Dividend & Income Select Closed-End Portfolio, Series 112
When it comes to investing for income, investors have several choices. Even with all the
options, there are those investors who do not want to give up the growth potential offered by
stocks in order to earn a high rate of current income. The Dividend & Income Select Closed-End
Portfolio has been developed to address this need. This unit investment trust is comprised of a
pool of closed-end funds which invest in dividend-paying common stocks and preferred securities.
A portion of these closed-end funds invest in common stocks and, on an ongoing basis, will sell
covered call options. An option is considered “covered” when a closed-end fund owns the equity
securities against which the options are sold. Though call options can be used for many investment
purposes, they are typically used as a tool to potentially enhance returns, offer a current yield to
investors, and provide limited downside protection.
The Importance of Dividends
Dividends have traditionally been one of the few constants in the world of investing, helping
to buffer volatility in both good and bad markets. When markets decline, dividends have the
potential to offset losses, and when markets rise, dividends have the potential to enhance returns.
A dividend is a payment from a company’s earnings. Since corporations are not obligated to share
their earnings with stockholders, dividends may be viewed as a sign of a company’s profitability
as well as management’s assessment of the future.
Why Closed-End Funds?
Since closed-end funds maintain a relatively fixed pool of investment capital, portfolio managers are
better able to adhere to their investment philosophies through greater flexibility and control. In addition,
closed-end funds don’t have to manage fund liquidity to meet potentially large redemptions.
Because they are not subjected to cash inflows and outflows, which can dilute distributions over time,
closed-end funds can generally provide a more stable income stream than other managed investment
products. However, stable income cannot be assured.
Portfolio Objective
This unit investment trust seeks above-average total return through a combination of
capital appreciation and dividend income; however, there is no assurance the
objective will be met.
| Not FDIC Insured • Not Bank Guaranteed • May Lose Value |
You should consider the portfolio's investment objectives, risks, and
charges and expenses carefully before investing. Contact your financial professional
or call First Trust Portfolios, L.P. at 1.800.621.1675 to request a prospectus,
which contains this and other information about the portfolio. Read it carefully
before you invest.
Risk Considerations
An investment in this unmanaged unit investment trust should be made
with an understanding of the risks associated with an investment in a portfolio of closed-end funds which
invest in common stocks, preferred stocks and options.
Closed-end funds are subject to various risks, including management’s ability to meet the fund’s investment objective, and to manage the fund’s portfolio when the underlying securities are redeemed or sold, during periods of
market turmoil and as investors’ perceptions regarding the funds or their underlying investments change. Unlike open-end funds, which trade at prices based on a current determination of the fund’s net asset value, closed-end
funds frequently trade at a discount to their net asset value in the secondary market. Certain funds may employ the use of leverage which increases the volatility of such funds.
Common stocks are subject to certain risks, such as an economic recession and the possible deterioration of either the financial condition of the issuers of the equity securities or the general condition of the stock market.
Options are subject to various risks including that their value may be adversely affected if the market for the option becomes less liquid or smaller. In addition, options will be affected by changes in the value and
dividend rates of the stock subject to the option, an increase in interest rates, a change in the actual and perceived volatility of the stock market and the common stock and the remaining time to expiration.
Preferred securities are equity securities of the issuing company which pay income in the form of dividends. Preferred securities are typically subordinated to bonds and other debt instruments in a company’s capital structure,
and therefore will be subject to greater credit risk than those debt instruments.
Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers.
As the use of Internet technology has become more prevalent in the course of business, the trust
has become more susceptible to potential operational risks through breaches in cybersecurity.
Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East, have caused and could continue to cause significant market disruptions and volatility
within the markets in Russia, Europe, the Middle East and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.
The ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future variants of the disease.
It is important to note that an investment can be made in the underlying funds directly rather than through the trust. These direct investments can be
made without paying the trust's sales charge, operating expenses and organizational costs.
The value of the securities held by the trust may be subject to steep declines or increased volatility
due to changes in performance or perception of the issuers.
This UIT is a buy and hold strategy and investors should consider their ability to hold the trust until maturity. There may be tax consequences unless units are purchased in an IRA or other qualified plan.
For a discussion of additional risks of
investing in the trust see the “Risk Factors”
section of the prospectus.