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Investment Objectives

The Fund’s investment objectives are (i) to provide a high level of current income consistent with the preservation of capital, its investment policies and prudent investment management, (ii) to distribute net assets to shareholders of the Fund during the period commencing on approximately June 30, 2022, and ending approximately on the Target Date and (iii) to distribute monthly dividends of substantially all of its net investment income.

In accordance with the Puerto Rico Investment Companies Act and rulings issued by the Commissioner to the Fund, under normal conditions, at least 67% of the Fund’s total assets will be invested in Puerto Rico taxable and tax- exempt obligations (the “67% Investment Requirement”). The balance of the Fund’s assets will be invested in non- Puerto Rico taxable and tax-exempt debt and other fixed-income obligations. The Fund may not invest more than 5% of its total assets in securities of foreign issuers. See “Investment Objectives and Policies—Principal Investment Strategies.”

The Fund intends to comply with the 67% Investment Requirement by investing, on or before October 5, 2013 (the first anniversary of the initial date of registration of the Fund with the Commissioner), and at all times thereafter, at least 67% of its total assets in Puerto Rico obligations.

The Fund may invest up to 10% of its total assets in taxable securities, including preferred stock of Puerto Rico issuers, if the Investment Adviser believes such investments offer attractive after-tax returns to shareholders. The Fund may not, however, invest in common stock of any type without the specific approval of its Board of Directors. The Fund’s investment objectives and certain investment policies are fundamental policies that may not be changed unless authorized by a majority of the holders of the Fund’s outstanding shares and by the Commissioner. All other investment policies and limitations, however, subject to applicable Puerto Rico law, may be changed by the Fund’s Board of Directors without the approval of either the Fund’s shareholders or the Commissioner. See “Investment Restrictions.” At times, the Fund may seek to hedge its portfolio through the use of futures transactions and options to reduce volatility in the net asset value of its shares of Common Stock. There can be no assurance that the investment objectives of the Fund will be realized.

Principal Investment Strategies

The Fund seeks to achieve its investment objectives by investing, under normal market conditions, in a non- diversified portfolio consisting of two general asset classes:

Asset Class I, Puerto Rico obligations, consisting principally of the following securities:

x debt securities issued or guaranteed by the Commonwealth of Puerto Rico and its political subdivisions, agencies or instrumentalities;

x mortgage-backed securities backed by mortgage loans secured by mortgages on real property located in Puerto Rico, such as Fannie Mae, Freddie Mac and GNMA mortgage-backed securities, and CMOs secured by Puerto Rico mortgages;

x asset-backed securities backed by assets located in Puerto Rico and owned by (i) corporations, partnerships or other entities organized under the laws of Puerto Rico that are actively engaged in business in Puerto Rico or (ii) corporations, partnerships or other entities organized under the laws of a state or foreign jurisdiction that derive at least 80% of their gross income from Puerto Rico sources (“Puerto Rico Entities”);

x preferred stock and debt securities issued or guaranteed by Puerto Rico Entities, including corporate bonds and notes;

x deposit accounts with banking institutions authorized to engage in the business of banking in Puerto Rico;

x repurchase agreements pursuant to which the Fund purchases securities from Puerto Rico Entities with an agreement to resell such securities at a later date; provided, however, that the underlying security must in itself be a Puerto Rico obligation; and

x any other taxable or tax-exempt securities which the Commissioner may determine by rule, regulation or ruling to constitute Puerto Rico obligations.

Asset Class II, non-Puerto Rico obligations, consisting principally of the following securities:

x debt securities issued or guaranteed by the U.S. Government, its political subdivisions, agencies or instrumentalities;

x municipal securities of U.S. issuers, including but not limited to securities issued or guaranteed by any state of the United States, its political subdivisions, agencies or instrumentalitiesor other government- sponsored enterprises;

x preferred stock and debt securities of U.S. issuers, including convertible securities and corporate commercial paper;

x mortgage-backed securities secured by mortgages on real property not located in Puerto Rico, such as Fannie Mae, Freddie Mac and GNMA mortgage-backed securities, and CMOs;

x asset-backed securities (i) backed by assets not located in Puerto Rico or (ii) backed by assets located in Puerto Rico that are not owned by Puerto Rico Entities;

x bank certificates of deposit, fixed time deposits and bankers’ acceptances;

x repurchase agreements (i) pursuant to which the Fund purchases Puerto Rico or U.S. securities from U.S. entities with an agreement to resell such securities at a later date or (ii) pursuant to which the Fund purchases U.S. securities from Puerto Rico Entities with an agreement to resell such securities at a later date;

x U.S.-dollar-denominated fixed-income securities of foreign issuers, including obligations of foreign governments (or their subdivisions, agencies and government-sponsored enterprises), international agencies or supranational entities; and

x any other taxable or tax-exempt securities issued by non-Puerto Rico issuers as exist now or may exist in the future.

The Fund intends to invest at least 90% of its total assets in securities, whether directly or through conduit transactions, that are rated at the time of purchase within the four highest investment grade categories of Moody’s, S&P, Fitch or any other NRSRO or, if unrated, are deemed to be of comparable credit quality by the Investment Adviser. The Fund may invest up to 10% of its total assets in securities that, at the time of purchase, are rated below investment grade or, if unrated, are deemed by the Investment Adviser to be below investment grade. Obligations rated below investment grade are speculative with respect to the capacity of the issuer to pay interest and repay principal in accordance with the terms of the obligation and generally involve greater volatility of price than obligations in higher rating categories. See “Appendix B–Ratings of Municipal Obligations and Debt Securities.” You may obtain additional information from the websites maintained and updated from time to time by the rating agencies. Currently, the website for S&P is

http://www.standardandpoors.com; for Moody’s, http://www.moodys.com; and for Fitch, http://www.fitchratings.com. As a fundamental policy, the Fund may not issue debt securities or borrow money from banks or other financial institutions (including borrowings through dollar rolls and reverse repurchase agreements) or issue shares of preferred stock, in excess of 50% of the Fund’s total assets (including the amount of borrowings and debt securities and preferred stock issued, but reduced by any liabilities and indebtedness not constituting borrowings or debt securities), except that the Fund may borrow up to an additional 5% of its total assets (after giving effect to the amount borrowed) from banks or other financial institutions in order to meet repurchase requests, for other cash management purposes, to fund the purchase of portfolio securities for a period of not longer than 30 days and for other temporary, emergency or defensive purposes. As an additional fundamental policy, no securities purchased by the Fund (other than perpetual preferred stock, which do not have a maturity date) will have a maturity date (or assumed final distribution date) subsequent to June 30, 2042.

change as the general levels of interest rates fluctuate. When interest rates decline, the value of a fixed-income portfolio can be expected to rise. Conversely, when interest rates rise, the value of a fixed-income portfolio can be expected to decline. Prices of longer-term securities generally fluctuate more in response to interest rate changes than do short-term or medium-term securities. These changes in net asset value per share are likely to be greater in the case of a fund having a leveraged capital structure, such as the Fund. See “Risk Factors and Special Considerations of Leverage.”

The Commissioner’s Ruling grants the Fund a waiver from compliance with the 67% Investment Requirement under the circumstances set forth below:

(i) During a maximum of sixty (60) days in any given fiscal year of the Fund, for defensive or strategic purposes such as strategies designed to protect investors and the Fund’s assets from fluctuations in interest rates or market conditions that could adversely affect the net asset value of the shares of Common Stock;

(ii) During a maximum of thirty (30) days in any given fiscal year of the Fund, upon the proven scarcity of Puerto Rico obligations or upon a proven market disruption. For these purposes, the term “proven scarcity” shall mean the unavailability of Puerto Rico obligations or their availability at a price unreasonably above their market value or at maturities or interest rates inconsistent with the Fund’s investment objectives, as determined by the Investment Advisers; and

(iii) Otherwise, for such longer periods as may be approved by the Commissioner.

During the initial period of the Fund’s operations, and subject to the requirements of the Commissioner’s Ruling, if, in the opinion of the Investment Adviser, no suitable Puerto Rico obligations are available, or if the Investment Adviser believes unusual circumstances warrant a defensive posture, the Fund temporarily may commit all or any portion of its assets to cash or cash equivalents such as money market instruments and to U.S. Government obligations.

During the Fund’s initial operating period ending on June 30, 2022, the Fund intends to distribute monthly dividends equal to substantially all of its net investment income, if any, and annual dividends equal to substantially all of its net capital gains, unless the Fund’s Board of Directors deems it advisable to retain some or all of the net capital gains, as permitted under Puerto Rico law. During the distribution period, the Fund will also make pro-rata distributions of principal. See “Dividends and Distributions” and “Tax Matters.”

Other Investment Policies and Practices

The Fund has adopted certain other investment policies and practices as set forth below:

Asset Coverage Requirements for Ratings on the Commercial Paper or Other Debt Securities or the Shares of Preferred Stock. If the Fund issues commercial paper or other debt securities or if the Fund issues shares of preferred stock and seeks to obtain a rating on such securities, any NRSRO may impose asset coverage or other requirements as a condition to issuing such rating. The NRSRO guidelines on particular forms of leverage may restrict the Fund’s ability to engage in certain of the following investment practices.

Borrowings. As a form of leverage, the Fund is authorized to borrow money from banks or other financial institutions in an aggregate amount (with all other forms of leverage) of up to 50% of the value of its total assets at the time of such borrowings; provided, further, that the Fund is authorized to borrow additional money from banks or other financial institutions in an amount of up to 5% of the value of its total assets at the time of such borrowings to repurchase Common Stock or redeem or repurchase commercial paper, debt securities or shares of preferred stock, or for temporary, extraordinary or emergency purposes. Borrowing by the Fund creates an opportunity for greater total return since the Fund will not be required to sell portfolio securities to repurchase Common Stock or redeem or repurchase commercial paper, debt securities or shares of preferred stock but, at the same time, increases exposure to risk of loss of principal. In addition, borrowed funds are subject to interest costs that may offset or exceed the return earned on the borrowed funds. See “Risk Factors and Special Considerations of Leverage.”

When-Issued Securities and Delayed Delivery Transactions. The Fund may purchase or sell securities on a delayed delivery basis or on a when-issued basis at fixed purchase or sale terms. These transactions arise when securities are purchased or sold by the Fund with payment and delivery taking place in the future. The purchase will be recorded

on the date the Fund enters into the commitment, and the value of the obligation thereafter will be reflected in the calculation of the Fund’s net asset value per share. The value of the obligation on the delivery date may be more or less than its purchase price. A segregated account of the Fund will be established with the custodian of the Fund consisting of cash, cash equivalents or liquid securities having a market value at all times at least equal to the amount of the commitment.

Indexed and Inverse Floating Obligations. The Fund may invest in obligations whose potential returns are directly related to changes in an underlying index or interest rates. For example, the Fund may invest in Puerto Rico obligations, U.S. Government obligations or municipal obligations that pay interest based on an index of Puerto Rico obligation, U.S. Government obligation or municipal obligation interest rates or based on the value of gold or some other product. The principal amount payable upon maturity of certain obligations also may be based on the value of an index. To the extent the Fund invests in these types of securities, the Fund’s return on such securities will rise when the underlying index or interest rate rises and fall when the index or interest rate falls.

The Fund also may invest in so-called “inverse floating obligations” or “residual interest bonds” on which the interest rates typically vary inversely with a short-term floating rate (which may be reset periodically by a dutch auction, a remarketing agent, or by reference to a short-term tax-exempt interest rate index). The Fund may purchase synthetically-created inverse floating rate bonds evidenced by custodial or trust receipts. Generally, interest rates on inverse floating rate bonds change in value in a manner that is opposite to most bonds—that is, income on inverse floaters will decrease when interest rates increase and increase when interest rates decrease. Such securities have the effect of providing a degree of investment leverage, since they may increase or decrease in value in response to changes in market interest rates at a rate which is a multiple (typically two) of the rate at which fixed-rate, long-term, tax-exempt securities increase or decrease in response to such changes. As a result, the market values of such securities will generally be more volatile than that of fixed-rate, tax-exempt securities. To seek to limit the volatility of these securities, the Fund may purchase inverse floating obligations with shorter-term maturities or which contain limitations on the extent to which the interest rate may vary. The Investment Adviser believes that indexed and inverse floating obligations represent a flexible portfolio management instrument for the Fund which allows the Investment Adviser to vary the degree of investment leverage relatively efficiently under different market conditions.

Call Rights. The Fund may purchase an issuer’s right to call all or a portion of a Puerto Rico obligation or municipal obligation for mandatory tender for purchase (a “Call Right”). A holder of a Call Right may exercise such right to require a mandatory tender for the purchase of related Puerto Rico obligations or municipal obligations, subject to certain conditions. A Call Right that is not exercised prior to the maturity of the related Puerto Rico obligation or municipal obligation will expire without value. The economic effect of holding both a Call Right and the related Puerto Rico obligation or municipal obligation is identical to holding a Puerto Rico obligation or municipal obligation as a non- callable security.

Repurchase Agreements. The Fund may invest in securities pursuant to repurchase agreements, which, for

purposes of this prospectus, are transactions in which the Fund purchases securities from a bank or other financial institution or a recognized securities dealer (the “counterparty”), and simultaneously commits to resell the securities to the counterparty at an agreed-upon date and price reflecting a market rate of interest unrelated to the coupon rate or maturity of the purchased securities, thereby determining the yield during the term of the agreement. This results in a fixed rate of return insulated from market fluctuations during such period. The prices at which the trades are conducted do not reflect the accrued interest on the underlying obligations. As a purchaser, the Fund will require the seller to provide additional securities if the market value of the purchased securities falls below the repurchase price at any time during the term of the repurchase agreement.

Securities acquired by the Fund under repurchase agreements will be considered part of its investment portfolio and must be included by the Fund for purposes of determining the Fund’s compliance with the 67% Investment Requirement.

In the event of default by the seller under a repurchase agreement the Fund may suffer time delays and incur costs or possible losses in connection with the disposition of the purchased securities. In the event of a default, instead of the contractual fixed rate of return, the rate of return to the Fund shall be dependent upon intervening fluctuations of the market values of such securities and the accrued interest on the securities. In such event, the Fund would have rights against the seller for breach of contract with respect to any losses resulting from market fluctuations following the failure

In general, for tax purposes, repurchase agreements are treated as collateralized loans secured by the securities “sold.” Therefore, amounts earned under such agreements will be considered taxable income unless the counterparty is able to pay tax-exempt interest to the Fund.

It is anticipated that the Fund may enter into repurchase agreements with Banco Santander or one of its affiliates, including Santander Securities, and with other mutual funds that are part of the First Puerto Rico family of funds. Such transactions will be subject to procedures adopted by the Board of Directors of the Fund and, particularly, by the Independent Directors (as defined herein), in an effort to address potential conflicts of interest that may arise from such transactions. See “Portfolio Transactions—Transactions Involving Affiliates.”

Dollar Rolls and Reverse Repurchase Agreements. The Fund may enter into dollar rolls. A dollar roll is a transaction in which the Fund sells mortgage-backed or other securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified