Form 485BPOS Atlas U.S. Tactical Inco
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Filed with the Securities and Exchange Commission on
1933 Act Registration File No. 333-257154
1940 Act File No. 811-23705
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ☒
| ☐ | Pre-Effective Amendment No. |
| ☒ | Post-Effective Amendment No. 5 |
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ☒
| ☒ | Amendment No. 5 |
(Check appropriate box or boxes.)
(Exact Name of Registrant as Specified in Charter)
Buchanan Office Center
Road 165 #40, Suite 201
Guaynabo, Puerto Rico 00968
(Address of Principal Executive Offices, including Zip Code)
Registrant’s Telephone Number, including Area Code: +1 787-781-1301
JoAnn M. Strasser, Esq.
Thompson Hine LLP
41 S. High Street
Suite 1700
Columbus, OH 43215
(Name and. Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
| ☐ | immediately upon filing pursuant to paragraph (b) |
| ☒ | on February 1, 2026 pursuant to paragraph (b) |
| ☐ | 60 days after filing pursuant to paragraph (a)(l) |
| ☐ | on (date) pursuant to paragraph (a)(l) |
| ☐ | 75 days after filing pursuant to paragraph (a)(2) |
| ☐ | on (date) pursuant to paragraph (a)(2) of Rule 485. |
If appropriate, check the following box:
| ☐ | this post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of 1940, the Registrant declares that an indefinite number of its shares of common stock are being registered under the Securities Act of 1933 by this registration statement.
The Registrant hereby amends this Registration Statement under the Securities Act of 1933 on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that the Registration Statement shall thereafter become effective in accordance with the provisions of Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.
ATLAS U.S. TACTICAL INCOME FUND, INC.
Prospectus
| Share Class | Ticker | Cusip # |
| Class A | ATLAX | 049446 107 |
| Class C | ATLCX | 049446 206 |
Prospectus Date:
This Prospectus provides important information about the Atlas U.S. Tactical Income Fund, Inc. (the “Fund”) that you should know before investing. Please read it carefully and keep it for future reference.
The Securities and Exchange Commission has not approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Table of Contents
| Investment Objectives | 1 |
| Fees and Expenses of the Fund | 1 |
| Portfolio Turnover | 2 |
| Principal Investment Strategies of the Fund | 2 |
| Principal Risks of Investing in the Fund | 2 |
| Performance | 4 |
| Investment Adviser | 5 |
| Portfolio Managers | 5 |
| Purchase and Sale of Fund Shares | 5 |
| Tax Information | 6 |
| Financial Intermediary Compensation | 6 |
| ADDITIONAL INFORMATION ABOUT PRINCIPAL INVESTMENT STRATEGIES AND RISKS | 6 |
| Investment Objectives and Strategy | 6 |
| Risk Factors | 7 |
| Portfolio Holdings | 12 |
| Management of the Fund | 12 |
| Investment Adviser | 12 |
| Portfolio Manager | 13 |
| Legal Proceedings | 13 |
| Restrictions on Transfer | 13 |
| Shareholders’ Guide | 13 |
| Pricing of Fund Shares | 14 |
| Purchase | 14 |
| Qualifying for a Reduction or Waiver of Class A Shares Sales Charge | 17 |
| Right of Accumulation | 17 |
| Letter of Intent | 17 |
| Contingent Deferred Sales Charge | 18 |
| CDSC Waivers | 18 |
| Redemption of Fund Shares | 18 |
| Redeeming Shares | 18 |
| Redemption Fee | 19 |
| Dividends and Distributions | 20 |
| Tax Consequences | 21 |
| Puerto Rico Taxation | 22 |
| United States Taxation | 24 |
| Distribution Arrangements | 26 |
| Additional Information | 27 |
| Performance | 27 |
| Financial Highlights | 28 |
| Financial Highlights (continued) | 29 |
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| Share Class | Ticker | Cusip |
| Class A Shares | ATLAX | 049446 107 |
| Class C Shares | ATLCX | 049446 206 |
The Fund seeks to maximize total return, consistent with preservation of capital.
This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below. Each share class has different expenses but represents an investment in the same Fund. For the Fund’s Class A shares (the “Class A Shares”),
| SHAREHOLDER FEES (fees paid directly from your investment) | ||
| Class A | Class C | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | ||
| Maximum deferred sales charge (load) (as a percentage of the amount redeemed) | ||
| Redemption Fee (as a percentage of amount redeemed on shares held for 60 days or less) | ||
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | ||
| Management Fees(2)(3) | ||
| Distribution and Service (12b-1) Fees | ||
| Interest Expense | ||
| Other Expenses | ||
| Total Annual Fund Operating Expenses(3) | ||
| (1) |
|
| (2) |
|
| (3) |
|
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) |
Class A | Class C |
| Management Fees | ||
| Distribution and Service (12b-1) Fees | ||
| Other Expenses | ||
| Adviser’s Voluntary Fee Waiver | ( |
( |
| Total Annual Fund Operating Expenses |
| + | Shares purchased through the Fund’s transfer agent, Ultimus Fund Solutions, LLC (“Ultimus”), are not subject to sales charges. |
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
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| With redemption at the end of the period: | 1 Year | 3 Years | 5 Years | 10 Years |
| Class A Shares | $ |
$ |
$ |
$ |
| Class C Shares | $ |
$ |
$ |
$ |
|
Without redemption at the end of the period: |
1 Year | 3 Years | 5 Years | 10 Years |
| Class A Shares | $ |
$ |
$ |
$ |
| Class C Shares | $ |
$ |
$ |
$ |
The example should not be considered a representation of past or future expenses and actual expenses may be greater or lesser than those shown above.
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was
The Fund pursues its investment strategy by constructing a portfolio of securities as described below. The Fund relies on the professional judgment of the Adviser to make decisions about the Fund’s portfolio investments. The basic investment philosophy of the Adviser is to seek to invest in attractively valued securities that, in its opinion, represent good, long-term investment opportunities. Securities may be sold when the Adviser believes that they no longer represent relatively attractive investment opportunities.
The Fund invests primarily in fixed-income securities, including U.S. government, mortgage-backed, and corporate debt securities, and municipal obligations. Fixed-income securities are debt obligations such as bonds and debentures, U.S. government securities, debt obligations of domestic and non-U.S. corporations, debt obligations of non-U.S. governments and their political subdivisions, asset-backed securities, high-yield securities, various mortgage-backed securities (both residential and commercial), other floating or variable rate obligations, convertible securities, municipal, obligations and zero-coupon debt securities. Under no circumstances will the Fund have the flexibility to invest in direct or indirect obligations of the Commonwealth of Puerto Rico or any of its instrumentalities. Depending on market conditions, the Fund may invest in other market sectors.
The Fund engages in borrowing and uses other forms of leverage, such as derivatives, to increase amounts available for investment consistent with its investment objective. The Adviser may, when consistent with the Fund’s objective, buy options or futures on a security or an index of securities, or enter into swap agreements, including interest rate and credit default swaps (collectively, commonly known as derivatives). The Fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or credit risk. The Fund may also use derivatives for leverage. The Fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements).
The Fund may invest up to 25% of its assets in below investment-grade fixed-income securities (or unrated fixed-income securities deemed by the Adviser to be of comparable credit quality). Investment-grade refers to fixed-income securities that are rated “AAA,” “AA,” “A” or “BBB” by S&P Global Ratings (“S&P”), “Aaa,” “Aa,” “A” or “Baa” by Moody’s Investors Service, Inc. (“Moody’s”), or “AAA,” “AA,” “A” or “BBB” by Fitch Ratings, Inc. (“Fitch”) without regard to any gradations within such categories, or within the four highest investment grade categories (without regard to any gradations within such categories) by any other nationally recognized statistical rating organization, or, if not rated, are considered by the Adviser to be of comparable credit quality. Below investment-grade fixed-income securities are also known as “junk bonds” which are speculative and subject to greater credit risk, price volatility and risk of loss than investment-grade securities.
The Fund may invest up to 20% of its total assets in mortgage-backed real estate investment trusts (“REITs”) and large capitalization stocks, including through the use of passive investments, such as exchange-traded funds (“ETFs”). The Fund may invest up to 20% of its total assets in fixed-income securities or large capitalization stocks (mainly ETFs) of foreign issuers in U.S. dollar denominations.
The Fund may actively trade its securities to achieve its principal investment strategies. The Fund normally investments at least 80% of its assets in a diversified portfolio of U.S. fixed-income instruments of varying maturities.
Principal Risks of Investing in the Fund
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| ● | Derivatives Risk. Derivatives, futures, and options can be highly volatile and involve similar risks to those as the underlying referenced securities, such as risks related to interest rates, market, credit, valuation, and liquidity, among others. There are also additional risks. Gains or losses from a derivative investment can be substantially greater than the derivative’s original cost and can therefore involve leverage. Leverage may cause the Fund to be more volatile than if it had not used leverage. Derivatives can be complex instruments and may involve analysis that differs from that required for other investment types used by the Fund. If the value of a derivative does not correlate well with the particular market or other asset class to which the derivative is intended to provide exposure, the derivative may not produce the anticipated result. Derivatives can also reduce the opportunity for gain or result in losses by offsetting positive returns in other investments. Derivatives may be difficult to value, can be less liquid than other types of investments and entail the risk that the counterparty will default on its payment obligations. |
| ● | Equity Securities Risk. Investments in publicly issued equity securities and securities that provide exposure to equity securities, including common stocks, in general are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities in which the Fund invests will cause the net asset value per share (“NAV”) of the Fund to fluctuate. |
| ● | Fixed-Income Securities Risk. When the Fund invests in fixed-income securities, the value of your investment in the Fund will fluctuate with changes in interest rates. Typically, a rise in interest rates causes a decline in the value of fixed-income securities or derivatives owned by the Fund. In general, the market price of fixed-income securities with longer maturities will increase or decrease more in response to changes in interest rates than shorter term securities. Other risk factors include credit risk (the debtor may default) and prepayment risk (the debtor may pay its obligation early, reducing the amount of interest payments). These risks could affect the value of a particular investment by the Fund, possibly causing the Fund’s share price and total return to be reduced and fluctuate more than other types of investments. |
| ○ | Credit Risk. The issuer of bonds or other debt securities may be unable or unwilling, or may be perceived as unable or unwilling, to make timely interest or principal payments or otherwise honor its obligations. |
| ○ | Duration Risk. Longer-term securities may be more sensitive to interest rate changes. Rising interest rates pose a heightened risk to the Fund’s longer-term fixed-income securities. If rates increase significantly, effective duration may tend to understate the drop in a security’s price. If rates drop significantly, effective duration may tend to overstate the increase in a security’s price. |
| ○ | Extension Risk. During periods of rising interest rates, a debtor may pay back a bond or other fixed-income security slower than expected or required, and the value of such security may fall. |
| ○ | Interest Rate Risk. During periods of rising interest rates, the Fund’s yield (and the market value of its securities) will tend to be lower than prevailing market rates; in periods of falling interest rates, the Fund’s yield (and the market value of its securities) will tend to be higher. Securities with longer maturities tend to be more sensitive to changes in interest rates, causing them to be more volatile than securities with shorter maturities. Securities with shorter maturities tend to provide lower returns and be less volatile than securities with longer maturities. If interest rates rise, the Fund’s yield may not increase proportionately, and the maturities of fixed-income securities that have the ability to be prepaid or called by the issuer may be extended. |
| ○ | Liquidity Risk. Fixed-income securities may be difficult or impossible to sell at the time that the Adviser would like or at the price the Adviser believes the security is currently worth. |
| ○ | Prepayment (or Call) Risk. During periods of falling interest rates, certain fixed-income securities with higher interest rates, such as mortgage- and asset-backed securities, may be prepaid by their issuers thereby reducing the amount of interest payments. |
| ○ | Valuation Risk. One or more of the fixed-income securities in which the Fund invests may be priced differently than the value realized upon such security’s sale. In times of market instability, valuation may be more difficult. |
| ● | Foreign Exposure Risk. Investments in foreign securities and securities that provide exposure to foreign securities involve greater risks than investments in domestic securities. As a result, the Fund’s returns and NAVs may be affected to a large degree by fluctuations in currency exchange rates, political, diplomatic or economic conditions and regulatory requirements in other countries. The laws and accounting, auditing, and financial reporting standards in foreign countries typically are not as strict as they are in the U.S., and there may be less public information available about foreign companies. |
| ● | High-Yield Risk. The Fund’s high-yield-fixed-income securities, sometimes known as “junk bonds” will be subject to greater credit risk, price volatility and risk of loss than investment grade securities, which can adversely affect the Fund’s return and NAV. High-yield securities are considered highly speculative and are subject to the increased risk of an issuer’s inability to make principal and interest payments. |
| ● | Investment and Market Risk. The prices of, and the income generated by, the bonds, common stocks and other securities held by the Fund may decline, sometimes rapidly or unpredictably, due to various factors, including events or conditions affecting the general economy or particular industries; overall market changes; local, regional or global political, social or economic instability; governmental or governmental agency responses to economic conditions; currency exchange rate, |
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interest rate and commodity price fluctuations; market disruptions caused by local or regional events such as war, acts of terrorism, natural disasters, climate-change or climate-related events, the spread of infectious illness (including epidemics and pandemics) or other public health issues, tariffs and trade wars, recessions or other events or adverse investor sentiment. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide due to increasingly interconnected global economies and financial markets.
| ● | Large-Capitalization Company Risk. Large-capitalization companies may be less able than smaller capitalization companies to adapt to changing market conditions. Large-capitalization companies may be more mature and subject to more limited growth potential compared with smaller capitalization companies. During different market cycles, the performance of large capitalization companies has trailed the overall performance of the broader securities markets. |
| ● | Leverage Risk. The Fund may employ leveraged investment techniques, including the use of financial instruments to produce leverage results for investment purposes. Use of leverage can magnify the effects of changes in the value of the Fund and make it more volatile. The leveraged investment techniques that the Fund employs could cause investors in the Fund to lose more money in adverse environments. Borrowing magnifies the potential for losses and exposes the Fund to interest expenses on money borrowed. |
| ● | Management Risk. The Adviser actively manages the Fund’s investments. Consequently, the Fund is subject to the risk that the methods and analysis employed by the Adviser in this process may not produce the desired results. This could cause the Fund to lose value or its investment results to lag relevant benchmarks or other funds with similar objectives. |
| ● | Mortgage-Backed Securities Risk. Mortgage-related securities, such as mortgage-backed securities, and other asset-backed securities, include debt obligations that represent interests in pools of mortgages or other income-bearing assets, such as consumer loans or receivables. Such securities often involve risks that are different from or more acute than the risks associated with investing in other types of debt securities. Mortgage-backed and other asset-backed securities are subject to changes in the payment patterns of borrowers of the underlying debt. When interest rates fall, borrowers are more likely to refinance or prepay their debt before its stated maturity. This may result in the Fund having to reinvest the proceeds in lower yielding securities, effectively reducing the Fund’s income. Conversely, if interest rates rise and borrowers repay their debt more slowly than expected the time in which the mortgage-backed and other asset-backed securities are paid off could be extended, reducing the Fund’s cash available for reinvestment in higher yielding securities. |
| ● | Sector Risk. Equity securities within the same group of industries may decline in price due to sector-specific market or economic developments. If the Adviser invests a significant portion of the Fund’s assets in a particular sector, the Fund is subject to the risk that companies in the same sector are likely to react similarly to legislative or regulatory changes, adverse market conditions and/or increased competition affecting that market segment. This may cause the Fund’s NAV to fluctuate more than that of a fund that does not focus in a particular sector. |
| ○ | Financial Sector Risk. The Fund invests a certain amount of its assets in the financial sector. The operations and businesses of financial services companies are subject to extensive governmental regulation, the availability and cost of capital funds, and interest rate changes. General market downturns may affect financial services companies adversely. |
| ● | U.S. Government Securities Risk. Securities backed by the U.S. Treasury, or the full faith and credit of the U.S. government are guaranteed only as to the timely payment of interest and principal when held to maturity. Accordingly, the current market values for these securities will fluctuate with changes in interest rates. Securities issued by government-sponsored entities and federal agencies and instrumentalities that are not backed by the full faith and credit of the U.S. government are neither issued nor guaranteed by the U.S. government. |
Although the Fund has been in continuous operation since October 1, 2015, the Fund has been registered under the Investment Company Act of 1940, as amended (the “1940 Act”), only since June 17, 2021.
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During the periods shown in the bar chart,
| One Year | Life of Fund* | |
| Class A Shares (with load) | ||
| Return After Taxes on Distributions | ( | |
| Return After Taxes on Distributions and Sale of Fund Shares | ( | |
| Class C Shares | ||
|
S&P 500® Total Return Index(1) ( |
||
|
Bloomberg U.S. Aggregate Bond Index(2) (reflects no deduction for fees, expenses or taxes) |
( |
| * |
|
| (1) | ||
| (2) |
Management
Investment Adviser
Atlas Asset Management, LLC is the investment adviser of the Fund.
Portfolio Manager
Paul Hopgood, President of the Adviser, has been a Portfolio Manager of the Fund since its inception and founded the Adviser in September 2014.
The SAI provides additional information about the portfolio manager’s method of compensation, other accounts managed by the portfolio manager and the portfolio manager’s ownership of the Fund’s shares.
Purchase and Sale of Fund Shares
The Fund offers two classes of shares of common stock: Class A and Class C, each with different charges and expenses (the “Shares”). You should discuss purchase options with your financial consultant to determine which class of Shares represents the best investment option for your particular situation. Shares may not be available for purchase in all states. More information is available in the SAI.
This section provides information to assist you in buying, exchanging, and redeeming shares of each class of the Fund. You may buy, exchange or redeem shares on any business day at a price based on the NAV that is calculated after you place your order, plus any applicable sales load in the case of Class A shares. A contingent deferred sales charge may apply at the time you sell certain Class A shares or Class C Shares. Redemptions will be paid by automated clearing house funds (“ACH”), check or wire transfer. Please read the entire Prospectus carefully before buying shares of the Fund.
5
The minimum initial investment for Class A and Class C Shares is $2,500. The minimum subsequent investment for Class A and Class C Shares is $100. The Fund and the Adviser each reserve the right to waive or modify the initial and subsequent investment requirements at any time. There is no minimum investment requirement when you are buying shares by reinvesting dividends and distributions from the Fund.
Shares may be purchased through the Distributor. Subscriptions for Shares must be made through any securities dealers that have entered into dealer agreements with the Fund or the Distributor, or through the Fund’s transfer agent, Ultimus. Transactions may be initiated by written request, by telephone or through your financial intermediary. Written requests to the Fund should be sent to the applicable address below or you may call (855) 969-8440 for assistance:
|
Regular/Express Mail Atlas U.S. Tactical Income Fund, Inc. c/o Ultimus Fund Solutions, LLC P.O. Box 46707 |
Overnight Mail Atlas U.S. Tactical Income Fund, Inc. c/o Ultimus Fund Solutions, LLC 225 Pictoria Drive, Suite 450 Cincinnati, OH 45246 |
Tax Information
The Fund intends to make distributions that may be taxed as a preferential tax to be withheld at source rather than the regular tax on ordinary income. Puerto Rico residents and entities may be exempt from Puerto Rico regular income tax and alternative minimum tax on certain eligible distributions. A portion of the Fund’s distribution may be subject to regular Puerto Rico tax rates.
| ● | Dividends received by Puerto Rico individuals and Puerto Rico entities that qualify as Exempt Dividends (each as defined herein) will be exempt from Puerto Rico regular income tax and alternative minimum tax. See “Tax Consequences” in this Prospectus. |
| ● | Taxable Dividends (as defined herein) received by Puerto Rico individuals, estates and trusts will be subject to a 15% preferential tax to be withheld at source rather than to the regular tax on ordinary income. See “Tax Consequences” in this Prospectus. |
| ● | Investments in the Fund by individuals who acquired their U.S. citizenship by reason of their birth or residence in Puerto Rico and who are domiciled in Puerto Rico at the time of death are not subject to Puerto Rico or U.S. estate taxes. |
Gain on the sale or redemption of Fund shares held for more than one year is subject to special tax rates for Puerto Rico individuals and Puerto Rico entities.
Financial Intermediary Compensation
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
Additional Information About Principal Investment Strategies and Risks
Investment Objective and Strategy
The Fund seeks to maximize total returns, consistent with preservation of capital. The Fund seeks to provide long-term positive returns and to preserve capital through various market environments by managing portfolio duration, credit risk, and volatility. The Fund has the flexibility to invest across a variety of fixed-income asset classes and is not managed to be compared to any specific index. The Fund has latitude to pursue opportunities across the fixed-income spectrum to create a diversified portfolio of varying maturities, including moving between sectors or across credit risk, and may have positive or negative duration. The Fund normally maintains an average portfolio duration of negative 3 years to plus 13 years. The Fund’s investment objective is not fundamental and may be changed without shareholder approval.
The Fund invests primarily in fixed-income securities, including U.S. government, mortgage-backed, and corporate debt securities, and municipal obligations. Fixed-income securities are debt obligations such as bonds and debentures, U.S. government securities, debt obligations of domestic and non-U.S. corporations, debt obligations of non-U.S. governments and their political subdivisions, asset-backed securities, high-yield securities, various mortgage-backed securities (both residential and commercial), other floating or variable rate obligations, convertible securities, municipal, obligations and zero-coupon debt securities.
The Fund engages in borrowing and uses other forms of leverage, such as derivatives, to increase amounts available for investment consistent with its investment objective. The Adviser may, when consistent with the Fund’s objective, buy options or futures on a security or an index
6
of securities, or enter into swap agreements, including interest rate and credit default swaps (collectively, commonly known as derivatives). The Fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or credit risk. The Fund may also use derivatives for leverage, in which case their use would involve leveraging risk. The Fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements). Reverse repurchase agreements may be considered to be a type of borrowing.
The Fund also may utilize leverage to pay for redemptions of its Shares or to pay certain expenses of the Fund. The Fund contemplates using leverage in order to seek to enhance its potential to provide a high level of income and total return.
The Fund may invest up to 25% of its assets in fixed-income securities that, at the time of purchase, are rated below “investment grade.” Investment grade refers to fixed-income securities that are rated “AAA,” “AA,” “A” or “BBB” by S&P, “Aaa,” “Aa,” “A” or “Baa” by Moody’s, “AAA,” “AA,” “A” or “BBB” by Fitch (without regard to any gradations within such categories), or within the four highest investment grade categories (without regard to any gradations within such categories), by any other nationally recognized statistical rating organization; or, if not rated, are considered by the Adviser to be of comparable credit quality. Investments in below investment-grade securities are expected to be made mainly through the use of passive investment vehicles, such as ETFs. Below investment-grade fixed-income securities are also known as “junk bonds,” which are speculative and subject to greater credit risk, price volatility and risk of loss than investment-grade securities.
The Fund may invest up to 20% of its total assets in mortgage-backed REITs and large capitalization stocks, including through the use of passive investments, such as ETFs. The Fund may invest up to 20% of its total assets in fixed-income securities or large capitalization stocks (mainly ETFs) of foreign issuers in U.S. dollar denominations.
The Fund may borrow money from banks. The proceeds from such borrowing will be invested in accordance with the Fund’s investment objective. In addition, the Fund may also borrow for temporary or emergency purposes in an amount up to 5% of its total assets. Issuance and ongoing expenses of such borrowing will be borne by the Fund and will reduce the NAV of the Shares.
The Fund pursues its investment objective by investing, under normal circumstances, at least 80% of its net assets in fixed-income assets in the United States. This investment policy is not fundamental, and the Fund will notify shareholders at least 60 days in advance of any change in this investment policy.
The Fund is classified as diversified under the 1940 Act and may invest its assets in more issuers than “non-diversified” mutual funds.
For a more complete description of which securities the Fund can invest in and securities ratings, see the SAI.
The Fund has a non-fundamental policy not to invest in direct or indirect obligations of the Commonwealth of Puerto Rico or any of its instrumentalities and any security, regardless of jurisdiction, that may be deemed illiquid by the Adviser.
Risk Factors
The following is a summary discussion of the principal risks of investing in the Fund. There can be no guarantee that the Fund will meet its investment objective or that the performance of the Fund will be positive for any period of time. You can lose money by investing in the Fund. The Fund may use various investment techniques, some of which involve greater amounts of risk than others. To reduce risk, the Fund is subject to certain limitations and restrictions on its investments, which are described in more detail in the SAI.
| ● | Derivatives Risk. Derivatives, futures, and options can be highly volatile and involve similar risks to those as the underlying referenced securities, such as risks related to interest rates, market, credit, valuation, and liquidity, among others. There are also additional risks. Gains or losses from a derivative investment can be substantially greater than the derivative’s original cost and can therefore involve leverage. Leverage may cause the Fund to be more volatile than if it had not used leverage. Derivatives can be complex instruments and may involve analysis that differs from that required for other investment types used by the Fund. If the value of a derivative does not correlate well with the particular market or other asset class to which the derivative is intended to provide exposure, the derivative may not produce the anticipated result. Derivatives can also reduce the opportunity for gain or result in losses by offsetting positive returns in other investments. Derivatives may be difficult to value, can be less liquid than other types of investments and entail the risk that the counterparty will default on its payment obligations. If the counterparty to a derivative transaction defaults, the Fund would risk the loss of the net amount of the payments that it contractually is entitled to receive. To the extent the Fund enters into short derivative positions, the Fund may be exposed to risks similar to those associated with short sales, including the risk that the Fund’s losses are theoretically unlimited. If there is a default by the other party to such a transaction, the Fund normally will have contractual remedies pursuant to the agreements related to the transaction. Swap agreements also bear the risk that the Fund will not be able to meet its obligation to the counterparty. The Fund’s investments in interest rate futures in particular entail the risk that the Adviser’s prediction of the direction of interest rates is wrong, and the Fund could incur a loss. If the Fund invests a significant portion of its assets in derivatives, its investment performance could be dependent on securities not directly owned by the Fund. |
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The Fund is subject to equity price risk in the normal course of pursuing its investment objective and may purchase options to help hedge against risk. The Fund may purchase put and call options. Put options are purchased to hedge against a decline in the value of securities held in the Fund’s portfolio. If such a decline occurs, the put options will permit the Fund to sell the securities underlying such options at the exercise price, or to close out the options at a profit. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security rises or declines sufficiently, the option may expire worthless to the Fund. In addition, in the event that the price of the security in connection with which an option was purchased moves in a direction favorable to the Fund, the benefits realized by the Fund as a result of such favorable movement will be reduced by the amount of the premium paid for the option and related transaction costs. Purchased options are non-income producing securities.
Risks of Repurchase and Reverse Repurchase Agreements. The Fund may engage in repurchase agreements, which are transactions in which the Fund sells a security to a counterparty and agrees to buy it back at a specified time and price in a specified currency. Repurchase agreements involve the risk that the buyer of the securities sold by the Fund might be unable to deliver the securities when the Fund seeks to repurchase them and may be unable to replace the securities or only at a higher cost. If the buyer of securities under a repurchase agreement files for bankruptcy or becomes insolvent, the buyer may receive an extension of time to determine whether to enforce the Fund’s obligation to repurchase the securities, and the Fund’s use of the proceeds of the repurchase agreement may be severely restricted during that extension period.
The Fund may also engage in reverse repurchase agreements, which are transactions in which the Fund purchases a security from a counterparty and agrees to sell it back at a specified time and price in a specified currency. If a reverse repurchase agreement’s counterparty defaults, the Fund may suffer time delays and incur costs or possible losses in connection with the disposition of the securities underlying the reverse repurchase agreement. In the event of a default, instead of the contractual fixed rate of return, the rate of return to the Fund will depend on intervening fluctuations of the market values of the underlying securities and the accrued interest thereon. In such an event, the Fund would have rights against the counterparty for breach of contract with respect to any losses resulting from those market fluctuations.
While there is authority generally supporting the treatment of repurchase agreements as collateralized loans for Puerto Rico income tax purposes, that authority does not address the tax treatment of repurchase agreements that the Fund typically enters into, which contain provisions that grant the purchaser the right to sell, transfer, pledge or hypothecate the securities. The Puerto Rico Treasury Department (“PRTD”) could take the position that this type of arrangement should be viewed as a transfer of ownership of the underlying security and that Puerto Rico courts could agree with that view. In such event, the tax-exempt interest of the securities will not constitute tax exempt income of the Fund, and the portion of the Tax Exempt Dividends distributed by the Fund from such interest could be treated either as Taxable Dividends or Capital Gain Dividends subject to Puerto Rico income tax. See “Tax Consequences” - Taxation of Puerto Rico Investors” in this Prospectus.
| ● | Equity Risk. The Fund’s use of equity securities, such as exchange-traded stocks, creates additional risk as those securities typically have greater price volatility than fixed-income securities and may decline in response to general market conditions. |
| ● | Fixed-Income Securities Risks. The Fund invests in a variety of fixed-income securities, which are subject to certain risks, as described below. |
| ○ | Credit Risk. The credit strength of an issuer of a fixed-income security will weaken and/or the issuer will be unable to make timely principal and interest payments and that the security may go into default. |
| ○ | Duration Risk. Longer-term securities may be more sensitive to interest rate changes. Rising interest rates pose a heightened risk to the Fund’s longer-term fixed-income securities. If rates increase significantly, effective duration may tend to understate the drop in a security’s price. If rates drop significantly, effective duration may tend to overstate the increase in a security’s price. |
| ○ | Extension Risk. During periods of rising interest rates, a debtor may pay back a bond or other fixed-income security slower than expected or required, and the value of such security may fall. |
| ○ | Interest Rate Risk. Generally, a fixed-income security will increase in value when prevailing interest rates fall and decrease in value when prevailing interest rates rise. Longer-term securities are generally more sensitive to interest rate changes than shorter-term securities, but they generally offer higher yields to compensate investors for the associated risks. In addition, the Fund is subject to the risk that interest rates may exhibit increased volatility, which could cause the Fund’s NAV to fluctuate more. If rising interest rates cause the Fund to lose enough value, the Fund could also face increased shareholder redemptions, which could force the Fund to liquidate investments at disadvantageous times or prices, therefore adversely affecting the Fund. How specific fixed-income securities may react to changes in interest rates will depend on the specific characteristics of each security. High-yield bond prices and floating rate debt security prices are generally less directly responsive to interest rate changes than investment grade issues or comparable fixed rate securities and may not always follow this pattern. The Fund may manage interest rate risk by varying the average-weighted effective maturity of the portfolio to reflect an analysis of interest rate trends and other factors. The Fund’s average-weighted effective maturity will tend to be shorter when the portfolio manager expects interest rates to rise and longer when the portfolio manager expects interest rates to fall. The Fund intends to use primarily futures to manage interest rate risk but may also use swaps and options. |
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| ○ | Liquidity Risk. Fixed-income securities may be difficult or impossible to sell at the time that the Adviser would like or at the price the Adviser believes the security is currently worth. |
| ○ | Prepayment Risk. Because many issuers of fixed-income securities have an option to prepay their fixed-income securities, the exercise of such option may result in a decreased rate of return and a decline in value of those securities and accordingly, a decline in the Fund’s NAV. Issuers may be more likely to prepay their securities if interest rates fall. If this happens, the Fund will not benefit from the rise in the market price of the securities that normally accompanies a decline in interest rates and will be forced to reinvest prepayment proceeds at a time when yield on securities available in the market are lower than the yield on prepaid securities. The Fund may also lose any premium it paid to purchase the securities. |
| ○ | Valuation Risk. One or more of the fixed-income securities in which the Fund invests may be priced differently than the value realized upon such security’s sale. In times of market instability, valuation may be more difficult. |
| ● | Foreign Exposure Risk. The Fund may have exposure to foreign markets as a result of its investments in foreign securities which can be more volatile than the U.S. markets. There are substantial risks involved in investing in foreign securities. These risks include differences in accounting, auditing and financial reporting standards, generally higher commission rates on foreign transactions, the possibility of expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations, political instability, and potential restrictions on the flow of international capital. As a result, the Fund’s returns and NAV may be affected to a large degree by fluctuations in political or economic conditions in a particular country. In some foreign markets, there may not be protection against failure by other parties to complete transactions. To the extent the Fund invests in foreign debt securities, such investments are sensitive to changes in interest rates. Additionally, investments in securities of foreign governments involve the risk that a foreign government may not be willing or able to pay interest or repay principal when due. In many countries there is less publicly available information about issuers than is available in reports about companies in the United States. Additionally, many countries are dependent on a healthy U.S. economy, and are adversely affected when the U.S. economy weakens, or its markets decline. In addition, the risks of loss and volatility have increased over the past few years and may continue because of high levels of debt and other economic distress in various countries. In February 2022, Russia commenced a military attack on Ukraine. The outbreak of hostilities between the two countries and the threat of wider-spread hostilities could have a severe adverse effect on the region and global economies, including significant negative impacts on the markets for certain securities and commodities, such as oil and natural gas. In addition, sanctions imposed on Russia by the United States and other countries, and any sanctions imposed in the future, could have a significant adverse impact on the Russian economy and related markets. The price and liquidity of investments may fluctuate widely as a result of such conflicts and related events. How long the armed conflict and related events will last cannot be predicted. |
| ● | High-Yield Risk. The Fund intends to invest at least 80% of its assets in fixed-income securities that, at the time of purchase, are rated “investment grade,” that is, rated “AAA,” “AA,” “A” or “BBB” by S&P, “Aaa,” “Aa,” “A” or “Baa” by Moody’s, “AAA,” “AA,” “A” or “BBB” by Fitch (without regard to any gradations within such categories), or within the four highest investment grade categories (without regard to any gradations within such categories) by any other nationally recognized statistical rating organization, or, if not rated, are considered by the Adviser to be of comparable credit quality or are approved by the Office of the Commissioner of Financial Institutions of Puerto Rico (the “Commissioner”). Obligations rated in the lowest investment grade category (BBB by S&P, Baa by Moody’s or BBB by Fitch (without regard to any gradations within such categories) are generally regarded as having adequate capacity to pay interest and repay principal but may have some speculative characteristics. Obligations rated below investment grade (i.e., below BBB by S&P, Baa3 by Moody’s or BBB by Fitch), in which the Fund may invest up to 25% of its assets, may have speculative characteristics, including the possibility of default or bankruptcy of the issuers of such securities, market price volatility based upon interest rate sensitivity, questionable creditworthiness and relative illiquidity of the secondary trading market. Because lower-rated bonds have been found to be more sensitive to adverse economic changes or individual corporate developments and less sensitive to interest rate changes than higher-rated investments, an economic downturn could disrupt the market for lower-rated bonds and adversely affect the value of outstanding bonds and the ability of issuers to repay principal and interest. In addition, in a declining interest rate market, issuers of lower-rated bonds may exercise redemption or call provisions, which may force the Fund, to the extent it owns such securities, to replace those securities with lower yielding securities. This could result in a decreased return. Subsequent to its purchase by the Fund, an issuer of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. In addition, it is possible that S&P, Moody’s, Fitch, and other ratings agencies might not change in a timely manner their ratings of a particular issue to reflect subsequent events. The Adviser is under no obligation to sell portfolio securities that are downgraded below investment grade after these securities are purchased by the Fund. If a portfolio security is downgraded, the Adviser will consider factors such as price, credit, risk, market conditions, the financial condition of the issuer and prevailing and anticipated interest rates in determining whether to sell or hold the security as a portfolio investment. |
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| ● | Investment and Market Risk. The Fund’s investments may be adversely affected by the performance of U.S. and foreign investment securities markets, which, in turn, may be influenced by a number of factors, including (i) the level of interest rates, (ii) the rate of inflation, (iii) political decisions, (iv) fiscal policy, and (v) current events in general. Although the Fund may be less volatile than funds that invest most of their assets in common stocks because the Fund invests in fixed-income securities, the Fund’s NAV may fluctuate due to market conditions, and as a result you may experience a decline in the value of your investment in the Fund and you may lose money. |
For example, the COVID-19 global pandemic and the aggressive responses taken by many governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions, as well as the forced or voluntary closure of, or operational changes to, many retail and other businesses, had negative impacts, and in many cases severe negative impacts, on markets worldwide. Market events like COVID-19 could negatively affect the worldwide economy, as well as the economies of individual countries, the financial health of individual companies and the market in general in significant and unforeseen ways. Any such impact could adversely affect the Fund’s performance and the performance of the securities in which the Fund invests. The Fund could lose money over short periods due to short-term market movements and over longer periods during more prolonged market downturns.
Market events may cause significant declines in the values and liquidity of many securities and other instruments, and significant disruptions to global business activity and financial markets. Turbulence in financial markets, and reduced liquidity in equity, credit and fixed-income markets may negatively affect many issuers both domestically and around the world, and can result in trading halts, any of which could have an adverse impact on the Fund. During periods of market volatility, security prices (including securities held by the Fund) could change drastically and rapidly, and therefore adversely affect the Fund.
An investment in the Shares is designed primarily, and is suitable only, for long-term investors, and is not suitable for all investors. Further, an investment in the Fund is not equivalent to an investment in the underlying securities of the Fund and investors in the Shares should not view the Fund as a vehicle for trading purposes.
| ● | Large Capitalization Company Risk. Large-capitalization stocks as a group could fall out of favor with the market, causing the Fund to underperform investments that focus solely on small- or medium-capitalization stocks. |
| ● | Leverage Risk. The use of leverage by the Fund creates an opportunity for increased net income, but at the same time, creates special risks. Because, under normal market conditions, obligations with longer-term or medium-term maturities produce higher yields than short-term obligations, the Adviser believes that the spread inherent in the difference between the short-term rates paid by the Fund in the course of leveraging and the longer-term rates received by the Fund from securities purchased with the proceeds of such leverage will provide holders of Shares with a potentially higher yield. Investors should note, however, that leverage creates certain risks for holder of Shares, including higher volatility in the NAV and market value of the Shares as well as in the dividend rate paid by the Fund on the Shares. Since any decline in the value of the Fund’s investment will be borne entirely by the holders of Shares, the effect of leverage in the declining market would result in a greater decrease in NAV than if the Fund were not leveraged, which will result in a lower redemption price of the Shares. The effect of leverage may cause a shareholder to lose all or a portion of its investment in the Fund. |
Holders of Shares will receive substantially all net income of the Fund remaining after payment of interest or dividends associated with leverage and will generally be entitled to a pro-rata share of net realized capital gains.
Because the Management Fee is based on the value of the Fund’s gross assets, the incurrence of debt or the use of leverage will increase the Management Fee due to the Adviser. As such, the Adviser may have an incentive to use leverage to make additional investments.
| ● | Management Risk. The Fund is an actively managed investment portfolio and is therefore subject to the risk that the investment strategies employed for the Fund may fail to produce the intended results. Although the Fund seeks to provide long-term positive returns, market conditions or implementation of the Fund’s investment process may result in losses, and the Fund may not meet its investment objective. As such, there can be no assurance of positive “absolute” returns. |
| ● | Mortgage-Backed Securities Risk. Mortgage-backed securities are classified generally as either commercial mortgage-backed securities or residential mortgage-backed securities, each of which is subject to certain specific risks. Mortgage-backed securities tend to be more sensitive to changes in interest rates than other types of debt securities. Investments in mortgage-backed securities are subject to both extension risk, where borrowers extend the duration of their mortgages in times of rising interest rates, and prepayment risk, where borrowers pay off their mortgages sooner than expected in times of declining interest rates. These risks may reduce the Fund’s returns. In addition, investments in mortgage-backed securities, including those comprised of subprime mortgages, may be subject to a higher degree of credit risk, valuation risk, and liquidity risk than various other types of fixed-income securities. |
| ● | Sector Risk. Equity securities within the same group of industries may decline in price due to sector-specific market or economic developments. If the Adviser invests a significant portion of the Fund’s assets in a particular sector, the Fund is subject to the risk that companies in the same sector are likely to react similarly to legislative or regulatory changes, adverse market conditions and/or increased competition affecting that market segment. This may cause the Fund’s NAV to fluctuate more than that of a fund that does not focus in a particular sector. |
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| ○ | Financial Sector Risk. The Fund invests a certain amount of its assets in the financial sector. The operations and businesses of financial services companies are subject to extensive governmental regulation, the availability and cost of capital funds, and interest rate changes. General market downturns may affect financial services companies adversely. |
| ● | U.S. Government Securities Risk. Securities backed by the U.S. Treasury, or the full faith and credit of the U.S. government are guaranteed only as to the timely payment of interest and principal when held to maturity. Accordingly, the current market values for these securities will fluctuate with changes in interest rates. Securities issued by government-sponsored entities and federal agencies and instrumentalities that are not backed by the full faith and credit of the U.S. government are neither issued nor guaranteed by the U.S. government. |
The following are non-principal risks of investing in the Fund.
| ● | Cybersecurity Risk. With the increased use of the Internet and because information technology (“IT”) systems and digital data underlie most of the Fund’s operations, the Fund and the Adviser, custodian, transfer agent, Distributor and other service providers and the financial intermediaries of each (collectively, “Service Providers”) are exposed to the risk that their operations and data may be compromised as a result of internal and external cyber-failures, breaches, or attacks (“Cyber Risk”). This could occur as a result of malicious or criminal cyberattacks. Cyber-attacks include actions taken to: (i) steal or corrupt data maintained online or digitally, (ii) gain unauthorized access to or release confidential information, (iii) shut down the Fund or Service Provider website through denial-of-service attacks, or (iv) otherwise disrupt normal business operations. However, events arising from human error, faulty or inadequately implemented policies and procedures or other systems failures unrelated to any external cyber-threat may have effects similar to those caused by deliberate cyber-attacks. |
Successful cyber-attacks or other cyber-failures or events affecting the Fund or its Service Providers may adversely impact the Fund or its shareholders. For instance, such attacks, failures, or other events may interfere with the processing of shareholder transactions, impact the Fund’s ability to calculate its NAV, cause the release of private shareholder information or confidential Fund information, impede trading, or cause reputational damage. Such attacks, failures or other events could also subject the Fund or its Service Providers to regulatory fines, penalties or financial losses, reimbursement, or other compensation costs, and/or additional compliance costs. Insurance protection and contractual indemnification provisions may be insufficient to cover these losses. The Fund or its Service Providers may also incur significant costs to manage and control Cyber Risk. While the Fund and its Service Providers have established IT and data security programs and have in place business continuity plans and other systems designed to prevent losses and mitigate Cyber Risk, there are inherent limitations in such plans and systems, including the possibility that certain risks have not been identified or that cyber-attacks may be highly sophisticated.
Cyber Risk is also present for issuers of securities or other instruments in which the Fund invests, which could result in material adverse consequences for such issuers and may cause the Fund’s investment in such issuers to lose value.
| ● | Portfolio Turnover Risk. Increased portfolio turnover may result in higher costs, which may have a negative effect on the Fund’s performance. In addition, higher portfolio turnover may result in the acceleration of capital gains and the recognition of greater levels of short-term capital gains, which are taxed at ordinary federal income tax rates when distributed to shareholders. |
| ● | Risk of Investing in Other Investment Companies (including ETFs). The Fund may invest in ETFs, which are typically open-end investment companies that are traded on a national securities exchange. ETFs typically incur fees, such as investment advisory fees and other operating expenses that are separate from those of the Fund, which will be indirectly paid by the Fund. As a result, the cost of investing in the Fund may be higher than the cost of investing directly in ETFs and may be higher than other mutual funds that invest directly in stocks and bonds. An investment in the Fund is subject to the risks associated with investments in the underlying ETFs in which it invests. The Fund will indirectly pay a proportional portion of the asset-based fees of the underlying ETFs in which it invests. |
There is a risk that the Adviser’s evaluation and assumptions regarding a broad asset class or the ETFs in which the Fund invests may be incorrect based on actual market conditions. In addition, at times the segment of the market represented by an underlying ETF may be out of favor and under perform other segments. There can be no assurance that the underlying ETFs will achieve their investment objectives, and the performance of the underlying ETFs may be lower than the asset class that they were selected to represent. The underlying ETFs may change their investment objectives or policies without the approval of the fund. If that were to occur, the Fund might be forced to withdraw its investment from the underlying ETFs at a time that is unfavorable to the Fund.
An investment in an ETF is not equivalent to an investment in the assets held by the ETF. The market price of ETF units on the securities exchange on which they are traded may be lower than or higher than their NAV. An active trading market for ETF units may not develop or be maintained. Trading of ETF units may be halted if the listing exchange’s officials deem such action appropriate. ETFs may not fulfill their objective of tracking the performance of an index or specific security or benchmark which they seek to track. A significant percentage of certain ETFs may be comprised of issuers in a single industry or sector of the economy, which may present more risks than if such funds were broadly diversified.
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An investment in the Fund is not a bank deposit or obligation, is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency and may lose value.
Portfolio Holdings
A description of the Fund’s policies and procedures with respect to the disclosure of the Fund’s portfolio securities is available in the Fund’s SAI. Shareholders may request portfolio holdings schedules at no charge by calling (855) 969-8440.
Management of the Fund
The Fund’s Board of Directors (the “Board”) has the overall responsibility for the management of the Fund.
Investment Adviser
Atlas Asset Management, LLC, a Puerto Rico limited liability company registered as an investment adviser with the Securities and Exchange Commission (the “SEC”) and Office of the Commissioner, is the adviser of the Fund. The Adviser’s address is Buchanan Office Center, Suite 201, Road 165 #40, Guaynabo, Puerto Rico 00968 and its telephone number is (787) 781-1301. As of December 31, 2025, the Adviser had approximately $576,432,654 in assets under management.
The Adviser provides the Fund with investment advisory and management services, subject to the control and oversight of the Board of Directors and the officers of the Fund. As the investment adviser, the Adviser is responsible for choosing the Fund’s investments and handling its business affairs. The Adviser offers money management and investment services to institutional clients in Puerto Rico.
As compensation for advisory services to the Fund, the Adviser is entitled to a monthly fee at an annual rate of 0.65% of the total assets under management of the Fund, which refers to the average daily gross assets of the Fund plus the proceeds from borrowings from banks or through repurchase agreements for leverage (but not including borrowings for temporary, emergency, or defensive purposes). This fee will be reduced depending on the total assets of the Fund to a rate of 0.60% of the total assets under management of the Fund over $100 million and 0.55% of the total assets under management of the Fund over $300 million. For purposes of this calculation, total assets are determined at the end of each month on the basis of the average total assets of the Fund for each business day during the month. The fee is paid monthly.
The Adviser has voluntarily agreed to waive a portion of the Management Fees for the Fund. For the fiscal year ended September 30, 2025, the aggregate fee paid to the Adviser was 0.88% of average gross assets, however in future periods such amounts may be lower due to limitations on the Fund’s ability to leverage its portfolio under the 1940 Act. The Fund was not registered under the 1940 Act prior to June 17, 2021 and was subject to different limitations. A discussion regarding the basis for the Board’s approval of the investment advisory agreement for the Fund is available in the Fund’s Form N-CSR for the fiscal year ended September 30, 2025, which is available on the SEC’s website at http://www.sec.gov.
Unless earlier terminated, the investment advisory agreement will continue in effect for a period of two years from the date of execution and will remain in effect from year to year thereafter, if approved annually by a majority of the Independent Directors. The investment advisory agreement is not assignable and may be terminated without penalty (i) on 60 days’ written notice at the option of either party thereto or by the vote of a majority of the outstanding Shares of the Fund or (ii) at any time by a unanimous vote of the Independent Directors.
The Adviser has contractually agreed to reduce the Fund’s fees and/or to make payments to limit Fund expenses until at least January 31, 2027 so that the total annual operating expenses (exclusive of any front-end or contingent deferred loads; brokerage fees and commissions; acquired fund fees and expenses; borrowing costs, such as interest and dividend expenses on securities sold short; taxes; and extraordinary expenses, such as litigation expenses) of the Fund do not exceed 1.15% of the average daily gross assets for Class A Shares and 1.90% of the average daily gross assets for Class C Shares. These fee waivers and expense reimbursements are subject to possible recoupment from the Fund in future years on a rolling three-year basis (within the three years after the fees have been waived or reimbursed) if such recoupment can be achieved within the foregoing expense limits as well as any expense limitation that was in effect at the time the reimbursement was made.
Administrator
Ultimus acts as administrator to the Fund. Pursuant to an Administration Agreement with the Fund, Ultimus, subject to the overall supervision of the Board, provides facilities and personnel to the Fund in the performance of certain services including the determination of the Fund’s NAV and net income. As compensation for its administration services to the Fund, Ultimus will receive an administration fee (which is indirectly paid entirely by the Fund’s shareholders) of the greater of an annual minimum fee or an asset-based fee, which scales downward based upon net assets for fund administration, fund accounting and transfer agency services, payable monthly.
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Portfolio Manager
Paul Hopgood, President of the Adviser, has been a Portfolio Manager of the Fund since its inception and founded the Adviser in September 2014. Mr. Hopgood provides investment advice to individual and institutional investors based on strong macro-economic analytics with an emphasis in minimizing unsystematic risks. Prior to founding the Adviser, Mr. Hopgood was the Chief Investment Officer and Portfolio Manager at Santander Asset Management from 2003 through 2014. At Santander, Mr. Hopgood was responsible for the oversight and management of 17 investment companies and the institutional fixed-income mandates. Mr. Hopgood was responsible for trading a range of products, from corporate, mortgage backed, municipal and equity securities to derivates, such as futures, options, interest rate and structured swaps. Prior to joining Santander, Mr. Hopgood was a portfolio analyst at Popular Asset Management and the Bank Trust engaged in the analysis of fixed-income securities, from 2001 to 2003 and 1999 to 2001, respectively. Mr. Hopgood holds a Bachelor of Business Administration with a concentration in Finance from the University of Puerto Rico. Mr. Hopgood is a CFA Charterholder (2006) and a CAIA Charterholder (2015).
The SAI provides additional information about the portfolio manager’s method of compensation, other accounts managed by the portfolio manager and the portfolio manager’s ownership of the Fund’s shares.
Legal Proceedings
The Fund is not a party to any legal proceeding as of the date hereof.
Restrictions on Transfer
The Shares are generally not transferable except in special circumstances by operation of law and may not be generally disposed of, except through redemption as set forth herein. The Distributor and the Transfer Agent (as defined below) have implemented various procedures to verify periodically any Shareholder’s residence on behalf of the Fund, and based on information provided by any such Shareholder, have an obligation to inform the Fund of such Shareholder who ceases to be a resident of Puerto Rico and to provide the Fund with such additional information as required for compliance with the regulations issued by the U.S. Department of the Treasury and the Internal Revenue Service (“IRS”) on January 17, 2013 (the “FATCA Regulations”).
If the Fund is unable to obtain such information from any such investor or otherwise fails or is unable to comply with the requirements of the FATCA Regulations, certain payments to the Fund may be subject to a 30% withholding tax. By making an investment in the Fund, each investor agrees to provide all information and certifications necessary to enable the Fund to comply with these requirements. Any investor that fails to provide in a timely manner the requested information or certifications will be required to indemnify the Fund for the entirety of the 30% percent tax withheld on all of the Fund’s income as a result of such investor’s failure to provide the information.
Shareholders’ Guide
The Fund offers two classes of Shares in order to meet the needs of various types of investors.
Class A Shares and Class C Shares are offered through the Distributor or Selected Dealers and directly from the Fund. Class A Shares pay up to 0.25% of net assets to the Distributor or Selected Dealers for the provision of distribution services and/or shareholder services on behalf of their clients. Class C Shares pay up to 1.00% of net assets for payment to the Distributor or Selected Dealers for the provision of distribution and/or shareholder services.
Class A Shares: The Fund offers its Class A Shares through the Distributor or Selected Dealers at a price equal to the NAV per Share next determined after a purchase order is received, plus a maximum initial sales charge of 3.50%. The initial sales charge will be reduced gradually for purchases of $50,000 or more, and will be eliminated for purchases of $1,000,000 or more, in a single transaction or in several transactions pursuant to such shareholder’s Right of Accumulation or a Letter of Intent. A contingent deferred sales charge of 1.00% will be assessed on redemptions of Class A Shares made within one year after purchase where no initial sales charge was paid at time of purchase as part of an investment of $1,000,000 or more (whether in a single transaction or in several transactions pursuant to such shareholder’s Right of Accumulation or a Letter of Intent); otherwise, Class A Shares will not be subject to a contingent deferred sales charge upon redemption. See “Contingent Deferred Sales Charge,” “Right of Accumulation” and “Letter of Intent.”
Class C Shares: Class C Shares of the Fund are offered at a price equal to the NAV per Share next determined after a purchase order is received, without a sales charge. However, Class C Shares are subject to a higher distribution and service fee than the Class A Shares. Class C Shares are not subject to a contingent deferred sales charge upon redemption. See “Contingent Deferred Sales Charge.”
To permit the Fund to invest the net proceeds from the sale of its Shares in an orderly manner, the Fund may, from time to time, suspend the sale of its Shares. A suspension of issuances of Shares could result in the acceleration of certain debt obligations of the Fund. Payment of such obligations could decrease the assets of the Fund.
You should consult with the Distributor or Selected Dealer for additional information on whether the Shares are an appropriate investment choice. You should carefully consider which class of shares to purchase. Certain classes have higher expenses than other classes, which may lower the return on your investment. For instructions on how to purchase or redeem Shares, contact your financial intermediary.
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Pricing of Fund Shares
The per share NAV for each class is computed by dividing the total value of all assets (including interest accrued but not yet received) less all liabilities (including borrowings and accrued interest thereon and other accrued expenses), by the total number of outstanding Shares of the class. The Fund’s NAV is calculated as of the close of the regular trading session of the New York Stock Exchange (“NYSE”) (normally 4:00 p.m. Eastern time) each day that the NYSE is open (“business day”). Shares will not be priced on the days on which the NYSE is closed for trading. The NYSE is closed on weekends and New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Juneteenth, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. However, the NAV may be calculated earlier if trading on the NYSE is restricted, or as permitted by the SEC. Foreign securities held by the Fund may be traded on days and at times when the NYSE is closed, and the NAV is therefore not calculated. Accordingly, the value of the Fund’s holdings may change on days that are not business days in the United States and on which you will not be able to purchase or redeem the Fund’s Shares.
The price you pay for purchases of Shares is the public offering price, which is the NAV next determined after your request is received in good order by the Fund or its agents, plus, for Class A Shares, any applicable initial sales charge. The price you pay to sell Shares to the Fund is also the NAV, although for Class A Shares and Class C Shares, a contingent deferred sales charge may be taken out of the proceeds. Your financial intermediary may charge you a separate or additional fee for processing purchases and redemptions of Shares. In order to receive a day’s price, your order must be received in good order by the Fund or its agents by the close of the regular trading session of the NYSE.
Securities held by the Fund are valued in accordance with policies and procedures established by and under the supervision of the Board. To the extent available, equity securities are generally valued on the basis of market quotations. Most fixed-income securities are typically valued using an evaluated price supplied by a pricing service that is intended to reflect market value. The evaluated price is an evaluation that may consider factors such as security prices, yields, maturities, and ratings. Certain short-term instruments maturing within 60 days or less are valued at amortized cost, which approximates market value. If a market quotation or evaluated price for a security is not readily available or is deemed unreliable, or if an event that is expected to affect the value of the security occurs after the close of the principal exchange or market on which the security is traded, and before the close of the NYSE, a fair value of the security will be determined in good faith under the Board’s policies and procedures. Such events include but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security.
Purchase
You may purchase or redeem Fund shares on any day that the NYSE is open for trading by written request via mail to the applicable address below, by wire transfer, or through a financial intermediary.
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Regular/Express Mail Atlas U.S. Tactical Income Fund, Inc. c/o Ultimus Fund Solutions, LLC P.O. Box 46707 |
Overnight Mail Atlas U.S. Tactical Income Fund, Inc. c/o Ultimus Fund Solutions, LLC 225 Pictoria Drive, Suite 450 Cincinnati, OH 45246 |
The USA PATRIOT Act requires financial institutions, including the Fund, to adopt certain policies and programs to prevent money-laundering activities, including procedures to verify the identity of customers opening new accounts. As requested on the application, you should supply your full name, date of birth, social security number and permanent street address. Mailing addresses containing a P.O. Box will not be accepted. This information will assist the Fund in verifying your identity. Until such verification is made, the Fund may temporarily limit additional share purchases. In addition, the Fund may limit additional share purchases or close an account if it is unable to verify a shareholder’s identity. As required by law, the Fund may employ various procedures, such as comparing the information to fraud databases or requesting additional information or documentation from you, to ensure that the information supplied by you is correct.
Purchase through Brokers: You may invest in the Fund through brokers or agents who have entered into selling agreements with the Distributor. The brokers and agents are authorized to receive purchase and redemption orders on behalf of the Fund. Such brokers are authorized to designate other intermediaries to receive purchase and redemption orders on the Fund’s behalf. The Fund will be deemed to have received a purchase or redemption order when an authorized broker or its designee receives the order. The broker or agent may set its own initial and subsequent investment minimums. You may be charged a fee if you use a broker or agent to buy or redeem shares of the Fund. Finally, various servicing agents use procedures and impose restrictions that may be in addition to, or different from, those applicable to investors purchasing shares directly from the Fund. You should carefully read the program materials provided to you by your servicing agent.
Purchase by Wire: If you wish to wire money to make an investment in the Fund, please call the Fund toll-free at 1 (855) 969-8440 for wiring instructions and to notify the Fund that a wire transfer is coming. Any commercial bank can transfer same-day funds via wire. The Fund will normally accept wired funds for investment on the day received if they are received by the Fund’s designated bank before the close of regular trading on the NYSE. Your bank may charge you a fee for wiring same-day funds.
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Telephone Transactions: You may purchase, exchange, or redeem Fund shares by calling 1(855) 969-8440. Telephone transaction privileges are automatically available for new accounts unless you decline them on your account application or later revoke them by written instruction to the Fund or its Transfer Agent.
Telephone instructions, if received in good order before the applicable cut-off time, will be processed at the Fund’s next determined net asset value (“NAV”). Redemption proceeds will be sent promptly to your address of record by check or to your bank account of record by ACH or wire transfer. Telephone redemptions are generally limited to $50,000 per account. Requests for amounts above this limit must be submitted in writing and must include a Medallion Signature Guarantee.
During periods of heavy market activity or other unusual conditions, you may experience difficulty reaching the Fund or its Transfer Agent. Please allow additional time to place your transaction. The Fund or its Transfer Agent will not be held liable for any loss if you are unable to reach them to confirm a telephone transaction.
The Fund and its Transfer Agent use reasonable procedures to verify the authenticity of telephone instructions. These may include requiring an account number, a personal identification number (PIN) if applicable, recording of calls, and/or written confirmations. If these procedures are followed, neither the Fund nor its Transfer Agent will be responsible for any loss, liability, cost, or expense arising from unauthorized of fraudulent telephone instructions.
If you own an IRA, you will be asked to make an election regarding federal income tax withholding at the time of a redemption.
For your protection, telephone redemptions may be restricted for 30 days following a change of address or banking information. The Fund may also require a signature guarantee or other documentation for certain transactions.
The Fund reserves the right to modify, suspend, or terminate the telephone transaction privilege at any time, with or without notice.
Automatic Investment Plan (“AIP”): Investors may purchase shares of the Fund through an AIP”), which allows for regular, periodic investments from a designated bank account. With the investor’s authorization, the Fund’s transfer agent will automatically withdraw the amount specified by the investor and invest it in Fund shares on a periodic basis.
There is no minimum investment required to participate in the AIP. Investors may modify or terminate their participation in the AIP at any time by notifying the Fund or its transfer agent. Only bank accounts maintained at U.S. financial institutions that are ACH members may be used. The Fund reserves the right to suspend or discontinue the AIP at any time.
Automatic Investment Plan: You may participate in the Fund’s Automatic Investment Plan, an investment plan that automatically moves money from your bank account and invests it in the Fund through the use of electronic funds transfers or automatic bank drafts. You may elect to make subsequent investments by transfers of a minimum of $250 on the first day of each month into your established Fund account. Please contact the Fund toll-free at 1(855) 969-8440 for more information about the Fund’s Automatic Investment Plan.
Automated Clearing House (ACH) Purchase: Current shareholders may purchase additional shares via Automated Clearing House (“ACH”). To have this option added to your account, please send a letter to the Fund requesting this option and supply a voided check for the bank account. Only bank accounts held at domestic institutions that are ACH members may be used for these transactions.
You may not use ACH transactions for your initial purchase of Fund shares. ACH purchases will be effective at the closing price per share on the business day after the order is placed. The Fund may alter, modify, or terminate this purchase option at any time.
Shares purchased by ACH will not be available for redemption until the transactions have cleared. Shares purchased via ACH transfer may take up to 15 days to clear.
Note: Ultimus, the Fund’s transfer agent, will charge a $25 fee against a shareholder’s account, in addition to any loss sustained by the Fund, for any check or electronic payment returned to the transfer agent for insufficient funds.
When Order is Processed: All shares will be purchased at the NAV (plus applicable shares charges, if any) next determined after the Fund receives your application or request in good order. All requests received in good order by the Fund before 4:00 p.m. (Eastern Time) will be processed on that same day. Requests received after 4:00 p.m. will be processed on the next business day.
Purchase Requests in Good Order: A purchase request will be considered to be in “good order” only if it includes all of the following:
| ● | A completed and signed account application (for new accounts). |
| ● | The exact dollar amount of the investment. |
| ● | For existing accounts, the account number and the name(s) exactly as registered on the account. |
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| ● | Payment in U.S. dollars, payable to the Fund. |
| ● | Any documentation reasonably required by the Fund or its transfer agent to verify the identity or authority of the purchaser, if applicable. |
Requests that are incomplete, unclear, or submitted without the required documentation may be delayed or rejected. The Fund and its transfer agent are not responsible for delays or losses due to requests that are not received in good order.
Good order means that your purchase (whether direct or through a financial intermediary) is complete and contains all necessary information; has all supporting documentation (such as trust documents, beneficiary designations, proper signature guarantees, IRA rollover forms, etc.); and is accompanied by sufficient purchase proceeds. An Account Application that is sent to the Fund’s transfer agent does not constitute a purchase order until the transfer agent processes the Account Application and receives correct payment by check or wire transfer.
Unacceptable Forms of Payment: Cash equivalents, including, but not limited to, cash, cashier’s checks, bank official checks, certified checks, bank money orders, third party checks (except for properly endorsed IRA transfer and rollover checks), as well as counter checks, starter checks, traveler’s checks, money orders, credit card checks, and payments drawn on non-U.S. financial institutions, will generally not be accepted for the purchase of fund shares.
All purchases, redemptions, or other account activity must be processed through your financial intermediary. Your financial intermediary is responsible for promptly transmitting purchase, redemption, and other requests to the Fund under the arrangements made between your financial intermediary and its customers. The Fund is not responsible for the failure of any financial intermediary to carry out its obligations to its customers.
Investors may be charged a fee if they affect transactions through an intermediary, broker, or agent. The Distributor or the Fund has authorized one or more brokers to accept on its behalf purchase (and redemption) orders, and these brokers are authorized to designate other intermediaries on the Fund’s behalf. The Fund will be deemed to have received a purchase (or redemption) order when an authorized broker, or that broker’s designee, accepts the order, and that order will be priced at the next computed NAV after acceptance by the authorized broker, or that broker’s designee.
Choosing a Share Class
Class A Shares and Class C Shares are offered by this Prospectus. The Fund offers the referenced classes of Shares in order to meet the needs of various types of investors.
Each class represents an interest in the same portfolio of investments, but has different charges and expenses, allowing you to choose the class that best meets your needs. When choosing a Share class, you should consider:
| ● | how much you plan to invest; |
| ● | how long you expect to own the shares; |
| ● | the expenses paid by each class share; and |
| ● | for Class A Shares and Class C Shares, whether you qualify for any reduction or waiver of any sales charges. |
You should also consult your financial intermediary about which class is most suitable for you. In addition, you should consider the factors below with respect to each class of Shares:
| CLASS A SHARES | |||
| Initial sales charge on purchases+ | Up to 3.50% | ||
| ● |
applicable to purchases made through the Distributor or a dealer |
||
| ● | reduction of initial sales charge for purchases of $50,000 or more | ||
| ● | initial sales charge waived for purchases of $1,000,000 or more | ||
| ● |
Contingent deferred sales charge (CDSC) |
None except on certain redemptions of Shares purchased without an initial sales charge(1) | |
| Redemption Fee | None(2) | ||
| Management Fee(3) | 0.65% | ||
| Administration and Transfer Agency fees | 0.08% | ||
| Minimum initial investment | $2,500 | ||
| Maximum purchase | None | ||
| Minimum aggregate account balance | None | ||
| 12b-1 fee | 0.25% annual distribution/service fee | ||
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| CLASS C SHARES | |
| Initial sales charge on purchases | None |
| Contingent deferred sales charge (CDSC) | None |
| Redemption Fee | None(2) |
| Management Fee(3) | 0.65% |
| Administration and Transfer Agency fees | 0.08% |
| Minimum initial investment | $2,500 |
| Maximum purchase | None |
| Minimum aggregate account balance | None |
| 12b-1 fee | 1.00% annual distribution/service fee |
| (1) | A contingent deferred sales charge of 1.00% will be assessed on redemptions of Class A Shares made within one year after purchase where no initial sales charge was paid at time of purchase as part of an investment of $1,000,000 or more (whether in a single transaction or in several transactions pursuant to such shareholder’s Right of Accumulation or a Letter of Intent). |
| (2) | Redemption fees of 1.00% are applicable only in cases of redemptions of Class A Shares and Class C Shares within 60 days of purchase and are based on the NAV of such shares at the time of the redemption. |
| (3) | Management Fees will be reduced if the average daily total assets of the Fund exceed $100 million. |
| + | Shares purchased through the Fund’s transfer agent, Ultimus, are not subject to sales charges. |
Initial Sales Charge
An initial sales charge may apply to your purchase of Class A Shares of the Fund if made through the Distributor or a Selected Dealer, or its authorized designee, based on the amount invested, as set forth in the table below. The sales charge is allocated to your Distributor or Selected Dealer. Sales charges are expressed as a percentage offering price (which includes the sales charge) and as a percentage of your net investment, are shown in the table. The dollar amount of your initial sales charge is calculated as the difference between the offering price and the NAV of those Shares. Since the offering price is calculated to two decimal places using standard rounding criteria, the number of Shares purchased and the dollar amount of your sales charge as a percentage of the offering price and of your net investment may be higher or lower than the amounts set forth in the table depending on whether there was a downward or upward rounding.
| Amount of Purchase at Offering Price | Class A Shares Sales Charge as a Percentage of Offering Price(1)(2)(3) |
Class A Shares Sales Charge as a Percentage of Net Amount Invested(2)(3) |
Dealer’s Reallowance as a Percentage of Offering Price(2)(3) |
| Under $50,000 | 3.50% | 3.63% | 3.25% |
| $50,000 but under $100,000 | 3.25% | 3.36% | 3.00% |
| $100,000 but under $250,000 | 3.00% | 3.09% | 2.75% |
| $250,000 but under $500,000 | 2.50% | 2.56% | 2.25% |
| $500,000 but under $1,000,000 | 2.00% | 2.04% | 1.75% |
| Over $1,000,000 | None | None | None |
| (1) | Offering Price includes the initial sales charge. |
| (2) | A contingent deferred sales charge of 1.00% may apply to Class A Shares purchased without an initial sales charge if redeemed within 12 months of purchase. |
| (3) | Shares purchased through the Fund’s Transfer Agent, Ultimus, will not be subject to sales charge. |
Qualifying for a Reduction or Waiver of Class A Shares Sales Charge
Right of Accumulation
You may purchase Class A Shares of the Fund at a reduced sales charge determined by aggregating the dollar amount of the new purchase (measured by the offering price) and the total prior day’s NAV (net amount invested) of all Class A Shares of the Fund held by you, or held in accounts, as set forth below identified under “Aggregating Accounts,” and applying the sales charge applicable to such aggregate amount. In order for your purchases and holdings to be aggregated for purposes of qualifying for such discount, they must have been made through one financial intermediary, and you must provide sufficient information to your financial intermediary at the time of purchase to permit verification that the purchase qualifies for the reduced sales charge. The right of accumulation is subject to modification or discontinuance at any time with respect to all shares purchased thereafter.
Letter of Intent
You may obtain a reduced sales charge on Class A Shares by signing a Letter of Intent indicating your intention to purchase $50,000 or more of Class A Shares (including Class A Shares in other series of the Fund) over a 13-month period. The term of the Letter of Intent will commence upon the date you sign the Letter of Intent. You must refer to such Letter when placing orders. With regard to a Letter of Intent, the amount of investment for purposes of applying the sales load schedule includes (i) the historical cost (what you actually paid for the shares at the time of purchase, including any sales charges) of all Class A Shares acquired during the term of the Letter of Intent, minus (ii) the value of any redemptions of Class A Shares made during the term of the Letter of Intent. Each investment made during the period receives the reduced sales charge applicable to the total amount of the investment goal. A portion of shares purchased may be held in escrow to pay for any sales charge that may be applicable. If the goal is not achieved within the period, you must pay the difference between the sales charges applicable to the purchases made and the charges previously paid, or an appropriate number of escrowed shares will be redeemed. Please contact your financial intermediary to obtain a Letter of Intent application.
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Aggregating Accounts
To take advantage of reduced Class A Shares sales charges on large purchases or through the exercise of a Letter of Intent or right of accumulation, investments made by you, your spouse, and your children under age 18 may be aggregated if made for your own account(s) and/or certain other accounts such as:
| ● | trust accounts established by the above individuals (or the accounts of the primary beneficiary of the trust if the person who established the trust is deceased); |
| ● | solely controlled business accounts; and |
| ● | single participant retirement plans. |
To receive a reduced sales charge under rights of accumulation or a Letter of Intent, you must notify your financial intermediary of any eligible accounts that you, your spouse, and your children under age 18 have at the time of your purchase.
You may access information regarding sales loads, breakpoint discounts, and purchases of the Fund’s shares, free of charge, and in a clear and prominent format through your financial intermediary.
Contingent Deferred Sales Charge
A 1.00% CDSC may be deducted with respect to Class A Shares purchased through the Distributor or a Selected Dealer without an initial sales charge if redeemed within 12 months of purchase unless any of the CDSC waivers listed apply. The CDSC will be based on the lower of the original purchase price or the value of the redemption of the Class A Shares, as applicable.
CDSC Waivers
There are certain cases in which you may be exempt from a CDSC charged to Class A Shares. Among others, these include:
| ● | Upon the death or disability of an account owner. |
| ● | The redemption of Class A Shares acquired through reinvestment of Fund dividends or distributions. |
| ● | If the Fund chooses to liquidate or involuntarily redeem shares in your account. |
To keep the CDSC as low as possible, Class A Shares not subject to any CDSC will be redeemed first, followed by shares held longest.
Redemption of Fund Shares
Redeeming Shares
The Fund typically expects that it will take one business day following the receipt of your redemption request to pay out redemption proceeds by check or electronic transfer. The Fund typically expects to pay redemptions from cash, cash equivalents, proceeds from the sale of Fund shares, any lines of credit, and then from the sale of portfolio securities. These redemption payment methods will be used in regular and stressed market conditions.
The Fund reserves the right to postpone payment of redemption proceeds whenever: (i) trading on the NYSE is restricted, as determined by the SEC, or the NYSE is closed (except for holidays and weekends); or (ii) the SEC permits such suspension and so orders.
The Fund reserves the right to redeem all Class A Shares and Class C Shares if the net assets of such class of common stock are less than $15 million. For a detailed description of this right, refer to the “Principal Investment Risks—Optional Redemption” section of the SAI.
Redemptions, like purchases, may generally be effected through the Distributor, or a Selected Dealer or other intermediaries, or through the Transfer Agent in the case of direct ownership, and a processing or service fee may be charged in connection with the redemption of Shares.
Redemptions through Broker: If shares of the Fund are held by a broker-dealer, financial institution or other servicing agent, you must contact that servicing agent to redeem shares of the Fund. The servicing agent may charge a fee for this service.
Redemptions by Wire: You may request that your redemption proceeds be wired directly to your bank account. The Fund’s transfer agent imposes a $15 fee for each wire redemption and deducts the fee directly from your account. Your bank may also impose a fee for the incoming wire.
Systematic Withdrawal Plan (“SWP”): Shareholders may elect to participate in a SWP to have a specified amount withdrawn from their account on a periodic basis. Withdrawals may be made in any amount and at any frequency selected by the shareholder. To establish an SWP, please complete the appropriate form or contact the Transfer Agent. IRAs and other qualified plan accounts are not eligible for SWP.
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Redemptions are Sent: Once the Fund receives your redemption request in “good order” as described below, it will issue a check based on the next determined NAV following your redemption request. If you purchase shares using a check and soon after request a redemption, your redemption proceeds, which are payable at the next determined NAV following the receipt your redemption request in “good order”, as described below, will not be sent until the check used for your purchase has cleared your bank.
Redemption Requests in Good Order: A redemption request will be considered to be in “good order” only if it includes all of the following:
| ● | The name of the Fund and the account number |
| ● | The exact dollar amount or number of shares to be redeemed |
| ● | The name(s) of the registered account owner(s), exactly as they appear on the account |
| ● | Signature(s) of all registered owner(s) |
| ● | Any required signature guarantee or medallion signature guarantee, if applicable |
| ● | Any documentation reasonably required by the Fund or its transfer agent to verify the identity or authority of the person(s) requesting the redemption |
Redemption requests that are incomplete, unclear, unsigned, or submitted without the required documentation or signature guarantees may be delayed or rejected. The Fund and its transfer agent are not responsible for processing delays or losses resulting from requests not received in good order.
Medallion Signature Guarantee Requirements: To protect shareholders and the Fund against potential fraud, a signature guarantee, specifically a Medallion Signature Guarantee (“MSG”), may be required in certain circumstances. A Medallion Signature Guarantee is a stamped certification provided by an eligible guarantor institution to verify the authenticity of a signature and the authority of the individual signing on behalf of the account owner.
The Fund or its transfer agent may require a Medallion Signature Guarantee in the following situations:
| ● | The proceeds are being mailed to an address or transferred to a bank account that was changed or added within the past 30 calendar days; |
| ● | The redemption proceeds are made payable to someone other than the registered account owner; |
| ● | The proceeds are directed to a financial institution account not held in the shareholder’s name; |
| ● | The account registration or ownership is being changed; |
| ● | Redemption instructions are submitted by mail with alternate delivery instructions or special processing; |
| ● | Any other situation where the Fund or its transfer agent reasonably determines that additional documentation or verification is warranted. |
Medallion Signature Guarantees must be obtained from eligible guarantor institutions that are members of a Medallion Signature Guarantee program recognized by the Securities Transfer Association (e.g., STAMP, SEMP, or MSP). These typically include commercial banks, savings associations, credit unions, and broker-dealers. Notarization is not an acceptable substitute for a Medallion Signature Guarantee.
Shareholders should contact the Fund’s transfer agent in advance of submitting any transaction requests if they are uncertain whether a Medallion Signature Guarantee is required. The Fund’s Transfer Agent reserves the right to reject any signature guarantee.
Redemption Fee
Redemption fees of 1.00% are applicable only in cases of redemptions of Class A Shares and Class C Shares within 60 days of purchase and are based on the NAV of such shares at the time of the redemption.
Conversion Privilege
Upon request, eligible beneficial holders of the Fund’s Class C Shares may convert their shares into Class A Shares of such Fund. The Fund will determine the eligibility of an investor to exercise the conversion privilege based on the current NAV of Class C Shares held by the investor. Such a conversion will be effected at the NAVs of the Class A Shares and Class C Shares next calculated after the conversion request is received by the Fund’s transfer agent in good order. Shares of each class of the Fund represent equal pro rata interests in the Fund and accrue dividends and calculate NAV and performance quotations in the same manner. The performance of each class is quoted separately due to different actual expenses. The total return on Class A Shares can be expected to differ from the total return on Class C Shares. The Fund reserves the right, at its sole discretion, to change or discontinue the
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conversion privilege, or temporarily suspend the privilege during unusual market conditions when, in the judgment of management, such change or discontinuance is in the best interests of the Fund. Shareholders who exercise the conversion privilege will generally not recognize a taxable gain or loss for federal income tax purposes on a conversion of Class C Shares into Class A Shares. Investors who hold Fund shares through a financial intermediary that does not have an agreement to make certain share classes of the Fund available or that cannot systematically support the conversion may not be eligible to convert their shares. If you are a holder of Class C Shares of the Fund, you may make a conversion request by sending a written request to the Fund’s transfer agent on behalf of the Fund at the applicable address below or by contacting your broker or financial intermediary.
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Regular/Express Mail Atlas U.S. Tactical Income Fund, Inc. c/o Ultimus Fund Solutions, LLC P.O. Box 46707 |
Overnight Mail Atlas U.S. Tactical Income Fund, Inc. c/o Ultimus Fund Solutions, LLC 225 Pictoria Drive, Suite 450 Cincinnati, OH 45246 |
Account Statements and Transaction Confirmations
You will receive periodic account statements summarizing all account activity, including purchases, redemptions, exchanges, and any reinvested dividends or capital gains. Additionally, a transaction confirmation will be sent for each financial transaction that occurs in your account, except for those taking place on a recurring basis, such as through an automatic investment plan or for dividend and capital gain distributions. For recurring transactions, the details will appear on your periodic account statement, serving as confirmation for such activity.
It is your responsibility to carefully review all transaction confirmations and account statements for accuracy immediately upon receipt. You must contact the Fund or its Transfer Agent in writing or by telephone promptly within 60 days of the date of the statement or confirmation that first reflects the disputed item. If you fail to provide timely notification within this 60-day period, you will be deemed to have ratified all account activity set forth therein, and the Fund and its agents will not be liable for any losses that may result from your failure to report the issue.
Lost Shareholders, Inactive Accounts and Unclaimed Property
Unclaimed property laws may require the Fund or its transfer agent to transfer the assets of accounts that are considered abandoned, inactive, or lost (due to returned mail) to the appropriate state authority. An account may be deemed unclaimed if the shareholder has not initiated any contact or transaction within a time period specified by applicable state law.
Before any transfer to the state is made, the Fund or its transfer agent will send a due diligence notice to the shareholder, if legislatively required.
In some cases, this process is referred to as escheatment, and shareholders may be required to reclaim the assets from the applicable state’s unclaimed property office. Some states may also require the liquidation of shares prior to escheatment, and shareholders may only be entitled to receive the cash value at the time of sale.
For retirement accounts, such escheatment may be treated as a taxable distribution, and federal and/or state income tax withholding may apply.
To help avoid escheatment, shareholders should maintain current contact information and periodically initiate contact with the Fund or its transfer agent. Examples of shareholder-initiated contact include written correspondence, telephone inquiries, or initiating a transaction in the account.
In accordance with Texas law, residents of the state of Texas may designate a representative to receive legislatively required unclaimed property due diligence notifications. A Texas Designation of Representative Form is available for making such an election.
Dividends and Distributions
The Fund intends to declare and distribute monthly dividends of substantially all of its net investment income. All dividends declared and distributed by the Fund will be reinvested automatically in additional Shares of the Fund unless a shareholder elects to receive cash.
All dividends on the Class A and Class C Shares of the Fund are reinvested automatically in full and fractional shares of Class A and Class C common stock, respectively, at the NAV per Share next determined after the declaration of such dividend or distribution (the “Automatic Dividend Reinvestment Plan”). Shareholders whose shares are held in the name of a broker or nominee should contact such broker or nominee to confirm that they may participate in the Fund’s Automatic Dividend Reinvestment Plan.
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A shareholder may elect, during the period commencing on the first business day following the payment of dividends on each calendar month and ending on the last business day of each calendar month, to have dividends and capital gain distributions paid in cash, rather than reinvested pursuant to the Fund’s Automatic Dividend Reinvestment Plan. Shareholders can make this election through a broker or by written notice to the Fund. If shareholders elect to receive cash distributions, cash payments will be mailed or deposited directly to the shareholder’s bank account on or about the payment date.
Class A and Class C Shares acquired through the Fund’s Automatic Dividend Reinvestment Plan are not subject to an initial sales charge or to any redemption fees or contingent deferred sales charges upon redemption.
Distributions of Taxable Dividends, whether automatically reinvested or paid in cash, will be paid to shareholders net of the applicable withholding tax. The automatic reinvestment of dividends and distributions will not relieve participants of any Puerto Rico income tax that may be payable (or required to be withheld) on such dividends or distributions.
Uncashed checks/Automatic Div Cap Gain Reinvestment
If you elect to receive your dividend and capital gain distributions via check, ACH or wire, and the distribution amount is $50 or less, then the amount will be automatically reinvested as additional shares into your account.
For non-retirement and non-educational accounts, any dividend and capital gain distributions sent by check which are not cashed within 180 days will be reinvested into your account at the current day’s NAV. When reinvested, those amounts are subject to market risk like any other investment. Your distribution option will automatically be converted to having all dividends and capital gain distributions reinvested into your account as additional shares if any of the following occur:
| 1. | Postal or other delivery service is unable to deliver mail or checks to the address of record thereby designating your account as “lost”; |
| 2. | Dividends and capital gain distributions checks are not cashed within 180 days; or |
| 3. | Bank account of record is no longer valid. |
For non-retirement and non-educational accounts, redemption proceeds sent by check which are not cashed within 180 days will be reinvested into your account at the current day’s NAV. When reinvested, redemption proceeds are subject to market risk like any other investment.
Tax Consequences
As with any investment, you should consider the tax consequences of investing in the Fund. The following is a general discussion of certain Puerto Rico and federal income tax consequences of investing in the Fund. You should consult your tax adviser regarding the effect that an investment in the Fund may have on your particular tax situation, including the local and federal tax consequences of your investment.
THIS SECTION IS NOT TO BE CONSTRUED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH SPECIFIC REFERENCE TO THEIR OWN TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF OTHER TAX LAWS AND ANY POSSIBLE CHANGES IN THE TAX LAWS AFTER THE DATE OF THIS PROSPECTUS.
The following discussion is a summary of the material Puerto Rico and U.S. federal tax considerations that may be relevant to prospective investors in the Fund. The discussion in connection with the Puerto Rico tax considerations is based on the provisions of the Puerto Rico Internal Revenue Code of 2011, as amended (the “Puerto Rico Code”), the regulations promulgated or applicable thereunder (the “Puerto Rico Code Regulations”), and the administrative pronouncements issued by the PRTD; the Puerto Rico Municipal Property Tax Act of 1991, as amended (the “MPTA”) and the regulations promulgated thereunder; the Municipal License Tax Act, as amended (the “MLTA”) and the regulations promulgated thereunder; and the Puerto Rico Investment Companies Act of 2013, as amended (“PRICA”).
The U.S. federal tax discussion is based on the current provisions of the U.S. Internal Revenue Code of 1986, as amended (the “U.S. Code”), the regulations promulgated thereunder (the “Code Regulations”) and administrative pronouncements issued by the IRS.
This discussion assumes that (i) the investors will be (a) individuals who for the entire taxable year (including the taxable year during which the Shares are acquired) are bona fide residents of Puerto Rico for purposes of Sections 933 and 937 of the U.S. Code and residents of Puerto Rico for purposes of the Puerto Rico Code, (the “Puerto Rico Individuals”), (b) corporations or other entities subject to Puerto Rico income tax as corporations organized under the laws of Puerto Rico, other than corporations or any such entity subject to a special tax regime under the Puerto Rico Code (the “Puerto Rico Entities”) and (c) trusts, the trustee of which is a Puerto Rico Entity or is a Puerto Rico Individual, and all of the beneficiaries of which are Puerto Rico Individuals, as described above (the
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“PR Trusts,” and jointly with the Puerto Rico Entities and the Puerto Rico Individuals, the “Puerto Rico Investors”), (ii) the Puerto Rico Investors do not qualify for or otherwise do not choose the optional income tax, (iii) the Puerto Rico Entities will not be subject at any time to any special tax regime under the U.S. Code including, without limitation, the provisions of the U.S. Code that apply to “controlled foreign corporations,” “passive foreign investment companies,” or “personal holding companies,” and (iv) for each taxable year the Fund will meet the 90% Distribution Requirement (as defined below).
The Fund may not be a suitable investment for individuals who are not Puerto Rico Individuals, trusts that are not PR Trusts, and entities that are not Puerto Rico Entities. These persons are urged to consult their own tax advisors with respect to the tax implications of the investment under the laws of the jurisdiction where they reside or are organized. In addition, if a shareholder of the Fund that was a Puerto Rico Individual, PR Trust or Puerto Rico Entity changes his, her or its tax status (for example, if a Puerto Rico Individual changes his or her principal place of residency to the United States) then such shareholder is urged to consult his, her or its own tax advisors with respect to the tax implications of such change in tax status.
Generally, an individual is a bona fide resident of Puerto Rico under the U.S. Code if he or she (i) is physically present in Puerto Rico for at least 183 days during the taxable year, (ii) has his or her principal place of business in Puerto Rico, and (iii) has more significant contacts with Puerto Rico than with the United States or a foreign country. Prospective investors should consult their tax advisers as to whether they qualify as “bona fide residents of Puerto Rico” under the U.S. Code.
This discussion does not purport to deal with all aspects of Puerto Rico and U.S. federal taxation that may be relevant to other types of investors, particular investors in light of their investment circumstances, or to certain types of investors subject to special treatment under the Puerto Rico Code or the U.S. Code (e.g., banks, insurance companies or tax-exempt organizations). Unless otherwise noted, the references in this discussion to the Puerto Rico regular income tax will include the alternative minimum tax and the alternate basic tax imposed on Puerto Rico Entities and Puerto Rico Individuals, respectively, by the Puerto Rico Code.
The existing provisions of the statutes, regulations, judicial decisions, and administrative pronouncements, on which this discussion is based, are subject to change (even with retroactive effect).
The statements herein are not binding on the Treasury Department, the Municipal Revenue Collection Center, any other agency or municipality of Puerto Rico, the IRS, or the courts. Accordingly, there can be no assurance that the positions set forth herein, if challenged, will be sustained.
Puerto Rico Taxation
Taxation of the Fund
Income Taxes. The Fund should be exempt from the regular income tax imposed by the Puerto Rico Code for each taxable year that it distributes as Taxable Dividends (as defined below) an amount equal to at least 90% of its net income for such year within the time period provided by the Puerto Rico Code (the “90% Distribution Requirement”). In determining its net income for purposes of the 90% Distribution Requirement, the Fund is not required to consider capital gains and losses. The Fund intends to meet the 90% Distribution Requirement to be exempt from the income tax imposed by the Puerto Rico Code.
Property Taxes. The Fund will be subject to personal property taxes under the MPTA. However, the shares of stock, bonds, participations, notes, and other securities or debt instruments issued by Puerto Rico or non-Puerto Rico corporations, partnerships or companies held by the Fund will be exempt from personal property taxes under the MPTA.
Municipal License Taxes. The Fund is exempt from municipal license taxes.
Taxation of Puerto Rico Investors
Income Taxes. The Fund may make distributions out of its current or accumulated earnings and profits attributable to (i) income that is included in the Fund’s gross income for purposes of the Puerto Rico Code, other than gains from the sale or exchange of property (the “Taxable Dividends”), (ii) income that is excluded from the Fund’s gross income (the “Tax Exempt Dividends”), or (iii) net gains derived from the sale or exchange of property (the “Capital Gain Dividends” and jointly with the Taxable Dividends and the Tax Exempt Dividends, the “Dividends”).
Interest and Other Expenses. In computing the earnings and profits from which the Fund may make distributions of Taxable Dividends and Tax Exempt Dividends, the Fund must allocate its accrued interest and other accrued expenses to gross taxable and gross exempt income based on the ratio of gross taxable income to total gross income and gross tax-exempt income to total gross income, respectively. As a result of this allocation, there is an increase in the ratio of Taxable Dividends to Tax Exempt Dividends.
Taxable Dividends Distributed to Puerto Rico Individuals or PR Trusts. Taxable Dividends distributed to Puerto Rico Individuals or PR Trusts will be subject to a 15% income withholding tax (the “15% Withholding Tax”). If the alternate basic tax is applicable, the Taxable Dividends may be subject to an additional 9% tax.
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Unless otherwise designated by the Fund, its distributions of Dividends to Puerto Rico Individuals or PR Trusts will consist of Taxable Dividends subject to the 15% Withholding Tax and, if applicable, the abovementioned alternate basic tax.
The Puerto Rico Code provides that a Puerto Rico individual and a PR Trust may elect out of the 15% Withholding Tax and be subject to the regular tax rates provided by the Puerto Rico Code. However, by purchasing Shares of the Fund, Puerto Rico Individuals and PR Trusts will be irrevocably agreeing to the 15% Withholding Tax on all Taxable Dividends paid by the Fund and will irrevocably waive the right to elect not to be subject to the 15% Withholding Tax, except that the applicability of the 15% Withholding Tax to Puerto Rico Individuals and PR Trusts that purchase Shares through dealers will depend on the dealer’s policies and its arrangements with the Distributor. Puerto Rico individuals and Puerto Rico trusts that purchase Shares through dealers should consult with the dealer with respect to its withholding policy or such agreements.
Taxable Dividends Distributed to Puerto Rico Entities. Puerto Rico Entities receiving or accruing Taxable Dividends during a taxable year are entitled to claim an 85% dividend received deduction with respect to such distributions (the “Dividend Received Deduction”). The Dividend Received Deduction may not exceed 85% of the Puerto Rico Entity’s net taxable income for such taxable year. The remaining 15% of such dividends is subject to income tax at the regular corporate income tax rates.
Unless otherwise designated by the Fund, its distributions of Dividends to Puerto Rico Entities will consist of Taxable Dividends subject to the Dividend Received Deduction.
Special rules are applicable to Taxable Dividends distributed to Puerto Rico Entities that are “special partnerships,” “partnerships,” “corporations of individuals,” life insurance companies, mutual insurance companies and non-mutual insurance companies under the Puerto Rico Code.
Capital Gain Dividends. Capital Gain Dividends will be subject to a capital gains tax of a maximum of 15% in the case of Puerto Rico Individuals and PR Trusts, and to a capital gains tax of a maximum of 20% in the case of Puerto Rico Entities. If the alternate basic tax is applicable, the Capital Gain Dividends of Puerto Rico Individuals and PR Trusts may be subject to an additional 9% tax. The Fund must report to the IRS and furnish to shareholders the cost basis information for shares purchased and sold. The Fund has chosen average cost as its standing (default) tax lot identification method for all shareholders, which means this is the method the Fund will use to determine which specific shares are deemed to be sold when there are multiple purchases on different dates at differing NAVs, and the entire position is not sold at one time. Shareholders may, however, choose a method other than the Fund’s standing method at the time of their purchase or upon sale of covered shares. Shareholders should consult their tax advisors to determine the best IRS-accepted cost basis method for their tax situation and to obtain more information about how cost basis reporting applies to them. Shareholders also should carefully review the cost basis information provided to them by the Fund and make any additional basis, holding period or other adjustments that are required when reporting these amounts on their federal income tax returns.
Tax Exempt Dividends. Tax Exempt Dividends distributed to Puerto Rico Investors will be exempt from Puerto Rico income tax.
Impact of Repurchase Agreements on Tax Exempt Dividends. The Fund intends to borrow money by entering into repurchase agreements, pursuant to which the Fund will sell securities, subject to the purchaser’s and the Fund’s agreement to respectively sell and purchase the securities or identical securities, on a future date. The repurchase price of the securities will be equal to the initial sales price of the securities, plus an amount equal to the interest accrued from the date of sale to the date of repurchase of the securities. The repurchase agreements will generally grant the purchaser the right to sell, transfer, pledge or hypothecate the securities. Generally, the securities that will be sold by the Fund pursuant to the repurchase agreements will consist of obligations of the United States government, municipal securities, and other securities, the interest from which is exempt from Puerto Rico income tax.
Repurchase agreements are generally treated as collateralized loans for Puerto Rico income tax purposes. Thus, the tax-exempt interest of the securities purportedly sold to the purchaser constitutes tax exempt income of the Fund. However, repurchase agreements that grant the purchaser the right to sell, transfer, pledge or hypothecate the securities could be treated as sales of the securities by the PRTD. In such event, the tax-exempt interest of the securities will not constitute tax exempt income of the Fund, and the portion of the Tax Exempt Dividends distributed by the Fund from such interest could be treated either as Taxable Dividends or Capital Gain Dividends. If Taxable Dividends treatment is applicable, the Puerto Rico Individuals and PR Trusts will be subject to the 15% Withholding Tax on such portion of the Tax Exempt Dividends, and, because of the 85% dividend received deduction of the Puerto Rico Code, the Puerto Rico Entities will be subject to a maximum effective income tax rate of 5.625% when the maximum regular corporate income tax rate pursuant to Act No. 257-2018 is 37.5%. On the other hand, if Capital Gains Dividends treatment is applicable, the Puerto Rico Individuals and PR Trusts, and the Puerto Rico Entities will be subject to the 15% and 20% maximum income tax, respectively.
Distributions of Principal. Distributions made by the Fund during a taxable year will be treated as Dividends to the extent that for such year the Fund has current or accumulated earnings and profits, as determined under the Puerto Rico Code. Distributions in excess of current and accumulated earnings and profits will be treated as a tax-free return of capital to the Puerto Rico Investor, to the extent of such investor’s tax basis in his/her/its Shares. If such distributions exceed the Puerto Rico Investor’s tax basis in the Shares, the excess will be treated as a gain derived from the sale, exchange, or other disposition of the Shares. If the Shares have
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been held by the Puerto Rico Investor for more than one year and constitute a capital asset in the hands of the Puerto Rico Investor, the gain will qualify as a long-term capital gain. The Puerto Rico Code provides long-term capital gains tax rates for Puerto Rico Individuals and Puerto Rico Entities for long-term capital gains realized from the sale or exchange of Shares of the Fund.
Sale, Exchange, or Other Disposition of the Shares. Gains realized from the sale, exchange or other disposition of Shares which have been held by a Puerto Rico Investor for more than one year and constitute capital assets in the hands of the Puerto Rico Investor, will be subject to a capital gains tax of a maximum of 15%, in the case of Puerto Rico Individuals and PR Trusts and a capital gains tax of a maximum of 20% in the case of Puerto Rico Entities. If the alternate basic tax is applicable, the gain derived by Puerto Rico Individuals or PR Trusts may be subject to an additional 9% tax.
Puerto Rico Investors may elect to treat such gains as ordinary income subject to regular income tax instead of the applicable capital gains tax.
Losses during a taxable year from the sale, exchange or other disposition of Shares that constitute capital assets in the hands of Puerto Rico Investors are deductible only to the extent of gains from the sale, exchange, or other disposition of capital assets during the taxable year. In the case of Puerto Rico Entities, the excess of capital losses incurred in a taxable year over the capital gains derived during the same taxable year may be carried forward as a deduction against future net capital gains, but only to the extent of 80% of the net capital gains derived during the particular taxable year. Puerto Rico Individuals may (a) deduct up to $1,000 of net capital losses incurred in a taxable year from ordinary income for such taxable year and (b) any remaining net capital losses may be carried forward to the following seven (7) taxable years as a deduction against net capital gains derived in such years provided, however, that the deduction may not exceed 80% of such capital gains.
Redemption of Shares. The partial or total redemption of Shares is generally treated as a sale or exchange of Shares unless the redemption is “essentially equivalent to a dividend.” If a redemption of Shares is treated as “essentially equivalent to a dividend,” then the redemption is treated as a Dividend to the extent of the Fund’s current and accumulated earnings and profits. In determining whether a redemption should be treated as “essentially equivalent to a dividend,” the Puerto Rico Code Regulations provide that (i) pro-rata redemptions of Shares are generally treated as essentially equivalent to a dividend, and (ii) redemptions that terminate a shareholder’s interest are not treated as “essentially equivalent to a dividend.” However, neither the Puerto Rico Code nor the Puerto Rico Code Regulations set forth guidelines to determine which other redemptions are not essentially equivalent to a dividend distribution. In the absence of Puerto Rico guidelines, the PRTD generally follows the principles established under the U.S. Code, the Regulations, rulings and other administrative pronouncements of the IRS, and federal court decisions.
Estate and Gift Taxes. No Puerto Rico estate and gift tax will be imposed on transfers of Shares by a Puerto Rico Individual.
Municipal License Taxes. Distributions made to Puerto Rico Entities are subject to a municipal license tax of up to 1.5% in the case of Puerto Rico Entities engaged in a financial business, and up to 0.5% in the case of Puerto Rico Entities engaged in a non-financial business, as defined in the MLTA. Distributions to Puerto Rico Individuals are not subject to municipal license tax.
Property Taxes. The Shares are exempt from Puerto Rico personal property taxes in the hands of the Puerto Rico Investors.
United States Taxation
Taxation of the Fund
Based on certain representations made by the Fund and the Adviser, the Fund will be treated under the U.S. Code as a foreign corporation not engaged in a U.S. trade or business. As a foreign corporation not engaged in a U.S. trade or business, the Fund is not subject to U.S. federal income tax on gains derived from the sale or exchange of personal property (except for gains from the disposition of a “United States Real Property Interest,” as defined in section 897 of the U.S. Code). The Fund is, however, subject to a U.S. federal income tax of 30% federal income tax on certain types of income from sources within the U.S., such as dividends and interest. Nevertheless, interest income derived from sources within the U.S. that qualifies as “portfolio interest” is not subject to the 30% income tax. In addition, dividend income from sources within the U.S. may qualify for a reduced 10% tax rate if certain conditions are met.
It is possible that the IRS or the courts could conclude that the Fund is engaged in business in the U.S. If that were to be the case, the Fund’s net income effectively connected with its U.S. trade or business would be subject to U.S. federal corporate income tax and to a 30% branch profit tax on its effectively connected earnings profits (on a “deemed repatriated” basis).
The “FATCA” rules of the U.S. Code also impose a 30% withholding tax upon most payments of U.S. source income (the “Withholdable Payments”) be made to certain “foreign financial institutions” or “non-financial foreign entities” (“NFFE”) unless certain certification and reporting requirements are satisfied. In the case of most payments of U.S. source income, the 30% withholding is currently applicable.
U.S. Code Regulations treat the Fund as a NFFE. The Fund is required to provide to the payors of such income (except with respect to certain grandfathered obligations) certain information with respect to its investors, and the payors are required to disclose such information to the IRS. However, the Fund is treated as a direct reporting NFFE, and, as such, is required to provide such information directly to the IRS (instead of providing it to such payors) by filing Form 8966 with the IRS on or before March 31 of each year.
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If the Fund is unable to obtain the required information from any such investor or otherwise fails or is unable to comply with the requirements of the U.S. Code, the Code Regulations or any other implementing rules, certain payments to the Fund may be subject to a 30% withholding tax.
By making an investment in Shares, each Puerto Rico Investor agrees to provide all information and certifications necessary to enable the Fund to comply with these requirements and authorizes the Fund to redeem the Shares of any investor that fails to timely provide such information or certifications. In addition, any Puerto Rico Investor that fails to timely provide the requested information or certifications will be required to indemnify the Fund for the entirety of the 30% percent tax withheld on all of the Fund’s income as a result of such Puerto Rico Investor’s failure to provide the information.
Taxation of Puerto Rico Individuals and Puerto Rico Entities
Dividends. Under U.S. Code Section 933, Puerto Rico Individuals will not be subject to U.S. federal income tax on dividends distributed by the Fund that constitute income from sources within Puerto Rico not effectively connected with a U.S. trade or business. The dividends distributed by the Fund should constitute income from sources within Puerto Rico not subject to U.S. federal income tax in the hands of a Puerto Rico Individual. However, in the case of Puerto Rico Individuals who own, directly or indirectly, at least 10% of the issued and outstanding voting Shares (the “10% Shareholders”), only the Puerto Rico source ratio of any dividend paid or accrued by the Fund shall be treated as income from sources within Puerto Rico. The Puerto Rico source ratio of any dividend from the Fund is a fraction, the numerator of which equals the gross income of the Fund from sources within Puerto Rico during the 3-year period ending with the close of the taxable year of the payment of the dividend (or such part of such period as the Fund has been in existence, if less than 3 years) and the denominator of which equals the total gross income of the Fund for such period. In the case of 10% Shareholders, the part of the dividend determined to be from sources other than Puerto Rico (after applying the rules described in this paragraph) may be subject to United States income taxation.
The U.S. Code contains certain attribution rules pursuant to which Shares owned by other persons are deemed owned by the Puerto Rico Individuals for purposes of determining whether they are 10% Shareholders. Additionally, the Fund has certain rules pursuant to which the voting rights of a Puerto Rico Investor may be suspended. As a result, a Puerto Rico Individual that owns less than 10% of the issued and outstanding voting Shares may become a 10% Shareholder if he or she is a partner, member, beneficiary or shareholder of a partnership, estate, trust or corporation, respectively, that also owns Shares or because of the suspension of the voting rights of other Puerto Rico Investors of the Fund. To determine whether a Puerto Rico Individual is a 10% Shareholder, the Puerto Rico Individual must consult his or her tax advisor and obtain from his or her financial advisor the information that the tax advisor deems appropriate for such purpose. If it is determined that a Puerto Rico Individual is a 10% Shareholder, such individual must obtain from his or her financial advisor the information to determine which part of the dividend is from sources outside of Puerto Rico and may thus be subject to U.S. federal income tax.
Puerto Rico Investors should also note that the Regulations under Section 937(b) of the Code addressing “conduit arrangements” may impact the source of income of dividends distributed by the Fund. In general, the Code Regulations describe a “conduit arrangement” as one in which pursuant to a plan or arrangement, income is received by a person in exchange for consideration provided to another person and such other person provides the same consideration (or consideration of a like kind) to a third person in exchange for one or more payments constituting income from sources within the United States. Based on the current language of the Regulations, the guidance offered therein, and the Fund’s representation that at least 20% of the Fund’s assets will be invested solely in securities issued by Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation representing an interest in or guaranteed by mortgages on real property located in Puerto Rico, it is more likely than not that the Fund will not be considered a “conduit arrangement” under the Code Regulations. The Fund does not plan to request a ruling from the IRS with respect to the non-applicability of such conduit rule to the Fund and no assurance can be given that the IRS or the courts will agree with the views presented here. You should consult your tax advisor as to this matter.
Foreign corporations not engaged in a U.S. trade or business are generally not subject to U.S. federal income tax on amounts received from sources outside the U.S. Corporations incorporated in Puerto Rico are treated as foreign corporations under the U.S. Code. As previously stated, it is more likely than not that dividends distributed by the Fund to Puerto Rico corporations will constitute income from sources within Puerto Rico. Accordingly, it is more likely than not that Puerto Rico corporations not engaged in a U.S. trade or business will not be subject to U.S. taxation on dividends received from the Fund. It is more likely than not that dividends received or accrued by a Puerto Rico corporate investor that is engaged in a U.S. trade or business will be subject to U.S. federal income tax only if such dividends are effectively connected to its U.S. trade or business.
The U.S. Code provides special rules for Puerto Rico Entities that are treated as partnerships for U.S. federal income tax purposes.
Sales, Exchange, or Disposition of Shares. Gain, if any, from the sale, exchange, or other disposition of Shares by a Puerto Rico Individual, including an exchange of Shares of the Fund for Shares of an affiliated investment company, will generally be treated as Puerto Rico source income and, therefore, exempt from federal income taxation.
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A Puerto Rico corporation that invests in the Fund will be subject to U.S. federal income tax on a gain from a disposition of Shares only if the gain is effectively connected to a U.S. trade or business carried on by the Puerto Rico corporation.
The U.S. Code provides special rules for Puerto Rico Entities that are subject to federal income tax as partnerships.
PFIC Rules. The Fund will likely be treated as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. Under the PFIC rules, a Shareholder that is a U.S. person (i.e., a citizen or resident of the U.S., a U.S. domestic corporation or partnership, or an estate or trust that is taxed as a resident of the U.S.) (such Shareholder is referred to as a “U.S. Shareholder”), that disposes of its PFIC stock at a gain, is treated as receiving an “excess distribution” equal to such gain. In addition, if a U.S. Shareholder receives a distribution from a PFIC in excess of 125% of the average amount of distributions such Shareholder received from the PFIC during the three preceding taxable years (or shorter period if the U.S. Shareholder has not held the stock for three years), the U.S. Shareholder is also treated as receiving an “excess distribution” equal to such excess. In general, an “excess distribution” is taxed as ordinary income, and to the extent it is attributed to earlier years in which the PFIC stock was held, is subject to the highest applicable income tax rate and to an interest charge which the U.S. Code refers to as the “deferred tax amount.”
Prop. Reg. Sec.1.1291-1(f) states that a “deferred tax amount” will be determined under Section 1291 of the U.S. Code on amounts derived from sources within Puerto Rico by Puerto Rico Individuals only to the extent such amounts are allocated to a taxable year in the Shareholder’s holding period during which the Shareholder was not entitled to the benefits of Section 933 thereof. Thus, under the proposed regulations, Puerto Rico Individuals will not be subject to the PFIC provisions if they are entitled to the benefits of Section 933 of the U.S. Code for each entire taxable year that they hold Shares; provided that the dividends from the Fund qualify as Puerto Rico source income under the U.S. Code. Puerto Rico corporations are not U.S. Shareholders for purposes of the PFIC provisions.
Puerto Rico Individuals have to file a Form 8621, Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund with the IRS, unless an exemption from the filing requirement is applicable. If an exemption is not applicable, the informative return must be filed on or before the due date of the federal income tax return, regardless of whether the Puerto Rico Individual or such Puerto Rico Entity has the obligation to file a United States federal income tax return.
Estate and Gift Taxes
Under the provisions of the U.S. Code, the Shares will not be subject to U.S. estate and gift taxes if held by a Puerto Rico Individual who is a citizen of the U.S. who acquired his or her citizenship solely by reason of his or her Puerto Rico citizenship, birth or residence in Puerto Rico and was domiciled in Puerto Rico, in the case of estate taxes, at the time of death, and in the case of gift taxes, at the time the gift was made.
Potential investors are advised to consult their own tax advisers as to the consequences of an investment in the Fund under the tax laws of Puerto Rico and the U.S., including the consequences of the sale or redemption of Shares.
Distribution Arrangements
The Fund is distributed by the Distributor, a registered securities broker-dealer and member of FINRA. To obtain information about FINRA member firms and their associated persons, you may contact FINRA at www.finra.org, or 1-800-289-9999.
Pursuant to a Distribution Agreement (the “Distribution Agreement”), the Distributor has agreed to use reasonable efforts to sell the Shares on behalf of the Fund. Shares of the Fund are offered on a continuous basis. Pursuant to the Distribution Agreement, the Fund pays the Distributor a monthly fee for the sale and distribution and/or shareholder servicing of the Shares for which the Distributor is the holder of record (commonly known as “12b-1 fees”) based on the average daily net assets of the Fund (excluding the proceeds of leverage), at the following annual rates:
| Class | 12b-1 Fee |
| Class A Shares | 0.25% |
| Class C Shares | 1.00% |
Class A Shares purchased through the Distributor or at the Selected Dealer will pay a sales charge of up to 3.50%, while Class C Shares will not pay any sales charge. Because 12b-1 fees are charged as an ongoing fee, over time the fee will increase the cost of your investment and may cost Class C shareholders more than paying sales charges for Cass A Shares. With respect to Shares purchased through the Fund’s Transfer Agent, Ultimus, the 12b-1 fees may be paid to third party providers for marketing and distributions expenses, subject to Board approval.
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Additional Information
Performance
Financial publications may compare the Fund’s performance to the performance of various indexes and investments for which reliable performance data is available. These publications may also compare the Fund’s performance to averages, performance rankings, or other information prepared by recognized mutual fund statistical services. In addition, from time to time, the Fund may advertise total return information. Total return information will be calculated according to rules established by the SEC and will not include any fees charged by Selected Dealers.
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Financial Highlights
The financial highlights table is intended to help you understand the Fund’s financial performance for the period of the Fund’s operations. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information for the fiscal years ended September 30, 2021 and 2022 was audited by the Fund’s prior independent registered public accounting firm. The information for the fiscal years ended September 30, 2023, 2024 and 2025 has been audited by Cohen & Company, Ltd., the Fund’s current independent registered public accounting firm, whose report, along with the Fund’s financial statements, are available at no charge upon request.
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Year.
| Class A | |||||||||||||||||||||
| For the Year Ended September 30, 2025 |
For the Year Ended September 30, 2024 |
For the Year Ended September 30, 2023 |
For the Year Ended September 30, 2022 |
For the Year Ended September 30, 2021 |
|||||||||||||||||
| Per-share operating performance: | |||||||||||||||||||||
| Net asset value, beginning of year | $ | 8.65 | $ | 7.55 | $ | 7.55 | $ | 10.39 | $ | 9.77 | |||||||||||
| Income from investment operations: | |||||||||||||||||||||
| Net investment income* | 0.41 | 0.37 | 0.33 | 0.24 | 0.25 | ||||||||||||||||
| Net realized and unrealized gain (loss) from investment operations | 0.14 | 1.12 | 0.06 | (2.67 | ) | 0.79 | |||||||||||||||
| 0.55 | 1.49 | 0.39 | (2.43 | ) | 1.04 | ||||||||||||||||
| Less distributions: | |||||||||||||||||||||
| Dividends from net investment income | (0.40 | ) | (0.37 | ) | (0.34 | ) | (0.38 | ) | (0.42 | ) | |||||||||||
| Return of capital | (.01 | ) | (0.02 | ) | (0.05 | ) | (0.03 | ) | - | ||||||||||||
| Total distributions | (0.41 | ) | (0.39 | ) | (0.39 | ) | (0.41 | ) | (0.42 | ) | |||||||||||
| Paid in capital from redemption fees* | - | 0.00 | ^ | - | 0.00 | ^ | 0.00 | ^ | |||||||||||||
| Net asset value, end of year | $ | 8.79 | + | $ | 8.65 | $ | 7.55 | $ | 7.55 | $ | 10.39 | ||||||||||
| Total investment return based on net asset value per share** | 6.59 | % | 20.17 | % | 5.07 | % | (24.00 | )% | 10.77 | % | |||||||||||
| Net assets, end of year (in thousands) | $ | 66,603 | $ | 70,239 | $ | 66,691 | $ | 66,340 | $ | 86,658 | |||||||||||
| Ratios as a percentage of average net assets: | |||||||||||||||||||||
| Expenses***: | |||||||||||||||||||||
| before waiver | 5.95 | % | 6.06 | % | 5.62 | % | 2.41 | % | 1.90 | % | |||||||||||
| net of waiver | 5.64 | % | 5.41 | % | 4.72 | % | 1.99 | % | 1.58 | % | |||||||||||
| Net investment income | 4.82 | % | 4.51 | % | 4.18 | % | 2.56 | % | 2.45 | % | |||||||||||
| Portfolio turnover rate | 7 | % | 21 | % | 109 | % | 139 | % | 14 | % | |||||||||||
| * | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the year. | ||||||||||||||||||||
| ** | Total returns shown are historical in nature and assume changes in share price, reinvestment of dividends and distributions, if any, and exclude the effect of applicable sales charges and redemption fees. Had the adviser not waived fees, total returns would have been lower. | ||||||||||||||||||||
| *** | Expenses excluding interest and leverage related expenses: | ||||||||||||||||||||
| before waiver | 1.88 | % | 1.77 | % | 1.83 | % | 1.73 | % | 1.77 | % | |||||||||||
| net of waiver | 1.57 | % | 1.12 | % | 0.93 | % | 1.31 | % | 1.45 | % | |||||||||||
| + | Includes adjustments in accordance with accounting principles generally accepted in the United States and, consequently the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset values and returns for shareholder transactions. | ||||||||||||||||||||
| ^ | Less than $0.01 per share. | ||||||||||||||||||||
28
Financial Highlights (continued)
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Year.
| Class C | |||||||||||||||||||||
| For the Year Ended September 30, 2025 |
For the Year Ended September 30, 2024 |
For the Year Ended September 30, 2023 |
For the Year Ended September 30, 2022 |
For the Year Ended September 30, 2021 |
|||||||||||||||||
| Per-share operating performance: | |||||||||||||||||||||
| Net asset value, beginning of year | $ | 8.63 | $ | 7.55 | $ | 7.55 | $ | 10.37 | $ | 9.75 | |||||||||||
| Income from investment operations: | |||||||||||||||||||||
| Net investment income* | 0.33 | 0.31 | 0.28 | 0.17 | 0.17 | ||||||||||||||||
| Net realized and unrealized gain (loss) from investment operations | 0.15 | 1.11 | 0.05 | (2.67 | ) | 0.79 | |||||||||||||||
| 0.48 | 1.42 | 0.33 | (2.50 | ) | 0.96 | ||||||||||||||||
| Less distributions: | |||||||||||||||||||||
| Dividends from net investment income | (0.34 | ) | (0.32 | ) | (0.28 | ) | (0.29 | ) | (0.34 | ) | |||||||||||
| Return of capital | (0.01 | ) | (0.02 | ) | (0.05 | ) | (0.03 | ) | - | ||||||||||||
| Total distributions | (0.35 | ) | (0.34 | ) | (0.33 | ) | (0.32 | ) | (0.34 | ) | |||||||||||
| Paid in capital from redemption fees* | - | 0.00 | ^ | - | 0.00 | ^ | 0.00 | ^ | |||||||||||||
| Net asset value, end of year | $ | 8.76 | + | $ | 8.63 | $ | 7.55 | $ | 7.55 | $ | 10.37 | ||||||||||
| Total investment return based on net asset value per share** | 5.82 | % | 19.23 | % | 4.19 | % | (24.56 | )% | 9.89 | % | |||||||||||
| Net assets, end of year (in thousands) | $ | 9.283 | $ | 11,005 | $ | 10,644 | $ | 11,137 | $ | 14,649 | |||||||||||
| Ratios as a percentage of average net assets: | |||||||||||||||||||||
| Expenses***: | |||||||||||||||||||||
| before waiver | 6.70 | % | 6.81 | % | 6.36 | % | 3.13 | % | 2.64 | % | |||||||||||
| net of waiver | 6.39 | % | 6.16 | % | 5.49 | % | 2.73 | % | 2.32 | % | |||||||||||
| Net investment income | 4.06 | % | 3.76 | % | 3.40 | % | 1.80 | % | 1.68 | % | |||||||||||
| Portfolio turnover rate | 7 | % | 21 | % | 109 | % | 139 | % | 14 | % | |||||||||||
| * | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the year. | ||||||||||||||||||||
| ** | Total returns shown are historical in nature and assume changes in share price, reinvestment of dividends and distributions, if any, and exclude the effect of applicable redemption fees. Had the adviser not waived fees, total returns would have been lower. | ||||||||||||||||||||
| *** | Expenses excluding interest and leverage related expenses: | ||||||||||||||||||||
| before waiver | 2.63 | % | 2.51 | % | 2.58 | % | 2.46 | % | 2.51 | % | |||||||||||
| net of waiver | 2.32 | % | 1.86 | % | 1.71 | % | 2.06 | % | 2.19 | % | |||||||||||
| + | Includes adjustments in accordance with accounting principles generally accepted in the United States and, consequently the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset values and returns for shareholder transactions. | ||||||||||||||||||||
| ^ | Less than $0.01 per share. | ||||||||||||||||||||
29
PRIVACY NOTICE
| FACTS | WHAT DOES ATLAS U.S. TACTICAL INCOME FUND DO WITH YOUR PERSONAL INFORMATION | ||
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. | ||
| What? |
THE TYPES OF PERSONAL INFORMATION WE COLLECT AND SHARE DEPENDS ON THE PRODUCT OR SERVICE THAT YOU HAVE WITH US. THIS INFORMATION CAN INCLUDE:
| ||
| ● | Social Security number and income | ||
| ● | Account transactions and transaction history | ||
| ● | Investment experience and purchase history | ||
|
When you are no longer our customer, we continue to share your information as described in this notice. | |||
| How? |
All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reason the Fund chooses to share and whether you can limit this sharing. | ||
| Reasons we can share your personal information | Does the Fund share? |
Can you limit this sharing? |
| For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus |
YES | NO |
| For our marketing purposes – to offer our products and services to you |
NO | We do not share |
| For joint marketing with other financial companies | NO | We do not share |
| For our affiliates’ everyday business purposes – information about your transactions and experiences |
NO | We do not share |
| For our affiliates’ everyday business purposes – information about your creditworthiness |
NO | We do not share |
| For our affiliates to market to you | NO | We do not share |
| For nonaffiliates to market to you | NO | We do not share |
| Questions? | Call (855) 969-8440 |
30
| ATLAS U.S. TACTICAL INCOME FUND, INC. Buchanan Office Center Road 165 #40, Suite 201 Guaynabo, Puerto Rico 00968 (787) 781-1301 |
| INVESTMENT ADVISER Atlas Asset Management, LLC Buchanan Office Center Road 165 #40, Suite 201 Guaynabo, Puerto Rico 00968 |
CUSTODIAN U.S. Bank, N.A. 425 Walnut Street Cincinnati, OH 45202 |
|
TRANSFER AND DIVIDEND DISBURSING AGENT Ultimus Fund Solutions, LLC 225 Pictoria Drive, Suite 450 Cincinnati, OH 45246 |
INDEPENDENT REGISTERED Cohen & Company, Ltd. 1835 Market Street, Suite 310 Philadelphia, PA 19103 | |
| LEGAL COUNSEL Thompson Hine LLP 41 South High Street, Suite 1700 Columbus, OH 43215 |
DISTRIBUTOR Northern Lights Distributors, LLC 4221 North 203rd St., Suite 100 Elkhorn, NE 68022-3474 |
Additional information about the Fund’s investments is available in the Fund’s annual and semi-annual reports to shareholders and in Form N-CSR. In the Fund’s annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during the last fiscal year or period. In Form N-CSR, you will find the Fund’s annual and semi-annual financial statements.
The SAI, which provides a more complete discussion of several of the matters contained in this Prospectus, is incorporated by reference. To obtain a free copy of the SAI or any shareholder report, or to make any other inquiries about the Fund, you may call the Fund at (855) 969-8440 or write to:
|
Regular/Express Mail Atlas U.S. Tactical Income Fund, Inc. c/o Ultimus Fund Solutions, LLC P.O. Box 46707 |
Overnight Mail Atlas U.S. Tactical Income Fund, Inc. c/o Ultimus Fund Solutions, LLC 225 Pictoria Drive, Suite 450 Cincinnati, OH 45246 |
Reports and other information about the Fund are available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. Copies may also be obtained upon payment of a duplicating fee, by electronic request at the following e-mail address: [email protected], or by writing the SEC’s Public Reference Section, Washington, D.C. 20549-1520.
You may also obtain a copy of the Fund’s Prospectus, SAI, annual and semi-annual reports free of charge from the Fund’s website at www.atlas-am.com.
Investment Company Act File No. 811-23705
STATEMENT OF ADDITIONAL INFORMATION
ATLAS U.S. TACTICAL INCOME FUND, INC.
| Share Class | Ticker | Cusip # | ||
| Class A | ATLAX | 049446 107 | ||
| Class C | ATLCX | 049446 206 |
February 1, 2026
This Statement of Additional Information (“SAI”) is not a prospectus but should be read in conjunction with the prospectus of the Atlas U.S. Tactical Income Fund (the “Fund”) dated February 1, 2026 (the “Prospectus”). This SAI is incorporated by reference in its entirety into the Prospectus. Copies of the Prospectus may be obtained without charge by calling (855) 969-8440 or by contacting the Fund in writing at:
|
Regular/Express Mail Atlas U.S. Tactical Income Fund, Inc. c/o Ultimus Fund Solutions, LLC |
Overnight Mail Atlas U.S. Tactical Income Fund, Inc. c/o Ultimus Fund Solutions, LLC |
Table of Contents
| Investment Strategies | 1 | |
| Dividend Distributions | 1 | |
| Use of Leverage | 1 | |
| Principal Investment Risks | 2 | |
| Additional Information Regarding Fund Investments | 10 | |
| Fund Policies | 17 | |
| Disclosure of Portfolio Holdings | 17 | |
| Management of the Fund | 19 | |
| Leadership Structure and Board of Directors | 21 | |
| Compensation of Independent Directors | 22 | |
| Director and Officer Ownership of Fund Shares and Material Transactions | 22 | |
| Code of Ethics | 22 | |
| Control Persons and Principal Holders of Securities | 22 | |
| Investment Advisory and Other Services | 23 | |
| Investment Adviser | 23 | |
| Administration and Transfer Agent | 25 | |
| Distributor | 26 | |
| Distribution and Service Plan | 26 | |
| Payments to Financial Intermediaries by the Investment Adviser or its Affiliates | 27 | |
| Independent Registered Public Accounting Firm | 28 | |
| Legal Counsel | 28 | |
| Additional Information | 30 | |
| Description of Shares | 30 | |
| Appendix A | A-1 | |
| Appendix B | B-1 | |
| Appendix C – Proxy Voting Policies | C-1 |
i
STATEMENT OF ADDITIONAL INFORMATION
Atlas U.S. Tactical Income Fund, Inc. (the “Fund”) was incorporated in the Commonwealth of Puerto Rico on April 16, 2015. The Fund is an open-end management investment company and is classified as diversified under the Investment Company Act of 1940, as amended (the “1940 Act”).
Much of the information contained in this statement of additional information (“SAI”) expands on subjects discussed in the Fund’s Prospectus. Capitalized terms not defined herein are used as defined in the Prospectus. No investment in shares of the Fund should be made without first reading the Prospectus.
ii
Investment Strategies
The Fund seeks to maximize total return, consistent with preservation of capital. The Fund’s investment objective is not fundamental. That means that it may be changed without a shareholder vote. There can be no assurance that the Fund will achieve its investment objectives.
The Fund seeks to provide long-term positive returns and to preserve capital through various market environments by managing portfolio duration, credit risk, and volatility. The Fund has the flexibility to invest across a variety of fixed-income asset classes and is not managed to be compared to any specific index. The Fund has latitude to pursue opportunities across the fixed-income spectrum to create a diversified portfolio of varying maturities, including moving between sectors or across credit risk, and may have positive or negative duration.
The Fund pursues its investment objective by investing, under normal circumstances, at least 80% of its assets in a diversified portfolio of U.S. fixed-income instruments of varying maturities. The type of bonds in which the Fund may invest include a variety of fixed-income instruments such as, but not limited to, government notes and bonds, corporate bonds, commercial and residential mortgage-backed securities, asset-backed securities, and derivatives such as swap agreements, futures contracts, and options that provide exposure and mitigate risks associated with various fixed-income instruments.
The Fund is explicitly prohibited from investing in direct or indirect obligations of the Commonwealth of Puerto Rico or any of its instrumentalities.
Dividend Distributions
The Fund intends to distribute to its shareholders substantially all of its net investment income, if any. Dividends from such net investment income will be declared and paid monthly to holders of the Fund’s shares (“Shares”). After the issuance by the Fund of debt securities, monthly distributions to holders of shares normally will consist of all or a portion of its net investment income remaining after the payment of interest on borrowings. Please note that dividend rates will vary from month to month. The Fund may at times pay out less than the entire amount of net investment income earned in any particular period and may at times pay out such accumulated undistributed income in addition to net investment income earned in other periods in order to permit the Fund to maintain a more stable level of dividends to holders of Shares. As a result, the dividend paid by the Fund to holders of Shares for any particular period may be more or less than the amount of net investment income earned by the Fund during such period.
The record date for dividend payments to holders of Shares is selected by the Fund’s Board of Directors (the “Board”) on or prior to such record date, and the dividend payment date is the fifteenth day of the following month (or if such day is not a business day, i.e., a day that the New York Stock Exchange (“NYSE”) is open for business (“Business Day”), the next succeeding Business Day). Shareholders of record are entitled to dividend distributions if the trade date for purchase of Shares is on or prior to the record date for such dividend distribution. If the trade date for a purchase of Shares is subsequent to such record date, the shareholders will not be entitled to such dividend distribution. Shares redeemed with a trade date on or prior to the record date for a dividend distribution are not entitled to such dividend distribution. Net realized capital gains, if any, will be retained by the Fund, unless the Board determines that capital gains must be distributed to holders of Shares in order to ensure advantageous tax treatment for the Fund.
The per-share dividends on Class C Shares of the Fund will be lower than the per-share dividends on Class A Shares principally as a result of the higher account maintenance and distribution fees applicable to Class C Shares.
Taxable Dividends distributed to investors who are individuals will be distributed net of a 15% Puerto Rico income tax withholding, which will be automatically withheld at the source by the issuing and paying agent of the Fund.
Use of Leverage
The Fund engages in borrowing and other forms of leverage, such as derivatives, to increase amounts available for investment consistent with its investment objective. Atlas Asset Management, LLC (the “Adviser”) may, when consistent with the Fund’s investment objective, buy options or futures on a security or an index of securities, or enter into swap agreements, including, interest rate and credit default swaps (collectively, commonly known as derivatives). The Fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a
1
strategy designed to reduce exposure to other risks, such as interest rate or credit risk. The Fund may also use derivatives for leverage. The Fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements). Reverse repurchase agreements may be considered to be a type of borrowing.
Principal Investment Risks
An investment in the Fund entails certain risks and, therefore, should be undertaken only by investors capable of evaluating and bearing the risks of the Fund. There can be no assurance that the Fund’s investment objectives will be achieved or that an investor will receive a return of its capital.
The value of your investment will vary over time, sometimes significantly, and you may lose money by investing in the Fund. The Fund invests substantially all of its assets in fixed-income instruments and derivatives that provide exposure to fixed-income instruments. The following information is intended to help you better understand some of the risks of investing in the Fund. It is not intended to constitute a complete list of all risks which could potentially impact an investment in the Fund. The impact of the following risks on the Fund may vary depending on the Fund’s investments. The greater the Fund’s investment in a particular security, the greater the Fund’s exposure to the risks associated with that security.
Before investing in the Fund, you should carefully consider the risks that you assume when investing in the Fund. In addition to the risks listed below, you should evaluate all of the additional information contained in this Prospectus and consult with your financial, legal and tax advisers prior to making an investment decision with respect to the Fund.
Investment and Market Risk. The Fund’s investments may be adversely affected by the performance of U.S. and foreign investment securities markets, which, in turn, may be influenced by a number of factors, including (i) the level of interest rates, (ii) the rate of inflation, (iii) political decisions, (iv) fiscal policy, and (v) current events in general. Although the Fund may be less volatile than funds that invest most of their assets in common stocks because the Fund invests in investment securities, the Fund’s net asset value (“NAV”) may fluctuate due to market conditions, and as a result you may experience a decline in the value of your investment in the Fund and you may lose money.
Securities in the Fund’s portfolio may underperform due to inflation (or expectations for inflation), interest rates, global demand for particular products or resources, natural disasters, climate change and climate-related events, pandemics, epidemics, terrorism, tariffs and trade wars, international conflicts, regulatory events and governmental or quasi-governmental actions. Market events can have a profound economic and business effect that results in cancellations and disruptions to supply chains and customer activity, disruption and displacement of one or more sectors or industries, closing of borders and imposition of travel restrictions and quarantines, general public concern and uncertainty and, in extreme cases, exchange trading halts due to rapidly falling prices. For example, COVID-19 caused significant volatility and declines in global financial markets, including the U.S. financial markets. Such events can cause investor fear, which can adversely affect the economies of nations, regions and the market in general, in way that cannot necessarily be foreseen.
Market events such as these and other types of market events may cause significant declines in the values and liquidity of many securities and other instruments, and significant disruptions to global business activity and financial markets. Turbulence in financial markets, and reduced liquidity in equity, credit and fixed income markets may negatively affect many issuers both domestically and around the world, and can result in trading halts, any of which could have an adverse impact on the Fund. During periods of market volatility, security prices (including securities held by the Fund) could change drastically and rapidly, and therefore adversely affect the Fund.
An investment in the Fund is designed primarily, and is suitable only, for long-term investors, and is not suitable for all investors. Further, an investment in the Fund is not equivalent to an investment in the underlying securities of the Fund and investors should not view the Fund as a vehicle for trading purposes.
Fixed-Income Securities Risk. The Fund invests in a variety of fixed-income securities. Typically, the values of fixed-income securities change inversely with prevailing interest rates. Therefore, a fundamental risk of fixed-income securities is interest rate risk, which is the risk that the value of such securities will generally decline as prevailing interest rates rise, which may cause the Fund’s NAV to likewise decrease. In addition, the Fund is subject to the risk that interest rates may exhibit increased volatility, which could cause the Fund’s NAV to fluctuate more. If rising
2
interest rates cause the Fund to lose enough value, the Fund could also face increased shareholder redemptions, which could force the Fund to liquidate investments at disadvantageous times or prices, therefore adversely affecting the Fund. How specific fixed-income securities may react to changes in interest rates will depend on the specific characteristics of each security. For example, while securities with longer maturities tend to produce higher yields, they also tend to be more sensitive to changes in prevailing interest rates and are therefore more volatile than shorter-term securities and are subject to greater market fluctuations as a result of changes in interest rates. Fixed-income securities are also subject to credit risk, which is the risk that the credit strength of an issuer of a fixed-income security will weaken and/or that the issuer will be unable to make timely principal and interest payments and that the security may go into default. In addition, there is prepayment risk, which is the risk that during periods of falling interest rates, certain fixed-income securities with higher interest rates, such as mortgage- and asset-backed securities, may be prepaid by their issuers thereby reducing the amount of interest payments.
This may result in the Fund having to reinvest its proceeds in lower yielding securities.
Fixed-income securities may also be subject to valuation risk and liquidity risk. Valuation risk is the risk that one or more of the fixed-income securities in which the Fund invests are priced differently than the value realized upon such security’s sale. In times of market instability, valuation may be more difficult. Liquidity risk is the risk that fixed-income securities may be difficult or impossible to sell at the time that the Adviser would like or at the price the Adviser believes the security is currently worth. Securities underlying mortgage- and asset-backed securities, which may include subprime mortgages, also may be subject to a higher degree of credit risk, valuation risk, and liquidity risk.
Exchange-Traded Funds Risk (“ETFs”). The Fund may invest in ETFs, which are typically open-end investment companies that are traded on a national securities exchange. ETFs typically incur fees, such as investment advisory fees and other operating expenses that are separate from those of the Fund, which will be indirectly paid by the Fund. As a result, the cost of investing in the Fund may be higher than the cost of investing directly in ETFs and may be higher than other mutual funds that invest directly in stocks and bonds. An investment in the Fund is subject to the risks associated with investments in the underlying ETFs in which it invests. The Fund will indirectly pay a proportional share of the asset-based fees of the underlying ETFs in which it invests.
There is a risk that the Adviser’s evaluation and assumptions regarding a broad asset class or the ETFs in which the Fund invests may be incorrect based on actual market conditions. In addition, at times the segment of the market represented by an underlying ETF may be out of favor and under perform other segments. There can be no assurance that the underlying ETFs will achieve their investment objectives, and the performance of the underlying ETFs may be lower than the asset class that they were selected to represent. The underlying ETFs may change their investment objectives or policies without the approval of the Fund. If that were to occur, the Fund might be forced to withdraw its investment from the underlying ETFs at a time that is unfavorable to the Fund.
An investment in an ETF is not equivalent to an investment in the assets held by the ETF. The market price of ETF units on the securities exchange on which they are traded may be lower than or higher than their NAV. An active trading market for ETF units may not develop or be maintained. Trading of ETF units may be halted if the listing exchange’s officials deem such action appropriate. ETFs may not fulfill their objective of tracking the performance of an index or specific security or benchmark which they seek to track. A significant percentage of certain ETFs may be comprised of issuers in a single industry or sector of the economy, which may present more risks than if such funds were broadly diversified.
Interest Rate Risk. Generally, a fixed-income security will increase in value when prevailing interest rates fall and decrease in value when prevailing interest rates rise. Longer-term securities are generally more sensitive to interest rate changes than shorter-term securities, but they generally offer higher yields to compensate investors for the associated risks. High-yield bond prices and floating rate debt security prices are generally less directly responsive to interest rate changes than investment grade issues or comparable fixed rate securities and may not always follow this pattern. The Fund may manage interest rate risk by varying the average-weighted effective maturity of the portfolio to reflect an analysis of interest rate trends and other factors. The Fund’s average-weighted effective maturity will tend to be shorter when the portfolio manager expects interest rates to increase and longer when the portfolio manager expects interest rates to fall. The Fund intends to use futures primarily to manage interest rate risk but may also use swaps and options.
3
Leverage Risk. Engaging in transactions using leverage or those having a leveraging effect subjects the Fund to certain risks. These risks may be heightened if the Fund invests all, or a significant portion of its assets in futures, forwards, swaps, and other types of derivatives. Leverage can magnify the effect of any gains or losses, causing the Fund to be more volatile than if it had not been leveraged. Through the use of leverage, the Fund’s total investment exposure could far exceed the value of its portfolio securities, and its investment performance could be dependent on securities not directly owned by the Fund. Certain commodity-linked derivatives may subject the Fund to leveraged market exposure to commodities. In addition, the Fund’s assets that are used as collateral to secure short sale transactions may decrease in value while the short positions are outstanding, which may force the Fund to use its other assets to increase collateral. There is no assurance that a leveraging strategy will be successful. The effect of leverage may cause a shareholder to lose all or a portion of its investment in the Fund.
High-Yield Risk. The Fund intends to invest at least 80% of its assets in fixed-income securities that, at the time of purchase, are rated “investment grade,” that is, rated “AAA,” “AA,” “A” or “BBB” by S&P Global Ratings (“S&P”), “Aaa,” “Aa,” “A” or “Baa” by Moody’s Investor Services, Inc. (“Moody’s”), “AAA,” “AA,” “A” or “BBB” by Fitch Ratings, Inc. (“Fitch”), without regard to any gradations within such categories, or within the four highest investment grade categories (without regard to any gradations within such categories) by any other nationally recognized statistical rating organization, or, if not rated, are considered by the Adviser to be of comparable credit quality or are approved by the Office of the Commissioner of Financial Institutions of Puerto Rico (the “Commissioner”). Obligations rated in the lowest investment grade category (BBB by S&P, Baa by Moody’s or BBB by Fitch, without regard to any gradations within such categories) are generally regarded as having adequate capacity to pay interest and repay principal but may have some speculative characteristics. Obligations rated below investment grade (i.e., below BBB− by S&P, Baa3 by Moody’s or BBB− by Fitch), in which the Fund may invest up to 10% of its assets, may have speculative characteristics, including the possibility of default or bankruptcy of the issuers of such securities, market price volatility based upon interest rate sensitivity, questionable creditworthiness and relative illiquidity of the secondary trading market. Because lower-rated bonds have been found to be more sensitive to adverse economic changes or individual corporate developments and less sensitive to interest rate changes than higher-rated investments, an economic downturn could disrupt the market for lower-rated bonds and adversely affect the value of outstanding bonds and the ability of issuers to repay principal and interest. In addition, in a declining interest rate market, issuers of lower-rated bonds may exercise redemption or call provisions, which may force the Fund, to the extent it owns such securities, to replace those securities with lower yielding securities. This could result in a decreased return. Subsequent to its purchase by the Fund, an issuer of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. In addition, it is possible that S&P, Moody’s, Fitch, and other ratings agencies might not change in a timely manner their ratings of a particular issue to reflect subsequent events. The Adviser is under no obligation to sell portfolio securities that are downgraded below investment grade after these securities are purchased by the Fund. If a portfolio security is downgraded, the Adviser will consider factors such as price, credit, risk, market conditions, the financial condition of the issuer and prevailing and anticipated interest rates in determining whether to sell or hold the security as a portfolio investment.
Mortgage- and Asset-Backed Securities Risk. Rising interest rates tend to extend the duration of, or reduce the rate of prepayments on, both commercial mortgage-backed securities (“CMBSs”) and residential mortgage-backed securities (“RMBSs”), making them more sensitive to changes in interest rates (“extension risk”). As a result, in a period of rising interest rates, the price of mortgage-backed securities may fall, causing the Fund to exhibit additional volatility. Mortgage-backed securities are also subject to prepayment risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected.
This can reduce the Fund’s returns because the Fund will have to reinvest that money at lower prevailing interest rates. In addition to extension risk and prepayment risk, investments in mortgage-backed securities, including those comprised of subprime mortgages, may be subject to a higher degree of credit risk, valuation risk, and liquidity risk than various other types of fixed-income securities.
CMBSs are subject to certain other risks. The market for CMBSs developed more recently than that for RMBSs and is relatively small in terms of outstanding principal amount of issues compared to the RMBS market. CMBSs are also subject to risks associated with a lack of standardized terms, shorter maturities than residential mortgage loans, and payment of all or substantially all of the principal at maturity, rather than regular amortization of principal. Moreover, the type and use of a particular commercial property may add to the risk of CMBS investments. Adverse changes in economic conditions and circumstances are more likely to have an adverse impact on mortgage-backed securities secured by loans on commercial properties than on those secured by residential properties.
4
Similarly, the value of the Fund’s investments in asset-backed securities may be adversely affected by changes in interest rates, factors concerning the interests in and structure of the issuer or originator of the receivables, the creditworthiness of the entities that provide any supporting letters of credit, surety bonds, or other credit or liquidity enhancements, and/or the market’s assessment of the quality of the underlying assets. In addition, most asset-backed securities are subject to prepayment risk in a declining interest rate environment. The impact of prepayments on the value of asset-backed securities may be difficult to predict and may result in greater volatility. Rising interest rates tend to extend the duration of asset-backed securities, making them more volatile and sensitive to changing interest rates.
Collateralized Mortgage Obligation Risk. The Fund may invest in collateralized mortgage obligations (“CMOs”), which are a type of mortgage-backed security. CMOs are created by dividing the principal and interest payments collected on a pool of mortgages into several revenue streams (tranches) with different priority rights to portions of the underlying mortgage payments. Certain CMO tranches may represent a right to receive interest only (“IOs”), principal only (“POs”) or an amount that remains after floating-rate tranches are paid (an inverse floater). These securities are frequently referred to as “mortgage derivatives” and may be extremely sensitive to changes in interest rates. Interest rates on inverse floaters, for example, vary inversely with a short-term floating rate (which may be reset periodically). Interest rates on inverse floaters will decrease when short-term rates increase and will increase when short-term rates decrease. These securities have the effect of providing a degree of investment leverage. In response to changes in market interest rates or other market conditions, the value of an inverse floater may increase or decrease at a multiple of the increase or decrease in the value of the underlying securities. If the Fund invests in CMO tranches (including CMO tranches issued by government agencies) and interest rates move in a manner not anticipated by the Adviser, it is possible that the Fund could lose all or substantially all of its investment.
Counterparty Risk. Fund transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Fund (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not. A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Fund. The Fund may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The Fund may be exposed to counterparty risk to the extent it participates in lending its securities to third parties and/or cash sweep arrangements whereby the Fund’s cash balance is invested in one or more types of cash management vehicles. In addition, the Fund may be exposed to counterparty risk through its investments in certain securities, including, but not limited to, repurchase agreements, debt securities, and derivatives (including various types of forwards, swaps, futures, and options). The Fund intends to enter into financial transactions with counterparties that the Adviser believes to be creditworthy at the time of the transaction. There is always the risk that the Adviser’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Fund focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Credit Quality Risk. Through the Fund’s investments in fixed-income securities, the Fund is subject to the risks associated with the credit quality of the issuers of those fixed-income securities. Credit quality measures the likelihood that the issuer or borrower will meet its obligations on a bond. One of the fundamental risks is credit risk, which is the risk that an issuer will be unable to make principal and interest payments when due, or default on its obligations. Higher credit risk may negatively impact the Fund’s returns and yield. U.S. government securities are generally considered to be the safest type of investment in terms of credit risk. Municipal obligations generally rank between U.S. government securities and corporate debt securities in terms of credit safety. Corporate debt securities, particularly those rated below investment grade, present the highest credit risk.
Many fixed-income securities receive credit ratings from services such as S&P, Fitch, and Moody’s. These services assign ratings to securities by assessing the likelihood of issuer default. The lower a bond issue is rated by an agency, the more credit risk it is considered to represent. Lower rated instruments and securities generally pay interest at a higher rate to compensate for the associated greater risk. Interest rates can fluctuate in response to economic or market conditions, which can result in a fluctuation in the price of a security and impact your return and yield. Please refer to Appendix B of this SAI for a description of bond rating categories.
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Derivatives Risk. Derivatives can be highly volatile and involve risks in addition to the risks of the underlying referenced securities. Gains or losses from a derivative investment can be substantially greater than the derivative’s original cost and can therefore involve leverage. Leverage may cause the Fund to be more volatile than if it had not used leverage. Derivatives can be complex instruments and may involve analysis that differs from that required for other investment types used by the Fund. If the value of a derivative does not correlate well with the particular market or other asset class to which the derivative is intended to provide exposure, the derivative may not produce the anticipated result. Derivatives can also reduce the opportunity for gain or result in losses by offsetting positive returns in other investments. Derivatives can be less liquid than other types of investments and entail the risk that the counterparty will default on its payment obligations. If the counterparty to a derivative transaction defaults, the Fund would risk the loss of the net amount of the payments that it contractually is entitled to receive. To the extent the Fund enters into short derivative positions, the Fund may be exposed to risks similar to those associated with short sales, including the risk that the Fund’s losses are theoretically unlimited.
Treasury Futures Contracts Risk. While transactions in Treasury futures contracts may reduce certain risks, unanticipated changes in interest rates or securities prices may result in a poorer overall performance for the Fund than if it had not entered into any Treasury futures contracts. To the extent the Fund uses Treasury futures contracts, it is exposed to additional volatility and potential losses resulting from leverage. Losses (or gains) involving Treasury futures contracts can sometimes be substantial, in part because a relatively small price movement in a Treasury futures contract may result in an immediate and substantial loss (or gain) for the Fund.
Foreign Exposure Risks. The Fund may invest in foreign debt, mostly in developed economies. With respect to investments in securities of issuers or companies that are economically tied to different countries throughout the world, securities may be deemed to be economically tied to a particular country based on such factors as the issuer’s country of incorporation, primary listing, and other factors including, but not limited to operations, revenues, headquarters, governments, and may involve greater risks than investing in domestic securities because the Fund’s performance may depend on factors other than the performance of a particular company.
Foreign Market Risk. Purchases of foreign equity securities entail certain risks. For example, there may be less information publicly available about a foreign company than about a U.S. company, and foreign companies generally are not subject to accounting, auditing and financial reporting standards and practices comparable to those in the U.S. Other risks associated with investments in foreign securities include changes in restrictions on foreign currency transactions and rates of exchanges, changes in the administrations or economic and monetary policies of foreign governments, the imposition of exchange control regulations, the possibility of expropriation decrees and other adverse foreign governmental action, the imposition of foreign taxes, less liquid markets, less government supervision of exchanges, brokers and issuers, difficulty in enforcing contractual obligations, delays in settlement of securities transactions and greater price volatility. In addition, investing in foreign securities will generally result in higher commissions than investing in similar domestic securities. Future political and economic developments, the possible imposition of withholding taxes on dividends, the possible seizure or nationalization of foreign holdings, the possible establishment of exchange controls, or the adoption of other governmental restrictions, might adversely affect the payment of dividends or principal and interest on foreign obligations. The Public Company Accounting Oversight Board, which regulates auditors of U.S. public companies, is unable to inspect audit work papers in certain foreign countries. Investors in foreign countries often have limited rights and few practical remedies to pursue shareholder claims, including class actions or fraud claims, and the ability of the Securities and Exchange Commission (the “SEC”), the U.S. Department of Justice and other authorities to bring and enforce actions against foreign issuers or foreign persons is limited.
Geographic Investment Risk. To the extent that the Fund invests a significant portion of its assets in a particular country or geographic region, the Fund will generally have more exposure to certain risks due to possible political, economic, social, or regulatory events in that country or region. Adverse developments in certain regions could also adversely affect securities of other countries whose economies appear to be unrelated and could have a negative impact on the Fund’s performance.
Political and Economic Risk. Foreign investments may be subject to heightened political and economic risks, particularly in emerging markets which may have relatively unstable governments, immature economic structures, national policies restricting investments by foreigners, social instability, and different and/or developing legal systems. In some countries, there is the risk that the government may take over the assets or operations of a company or that the government may impose withholding and other taxes or limits on the removal of the Fund’s assets from that
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country. In addition, the economies of emerging markets may be predominantly based on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates.
Regulatory Risk. There may be less government supervision of foreign markets. As a result, foreign issuers may not be subject to the uniform accounting, auditing, and financial reporting standards, and practices applicable to domestic issuers, and there may be less publicly available information about foreign issuers.
Restrictions on the Transfer of Class A Shares and Class C Shares and Loss of Tax Benefits Risk. The Class A shares and Class C shares may only be transferred by operation of law, and only to Puerto Rico Residents. In addition, shareholders of the Fund (“Shareholders”) who cease to be Puerto Rico Investors (as defined in “Dividends and Taxes” below) may no longer have available the tax benefits that make the Fund an attractive investment.
Suspension of Issuances and Redemptions Risk. The Fund intends to issue shares on a continuous basis and effect daily redemptions but reserves the right to postpone payment of redemption proceeds whenever: (i) trading on the NYSE is restricted, as determined by the SEC, or the NYSE is closed (except for holidays and weekends); or (ii) the SEC permits such suspension and so orders.
Industry Risk. Industry risk is the possibility that a group of related securities will decline in price due to industry-specific developments. Companies in the same or similar industries may share common characteristics and are more likely to react similarly to industry-specific market or economic developments. The Fund’s investments, if any, in multiple companies in a particular industry increase the Fund’s exposure to industry risk.
Management Risk. The Fund is an actively managed investment portfolio and is therefore subject to the risk that the investment strategies employed for the Fund may fail to produce the intended results. The Fund may underperform its benchmark index or other mutual funds with similar investment objectives.
Because the Fund invests substantially all of its assets in fixed-income securities or income-generating securities, it is subject to risks such as credit risk and interest rate fluctuations. The Fund’s performance may also be affected by risks of certain types of investments, such as foreign (non-U.S.) securities and derivative instruments.
The Fund may use short sales, futures, options, swap agreements (including, but not limited to, interest rate, credit default and total return), and other derivative instruments individually or in combination to “hedge” or protect its portfolio from adverse movements in securities prices and interest rates. There is no guarantee that the Adviser’s use of derivative investments will benefit the Fund. The Fund’s performance could be worse than if the Fund had not used such instruments. The use of such investments may instead increase risk to the Fund, rather than reduce risk.
Market Risk. The value of the Fund’s portfolio may decrease if the value of an individual security or multiple securities in the portfolio decreases or if the Adviser’s belief about a security’s intrinsic worth is incorrect. Further, regardless of how well individual securities perform, the value of the Fund’s portfolio could also decrease if there are deteriorating economic or market conditions, including, but not limited to, a general decline in prices on the stock markets or if the market favors different types of securities than the types of securities in which the Fund invests. If the value of the Fund’s portfolio decreases, the Fund’s NAV will also decrease, which means if you sell your shares in the Fund, you may lose money.
Portfolio Turnover Risk. Increased portfolio turnover may result in higher costs, which may have a negative effect on the Fund’s performance. In addition, higher portfolio turnover may result in the acceleration of capital gains and the recognition of greater levels of short-term capital gains, which are taxed as ordinary income tax rates when distributed to shareholders.
Real Estate Investments Trust (“REIT”) Risk. The prices of mortgage REITs are affected by the quality of any credit they extend, the creditworthiness of the mortgages they hold, as well as by the value of the property that secures the mortgages. Mortgage REITs generally are not diversified and are subject to heavy cash flow dependency, defaults by borrowers, and self-liquidation. There is also the risk that borrowers under mortgages held by a REIT may be unable to meet their obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may incur substantial costs associated with protecting its investments. In addition, mortgage REITs and mortgage-backed securities are subject to prepayment risk.
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Repurchase and Reverse Repurchase Agreements Risk. The Fund may engage in repurchase agreements, which are transactions in which the Fund sells a security to a counterparty and agrees to buy it back at a specified time and price in a specified currency. Repurchase agreements involve the risk that the buyer of the securities sold by the Fund might be unable to deliver the securities when the Fund seeks to repurchase them and may be unable to replace the securities or only at a higher cost. If the buyer of securities under a repurchase agreement files for bankruptcy or becomes insolvent, the buyer may receive an extension of time to determine whether to enforce the Fund’s obligation to repurchase the securities, and the Fund’s use of the proceeds of the repurchase agreement may be severely restricted during that extension period.
The Fund may also engage in reverse repurchase agreements, which are transactions in which the Fund purchases a security from a counterparty and agrees to sell it back at a specified time and price in a specified currency. If the counterparty to a reverse repurchase agreement defaults, the Fund may suffer time delays and incur costs or possible losses in connection with the disposition of the securities underlying the reverse repurchase agreement. In the event of a default, instead of the contractual fixed rate of return, the rate of return to the Fund will depend on intervening fluctuations of the market values of the underlying securities and the accrued interest thereon. In such an event, the Fund would have rights against the counterparty for breach of contract with respect to any losses resulting from those market fluctuations.
While there is authority generally supporting the treatment of repurchase agreements as collateralized loans for Puerto Rico income tax purposes, such authority does not address the tax treatment of repurchase agreements that the Fund typically enters into, which contain provisions that grant the purchaser the right to sell, transfer, pledge or hypothecate the securities. The Puerto Rico Treasury Department could take the position that this type of arrangement should be viewed as a transfer of ownership of the underlying security and that the Puerto Rico courts would agree with that view. In such event, the tax-exempt interest of the securities will not constitute tax exempt income of the Fund, and the portion of the Tax-Exempt Dividends distributed by the Fund from such interest could be treated either as Taxable Dividends or Capital Gain Dividends subject to Puerto Rico income tax. See “Taxes”— “Puerto Rico Taxation”— “Impact of Repurchase Agreements on Tax Exempt Dividends” in the Prospectus.
Sector Risk. Equity securities within the same group of industries may decline in price due to sector-specific market or economic developments. If the Adviser invests a significant portion of the Fund’s assets in a particular sector, the Fund is subject to the risk that companies in the same sector are likely to react similarly to legislative or regulatory changes, adverse market conditions and/or increased competition affecting that market segment. This may cause the Fund’s NAV to fluctuate more than that of a fund that does not focus in a particular sector.
Financial Sector Risk: The Fund invests a certain amount of its assets in the financial sector. The operations and businesses of financial services companies are subject to extensive governmental regulation, the availability and cost of capital funds, and interest rate changes. General market downturns may affect financial services companies adversely.
Sovereign Debt Risk. The Fund may invest in U.S. and non-U.S. government debt securities. Investments in U.S. sovereign debt are considered low risk. However, investments in non-U.S. sovereign debt can involve a high degree of risk, including the risk that the governmental entity that controls the repayment of sovereign debt may not be willing or able to repay the principal and/or to pay the interest on its sovereign debt in a timely manner. A sovereign debtor’s willingness or ability to satisfy its debt obligation may be affected by various factors, including its cash flow situation, the extent of its foreign currency reserves, the availability of foreign exchange when a payment is due, the relative size of its debt position in relation to its economy as a whole, the sovereign debtor’s policy toward international lenders, and local political constraints to which the governmental entity may be subject. Sovereign debtors may also be dependent on expected disbursements from foreign governments, multilateral agencies, and other entities. The failure of a sovereign debtor to implement economic reforms, achieve specified levels of economic performance, or repay principal or interest when due may result in the cancellation of third-party commitments to lend funds to the sovereign debtor, which may further impair such debtor’s ability or willingness to timely service its debts. The Fund may be requested to participate in the rescheduling of such sovereign debt and to extend further loans to governmental entities, which may adversely affect the Fund’s holdings. In the event of default, there may be limited or no legal remedies for collecting sovereign debt and there may be no bankruptcy proceedings through which the Fund may collect all or part of the sovereign debt that a governmental entity has not repaid. In addition, to the extent the Fund invests in non-U.S. sovereign debt it may be subject to currency risk.
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Puerto Rico Investment Companies Act of 2013 Compliance Risk. Prior to registration under the 1940 Act, the Fund was registered under the Puerto Rico Investment Companies Act of 2013, as amended (“PRICA”) and subject to the investment and regulatory requirements set forth therein. The Puerto Rico securities regulator has informally indicated that the Fund will not be required to comply with the PRICA since it is now registered under the 1940 Act, although the matter is not entirely free from doubt. In the event the Fund is required to comply with the PRICA, it intends do so. Most of the requirements of PRICA are either substantially identical to, or less restrictive than, the requirements with which the Fund must comply pursuant to the 1940 Act.
Changes in Applicable Law Risk. Legislation affecting Puerto Rico securities, assets other than Puerto Rico securities, Puerto Rico and U.S. investment companies, taxes, and other matters related to the business of the Fund are continually being considered by the Puerto Rico Legislature and the U.S. Congress. Moreover, the determinations made, and the waivers and rulings granted by the Commissioner to the Fund do not constitute a precedent binding on the Commissioner. There can be no assurance that legislation enacted, or regulations promulgated after the date hereof will not have an adverse effect on the operations of the Fund, the economic value of the Shares, or the tax consequences of the acquisition or redemption of Shares.
Changes in United States Tax Law; No U.S. Federal Tax Ruling Risk. Under regulations issued under Section 937(b) of the U.S. Internal Revenue Code of 1986, as amended (the “U.S. Code”), income that is otherwise treated as income from sources within Puerto Rico under the general source of income rules is treated as income from United States sources and not excludable from gross income under Section 933 of the U.S. Code if it consists of income derived in a “conduit arrangement.” Based on the current language of the regulations and the guidance offered therein, it is more likely than not that an investment in the Shares is not the type of transaction intended to be covered by these rules, and in accordance with this interpretation, it is more likely than not that the source of dividends on the Shares will be treated as income from sources within Puerto Rico. The Fund does not plan to request a ruling from the Internal Revenue Service (the “IRS”) with respect to the U.S. federal income tax treatment to be accorded to an investment in the Shares, and no assurance can be given that the IRS or the courts will agree with the tax treatment described herein. You should read carefully the section entitled “Tax Consequences” beginning on page 21 of the Prospectus for a more detailed description of the tax implications any investment the Shares entails. You should also consult your tax advisor about your tax situation.
U.S. Federal Tax Law; FATCA Rules. Sections 1471 through 1474 of the U.S. Code (commonly known as “FATCA”), interpreted by the corresponding regulations, impose a 30% withholding tax at the source upon most payments of U.S. source income made to certain “foreign financial institutions” or “non-financial institutions” or “non-financial foreign entities” (each, a “NFFE”), unless certain certification and reporting requirements are satisfied by such NFFE, including providing information with respect to its respective investors. The regulations issued by the U.S. Treasury and the IRS, provide that the Fund is to be treated as a NFFE. Accordingly, the Fund will be required to provide the payors of such U.S. source income certain information with respect to its investors, which would then be disclosed to the IRS. However, the Fund has elected to be treated as a direct reporting NFFE, and, as such, it is required to provide such information directly to the IRS (instead of providing it to such payors) by filing Form 8966 with the IRS on or before March 31 of each year.
If the Fund were to be unable to provide such investor information to its payors or otherwise fail or be unable to comply with the legal and regulatory requirements of the U.S. Code, the Fund’s U.S. source income may be reduced, inasmuch as it would be subject to such 30% withholding tax at the source. This reduction may negatively affect the amount of dividends that may be distributed by the Fund or the Fund’s NAV.
U.S. federal tax law: 30% withholding on dividends from sources within the United States received by the Fund may qualify for a 10% U.S. federal income tax rate if it meets certain requirements of the U.S. Code. If the Fund claims the application of the 10% rate and does not meet these requirements, then the dividends would be subject a 30% U.S. federal income tax.
Political and Other Risk. Political, legal or regulatory developments in Puerto Rico and in the United States or changes in the applicability of existing laws to the Fund could adversely affect the tax-exempt status of interest paid on securities or the tax-exempt status of that portion of the Fund’s dividends that are tax-exempt. These developments could also cause the value of the Fund’s investments and therefore, the Shares, to fall or jeopardize the continued viability of the Fund, resulting, in either case, in a possible loss to shareholders.
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Market Timers Risk. The interests of the Fund’s long-term shareholders and the Fund’s ability to manage its investments may be adversely affected when its Shares are repeatedly bought and sold in response to short-term market fluctuations―also known as “market timing.” Market timing may cause the Fund to have difficulty implementing long-term investment strategies, because it cannot predict how much cash it will have available to invest. Market timing also may force the Fund to sell portfolio securities at disadvantageous times to raise the cash needed to buy a market timer’s Shares. These factors may hurt the Fund’s performance and, as a consequence, its shareholders. The Fund has procedures in place to deter and monitor such activity.
Borrowings Risk. The Fund is permitted to borrow up to 5% of the Fund’s total assets from banks for temporary or emergency purposes, including to meet redemptions of the Fund’s shares that otherwise require the untimely disposition of securities owned by the Fund.
Optional Redemption Risk. The Fund reserves the right to redeem all Class A Shares or Class C Shares if, after one year following the commencement of the Fund’s operations, the net assets of such class of common stock are less than $15 million. Ultimus Fund Solutions, LLC (“Ultimus,” the “Administrator,” or the “Transfer Agent”) will be responsible for performing the calculation of the NAV per share of each class for purposes of this optional redemption feature. If the Fund exercises this right, an investor may not recover his or her entire investment in the Fund because (i) the Fund’s NAV of such class may be lower than the price per share of such class paid by such investor and (ii) in the case of a redemption of Class A Shares, an investor will not recover any sales charges paid in connection with its acquisition of the Class A Shares.
Key Personnel Risk. The Fund depends on the diligence, skill, and network of business contacts of the investment professionals of the Adviser to achieve the Fund’s investment objectives. The Fund expects that the Adviser’s team of investment professionals will source, evaluate, negotiate, structure, close and monitor the Fund’s investments in accordance with the terms of the investment advisory agreement by and between the Fund and the Adviser (the “Advisory Agreement”). The loss of any key member of the Adviser would limit the Fund’s ability to achieve its investment objectives and operate as the Fund anticipates. This could have a material adverse effect on the Fund’s financial condition, results of operations and cash flows.
Multiple Advisory Clients Risk. The Adviser may provide advice to separate account clients and other investment companies. The services to be provided by the Adviser will not be exclusive, and the Adviser will be free to render similar services to other parties. As such, the advice given by the Adviser to other clients may differ from the advice given to the Fund, even though the investment objectives of such other clients may be the same or similar to the Fund’s investment objectives. In some instances, these practices could result in a detrimental effect on the price, volume, and/or availability of an investment for the Fund.
The Adviser may, at any time, buy or sell, or may direct or recommend that another person buys or sells, investments, securities or other property of the same kind or class that are purchased or sold by the Fund upon the recommendation of the Adviser. The Adviser may have a general policy regarding each investment opportunity being considered for investment on behalf of and by all its respective clients looking to invest their available capital. If an investment opportunity is approved, such investment opportunity may be allocated across all clients with capital available for investment and for which such investment opportunity is suitable.
Additional Information Regarding Fund Investments
The following policies and limitations supplement the Fund’s investment policies set forth in the Prospectus. The Fund’s investments in securities and other financial instruments are subject to the other investment policies and limitations described in the Prospectus and this SAI. The following sections list the Fund’s investment policies, limitations, and restrictions.
Fundamental Investment Limitations
The investment limitations described below may be changed with respect to the Fund only by a vote of the holders of a majority of the Fund’s outstanding Shares. Such majority is defined as the lesser of (a) 67% or more of the Shares present at a meeting at which the holders of more than 50% of the outstanding Shares are represented in person or by proxy, or (b) more than 50% of the outstanding Shares of the Fund.
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The Fund may not:
| 1. | Make loans to other persons, provided that the Fund may lend its portfolio securities in an amount up to 33 1/3% of total Fund assets, and provided further that, for purposes of this restriction, investment in U.S. Government obligations, short-term commercial paper, certificates of deposit, banker’s acceptances, repurchase agreements and any other lending arrangement permitted by the 1940 Act, any rules and regulations promulgated thereunder or interpretations of the SEC or its staff shall not be deemed to be the making of a “loan”. For purposes of this limitation, the term “loans” shall not include the purchase of a portion of an issue of publicly distributed bonds, debentures, or other debt securities. |
| 2. | Purchase or sell real estate or real estate limited partnerships, except to the extent permitted under the 1940 Act, the rules, and regulations thereunder or any exemptions therefrom, as such statute, rules or regulations may be amended or interpreted from time to time. This restriction shall not prevent the Fund from investing directly or indirectly in portfolio instruments secured by real estate or interests therein or acquiring securities of real estate investment trusts (“REITs”) or other issuers that deal in real estate. |
| 3. | Invest in commodities or commodity contracts, except to the extent permitted under the 1940 Act, the rules, and regulations thereunder or any exemptions therefrom, as such statute, rules or regulations may be amended or interpreted from time to time. |
| 4. | Act as underwriter of securities, except to the extent permitted under the 1940 Act, the rules, and regulations thereunder or any exemptions therefrom, as such statute, rules or regulations may be amended or interpreted from time to time. |
| 5. | Concentrate its investments in a particular industry or group of industries, as concentration is defined under the 1940 Act, the rules, and regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time. |
| 6. | Borrow money or issue senior securities, except to the extent permitted under the 1940 Act, the rules, and regulations thereunder or any exemptions therefrom, as such statute, rules or regulations may be amended or interpreted from time to time. |
Notwithstanding any of the Fund’s fundamental investment restrictions (including, without limitation, those restrictions relating to industry concentration), the Fund may: (a) purchase securities of other investment companies to the full extent permitted under Section 12 or any other provision of the 1940 Act (or any successor provision thereto) or under any regulation or order of the SEC; and (b) invest all or substantially all of its assets in a single open-end investment company or series thereof with substantially the same investment objective, strategies and fundamental restrictions as the Fund.
With respect to senior securities, the SEC and its staff have identified various securities trading practices and derivative instruments used by mutual funds that give rise to potential senior security issues under Section 18(f) of the 1940 Act.
Rule 18f-4 under the 1940 Act (“Rule 18f-4”) regulates the use of derivatives by the Fund. Rule 18f-4 generally permits the Fund to enter into derivatives transactions provided it complies with certain conditions. Rule 18f-4 permits the Fund to treat reverse repurchase transactions (and other similar financing transactions) either as borrowings or as “derivatives transactions” subject to the risk-based limits of Rule 18f-4 and does not require the Fund to maintain segregated assets to meet its asset coverage requirements. Rule 18f-4 also permits the Fund to invest in securities on a when-issued or forward-settling basis, or with a non-standard settlement cycle. These transactions will not be deemed to involve a senior security, and thus generally will not require the Fund to maintain a “segregated account” when engaging in these types of transactions, subject to certain conditions and any other restrictions that the Fund has adopted.
Non-Fundamental Investment Limitations
Under normal circumstances, the Fund will invest at least 80% of its assets (net assets plus the amount of any borrowing for investment purposes) in securities of issuers in the United States. The Fund will notify shareholders at
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least 60 days in advance of any change in this investment policy. Investments may include U.S. registered securities of issuers outside of the United States such as American Depository Receipts.
The Fund has a non-fundamental policy not to invest in direct or indirect obligations of the Commonwealth of Puerto Rico or any of its instrumentalities and any security, regardless of jurisdiction, which may be deemed illiquid by the Adviser.
The following descriptions from the 1940 Act may assist shareholders in understanding the above policies and restrictions.
| ● | Concentration. The SEC has presently defined concentration as investing 25% or more of an investment company’s net assets in an industry or group of industries, with certain exceptions. In determining industry classification, the Fund may use any one of the following: the Bloomberg Industry Group Classification, S&P, J.J. Kenny Municipal Purpose Codes, FT Interactive Industrial Codes, Securities Industry Classification Codes, or the Global Industry Classification Standard. For the purpose of determining the percentage of the Fund’s total assets invested in securities of issuers having their principal business activities in a particular industry, an asset-backed security will be classified separately based on the nature of its underlying assets. |
| ● | Borrowing. The 1940 Act presently allows the Fund to borrow from any bank (including pledging, mortgaging or hypothecating assets) in an amount up to 33 1/3% of its total assets, including the amount borrowed (not including temporary borrowings not in excess of 5% of its total assets). |
| ● | Senior Securities. Senior securities may include any obligation or instrument issued by the Fund evidencing indebtedness. The 1940 Act generally prohibits funds from issuing senior securities, although it does not treat certain transactions as senior securities, such as certain borrowings, short sales, reverse repurchase agreements, firm commitment agreements and standby commitments, with appropriate earmarking or segregation of assets to cover such obligation. |
| ● | Lending. Under the 1940 Act, the Fund may only make loans if expressly permitted by its investment policies. The Fund’s investment policies on lending are set forth above. As of the date of this SAI, the Fund does not engage in securities lending. |
| ● | Underwriting. Under the 1940 Act, underwriting securities involves the Fund purchasing securities directly from an issuer for the purpose of selling (distributing) them or participating in any such activity either directly or indirectly. Under the 1940 Act, a diversified fund may not make any commitment as underwriter, if immediately thereafter the amount of its outstanding underwriting commitments, plus the value of its investments in securities of issuers (other than investment companies) of which it owns more than 10% of the outstanding voting securities, exceeds 25% of the value of its total assets. |
| ● | Real Estate. The 1940 Act does not directly restrict the Fund’s ability to invest in real estate but does require that every fund have a Fundamental Investment Policy governing such investments. The Fund has adopted a Fundamental Policy that would permit direct investment in real estate. However, the Fund has a non-fundamental investment limitation that prohibits it from investing directly in real estate. This non-fundamental policy may be changed only by vote of the Board. |
Any investment limitation that involves a maximum percentage (other than the restriction set forth above with respect to borrowing money) will not be considered violated unless an excess over the percentage occurs immediately after, and is caused by, an acquisition of securities or assets of, or borrowings by, the Fund. The 1940 Act requires that if the asset coverage for bank borrowings at any time falls below 33-1/3% of its total assets (including the amount borrowed) plus an additional 5% of its total assets for temporary purposes, the Fund will, within three days thereafter (not including Sundays and holidays), reduce the amount of its borrowings to an extent that the net asset coverage of such borrowings shall conform to such limits.
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Unless otherwise stated, the following additional investment strategies and general policies apply to the Fund and provide further information regarding the types of securities the Fund may invest in when implementing its investment objective. Some of these strategies and policies may be part of a principal strategy. Other strategies and policies may be utilized to a lesser extent. The percentage limitations included in these policies and elsewhere in this SAI normally apply only at the time of purchase of a security. If the Fund exceeds a limit as a result of market fluctuations or the sale of other securities, it will not be required to dispose of any securities. The “Glossary of Investment Terms” attached as Appendix A includes descriptions of investment terms used throughout the Prospectus and SAI.
Cash Position
The Fund may not always stay fully invested. For example, when the Adviser believes that market conditions are unfavorable for investing, or when it is otherwise unable to locate attractive investment opportunities, the Fund’s cash or similar investments may increase. In other words, cash or similar investments generally are residual, they represent the assets that remain after the Fund has committed available assets to desirable investment opportunities. When the Fund’s investments in cash or similar investments increase, it may not participate in market advances or declines to the same extent that it would if the Fund remained more fully invested. To the extent the Fund invests its uninvested cash through a sweep program (meaning its uninvested cash is pooled with uninvested cash of other funds and invested in certain securities such as repurchase agreements), it is subject to the risks of the account or fund into which it is investing, including liquidity issues that may delay the Fund from accessing its cash.
In addition, the Fund may temporarily increase its cash position under certain unusual circumstances, such as to protect its assets or maintain liquidity in certain circumstances to meet unusually large redemptions. The Fund’s cash position may also increase temporarily due to unusually large cash inflows.
Exchange-Traded Funds
The Fund generally achieves a portion of its investment objective by investing in shares of common stock of ETFs.
Each share of an ETF represents an undivided ownership interest in the portfolio of stocks held by the ETF. ETFs are trust or similar vehicles that acquire and hold either: (1) shares of all of the companies that are represented by a particular index in the same proportion that is represented in the indices themselves or (2) shares of a sampling of the companies that are represented by a particular index in a proportion meant to track the performance of the entire index.
ETFs are intended to provide investment results that, before expenses, generally correspond to the price and yield performance of the corresponding market index, and the value of their shares should, under normal circumstances, closely track the value of the index’s underlying component stocks. ETFs generally do not buy or sell securities, except to the extent necessary to conform their portfolios to the corresponding index. Because an ETF has operating expenses and transaction costs, while a market index does not, ETFs that track particular indices typically will be unable to match the performance of the index exactly.
ETFs generally do not sell or redeem their shares for cash, and most investors do not purchase or redeem shares directly from an ETF at all. Instead, the ETF issues and redeems its shares in large blocks (typically 50,000 of its shares) called creation units. Creation units are issued to anyone who deposits a specified portfolio of the ETF’s underlying securities, as well as a cash payment generally equal to accumulated dividends of the securities (net of expenses) up to the time of deposits, and creation units are redeemed in kind for a portfolio of the underlying securities (based on the ETF’s NAV) together with a cash payment generally equal to accumulated dividends as of the date of redemption. Most ETF investors, however, purchase and sell ETF shares in the secondary trading market on a securities exchange, in lots of any size, at any time during the trading day. ETF investors generally must pay a brokerage fee for each purchase or sale of ETF shares, including purchases made to reinvest dividends.
Investors should be aware that funds or unit investment trusts that try to replicate the performance of a particular market index will never be able to do so exactly because of the operational fees and expenses incurred by the trust or fund or because of the temporary unavailability of certain of the securities underlying the index. The market price of this type of investment on the securities exchange on which they are traded may also be lower than their NAV. The difference in price may be due to the fact that the supply and demand in the market for shares in the investment vehicle at any time is not always identical to the supply and demand in the market for the basket of securities underlying the particular index.
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Investors should also be aware that by investing in the Fund, they will, in effect, incur the costs of two levels of management services: (1) the services provided by the Adviser and (2) the services provided by the managers or advisers of the various funds in which the Fund may invest.
Foreign Securities
The Fund may invest in foreign securities. The portfolio manager seeks investments that meet the selection criteria, regardless of where an issuer or company is located. Foreign securities are generally selected on a security-by-security basis without regard to any predetermined allocation among countries or geographic regions. However, certain factors, such as expected levels of inflation, government policies influencing business conditions, the outlook for currency relationships, and prospects for economic growth among countries, regions, or geographic areas, may warrant greater consideration in selecting foreign securities. The Fund may not invest more than 20% of its total assets in fixed income securities or large capitalization stocks (mainly ETFs) of foreign issuers denominated in U.S. dollars.
High-Yield Bonds
The Fund may invest up to 10% of its assets in a diversified pool of non-investment grade fixed income securities solely through the use of ETFs. A high-yield bond (also called a “junk” bond) is a bond rated below investment grade by the major rating agencies (i.e., BB+ or lower by S&P and Fitch, or Ba or lower by Moody’s) or is an unrated bond of similar quality. It presents greater risk of default (the failure to make timely interest and principal payments) than higher quality bonds.
Illiquid or Restricted Investments
The Fund may purchase commercial paper issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and securities that are not registered under the 1933 Act but can be sold to “qualified institutional buyers” in accordance with Rule 144A under the 1933 Act. These securities will not be considered illiquid so long as the Adviser determines that, under guidelines approved by the Board, an adequate trading market exists. This practice could increase the level of illiquidity during any period that qualified institutional buyers become uninterested in purchasing these securities.
The Fund may be limited in pursuing investment opportunities, particularly those in emerging and frontier markets, by the limits on its ability to hold illiquid investments. Certain securities trade in lower volume and may be less liquid than securities of large established companies. Because the SEC places a limit of 15% of net assets that can be invested in illiquid investments, the Fund may be forced to forego investments that are deemed illiquid. The Fund does not currently intend to invest in securities that the Adviser deems illiquid.
Investment Companies
The Fund may invest in securities issued by other investment companies. The Fund intends to limit its investments in accordance with applicable law or as permitted by Rule 12d1-4 under the 1940 Act. Among other things, such law would limit these investments so that, as determined immediately after a securities purchase is made by the Fund: (a) not more than 5% of the value of its total assets will be invested in the securities of any one investment company; (b) not more than 10% of the value of its total assets will be invested in the aggregate in securities of investment companies as a group; (c) not more than 3% of the outstanding voting stock of any one investment company will be owned by the Fund; and (d) not more than 10% of the outstanding voting stock of any one closed-end investment company will be owned by the Fund together with all other investment companies that have the same advisor. Under certain sets of conditions, different sets of restrictions may be applicable. As a shareholder of another investment company, the Fund would bear, along with other shareholders, its proportionate share of that investment company’s expenses, including advisory fees. These expenses would be in addition to the advisory fee and other expenses that the Fund bears directly in connection with its own operations. Investment companies in which the Fund may invest may also impose a sales or distribution charge in connection with the purchase or redemption of their shares and other types of commissions or charges. Such charges will be payable by the Fund and, therefore, will be borne directly by the Fund’s shareholders.
To the extent applicable, the Fund intends to rely on Section 12(d)(1)(F) and Rule 12d1-4 under the 1940 Act which in conjunction with one another allow registered investment companies (such as the Fund) to exceed the limitations set forth above, provided the aggregate sales loads any investor pays (i.e., the combined distribution expenses of both
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the acquiring fund and the acquired funds) do not exceed the limits on sales loads established by the Financial Industry Regulatory Authority, Inc. (“FINRA”) for funds of funds, and the registered investment company “mirror votes” any securities purchased pursuant to Section 12(d)(1)(F).
Leverage
The Fund may enter into repurchase and futures transactions that meet the requirements of Rule 18f-4 under the 1940 Act. Leverage creates certain risks for common shareholders, including higher volatility of the NAV of the Shares, as well as higher volatility in the dividend rate paid by the Fund on its Shares. Leverage also creates the risk that the investment return on the Fund’s Shares will be reduced to the extent the interest on debt securities, as applicable, and other related expenses exceed the income earned by the Fund on its investments.
In addition, leverage also may reduce the return on Shares due to the risk of losses that may be recognized on portfolio securities or borrowings. The effects of leverage may cause a shareholder to lose all or a portion of its investment in the Fund. If the Fund is liquidated, debtholders will be entitled to receive liquidating distributions before any distribution is made to common shareholders. Moreover, the Fund is authorized to borrow money in an amount up to 5% of its total assets (after giving effect to the amount borrowed) for temporary or emergency purposes. The rights of any lenders to the Fund to receive payments of interest or repayments of principal will be senior to those of the holders of the Fund’s Shares, and the terms of any borrowings may contain provisions that limit certain activities of the Fund, including the payment of dividends (if any) to holders of Shares. Interest payments and fees incurred in connection with borrowings will increase the Fund’s expense ratio and will reduce any income the Fund otherwise has available for the payment of dividends.
Mortgage- and Asset-Backed Securities
The Fund will invest a minimum of 20% of the Fund’s total assets in fixed or variable rate commercial or residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae, Freddie Mac, or other governmental or government-related entities representing an interest in or guaranteed by mortgages on real property located in Puerto Rico. Ginnie Mae’s guarantees are backed by the full faith and credit of the U.S. Government. Historically, Fannie Maes and Freddie Macs were not backed by the full faith and credit of the U.S. Government and may not be in the future. Fannie Mae and Freddie Mac are under the conservatorship of the Federal Housing Finance Agency (“FHFA”), an agency of the U.S. Government.
Under the conservatorship, Fannie Mae and Freddie Mac have received capital support through U.S. Treasury preferred stock purchases and Treasury and Federal Reserve purchases of their mortgage-backed securities. The FHFA and the U.S. Treasury have imposed strict limits on the size of these entities’ mortgage portfolios. The FHFA has the power to cancel any contract entered into by Fannie Mae and Freddie Mac prior to FHFA’s appointment as conservator or receiver, including the guaranteed obligations of Fannie Mae and Freddie Mac.
The Fund may purchase mortgage- and asset-backed securities through single- and multi-seller conduits, collateralized mortgage obligations, collateralized debt obligations (including collateralized loan obligations and collateralized bond obligations), structured investment vehicles, and other similar securities. Asset-backed securities may be backed by various consumer obligations, including automobile loans, equipment leases, credit card receivables, or other collateral. In the event the underlying loans are not paid, the securities’ issuer could be forced to sell the assets and recognize losses on such assets, which could impact the Fund’s yield and your return.
Unlike traditional debt instruments, payments on mortgage- and asset-backed securities include both interest and a partial payment of principal. Prepayment of the principal of underlying loans at a faster pace than expected is known as “prepayment risk,” and may shorten the effective maturities of these securities. This may result in the Fund having to reinvest proceeds at a lower interest rate. Mortgage- and asset-backed securities tend to be more sensitive to changes in interest rates than other types of debt securities.
In addition to prepayment risk, investments in mortgage-backed securities, particularly those comprised of subprime mortgages, and investments in other asset-backed securities comprised of under-performing assets may be subject to a higher degree of credit risk, valuation risk, and liquidity risk than other mortgage- and asset-backed securities.
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Mortgage and asset-backed securities are also subject to extension risk, which is the risk that rising interest rates could cause mortgages or other obligations underlying these securities to be paid more slowly than expected, increasing the Fund’s sensitivity to interest rate changes and causing its price to decline.
Options on Securities and Indices
The Fund may purchase and write put and call options on securities and indices. A put option on a security gives the purchaser of the option the right to sell, and the writer of the option the obligation to buy, the underlying security at any time during the option period. A call option on a security gives the purchaser of the option the right to buy, and the writer of the option the obligation to sell, the underlying security at any time during the option period. The premium paid to the writer is the consideration for undertaking the obligations under the option contract.
Put and call options on indices are similar to options on securities except that options on an index give the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of the underlying index is greater than (or less than, in the case of puts) the exercise price of the option. This amount of cash is equal to the difference between the closing price of the index and the exercise price of the option, expressed in dollars multiplied by a specified number. Thus, unlike options on individual securities, all settlements are in cash, and gain or loss depends on price movements in the particular market represented by the index generally, rather than the price movements in individual securities. All options written on indices or securities will be “covered” as if the requirements of the 1940 Act were applicable.
Portfolio Turnover
Portfolio turnover rates are generally not a factor in making buy and sell decisions. Changes may be made to the Fund’s portfolio, consistent with the Fund’s investment objective and policies, when the portfolio manager believes such changes are in the best interests of the Fund and its shareholders. Short-term transactions may result from the purchase of a security in anticipation of relatively short-term gains, liquidity needs, securities having reached a price or yield objective, changes in interest rates or the credit standing of an issuer, or by reason of economic or other developments not foreseen at the time of the initial investment decision. The Fund may also sell one security and simultaneously purchase the same or a comparable security to take advantage of short-term differentials in bond yields or securities prices. Portfolio turnover is affected by market conditions, changes in the size of the Fund (including due to shareholder purchases and redemptions), the nature of the Fund’s investments, and the investment style of the portfolio manager. Changes are normally made in the Fund’s portfolio whenever the Adviser believes such changes are desirable. Due to the nature of the securities in which it invests, the Fund may have relatively high portfolio turnover compared to other funds.
Real Estate-Related Securities
The Fund may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. The Fund may only invest in shares of REITS limited to mortgage-backed securities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. Only exchange-traded shares will be considered for an investment in the Fund.
Treasury Futures Contracts
Treasury futures contracts, which are exchange-traded, are typically used to obtain interest rate exposure in order to manage duration. A Treasury futures contract is a bilateral agreement where one party agrees to accept and the other party agrees to make delivery of a U.S. Treasury security, as called for in the agreement at a specified date and at an agreed upon price. Generally, Treasury futures contracts are closed out or rolled over prior to their expiration date.
U.S. Municipal Obligations
Municipal Obligations share the attributes of debt/fixed income securities in general, but are generally issued by states, municipalities and other political subdivisions, agencies, authorities and instrumentalities of states and multi-state agencies or authorities. Among the Municipal Obligations that the Fund may purchase are general obligation bonds and limited obligation bonds (or revenue bonds), including industrial development bonds. General obligation bonds
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are obligations involving the credit of an issuer possessing taxing power and are payable from such issuer’s general revenues and not from any particular source. Limited obligation bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source. Tax-exempt private activity bonds and industrial development bonds generally are also revenue bonds and thus are not payable from the issuer’s general revenues. The credit and quality of private activity bonds and industrial development bonds are usually related to the credit of the corporate user of the facilities. Payment of interest on and repayment of principal of such bonds is the responsibility of the corporate user (and/or any guarantor).
Municipal Obligations are subject to credit and market risk. Generally, prices of higher-quality issues tend to fluctuate less with changes in market interest rates than prices of lower-quality issues and prices of longer-maturity issues tend to fluctuate more than prices of shorter-maturity issues.
U.S. Government Securities
The Fund may invest in U.S. government securities. U.S. government securities include those issued directly by the U.S. Treasury, including Treasury Inflation-Protected Securities (also known as “TIPS”), and those issued or guaranteed by various U.S. government agencies and instrumentalities. Some government securities are backed by the “full faith and credit” of the United States. Other government securities are backed only by the rights of the issuer to borrow from the U.S. Treasury. Others are supported by the discretionary authority of the U.S. government to purchase the obligations. Certain other government securities are supported only by the credit of the issuer. For securities not backed by the full faith and credit of the United States, the Fund must look principally to the agency or instrumentality issuing or guaranteeing the securities for repayment and may not be able to assert a claim against the United States if the agency or instrumentality does not meet its commitment. Such securities may involve increased risk of loss of principal and interest compared to government debt securities that are backed by the full faith and credit of the United States.
Because of the rising U.S. government debt burden, it is possible that the U.S. government may not be able to meet its financial obligations or that securities issued or backed by the U.S. government may experience credit downgrades. Such a credit event may adversely affect the financial markets.
Fund Policies
Disclosure of Portfolio Holdings
The Board has adopted policies with respect to the disclosure of the Fund’s portfolio holdings by the Fund, the Adviser, or their affiliates. These policies and procedures are designed to ensure that disclosures of the Fund’s portfolio holdings are made consistently with the antifraud provisions of the federal securities laws and the fiduciary duties of the Fund and the Adviser. The policies provide that the Fund’s portfolio holdings information generally may not be disclosed to any party prior to the information becoming public. Certain limited exceptions are described below. These policies apply to disclosures to all categories of persons, including individual investors, institutional investors, intermediaries who sell shares of the Fund, third parties providing services to the Fund (accounting agent, print vendors, etc.), rating and ranking organizations and affiliated persons of the Fund.
In addition, the Fund discloses its portfolio holdings reports on Forms N-CSR and N-PORT two months after the end of each quarter/semi-annual period. The Fund may also disclose its portfolio holdings by mailing a quarterly report to its shareholders.
The Fund may choose to make available to rating agencies such as Lipper, Morningstar, or Bloomberg earlier and more frequently on a confidential basis.
The Fund’s Chief Compliance Officer is responsible for monitoring the Fund’s compliance with these policies, providing regular reports (at least annually) to the Board regarding the adequacy and effectiveness of the policy, and recommending changes, if necessary.
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Non-Public Disclosures
The Adviser may authorize the disclosure of non-public portfolio holdings information under certain limited circumstances. The Fund’s policies provide that non-public disclosures of the Fund’s portfolio holdings may only be made if: (i) the Fund has a “legitimate business purpose” (as determined by the President of the Fund) for making such disclosure; and (ii) the party receiving the non-public information enters into a confidentiality agreement, which includes a duty not to trade on the non-public information and describes any compensation to be paid to the Fund or any “affiliated person” of the Adviser, including any arrangement to maintain assets in the Fund or in other investment companies or accounts managed by the Adviser or by any “affiliated person” of the Adviser.
The Adviser will consider any actual or potential conflicts of interest between the Adviser and the Fund’s shareholders and will act in the best interest of the Fund’s shareholders with respect to any such disclosure of portfolio holdings information. If a potential conflict can be resolved in a manner that does not present detrimental effects to the Fund’s shareholders, the Adviser may authorize the release of portfolio holdings information. Conversely, if the potential conflict cannot be resolved in a manner that does not present detrimental effects to the Fund’s shareholders, the Adviser will not authorize such release.
Ongoing Non-public Disclosure Arrangements
As authorized by the Board and/or the Fund’s executive officers, the Fund may periodically disclose non-public portfolio holdings on a confidential basis to various service providers that require such information in order to assist the Fund in its day-to-day operations, as well as public information to certain ratings organizations. In none of these arrangements does the Fund or any “affiliated person” of the Adviser receive any compensation, including any arrangement to maintain assets in the Fund or in other investment companies or accounts managed by the Adviser or by any “affiliated person” of the Adviser. Set forth below are the authorized ongoing arrangements as of the date of this SAI:
| ● | Full holdings on a daily basis to the Adviser at the end of each day. |
| ● | Full holdings on a daily basis to Ultimus as Transfer Agent and Administrator of the Fund, at the end of each day; |
| ● | Full holdings on a daily basis to U.S. Bank, National Association, as custodian for the Fund; |
| ● | Full holdings to Northern Lights Distributors, LLC, as distributor of the Fund (the “Distributor”), on a monthly basis; |
| ● | Full holdings to Cohen & Company, Ltd., the Fund’s independent registered public accounting firm as soon as practicable following the Fund’s fiscal year-end or on an as-needed basis; and |
| ● | Full holdings to Thompson Hine LLP, as legal counsel to the Fund, as necessary for the performance of services. |
These service providers are required to keep all non-public information confidential and are prohibited from trading based on the information or otherwise using the information, except as necessary in providing services to the Fund.
The Fund’s Chief Compliance Officer reviews the arrangements with each recipient on an annual basis. The Board shall, on a quarterly basis, be advised of any revisions to the list of recipients of portfolio holdings and the reason for such disclosure. These policies and procedures will be reviewed for adequacy and effectiveness in connection with the Fund’s compliance program under Rule 38a-1 under the 1940 Act.
A listing of the parties who will receive portfolio holdings pursuant to these procedures is maintained by the Fund’s Compliance department. There can be no assurance that the policies and procedures on portfolio holdings information will protect the Fund from the potential misuse of such information by individuals or entities that come into possession of the information.
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Management of the Fund
Overall responsibility for management of the Fund is vested with the members of the Board, who are elected by the shareholders of the Fund, unless appointed to fill a vacancy in accordance with the By-laws of the Fund and the 1940 Act. The Fund is managed by the Board in accordance with the laws of the Commonwealth of Puerto Rico. There are currently four (4) Directors, three (3) of whom are not “interested persons” (as defined in the 1940 Act) of the Fund (the “Independent Directors”).
The three (3) Independent Directors are Eduardo Inclán, Fernando J. Nido and Jorge Padilla. The one (1) Interested Director is Paul Hopgood.
The following table lists each Director, his year of birth, position with the Fund, principal occupations during the past five years, and other directorships. Each Director oversees the Fund. Directors shall be elected annually at a meeting of stockholders held for that purpose as provided in the Certificate of Incorporation. The term of office of each Director shall be from the time of his election and qualification until the election of Directors next succeeding his election and until his successor shall have been elected and shall have qualified or until his death, or until he shall have resigned or until December 31 of the year in which he shall have reached eighty (80) years of age, or until he shall have been removed as provided in the Fund’s By-laws, or as otherwise provided by statute or the Certificate of Incorporation. The Board may extend the retirement age for a Director who reaches 80 years of age for an additional twelve-month period. Each Director’s address is c/o Atlas U.S. Tactical Income Fund, Inc., Buchanan Office Center, Road 165 No. 40, Suite 201, Guaynabo, PR 00968.
| Name (Year of Birth) |
Position(s) |
Term
of Office and Length of Time Served |
Principal Occupation(s) |
Number
of Portfolios in Fund Complex Overseen by Director(i) |
Other Directorships |
| Independent Directors | |||||
| Eduardo Inclán (1975) |
Director | 1 year; Since Inception |
Founder and Managing Director, Bluhaus Capital, LLC; Founder and Managing Partner, Bluhaus Small Business Fund; Director East Island Excursions, Inc.; Former Senior Vice President Investment Banking Director Santander Securities. | 2 | East Island Excursions, Inc. |
|
Fernando J. Nido |
Director | 1 year, Since September 2022 |
Independent Consultant, professional services since June 2014, Former Managing Partner, Puerto Rico, Deloitte; Former Member of Puerto Rico’s Board of Accountants; Former Vice Chair of Puerto Rico’s CPA Association. | 2 | Trans-Oceanic Life Insurance Company and Trans-Oceanic Life Insurance Company of America. |
| Jorge Padilla (1956) |
Director | 1 year; Since Inception |
JP Consulting Services (Independent Consultant) since January 1, 2017; Former Senior Vice President and Chief Financial Officer of Universal Insurance Group, Inc.; Former President Universal Finance, Inc.; Certified Public Accountant since 1980. | 2 | Director Converge Re., Executive Director and Trustee GDB Debt Recovery Authority, Director Vanguard Ultimate Protection, LLC. |
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| Name (Year of Birth) |
Position(s) |
Term
of Office and Length of Time Served |
Principal Occupation(s) |
Number
of Portfolios in Fund Complex Overseen by Director(i) |
Other Directorships |
| Interested Director and Officers | |||||
| Paul Hopgood (1976) (ii) |
President and Director | 1 year; Since Inception |
President, Atlas Asset Management LLC; Former Chief Investment Officer of Santander Asset Management, LLC. | 2 | None |
| Pedro Gonzalez (1959) |
Vice President, Secretary and Treasurer |
1 year; |
Managing Director, Atlas Asset Management, LLC (since 2024); Vice-President of Finance, Transoceanic Life Insurance Co. (2021-2024); Consultant for Asset Liability and Liquidity Management, Puerto Rican Credit Unions (2020-2021). | N/A |
None |
| Timothy Shaloo (iii) (1970) |
Chief Compliance Officer |
1 year; |
Assistant Vice President, Compliance Officer, Northern Lights Compliance Services, LLC (“NLCS”) (since 2023); Senior Compliance Analyst, NLCS (2021-2023); Compliance Specialist, Ultimus Fund Solutions, LLC (2016 to 2021). | N/A | N/A |
| (i) | The Fund Complex consists of the Fund and the Atlas U.S. Government Money Market Fund, Inc. | |
| (ii) | An “interested person” as defined by the 1940 Act. Mr. Hopgood is deemed to be an “interested” director because he is the 100% owner of the membership interests of the Adviser and also serves as its President. | |
| (iii) | The address for Mr. Shaloo is Ultimus Fund Solutions, LLC, 2 Easton Oval, Suite 300, Columbus, OH 43219. |
The Board believes that each Director’s experience, qualifications, attributes, and skills on an individual basis and in combination with those of the other Directors lead to the conclusion that each Director should serve in such capacity. Among the attributes common to all Directors are the abilities to review critically, evaluate, question, and discuss information provided to them, to interact effectively with the other Directors, the Adviser, other service providers, counsel and the independent registered public accounting firm, and to exercise effective business judgment in the performance of their duties as Directors. A Director’s ability to perform his duties effectively may have been attained through the Director’s business, consulting and/or public service; experience as a board member of the Fund, other investment funds, or non-profit entities or other organizations; education or professional training; and/or other life experiences.
Mr. Padilla is a CPA with over 43 years of experience in the financial industry and has demonstrated leadership and management abilities as evidenced by the senior executive level positions he has held during his career. Mr. Padilla has 30 years of executive-level management experience in the insurance and financial services industry and has served on the boards of various corporations. Over the last ten years, Mr. Padilla has worked as a consultant to financial services organizations and is an investor in various business ventures.
Mr. Inclán has over 23 years of experience in the finance industry including serving for over 16 years in an investment banking executive role, and over six years as founder and manager of a financial advisory and private equity firm. Mr. Inclán serves on the board of East Island Excursions, Inc., and is a manager of the $50 million Bluhaus Small Business Fund L.P. SBIC Fund.
Mr. Nido has practiced public accounting for over thirty years and now serves as an independent consultant for private business and as a director on several boards. Mr. Nido had a 33-year career at Deloitte & Touche LLP (“Deloitte”),
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including 23 years as a partner for Deloitte’s practice in Puerto Rico until his retirement. Mr. Nido’s responsibilities at Deloitte included client service delivery, professional practice quality, financial performance and attracting, developing and retaining talent. Mr. Nido currently serves as Director, Trans-Oceanic Life Insurance Company and Trans-Oceanic Life Insurance Company of America and served on the Board of X-Square Balanced Fund, LLC from January 2019 to April 2022.
Mr. Hopgood has over 25 years of experience in the asset management industry, including serving for over six years as senior portfolio manager and chief investment officer for a global asset management firm. Mr. Hopgood is President and Chief Investment Officer of the Adviser.
Leadership Structure and Board of Directors
Overall responsibility for oversight of the Fund rests with the Board. The Fund has engaged the Adviser to manage the Fund on a day-to-day basis. The Board is responsible for overseeing the Adviser and other service providers in the operation of the Fund in accordance with the provisions of the 1940 Act, applicable provisions of state and other laws and the Fund’s By-laws. The Board is currently composed of five members, three of whom are Independent Directors. The Board meets at regularly scheduled meetings four times each year. In addition, the Board may hold special meetings or informal conference calls to discuss specific matters that may arise or require action between regular meetings. As described below, the Board has established an Audit Committee and may establish ad hoc committees or working groups from time to time to assist the Board in fulfilling its oversight responsibilities.
The Board has appointed Mr. Hopgood, an Interested Director, to serve in the role of Chairman. The Chairman’s role is to preside at all meetings of the Board and to act as liaison with the Adviser, other service providers, counsel, and other Directors generally between meetings. The Chairman serves as a key point person for dealings between management and the Directors. The Chairman may also perform such other functions as may be delegated by the Board from time to time. Mr. Padilla serves as the Lead Independent Director of the Fund. The Board has determined that the Board’s leadership structure is appropriate because it allows the Board to exercise informed and independent judgment over matters under its purview and it allocates areas of responsibility among committees of Directors and the full Board in a manner that enhances effective oversight.
The Fund is subject to a number of risks, including investment, compliance, operational and valuation risks, among others. Risk oversight forms part of the Board’s general oversight of the Fund and is addressed as part of various Board and committee activities. Day-to-day risk management functions are subsumed within the responsibilities of the Adviser and other service providers (depending on the nature of the risk), which carry out the Fund’s investment management and business affairs. The Adviser and other service providers employ a variety of processes, procedures, and controls to identify various events or circumstances that give rise to risks, to lessen the probability of their occurrence and/or to mitigate the effects of such events or circumstances if they do occur. The Adviser and other service providers each have their own independent interests in risk management, and their policies and methods of risk management will depend on their functions and business models. The Board recognizes that it is not possible to identify all of the risks that may affect the Fund or to develop processes and controls to eliminate or mitigate their occurrence or effects. The Board requires senior officers of the Fund and the Adviser to report to the full Board on a variety of matters at regular and special meetings of the Board, including matters relating to risk management. The Board and the Audit Committee also receive regular reports from the Fund’s independent registered public accounting firm on internal control and financial reporting matters. The Board also receives reports from certain of the Fund’s other primary service providers on a periodic or regular basis. The Board may, at any time and in its discretion, change the manner in which it conducts risk oversight.
The Board has a standing Audit Committee. The Audit Committee’s function is to oversee the Fund’s accounting and financial reporting policies and practices and to recommend to the Board any action to ensure that the Fund’s accounting and financial reporting are consistent with accepted accounting standards applicable to the mutual fund industry. The members of the Audit Committee are Messrs. Inclán, Nido and Padilla. During the fiscal year ended September 30, 2025, the Audit Committee met three times.
The following tables show the dollar ranges of securities beneficially owned by the Directors in the Fund as of December 31, 2025. No Independent Director or any of his immediate family member owns beneficially or of record an interest in the Adviser or in any person directly or indirectly controlling, controlled by, or under common control with the Adviser. As of December 31, 2025, the Directors and Officers as a group held 1.99% of the outstanding Class A shares and less than 1% of the outstanding Class C shares of the Fund.
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| Dollar
Range of Equity Securities in the Fund |
Aggregate
Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Director in Fund Complexi | |
| Independent Directors | ||
| Fernando J. Nido | over $100,000 | over $100,000 |
| Eduardo Inclán | $0 | $0 |
| Jorge Padilla | over $100,000 | over $100,000 |
| Interested Directors | ||
| Paul Hopgood | over $100,000 | over $100,000 |
| * | The Fund Complex consists of the Fund and Atlas U.S. Government Money Market Fund, Inc. |
Compensation of Independent Directors
Each Independent Director receives an annual stipend from the Fund of $10,000 plus expenses for attendance at each meeting of the Board. The Independent Directors do not receive retirement or other benefits as part of their compensation. The following table sets forth the compensation (minus withholding tax) earned by the Independent Directors for the Fund’s fiscal year ended September 30, 2025:
|
Compensation |
Total | |
| Independent Director | ||
| Eduardo Inclán | $10,000 | $10,000 |
| Fernando J. Nido | $10,000 | $10,000 |
| Jorge Padilla | $10,000 | $10,000 |
| (1) | The Fund Complex consists of the Fund and Atlas. U.S. Government Money Market Fund, Inc. The Atlas U.S. Government Money Market Fund, Inc. commenced operations on August 18, 2025. |
Director and Officer Ownership of Fund Shares and Material Transactions
Certain directors and officers of the Fund are expected to purchase shares of the Fund. None of the directors and officers of the Fund have entered into any material transactions with the Fund; provided, however, that certain of the directors and officers of the Fund are employees of entities which may have entered into material agreements with the Fund, as described herein.
Code of Ethics
The Board has adopted a Code of Ethics. The Code of Ethics requires directors and officers of the Fund who are officers or employees of the Adviser and the Distributor, if any, to comply with various requirements in connection with securities transactions by such officers or employees, including obtaining pre-authorization for certain transactions. It also imposes on these directors and officers certain confidentiality obligations, limitations on outside business activities, and certain other obligations. The Code of Ethics requires Independent Directors to report to the Fund’s compliance officer purchases or sales of securities by such directors, if such directors know (or should have known) that during the prior 15-day period the Fund purchased or sold such securities, or the Adviser considered purchasing or selling such security. In addition, as required by law, the Board, including a majority of the Independent Directors, has approved the Code of Ethics of the Distributor and the Adviser.
Control Persons and Principal Holders of Securities
A principal shareholder is any person who owns (either of record or beneficially) 5% or more of the outstanding shares of the Fund. A control person is one who owns, either directly or indirectly, more than 25% of the voting securities
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of a fund or acknowledges the existence of such control. A shareholder owning of record or beneficially more than 25% of the Fund’s outstanding shares may be considered a controlling person. That shareholder’s vote could have more significant effect on matters presented at a shareholders meeting than votes of other shareholders.
As of January 13, 2026, the following shareholders of record owned 5% or more of the outstanding shares of the Fund:
| Name & Address | Percentage of Share Class |
| Class A Shares | |
|
Asociación De Empleados Del ELA |
9.49% |
|
Pershing LLC |
6.36% |
| Class C Shares | |
|
Amadee LLC c/o Pershing LLC |
7.47% |
Investment Advisory and Other Services
The following sections describe the Fund’s material agreements for investment advisory, custodial and transfer agency services.
Investment Adviser
The Adviser is an investment advisory firm organized as a limited liability company under the laws of the Commonwealth of Puerto Rico. The Adviser is registered as an investment adviser with the SEC and the Commissioner. Its principal offices are located at Buchanan Office Center, Suite 201, Road 165 No. 40, Guaynabo, Puerto Rico 00968, and its main telephone number is (787) 781-1301. The Adviser provides the Fund with investment advisory and management services, subject to the control and oversight of the Board and the officers of the Fund. The Adviser is responsible for choosing the Fund’s investments and handling its business affairs. The Adviser offers money management and investment services to institutional clients in Puerto Rico. As of December 31, 2025, the Adviser had approximately $,576,432,654 in assets under management.
The Adviser is controlled by Paul Hopgood, who owns 100% of its membership interests.
On May 21, 2021, the Board, including a majority of the Independent Directors, approved the Advisory Agreement. As compensation for advisory services to the Fund, the Adviser is entitled to receive an annual investment advisory fee not to exceed (i) 0.65% of the average daily gross assets of the Fund (including assets purchased with the proceeds of leverage) up to $100 million, (ii) 0.60% of the average daily gross assets of the Fund (including assets purchased with the proceeds of leverage) for the next $200 million, (iii) 0.55% of the average daily gross assets of the Fund (including assets purchased with the proceeds of leverage) for amounts in excess of $300 million, payable monthly. For purposes of this calculation, average daily gross assets are determined at the end of each month on the basis of the average gross assets of the Fund for each Business Day during the month. The Adviser may waive its fees or pay the Fund’s expenses in order to maintain total annual fund operating expenses at the levels set forth in “Fees and Expenses of the Fund.” Any reduction in management fees or payment by the Adviser of the Fund’s expenses is subject to reimbursement by the Fund within the following three fiscal years if overall expenses fall below these percentage limitations. The Adviser reserves the right to discontinue any voluntary waiver of its fees or payment of Fund expenses in the future.
Securities held by the Fund also may be held by or be appropriate investments for other advisory clients for which the Adviser acts as an adviser. Because of different objectives or other factors, a particular security may be bought for one or more clients when one or more clients are selling the same security. If purchases or sales of securities by the Adviser for the Fund or for advisory clients arise for consideration at or about the same time, transactions in such securities will be made as far as feasible for the Fund and the respective clients in a manner deemed equitable to all.
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To the extent that transactions on behalf of more than one client of the Adviser during the same period may increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price.
The Advisory Agreement continued in effect for a period of two years from the date of execution and, unless terminated as described below, will remain in effect from year to year thereafter, if approved annually by a majority of the Independent Directors. The Advisory Agreement is not assignable and may be terminated without penalty (i) on 60 days’ written notice at the option of either party thereto or by the vote of a majority of the outstanding Shares of the Fund or (ii) at any time by a unanimous vote of the Independent Directors. The Advisory Agreement terminates automatically in the event of any assignment, as defined in the 1940 Act. The Advisory Agreement was most recently renewed by the Board, including by a majority of the Independent Directors, at a meeting held on May 14, 2025. A discussion regarding the basis for the Board’s renewal of the Advisory Agreement is available in the Fund’s Form N-CSR for the fiscal year ended September 30, 2025, which is available on the Fund’s website at (www.atlas-am.com).
Expense Limitation. The Adviser has contractually agreed to waive the advisory fee payable by the Fund and/or pay expenses (subject to reimbursement by the Fund) in an amount equal to the amount, if any, that the Fund’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding (i) any front-end contingent deferred loads; (ii) brokerage fees and commissions, (iii) acquired fund fees and expenses; (iv) borrowing costs (such as interest and dividend expenses on securities sold short); (v) taxes; and (vi) extraordinary expense, such as litigation expenses exceed the annual rate of 1.15% of total assets for Class A Shares and 1.90% for Class C Shares. Fees waived or reimbursed by the Adviser may be recouped by the Adviser from the Fund, to the extent that overall expenses fall below the expense limitation within three years following when such amounts were waived and/or reimbursed if such recoupment can be achieved within the lesser of the foregoing expense limits or the expenses limits in place at the time of the recoupment. For information about how the expense limitation affects the total expenses of the Fund, see the “Fees and Expenses of the Fund” table in the Fund Summary of the Prospectus. The Adviser has agreed to continue the waiver of its fee and/or payment of expenses until at least January 31, 2027.
The Adviser is responsible for the performance of certain administrative and management services for the Fund, including paying all compensation of and furnishing office space for officers and employees of the Fund connected with investment and economic research, trading and investment management of the Fund, as well as the compensation of all Directors of the Fund who are affiliated persons of the Adviser. The Fund pays all other expenses incurred in the operation of the Fund, including, among other things, expenses for legal and auditing services, taxes, costs of printing proxies, listing fees, if any, stock certificates and shareholders reports, charges of the Administrator, the Custodian and the Transfer Agent, charges of any paying agent, expenses of registering the Shares under Puerto Rico securities laws, fees of the Commissioner, fees and expenses of the Independent Directors, accounting and pricing costs, insurance, interest, brokerage costs, litigation and other extraordinary or non-recurring expenses, mailing and other expenses properly payable by the Fund.
The Adviser and its directors, officers and employees will not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in the management of the Fund, except for willful misfeasance, bad faith, gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties under the Advisory Agreement.
The table below provides information about the advisory fees earned by the Adviser for the fiscal years ended September 30:
| Fiscal Year Ended September 30 |
Advisory Fee Paid* |
Fees Earned by the Adviser |
Advisory Fees (Waived) Recouped |
Net Fees Adviser |
Distribution Expenses Waived by the Adviser |
Amount Subject to Recoupment |
| 2023 | 0.63% | $918,144 | $(711,150)** | $206,994 | $15,116*** | $0 |
| 2024 | 0.64% | $885,266 | $(510,416)** | $374,850 | $0 | $0 |
| 2025 | 0.47% | $895,663 | $(235,663)** | $660,000 | $0 | $0 |
| * | The Advisory fee shown is a percentage of gross assets of the Fund. |
| ** | The Adviser voluntarily waived a portion of the Management Fees for the Fund during the fiscal years indicated. |
| *** | The Adviser voluntarily waived a portion of the distribution expenses of the Fund during the fiscal years indicated. |
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Portfolio Manager
This section includes information about Paul Hopgood, the Fund’s portfolio manager, including information concerning other accounts he manages, the dollar range of Fund shares he owns and how he is compensated as of December 31, 2025.
| Portfolio Manager | Number of Accounts |
Accounts (Total Assets) |
Number of Other Accounts (Total Assets) Subject to a Performance Fee |
| Paul Hopgood | |||
| Registered Investment Companies | 3 | $264,139,146.31 | None |
| Other Pooled Investment Vehicles | 0 | $0 | None |
| Other Accounts | 13 | $312,293,507.41 | None |
In managing other investment companies, other pooled investment vehicles and other accounts, the Adviser may employ strategies similar to those employed by the Fund. As a result, these other accounts may invest in the same securities as the Fund. The SAI section entitled “Portfolio Transactions” discusses the various factors that the Adviser considers in allocating investment opportunities among the Fund and other similarly managed accounts.
Fund Ownership
As of December 31, 2025, the portfolio manager owned over $100,000 of equity securities in the Fund.
Compensation
The portfolio manager receives base and discretionary compensation that is not directly linked to account performance.
Administration and Transfer Agent
Ultimus serves as Administrator of the Fund. The Administrator’s principal business address is 225 Pictoria Drive, Suite 450, Cincinnati, OH 45246.
Pursuant to an Administration Agreement with the Fund, the Administrator, subject to the overall supervision of the Board, provides facilities and personnel to the Fund in the performance of certain services including the determination of the Fund’s NAV and net income.
Ultimus is also the Fund’s Transfer Agent. The Transfer Agent will be responsible for maintaining a register of the Shares for holders of record and opening and maintaining Shareholder accounts.
For the services rendered to the Fund by the Administrator, the Fund pays the Administrator the greater of an annual minimum fee or an asset-based fee, which scales downward based upon net assets for fund administration, fund accounting and transfer agency services. For the fiscal years ended September 30, the Fund paid administration fees as listed below:
| Fiscal Years Ended September 30, |
Fund Accounting Fees | Administrative Fees | Transfer Agent Fees |
| 2023 | $39,872 | $92,927 | $41,194 |
| 2024 | $25,006 | $71,222 | $41,592 |
| 2025 | $40,653 | $76,560 | $39,934 |
Custodian
U.S. Bank, National Association, with principal offices at 425 Walnut Street, Cincinnati, OH 45202 (the “Custodian”) serves as custodian for the assets of the Fund under an agreement with the Fund, dated July 31, 2021 (the “Custodian Agreement”). Under the Custodian Agreement, the Custodian holds the Fund’s securities and keeps all necessary
25
accounts and records. Under the Custodian Agreement, the Custodian (1) maintains a separate account or accounts in the name of the Fund; (2) makes receipts and disbursements of money on behalf of the Fund; (3) collects and receives all income and other payments and distributions on account of the Fund’s securities; and (4) responds to correspondence from security brokers and others relating to its duties. The Custodian may, with the approval of the Fund and at the Custodian’s own expense, open and maintain a sub-custody account or accounts on behalf of the Fund, provided that the Custodian shall remain liable for the performance of all of its duties under the Custodian Agreement.
Distributor
The Fund is distributed by the Distributor, a registered broker-dealer and member of the FINRA. The Distributor has agreed to use reasonable efforts to sell the shares of the Fund, subject to the satisfaction of certain conditions. The offering of the Fund’s shares is continuous.
The following table sets forth the total amount paid by the Fund for underwriting commissions, and the net amounts retained by the principal underwriter during the last three fiscal years:
| Fiscal Year Ended September 30 |
Total Underwriting Commissions |
Net Underwriting Discounts and Commissions Retained by Distributor |
| 2023 | $54,018 | $5,698 |
| 2024 | $57,017 | $4,651 |
| 2025 | $36,966 | $2,758 |
Distribution and Service Plan
The Board has adopted a distribution and service plan (the “12b-1 Plan”) pursuant to Rule 12b-1 under the 1940 Act. Rule 12b-1 provides in substance that a mutual fund may not engage directly or indirectly in financing any activity that is primarily intended to result in the sale of Shares of such mutual fund except pursuant to a plan adopted by the fund under Rule 12b-1. Under the 12b-1 Plan, the Fund is authorized to pay distribution fees in connection with the sale and distribution of its Shares and pay service fees in connection with the provision of ongoing services to shareholders and the maintenance of shareholder accounts in an amount up to 0.25% of its average daily net assets with respect to Class A Shares and 1.00% with respect to Class C Shares.
In approving the 12b-1 Plan in accordance with the requirements of Rule 12b-1 under the 1940 Act, the Board, including a majority of the Independent Directors who have no direct or indirect financial interest in the operation of the 12b-1 Plan or in any agreements related to the 12b-1 Plan (the “Rule 12b-1 Directors”), considered various factors and determined that there is a reasonable likelihood that the 12b-1 Plan will benefit the Fund and its shareholders.
The 12b-1 Plan will continue in effect from year to year if specifically approved annually (a) by the majority of the Fund’s outstanding voting shares or by the Board and (b) by the vote of a majority of the Rule 12b-1 Directors cast in person at a meeting called specifically for the purpose of voting on the 12b-1 Plan. While the 12b-1 Plan remains in effect, the Fund will furnish to the Board a written report of the amounts spent by the Fund under the 12b-1 Plan and the purposes for these expenditures. The 12b-1 Plan may not be amended to increase materially the amount to be spent for distribution or shareholder services without shareholder approval and all material amendments to the 12b-1 Plan must be approved by a majority of the Board and by the Rule 12b-1 Directors in a vote cast in person at a meeting called specifically for that purpose. While the 12b-1 Plan is in effect, the selection and nomination of the Independent Directors shall be made by those Independent Directors then in office, and a majority of the Board shall be comprised of Independent Directors.
During the fiscal year ended September 30, 2025, the Fund paid $163,406 and $99,457 for Class A Shares and Class C Shares, respectively, in distribution related fees pursuant to the 12b-1 Plan. During the fiscal year shown below, the Fund incurred the following allocated distribution expenses:
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Actual 12b-1 Expenditures Paid by the Fund
Fiscal Year Ended September 30, 2025
| Class A Shares | Class C Shares | |
| Advertising/Marketing | $0 | $0 |
| Printing/Postage | $0 | $0 |
| Payment to distributor | $18,822 | $0 |
| Payment to dealers | $125,015 | $99,218 |
| Compensation to sales personnel | $0 | $0 |
| Other | $19,569 | $239 |
| Total | $163,406 | $99,457 |
Payments to Financial Intermediaries by the Investment Adviser or its Affiliates
In addition to and apart from payments made by the Fund under the 12b-1 Plan, the Adviser and its affiliates also may make payments out of their own assets to selected broker-dealer firms or other financial intermediaries that sell Class A Shares of the Fund for distribution, marketing, promotional, or related services. Such payments may be based on gross sales, assets under management, or transactional charges, or on a combination of these factors. Payments based primarily on sales create an incentive to make new sales of shares, while payments based on assets create an incentive to retain previously sold shares. Payments based on transactional charges may include the payment or reimbursement of all or a portion of “ticket charges.” Ticket charges are fees charged to salespersons purchasing through a financial intermediary firm in connection with mutual fund purchases, redemptions, or exchanges. The payment or reimbursement of ticket charges creates an incentive for salespersons of an intermediary to sell shares of the Fund over shares of funds for which there is lesser or no payment or reimbursement of any applicable ticket charge. The Adviser and its affiliates consider a number of factors in making payments to financial intermediaries. Criteria may include, but are not limited to, the distribution capabilities of the intermediary, the overall quality of the relationship, expected gross and/or net sales generated by the relationship, redemption and retention rates of assets held through the intermediary, the willingness to cooperate with the Adviser’s marketing efforts, access to sales personnel, and the anticipated profitability of sales through the institutional relationship. These factors and their weightings may differ from one intermediary to another and may change from time to time.
As of December 31, 2025, the broker-dealer firms with which the Adviser or its affiliates have agreements or are currently negotiating agreements to make payments out of their own assets related to the acquisition or retention of shareholders for Class A Shares of the Fund and its broker-dealer subsidiaries are as follows: Oriental Financial Services Corp., Herbert J. Sims & Co., Inc., Stonecrest Partners, Nationwide Planning Associates, Inc., Kovack Securities, Inc. and First Southern, LLC. These fees may be in addition to fees paid from the Fund’s assets to them or other financial intermediaries. Any additions, modifications, or deletions to the broker-dealer firms identified that have occurred since that date are not reflected.
In addition, for all share classes, the Adviser, the Distributor, or their affiliates may pay, from their own assets, brokerage firms, banks, financial advisors, retirement plan service providers, and other financial intermediaries’ fees for providing other marketing or distribution-related services, as well as recordkeeping, sub accounting, transaction processing, and other shareholder or administrative services in connection with investments in the Fund. The Adviser or its affiliates may have numerous agreements to make payments to financial institutions which perform recordkeeping or other administrative services with respect to shareholder accounts. Contact your financial intermediary if you wish to determine whether it receives such payments.
The Adviser or its affiliates may also share certain marketing expenses with intermediaries, or pay for, or sponsor informational meetings, seminars, client awareness events, support for marketing materials, sales reporting, or business building programs for such financial intermediaries to raise awareness of the Fund. The Adviser or its affiliates may make payments to participate in intermediary marketing support programs which may provide the Adviser or its affiliates with one or more of the following benefits: attendance at sales conferences, participation in meetings or training sessions, access to or information about intermediary personnel, use of an intermediary’s marketing and communication infrastructure, fund analysis tools, business planning and strategy sessions with
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intermediary personnel, information on industry- or platform-specific developments, trends and service providers, and other marketing-related services. Such payments may be in addition to, or in lieu of, the payments described above. These payments are intended to promote the sales of the Fund and to reimburse financial intermediaries, directly or indirectly, for the costs that they or their salespersons incur in connection with educational seminars, meetings, and training efforts about the Fund to enable the intermediaries and their salespersons to make suitable recommendations, provide useful services, and maintain the necessary infrastructure to make the Fund available to their customers.
The receipt of (or prospect of receiving) payments, reimbursements, and other forms of compensation described above may provide a financial intermediary and its salespersons with an incentive to favor sales of the Fund’s shares over sales of other mutual funds (or non-mutual fund investments) or to favor sales of one class of the Fund’s shares over sales of another, with respect to which the financial intermediary does not receive such payments or receives them in a lower amount. The receipt of these payments may cause certain financial intermediaries to elevate the prominence of the Fund within such financial intermediary’s organization by, for example, placement on a list of preferred or recommended funds and/or the provision of preferential or enhanced opportunities to promote the Fund in various ways within such financial intermediary’s organization.
From time to time, certain financial intermediaries approach the Adviser to request that the Adviser make contributions to certain charitable organizations. In these cases, the Adviser’s contribution may result in the financial intermediary, or its salespersons, recommending the Fund over other mutual funds (or non-mutual fund investments).
The payment arrangements described above will not change the price an investor pays for Class A Shares nor the amount that the Fund receives to invest on behalf of the investor. You should consider whether such arrangements exist when evaluating any recommendations from an intermediary to purchase or sell Class A Shares and, if applicable, when considering which share class of the Fund is most appropriate for you.
Independent Registered Public Accounting Firm
Cohen & Company, Ltd., 1835 Market Street, Suite 310, Philadelphia, PA 19103, serves as the Fund’s independent registered public accounting firm.
Compliance Services Provider
NLCS, located at 4221 North 203rd Street, Suite 100, Elkhorn, NE 68022, provides compliance support services to the Fund. For its services and for the services of the Fund’s Chief Compliance Officer and the Fund’s Anti-Money Laundering Officer the Fund pays NLCS a yearly fee.
Legal Counsel
Thompson Hine LLP, 41 South High Street, Suite 1700, Columbus, OH 43215, serves as legal counsel to the Fund.
Code of Ethics
Pursuant to the requirements of Rule 17j-1 under the 1940 Act and in order to protect against certain unlawful acts, practices and courses of business by certain individuals or entities related to the Fund, Distributor, and the Adviser have each adopted a Code of Ethics and procedures for implementing the provisions of their respective Code. The personnel of the Fund and Adviser are permitted to purchase securities including those that may be purchased, held, or sold by the Fund, subject to the Code of Ethics. Investment personnel must refrain from certain trading practices and are required to report on certain personal investment activities.
Violations of the Codes of Ethics can result in penalties, suspension, or termination of employment.
Proxy Voting Policy
The Fund has adopted Proxy Voting Policy and Procedures to: (1) ensure that the Fund votes proxies in the best interests of shareholders of the Fund with a view toward maximizing the value of their investments; (2) address any conflicts that may arise between Fund shareholders on the one hand, and “affiliated persons” of the Fund or of the Adviser (or its affiliates) on the other; (3) provide for oversight of proxy voting by the Board; and (4) provide for the disclosure of the Fund’s proxy voting records and this Policy.
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The Fund has delegated the responsibility for voting proxies on behalf of the Fund with respect to all equity securities held by the Fund to the Adviser, in accordance with this Policy, subject to oversight by the Board. The Board has reviewed the Adviser’s Proxy Voting Policy and Procedures (the “Adviser’s Policy”) and has determined that it is reasonably designed to ensure that the Adviser will vote all proxies in the best interests of the Fund’s shareholders, untainted by conflicts of interests. The Fund’s Policy and the Adviser’s Policy are attached to this SAI at Appendix C. Both Policies are subject to Board review annually.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available: (1) without charge, upon request, by calling 1 (855) 969-8440; (2) at the Fund’s website (www.atlas-am.com); and (3) at the SEC’s website (www.sec.gov).
Portfolio Transactions
The Fund purchases portfolio securities from dealers and underwriters as well as from issuers. Securities are usually traded on a net basis with dealers acting as principal for their own accounts without a stated commission. Prices paid to dealers in principal transactions generally include a “spread,” which is the difference between the prices at which the dealer is willing to purchase and sell a specific security at the time. When securities are purchased in underwritten offerings, they generally include a fixed amount of compensation to the underwriter.
For purchases or sales with broker-dealer firms that act as principal, the Adviser seeks best execution. Although the Adviser may receive certain research or execution services in connection with these transactions, it will not purchase securities at a higher price or sell securities at a lower price than would otherwise be paid if no weight were attributed to the services provided by the executing dealer. The Adviser may engage in agency transactions and riskless principal transactions in over-the-counter securities in return for research and execution services. These transactions are entered into only pursuant to procedures designed to ensure that the transaction (including any applicable commissions) is a least as favorable as it would have been if effected directly with a market-maker that did not provide research or execution services.
Research services and information received from brokers or dealers are supplemental to the Adviser’s own research efforts and, when utilized, are subject to internal analysis before being incorporated into its investment processes. Information and research services furnished by brokers or dealers through which or with which the Fund effects securities transactions may be used by the Adviser in advising other funds or accounts and, conversely, research services furnished to the Adviser by brokers and dealers in connection with other funds or accounts that it advises may be used in advising the Fund.
Investment decisions for the Fund and for other investment accounts managed by the Adviser are made independently of each other in light of differing considerations for the various accounts. However, the same investment decision may occasionally be made for the Fund and one or more accounts. In those cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated between the Fund and the other account(s) as to amount in a manner deemed equitable to the Fund and the other account(s). While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Fund is concerned, or upon its ability to complete its entire order, in other cases it is believed that simultaneous transactions and the ability to participate in volume transactions will benefit the Fund.
During the fiscal years ended September 30, 2023, September 30, 2024 and September 30, 2025, the Fund paid brokerage commissions of $7,208, $763 and $730, respectively.
Portfolio Turnover
The Fund’s portfolio turnover rate is calculated by dividing the lesser of purchases or sales of portfolio securities for the fiscal year by the monthly average of the value of the portfolio securities owned by the Fund during the fiscal year. The calculation excludes from both the numerator and the denominator securities with maturities at the time of acquisition of one year or less. High portfolio turnover involves correspondingly greater commissions and other transaction costs, which will be borne directly by the Fund. During the fiscal years ended September 30, 2024 and September 30, 2025, the Fund’s portfolio turnover rate was 21% and 7%, respectively. A 100% turnover rate would occur if all of the Fund’s portfolio securities were replaced once within a one-year period.
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Additional Information
Description of Shares
The Fund is authorized to issue in the aggregate 1,000,000,000 Class A Shares and Class C Shares $0.01 par value per Share. The Board is authorized to classify and reclassify any unissued shares of capital stock from time to time by setting or changing the rights, preferences, and other terms and conditions of such Shares.
The Shares have no preemptive or conversion rights. Each Share has equal voting, dividend, distribution, and liquidation rights. Shareholders are entitled to one vote per Share. All voting rights for the election of directors are noncumulative, which means that the holders of more than 50% of the Shares can elect 100% of the directors then nominated for election if they choose to do so, and in such event, the holders of the remaining Shares will not be able to elect any directors.
Valuation of Shares
The price of your Fund shares is based on the NAV of the Fund. The Fund calculates NAV daily, as of the close of the NYSE (generally 4 p.m. Eastern time). For purposes of determining the NAV of a share, the value of the securities held by the Fund plus any cash or other assets (including interest accrued but not yet received) minus all liabilities (including borrowings and accrued interest thereon and other accrued expenses) is divided by the total number of Shares outstanding at such time. Expenses, including the fees payable to the Adviser, the Distributor and the Administrator, are accrued daily and paid monthly.
The NAV per Fund share is based solely on the value of the assets in the Fund. Your price for buying or selling Shares will be the NAV of the Fund that is next calculated after the Fund accepts your order. Your financial advisor or other selected securities dealer is responsible for making sure that your order is promptly sent to the Fund when Shares are purchased in a manner other than through the automatic distribution reinvestment program described in the following paragraph.
All distributions on Shares are reinvested automatically in full and fractional shares at the NAV per Share next determined after the declaration of such distribution. A shareholder at any time, by written notification to the Distributor or a dealer, may request to have subsequent distributions paid in cash, rather than reinvested, in which event payment will be mailed on or about the payment date.
The Board has designated the Adviser as its “Valuation Designee” for overseeing the pricing and valuation of all securities held in the Fund. The Valuation Designee operates under pricing and valuation policies and procedures established and approved by the Board. The policies and procedures set forth the mechanisms and processes to be employed on a daily basis related to the valuation of portfolio securities for the purpose of determining the NAV of the Fund.
The Valuation Designee may consult pricing services approved by the Fund’s management and the Board when valuing securities. In arriving at their valuation, pricing sources may use both a grid matrix of securities values as well as the evaluations of their staff. The valuation, in either case, is based on information concerning actual market transactions and quotations from dealers or a grid matrix performed by an outside vendor that reviews certain market and security factors to arrive at a bid price for a specific security. The Adviser can override any price that it believes is not consistent with market conditions.
Generally Accepted Accounting Principles (“GAAP”) provide a framework for measuring fair value and expands disclosures about fair value measurements and requires disclosures surrounding the various inputs that are used in determining the fair value of the Fund’s investments. These inputs are summarized in three (3) broad levels listed below:
| ● | Level 1 - Quoted prices in active markets for identical assets and liabilities at the measurement date. An active market is one in which transactions for the asset occurs with sufficient frequency and volume to provide pricing information on an ongoing basis. |
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| ● | Level 2 - Are significant inputs other than quoted prices included in Level 1 that are observable (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.), either directly or indirectly. |
| ● | Level 3 - Significant unobservable inputs, for example, inputs derived through extrapolation that cannot be corroborated by observable market data. These will be developed based on the best information available in the circumstances. Level 3 inputs will consider the assumptions that market participants would use in pricing the asset, including assumptions about risk (e.g., credit risk, model risk, etc.). |
The Fund maximizes the use of observable inputs and minimizes the use of unobservable inputs, by requiring that the observable inputs be used when available. Fair value is based upon quoted market prices when available. Valuation adjustments are limited to those necessary to ensure that the financial instrument’s fair value is adequately representative of the price that would be received or paid in the marketplace. These adjustments include amounts that reflect counterparty credit quality, the Fund’s credit standing, constraints on liquidity, and unobservable parameters that are applied consistently.
The estimated fair value may be subjective in nature and may involve uncertainties and matters of significant judgment for certain financial instruments. Changes in the underlying assumptions used in calculating fair value could significantly affect the results.
Therefore, the estimated fair value may materially differ from the value that could actually be realized on sale.
Anti-Money Laundering Program
The Fund has established an Anti-Money Laundering Compliance Program (the “Program”) as required by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”). To ensure compliance with this law, the Fund’s Program provides for the development of internal practices, procedures and controls, designation of an anti-money laundering compliance officer (the Fund’s Chief Compliance Officer), an ongoing training program and an independent audit function to determine the effectiveness of the Program.
Procedures to implement the Program include, but are not limited to, determining that the Fund’s Transfer Agent has established proper anti-money laundering procedures, reported suspicious and/or fraudulent activity and a complete and thorough review of all new opening account applications. The Fund will not transact business with any person or entity whose identity cannot be adequately verified under the provisions of the USA PATRIOT Act.
As a result of the Program, the Fund may be required to “freeze” the account of a shareholder if the shareholder appears to be involved in suspicious activity or if certain account information matches information on government lists of known terrorists or other suspicious persons, or the Fund may be required to transfer the account or proceeds of the account to a governmental agency.
Purchase of Shares
Orders for shares received by the Fund in good order prior to the close of business on the NYSE on each day during such periods that the NYSE is open for trading are priced at the public offering price, which is NAV plus any sales charge, or at NAV per share (if no sales charges apply) computed as of the close of the regular session of trading on the NYSE. Orders received in good order after the close of the NYSE, or on a day it is not open for trading, are priced at the close of such NYSE on the next day on which it is open for trading at the next determined NAV value per share plus sales charges, if any. In addition to issuing shares in exchange for cash, the Fund may issue shares in exchange for securities (in kind) at its discretion.
Redemption of Shares
The Fund will redeem all or any portion of a shareholder’s shares of the Fund when requested in accordance with the procedures set forth in the “Redemptions” section of the Prospectus. Under the 1940 Act, a shareholder’s right to redeem shares and to receive payment therefore may be suspended at times including: (a) when the NYSE is closed, other than customary weekend and holiday closings; (b) when trading on that exchange is restricted for any reason;
31
(c) when an emergency exists as a result of which disposal by the Fund of securities owned is not reasonably practicable or it is not reasonably practicable for the Fund to fairly determine the value of net assets, provided that applicable rules and regulations of the SEC (or any succeeding governmental authority) will govern as to whether the conditions prescribed in (b) or (c) exist; or (d) when the SEC by order permits a suspension of the right to redemption or a postponement of the date of payment on redemption.
In case of suspension of the right of redemption, payment of a redemption request will be made based on the NAV value next determined after the termination of the suspension.
Supporting documents in addition to those listed under “Redemptions” in the Prospectus will be required from executors, administrators, trustees, or if redemption is requested by someone other than the shareholder of record. Such documents include, but are not restricted to, stock powers, trust instruments, certificates of death, appointments as executor, the certificates of corporate authority and waiver of tax required in some states when settling estates.
FINANCIAL STATEMENTS
The Fund’s financial statements and report of the independent registered public accounting firm required to be included in the SAI are hereby incorporated by reference to the Financial Statements for the Fund for the fiscal year ended September 30, 2025. You can obtain a copy of the financial statements without charge by calling the Fund at (855) 969-8440.
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Appendix A
Glossary of Investment Terms
This glossary provides a more detailed description of some of the types of securities, investment strategies, and other instruments in which the Fund may invest, as well as some general investment terms. The Fund may invest in these instruments to the extent permitted by its investment objective and policies. The Fund is not limited by this discussion and may invest in any other types of instruments not precluded by the policies discussed elsewhere in this Prospectus.
Equity and Debt Securities
Average-Weighted Effective Maturity is a measure of a bond’s maturity. The stated maturity of a bond is the date when the issuer must repay the bond’s entire principal value to an investor. Some types of bonds may also have an “effective maturity” that is shorter than the stated date due to prepayment or call provisions. Securities without prepayment or call provisions generally have an effective maturity equal to their stated maturity. Average-weighted effective maturity is calculated by averaging the effective maturity of bonds held by a fund with each effective maturity “weighted” according to the percentage of net assets that it represents.
Bonds are debt securities issued by a company, municipality, government, or government agency. The issuer of a bond is required to pay the holder the amount of the loan (or par value of the bond) at a specified maturity and to make scheduled interest payments.
Common stocks are equity securities representing shares of ownership in a company and usually carry voting rights and earn dividends. Unlike preferred stock, dividends on common stock are not fixed but are declared at the discretion of the issuer’s board of directors.
Debt securities are securities representing money borrowed that must be repaid at a later date. Such securities have specific maturities and usually a specific rate of interest or an original purchase discount.
Duration is the time it will take investors to recoup their investment in a bond. Unlike average maturity, duration reflects both principal and interest payments. Generally, the higher the coupon rate on a bond, the lower its duration will be. The duration of a bond portfolio is calculated by averaging the duration of bonds held by a fund with each duration “weighted” according to the percentage of net assets that it represents. Because duration accounts for interest payments, the Fund’s duration is usually shorter than its average maturity.
Equity securities generally include domestic and foreign common stocks; preferred stocks; securities convertible into common stocks or preferred stocks; warrants to purchase common or preferred stocks; and other securities with equity characteristics.
Exchange-traded funds (“ETFs”) are index-based investment companies which hold substantially all of their assets in securities with equity characteristics. As a shareholder of another investment company, a fund would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Fund bears directly in connection with its own operations.
Fixed-income securities are securities that pay a specified rate of return. The term generally includes short- and long-term government, corporate, and municipal obligations that pay a specified rate of interest, dividends, or coupons for a specified period of time. Coupon and dividend rates may be fixed for the life of the issue or, in the case of adjustable and floating rate securities, for a shorter period.
High-yield/high-risk bonds are bonds that are rated below investment grade by the primary rating agencies (i.e., BB+ or lower by Standard & Poor’s and Fitch, or Ba or lower by Moody’s). Other terms commonly used to describe such bonds include “lower rated bonds,” “non-investment grade bonds,” and “junk bonds.”
Mortgage- and asset-backed securities are shares in a pool of mortgages or other debt instruments. These securities are generally pass-through securities, which means that principal and interest payments on the
A-1
underlying securities (less servicing fees) are passed through to shareholders on a pro rata basis. These securities involve prepayment risk, which is the risk that the underlying mortgages or other debt may be refinanced or paid off prior to their maturities during periods of declining interest rates. In that case, a fund may have to reinvest the proceeds from the securities at a lower rate. Potential market gains on a security subject to prepayment risk may be more limited than potential market gains on a comparable security that is not subject to prepayment risk.
Municipal securities are bonds or notes issued by a U.S. state or political subdivision. A municipal security may be a general obligation backed by the full faith and credit (i.e., the borrowing and taxing power) of a municipality or a revenue obligation paid out of the revenues of a designated project, facility, or revenue source.
Pass-through securities are shares or certificates of interest in a pool of debt obligations that have been repackaged by an intermediary, such as a bank or broker-dealer.
Real estate investment trust (“REIT”) is an investment trust that operates through the pooled capital of many investors who buy its shares. Investments are in direct ownership of either income property or mortgage loans.
U.S. Government securities include direct obligations of the U.S. Government that are supported by its full faith and credit. Treasury bills have initial maturities of less than one year, Treasury notes have initial maturities of one to ten years, and Treasury bonds may be issued with any maturity but generally have maturities of at least ten years. U.S. Government securities also include indirect obligations of the U.S. Government that are issued by federal agencies and government sponsored entities. Unlike Treasury securities, agency securities generally are not backed by the full faith and credit of the
U.S. Government. Some agency securities are supported by the right of the issuer to borrow from the Treasury, others are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations, and others are supported only by the credit of the sponsoring agency.
Variable and floating rate securities have variable or floating rates of interest and, under certain limited circumstances, may have varying principal amounts. Variable and floating rate securities pay interest at rates that are adjusted periodically according to a specified formula, usually with reference to some interest rate index or market interest rate (the “underlying index”). The floating rate tends to decrease the security’s price sensitivity to changes in interest rates.
Futures and Options
Derivatives are financial instruments whose performance is derived from the performance of another asset (stock, bond, commodity, currency, interest rate or market index). Types of derivatives can include, but are not limited to options, forward contracts, swaps, and futures contracts.
Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. The Fund may buy and sell futures contracts on foreign currencies, securities, and financial indices including indices of U.S. Government, foreign government, equity, or fixed-income securities. The Fund may also buy options on futures contracts. An option on a futures contract gives the buyer the right, but not the obligation, to buy or sell a futures contract at a specified price on or before a specified date. Futures contracts and options on futures are standardized and traded on designated exchanges.
Options are the right, but not the obligation, to buy or sell a specified amount of securities or other assets on or before a fixed date at a predetermined price. The Fund may purchase and write put and call options on securities, securities indices, and foreign currencies. The Fund may purchase or write such options individually or in combination.
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Other Investments, Strategies, and/or Techniques
Diversification is a classification given to a fund under the 1940 Act and the Puerto Rico Investment Companies Act of 2013, as amended (the “2013 Act”). Funds are classified as either “diversified” or “non-diversified.” To be classified as “diversified” under the 1940 Act and the 2013 Act, a fund may not, with respect to 75% of its total assets, invest more than 5% of its total assets in any issuer and may not own more than 10% of the outstanding voting securities of an issuer. A fund that is classified as “no diversified” under the 1940 Act and the 2013 Act, may not invest more than 25% of its assets, including cash, in the outstanding voting securities of any single issuer. Because the appreciation or depreciation of a single security may have a greater impact on the net asset value of a fund which is classified as no diversified, its share price can be expected to fluctuate more than a comparable fund which is classified as diversified.
Market capitalization is the most commonly used measure of the size and value of a company. It is computed by multiplying the current market price of a share of the company’s stock by the total number of its shares outstanding. Market capitalization is an important investment criterion for certain funds, while others do not emphasize investments in companies of any particular size.
Repurchase agreements involve the sale of a security by a fund to another party (generally a bank or dealer) in return for cash and an agreement by the fund to buy the security back at a specified price and time. This technique will be used primarily to provide cash to satisfy unusually high redemption requests, or for other temporary or emergency purposes.
Short sales in which a fund may engage may be either “short sales against the box” or other short sales. Short sales against the box involve selling short a security that a fund owns, or the fund has the right to obtain the amount of the security sold short at a specified date in the future. A fund may also enter into a short sale to hedge against anticipated declines in the market price of a security or to reduce portfolio volatility. If the value of a security sold short increases prior to the scheduled delivery date, the fund loses the opportunity to participate in the gain. For short sales, the fund will incur a loss if the value of a security increases during this period because it will be paying more for the security than it has received from the purchaser in the short sale. If the price declines during this period, a fund will realize a short-term capital gain. Although a fund’s potential for gain as a result of a short sale is limited to the price at which it sold the security short less the cost of borrowing the security, its potential for loss is theoretically unlimited because there is no limit to the cost of replacing the borrowed security.
Reverse Repurchase agreements involve the purchase of a security by a fund and a simultaneous agreement by the seller (generally a bank or dealer) to repurchase the security from the fund at a specified date or upon demand. This technique offers a method of earning income on idle cash. These securities involve the risk that the seller will fail to repurchase the security, as agreed. In that case, a fund will bear the risk of market value fluctuations until the security can be sold and may encounter delays and incur costs in liquidating the security.
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Appendix B
The following is a description of credit ratings issued by three of the major credit rating agencies. Credit ratings evaluate only the safety of principal and interest payments, not the market value risk of lower quality securities. Credit rating agencies may fail to change credit ratings to reflect subsequent events on a timely basis. Although AAM considers security ratings when making investment decisions, it also performs its own investment analysis and does not rely solely on the ratings assigned by credit agencies.
S&P Global Ratings
Description of Issue Credit Rating Definitions of S&P Global Ratings (“S&P”)
An S&P issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion reflects S&P’s view of the obligor’s capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.
Issue credit ratings can be either long-term or short-term. Short-term issue ratings are generally assigned to those obligations considered short-term in the relevant market, typically with an original maturity of no more than 365 days. Short-term issue credit ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. S&P would typically assign a long-term issue credit rating to an obligation with an original maturity of greater than 365 days. However, the ratings S&P assigns to certain instruments may diverge from these guidelines based on market practices.
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on S&P’s analysis of the following considerations:
| · | The likelihood of payment--the capacity and willingness of the obligor to meet its financial commitments on an obligation in accordance with the terms of the obligation; |
| · | The nature of and provisions of the financial obligation, and the promise S&P imputes. |
| · | The protection afforded by, and relative position of, the financial obligation in the event of a bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors’ rights. |
An issue rating is an assessment of default risk but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)
AAA
An obligation rated ‘AAA’ has the highest rating assigned by S&P. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
AA
An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitments on the obligation is very strong.
A
An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitments on the obligation is still strong.
BBB
An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the obligor’s capacity to meet its financial commitments on the obligation.
BB; B; CCC; CC; and C
Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
B-1
BB
An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to the obligor’s inadequate capacity to meet its financial commitments on the obligation.
B
An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitments on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments on the obligation.
CCC
An obligation rated ‘CCC’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitments on the obligation.
CC
An obligation rated ‘CC’ is currently highly vulnerable to nonpayment. The ‘CC’ rating is used when a default has not yet occurred but S&P expects default to be a virtual certainty, regardless of the anticipated time to default.
C
An obligation rated ‘C’ is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared with obligations that are rated higher.
D
An obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless S&P believes that such payments will be made within the next five business days in the absence of a stated grace period or within the earlier of the stated grace period or the next 30 calendar days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. A rating on an obligation is lowered to ‘D’ if it is subject to a distressed debt restructuring.
| * | The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories. |
Short-Term Issue Credit Ratings
A-1
A short-term obligation rated ‘A-1’ is rated in the highest category by S&P. The obligor’s capacity to meet its financial commitments on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitments on these obligations is extremely strong.
A-2
A short-term obligation rated ‘A-2’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitments on the obligation is satisfactory.
A-3
A short-term obligation rated ‘A-3’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken an obligor’s capacity to meet its financial commitments on the obligation.
B
A short-term obligation rated ‘B’ is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties that could lead to the obligor’s inadequate capacity to meet its financial commitments.
C
A short-term obligation rated ‘C’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation.
B-2
D
A short-term obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless S&P believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. A rating on an obligation is lowered to ‘D’ if it is subject to a distressed debt restructuring.
Fitch Ratings
Description of Fitch Ratings, Inc.’s (“Fitch” or “Fitch Ratings”) Credit Ratings
Fitch Ratings’ credit ratings provide an opinion on the relative ability of an entity to meet financial commitments, such as interest, preferred dividends, repayment of principal, insurance claims or counterparty obligations. Credit ratings are used by investors as indications of the likelihood of receiving the money owed to them in accordance with the terms on which they invested. The agency’s credit ratings cover the global spectrum of corporate, sovereign (including supranational and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.
The terms “investment grade” and “speculative grade” have established themselves over time as shorthand to describe the categories ‘AAA’ to ‘BBB’ (investment grade) and ‘BB’ to ‘D’ (speculative grade). The terms “investment grade” and “speculative grade” are market conventions, and do not imply any recommendation or endorsement of a specific security for investment purposes. “Investment grade” categories indicate relatively low to moderate credit risk, while ratings in the “speculative” categories either signal a higher level of credit risk or that a default has already occurred.
A designation of “Not Rated” or “NR” is used to denote securities not rated by Fitch where Fitch has rated some, but not all, securities comprising an issuance capital structure.
Credit ratings express risk in relative rank order, which is to say they are ordinal measures of credit risk and are not predictive of a specific frequency of default or loss. For information about the historical performance of ratings please refer to Fitch’s Ratings Transition and Default studies which detail the historical default rates and their meaning. The European Securities and Markets Authority also maintains a central repository of rating default rates.
Fitch Ratings’ credit ratings do not directly address any risk other than credit risk. In particular, ratings do not deal with the risk of a market value loss on a rated security due to changes in interest rates, liquidity and other market considerations. However, in terms of payment obligation on the rated liability, market risk may be considered to the extent that it influences the ability of an issuer to pay upon a commitment. Ratings nonetheless do not reflect market risk to the extent that they influence the size or other conditionality of the obligation to pay upon a commitment (for example, in the case of index-linked bonds).
In the default components of ratings assigned to individual obligations or instruments, the agency typically rates to the likelihood of non-payment or default in accordance with the terms of that instrument’s documentation. In limited cases, Fitch Ratings may include additional considerations (i.e. rate to a higher or lower standard than that implied in the obligation’s documentation). In such cases, the agency will make clear the assumptions underlying the agency’s opinion in the accompanying rating commentary.
Corporate Finance Obligations – Long-Term Rating Scales
Ratings of individual securities or financial obligations of a corporate issuer address relative vulnerability to default on an ordinal scale. In addition, for financial obligations in corporate finance, a measure of recovery given default on that liability is also included in the rating assessment. This notably applies to covered bonds ratings, which incorporate both an indication of the probability of default and of the recovery given a default of this debt instrument.
The relationship between issuer scale and obligation scale assumes an historical average recovery of between 30%-50% on the senior, unsecured obligations of an issuer. As a result, individual obligations of entities, such as corporations, are assigned ratings higher, lower, or the same as that entity’s issuer rating or IDR. At the lower end of the ratings scale, Fitch Ratings now additionally publishes explicit Recovery Ratings in many cases to complement issuer and obligation ratings.
AAA: Highest credit quality.
‘AAA’ ratings denote the lowest expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
B-3
AA: Very high credit quality.
‘AA’ ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A: High credit quality.
‘A’ ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB: Good credit quality.
‘BBB’ ratings indicate that expectations of credit risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB: Speculative.
‘BB’ ratings indicate an elevated vulnerability to credit risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial commitments to be met.
B: Highly speculative.
‘B’ ratings indicate that material credit risk is present.
CCC: Substantial credit risk.
‘CCC’ ratings indicate that substantial credit risk is present.
CC: Very high levels of credit risk.
‘CC’ ratings indicate very high levels of credit risk.
C: Exceptionally high levels of credit risk.
‘C’ indicates exceptionally high levels of credit risk.
Defaulted obligations typically are not assigned ‘RD’ or ‘D’ ratings but are instead rated in the ‘B’ to ‘C’ rating categories, depending upon their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.
Note: The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’ obligation rating category, or to corporate finance obligation ratings in the categories below ‘CCC’.
The subscript ‘emr’ is appended to a rating to denote embedded market risk which is beyond the scope of the rating. The designation is intended to make clear that the rating solely addresses the counterparty risk of the issuing bank. It is not meant to indicate any limitation in the analysis of the counterparty risk, which in all other respects follows published Fitch criteria for analyzing the issuing financial institution. Fitch does not rate these instruments where the principal is to any degree subject to market risk.
Short-Term Ratings
A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity or security stream and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as “short term” based on market convention. Typically, this means up to 13 months for corporate, sovereign, and structured obligations, and up to 36 months for obligations in U.S. public finance markets.
F1: Highest short-term credit quality.
Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature.
F2: Good short-term credit quality.
Good intrinsic capacity for timely payment of financial commitments.
F3: Fair short-term credit quality.
The intrinsic capacity for timely payment of financial commitments is adequate.
B: Speculative short-term credit quality.
Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
B-4
C: High short-term default risk.
Default is a real possibility.
RD: Restricted default.
Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Typically applicable to entity ratings only.
D: Default.
Indicates a broad-based default event for an entity, or the default of a short-term obligation.
Moody’s
Description of Moody’s Investors Service, Inc.’s (“Moody’s”) Ratings:
Moody’s Global Rating Scales
Ratings assigned on Moody’s global long-term and short-term rating scales are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default.1 Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default.2
Moody’s differentiates structured finance ratings from fundamental ratings (i.e., ratings on nonfinancial corporate, financial institution, and public sector entities) on the global long-term scale by adding (sf) to all structured finance ratings. The (sf) indicator was introduced on August 11, 2010 and explained in a special comment entitled, “Moody’s Structured Finance Rating Scale.” The addition of (sf) to structured finance ratings should eliminate any presumption that such ratings and fundamental ratings at the same letter grade level will behave the same. The (sf) indicator for structured finance security ratings indicates that otherwise similarly rated structured finance and fundamental securities may have different risk characteristics. Through its current methodologies, however, Moody’s aspire to achieve broad expected equivalence in structured finance and fundamental rating performance when measured over a long period of time.
Global Long-Term Rating Scale
Aaa
Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.
Aa
Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A
Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.
Baa
Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.
Ba
Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
B
Obligations rated B are considered speculative and are subject to high credit risk.
Caa
Obligations rated Caa are judged to be speculative of poor standing and ‘are subject to very high credit risk.
| 1 | For certain structured finance, preferred stock and hybrid securities in which payment default events are either not defined or do not match investors’ expectations for timely payment, the ratings reflect the likelihood of impairment and the expected financial loss in the event of impairment. |
| 2 | For certain structured finance, preferred stock and hybrid securities in which payment default events are either not defined or do not match investors’ expectations for timely payment, the ratings reflect the likelihood of impairment. |
B-5
Ca
Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C
Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.
Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. Modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a “(hyb)” indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.* Note: For more information on long-term ratings assigned to obligations in default, please see the definition “Long-Term Credit Ratings for Defaulted or Impaired Securities” in the Other Definitions section of this publication. * By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.
Global Short-Term Rating Scale
P-1
Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2
Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
NP
Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
B-6
Appendix C – Proxy Voting Policies
ATLAS ASSET MANAGEMENT LLC
PROXY VOTING POLICY
Principles
Proxy voting and the analysis of corporate governance issues in general are important elements of the portfolio management services we provide to our advisory clients who have authorized us to address these matters on their behalf. Our guiding principles in performing proxy voting are to make decisions that favor proposals that in Atlas’s view maximize a company’s shareholder value and are not influenced by conflicts of interest. These principles reflect Atlas’s belief that sound corporate governance will create a framework within which a company can be managed in the interests of its shareholders. Atlas has adopted the policies and procedures set out below regarding the voting of proxies.
Process
To implement these guiding principles for investments in publicly traded equities for which Atlas has voting power on any record date, we follow proxy voting guidelines that have been developed by Atlas portfolio management. The guidelines embody the positions and factors Atlas generally considers important in casting proxy votes. They address a wide variety of individual topics, including, among other matters, shareholder voting rights, changes in capital structure, the election of directors, executive and director compensation, corporate transactions, issues of corporate social responsibility and various shareholder proposals. The portfolio management team may use Industry Service Provider (“ISP”) to provide research and voting recommendations for proxies relating to equity securities in accordance with the ISP’s guidelines. The principles and positions reflected in this Policy are designed to guide the portfolio management team in voting proxies, and not necessarily in making investment decisions.
Guidelines
| 1. | Routine Matters |
We generally support routine management proposals.
| 2. | Board of directors |
Elections - In vote decisions, we may take into consideration whether the company has a majority voting policy in place that we believe makes the director vote more meaningful. In the absence of a proxy contest, we generally support the board’s nominees for director.
Board independence - We generally support shareholder proposals requiring that a majority percentage of the company’s board members be independent directors, and promoting independent audit, compensation, and nominating/governance committees.
Board diversity - We generally support shareholder proposals urging diversity of board membership with respect to gender, race, or other factors where we believe the board has failed to take these factors into account.
Separation of Chairman and CEO - We vote on shareholder proposals to separate the referenced duties.
Director retirement age and term limits - We generally favor age and term limits.
Majority voting - We generally support proposals requesting or requiring majority voting policies in election of directors.
C-1
| 3. | Corporate deals & proxy fights |
We will seek to act on such proposals on a case-by-case basis in a manner that the portfolio management team believe is most likely to enhance the economic value of the underlying securities.
| 4. | Changes in capital structure |
We will seek to act on such proposals on a case-by-case basis in a manner that the portfolio management team believe is most likely to protect and enhance existing rights and do not dilute voting rights and discounted to existing market valuations.
| 5. | Executive and director’s compensation |
We generally support proposals that would provide employees with competitive equity compensation plans that would align with shareholder interests; reasonable fees to outside independent directors; employee stock purchase plans at reasonable market valuations and other proposals that may require the portfolio management team to analyze on a case-by-case basis.
| 6. | Auditors |
We generally support management proposals for selection or ratification of independent auditors, unless firm has sustained credibility issues as a result of irregularities.
| 7. | Social Issues |
We generally support proposals that would enhance disclosure on employee and board diversity, including gender, race, among other factors.
Recordkeeping
Atlas must maintain the documentation described in this Policy for a period of not less than five (5) years from the end of the fiscal year, and the first two (2) years at its principal place of business. Atlas will be responsible for the following procedures and for ensuring that the required documentation is retained. Atlas may engage an ISP to retain the proxy voting records on behalf of Its clients.
C-2
ATLAS U.S. TACTICAL INCOME FUND, INC.
PROXY VOTING POLICY
Adopted: August 19, 2021
The Board of Directors of the Atlas Fund (the “Board”) acknowledges their duty to supervise the voting of proxies relating to securities held by the Fund. The power to vote proxies may be delegated to a fund’s investment adviser, and it is the policy of the Atlas Fund to so delegate voting authority to Atlas Asset Management, LLC (the “Adviser”). The Adviser has accepted the delegation to vote proxies of securities held by the Fund and shall vote such proxies in accordance with the Adviser’s own proxy voting policies, practices, and procedures; provided that the Adviser shall vote such proxies in what it deems to be in the best interests of the Fund’s shareholders and in a manner that is consistent with this Proxy Voting Policy, as amended from time to time by the Board.
To ensure that the Adviser’s voting policies, practices and procedures are in the best interests of the Fund’s shareholders and consistent with this Proxy Voting Policy, the Adviser shall review with the Executive Committee of the Board any proposed material changes or amendments to the Adviser’s proxy voting policies, practices, and procedures prior to implementation.
To ensure that the Adviser is voting proxies in accordance with this Proxy Voting Policy, the Board may require the Adviser to submit proxy voting reports to the Board as deemed necessary or appropriate by the Board.
C-3
REGISTRATION STATEMENT
of
ATLAS
U.S. TACTICAL INCOME FUND, INC.
on
Form N-1A
|
Item 29.
|
Persons Controlled by or Under Common Control with Registrant |
|
None.
| |
| Item 30. |
Indemnification
|
|
Each Officer and each Director of the Corporation shall be indemnified by the Fund to the fullest extent permitted under the laws of Puerto Rico and the United States. No amendment to these By-Laws or repeal of any provision hereof shall limit or eliminate the benefits provided to Directors under this provision in connection with any act or omission that occurred prior to such amendment or repeal.
Each Officer and Director of the Corporation claiming indemnification within the scope of this Article VI shall be entitled to advances from the Corporation for payment of the reasonable expenses incurred by him in connection with proceedings to which he is a party in the manner and to the fullest extent permitted under applicable law without a preliminary determination as to his ultimate entitlement to indemnification (except as set forth below); provided, however, that the person seeking indemnification shall provide to the Corporation a written affirmation of his good faith belief that the standard of conduct necessary for indemnification by the Corporation has been met and a written undertaking to repay any such advance, if it should ultimately be determined that the standard of conduct has not been met, and provided further that at least one of the following additional conditions is met: (a) the person seeking indemnification shall provide a security in form and amount acceptable to the Corporation for his undertaking; (b) the Corporation is insured against losses arising by reason of the advance; (c) a majority of a quorum of non-party Independent Directors, or independent legal counsel in a written opinion, shall determine, based on a review of facts readily available to the Corporation at the time the advance is proposed to be made, that there is reason to believe that the person seeking indemnification will ultimately be found to be entitled to indemnification.
The Corporation may purchase insurance on behalf of an Officer or Director protecting such person to the fullest extent permitted under the laws of Puerto Rico, from liability arising from his activities as Officer or Director of the Corporation. The Corporation, however, may not purchase insurance on behalf of any Officer or Director of the Corporation that protects or purports to protect such person from liability to the Corporation or to its stockholders to which such Officer or Director would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office.
The Corporation may indemnify, make advances or purchase insurance to the extent provided in this Article VI on behalf of an employee who is not an Officer or Director of the Corporation.
Section 9 of the Investment Advisory Agreement between Registrant and Atlas Asset Management, LLC (the “Adviser”) incorporated herein by reference to exhibit (d)(1), provides for the indemnification of Atlas against certain losses as follows:
Limitation of Liability of the Adviser. The Adviser shall not be liable for any loss, expense, cost, or liability arising out of any error in judgment or any action or omission, including any instruction given to the Custodian unless (i) such action or omission involved an officer, director, employee, or agent of the Adviser and (ii) such loss, expense, cost or liability arises out of the Adviser’s negligence, malfeasance or bad faith or results in a material violation by the Adviser or any sub-adviser of the terms and conditions of the Ruling. The Adviser may rely on any notice or communication (written or oral) reasonably believed by it to be genuine. These limitations shall not relieve the Adviser from any responsibility or liability for any responsibility, obligation or duty that the Adviser may have under state statutes, the laws of Puerto Rico, or any federal securities law which is not waivable. Any person, even though also an officer, partner, employee, or agent of the Adviser or its affiliates, who may be or become a director, employee, or agent of the Fund shall be deemed, when rendering services to the Fund or acting with respect to any business of the Fund, to be rendering such service to or acting solely for the Fund and not as a director, employee, or agent or one under the control or direction of the Adviser or such affiliates even though paid by it. Nothing herein shall be deemed a waiver of any rights which the Fund may have pursuant to applicable securities laws or regulations.
The Master Services Agreement (the “Agreement”) with Ultimus Fund Solutions, LLC (the “Administrator”) provides that each of the Fund and Administrator (each an “Indemnifying Party”) agree to indemnify, defend, and protect the other party, including its directors, managers, officers, employees, and other agents (collectively, the “Indemnitees” and each an “Indemnitee”), and shall hold the Indemnitees harmless from and against any actions, suits, claims, losses, damages, liabilities, and reasonable costs, charges, and expenses (including attorney fees and investigation expenses) (collectively, “Losses”) arising directly or indirectly out of (1) the Indemnifying Party’s failure to exercise the standard of care set forth above unless such Losses were caused in part by the Indemnitees own willful misfeasance, bad faith or gross negligence; (2) any violation of Applicable Law (defined below) by the Indemnifying Party or its affiliated persons or agents relating to the Agreement and the activities thereunder; and (3) any material breach by the Indemnifying Party or its affiliated persons or agents of the Agreement.
Sections 11.3 and Section 11.4 of the Distribution Agreement between Registrant and Northern Lights Distributors, Inc. (the “Distributor”) incorporated herein by reference to exhibit (e), provides for the indemnification of the Distributor against certain losses as follows:
11.3 Indemnification
A. Each party (the “Indemnifying Party”) agrees to indemnify, defend, and protect the other party, including its trustees or directors, officers, employees, and other agents (collectively, the “Indemnitees”), and shall hold the Indemnitees harmless from and against any actions, suits, claims, losses, damages, liabilities, and reasonable costs, charges, expenses (including attorney fees and investigation expenses) (collectively, “Losses”) arising directly or indirectly out of (1) the Indemnifying Party’s failure to exercise the standard of care set forth above unless such Losses were caused in part by the Indemnitees own willful misfeasance, bad faith or gross negligence; (2) any violation of Applicable Law by the Indemnifying Party or its affiliated persons or agents relating to this Agreement and the activities hereunder; and (3) any material breach by the Indemnifying Party or its affiliated persons or agents of this Agreement.
B. Notwithstanding the foregoing provisions, the Corporation, any applicable Fund, and the Advisor shall indemnify Distributor for Distributor’s Losses arising from circumstances under Section 11.2.A.
C. Upon the assertion of a claim for which any party may be required to indemnify another party, the party seeking indemnification shall promptly notify the other party(ies) of such assertion, and shall keep the other party(ies) advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim or to defend against said claim in its own name or in the name of the other party. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the indemnifying party’s prior written consent.
11.4 Dealer Agreement Indemnification
A. Distributor acknowledges and agrees that certain dealers require that Distributor enter into dealer agreements (the “Non-Standard Dealer Agreements”) that contain certain representations, undertakings, and indemnification that are not included in the Distributor’s standard dealer agreement (the “Standard Dealer Agreement”).
B. To the extent that Distributor is requested or required by the Corporation to enter into any Non- Standard Dealer Agreement, the Corporation shall indemnify, defend and hold the Distributor Indemnitees free and harmless from and against any and all Losses that any Distributor Indemnitee may incur arising out of or relating to (a) the Distributor’s actions or failures to act pursuant to any Non-Standard Dealer Agreement; (b) any representations made by the Distributor in any Non-Standard Dealer Agreement to the extent that the Distributor is not required to make such representations in the Standard Dealer Agreement; or (c) any indemnification provided by the Distributor under a Non-Standard Dealer Agreement to the extent that such indemnification is beyond the indemnification the Distributor provides to intermediaries in the Standard Dealer Agreement. In no event shall anything contained herein be so construed as to protect the Distributor Indemnitees against any liability to the Corporation or its shareholders to which the Distributor Indemnitees would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of Distributor’s obligations or duties under the Non-Standard Dealer Agreement or by reason of Distributor’s reckless disregard of its obligations or duties under the Non-Standard Dealer Agreement.
|
|||||
| Item 31. |
Business and Other Connections of the Investment Adviser
|
||||
| Atlas Asset Management, LLC serves as investment adviser to the Fund. The executive officers of the Adviser are listed in the investment adviser registration on Form ADV for the Adviser (File No. 801-119872) and are hereby incorporated herein by reference thereto. | |||||
| Item 32. | Principal Underwriter | ||||
(a) Northern Lights Distributors, LLC (“NLD”), is the principal underwriter for the Atlas U.S. Tactical Income Fund, Inc.
NLD also acts as principal underwriter for the following open-end investment companies:
Atlas U.S. Government Money Market Fund, Inc., Boyar Value Fund, Inc., Capitol Series Trust, Copeland Trust, DGI Investment Trust, Grandeur Peak Global Trust, Miller Investment Trust, Mutual Fund and Variable Insurance Trust, Mutual Fund Series Trust, Northern Lights Fund Trust, Northern Lights Fund Trust II, Northern Lights Fund Trust III, Northern Lights Fund Trust IV, Northern Lights Variable Trust, OCM Mutual Fund, The North Country Funds, Texas Capital Funds Trust, The Saratoga Advantage Trust, Segall Bryant & Hamill Trust, Tributary Funds, Inc., Two Roads Shared Trust, Rayliant Trust, Ultimus Managers Trust, Unified Series Trust, THOR Financial Technologies Trust, Valued Advisers Trust and Zacks Trust.
NLD also acts as principal underwriter for the following closed-end investment companies:
CIM Real Assets & Credit Fund, Princeton Everest Fund and US Treasury Fund.
| (b) | NLD is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). The principal business address of NLD is 4221 North 203rd St., Suite 100, Elkhorn, NE 68022. NLD is an affiliate of Ultimus Fund Solutions, LLC. Both NLD and Ultimus Fund Solutions, LLC are under common ownership of The Ultimus Group, LLC. To the best of Registrant’s knowledge, the following are the members and officers of NLD: |
| Name |
Positions and Offices with Underwriter |
Positions and Offices with the Fund |
| Kevin Guerette | President | None |
| Stephen Preston | Treasurer, Chief Compliance Officer, Financial Operations Principal, and AML Compliance Officer | None |
| William J. Strait | Manager, Secretary, General Counsel | None |
| David James | Manager | None |
| Melvin Van Cleave | Chief Information Security Officer | None |
(c) Not Applicable. No underwriting commissions are paid in connection with the sale of Registrant’s Shares.
| Item 33. | Location of Accounts and Records |
| (1) | Atlas Asset Management, LLC, Buchanan Office Center, Road 165 #40, Suite 201, Guaynabo PR 00968 (records related to its services as the Registrant’s investment adviser). |
| (2) | U.S. Bank, N.A., 425 Walnut Street, Cincinnati, OH 45202 (records related to its services as Registrant’s custodian). |
| (3) | Ultimus Fund Solutions, LLC, 4221 North 203rd St., Suite 100, Elkhorn, NE 68022 (records related to its services as Registrant’s administrator and transfer agent). |
| (4) | Northern Lights Distributors, LLC, 4221 North 203rd St., Suite 100, Elkhorn, NE 68022 (records related to its services as Registrant’s distributor). |
|
Item 34.
|
Management Services |
|
None.
| |
|
Item 35.
|
Undertakings |
| None. |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the “1933 Act”) and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the 1933 Act and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Guaynabo, Puerto Rico on the 28th day of January, 2026.
Atlas U.S. Tactical Income Fund, Inc.
| By: | /s/ Paul Hopgood |
|
Paul Hopgood President and Director |
Pursuant to the requirements of the 1933 Act, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
| Signature | Title | Date | |||
| /s/ Paul Hopgood | President and Director | January 28, 2026 | |||
| Paul Hopgood | |||||
| Pedro Gonzalez* | Vice President, Secretary and Treasurer | January 28, 2026 | |||
| Pedro Gonzalez | |||||
| Jorge Padilla* | Director | January 28, 2026 | |||
| Jorge Padilla | |||||
| Fernando Nido* | Director | January 28, 2026 | |||
| Fernando Nido | |||||
| Eduardo Inclán* | Director | January 28, 2026 | |||
| Eduardo Inclán | |||||
*By: /s/ Paul Hopgood
Paul Hopgood
Attorney in fact
Exhibit Index
| (e) | Distribution Agreement |
| (i)(2) | Consent of Thompson Hine LLP |
| (j)(1) | Consent of Cohen & Company, Ltd. |
| (q)(3) | Power of Attorney for Pedro Gonzalez |
ATTACHMENTS / EXHIBITS
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