Employees Retirement System of the Government of the Commonwealth of Puerto Rico and its Instrumentalities (ERS)

Website: http://www.retiro.pr.gov

Credit Ratings

Security

The System has authorized the issuance of one or more series of senior pension bonds to increase the funds currently available to pay pension benefits to certain of its beneficiaries and reduce its unfunded accrued actuarial pension liability. The System will pledge future Employer Contributions to the payment of the Bonds, invest the proceeds of the Bonds and use these investments and the earnings thereon to provide such pension benefits to its beneficiaries. The Bonds are limited, non-recourse obligations of the System payable solely from and secured solely by a pledge of Employer Contributions made after the date of issuance of the Bonds. The Bonds are not payable from the investments made by the System with the proceeds of the Bonds or from any other assets of the System, or from employee contributions to the System. The Bonds are not an obligation of the Commonwealth of Puerto Rico or any of its other instrumentalities or political subdivisions.

Functions

The Employees Retirement System of the Government of the Commonwealth of Puerto Rico (the "System") is a trust by law in 1951 by the Legislature of the Commonwealth of Puerto Rico to provide pension and other benefits to retired employees of the government of the Commonwealth and its instrumentalities. These benefits are funded by contributions made monthly or twice a month to the System by the Commonwealth of Puerto Rico and its instrumentalities ("Employer Contributions") and their employees, and by investment earnings. Government employers are currently required by law to make Employer Contributions to the System of at least 9.275% of their covered payroll. As of June 30, 2007, the System had 176,837 participating employees employed by 210 government employers, and provided retirement benefits to 99,851 beneficiaries, which consist of retirees and spouses of deceased retirees. As of the same date, the System's net assets held in trust for pension plan benefits were $2.891 billion.

Trustees Under the Trust Indenture:

Bank of New York

Financial Statements Audited by:

KPMG LLP