Spaceman Spiff:

What does UNII stand for?  

Uneducated Nitwit Interested in Investing

Or...Undistributed Net Investment Income    Take your pick.  BTW, I think I've got it figured out, but before I attempt to explain it to a client, I'd love it if someone tried to explain it to me. 

UNII may be good or bad, depending on the situation.  Often times a fund will run negative UNII in order to maintain a dividend payment.  Their hope in the future is that they will have enough earnings to bring the UNII back to even.  It’s tough to buy a fund with negative UNII, because at some point in the future, they will either need to reduce their dividend, or use future NII to offset prior losses (negative UNII).

It's typical in CEF's employing leverage. There are times (which is OK) when a CEF can run negative UNII because they want to maintain a constant monthly dividend, while some of their investments (i.e. munis) pay annually or semi-annually or quarterly.  However, sometimes (more often) it is a sign that they have run some losses but do not want to reduce the dividend yet (in hopes of offsetting losses in the future).  One of the bigger problems is that at some point, if the UNII is not pad back, the fund must either face NAV erosion, or begin paying ROC (return of capital).  This is when you see CEF's just start to implode. So it's important to read and understand why UNII is the way it is in a particular CEF, and if it is consistent historically.  If negative UNII is getting consistently larger, it's probably a bad sign. I didn't exaplin it completely, but I think you get the picture.   Unless your client is a financial type, they probably won't get it.