What characterizes a Unit Paying Fund?

A Unit Paying Fund is characterized by its practice of distributing income regularly to its investors. This typically involves paying out earnings, such as dividends or interest, instead of reinvesting them back into the fund. The consistent payout of income is a key feature that appeals to investors seeking regular cash flow from their investments.

In contrast to the other options, a Unit Paying Fund does not reinvest all earnings into new assets, which makes option B distinct. It also isn't limited to only investing in equities or focusing solely on money market instruments, as its structure can include a diverse range of investment types, aiming to generate income for distribution. Therefore, the hallmark of a Unit Paying Fund lies in its income distribution strategy.