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Puerto Rico AAA Portfolio Target Maturity Fund, Inc.
Tax-Free Secured Obligations
The Tax-Free Secured Obligations (the “Notes”) are offered by Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (the “Fund”), which
is a non-diversified, closed-end management investment company organized under the laws of the Commonwealth of Puerto Rico (“Puerto Rico”)
and registered as an investment company under the Puerto Rico Investment Companies Act, as amended (the “PR-ICA”). The Notes will be issued
in three (3) series consisting of (i) Notes which are collateralized in an amount equal to their full outstanding principal amount and have a maturity
date of up to 270 days after the date of issuance thereof, or be payable on demand on a date not later than 270 days after the issuance thereof (such
series referred to herein as the “100% Principal Protection Short-Term Notes”); (ii) Notes which are collateralized in an amount equal to their full
outstanding principal amount and have a maturity date of over 270 days after the date of issuance thereof (such series referred to herein as the
“100% Principal Protection Medium-Term Notes” and collectively with the 100% Principal Protection Short-Term Notes referred to herein as the
“100% Principal Protection Notes”); and (iii) Notes the terms of which do not obligate the Fund to the full repayment of the original principal
amount at maturity and which may or may not be collateralized in an amount equal to their outstanding principal amount (such series referred to
herein as the “Contingent / Partial Principal Protection Notes”). Each series of Notes may be separately collateralized by a pledge of certain Eligible
Securities (as defined below), in the form, manner, and amount described herein and in the applicable supplement to this Offering Circular (each,
a “Product Supplement”). The collateral will be held by UBS Trust Company of Puerto Rico (“UBS Trust PR”), as collateral agent for the benefit
of the holders of the applicable series of Notes. See “SECURITY FOR THE NOTES” in the main body of this Offering Circular. The proceeds
from the issuance of the Notes will be used by the Fund for investment purposes consistent with its investment objectives.
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The Fund’s investment objectives are the following: (i) to provide investors in its Common Stock with current income, as is
consistent with the preservation of capital, and (ii) to return the initial investment of $10 per share of Common Stock by or before
December 31, 2032.
The Fund normally invests at least 67% of its total assets in securities issued by Puerto Rico entities. These include securities
issued by the Commonwealth of Puerto Rico and its political subdivisions, organizations, agencies, and instrumentalities, Puerto
Rico mortgage-backed and asset-backed securities, corporate obligations and preferred stock of Puerto Rico entities, and other
Puerto Rico securities that the Fund’s Investment Adviser may select, consistent with the Fund’s investment objectives and
policies.
The Fund may invest up to 33% of its total assets in securities issued by non-Puerto Rico entities. These include securities issued
or guaranteed by the U.S. Government, its agencies and instrumentalities, non-Puerto Rico mortgage-backed and asset-backed
securities, corporate obligations and preferred stock of non-Puerto Rico entities, municipal securities of issuers within the U.S.,
and other non-Puerto Rico securities that the Fund’s Investment Adviser may select, consistent with the Fund’s investment
objectives and policies.
At least 95% of the Fund’s total assets are invested in securities that, at the time of purchase are rated “AAA” by Standard
&Poor’s, a division of The McGraw-Hill Companies, Inc., “AAA” by Fitch Ratings (“Fitch”), or “Aaa” by Moody’s Investors
Service, Inc., or are comparably rated by a nationally recognized statistical rating organization or which may be determined by
the Fund’s Investment Adviser to be of comparable credit quality. The Fund may not invest in securities which have a maturity
date subsequent to December 31, 2032.
See “INVESTMENT OBJECTIVES AND POLICIES OF THE FUND” in the main body of this Offering Circular. No assurance can be given
that the Fund will achieve its investment objectives.
The Fund has obtained a credit rating of “F1+” for the 100% Principal Protection Short-Term Notes and “AA” for the 100% Principal
Protection Medium-Term Notes by Fitch. However, Fitch has not assigned a credit rating to the Contingent / Partial Principal Protection
Notes. See “RATINGS ON THE 100% PRINCIPAL PROTECTION NOTES” and “DESCRIPTION OF THE NOTES” in the main body of this
Offering Circular.
An investment in the N otes entails certain risks, including the risk of loss of some or all amounts invested. You should be aware that
certain conflicts of interest exist among the Fund, its Investment Adviser and/or their affiliates. Although the Notes are secured by certain collateral,
the Fund is not guaranteeing the creditworthiness of any particular security comprising such collateral or the issuer of such security. You should
not view the Notes as a vehicle for trading purposes. See “RISK FACTORS AND SPECIAL CONSIDERATIONS” commencing on page 1 and
“SPECIAL LEVERAGE CONSIDERATIONS” commencing on page 23. This Offering Circular contains important information about the Notes.
You should read this Offering Circular in its entirety before deciding whether to invest and retain it for future reference.
The Notes will be issued only in registered form, without coupons, from time to time in minimum denominations of $1,000 or as may
otherwise be specified in the relevant confirmation for any given transaction or the applicable Product Supplement and will bear interest, if any,
at a fixed, variable, or floating rate or at a rate determined by reference to an index, determined at the time of issuance. Such interest will be payable
(i) in the case of the 100% Principal Protection Medium-Term Notes, as will be specified in the relevant Note and in the confirmation for any given
transaction or the applicable Product Supplement; (ii) in the case of the 100% Principal Protection Short-Term Notes, periodically or at maturity,
as will be specified in the relevant Note and in the confirmation for any given transaction or the applicable Product Supplement; and (iii) in the case
of the Contingent / Partial Principal Protection Notes, periodically or at maturity, as will be specified in the relevant Note and in the applicable
Product Supplement. The 100% Principal Protection Medium-Term Notes and the Contingent / Partial Principal Protection Notes may be
redeemable prior to their stated maturity at the option of the Fund as provided in the relevant Note and in the confirmation for any given transaction
or the applicable Product Supplement. The 100% Principal Protection Short-Term Notes will not be redeemable prior to their stated maturities
unless otherwise provided in the relevant Note and in the confirmation for any given transaction or the applicable Product Supplement.
This Offering Circular sets forth certain information about the Notes that you need to know before making an investment decision. You
are encouraged to read this Offering Circular carefully and retain it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE OFFICE OF THE COM M ISSIONER OF
FINANCIAL INSTITUTIONS OF PUERTO RICO. THE OFFICE OF THE COM M ISSIONER OF FINANCIAL INSTITUTIONS HAS
NOT M ADE ANY DETERM INATION REGARDING THE ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY
REPRESENTATION TO THE CONTRARY IS A CRIM INAL OFFENSE.
The Notes will be offered on behalf of the Fund by the following dealer and other dealers as may be appointed from time to time.
UBS Financial Services Incorporated of Puerto Rico
The date of this Offering Circular is September 28, 2011.
THESE NOTES HAVE NOT BEEN REGISTERED W ITH THE SECURITIES AND EXCHANGE
COM M ISSION UNDER THE U.S. SECURITIES ACT OF 1933, AS AM ENDED, TH E PUERTO RICO
UNIFORM SECURITIES ACT, AS AM ENDED, O R TH E SECURITIES LAW S OF ANY JURISDICTION,
AND THE FUND HAS NOT BEEN REGISTERED UNDER THE U.S. INVESTM ENT COM PANY ACT OF
1940, AS AM ENDED. THE NOTES ARE OFFERED EXCLUSIVELY TO INDIVIDUALS HAVING THEIR
PRINCIPAL RESIDENCE W ITHIN PUERTO RICO AND TO PERSO NS O THER THAN INDIVIDUALS
W HOSE PRINCIPAL OFFICE AND PRINCIPAL PLACE OF BUSINESS ARE LOCATED WITHIN PUERTO
RICO, PROVIDED THAT IF SUCH ENTITY IS A NON-BUSINESS TRUST, THE TRUSTEE AND ALL THE
TRUST BENEFICIARIES M UST BE RESIDENTS OF PUERTO RICO.
AN INVESTM ENT IN THE NOTES IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNM ENT OR BY THE GOVERNM ENT OF PUERTO RICO. PROSPECTIVE INVESTORS SHOULD
BE AW ARE THAT THE NOTES ARE NOT AN OBLIGATION OF OR GUARANTEED BY, UBS FINANCIAL
SERVICES INCORPORATED OF PUERTO RICO, UBS TRUST COM PANY OF PUERTO RICO, UBS AG,
OR ANY OF THEIR AFFILIATES. IN ADDITION, SUCH INVESTM ENTS ARE NOT DEPOSITS AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY
OR INSTRUM ENTALITY OF THE U.S. GOVERNM ENT.
The Fund consists of an actively managed portfolio of investment securities. UBS Asset Managers of Puerto
Rico, a division of UBS Trust PR, acts as investment adviser for the Fund. UBS Financial Services Incorporated of
Puerto Rico acts as dealer for the Notes. The address of the Fund is American International Plaza Building – Tenth Floor,
250 Muñoz Rivera Avenue, San Juan, Puerto Rico 00918, and its telephone number is (787) 773-3888.
You should rely only on the information contained in this Offering Circular. The Fund has not authorized
anyone to provide you with different information. You should not assume that the information provided by this Offering
Circular is accurate as of any date other than the date on the front of this Offering Circular. This Offering Circular
does not constitute an offer to sell or a solicitation of an offer to buy such securities in any circumstances in which such
offer or solicitation is unlawful.
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SUM M ARY
The following summary is qualified in its entirety by reference to the more detailed information included in the
main body of this Offering Circular, and unless otherwise specified, cross-references are to such information. This
Offering Circular speaks only as of its date, and the information contained herein is subject to change. No person is
authorized to detach this Summary from this Offering Circular or otherwise use it without the entire Offering Circular.
You should carefully consider information set forth under the heading “RISK FACTORS AND SPECIAL
CONSIDERATIONS” in the main body of this Offering Circular.
The Fund
Leverage Program
The Puerto Rico AAA Portfolio T arget Maturity Fund, Inc. (the “Fund”) is a
corporation organized under the laws of the Commonwealth of Puerto Rico (“Puerto
Rico”), which is duly registered as a non-diversified, closed-end management
investment company under the Puerto Rico Investment Companies Act, as amended
(the “PR-ICA”). The Fund was incorporated on July 12, 2002 and is subject to a
ruling issued by the Office of the Commissioner of Financial Institutions (the
“Commissioner’s Ruling”). See “THE FUND” in the main body of this Offering
Circular.
The Fund may increase amounts available for investment through the issuance of
preferred stock, debt securities, or other forms of leverage, representing not more
than 50% of its total assets immediately after any such issuance. As part of such
leverage program, the Fund is offering the Tax-Free Secured Obligations (the
“Notes”). Such offerings will be made only to individuals who have their principal
residence in Puerto Rico and to persons, other than individuals, that have their
principal office and principal place of business in Puerto Rico (collectively, the
“Puerto Rico Residents”). Moreover, the Fund may only issue preferred stock, debt
securities, or other forms of leverage to the extent that immediately after any such
issuance, the value of its total assets, less all the Fund’s liabilities and indebtedness
that are not represented by preferred stock, debt securities, or other forms of
leverage being issued or already outstanding, is equal to or greater than the total of
200% of the aggregate par value of all outstanding preferred stock (not including
any accumulated dividends or other distributions attributable to such preferred
stock) and the total amount outstanding of debt securities and other forms of
leverage issued by the Fund. See “LEVERAGE PROGRAM” and “SPECIAL
LEVERAGE CONSIDERATIONS” in the main body of this Offering Circular.
Description of the Notes
Type of Notes
M aturity
Rating
Collateral
100% Principal Protection
Short-Term Notes
up to 270 days from
their date of issuance
“F1+” by
Fitch
Principal
Protection
100%
Collateralized in an
amount equal to full
outstanding amount
Collateralized in an
amount equal to full
outstanding amount
100% Principal Protection
Medium-Term Notes
over 270 days from
their date of issuance
“AA” by
Fitch
100%
Contingent / Partial
Principal Protection Notes
any term
None
As set forth in
the applicable
P r o d u c t
Supplement
Collateralized in the
manner set forth in
t h e
a p p l i c a b l e
Product Supplement
Limitations on the Offering and Transfer of the Notes. The Notes will not be
registered under the U.S. Securities Act of 1933, as amended (the “1933 Act”), nor
under the securities laws of any state or jurisdiction, and the Fund has not been
registered under the U.S. Investment Company Act of 1940, as amended.
Consequently, the Notes may be sold, pledged, hypothecated, or otherwise
transferred exclusively to Puerto Rico Residents. All investors and transferees of
the Notes (each a “Noteholder” and collectively, the “Noteholders”) are required
to represent in writing that the residency conditions to purchase are satisfied or, in
the case of purchases through UBS Financial Services Incorporated of Puerto Rico
(“UBS Financial Services Puerto Rico”), to follow such other procedures as
required by UBS Financial Services Puerto Rico for determining residency.
Appendix C to this Offering Circular contains, in letter form, the substance of
representations that must be made by dealers (other than UBS Financial Services
Puerto Rico) that may be appointed in the future (each, a “Dealer”). The Dealers
will be contractually obligated to the Fund to obtain such letter of representation in
proper form. Any sale or transfer of the Notes to an investor or transferee (other
than transfers by operation of law) who (i) has not provided such a letter or (ii) in
the case of transfers effected through UBS Financial Services Puerto Rico, has not
complied with such procedures as may be required by UBS Financial Services
Puerto Rico to establish Puerto Rico residency, will be null and void. See “THE
NOTES” in the main body of this Offering Circular.
Maturities. The 100% Principal Protection Short-Term Notes have maturities of
up to 270 days from their date of issuance, including notes payable on demand (but
not later than 270 days) and the 100% Principal Protection Medium-Term Notes
have maturities of over 270 days from their date of issuance. The Contingent /
Partial Principal Protection Notes may have maturities of any length of time.
Ratings on the 100% Principal Protection Notes. Upon issuance, the 100%
Principal Protection Short-Term Notes and the 100% Principal Protection Medium-
Term Notes will be rated “F1+” and “AA,” respectively, by Fitch Ratings (“Fitch”).
FITCH HAS NOT ASSIGNED A CREDIT RATING TO THE FUND OR
THE CONTINGENT / PARTIAL PRINCIPAL PROTECTION NOTES.
Form and Minimum Denominations. The Notes will only be issued in registered
form without coupons and in minimum denominations of $1,000 or as may
otherwise be specified in the relevant confirmation for any given transaction or the
applicable Product Supplement.
Interest Rate. The Notes will bear interest, if any, at a rate determined at the time
of issuance of each Note and which will be set forth on the relevant Note and in the
applicable Product Supplement.
Redemption. The 100% Principal Protection Medium-Term Notes and the
Contingent / Partial Principal Protection N otes may be redeemable prior to their
stated maturities at the option of the Fund, as provided in the relevant Note and the
applicable Product Supplement. The 100% Principal Protection Short-Term Notes
will not be redeemable prior to their stated maturities, unless otherwise provided in
the relevant Note and the applicable Product Supplement.
Collateral. Each series of Notes may be separately collateralized by a pledge of
certain Eligible Securities (as further described herein), including among others,
P.R. Mortgage-Backed Securities, P.R. Governmental Obligations, U.S. Treasury
Securities, and U.S. Government Agency Securities (as described herein), in the
form, manner, and amount described herein and in the applicable Product
Supplement. See “SECURITY FOR THE NOTES” in the main body of this
Offering Circular.
The terms of the 100% Principal Protection Notes will obligate the Fund to fully
repay the original principal amount at maturity and will be collateralized in an
amount equal to their full outstanding principal amount, while the terms of the
Contingent / Partial Principal Protection Notes do not obligate the Fund to the full
repayment of the original principal amount at maturity and may or may not be
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Agent
Dealer
Investment Objectives
and Policies
M anagement of the Fund
collateralized in an amount equal to their outstanding principal amount, as described
herein and more specifically in the applicable Product Supplement.
UBS Trust Company of Puerto Rico (“UBS Trust PR”) will act as issuing, paying,
and transfer agent on behalf of the Fund and as collateral agent (the “Agent”) on
behalf of the Noteholders. See “THE AGENT” in the main body of this Offering
Circular.
UBS Financial Services Puerto Rico, an affiliate of UBS Trust PR, will offer the
Notes on behalf of the Fund and may purchase the Notes in a principal capacity and
use its best efforts to sell such Notes on behalf of the Fund. The Fund may appoint
other Dealers from time to time. Each Dealer may be paid a fee to be negotiated
from time to time equal to a percentage of the principal amount of the Notes sold
by such Dealer and may be reimbursed for certain out-of-pocket expenses incurred.
The Fund will also indemnify the Dealers against certain liabilities, including
liabilities under the 1933 Act. The Fund may also sell Notes directly to investors
from time to time.
The Fund’s investment objectives are (i) to provide investors in its Common Stock
with current income, as is consistent with the preservation of capital, and (ii) to
return the initial investment of $10 per share of Common Stock by or before
December 31, 2032. See “INVESTM ENT OBJECTIVES AND POLICIES OF
THE FUND” in the main body of this Offering Circular.
The Fund normally invests at least 67% of its total assets in securities issued by
Puerto Rico entities. These include securities issued by the Commonwealth of
Puerto Rico and
its political subdivisions, organizations, agencies, and
instrumentalities, Puerto Rico mortgage-backed and asset-backed securities,
corporate obligations and preferred stock of Puerto Rico entities, and other Puerto
Rico securities that the Investment Adviser (as defined below) may select,
consistent with the Fund’s investment objectives and policies.
The Fund may invest up to 33% of its total assets in securities issued by non-Puerto
Rico entities. These include securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, non-Puerto Rico mortgage-backed
and asset-backed securities, corporate obligations and preferred stock of non-Puerto
Rico entities, municipal securities of issuers within the U.S., and other non-Puerto
Rico securities that the Investment Adviser may select, consistent with the Fund’s
investment objectives and policies.
At least 95% of the Fund’s total assets are invested in securities that, at the time of
purchase (i) are rated “AAA” by Standard & Poor’s, a division of The McGraw-Hill
Companies, Inc., “AAA” by Fitch, or “Aaa” by Moody’s Investors Service, Inc., or
are comparably rated by a nationally recognized statistical rating organization or (ii)
which may be determined by the Investment Adviser to be of comparable credit
quality. The Fund may not invest in securities which have a maturity date
subsequent to December 21, 2032.
See “INVESTMENT OBJECTIVES AND POLICIES OF THE FUND” in the main
body of this Offering Circular. N o assurance can be given that the Fund will
achieve its investment objectives.
UBS Asset Managers of Puerto Rico, a division of UBS Trust PR, serves as the
Fund’s investment adviser (in such capacity, UBS Trust PR is referred to herein as
the “Investment Adviser”). UBS Trust PR also serves as the Fund’s administrator
(in such capacity, the “Administrator”), as well as its transfer agent, registrar,
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