Closed-End Equity & Income Portfolio Series 12

The trust invests in a diversified portfolio of Closed-End Funds that consist primarily of equity securities and/or income-producing securities. The assets held by such Closed-End Funds may include both foreign and domestic equity securities and fixed-income securities. The equity securities held in a Closed-End Fund may include common stocks, preferred stocks, convertible bonds, warrants and other securities with equity characteristics. The fixed-income securities held by a Closed-End Fund may consist of taxable bonds, government securities, high-yield or junk securities and other income-producing assets.

Closed-End Funds are investment companies that consist primarily of securities issued by various corporate or government entities. Closed-End Funds are typically traded on national securities exchanges and are managed by an investment adviser in accordance with the fund’s investment objectives and policies. The investment adviser generally charges a fee for such service.

When selecting Closed-End Funds for inclusion in this portfolio the sponsor looks at numerous factors. These factors include, but are not limited to:

Investment Objective. The sponsor favors funds that have a clear investment objective in line with the trust’s objective and, based upon a review of publicly available information, appear to be maintaining it.

Premium/Discount. The sponsor favors funds that are trading at a discount relative to their peers and relative to their long-term average.

Consistent Dividend. The sponsor favors funds that have a history of paying a consistent and competitive dividend which, in the opinion of the sponsor, can be maintained.

Performance. The sponsor favors funds that have a history of strong relative performance (based on market price and net asset value) when compared to their peers and an applicable benchmark.

• Share prices can be volatile. The value of your investment may fall over time. Market value fluctuates in response to various factors. These can include stock market movements, purchases or sales of securities by the trust, government policies, litigation, and changes in interest rates, inflation, the financial condition of the securities’ issuer or even perceptions of the issuer.
• The sponsor does not actively manage the portfolio. The trust will generally hold, and may continue to buy, the same securities even though a security’s outlook, market value or yield may have changed.
• The trust includes securities of Closed-End Funds. Closed-End Funds are actively managed investment companies that invest in various types of securities. Closed-End Funds issue shares of common stock that are traded on a securities exchange. Closed-End Funds are subject to various risks, including management’s ability to meet the Closed-End Fund’s investment objective, and to manage the Closed-End Fund portfolio when the underlying securities are redeemed or sold, during periods of market turmoil and as investors’ perceptions regarding Closed-End Funds or their underlying investments change. Closed-End Funds are not redeemable at the option of the shareholder and they may trade in the market at a discount to their net asset value. Closed-End Funds may also employ the use of leverage which increases risk and volatility.
• The value of the fixed-income securities in the Closed-End Funds will generally fall if interest rates, in general, rise. Typically, fixed-income securities with longer periods before maturity are more sensitive to interest rate changes.
• Certain Closed-End Funds held by the trust may invest in bonds that are rated below investment grade and are considered to be “junk” securities. Below investment grade obligations are considered to be speculative and are subject to greater market and credit risks, and accordingly, the risk of non-payment or default is higher than with investment grade securities. In addition, such securities may be more sensitive to interest rate changes and more likely to receive early returns of principal.
• Certain Closed-End Funds held by the trust may invest in bonds that are rated as investment grade by only one rating agency. As a result, such splitrated securities may have more speculative characteristics and are subject to a greater risk of default than securities rated as investment grade by both Moody’s and Standard & Poor’s.
• Certain Closed-End Funds held by the trust invest in common stocks. Common stocks represent a  proportional share of ownership in a company. Common stock prices fluctuate for several reasons including changes in investors’ perceptions of the financial condition of an issuer, changes in the general condition of the relevant stock market, such as the market volatility recently exhibited, or when political or economic events affect the issuers. Common stock prices may also be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase.
• Certain Closed-End Funds held by the trust invest in foreign securities. Investment in foreign securities presents additional risk. Foreign risk is the risk that foreign securities will be more volatile than U.S. securities due to such factors as adverse economic, currency, political, social or regulatory developments in a country, including government seizure of assets, excessive taxation, limitations on the use or transfer of assets, the lack of liquidity or regulatory controls with respect to certain industries or differing legal and/or accounting standards.
• Certain Closed-End Funds held by the trust may invest in securities issued by entities located in emerging markets. Emerging markets are generally defined as countries with low per capita income in the initial stages of their industrialization cycles. The markets of emerging markets countries are generally more volatile than the markets of developed countries with more mature economies.
• Certain Closed-End Funds held by the trust may invest in convertible securities. Convertible securities generally offer lower interest or dividend yields than non-convertible fixed-income securities of similar credit quality because of the potential for capital appreciation. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However, a convertible security’s market value also tends to reflect the market price of the common stock of the issuing company, particularly when that stock price is greater than the convertible security’s “conversion price.” Convertible securities fall below debt obligations of the same issuer in order of preference or priority in the event of a liquidation and are typically unrated or rated lower than such debt obligations.
• Certain Closed-End Funds held by the trust may invest in preferred securities. Preferred securities are typically subordinated to bonds and other debt instruments in a company’s capital structure in terms of priority to corporate income and therefore will be subject to greater credit risk then those debt instruments.
• A Closed-End Fund or an issuer of securities held by a Closed-End Fund may be unwilling or unable to make principal payments and/or to declare distributions in the future, may call a security before its stated maturity, or may reduce the level of distributions declared. This may result in a reduction in the value of your units.
• The financial condition of a Closed-End Fund or an issuer of securities held by a Closed-End Fund may worsen or its credit ratings may drop, resulting in a reduction in the value of your units. This may occur at any point in time, including during the primary offering period.
• In addition to expenses of the trust, the trust is subject to various expenses of the closed-end funds.
• Inflation may lead to a decrease in the value of assets or income from investments.