TO THE INVESTOR
The Commonwealth of Puerto Rico, its municipalities, instrumentalities and public corporations, are important issuers of tax-exempt municipal bonds, which are sold by leading securities dealers. Dealers in your area are listed in the Yellow Pages of telephone directories under "Stock and Bond Brokers" or "Investment Securities." The selection of a securities dealer is your decision. Your dealer will be able to provide specific details as to individual bond issues, including yields, prices, and maturities.
Tax-exempt public bonds of Puerto Rico are available at attractive yields in many maturities. New Bonds are frequently issued and are actively traded in the secondary market. Public bonds of Puerto Rico are held mainly by U.S. mainland investors, including individuals, bonds funds, insurance companies, commercial banks, and others. Denominations are usually in units of $5,000 or multiples thereof. By Federal law, bonds are now issued in registered form only, those issued before July 1, 1993 are available in both bearer and registered form. Recent issues are usually in book-entry form (without delivery of any actual certificate). Most paying agents and registrars are leading U.S. banks.
Certain Puerto Rico bonds that are issued and sold only in Puerto Rico would be taxable if held by a mainland U.S. resident, therefore, these bonds should not be offered in the mainland United States, unless stated otherwise in the official statement.
The Island of Puerto Rico, located in the Caribbean, is approximately 100 miles long and 35 miles wide, with an area of 3,423 square miles and a population of over 3.7 million. Its capital, San Juan, is about 1,600 miles southeast of New York and 1,000 miles southeast of Miami. Puerto Rico has been a part of the U.S. since 1898. The United States and Puerto Rico share a common defense, market, currency, and citizenship. The Commonwealth of Puerto Rico, as the Island's government is designated, exercises virtually the same control over its internal affairs as do each state of the United States.
DEBT PAYMENT RECORD
In the history of the Commonwealth of Puerto Rico, its public corporations and political subdivisions, there has been no instance of default in the timely payment of principal of, or interest on, any publicly held debt.
Credit ratings reflect the respective views of Moody's Investors Service Inc., Standard & Poor's Ratings Services and Fitch Ratings, and an explanation of the significance of such ratings may be obtained only from the rating agency furnishing the same. There is no assurance that such ratings will remain in effect for any given period or that they will not be revised or withdrawn entirely by any or all of such rating agencies if, in the judgment of any or all, circumstances so warrant. Any such revision or withdrawal of such rating or rating may have an effect on bond market prices.
TRIPLE TAX EXEMPTION
Under current acts of the U.S. Congress, the interest on most bonds issue by the Commonwealth of Puerto Rico, its political subdivisions and public corporations, is not includable in gross income for federal income tax purposes or subject to income tax by state and local municipalities. Few other U.S. municipal bonds enjoy the benefits of triple tax exemption in all states. Under the Internal Revenue Code of 1986, as amended, the interest paid on bonds issued by or on behalf of the Commonwealth could result in a federal tax to corporations, depending upon the tax position of the corporate investor.
Credit enhancement facilities such as bond insurance and letters of credit have been used by various Puerto Rico issuers to secure a higher rating. Consult your securities dealer for more information.
Certain bonds have been pre-refunded and are rated triple A by Moody's Investors Service and/or Standard & Poor's Ratings Services. Contact your securities dealer for specific details.