executive Committee (2002-2008); President and Principal Executive Officer, GMO Trust (open-end registered investment company) (2006-2009). Former
Partner, Coopers and Lybrand L.L.P. (now PricewaterhouseCoopers) (public accounting firm) (1987-1997).
Directorships in the Last Five Years.
None.
|
|
|
|
|
Benjamin C. Esty
1963
|
|
Class I
Trustee
|
|
Until 2015.
3 years.
Trustee since 2010.
|
|
Roy and Elizabeth Simmons Professor of Business Administration and Finance Unit Head, Harvard University Graduate School of Business
Administration.
Directorships in the Last Five Years.
(
1)
None.
|
|
|
|
|
Allen R. Freedman
1940
|
|
Class I
Trustee
|
|
Until 2015.
3 years.
Trustee since 2010.
|
|
Private Investor. Former Chairman (2002-2004) and a Director (1983-2004) of Systems & Computer Technology Corp. (provider of software to
higher education). Formerly, a Director of Loring Ward International (fund distributor) (2005-2007). Former Chairman and a Director of Indus International, Inc. (provider of enterprise management software to the power generating industry)
(2005-2007). Former Chief Executive Officer of Assurant, Inc. (insurance provider) (1979-2000).
Directorships in the Last Five Years.
(
1)
Director of
Stonemor Partners, L.P. (owner and operator of cemeteries). Formerly, Director of Assurant, Inc. (insurance provider) (1979-2011).
|
|
|
|
|
William H. Park
1947
|
|
Class II
Trustee
|
|
Until 2015.
3 years.
Trustee since 2010.
|
|
Consultant and private investor. Formerly, Chief Financial Officer, Aveon Group L.P. (investment management firm) (2010-2011). Formerly, Vice
Chairman, Commercial Industrial Finance Corp. (specialty finance company) (2006-2010). Formerly, President and Chief Executive Officer, Prizm Capital Management, LLC (investment management firm) (2002-2005). Formerly, Executive Vice President and
Chief Financial Officer, United Asset Management Corporation (investment management firm) (1982-2001). Formerly, Senior Manager, Price Waterhouse (now PricewaterhouseCoopers) (an independent registered public accounting
firm)
(1972-1981).
Directorships in the Last Five Years.
(
1)
None.
|
|
|
|
|
Ronald A. Pearlman
1940
|
|
Class II
Trustee
|
|
Until 2013.
1 year.
Trustee since 2010.
|
|
Professor of Law, Georgetown University Law Center. Formerly, Deputy Assistant Secretary (Tax Policy) and Assistant Secretary (Tax Policy), U.S.
Department of the Treasury (1983-1985). Formerly, Chief of Staff, Joint Committee on Taxation, U.S. Congress (1988-1990).
Directorships in the
Last Five Years.
(
1)
None.
|
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Management and Organization continued
|
|
|
|
|
|
|
Name and Year of Birth
|
|
Position(s)
with the
Trust
|
|
Term of Office;
Length of
Service
|
|
Principal Occupation(s) and Directorships
During Past Five Years and Other Relevant Experience
|
Noninterested Trustees (continued)
|
|
|
|
|
Helen Frame Peters
1948
|
|
Class III
Trustee
|
|
Until 2014.
2 years.
Trustee since 2010.
|
|
Professor of Finance, Carroll School of Management, Boston College. Formerly, Dean, Carroll School of Management, Boston College (2000-2002).
Formerly, Chief Investment Officer, Fixed Income, Scudder Kemper Investments (investment management firm) (1998-1999). Formerly, Chief Investment Officer, Equity and Fixed Income, Colonial Management Associates (investment management firm)
(1991-1998).
Directorships in the Last Five Years.
(
1)
Formerly, Director of BJs Wholesale Club, Inc. (wholesale club retailer) (2004-2011). Formerly, Trustee of SPDR Index Shares Funds and SPDR Series Trust (exchange
traded funds) (2000-2009). Formerly, Director of Federal Home Loan Bank of Boston (a bank for banks) (2007-2009).
|
|
|
|
|
Lynn A. Stout
1957
|
|
Class III
Trustee
|
|
Until 2014.
2 years.
Trustee since 2010.
|
|
Distinguished Professor of Corporate and Business Law, Jack G. Clarke Business Law Institute, Cornell University Law School. Formerly, the Paul
Hastings Professor of Corporate and Securities Law (2006-2012) and Professor of Law (2001-2006), University of California at Los Angeles School of Law.
Directorships in the Last Five Years.
(
1)
None.
|
|
|
|
|
Harriett Tee Taggart
1948
|
|
Class II
Trustee
|
|
Until 2013.
1 year.
Trustee since 2011.
|
|
Managing Director, Taggart Associates (a professional practice firm). Formerly, Partner and Senior Vice President, Wellington Management Company,
LLP (investment management firm) (1983-2006).
Directorships in the Last Five Years.
Director of Albemarle Corporation (chemicals
manufacturer) (since 2007) and The Hanover Group (specialty property and casualty insurance company) (since 2009). Formerly, Director of Lubrizol Corporation (specialty chemicals) (2007-2011).
|
|
|
|
|
Ralph F. Verni
1943
|
|
Chairman of the Board and
Class III
Trustee
|
|
Until 2014.
2 years.
Trustee since 2011.
Chairman of the Board since 2007.
|
|
Consultant and private investor. Formerly, Chief Investment Officer (1982-1992), Chief Financial Officer (1988-1990) and Director (1982-1992), New
England Life. Formerly, Chairperson, New England Mutual Funds (1982-1992). Formerly, President and Chief Executive Officer, State Street Management & Research (1992-2000). Formerly, Chairperson, State Street Research Mutual Funds (1992-2000).
Formerly, Director, W.P. Carey, LLC (1998-2004) and First Pioneer Farm Credit Corp. (2002-2006).
Directorships in the Last Five Years.
(1)
None.
|
|
|
|
|
|
|
|
|
|
|
|
Principal Officers who are not Trustees
|
Name and Year of Birth
|
|
Position(s)
with the
Trust
|
|
Length of
Service
|
|
Principal Occupation(s)
During Past Five Years
|
Duncan W. Richardson
1957
|
|
President
|
|
Since 2009
|
|
Director of EVC and Executive Vice President and Chief Equity Investment Officer of EVC, EVM and BMR.
|
|
|
|
|
Maureen A. Gemma
1960
|
|
Vice President, Secretary and Chief Legal Officer
|
|
Vice President since 2011 and Secretary and Chief Legal Officer since 2009
|
|
Vice President of EVM and BMR.
|
|
|
|
|
James F. Kirchner
1967
|
|
Treasurer
|
|
Since 2013
|
|
Vice President of EVM and BMR.
|
|
|
|
|
Paul M. ONeil
1953
|
|
Chief Compliance Officer
|
|
Since 2009
|
|
Vice President of EVM and BMR.
|
(1)
|
During their respective tenures, the Trustees (except Mr. Eston and Ms. Taggart) also served as trustees of one or more of the following Eaton Vance
funds (which operated in the years noted): Eaton Vance Credit Opportunities Fund (launched in 2005 and terminated in 2010); Eaton Vance Insured Florida Plus Municipal Bond Fund (launched in 2002 and terminated in 2009); and Eaton Vance National
Municipal Income Trust (launched in 1998 and terminated in 2009).
|
eUnits 2 Year U.S. Market Participation Trust:
Upside to Cap / Buffered Downside
January 30,
2013
Management and Organization continued
Number of Employees
The Trust is organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a closed-end management investment company and has no employees.
Number of Unit holders
As of January 30, 2013, Trust records indicate that there is one registered Unit holder and approximately 1,080 Unit holders owning the Trust
shares in street name, such as through brokers, banks, and financial intermediaries.
If you are a street name Unit holder and wish to receive Trust
reports directly, which contain important information about the Trust, please write or call:
Eaton Vance Distributors, Inc.
Two International Place
Boston,
MA 02110
1-800-262-1122
NYSE MKT
Symbol
The NYSE MKT symbol is ETUA.
Eaton Vance Funds
IMPORTANT NOTICES
Privacy.
The Eaton Vance organization is committed to ensuring your financial privacy. Each of the financial institutions identified below has in effect the
following policy (Privacy Policy) with respect to nonpublic personal information about its customers:
|
|
Only such information received from you, through application forms or otherwise, and information about your Eaton Vance fund transactions will be collected. This
may include information such as name, address, social security number, tax status, account balances and transactions.
|
|
|
None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees
necessary to service your account). In the normal course of servicing a customers account, Eaton Vance may share information with unaffiliated third parties that perform various required services such as transfer agents, custodians and
broker-dealers.
|
|
|
Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such
information.
|
|
|
We reserve the right to change our Privacy Policy at any time upon proper notification to you. Customers may want to review our Privacy Policy periodically for
changes by accessing the link on our homepage: www.eatonvance.com.
|
Our pledge of privacy applies to the following entities within the
Eaton Vance organization: the Eaton Vance Family of Funds, Eaton Vance Management, Eaton Vance Investment Counsel, Eaton Vance Distributors, Inc., Eaton Vance Trust Company, Eaton Vance Managements Real Estate Investment Group and Boston
Management and Research. In addition, our Privacy Policy applies only to those Eaton Vance customers who are individuals and who have a direct relationship with us. If a customers account (i.e., fund shares) is held in the name of a
third-party financial advisor/broker-dealer, it is likely that only such advisors privacy policies apply to the customer. This notice supersedes all previously issued privacy disclosures. For more information about Eaton Vances Privacy
Policy, please call 1-800-262-1122.
Delivery of Shareholder Documents.
The Securities and Exchange Commission (SEC) permits funds to deliver only one copy of shareholder documents, including prospectuses, proxy statements
and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is often called householding and it helps eliminate duplicate mailings to shareholders.
Eaton Vance,
or your financial advisor, may household the mailing of your documents indefinitely unless you instruct Eaton Vance, or your financial advisor, otherwise.
If you would prefer that your Eaton Vance documents not be householded, please contact
Eaton Vance at 1-800-262-1122, or contact your financial advisor. Your instructions that householding not apply to delivery of your Eaton Vance documents will be effective within 30 days of receipt by Eaton Vance or your financial advisor.
Portfolio Holdings.
Each Eaton Vance Fund and its underlying Portfolio(s) (if applicable) will file a schedule of portfolio holdings on Form N-Q with the SEC for the first and third quarters of each fiscal year. The
Form N-Q will be available on the Eaton Vance website at www.eatonvance.com, by calling Eaton Vance at 1-800-262-1122 or in the EDGAR database on the SECs website at www.sec.gov. Form N-Q may also be reviewed and copied at the
SECs public reference room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the public reference room).
Proxy Voting.
From time to time, funds are required to vote proxies related to the
securities held by the funds. The Eaton Vance Funds or their underlying Portfolios (if applicable) vote proxies according to a set of policies and procedures approved by the Funds and Portfolios Boards. You may obtain a description of
these policies and procedures and information on how the Funds or Portfolios voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge, upon request, by calling 1-800-262-1122 and by
accessing the SECs website at www.sec.gov.
Additional Notice to
Shareholders.
A Fund also may purchase shares of its common stock in the open market when they trade at a discount to net asset value or
at other times if the Fund determines such purchases are advisable. There can be no assurance that a Fund will take such action or that such purchases would reduce the discount. If applicable, a Fund may also redeem or purchase its outstanding
auction preferred shares (APS) in order to maintain compliance with regulatory requirements, borrowing or rating agency requirements or for other purposes as it deems appropriate or necessary.
Closed-End Fund Information.
The Eaton Vance closed-end funds make certain fund performance data and information about portfolio characteristics (such as top holdings and asset allocation) available on the Eaton Vance website after
the end of each month. Certain fund performance data for the funds, including total returns, are posted to the website shortly after the end of each month. Portfolio holdings for the most recent month-end are also posted to the website approximately
30 days following the end of the month. This information is available at www.eatonvance.com on the fund information pages under Individual Investors Closed-End Funds.
Investment Adviser and Administrator
Eaton Vance Management
Two International Place
Boston, MA 02110
Sub-Adviser
Parametric Risk Advisors LLC
274
Riverside Avenue
Wesport, CT 06880
Custodian
State Street Bank and
Trust Company
200 Clarendon Street
Boston, MA 02116
Transfer Agent
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022
Fund Offices
Two International Place
Boston, MA 02110