$151,935,000 Government of Guam General Obligation Bonds 2007 Series A

Transcription

1 NEW ISSUE FULL BOOK-ENTRY RATING: S&P B In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Government, based upon an analysis of existing laws, regulations, rulings and court decisions and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of In the further opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings in calculating federal corporate alternative minimum taxable income. Bond Counsel is also of the opinion that interest on the Bonds is exempt from income taxation by any state, territory or possession of the United States or any political subdivision of any of them. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See TAX MATTERS herein. Dated: Date of Delivery $151,935,000 Government of Guam General Obligation Bonds 2007 Series A Due: November 15, as shown below This official statement contains information relating to the offering and sale of the Government of Guam General Obligation Bonds, 2007 Series A (the Bonds ). The Bonds will be issued as fully registered bonds in book-entry form only, and will be initially issued and registered in the name of Cede & Co., as nominee for The Depository Trust Company ( DTC ), New York, New York. Interest on the Bonds will be due and payable semiannually on May 15 and November 15 of each year, commencing May 15, The Bonds will be issued in denominations of $5,000 principal amount or any integral multiple thereof. Payments of principal of, Redemption Price, if applicable, and interest on the Bonds are to be made to purchasers by DTC through the DTC participants. See BOOK-ENTRY SYSTEM herein. Purchasers will not receive certificates representing their interest in the Bonds. The Bonds are subject to redemption prior to maturity, as described herein. See THE BONDS Redemption herein. The Bonds are authorized to be issued pursuant to Section of Title 5 of the Guam Code Annotated, as amended and supplemented, including as supplemented by Public Law No , approved by the 29th Guam Legislature on September 23, 2007 and signed by the Governor of Guam on September 29, 2007, and by Public Law No , approved by the 29th Guam Legislature on October 22, 2007 and signed by the Governor of Guam on October 22, 2007 (the Bond Act ), and a Certificate of the Governor of Guam, dated as of November 1, 2007 (the Certificate ). The issuance and sale of the Bonds have been approved by the Guam Economic Development and Commerce Authority pursuant to Resolution No adopted on October 23, See THE BONDS Authority for the Bonds herein. The Bonds are being issued by the Government for the purpose of: (i) refunding and redeeming a portion of the Government of Guam General Obligation Bonds, 1993 Series A, (ii) funding capital projects and certain obligations of the Government of Guam, and (iii) paying expenses incurred in connection with the issuance of the Bonds. See PLAN OF FINANCE and THE PROJECTS herein. THE BONDS CONSTITUTE THE VALID AND LEGALLY BINDING GENERAL OBLIGATIONS OF THE GOVERNMENT, AND THE GOVERNMENT PLEDGES ITS FULL FAITH AND CREDIT FOR THE PUNCTUAL PAYMENT OF PRINCIPAL OF AND INTEREST ON THE BONDS. SEE SECURITY AND SOURCES OF PAYMENT FOR THE BONDS HEREIN. AN INVESTMENT IN THE BONDS INVOLVES CERTAIN RISKS, INCLUDING THOSE DESCRIBED HEREIN UNDER THE HEADINGS INTRODUCTION, SECURITY AND SOURCES OF PAYMENT FOR THE BONDS, GUAM FINANCIAL OPERATIONS AND CERTAIN INVESTMENT CONSIDERATIONS, IN APPENDIX A, AND ELSEWHERE IN THIS OFFICIAL STATEMENT. THIS COVER PAGE CONTAINS INFORMATION FOR REFERENCE ONLY; IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. MATURITY DATES, AMOUNTS, INTEREST RATES AND PRICES OR YIELDS $27,195, % Term Bonds Due November 15, 2023 Yield 5.200% CUSIP 40065B CA9 $27,120, % Term Bonds Due November 15, 2027 Yield 5.330% CUSIP 40065B CB7 $97,620, % Term Bonds Due November 15, 2037 Yield 5.450% CUSIP 40065B CC5 CUSIP numbers have been assigned by an organization not affiliated with the Government and are included solely for the convenience of the public. Neither the Government nor the Underwriters take any responsibility for the accuracy of such numbers. The Bonds will be offered when, as and if issued by the Government and received by the Underwriters, subject to the approval of validity of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Government. Certain matters will be passed on for the Government by the Attorney General of Guam, and for the Underwriters by their counsel, McCorriston Miller Mukai MacKinnon LLP, Honolulu, Hawaii. The Bonds, in bookentry form, will be available for delivery through DTC in New York, New York, on or about November 1, Citi Dated: October 23, 2007 Merrill Lynch & Co.

2

3 GOVERNMENT OF GUAM FELIX P. CAMACHO Governor MICHAEL W. CRUZ, M.D. Lieutenant Governor ALICIA G. LIMTIACO Attorney General MARK FORBES Speaker, Guam Legislature EDWARD J.B. CALVO Vice Speaker, Guam Legislature SPECIAL SERVICES Trustee Bank of Guam Hagåtña, Guam Paying Agent U.S. Bank National Association Los Angeles, California Bond Counsel Orrick, Herrington & Sutcliffe LLP San Francisco, California Financial Advisor Banc of America Securities LLC New York, New York

4 (THIS PAGE INTENTIONALLY LEFT BLANK)

5 NO DEALER, BROKER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED BY THE GOVERNMENT OR THE UNDERWRITERS TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN AS CONTAINED IN THIS OFFICIAL STATEMENT, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE GOVERNMENT OR THE UNDERWRITERS. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE BONDS, NOR SHALL THERE BE ANY SALE OF THE BONDS BY ANY PERSON, IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSONS TO MAKE SUCH OFFER, SOLICITATION OR SALE. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE GOVERNMENT SINCE THE DATE HEREOF. THIS OFFICIAL STATEMENT IS NOT TO BE CONSTRUED AS A CONTRACT WITH THE PURCHASERS OF THE BONDS. THE INFORMATION AND EXPRESSIONS OF OPINION CONTAINED IN THIS OFFICIAL STATEMENT ARE SUBJECT TO CHANGE WITHOUT NOTICE. STATEMENTS CONTAINED HEREIN WHICH INVOLVE ESTIMATES, FORECASTS OR MATTERS OF OPINION, WHETHER OR NOT EXPRESSLY SO DESCRIBED HEREIN, ARE INTENDED SOLELY AS SUCH AND ARE NOT TO BE CONSTRUED AS REPRESENTATIONS OF FACT OR REPRESENTATIONS THAT THE ESTIMATES WILL BE REALIZED. THIS OFFICIAL STATEMENT HAS BEEN DEEMED FINAL AS OF ITS DATE BY THE GOVERNMENT PURSUANT TO RULE 15c2-12 OF THE SECURITIES AND EXCHANGE COMMISSION PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE GOVERNMENT HAS ALSO UNDERTAKEN TO PROVIDE CONTINUING DISCLOSURE ON CERTAIN MATTERS, INCLUDING ANNUAL FINANCIAL INFORMATION AND SPECIFIC MATERIAL EVENTS, AS MORE FULLY DESCRIBED HEREIN. SEE CONTINUING DISCLOSURE HEREIN. THE UNDERWRITERS HAVE PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT: THE UNDERWRITERS HAVE REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, THEIR RESPECTIVE RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITERS DO NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT, NOR HAVE THEY BEEN REGISTERED UNDER THE SECURITIES LAWS OF ANY STATE.

6 CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, budget or similar words. Such forward-looking statements include, among others, statements found under CERTAIN DEMOGRAPHIC, ECONOMIC AND FINANCIAL INFORMATION REGARDING THE TERRITORY OF GUAM in Appendix A. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVES KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS, WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE GOVERNMENT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN CHANGES OCCUR TO ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED.

7 TABLE OF CONTENTS INTRODUCTION...1 Other Information...2 PLAN OF FINANCE...2 General...2 Refunding Plan...2 Sources and Uses of Funds...4 THE BONDS...4 Authority for the Bonds...4 Description of the Bonds...4 Redemption...5 Annual Debt Service...8 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS...9 General...9 Funds...9 Additional Bonds...10 GUAM FINANCIAL OPERATIONS...10 Budgetary Process...10 Major Sources of General Fund Revenues...12 Major Expense Categories of General Fund...14 Retirement Fund and Other Post-Employment Benefits...16 Section 30 Revenues...18 Fiscal Year 2008 Budget...19 Existing Indebtedness...21 Investment Policies of the Government...23 Pending Litigation...23 THE PROJECTS...24 Guam Public School System...24 Guam Memorial Hospital...24 University of Guam...24 Other Government Obligations...24 CERTAIN INVESTMENT CONSIDERATIONS...25 General...25 Impact of Tourism and U.S. Military Presence...25 Typhoons and Earthquakes...26 BOOK-ENTRY SYSTEM...26 VERIFICATION...29 TAX MATTERS...29 LEGAL MATTERS...31 No Litigation...31 Legal Opinions...32 CONTINUING DISCLOSURE...32 RATING...32 MISCELLANEOUS...32 Financial Advisors...32 Underwriting...33 Additional Information...34 APPENDIX A: CERTAIN DEMOGRAPHIC AND ECONOMIC INFORMATION REGARDING THE TERRITORY OF GUAM...A-1 APPENDIX B: EXCERPTS FROM GOVERNMENT OF GUAM AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, B-1 APPENDIX C: PROPOSED FORM OF BOND COUNSEL OPINION... C-1 APPENDIX D: SUMMARY OF CERTAIN PROVISIONS OF THE CERTIFICATE...D-1 APPENDIX E: FORM OF CONTINUING DISCLOSURE CERTIFICATE...E-1

8 (THIS PAGE INTENTIONALLY LEFT BLANK)

9 $151,935,000 GOVERNMENT OF GUAM GENERAL OBLIGATION BONDS, 2007 SERIES A INTRODUCTION This Official Statement, which includes the cover page and appendices hereto, provides information in connection with the offering and sale of the Government of Guam General Obligation Bonds, 2007 Series A (the Bonds ) in the aggregate principal amount of $151,935,000. The Bonds are being issued by the Government for the purpose of: (i) refunding and redeeming a portion of the Government of Guam General Obligation Bonds, 1993 Series A (the Prior Bonds ), (ii) funding capital projects and certain obligations of the Government of Guam (collectively, the Projects ), and (iii) paying expenses incurred in connection with the issuance of the Bonds. See PLAN OF FINANCE and THE PROJECTS herein. The Bonds are authorized to be issued pursuant to Section of Title 5 of the Guam Code Annotated, as amended and supplemented, including as supplemented by Public Law No , approved by the 29th Guam Legislature on September 23, 2007 and signed by the Governor of Guam on September 29, 2007, and by Public Law No , approved by the 29th Guam Legislature on October 22, 2007 and signed by the Governor of Guam on October 22, 2007 (the Bond Act ), and a Certificate of the Governor of Guam, dated as of November 1, 2007 (the Certificate ). The issuance and sale of the Bonds have been approved by the Guam Economic Development and Commerce Authority ( GEDCA ) pursuant to Resolution No adopted on October 23, See THE BONDS Authority for the Bonds herein. Under the Certificate, the Governor has appointed Bank of Guam as trustee (the Trustee ) and depositary (the Depositary ) for the Bonds and U.S. Bank National Association as paying agent (the Paying Agent ) and registrar for the Bonds. The Bonds constitute the valid and legally binding general obligations of the Government, and the Government pledges its full faith and credit for the punctual payment of principal of and interest on the Bonds. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS herein. Certain demographic, economic and financial information regarding the Territory of Guam is included herein under GOVERNMENT OF GUAM FINANCIAL OPERATIONS and in Appendix A hereto. Excerpts from the audited financial statements of the Government for the Fiscal Year ended September 30, 2006 are included in Appendix B hereto. Generally, the Government s audited financial statements for a given fiscal year are not available until approximately nine months after the close of the fiscal year. For the purposes of this Official Statement, all financial data for the Fiscal Year ended September 30, 2007, are unaudited and preliminary. The excerpts from the Fiscal Year 2006 audited financial statements included in Appendix B show a deficit in the Government s General Fund of $524.1 million as of September 30, Reference should be made to the excerpts from the audited financial statements included in Appendix B for a complete understanding of the information provided therein, including certain qualifications to the auditor s report on such financial statements. 1

10 The Government has covenanted for the benefit of bondholders (including beneficial owners of the Bonds) to provide certain financial information and operating data relating to the Government (the Annual Report ) by not later than 270 days following the end of the Government s fiscal year (which currently ends September 30), and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report will be filed by the Government with each Nationally Recognized Municipal Securities Information Repository (and with the appropriate state information depository, if any). Notices of material events will be filed by the Government with Nationally Recognized Municipal Securities Information Repositories or with the Municipal Securities Rulemaking Board (and with the appropriate state information depository, if any). See FORM OF CONTINUING DISCLOSURE CERTIFICATE in Appendix E. These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The summaries and descriptions of documents, statutes and constitutional provisions referred to herein do not purport to be comprehensive or definitive, and are qualified in their entirety by reference to each such document, statute and constitutional provision. The purchase of the Bonds involves certain investment risks that are described throughout this Official Statement. Accordingly, each prospective purchaser of the Bonds should make an independent evaluation of all of the information presented in this Official Statement in order to make an informed investment decision. PLAN OF FINANCE General A portion of the proceeds of the Bonds will be used to pay the costs of the Projects and a portion of the proceeds of the Bonds will be used to redeem a portion of the Prior Bonds. See Sources and Uses of Funds and THE PROJECTS. Refunding Plan A portion of the proceeds of the Bonds will be used to redeem and currently refund a portion of the Prior Bonds. The Prior Bonds were issued on October 5, 1993 in the aggregate principal amount of $175,000,000 and are currently outstanding in the aggregate principal amount of $110,975,000. The Prior Bonds are subject to optional redemption in whole or in part on any date at a redemption price equal to the principal amount of Prior Bonds to be redeemed, plus accrued interest thereon to the date fixed for redemption. The Government plans to redeem the Prior Bonds to be refunded (the Refunded Bonds ) on or about December 7,

11 The following table shows the maturity schedule for the Prior Bonds and the amount of each maturity to be redeemed and currently refunded with a portion of the proceeds of the Bonds. Maturity Date (November 15) Outstanding Principal Amount Principal Amount to be Refunded 2007 $ 6,845,000 $ 6,845, ,195,000 7,195, ,150,000 25,940, ,785,000 33,715,000 A portion of the proceeds of the Bonds, together with other available funds from the trustee for the Refunded Bonds, will be deposited in an escrow fund (the Escrow Fund ) pursuant to an agreement with U.S. Bank National Association, as escrow agent for the Refunded Bonds, and will be used to purchase State and Local Government Series Securities issued by the United States Treasury (the Federal Securities ) to be held in trust for the benefit of the owners of the Refunded Bonds. The Federal Securities in the Escrow Fund will mature at such times and in such amounts, and will bear interest payable at such times and in such amounts, that, together with the moneys available in the Escrow Fund, sufficient moneys will be available to provide for (1) the payment of scheduled principal of and interest on the Refunded Bonds through but not including their date of redemption and (2) the payment on such date of redemption of the redemption price of the Refunded Bonds plus accrued but unpaid interest thereon. Grant Thornton LLP, independent certified public accountants, will verify the mathematical accuracy of the computations prepared by the Underwriters with respect to the sufficiency of the Escrow Fund and the yield on the Bonds and the Escrow Fund. See VERIFICATION. 3

12 Sources and Uses of Funds Table 1 sets forth the anticipated sources and uses of funds pertaining to the Bonds. TABLE 1 Sources and Uses of Funds Sources: Principal Amount of Bonds $151,935, Original Issue Discount (4,141,081.35) Funds from Prior Bonds Trustee 1,970, Total Sources $149,764, Uses: Refunding of Prior Bonds $75,635, Deposit to Proceeds Fund 69,277, Costs of Issuance * 4,851, Total Uses $149,764, * Includes Underwriters discount and other miscellaneous fees and expenses. THE BONDS Authority for the Bonds The Bonds are authorized to be issued pursuant to the Bond Act. The issuance and sale of the Bonds have been approved by GEDCA pursuant to Resolution No adopted on October 23, The Bonds are issued under and pursuant to the Certificate. The Bond Act provides that Bonds may be issued in an aggregate principal amount necessary to fund the refinancing of the Prior Bonds, to provide no more than $90,000,000 for the payment of the costs of the Projects, to fund necessary reserves (although no reserves are being established with respect to the Bonds) and to pay certain expenses incurred in connection with the issuance of the Bonds. Description of the Bonds The Bonds, designated as the Government of Guam General Obligation Bonds, 2007 Series A are being issued in the aggregate principal amount of $151,935,000 and will be dated as of their date of issuance. The Bonds bear interest at the rates and mature on the dates and in the amounts set forth on the cover page hereof. The Bonds will be issued in denominations of $5,000 principal amount or any integral multiple thereof. Interest on the Bonds is payable on May 15 and November 15 of each year (each, an Interest Payment Date ), commencing May 15, Interest will accrue on the Bonds on the basis of a 360-day year comprised of twelve 30-day months. Interest on the Bonds will be payable by check or draft mailed by first-class mail to the persons whose names the Bonds are registered on the first day of the calendar month in which each such Interest Payment Date occurs (each, a Record Date ), except the payment shall be made in immediately available funds (e.g., by wire transfer) to any Owner of at least one million dollars of outstanding Bonds who shall have requested in writing such method of payment of 4

13 interest prior to the close of business on the Record Date immediately preceding any Interest Payment Date. The Bonds, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ( DTC ). So long as DTC or its nominee is the registered owner of all Bonds, all payments of principal of, Redemption Price, if applicable, and interest on the Bonds will be made directly to DTC. Disbursement of such payments to the Beneficial Owners (as defined below) of the Bonds will be the responsibility of the DTC Participants as more fully described herein. See BOOK- ENTRY SYSTEM. Each Bond will bear interest from the Interest Payment Date next preceding the date of registration thereof unless it is registered as of a day after a Record Date and on or before the related Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or unless it is registered on or before the Record Date for the first Interest Payment Date, in which event it shall bear interest from its date; provided, however, that if interest on the Bonds then outstanding shall be in default at the time of registration of any Bond, such Bond will bear interest from the date to which interest has previously been paid or made available for payment on the Bonds then outstanding. Redemption Optional Redemption. At the option of the Government, the Bonds maturing on or after November 15, 2018 are subject to redemption prior to their respective stated maturities, at the option of the Government, from any source of available funds, on any date on or after November 15, 2017, as a whole, or in part, by lot, at a Redemption Price equal to the principal amount thereof to be redeemed plus interest accrued thereon to the date fixed for redemption. The Government may only exercise its option to redeem Bonds maturing on or after November 15, 2018 by depositing certain federal securities, as described in the Certificate, with the Trustee before notice of redemption is given, which securities must be sufficient in amount and mature in timely manner to provide for such redemption. Mandatory Sinking Account Redemption. The Bonds maturing on November 15, 2023 are subject to redemption prior to their respective stated maturity, in part, by lot, on November 15 of each year commencing November 15, 2019, from Mandatory Sinking Account Payments at a redemption price equal to their principal amount, plus interest accrued thereon to the date fixed for redemption, without premium, in the years and in the amounts set forth in the following table: Year Amount 2019 $4,920, ,170, ,425, ,695, ,985,000 Final maturity. The Bonds maturing on November 15, 2027 are subject to redemption prior to their respective stated maturity, in part, by lot, on November 15 of each year commencing 5

14 November 15, 2024, from Mandatory Sinking Account Payments at a redemption price equal to their principal amount, plus interest accrued thereon to the date fixed for redemption, without premium, in the years and in the amounts set forth in the following table: Year Amount 2024 $6,280, ,600, ,945, ,295,000 Final maturity. The Bonds maturing on November 15, 2037 are subject to redemption prior to their respective stated maturity, in part, by lot, on November 15 of each year commencing November 15, 2028, from Mandatory Sinking Account Payments at a redemption price equal to their principal amount, plus interest accrued thereon to the date fixed for redemption, without premium, in the years and in the amounts set forth in the following table: Year Amount 2028 $ 7,670, ,075, ,505, ,940, ,415, ,905, ,430, ,975, ,550, ,155,000 Final maturity. At any time prior to giving notice of such redemption, the Trustee, upon the Request of the Government, will apply moneys in the Bond Fund, in an amount not in excess of such Mandatory Sinking Account Payment, to the purchase of the applicable Term Bonds at public or private sale, as and when and at such prices (including brokerage and other charges) as are specified in such Request, except that the purchase price (excluding accrued interest) may not exceed the price that would be payable for such Bonds upon redemption by application of such Mandatory Sinking Account Payment. If less than all of the Term Bonds of any maturity are to be redeemed other than by application of Mandatory Sinking Account Payments, the remaining Mandatory Sinking Account Payments for that maturity will in the aggregate be reduced by the same amount as the amount of Term Bonds so redeemed, and the amount of the reduction of each such Mandatory Sinking Account Payment will be determined by Request of the Government. Selection of Bonds. If less than all of the Bonds of any maturity are to be redeemed, the amount of each maturity of the Bonds to be redeemed will be determined by the Government, and the Bonds of such maturity to be redeemed will be selected by the Trustee by lot in such 6

15 manner as the Trustee may determine. For purposes of such selection, Bonds will be deemed to be composed of $5,000 portions, and any such portion may be separately redeemed. Notice of Redemption. The Trustee is required to give notice of redemption not less than 30 nor more than 60 days prior to the date fixed for redemption, by first class mail to each of the registered owners of any Bonds designated for redemption at their respective addresses as shown on the registration books of the Trustee on the date the Bonds to be redeemed are selected. As long as the book-entry system is in effect with respect to the Bonds, any redemption notice shall be given to DTC as Owner of the Bonds. Each notice of redemption is required to state, among other things, the date fixed for redemption, the place or places of redemption, the maturities to be redeemed, and, if less than all of any such maturity, the numbers of the Bonds of such maturity to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount or Mandatory Sinking Account Payment thereof to be redeemed. The notice is also required to state that on said date there will become due and payable on each of said Bonds the Redemption Price thereof or of said specified portion of the principal thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue. The notice must also require that such Bonds be surrendered, with a written instrument of transfer duly executed by the registered owner thereof or by such registered owner s attorney duly authorized in writing. Each notice will also state the CUSIP number, date of issue and interest rate on each Bond, or portion thereof, to be redeemed, and shall include the redemption agent name and address with contact person and telephone number. Any failure to provide a redemption notice or any defect in such notice will not affect the validity of the redemption. See SUMMARY OF CERTAIN PROVISIONS OF THE CERTIFICATE Notice of Redemption in Appendix D. Effect of Redemption. Notice of redemption having been duly given, and moneys being held by the Trustee or any Paying Agent for payment of the redemption price of, and interest accrued to the redemption date on, the Bonds (or portions thereof) so called for redemption, such Bonds, on the redemption date designated in such notice, will become due and payable at the redemption price specified in such notice plus interest accrued thereon to the date fixed for redemption, interest on the Bonds so called for redemption will cease to accrue, said Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Certificate, and the Holders of said Bonds will have no rights in respect thereof except to receive payment of said Redemption Price and accrued interest. Upon surrender of any Bond redeemed in part only, the Government will execute, and the Paying Agent will authenticate and deliver to the registered owner thereof, a new Bond or Bonds of authorized denominations, and of the same maturity and tenor, equal in aggregate principal amount to the unredeemed portion of the Bond surrendered. 7

16 Annual Debt Service Table 2 summarizes the annual debt service requirements for the Bonds and the other general obligation bonds of the Government: TABLE 2 Period Ending November 15 Government of Guam Annual General Obligation Debt Service Schedule 2007 Series A Outstanding Bonds (1) Principal Interest Total (2) Total (2) 2007 $1,004,534 $ 1,004, ,009,068 $ 8,180,938 $ 8,180,938 10,190, ,919,068 7,874,700 7,874,700 12,793, ,922,655 7,874,700 7,874,700 12,797, ,922,643 7,874,700 7,874,700 12,797, ,918,761 7,874,700 7,874,700 12,793, ,920,743 7,874,700 7,874,700 12,795, ,922,780 7,874,700 7,874,700 12,797, ,918,390 7,874,700 7,874,700 12,793, ,918,200 7,874,700 7,874,700 12,792, ,921,400 7,874,700 7,874,700 12,796, ,922,180 7,874,700 7,874,700 12,796, $ 4,920,000 7,874,700 12,794,700 12,794, ,170,000 7,628,700 12,798,700 12,798, ,425,000 7,370,200 12,795,200 12,795, ,695,000 7,098,950 12,793,950 12,793, ,985,000 6,814,200 12,799,200 12,799, ,280,000 6,514,950 12,794,950 12,794, ,600,000 6,193,100 12,793,100 12,793, ,945,000 5,854,850 12,799,850 12,799, ,295,000 5,498,919 12,793,919 12,793, ,670,000 5,125,050 12,795,050 12,795, ,075,000 4,722,375 12,797,375 12,797, ,505,000 4,298,438 12,803,438 12,803, ,940,000 3,851,925 12,791,925 12,791, ,415,000 3,382,575 12,797,575 12,797, ,905,000 2,888,288 12,793,288 12,793, ,430,000 2,368,275 12,798,275 12,798, ,975,000 1,820,700 12,795,700 12,795, ,550,000 1,244,513 12,794,513 12,794, ,155, ,138 12,793,138 12,793,138 TOTAL $52,220,420 $151,935,000 $178,116,782 $330,051,782 $382,272,202 (1) Consists of debt service on the Prior Bonds that are not being defeased and redeemed with proceeds of the Bonds. The Government of Guam also has a general obligation loan currently outstanding in the amount of $6,682,479, which is not included in this table. See GUAM FINANCIAL OPERATIONS Existing Indebtedness. (2) Totals may not add due to rounding. 8

17 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS General The Bonds constitute the valid and legally binding general obligations of the Government, and the Government pledges its full faith and credit for the punctual payment of principal and interest of the Bonds. On or before the fifth day of each calendar month, beginning with the month of December 2007, the Government shall deposit into the Bond Fund held by the Trustee an amount equal to the amount necessary to increase the amount in the Bond Fund to the aggregate amount for all outstanding Bonds of all unpaid interest, principal and Mandatory Sinking Account Payments which shall be required to have been transferred to the Bond Fund under the following transfer requirement rules: (i) the amount of interest payable on each Bond on a current uncompounded basis on any Interest Payment Date shall be transferred in equal monthly amounts over the Interest Accrual Period for such Bond ending on such Interest Payment Date; (ii) the amount of interest payable on each Bond on a deferred compounded basis on any Interest Payment Date shall be transferred in equal monthly amounts over the Principal Payment Period for such Bond ending on the maturity date for such Bond; (iii) the amount of the principal of each Bond shall be transferred in equal monthly amounts over the Principal Payment Period for such Bond ending on the maturity date for such Bond; and (iv) the amount of each Mandatory Sinking Account Payment for Bonds shall be transferred in equal monthly amounts over the Principal Payment Period for such Bonds ending on the date such Mandatory Sinking Account Payment is due. On or prior to the fifth Business Day preceding each Interest Payment Date, the Trustee shall notify the Government of the amount, if any, by which the aggregate amount of interest and principal to be paid on the Bonds on such date exceeds the aggregate amount on deposit in the Bond Fund and available to make such payments. On or prior to the third Business Day preceding such Interest Payment Date, the Government shall deposit with the Trustee an amount equal to the amount of such deficiency. In the event that on the third Business Day preceding any Interest Payment Date, the aggregate amount of interest and principal to be paid on the Bonds on such date exceeds the aggregate amount on deposit in the Bond Fund and available to make such payments, the Depositary upon the direction of the Trustee shall transfer to the Bond Fund the amount of such deficiency by withdrawing said amount from the Proceeds Fund. Funds The following funds are established under the Certificate: Proceeds Fund Moneys on deposit in the Proceeds Fund will be disbursed by the Depositary for the payment of the costs of the Projects to be funded from Bond proceeds and the costs associated with the issuance of the Bonds, and, to the extent necessary, to fund any deficiency in the Bond Fund to pay principal of, mandatory sinking account payments for and interest on the Bonds. Bond Fund The Trustee shall apply moneys on deposit in this Fund solely for the purposes of (1) paying interest on the Bonds as it shall become due and payable, (2) paying the 9

18 principal of the Serial Bonds when due and payable and (3) purchasing, redeeming or paying at maturity the Term Bonds as provided in the Certificate. Rebate Fund The Trustee shall hold in trust all moneys deposited in the Rebate Fund, to the extent required to satisfy the Rebate Requirement (as defined in the Tax Certificate), for payment to the United States of America, and the Trustee shall disburse such moneys in accordance with the Certificate and the Tax Certificate. In the event such moneys exceed the Rebate Requirement, the Government may direct the Trustee to transfer such excess moneys to the Bond Fund. Additional Bonds Section 11 of the Organic Act provides that no public indebtedness of the Government shall be authorized or allowed in excess of ten percent of the aggregate tax valuation of the property in Guam. On March 27, 2007, the Supreme Court of the United States issued its decision in the case of Limtiaco v. Camacho, which, among other things, interpreted aggregate tax valuation to mean the assessed valuation (i.e., the amount upon which the property tax rate is levied, as opposed to appraised value). At the time, the assessed valuation of property in Guam was defined by Guam statutes to mean 35% of the property s appraised value, as ascertained by the Guam assessor. Guam s property taxation statutes have been amended so that assessed value is now defined as 70% of appraised value, with related amendments to property tax rates so that revenue impacts were neutral. The aggregate tax valuation of the property of Guam as of October 2006 was $8.137 billion, and the public indebtedness of the Government as of October 1, 2007 was $247 million, which results in approximately $566 million of additional public debt which currently may be incurred by the Government. The updated aggregate tax valuation of the property of Guam as of October 2007 has been presented by the assessor to the Board of Equalization for certification for tax year If the updated appraisals are so certified, building values will decrease by approximately $23 million, and land values will decrease by approximately $180 million, resulting in a decrease in the aggregate tax valuation of the property on Guam to approximately $7.995 billion and a decrease in the amount of additional public debt which may be incurred by the Government to approximately $552 million. The Fiscal Year 2008 budget act requires the Director of Revenue and Taxation to conduct a valuation of real property of Guam pursuant to Guam statutes in Fiscal Year A portion of the proceeds of the Bonds will be used to pay for the costs of such valuation. Guam statutes generally require that any general obligation bond of the Government in excess of $25,000,000 be approved by the voters of Guam in a referendum held during a general election. The Bond Act states that, notwithstanding such statutory provisions, the issuance of the Bonds is not subject to the approval of the voters of Guam. Budgetary Process GUAM FINANCIAL OPERATIONS The Governor is required by law to direct the preparation and administration of the Executive Budget for the Government on an annual basis. The Executive Budget represents the Governor s financial proposal with recommended priorities for allocating resources. The budget 10

19 for the Government is developed through a four-phase process: formulation ( Formulation Phase ); adoption ( Adoption Phase ); execution ( Execution Phase ); and audit ( Audit Phase ). With the exception of the Adoption Phase, the Bureau of Budget and Management Research (the Bureau ) is the administrative entity responsible for carrying out the four phases of the budget cycle. During the Formulation Phase, the economic forecast and the program and financial plans are prepared for the various departments. Economic data and statistics are utilized in developing projected revenues for the upcoming fiscal year. Once revenues have been projected, a budget call is distributed to all the line agencies. This process starts when the Bureau issues guidelines to each line agency in the preparation and development of their respective budgets. The Formulation Phase culminates in the transmittal of the Program and Financial Plan (Executive Budget) to the Legislature accompanied by the Governor s budget message. The Adoption Phase includes the legislative review of individual department and agency budgets, the hearing process, revisions or adjustments at mark-up sessions and final passage of the General Appropriations Bill by the Legislature and its enactment into law by the Governor. The Execution Phase begins once the General Appropriations Bill is signed into law. Department and agency allotment schedules are prepared based on appropriated amounts and projected cash receipts. Review of program appropriation is conducted to ensure that planned expenditures are consistent with the Governor s goals and objectives and the General Appropriations Bill. Monthly releases of allotments are performed by the Bureau for normal operational requirements. The releases are coordinated with cash flow statements prepared by the Department of Administration to ensure that adequate cash resources are available to cover all allotment releases. Additionally, all major fiscal transactions (personnel actions, travel, contracts) are required to be approved by the Bureau to ensure that program actions are consistent with the General Appropriations Bill. This review of major fiscal transactions occurs on a daily basis and is done continuously throughout the fiscal year. The Bureau, in coordination with the chief financial officer of each governmental agency, is responsible for the budget s execution within the approved expenditure plan. In the event of revenue shortfalls, the Government may institute various measures which include the implementation of various cost containment policies, reprioritization of programs and the withholding or rescinding of allotment releases. In addition, Public Law mandates the Bureau to modify or withhold planned expenditures at any time during the appropriation period if the Bureau finds that such expenditures are greater than those necessary to execute the programs at the level authorized by the Governor and the Legislature or that anticipated receipts and/or appropriated funds will be insufficient to meet the authorized expenditure levels. Revenue shortfalls are determined by the Bureau by analysis of monthly revenue statements prepared by the Department of Administration. The 2008 Budget Act requires that the Bureau perform a revenue tracking exercise by comparing actual revenues collected for the month as well as year to date. The results of this tracking exercise are then reported to the Guam Legislature and posted on the Bureau s website along with the official projections for the same period. A penalty of 20% reduction in salary is imposed on the director, deputy director and chief financial officer of any agency that does not comply with these requirements. The monthly revenue statements are countersigned by the Directors of the Bureau, the Department of Administration, and the Department of Revenue and Taxation. 11

20 The daily review of major financial transactions by the Bureau described above is performed to achieve two objectives: (i) to ensure that authorized program objectives are being met and (ii) to ensure that adequate appropriations and cash resources are available to cover the expenditures. Failure to meet both of these objectives will automatically result in disapproval of the proposed action and may also result in the impoundment of previously released allotments. Only the Governor has the power of executive override. The Audit Phase identifies potential program deficiencies in order to improve program performance. During the Audit Phase, all financial transactions, accounts and reports are examined to determine compliance with applicable laws and regulations, to assure economic use of resources, and to enhance achievement of goals and objectives. Major Sources of General Fund Revenues The General Fund is the fund into which all Guam revenues, not otherwise restricted by statute, are deposited and from which appropriations are made. The Government is the only taxing authority in Guam. There are no separate municipal, county, school district or improvement district taxes. General Fund revenues have fluctuated in recent years due to external factors affecting Guam s economy. From Fiscal Year 2000 to Fiscal Year 2002, Guam experienced a 33% decline in General Fund revenues, from $480,550,428 in Fiscal Year 2000 to $319,629,279 in Fiscal Year Most of the decline in Fiscal Year 2002 can be attributed to a decline in tourism as a result of a combination of geopolitical events. General Fund revenues for Fiscal Year 2005 were $443,295,703, an 8.4% increase from the Fiscal Year 2004 General Fund revenues of $408,972,598, and a 38.7% increase from the low in Fiscal Year This increase in General Fund revenues can be attributed to the Government s improved financial management, the recovery of Guam s economy, typhoon recovery redevelopment and increased military activity. General Fund revenues for Fiscal Year 2006 declined slightly to $432,525,481, a 2.4% decrease from Fiscal Year During the first nine months of Fiscal Year 2007, total General Fund revenue collections amounted to approximately $356.9 million which was a $48 million increase as compared to the same period in Fiscal Year As described in Table 3, the two primary sources of General Fund revenues are tax revenues and federal contributions. Tax revenues are comprised of income taxes and business privilege taxes (formerly known as gross receipts taxes), which accounted for approximately 46% and 36% of total General Fund revenues, respectively, during Fiscal Year Real property tax revenues are required to be deposited in the Territorial Educational Facilities ( T.E.F. ) Fund which is not a part of the General Fund. However, moneys in the T.E.F. Fund are required to be used to reimburse the General Fund for payments of debt service on general obligation bonds of the Government, including the Bonds. Real property tax revenues totaled approximately $17.8 million in Fiscal Year The Legislature is responsible for setting business privilege tax rates which have remained at the current level of 4.0% for nearly ten years, with the exception of a period of time between February 2003 and March 2004 when the business privilege tax rate was increased from 4.0% to 6.0% under P.L and then amended back to 4.0% under P.L The Government levies the business privilege tax on a broad base of services and goods, including the sale of tangible personal property and the provision of professional services; however, wholesale businesses are exempt from the business privilege tax. Banks and lending institutions 12

21 are taxed on net annual income. In addition, under P.L , as amended by P.L , certain small businesses with gross annual income under $50,000 were granted exemption from the business privilege tax on the first $40,000 of annual revenues. There are no limitations on business privilege tax rates. Under the Organic Act, the Territorial Income Tax Code mirrors the United States Internal Revenue Code. As a result, the income tax laws in force in the United States are deemed to impose a separate Territorial income tax on residents of Guam payable to the Government. During each Fiscal Year, the Government collects individual and corporate income taxes through withholdings and payments from taxpayers. At the end of each Fiscal Year, the Government estimates the amount owed to taxpayers for overpayments. These estimated amounts, together with the actual tax refunds claimed for prior years but not yet paid are recorded as tax refunds payable and a reduction of tax revenues. At the end of Fiscal Year 2006, the Government recorded unpaid tax refunds in the amount of approximately $267 million, which included $90 million in unpaid Earned Income Tax Credit refunds and $28.6 million relating to interest payable to taxpayers for unpaid prior year tax refunds, a portion of which is expected to be paid with proceeds of the Bonds. The Government of Guam levies taxes on real property at a fixed rate of 0.125% of the assessed value and levies taxes on improvements to real property at a fixed rate of 0.5% of the assessed value of the improvements. By statute, all real property and improvements are assessed at 70% of appraised value. Although Guam statutes require a triennial update to the appraised value of all taxable property in Guam, the last updated appraisal of all taxable property was completed in October The Fiscal Year 2008 budget act requires the Director of Revenue and Taxation to conduct an appraisal of real property of Guam pursuant to Guam statutes in Fiscal Year 2008, and a portion of the proceeds of the Bonds are expected to be used to pay for the costs of such valuation. In each year during which no such appraisal occurs, the assessor is required to update the valuation of all taxable property, taking into account new improvements or additions to the property and any change in use, damage, destruction or removal of improvements from the property. Such updated appraisals are required to be certified to the Board of Equalization not later than September 1 of each year, whereupon they are made available for public inspection and application by the assessee to the Board of Equalization for equalization or reduction through October 15 of each year. The updated appraisals are then certified to the tax collector on or before October 31 of each year. For tax year 2007, if the updated appraisals presented to the Board of Equalization are so certified, building values will decrease by approximately $23 million and land values will decrease by approximately $180 million, resulting in less tax revenue for the Government available for the payment of debt service on general obligation bonds, including the Bonds, and a reduced capacity for incurring additional indebtedness. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Additional Bonds. Federal contributions represent the second largest source of General Fund revenues and in Fiscal Year 2006 accounted for approximately 14% of General Fund revenues. Such revenues are comprised primarily of amounts paid to the Government by the United States of America pursuant to Section 30 of the Organic Act of Guam, 48 U.S.C h ( Section 30 revenues ), which primarily consist of income taxes paid by federal employees on Guam, including military personnel, that are returned by the U.S. Treasury to the Government. See Section 30 Revenues. 13

22 Table 3 sets forth the source and amounts of revenue for the General Fund for Fiscal Years 2002 through Major Expense Categories of General Fund Table 3 also describes the overall increase in General Fund expenditures and transfers out during the past five years, as well as the major expenditure categories. Expenditures of General Fund revenues are made pursuant to appropriation laws. The two largest expenditure categories, public education and protection of life and property (primarily, police, fire and corrections), accounted for 48.1% and 18.6% of total General Fund expenditures in Fiscal Year 2006, respectively. TABLE 3 Summary of Major Categories of General Fund Revenues and Expenditures Fiscal Years (1) REVENUES, TRANSFERS IN & OTHER SOURCES Taxes $262,167,877 $348,822,203 $325,485,978 $376,375,879 $355,662,195 Licenses, Fees and Permits 1,816,360 2,383,700 2,282,224 1,540,974 1,602,292 Use of Money and Property 817, , , , ,353 Federal Contributions 53,292,441 65,222,931 62,501,258 54,564,785 59,038,070 Guam Public School System ,371,485 9,253,984 Contributions from Component - 1,974,920 2,133,054 2,027,291 1,858,360 Units Other 1,535,065 7,238,260 16,449,563 2,246,801 4,928,277 TOTAL $319,629,279 $426,276,454 $408,972,598 $443,295,703 $432,525,481 EXPENDITURES Current: General government $ 38,940,838 $ 34,528,555 $ 30,331,015 $ 35,311,558 $ 35,489,129 Protection of life and property 60,672,543 54,638,769 60,403,905 63,364,624 67,831,681 Public health 16,762,366 13,312,347 11,312,177 10,689,479 10,375,570 Community services 6,178,843 5,775,097 4,070,115 4,570,794 5,624,108 Recreation 4,740,111 3,173,113 3,582,525 3,365,121 3,656,981 Individual and collective rights 10,048,033 9,246,942 10,391,511 10,491,057 9,748,511 Transportation 232, ,438,035 1,432,274 38,247 Public education 147,877, ,793, ,005, ,393, ,188,946 Environmental protection 543,910 67, Economic development 4,099,837 8,568,690 3,117,728 3,033,206 3,224,862 Transfer to persons ,549,010 1,405,798 Payments to: Retirement Fund - 11,729,066 11,767,566 1,915,930 2,190,024 Chamorro Land Trust ,500 Commission Guam Community College - 12,217,084 12,421,530 12,826,669 7,494,926 Guam Economic Development and Commerce Authority , ,107 - Guam Educational Telecommunications Corporation , ,183 Guam Memorial Hospital ,057,527 Authority University of Guam - 29,322,667 28,253,500 30,251,004 27,266,417 Miscellaneous appropriations ,617,538 5,272,801 Non-appropriated expenditures ,007,524 7,519,313 Capital Projects 29, ,

23 Debt Service (2) Principal retirement 21,306, Interest and fiscal charges 1,572,536 2,014,798 2,146, Total expenditures $313,004,360 $342,550,414 $325,470,405 $368,585,637 $364,000,524 Excess (deficiency) of revenues over (under) expenditures $6,624,919 $83,726,040 $83,502,193 $74,710,066 $68,524,957 Other financing sources (uses): Proceeds from sale of bonds 10,000, Transfers in from other funds (3) 73,107,782 18,552,659 21,385,340 21,540,188 40,381,714 Transfers out to other funds (4) (184,660,153) (141,169,672) (122,351,770) (126,642,742) (131,000,868) Other sources (5) 5,826, Other uses (20,636,272) Equity transfers (3,290,254) Total other financing sources (uses), net $(119,652,797) $(122,617,013) $(100,966,430) $(105,102,554) $(90,619,154) Special items: Overprovisioning for tax refunds ,993, Retiree Cost of Living (123,580,231) Allowance judgment Earned income tax credit - (50,000,000) refunds Earned Income Tax Credit (30,000,000) judgment Total special items - $(50,000,000) $ 17,993,424 - $(153,580,231) Net change in fund balances $(113,027,878) $(88,890,973) $ 529,187 $(30,392,488) $(175,674,428) (deficits) Fund balances (deficits) at beginning of year, as restated (6) (96,579,978) (225,231,369) (314,122,342) (313,593,155) (348,403,932) Fund balances (deficits) at end of year $(209,607,856) $(314,122,342) $(313,593,155) $(343,985,643) $(524,078,360) (1) Figures may not add due to rounding. (2) Debt Service outlays reflect dates of transfer from the General Fund to debt service funds, not actual debt service payments. (3) Transfers in include transfers in from special revenue funds for purposes of paying debt service on certain general and limited obligation indebtedness of the Government. (4) Transfers out consist primarily of transfers to bond debt service funds, the Federal Grants Fund, the Unified Courts of Guam Operations Fund, the Supplemental Annuity Benefits Fund, and the Medically Indigent Program Payment Revolving Fund. (5) Other Sources include cancellation of accrued but unrealized liabilities and miscellaneous refundings. (6) Beginning fund deficits for Fiscal Years 2003 and 2006 were adjusted to reflect adjustments made to the ending fund deficits contained in the audited financial statements for Fiscal Years 2002 and 2005, respectively. Source: Audited Financial Statements, Government of Guam, Fiscal Years 2002 through

24 Table 4 sets forth the revenues, expenditures, transfers and fund balances of the Government s General Fund for the first nine months of Fiscal Years 2006 and TABLE 4 Summary of Major Categories of General Fund Revenues and Expenditures First Nine Months of Fiscal Years 2006 and 2007 (1) Oct June 2006 Oct June 2007 REVENUES, TRANSFERS IN & OTHER SOURCES Taxes $261,955,837 $312,349,745 Licenses, Fees and Permits 1,201,142 3,349,998 Use of Money and Property 217, ,292 Federal Contributions 44,918,162 40,146,833 Guam Public School System - - Contributions from Component Units - - Other 568, ,094 TOTAL $308,861,091 $356,922,962 EXPENDITURES Current: General government $26,553,253 $24,934,300 Protection of life and property 48,133,926 51,964,791 Public health 7,353,266 7,089,801 Community services 3,746,137 3,697,387 Recreation 2,574,131 2,560,216 Individual and collective rights 6,988,712 8,421,416 Transportation Public education 112,403, ,806,009 Economic development 2,328,957 2,470,148 Debt Service (3) Principal retirement - - Interest and fiscal charges 1,605,599 3,420,472 Total expenditures $211,687,351 $244,364,538 Excess (deficiency) of revenues over (under) expenditures $97,173,740 $112,558,424 Other financing sources (uses): Transfers in from other funds 19,753,708 20,192,588 Transfers out to other funds (117,654,384) (127,769,911) Other sources 79,657 5,220 Other uses (3,406,565) (5,441,954) Total other financing sources (uses), net $(101,218,584) $(113,014,058) Net change in fund balances (deficits) (4,044,844) (455,634) Fund balances (deficits) at beginning of period (343,985,643) (524,078,360) Fund balances (deficits) at end of period $(348,030,487) $(524,533,994) (1) The above data has not been subjected to audit or review. Figures may not add due to rounding. (2) Other Sources includes cancellation of accrued but unrealized liabilities and miscellaneous refundings. (3) Debt Service outlays reflect dates of transfer from the General Fund to debt service funds, not actual debt service payments. Source: Bureau of Budget and Management Research. 16

25 a defined benefit plan, all new Government employees hired after September 30, 1995 are instead participants in a defined contribution retirement plan. At the end of Fiscal Year 2006, the Retirement Fund had an unfunded accrued liability of $1.335 billion, for accrued benefits of $2.656 billion. The Government recorded a payment of $2,190,024 from the General Fund to the Retirement Fund in Fiscal Year The required contribution For Fiscal Year 2008 is 27.38% of payroll. Of this amount, 20.75% is for the unfunded liability of the defined benefit plan, 3.99% is for the normal cost of the defined benefit plan, and 2.63% is for contributions to the defined contribution plan. Guam statutes provide that the current employer contribution rate will increase over a five-year period until it reaches the actuarial contribution rate. The Government s agencies are responsible for remitting employer and member contributions directly to the Retirement Fund. At the end of Fiscal Year 2006, the Retirement Fund had employer contributions receivable of approximately $16.7 million, member contributions receivable of approximately $7.7 million, and interest and penalties receivable of approximately $7.3 million. A significant portion of these contributions receivable represent contributions from the Guam Public School System ( GPSS ) and the Guam Memorial Hospital Authority ( GMHA ). Public Law requires the General Fund to remit interest-only payments monthly to the Retirement Fund for these receivables from GPSS and GMHA. Such payments will continue until the outstanding balances are fully paid; however, if the obligations are not fully paid within five years, payment responsibility will return to GPSS and GMHA. In 1988, Public Law 19-19, as codified in 4 G.C.A. Section , required the Government to pay an annual lump-sum cost of living allowance ( COLA ) to retirees and survivors on the first retirement payday after July 1 of each year. In 1993, a Government retiree filed a class action suit in the Superior Court of Guam on behalf of 4,877 retirees and survivors, alleging that they were being denied such COLA benefits. The Governor and the Retirement Fund submitted to the Court their respective calculations of the COLA owed. In October 2006, the Court ordered the Retirement Fund to revise its COLA calculation, resulting in an award of $123,580,231 to the COLA class. Public Law 25-72, passed in 1999, requires the payment of supplemental annuity and COLA benefits to retirees and specifies that these payments are to be vested, limited-duration benefits to be provided by the Retirement Fund. Such benefits are to be actuarially funded over a twenty-year amortization period through an increase in contributions. The Retirement Fund initially recorded these benefit payments as a receivable in the amount of $137,200,000 and has reduced this receivable by a portion of employer contributions received. As of September 30, 2006, the receivable recorded by the Retirement Fund amounted to approximately $87.5 million. The Government also makes certain expenditures for post-employment benefits. The Government has not undertaken an actuarial study to determine the estimated liability for postemployment benefits. The Government will be required to comply with GASB Statement No. 45 regarding reporting of post-employment health benefit liabilities for periods beginning after December 15,

26 Section 30 Revenues Section 30 revenues include all amounts received by or on behalf of the Government as proceeds of customs duties and federal income taxes derived from Guam, the proceeds of all taxes collected under the internal revenue laws of the United States on articles produced in Guam and transported to the United States, its Territories, or possessions, or consumed in Guam, and the proceeds of any other taxes which may be levied by Congress on the inhabitants of Guam (including, but not limited to, compensation paid to members of the Armed Forces and pensions paid to retired civilian and military employees of the United States, or their survivors, who are residents of, or who are domiciled in, Guam), and all quarantine, passport, immigration and naturalization fees collected in Guam, and such other taxes as may be collected pursuant to Section 30 of the Organic Act, and held in account for the Government. The Bond Act currently provides that one-half of any Section 30 revenues in excess of $100,000,000 are to be used for the early redemption of the Bonds. The Bonds are subject to redemption at the option of the Government pursuant to the provisions summarized herein under THE BONDS Redemption Optional Redemption. The Government s right to receive Section 30 revenues is dependent upon Section 30 of the Organic Act, which is subject to amendment or revocation by an act of the U.S. Congress. Because Section 30 revenues are derived from income tax withholding, these revenues are also affected by workforce reductions and wage levels. The income of Guam residents who are not employed by the United States is currently exempt from federal income taxation and therefore does not currently contribute to Section 30 revenues. Section 30 revenues include all proceeds of customs duties derived from Guam, although the United States government does not currently impose any such duties. Each fiscal quarter, the federal agencies that collect Section 30 revenues (there are approximately 23 such agencies and departments) send a report to the Internal Revenue Service, which then submits the report to the Department of the Interior. This certification process is closed annually after the fourth quarterly report. The mechanism by which the Section 30 revenues are currently transferred to the Government is as follows: In mid-september of each year, the Governor of Guam submits to the United States Secretary of the Treasury an advance request, estimating the amount of the Section 30 revenues expected to be collected by the United States during the period from October 1 of such year to September 30 of the following year. The United States Secretary of the Interior and the Secretary of the Treasury review the estimate and adjust the figure upward by the amount of any underestimate that the Government may have made with respect to the Section 30 revenues in the preceding year. Any overestimation will result in a downward adjustment, which is made in the fiscal year two years after the year of the overestimation. On or before October 1, the Secretary of the Treasury is required to transfer an amount equal to the Government s estimate of these Section 30 revenues, after taking into consideration any adjustments, directly to the Government. For accurate requests to be submitted by the Government, its estimates must include information with respect to retired and other military personnel whose home of record is Guam. Estimates have been low in the past because information with respect to military personnel with a Guam home of record was excluded from Section 30 certification. The United States 18

27 government advances Section 30 revenues to the Government annually in one single payment (less any overpayment or together with any underpayment made in the previous year). When the Government determines the requested Section 30 revenues were underestimated whether due to home of record mistakes or otherwise, it files for supplemental amounts. The Government has issued its Limited Obligation (Section 30) Bonds, 2001 Series A (the Section 30 Bonds ), currently outstanding in the aggregate principal amount of $43,110,000. While the Section 30 Bonds remain outstanding, all Section 30 revenues are received directly from the United States government by Bank of Guam as trustee for the Section 30 Bonds. After all requirements of the indenture for the Section 30 Bonds are met, including payment of the Section 30 Bonds, Section 30 revenues remaining are available for General Fund expenditures. Section 30 revenues are also used for the payment of the loan incurred by the Government in 2001 pursuant to Public Law Table 5 below shows the amount of Section 30 revenues requested and received by or on behalf of the Government for Fiscal Years 2002 through Section 30 revenues have been received in the amount of $45,731,913 for Fiscal Year TABLE 5 Fiscal Year Schedule of Section 30 Revenues Requested and Received Fiscal Years Advance Requested Advance Received Adjustment for Overprovision Supplemental Amount Total Received 2002 $49,649,611 $52,889,599 $ 0 $ 0 $52,889, ,110,130 45,086, ,086, ,389,014 31,725, ,725, ,291,551 51,291, ,291, ,824,861 56,824, ,824, (1) 57,416,032 57,416,032 (5,506,684) (2) 21,175,749 (3) 73,085,097 (1) (2) Unaudited numbers. Reduction due to over-claims in Fiscal Years 2003 and 2004 of approximately $16.5 million. This amount is being deducted in equal installments from payments for Fiscal Years 2007 to (3) IRS retroactive adjustment on the Office of Personnel Management retirees from 1984 to Source: Government of Guam Department of Revenue and Taxation and Bureau of Budget and Management Research. Fiscal Year 2008 Budget The Fiscal Year 2008 Budget Act (the 2008 Budget ) was approved by the Legislature on September 23, 2007 and signed by the Governor on September 29, The 2008 Budget provides for total projected General Fund revenue of $489.9 million, of which $448 million is derived from fees and taxes and $41.9 million is derived from federal sources, including Section 30 revenues. Income tax revenues are projected to total $253.2 million, while business privilege tax revenue is projected to reach $178.9 million. The 2008 Budget provides for total General Fund appropriations of $489.9 million. 19

28 The 2008 Budget contains certain financial and deficit recovery measures, including refinancing of outstanding bonds and new bond issues to reduce the existing deficit, certain limitations on hiring within the executive branch of the Government and certain instrumentalities of the Government, a requirement that Guam voters approve any new or increased taxes, and a requirement that any revenues derived from new or increased taxes, fees or other revenue enhancements be set aside for the first year in the deficit elimination fund, or, if there is no deficit or debt of the Government, in a rainy day fund. The 2008 Budget also establishes a Modernization and Rightsizing Commission of the Government of Guam for the Twenty-First Century and Beyond to examine all units of the Government and make recommendations as to streamlining and modernization. The 2008 Budget provides that the Director of the Bureau of Budget and Management Research, in collaboration with the Director of Revenue and Taxation and the Director of Administration, is to prepare monthly reports of revenue collected and funds spent or encumbered during each month of the fiscal year. If revenues are tracking below projected revenues for the fiscal year, the Bureau of Budget and Management Research is required to adjust and sequester an amount of the remaining allotments for expenditures that is equal to the percentage of shortfall of actual revenues relative to projected revenues. In addition, those same Directors are to determine at the close of each fiscal quarter whether actual revenues collected for that quarter are consistent with the projected revenues for the fiscal year. If the Directors determine that projected fiscal year revenues, based on actual revenues collected, are three percent (3%) or more less than revenue projections adopted by the annual budget act, the Governor is required to submit to the Legislature a fiscal realignment plan that is to address the revenue disparity. The fiscal realignment plan may include, but is not limited to, costcontainment and austerity measures, governmental reorganization plans and other such actions. The 2008 Budget provides for additional representation in the recently-created Special Accounting Service ( SAS ) work group. The SAS work group is comprised of a senior staff member of the Legislature s Office of Finance and Budget, the Controller of the Department of Administration, the Chief of the Taxpayer Services Administration Branch of the Department of Revenue and Taxation, the Budget Analyst Supervisor of the Bureau of Budget and Management Research, the Chief Planner of the Bureau of Statistics and Plans, and the Chief Information Officer of the Bureau of Information Technology. The SAS work group meets from time to time to discuss and develop recommendations on fiscal policy, provide technical assistance to the Legislature s Office of Finance and Budget, and share information relative to government finances. The senior staff member of the Legislature s Office of Finance and Budget serves as Chairperson of the SAS work group. The 2008 Budget also provides for additional representation in the Special Economic Service ( SES ) work group. The SES work group is comprised of the Chairperson of the Legislature s Committee on Ways and Means, the Director of the Office of Finance and Budget, the Public Auditor, the Director of the Bureau of Budget and Management Research, the Director of Revenue and Taxation, the Director of Administration, the Administrator of the Guam Economic Development and Commerce Authority, the Chief Economist of the Department of Labor, the Chief Economist of the Bureau of Statistics and Plans, and the Administrator of Research and Evaluation of the Guam Visitors Bureau. The SES work group meets from time to time to discuss and develop recommendations on economic policy, provide technical assistance to the Office of Finance and Budget, and share information relative to the state of the economy. 20

29 The Chairperson of the Committee on Ways and Means serves as Chairperson of the SES work group. The 2008 Budget further mandates the development and implementation of performancebased budgeting by September 30, 2009 for the Department of Administration, the Bureau of Budget and Management Research, the Department of Revenue and Taxation, the Department of Public Works, the Department of Parks and Recreation, the Department of Land Management, the Department of Agriculture, the Bureau of Statistics and Plans, and the central operations of Guam Public School System. In addition, it requires that appropriate employees of the respective agencies attend all performance-based budgeting workshops and training opportunities offered by the Government. Existing Indebtedness The outstanding long-term indebtedness of the Government and its autonomous agencies is set forth in Table 6. Only general obligation and limited obligation indebtedness are considered to be public indebtedness the incurrence of which is limited by the provisions the Organic Act. Limited obligation indebtedness is payable from a particular source of revenues and is not secured by a pledge of the full faith and credit of the Government. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Additional Bonds. 21

30 TABLE 6 Government of Guam Outstanding Debt As of October 1, 2007 Description of Indebtedness Aggregate Outstanding Principal Amount General Obligation Bonds and Other General Obligation Indebtedness Guam General Obligation Bonds, 1993 Series A (1) $ 37,280,000 Government of Guam Loan (2001) (P.L ) (2) 6,682,479 Limited Obligation Bonds and Other Limited Obligation Indebtedness Limited Obligation Infrastructure Improvement Bonds, 1997 Series A (3) 46,585,000 Limited Obligation (Section 30) Bonds, 2001 Series A (4) 43,110,000 Limited Obligation Highway Refunding Bonds, 2001 Series A (5) 26,410,000 University of Guam Rural Development Loan (2003) (P.L ) (6) 13,192,689 Revenue Bonds and Other Indebtedness Guam Power Authority Revenue Bonds, 1993 Series A 76,085,000 Guam Power Authority Revenue Bonds, 1999 Series A 321,970,000 Guam Airport Authority General Revenue Bonds, 2003 Series 183,295,000 Guam Waterworks Authority Water and Wastewater System Revenue Bonds, 101,175,000 Series 2005 Guam Economic Development Authority Tobacco Settlement Asset-Backed 19,890,000 Bonds, Series 2001A and Series 2001B Guam Economic Development Authority Multifamily Mortgage Revenue 4,770,000 Bonds, Series 1985 C-1 (Royal Socio Apartments Project) Guam Economic Development Authority Multifamily Mortgage Revenue 2,890,000 Bonds, Series 1985 C-2 (Harmon Village Project) Guam Economic Development Authority Note Payable and Line of Credit 906,870 Guam Housing Corporation, Various Notes and Loans 9,406,161 Guam Housing Corporation Mortgage-Backed Revenue Bonds, Series ,320,000 University of Guam Dormitory and Student Union Revenue Bonds, Series 345, Judicial Building Fund Revenue Note (2006) (P.L & 28-68) 3,716,723 (7) Guam Education Financing Foundation Certificates of Participation 64,895,000 (1) Consists of the 1993 Series A Bonds that are not being defeased with proceeds of the Bonds. (2) Although it is being paid from Section 30 revenues, this loan is classified as general obligation debt. (3) Payable primarily from transient occupancy taxes. (4) Payable primarily from Section 30 revenues. See Section 30 Revenues above. (5) Payable primarily from liquid fuel taxes and vehicle registration and license fees. Outstanding balance as of December 31, (6) Payable primarily from mass transit automotive surcharges. (7) Outstanding balance as of September 30, Source: Guam Economic Development and Commerce Authority. 22

31 The 2008 Budget authorized two additional financings. The first is a bond issue by GEDCA to refinance its Tobacco Settlement Asset-Backed Bonds, Series 2001A and Series 2001B, and to provide at least $7 million in additional bond proceeds, expected to be issued in December The second is another general obligation bond issue by the Government, to be secured additionally by a pledge of the business privilege tax, in an amount sufficient to provide at least $115 million to fund past-due income tax refunds to Guam taxpayers, cost of living adjustment payments to Government retirees, and projects at the Guam Memorial Hospital. It is not anticipated that these bonds will be issued until the second quarter of Investment Policies of the Government The investment of Government funds is restricted by statute. The Director of Administration must determine whether any portion of the money in the General Fund is not necessary for immediate use. Any moneys in the General Fund or special funds of the Treasury of Guam in excess of 120% of the monthly disbursements made from the General Fund for the immediately preceding 12-month period may be declared available for investment. Following the determination of the Director of Administration, the Governor may then designate moneys as available to be invested in United States bonds, United States interest-bearing notes or other United States obligations, and to the extent insured by the FSLIC, in shares or investment certificates of any savings and loan association organized under the laws of Guam which is an insured institution as defined in Title IV of the National Housing Act and has been approved by the Director of Administration. Deposits or investment certificates insured by the FDIC or FSLIC do not require further security. In order to receive or retain other types of deposits, an eligible institution must place with the Government, as security for such deposits: (i) United States Treasury notes or bonds or those for which the faith and credit of the United States are pledged for the payment of principal and interest, (ii) any evidence of indebtedness of the Government, (iii) investment certificates of the Federal Home Loan Bank, or (iv) other securities approved by the Director of Administration and the Governor, each in an amount in value at least 110% of the amount of moneys deposited with the institution. The Department of Administration prepares quarterly projections of the cash sources and requirements of the General Fund as well as daily cash flow resources and requirements reports and weekly and month-end cash and investments reports. During the last twelve months, most of the unrestricted moneys available for payment of General Fund liabilities have been invested in savings and checking accounts. The Government has no investments in derivative products. Pending Litigation One lawsuit is currently pending against the Government in the Superior Court of Guam regarding the planned construction of a solid waste incinerator: Guam Resource Recovery Partners v. Department of Public Works and Government of Guam (the GRRP Lawsuit ). The GRRP Lawsuit is a breach of contract claim, and the total award currently sought by the plaintiffs is $10,704,000. The Government cannot predict the outcome of the GRRP Lawsuit or what financial impact, if any, it will have on the Government. 23

32 THE PROJECTS The Projects which are to be constructed, expanded, upgraded, implemented, equipped or otherwise financed using Bond proceeds are briefly described below. To the extent that the proceeds of the Bonds are not sufficient to fully fund all of the below-listed projects, the amount of funding, if any, to be provided for each project will be determined by the Governor. Guam Public School System Approximately $29.8 million of the proceeds of the Bonds will be used to fund certain capital improvements at all school sites throughout the Guam Public School System ( GPSS ). Those improvements include Americans with Disabilities Act compliance; asbestos abatement; installation of intercom, security and fire alarm systems; repairs to facilities; air conditioner replacement, maintenance or repairs; upgrades to and replacement of recreational facilities, physical infrastructure, plumbing, water tanks, water filters and water fountains; and certain other capital expenditures of GPSS. Guam Memorial Hospital Approximately $2.6 million of the proceeds of the Bonds will be used to fund certain capital improvements for the Guam Memorial Hospital ( GMH ), including the replacement of GMH s main electrical distribution system and emergency power generator, and the removal and replacement of the main chiller system for GMH. These projects will increase patient safety and facilitate future expansion of GMH. University of Guam Approximately $360,000 of the proceeds of the Bonds will be used to fund the renovation and expansion of the University of Guam s existing Health-Science Building. The renovation and upgrade will provide more classrooms, laboratory and support space within the building to accommodate increasing student enrollment and meet the community s need for more nurses. Other Government Obligations A portion of the proceeds of the Bonds will be used to fund obligations of the Government, including approximately $16 million for court-ordered payments of cost of living adjustments to retired public employees, approximately $21.2 million for past-due income tax refunds, approximately $2 million for obligations imposed by a permanent injunction awarded against the Department of Integrated Services for Individuals with Disabilities ( DISID ), including the provision of a new residential facility and development of a personal care assistance program, approximately $4 million for obligations imposed by a permanent injunction awarded against the Department of Mental Health and Substance Abuse ( DMHSA ), including provision of a therapeutic group home and other programmatic improvements, and approximately $1 million for the costs of the assessment of real property on Guam by the Guam Department of Revenue and Taxation in Fiscal Year The funds anticipated to be provided to DISID and DMHSA will only be so provided if the District Court of Guam approves the revised Comprehensive Integration Plan being developed by DISID and DMHSA. Any remaining balance of the proceeds of the Bonds is authorized to be used first to fund up to $2 million for the Absent Parent Automated System Information of the Department of Law, and second to fund the capital and operating expenses of Guam Memorial Hospital. 24

33 CERTAIN INVESTMENT CONSIDERATIONS In considering the matters set forth in this Official Statement, prospective investors should carefully review all investment considerations set forth throughout this Official Statement, and should specifically consider certain risks associated with the Bonds. There follows a discussion of some, but not necessarily all, of the possible considerations and risks which should be carefully evaluated by prospective purchasers of the Bonds prior to purchasing any Bonds. The following discussion of investment considerations does not necessarily reflect the relative importance of the various topics discussed. The Bonds may not be suitable investments for all persons. Prospective purchasers of the Bonds are advised to consider the following factors, among others, and to review the other information in this Official Statement, including the Appendices hereto, in evaluating the Bonds. Prospective purchasers should be able to evaluate the risks and merits of an investment in the Bonds and should confer with their own legal and financial advisors before considering a purchase of the Bonds. Any one or more of the considerations discussed and others could lead to a decrease in the market value and/or the liquidity of the Bonds. General Guam s economy suffered during the early 2000 s as a result of events including the general decline in the Asian economy, the terrorist attacks of September 11, 2001, the Iraq war, and the SARS epidemic. Although revenues have stabilized somewhat in more recent years, the economic downturn has resulted in a structural General Fund deficit in each of Fiscal Years 2002 through 2006 and a cumulative General Fund deficit of $524.1 million as of September 30, See GUAM FINANCIAL OPERATIONS. Although the 2008 Budget Act contains certain one-time and ongoing measures to improve Guam s financial position, there can be no assurances that such measures will have the intended effects or that the Government will not adjust its financial practices in the future. See GUAM FINANCIAL OPERATIONS Fiscal Year 2008 Budget. As of October 1, 2006, the Government also had an unfunded accrued retirement fund liability of $1.29 billion, for accrued benefits of $2.583 billion. See GUAM FINANCIAL OPERATIONS Retirement Fund and Other Post-Employment Benefits. Impact of Tourism and U.S. Military Presence The Guam economy depends in large measure on tourism and the U.S. military presence, each of which is subject to uncertainties as a result of global economic, social and political events. Tourism, particularly from Japan, where approximately 80% of visitors to Guam originated in 2006, represents a significant share of the economic activity on Guam. Historically, the tourism industry, both worldwide and on Guam, has correlated closely with the state of the world's economies and levels of real disposable income. Also, currency exchange rates, trade balances, political relationships, and conflicts within and between countries are increasingly important influences on tourism. A weak economy, war, epidemic outbreaks such as SARS, or the threat of terrorist activity, among other influences that are beyond the Government s control, can adversely affect the tourism industry. Economic growth in Japan and throughout the Pacific Rim, and the resulting effect on overseas travel from these countries, is a major determinant of tourism on Guam. The Japanese government has encouraged international travel as a means of reducing its trade surplus and Guam has benefited directly from this policy. 25

34 Any change in the policy could affect Government revenues. In the event of a significant downturn in tourism, including a downturn related to Japanese economic conditions or social policies, the Government could likely suffer a reduction in revenues. A decrease in tourism could in turn result in reduced employment levels as well as reduced tax revenues from hotels and other related tourist facilities. See DEMOGRAPHIC AND ECONOMIC INFORMATION Tourism Industry in Appendix A. The U.S. military presence also affects economic activity on Guam in various ways, both directly, through individuals demand for commercial, construction and other services, and indirectly, through Section 30 revenues. In addition, expansions in the U.S. military presence, such as the expansions planned for the next 10 years, can have a direct, positive impact on the Guam economy by creating jobs in construction and related fields, increasing demand for services and attracting visitors. Economic, geopolitical, and other influences which are beyond the Government s control might result in a decision by the U.S. military to reduce its existing presence on Guam or forego some or all of the planned enhancements to its presence on Guam. In the event that the U.S. military changes its current plans with respect to staffing and other strategic improvements on Guam, expected benefits may not be realized and the economy could be adversely affected. In the event that the U.S. military elects to reduce or eliminate its presence on Guam, the economy could decline and the Government could likely experience a reduction in revenues. See DEMOGRAPHIC AND ECONOMIC INFORMATION Military Activity and Future Role of the Military on Guam in Appendix A. It is expected that as a result of the anticipated relocation of Marines from Okinawa, Japan, to Guam, Guam will see up to $2.4 billion of additional construction activity in each of Fiscal Years , compared to Guam s historic capacity of approximately $800 million of construction activity per fiscal year. Although Guam s construction industry does have some time to develop its capacity in anticipation of this marked increase in activity, it is possible that much of the work will be awarded to outside developers and project managers. Although their presence will have indirect benefits for the Guam economy in the short term, the long-term benefits would not be as great as they would be if the work is largely completed by local firms. See DEMOGRAPHIC AND ECONOMIC INFORMATION Future Role of the Military on Guam in Appendix A. Typhoons and Earthquakes Because of its location on the southern end of the Mariana Island chain, Guam is exposed to periodic typhoons, super typhoons and earthquakes. Recent typhoons have caused significant damage to facilities and infrastructure on Guam including its water and electric systems. Although the United States Federal Emergency Management Agency ( FEMA ) makes disaster relief assistance available after significant typhoon or earthquake damage, there can be no assurance that future typhoons and/or earthquakes will not cause significant damage on Guam, or that FEMA will provide disaster relief assistance if significant damage is experienced. There can also be no assurance that, even with FEMA assistance, damage that results from future typhoons or earthquakes will not adversely affect the Guam economy. BOOK-ENTRY SYSTEM THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE 26

35 GOVERNMENT BELIEVES TO BE RELIABLE, BUT THE GOVERNMENT TAKES NO RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS THEREOF. THE GOVERNMENT CANNOT AND DOES NOT GIVE ANY ASSURANCES THAT DTC, DTC PARTICIPANTS OR INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS (A) PAYMENTS OF INTEREST AND PRINCIPAL WITH RESPECT TO THE BONDS, (B) CERTIFICATES REPRESENTING OWNERSHIP INTEREST IN OR OTHER CONFIRMATION OF OWNERSHIP INTEREST IN THE BONDS, OR (C) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE, AS THE REGISTERED OWNER OF THE BONDS, OR THAT THEY WILL SO DO ON A TIMELY BASIS OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE CURRENT RULES APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE CURRENT PROCEDURES OF DTC TO BE FOLLOWED IN DEALING WITH DTC PARTICIPANTS ARE ON FILE WITH DTC. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Bonds Exchange Act of DTC holds and provides asset servicing for over 2 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Bonds Clearing Corporation, Government Bonds Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Bonds Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Bonds and Exchange Commission. More information about DTC can be found at 27

36 Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Government as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Government or Paying Agent, on the payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC or its nominee, the Paying Agent, or the Government, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized 28

37 representative of DTC) is the responsibility of the Government or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Government or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The Government may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Government believes to be reliable, but the Government takes no responsibility for the accuracy thereof. VERIFICATION In connection with the issuance of the Bonds and the refunding of the Refunded Bonds, Grant Thornton LLP, independent certified public accountants, will verify the mathematical accuracy of: (a) certain computations demonstrating the sufficiency of the Escrow Fund established for the refunding of the Refunded Bonds, including the moneys deposited therein and the anticipated receipts from the securities deposited therein (the Escrow Securities ), to pay the principal or redemption price of and interest on all Refunded Bonds, when due; and (b) certain computations of the yield on the Bonds and the Escrow Fund to be relied upon by Bond Counsel for purposes of providing its opinion to the effect that the interest on the Bonds is excluded from gross income for federal income tax purposes. Such verification will be based in part on schedules and information provided by the Underwriters with respect to the foregoing computations. TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Government ( Bond Counsel ), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the Code ). Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel is also of the opinion that interest on the Bonds is exempt from income taxation by any state, territory or possession of the United States or any political subdivision of any of them. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix C hereto. 29

38 To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes original issue discount, the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and is exempt from income taxation by any state, territory or possession of the United States or any political subdivision of any of them. For this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Beneficial Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public. Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) ( Premium Bonds ) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The Government has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel s attention after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from income taxation by any state, territory or possession of the United States or any political subdivision of any of them, the 30

39 ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Beneficial Owner s federal, state or local tax liability. The nature and extent of these other tax consequences depend upon the particular tax status of the Beneficial Owner or the Beneficial Owner s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. As one example, on May 21, 2007, the United States Supreme Court agreed to hear an appeal from a Kentucky state court which ruled that the United States Constitution prohibited the state from providing a tax exemption for interest on bonds issued by the state and its political subdivisions but taxing interest on obligations issued by other states and their political subdivisions. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service ( IRS ) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Government, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The Government has covenanted, however, to comply with the requirements of the Code. Bond Counsel s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Government or the Beneficial Owners regarding the tax-exempt status of the Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the Government and its appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Government legitimately disagrees may not be practicable. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may cause the Government or the Beneficial Owners to incur significant expense. No Litigation LEGAL MATTERS No litigation is pending or threatened concerning the validity of the Bonds and a certificate to that effect will be furnished on behalf of the Government at the time of the original delivery of the Bonds. The Government is not aware of any litigation pending or threatened 31

40 questioning the political existence of the Government or contesting the Government s ability to levy and collect any tax revenues currently levied or collected or contesting the Government s ability to issue the Bonds. Legal Opinions The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel. A complete copy of the proposed form of Bond Counsel opinion is contained in Appendix C hereto. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain matters pertaining to the Bonds will be passed upon for the Government by the Attorney General of Guam and for the Underwriters by McCorriston Miller Mukai MacKinnon LLP, Honolulu, Hawaii. CONTINUING DISCLOSURE The Government has covenanted that it will comply with and carry out all of the provisions of each Continuing Disclosure Certificate relating to disclosure of annual financial information and notices of certain events executed by the Government as of the date of issuance and delivery of the Bonds, as it may be amended from time to time in accordance with the terms thereof. See INTRODUCTION herein and FORM OF CONTINUING DISCLOSURE CERTIFICATE in Appendix E. The Government has not failed to comply with any continuing disclosure obligations it has undertaken in connection with other bonds it has issued. RATING Standard & Poor s has assigned the Bonds a rating of B. The rating on the Bonds expresses only the view of the rating agency and is not a recommendation to buy, sell or hold the Bonds. There is no assurance that such rating will continue for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely by the rating agency, if in its judgment, circumstances so warrant. The Government and the Trustee undertake no responsibility either to notify the Owners of the Bonds of any revision or withdrawal of the rating or to oppose any such revision or withdrawal. Any such downward revision or withdrawal may have an adverse effect on the market price of the Bonds. Financial Advisors MISCELLANEOUS The Government has retained the services of Banc of America Securities LLC, New York, New York, as Financial Advisor in connection with the sale of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. All of the fees of the Financial Advisor with regard to the issuance of the Bonds are contingent upon the issuance and delivery of the Bonds. 32

41 Underwriting Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the Underwriters ) have agreed, pursuant to a purchase contract between the Government and the Underwriters, to purchase all of the Bonds for a purchase price of $146,295,754.43, which represents the par amount of the Bonds ($151,935,000.00), less an original issue discount of $4,141,081.35, and less an underwriters discount of $1,498, The purchase contract related to the Bonds provides that the Underwriters will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the purchase contract, the approval of certain legal matters by bond counsel and certain other conditions. 33

42 Additional Information The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations from and summaries and explanations of the Bonds, the Certificate, the provisions of the Organic Act and the Bond Act, and other statutes and documents referenced herein, do not purport to be complete, and reference is made to said documents, constitutional provisions and statutes for full and complete statements of their provisions. The attached Appendices are integral parts of this Official Statement and should be read in their entirety. The capitalized terms used in this Official Statement shall have the meanings ascribed to them in the text or in Appendix D. The Government has reviewed the information contained herein and has approved all such information for use in this Official Statement. The execution and delivery of this Official Statement have been duly authorized by the Government. GOVERNMENT OF GUAM By: /s/ Felix P. Camacho Governor 34

43 APPENDIX A CERTAIN DEMOGRAPHIC AND ECONOMIC INFORMATION REGARDING THE TERRITORY OF GUAM Guam is the westernmost territory of the United States of America, as well as the largest and southernmost island of the Marianas archipelago, and the largest of the 2,000 islands in Micronesia. Located at 13 degrees north latitude, 144 degrees east longitude, the island is about 30 miles long and varies in points from four to nine miles wide. The island encompasses a total land area of approximately 212 square miles, and is located approximately 6,000 miles southwest of San Francisco, 3,700 miles west-southwest of Honolulu, 1,500 miles southeast of Tokyo, 2,100 miles southeast of Hong Kong, 1,500 miles east of Manila, and 3,100 miles northwest of Sydney. The Marianas Trench, the deepest known ocean depth (-39,198 ft.), is located northeast of Guam. Guam s population as of 2007 was estimated by the U.S. Census Bureau to be 173,456. Despite the island s relatively small size, its strategic location in the Western Pacific has historically made it a desirable property for the world s superpowers. The indigenous Chamorro people first came in contact with Europeans, when Ferdinand Magellan landed at Guam s Umatac Bay, in Miguel Lopez de Legazpi claimed the island for Spain in Spanish colonization of Guam began in 1668 and lasted until the end of the Spanish-American War in As outlined in the Treaty of Paris, the island was ceded to the United States along with Cuba, Puerto Rico, and the Philippines. Guam has since remained under U.S. administration, except for two and a half years of Japanese occupation during World War II. On July 21, 1944, American occupation forces recaptured Guam and reestablished the naval government. In 1950, the U.S. Congress passed the Organic Act of Guam, granting the Chamorro people American citizenship and establishing a civilian government. The Government today consists of three branches: Executive, Legislative and Judicial. A governor elected at large every four years heads the Executive Branch. The Government maintains a staff of approximately 11,700 persons under the direction of the Governor and his department heads. The unicameral legislature is composed of 15 senators elected at large every two years. The Judiciary Branch consists of the Superior Court of Guam, the court of general trial jurisdiction, and the Supreme Court of Guam, the court of highest appeal, established in Guam also has one Federal District Court and an elected representative to the U.S. House of Representatives, who has voting power in the House committees and subcommittees of which he or she is a member and limited voting authority on the floor of the House. Guam s current political status is a territory of the United States governed by the Organic Act. In January 1984, the 17 th Guam Legislature created an eight-member Commission on Self- Determination to pursue an improved relationship with the federal government as a Commonwealth. The Guam Commonwealth Act, H.R. 100, would grant Guam greater authority over its internal affairs and ensure the right of self-determination for the Chamorro people of Guam. This draft act was developed on Guam and approved in two plebiscites by the people of Guam in 1987, and introduced in the 105 th U.S. Congress in Most people on Guam view Commonwealth status as a forward step that would allow Guam to progress further politically, socially, and economically. The key components of the Guam Commonwealth Act are mutual A-1

44 consent, Chamorro self-determination, and local control of immigration. Ultimate Constitutional authority for the territory rests with the U.S. Congress, and Guam continues to seek clear answers from Congress to its Commonwealth proposal. Tourism revenues and, to a growing extent, U.S. federal and military spending contribute to the island s economy. The island s proximity to every major city in Asia and the South Pacific greatly contributes to the diversity of the island s population and the visitor industry. This geographic advantage also provides U.S. military operations with significant flexibility compared to other locations in the Pacific and Asia. Guam has one international airport, the Antonio B. Won Pat International Air Terminal, operated by the Guam International Airport Authority, an autonomous agency of the Government. The airport s renovation and expansion was completed in 1998 to a spacious tri-level complex featuring car rental agencies, a currency exchange facility, several duty-free shops, and several restaurants and vendors. Most food and goods are imported, 75% of which are from the U.S. mainland, and the island serves as a transshipment distribution center for trade among its neighboring islands in the western Pacific. Guam s commercial port is the Commercial Port of Guam, situated within Apra Harbor, a natural lagoon enclosed by a submerged coral bank and barrier reef. Operated by the Port Authority of Guam, an autonomous agency of the Government, the port is the only commercial seaport on the island and the principal seaport in Micronesia. Geography and Climate DEMOGRAPHIC AND ECONOMIC INFORMATION The island of Guam was formed by an uplift of undersea volcanoes. It is surrounded by coral reefs near the shore and is comprised of two distinct areas of about equal size. The northern part of the island is a high coralline limestone plateau rising up 850 feet above sea level. It contains the northern water lens which is the main source of fresh water on the island. The southern region is mountainous with elevations of 700 to 1,200 feet above sea level. Apra Harbor, one of the largest protected deep-water harbors in the world, is located on the western side of the island. Guam s climate is pleasantly warm year-round. The mean annual temperature is 85 degrees Fahrenheit. The general temperature ranges from the low 70s to mid 80s. Annual rainfall averages 85 inches in the western coastal area to 110 inches in the highest mountain locations in the south. Three quarters of the total annual rainfall occurs between the months of June and December. Like other Pacific islands, Guam is periodically subject to typhoons and tropical storms. From 1962 to date, the eyes of twelve of these storms passed directly over or just south of the island. Seven of these typhoons caused damage great enough to result in federal disaster relief: Super Typhoon Karen in 1962, Typhoon Pamela in 1976, Typhoon Russ in 1990, Super Typhoon Omar in 1992, Super Typhoon Paka in 1997, and Typhoon Chata an and Super Typhoon Pongsona in Building codes enacted in 1978 require all new construction to be designed to tolerate wind velocities of 155 mph. Due to its location near the Marianas Trench, the island also occasionally experiences seismic activity. Other than a major earthquake of 8.1 A-2

45 magnitude on August 8, 1993, no recent earthquakes have caused significant damage to the island. Economic Indicators Population Guam s residents originate from all parts of the Asia-Pacific region in addition to the U.S. mainland. In addition to Guam s indigenous Chamorro people, who comprise approximately 47% of the population, large numbers of mainland Americans, Filipinos, Chinese, Japanese, and Koreans constitute the bulk of the island s population. There are also substantial numbers of Micronesian islanders, Vietnamese and East Indians. The island s diverse population makes it one of the most cosmopolitan communities in the Western Pacific. According to the 2000 U.S. Census, Guam s 2000 population estimate was 154,805. This represents a 16.3% increase over the 1990 U.S. Census tabulation of 133,152, which was in turn a 26% increase over the 1980 population of 105,979. Guam s 2007 population is estimated to be 173,456. Approximately 75% of the workforce is employed in the private sector, with the remainder in government, both local and federal. The island s individual and household income have fairly equal distributions, as compared to other nations, islands, or territories in a similar stage of economic development. Guam currently has 37 public schools, 24 private schools and four Department of Defense schools. Guam Public School System has recently secured financing for the construction of four additional public schools and possible renovation of one existing public school. In addition, Guam Community College and the University of Guam are located on the island. Approximately 31,000 students attend Guam s schools (excluding Guam Community College and the University of Guam). Employment From 2003 to 2005, total employment on Guam within the private and public sectors remained relatively stable. During 2006, both private and public sector employment increased in anticipation of upcoming military expansions. The largest private sector increase was in the service industry (including hotels) with 630 jobs. Total employment dropped slightly from December 2006 to June 2007 due to seasonal declines in employment by private and public sector educational institutions. However, employment in the construction industry continued to increase during this period. A-3

46 The distribution of civilian employment in Guam, based on payrolls, from 2003 to 2007 is listed by industry in Table A-1. Excluded from the civilian employment estimates in Table A-1 are self-employed individuals, proprietors and unpaid family workers. The payroll survey in Table A-1 includes all civilian personnel on payroll, including multiple jobholders counted at each place of employment, and nonresident alien workers. TABLE A-1 Civilian Employment As of December 31, As of June 30, Private sector: Agriculture Construction 5,480 4,810 4,460 4,380 5,270 Manufacturing 1,680 1,560 1,660 1,640 1,630 Transportation & public utilities 4,630 4,610 4,970 5,000 4,980 Wholesale trade 1,820 1,800 1,880 2,070 2,080 Retail trade 11,880 12,560 12,360 12,010 11,410 Finance, insurance, and real estate 2,190 2,370 2,540 2,450 2,580 Services 14,770 14,510 15,190 15,820 15,540 Total private 42,770 42,480 43,230 43,660 43,800 Public sector: Federal government 3,100 3,310 3,230 3,460 3,410 Guam government (1) 11,630 11,610 11,540 11,740 10,830 Total public 14,730 14,920 14,770 15,200 14,240 Total Payroll Employment 57,500 57,400 58,000 58,860 58,040 (1) Includes temporary contractual employees, autonomous agencies, AHRD Disaster Recovery, and senior/youth employment programs. Note: Data includes both full-time and part-time employees who worked during any part of the pay period, temporary alien workers and employees under 16 years of age. Data are based upon the number of paychecks issued by employers. Dual and multiple jobholders are counted once for each job held. Proprietors, unpaid family workers, domestic servants and military active duty personnel are excluded. Source: Current Employment Report, Department of Labor, Government of Guam. A-4

47 Table A-2 shows the top 15 private employers on Guam and number of employees. TABLE A-2 Top 15 Private Employers on Guam 2006 Employer (and Type of Enterprise) Number of Employees 1. Continental Micronesia (airline) 1, Calvo s Enterprises, Inc. (insurance, various) DaVinci-RP operating Lessee Inc. (hotel) InterPacific Resort Corp. (hotel) Black Construction Corp. (construction) Triple J Enterprises, Inc. (automotive, various) Joeten Enterprises (retail) Bank of Guam (financial services) Hotel Nikko Guam (hotel) TakeCare Insurance Co. Inc. (insurance) Guam Shipyard (ship repair) Alupang Beach Tower (hotel) Pacific Security Alarm (security) Marriot Guam Resort & Spa (hotel) Dick Pacific Construction Micronesia (construction) 226 Total 7,320 Source: Deloitte & Touche Guam Business Top 40 (2006). A-5

48 Unemployment The Government surveys and reports employment and unemployment separately. Guam s unemployment peaked in September 2001 when the unemployment rate was at 13.5%, but has decreased to 6.9% as of March Table A-3 lists unemployment statistics for September 2001 to March Differences in the employment figures in Table A-1 and Table A-3 arise as a result of differences in the surveys coverage and exclusions. The household survey in Table A-3 excludes civilians living within military installations or in military housing, and employees under the age of 16 years. (1) TABLE A-3 Unemployment Statistics Number Unemployment As of (1) Total Labor Force Unemployed Rate (%) Sept ,800 8, Mar ,050 7, Mar ,520 4, Dec ,130 4, Mar ,940 4, Dates as of which data are provided reflect reported data available from the Bureau of Labor Statistics (BLS). Data are not available for 2003 due to reorganization of BLS. Data are not available for March 2005 due to management and funding of BLS. Note: Data include civilian noninstitutional population 16 years of age and older, but exclude nonimmigrant aliens and civilians living within military installations or in military housing. Individuals with one or more jobs or dual jobs are counted once. Source: Guam Department of Labor, Bureau of Labor Statistics. Construction Guam s construction industry is generally measured by the number and value of building permits. Building permits constitute an important economic indicator of the type and level of construction activities planned as well as corresponding employment increases once the buildings are completed. The dollar value of building permits increased at an average annual rate of 26.2% from 2002 to A-6

49 Table A-4 lists the dollar value of the construction permits issued during Fiscal Years 2002 to TABLE A-4 Building and Construction Permits (Dollars in Thousands) Residential $26,080 $62,214 $32,404 $47,159 $71,456 Commercial & Industrial 7,547 22,033 26,735 24,061 34,411 Hotels 13,124 2,314 6,120 5,882 6,760 Government 35,361 20,179 20,708 46,114 61,117 Other 13,196 18,905 14,958 26,481 21,687 Total $95,308 $125,645 $100,925 $149,697 $195,431 Source: Department of Public Works. The American military presence on Guam results in many construction projects. The planned relocation of approximately 8,000 Marines from Okinawa, Japan, to Guam by 2014 is expected to have a major impact, including over $10 billion of facilities upgrades, new construction and infrastructure expenditures. In addition, facility construction needs are estimated to be $500 million through 2016 at Andersen Air Force Base. Various Navy projects have also been awarded. See Future Role of the Military on Guam. Over $100 million in hotel renovation projects were planned through 2007, including at the Hilton Guam Resort and Spa, Pacific Islands Club, Guam Marriott Resort, Hotel Nikko Guam, Royal Orchid Guam, Guam Okura Hotel and Sheraton Laguna Guam Hotel. Over $230 million in hotel renovation and new construction projects currently are planned for 2008 and beyond, including completion of a 14-acre Tumon Beachfront resort by Five housing projects are currently under construction with over 800 single-family units to be added to Guam s real estate market. Housing projects include 219 homes in Machanao Dededo built for low-income families interested in renting well-equipped homes that they may purchase after a fifteen-year compliance period, a 34-home community in Tamuning, 370 single family homes in Dededo, 351 half-acre home lots in Marbo Cave, and fourteen homes currently under construction in Maite. Ongoing and planned Government construction projects include the completion in 2008 of $150 million of airport capital improvements, including runway expansion and taxiway projects to accommodate expanded air service, long-haul flights to the U.S. mainland and projected passenger and cargo increases, a planned $20 million Ordot Landfill closure and $80 million for a new Dandan landfill, $5.9 million for the design, construction and purchase of collateral equipment for a forensic science laboratory and a $60 million for construction of four new schools and possible renovation of an additional school to accommodate increased enrollment as a result of migration from the Marshall Islands, the Federated States of Micronesia A-7

50 and Palau. Guam Waterworks Authority has also undertaken $70 million in capital improvement projects, completion of which is scheduled for Business Activity Table A-5 reflects business receipts by category for Fiscal Years 1999 through The gross business receipts data for Fiscal Years 2004 through 2006 are not yet available. TABLE A-5 Gross Business Receipts Fiscal Years (Dollars in Thousands) Retail $1,444,800 $1,472,300 $1,317,500 $1,237,394 $1,314,321 Service 63,000 64, , , ,719 Rentals 833, , , , ,774 Construction 345, , , , ,962 Insurance 465, , , , ,291 Other 453, , ,200 74,588 49,228 Total $3,605,600 $3,674,400 $3,071,100 $2,832,817 $2,923,298 Source: Department of Revenue and Taxation, Government of Guam. Table A-6 reflects the Government s business privilege tax collections for Fiscal Years 2001 through Business privilege tax collections for a given fiscal year may not directly reflect gross business receipts in the prior fiscal year because businesses sometimes file late or multi-year business privilege tax returns. The decline in collections in 2002 is attributable to the detrimental effects of the events of September 11, The growth in collections for 2004 reflects a temporary increase in the business privilege tax from 4% to 6% from April 2003 through April Generally, collections have increased from 2005 to A-8

51 TABLE A-6 Government of Guam Business Privilege Tax Collections Fiscal Years Business Privilege Year Tax Collections 2001 $147,514, ,321, ,287, ,598, ,649, ,186, ,023,759 (1) (1) Unaudited. Source: Bureau of Budget and Management Research. Tourism Industry Tourism has represented the primary source of income for Guam s economy for over twenty-five years. Visitor arrivals rose to over 1,000,000 travelers for the first time in 1994 and have remained near or above that level ever since Table A-7 sets forth the annual number of visitors to Guam from 2000 through August TABLE A-7 Annual Visitor Arrivals to Guam Percentage Year Visitor Arrivals Increase/(Decrease) ,286, ,159,071 (9.9)% ,058,704 (8.7) ,506 (14.1) ,159, ,227, ,211,674 (1.3) 2007 (1) 840, (1) Through August Source: Guam Visitors Bureau. From 2001 to 2002, Guam s visitor industry suffered from a regional recession, but more significant was the impact of the 2001 terrorist attacks on the island s annual visitor arrivals, as they affected tourism worldwide. In 2001, visitor arrivals declined by 9.9%. In 2002, Guam s tourist industry was also impacted by the terrorist bombings in Bali and the Philippines. In 2003, A-9

52 Guam s visitor arrivals were further impacted by the war in Iraq and the outbreak of SARS in the Asian Region. In 2004, visitor arrivals rebounded strongly and that growth continued in saw a small decline in visitor arrivals. The following Table A-8 is a comparison of cumulative visitor arrivals by month to Guam for 2002 through August TABLE A-8 Cumulative Visitor Arrivals to Guam by Month January 84,361 57, , , , ,502 February 176, , , , , ,501 March 276, , , , , ,705 April 351, , , , , ,090 May 445, , , , , ,483 June 534, , , , , ,760 July 622, , , , , ,070 August 733, , , , , ,813 September 836, , , , ,312 October 925, , ,579 1,025,468 1,012,011 November 1,020, ,572 1,058,734 1,124,909 1,108,396 December 1,058, ,506 1,159,881 1,227,587 1,211,674 Source: Guam Visitors Bureau. Key Visitor Markets The origin of visitors to Guam diversified during the 1990 s and has remained diverse in recent years. The great majority of visitors to Guam originate from Japan. Guam is one of only four markets worldwide that attracts nearly one million Japanese tourists per year. In 2006, Japan accounted for 80.5% of the visitors to Guam. The next largest tourist markets were Korea (9.9%), the U.S./Hawaii (3.8%), the Commonwealth of the Northern Mariana Islands (1.5%) and Taiwan (1.4%). The Guam Visitors Bureau is aggressively marketing to grow the Korean, Taiwan, Hong Kong and China markets, as a more diversified visitor base will shield Guam s economy from fluctuations in the Japanese economy. A-10

53 2006. Table A-9 is a comparison of annual visitor arrivals to Guam by country from 2002 to TABLE A-9 Annual Visitor Arrivals by Country Percent Percent Percent Percent Percent Arrivals of Total Arrivals of Total Arrivals of Total Arrivals of Total Arrivals of Total Japan 786, % 659, % 906, % 955, % 952, % Korea 128, , , , , Taiwan 19, , , , , U.S./Hawaii 41, , , , , CNMI (1) 19, , , , , Micronesia (2) 11, , , , , Philippines 6, , , , , Australia 1, , , , , Canada 1, Europe 1, , , , , Hong Kong 8, , , , , Nauru Thailand China P.R.C. 1, , Vietnam Others 2, , , , , Total Air 1,030, % 857, % 1,120, % 1,184, % 1,183, % Total Sea 27, , , , , Total Air & Sea 1,058, % 909, % 1,156, % 1,227, % 1,211, % (1) Commonwealth of the Northern Mariana Islands. (2) Figures for Micronesia reflect visitor arrivals from Palau, the Federated States of Micronesia and the Republic of the Marshall Islands. Source: Guam Visitors Bureau. As shown in Table A-10, the concentration of increased visitor arrivals from 2002 to 2006 was from Japan, mainly due to the reinstitution and expansion of airline services, as well as increased marketing efforts. A-11

54 Table A-10 highlights the percentage change in annual visitor arrivals to Guam by country from 2002 to TABLE A-10 Percentage Change in Annual Visitor Arrivals by Country %Change from %Change from %Change from %Change from %Change from 2005 Japan 786,947 (12.7)% 659,593 (16.2)% 906, % 955, % 952,687 (0.3)% Korea 128, ,341 (31.9) 89, , , Taiwan 19,500 (38.2) 18,673 (4.2) 24, ,386 (3.2) 16,729 (28.5) U.S./Hawaii 41,521 (0.9) 41,225 (0.7) 46, ,859 (0.6) 44,226 (5.1) CNMI (1) 19,080 (15.4) 18,487 (3.1) 19, ,042 (7.0) 17,813 (1.3) Micronesia (2) 11,578 (17.4) 13, ,996 (3.3) 12,648 (2.7) 12,047 (9.4) Philippines 6, ,470 (0.9) 7, ,051 (0.2) 8, Australia 1, , , ,546 (12.6) 2,328 (8.6) Canada 1, (64.7) (15.5) Europe 1, ,285 (10.5) 1, ,750 (15.8) 1,382 (21.0) Hong Kong 8,444 (8.0) 4,620 (45.3) 5, ,518 (12.4) 6, Nauru 10 (88.8) 7 (30.0) (64.0) Thailand 229 (15.8) 213 (7.0) (37.0) China 1, (41.3) , P.R.C. Vietnam (41.2) (50.0) Others 2,817 (12.0) 2, , (11.9) 3, Total Air 1,030,928 (8.3)% 857,432 (16.8)% 1,120, % 1,184, % 1,183,943 (0.1)% Total Sea 27,543 (20.5) 52, ,215 (30.5) 42, ,731 (35.0) Total Air & Sea 1,058,471 (8.7)% 909,506 (14.1)% 1,156, % 1,227, % 1,211,674 (1.3)% (1) Commonwealth of the Northern Mariana Islands (2) Figures for Micronesia reflect visitor arrivals from Palau, the Federated States of Micronesia and the Republic of the Marshall Islands. Source: Guam Visitors Bureau. Airlines and Hotels Nine international passenger airlines (Continental Airlines, JAL, Northwest Airlines, Korean Air, All Nippon, China Airlines, Philippine Airlines, Freedom Air and Asia Pacific Airlines) currently serve the Antonio B. Won Pat Guam International Airport, the sole commercial airport on Guam. These airlines serve 21 international destinations and over 3,000,000 passengers a year. Continental Micronesia, a wholly owned subsidiary of Continental Airlines, maintains a major hub on Guam servicing destinations in Micronesia, Hawaii, Japan, East Asia and Australia. Tumon Bay, located on Guam s northwest coast, is the heart of Guam s tourist industry. The hotels that line Tumon Bay provide lodging to the majority of visitors to Guam. During the 1990s and early 2000s, Guam s inventory of hotel rooms has increased over 100%, with A-12

55 substantial growth in the number of hotel rooms occurring from 1991 to 1993 and from 1995 to Recent hotel openings include the 191-room Ohana Oceanview Guam in 2002, the 315- room Guam Fiesta Resort in 2006 and the 311-room Sheraton Laguna Guam Hotel in There are 31 hotels in Guam, including many notable international hotel operators, with an inventory of over 8,000 rooms. As of August 2007, the weighted average hotel occupancy rate was 63% and the weighted average room rate was $ Table A-11 lists the top fifteen hotel operators and the number of rooms as of August TABLE A-11 Top Fifteen Hotel Operations in Guam As of August 2007 Hotel/Resort Year Opened Location Number of Rooms Pacific Islands Club 1980 Tumon 793 Hilton Guam Resort and Spa 1972 Tumon 667 Leo Palace Hotel 1993 Yona 624 Outrigger Guam Resort 1999 Tumon 600 Guam Plaza Hotel 1983 Tumon 508 Hotel Nikko Guam 1992 Tumon 492 Hyatt Regency Guam 1994 Tumon 455 Guam Marriot Resort 1987 Tumon 436 Onward Beach Resort 1992 Tamuning 430 Westin Resort Guam 1996 Tumon 426 Guam Fiesta Resort 2006 Tumon 315 Sheraton Laguna Guam Hotel 2007 Tamuning 311 Holiday Inn Resort 1996 Tumon 229 Royal Orchid 2000 Tumon 200 Ohana Oceanview Guam 2002 Tumon 191 Total 6,677 Source: Guam Visitors Bureau. A-13

56 In addition to visitor arrivals, the hotel occupancy tax is also a measure frequently referred to in assessing the strength of Guam s tourism industry. Table A-12 lists the hotel occupancy taxes collected for Fiscal Years 2001 through Collections of the hotel occupancy tax have increased in each year since TABLE A-12 Hotel Occupancy Taxes Collected Fiscal Years Fiscal Year Taxes Collected 2001 $18,850, ,178, ,353, ,859, ,158, ,528,389 Source: BR-20 Form, Department of Revenue and Taxation and Department of Administration, Government of Guam. Military Activity Military Personnel Military personnel figures rise and fall as dictated by world events and the U.S. response to these events. As shown in Table A-13, in 2005 Guam had approximately 6,514 active duty military personnel, an increase of 4.7% versus 2004 levels, but declined by 261 personnel, or 4%, in These variations largely reflect deployment of U.S. forces to and from Iraq. TABLE A-13 Active Duty Military Personnel on Guam Year Navy Air Force Army Marines Coast Guard Total ,626 1, , ,810 1, , ,760 1, , ,922 1, , ,085 1, , ,867 1, ,253 Source: COMNAVMAR Civil and Military Affairs Office. A-14

57 Table A-14 below depicts military dependents on Guam since (1) TABLE A-14 Military Dependents on Guam as of September 30, 2006 Year Navy Air Force Army Marines Coast Guard Total ,471 1, , ,327 1, , (1) N/A N/A N/A N/A N/A 5, ,191 2, , ,829 2,104 1, , ,829 1,893 1, ,059 Detailed data not available for Sources: Navy Shareholder Reports, Air Force Reports, Guam Annual Economic Review, The Economic Impact of Navy Base Closures and Outsourcing on Guam (Aug. 1999), 2005 Guam Statistical Yearbook. As displayed by Table A-15, the military has increased its number of civil service personnel on Guam from 1998 to TABLE A-15 Military Civil Service Personnel on Guam (1) Years Personnel (2) , , , ,518 (3) ,013 (4) , ,313 (1) Data unavailable for 2000 and (2) Civil Service Personnel figures for 1998 and 1999 include Navy civil service personnel only. (3) Includes local and stateside hires but not Non-Appropriated Fund (NAFI). (4) Includes local and stateside hire and NAFI. Sources: Navy Shareholder Reports, Air Force Reports, Guam Annual Economic Review, Active Duty, Selected Reserves, DoD Personnel and Their Family Members Stationed on Guam, 30 April 2002 and 30 Sept. 2004, The Economic Impact of Navy Base Closures and Outsourcing on Guam (Aug. 1999). As is occurring nationwide, the reduction of active-duty military personnel is accompanied by an increase in the number of Army and Air National Guardsmen and Reservists. A-15

58 These personnel perform vital services for the nation and for Guam but their numbers have yet to offset the loss of active duty personnel. Army National Guard TABLE A-16 Guardsmen and Reservists in Guam Fiscal Years Air National Guard Coast Guard Reserve Air Force Reserve Total Fiscal Years Army Reserve , , , , ,002 Sources: Communications with Guard and Reserve Units. Military Expenditures Table A-17 provides a breakdown of military salaries expended on the island during Fiscal Years 2000 through Total salaries, especially for active military, increased during this time period as a result of the increased military activity in Asia and the Middle East. TABLE A-17 Department of Defense Expenditures on Guam Active Duty and Civilian Military Salaries Fiscal Years (Dollars in Thousands) Fiscal Year Active Military Inactive Military Civil Service Employees (1) Coast Guard Employees Total Salaries 2000 $123,734 $10,320 $85,896 $96,958 $220, ,795 11,553 54, , , ,850 21,598 56, , , ,366 19,103 35,616 18, , (2) 206,570 20,533 38,776 15, ,220 (1) Reflects impact of impact of Navy and Air Force competitive sourcing and base closure activities. (2) Most recent year for which data is available. Source: Consolidated Federal Funds Report, Bureau of the Census. Department of Defense procurement contracts confirm the loss of civil service personnel. As the private sector carries out functions previously performed predominantly by civil service personnel, federal spending under procurement contracts decreased by 33% from 2003 to 2004 as shown in the table below. However, Fiscal Year 2004 Department of Defense procurement still exceeded the Fiscal Year 2000 to 2002 levels. A-16

59 TABLE A-18 Department of Defense Procurement Contracts for Guam Fiscal Years (Dollars in Thousands) Department of Fiscal Year Defense Procurement 2000 $211, , , , (1) 343,065 (1) Most recent year for which data is available. Source: Consolidated Federal Funds Report, Bureau of the Census. GEDCA maintains a database of contracts awarded by the Department of Defense for Guam as reported on various military websites. This database indicates that almost $330 million of contracts were awarded in Fiscal Year 2005, over $334 million were awarded in Fiscal Year 2006; and over $349 million were awarded in Fiscal Year Since not all Department of Defense contract awards are reported on the source websites, it is believed that the data base maintained by GEDCA understates total contract awards for these years. Future Role of the Military on Guam Recent world events have increased recognition of Guam s strategic military value that will result in increasing military presence in Guam and its contribution to the Guam economy. Following the events of September 11, 2001, the U.S. has started to redistribute its forces in the Pacific and reassess the role that Guam can play in the region. Tensions between China and Taiwan and India and Pakistan, North Korean threats, and containment of the Abu Sayaf in the Philippines increase Guam s importance as a location from which the U.S. can deter or preempt aggression and maintain peace. A strong U.S. presence in the Pacific also demonstrates active support for Japan, Australia and other Pacific Rim allies. Guam is uniquely positioned geographically to constitute an extended homeland defense perimeter, protecting the U.S. west coast and Hawaii from acts of aggression. Military based on Guam can support forward deployed capabilities in Asia and allow rapid response to any threat to stability of the Asian region or to the U.S. A-17

60 The map below shows Guam s location in the Pacific and relative distances between major cities in the Pacific Rim. There is a significant existing U.S. military presence on Guam. The U.S. Air Force has stationed 62 conventional air-launched cruise missiles and the 613th Contingency Response Squadron (110 personnel) at Andersen Air Force Base (Andersen AFB) and has recently completed construction of its newest aircraft maintenance hanger for B-2 stealth bombers at a cost of over $32 million. The Navy has home-ported three fast attack submarines in Guam: the USS Corpus Christi, the USS Houston and the USS Buffalo. In addition, recent reports indicate that the Navy is considering forward deploying several of its nuclear-powered ballistic submarines to Guam. A-18

61 Optimism over the future growth of the U.S. military presence on Guam is seen in Congressional authorizations for appropriations for military construction projects, as depicted in Table A-19 below. Steady growth in such authorizations is evident from Fiscal Year 2003 to Fiscal Year (1) TABLE A-19 U.S. Military Construction Appropriations Authorized for Guam Fiscal Years (Dollars in Thousands) Total Year Appropriations 2003 $ 74, , , , , (1) 345,800 President s Department of Defense Budget Request (House-approved). Sources: Guam Economic Development and Commerce Authority. For the next 10 years, Guam s economy is expected to benefit from a sizable commitment by the federal government to expand the American military presence on Guam, and construction payrolls are expected to grow rapidly as the military upgrades facilities and supporting infrastructure. Income tax and business privilege tax revenue from the military and private companies are anticipated to increase substantially as a result of these construction activities. Military expansions and other planned military activities on Guam include the following: U.S. Marine Corps Relocation from Okinawa. In 2002, the U.S. and Japan commenced a Defense Policy Review Initiative ( DPRI ) to transform their existing alliance. In October 2005, the two nations entered into an Alliance Transformation and Realignment Agreement, a wide-ranging plan for the realignment of U.S. military forces in Japan. This agreement and subsequent negotiations have resulted in a plan to move 8,000 U.S. Marines and 9,000 military dependents from Okinawa to Guam from 2010 to Of the $10.27 billion total cost of the relocation, Japan is to provide $6.09 billion for operational facilities, barracks, quality-of-life amenities, new family housing and utilities, and the U.S. is to provide $4.18 billion to construct operational facilities, barracks and quality-of-life improvements, and off-base infrastructure and highways. The required Environmental Impact Statement for the relocation of Marines to Guam is underway and is expected to be completed in mid Decisions as to what other forces will accompany these Marines, when the forces will be moved, where they will be based and other implementing details are being worked out by the U.S. Pacific Command and the U.S. and Japanese governments, but it is possible that the Marines will be accompanied by significant numbers of additional forces including possible maneuver forces that would form the basis of a new Littoral Warfighting Center. A-19

62 Beddown of Training and Support Initiatives at Northwest Field, Andersen AFB. Headquarters Pacific Air Forces is completing an environmental impact assessment for the reactivation of Northwest Field of Andersen AFB as a training area for combat engineers, security forces and combat communication units. This initiative is expected to result in the addition of an estimated 380 permanent active-duty Air Force, civilian personnel and contractor personnel and an estimated 4,500 active duty trainees to Guam on an annual basis. Construction of utilities, facilities, roads and other improvements is slated for completion over a six year period beginning in Fiscal Year Expenditures of $200 - $300 million commenced in Fiscal Year 2006 and are projected through and beyond Fiscal Year 2011 for creating an expeditionary combat support and training campus composed of heavy construction engineers, combat communications, security forces and combat skills training. A federal appropriation of $12.5 million toward the costs of the Northwest Field infrastructure was authorized under the Fiscal Year 2007 National Defense Authorization Act. Establishment and Operation of an Intelligence, Surveillance, Reconnaissance, and Strike Capability, Andersen AFB. Headquarters Pacific Air Forces has developed a draft environmental impact statement proposing to base a Global Strike Task Force on Andersen AFB, adding an intelligence, surveillance, reconnaissance, strike and aerial refueling capability to the base. The proposed action would base three Global Hawk unmanned aerial intelligence, surveillance and reconnaissance aircraft and 12 refueling aircraft at the base, as well as the rotation of 48 fighter and six bomber aircraft to Andersen AFB from bases in the 50 states. It is estimated that approximately 3,183 additional military, civilian and contractor personnel would be permanently based at Andersen AFB as well. This action would result in facility construction, addition, and alteration projects to support basing and operation. The basing action is expected to begin in 2007 with facility construction projects and be completed in 2016, at an estimated cost of over $200 million. A federal appropriation of $52.8 million has already been authorized for construction of a Global Hawk Maintenance and Operations Facility under the Fiscal Year 2007 National Defense Authorization Act. Forward Deployment of Navy Ships. The U.S. has projected expenditures of $187 - $241 million for various wharf improvements through Fiscal Year 2009, including improvements for accommodating transient nuclear aircraft carriers and their escorts, High-Speed Vessels, Littoral Combat Ships and new supply and ammunition vessels. A federal appropriation of approximately $30 million has already been authorized for wharf improvements under the Fiscal Year 2007 National Defense Authorization Act, as well as approximately $100 million for related construction of new housing. Army Ballistic Missile Defense System. A U.S. Army Air Defense Battalion is expected to be assigned to Guam and would require the construction of operational facilities and housing. The cost of establishing this capability on Guam has not yet been determined. Approximately 630 active duty personnel and 950 dependents are expected to be assigned to Guam to support this capability. The Army Ballistic Missile Defense System is incorporated in the environmental impact statement being developed for the relocation of Marines to Guam. A-20

63 This increased military activity is expected to sustain and grow the Guam economy in the years to come. The chart below depicts projected construction on Guam resulting from the relocation of Marines to Guam to the year Source: Presentation by General Bice, Joint Guam Program Office, at the Guam Industry Forum, August 23, A-21

64 (THIS PAGE INTENTIONALLY LEFT BLANK)

65 APPENDIX B EXCERPTS FROM GOVERNMENT OF GUAM AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 B-1

66 (THIS PAGE INTENTIONALLY LEFT BLANK)

67

68

69

70

71 GOVERNMENT OF GUAM Management s Discussion and Analysis Year Ended September 30, 2006 Our discussion and analysis of the Government of Guam ( GovGuam ) financial performance provides an overview of GovGuam s financial activities for the fiscal year ended September 30, Please read it in conjunction with GovGuam s basic financial statements, which follow this section. Fiscal year 2005 comparative information has been included, where appropriate. The amounts included for fiscal year 2005 for the purpose of comparisons have been restated, as further detailed in the fiscal year 2006 notes to the basic financial statements. FINANCIAL HIGHLIGHTS For the fiscal year ended September 30, 2006, GovGuam s total net assets decreased by $221.6 million (or 345.7%) from net assets of $64.1 million in the prior year to a net deficiency of $157.5 million. This decrease is primarily attributable to extraordinary items relating to the cost of living allowance (COLA) judgment of $123.6 million and an increase in the provision for tax refunds relating to Earned Income Tax Credits (EITC) of $30 million. During fiscal year 2006, GovGuam s expenses for governmental activities were $770.7 million, including expenses recorded or payments made or due to the autonomous agencies, and were funded in part by $261.4 million in program revenues and $427.5 million in taxes and other general revenues excluding extraordinary items of ($139.8 million). Expenses were up from fiscal year 2005 by $43.3 million (or 5.6%) whereas program revenues were up from fiscal year 2005 by $19.6 million (or 7.0%). This increase in program revenues was primarily due to a increase in operating grants and contributions ($19.3 million). For the fiscal year ended September 30, 2006, the General Fund reported general fund appropriations (including transfers out) of $495 million, $175.7 million in excess of revenues (including transfers in) of $472.9 million down by $0.2 million from fiscal year The excess of reported appropriations over revenues are due to an increase in extraordinary items relating to the COLA and EITC judgment liabilities of $153.6 million plus a decrease in revenues of $10.9 million. At September 30, 2006, the General Fund reported a total fund balance deficit of $524.0 million, which is an increase of $180 million from the prior year deficit of $348.4 million. This change in the deficit is primarily attributable to an increase in the deficit of the unreserved general fund balance of $162.2 million (or 31.0%) and reserve for related assets of $14.4 million (or 2.7%), offset by a decrease in continuing appropriations of $5.3 million (or 1.0%). OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to GovGuam s basic financial statements. GovGuam s basic financial statements comprise three components: 1) governmental-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains additional required supplementary information in the form of budgetary schedules, which are prepared on the budgetary basis of accounting, and other optional supplementary information, in addition to the basic financial statements themselves, which includes combining statements for governmental funds and component units. 3

72 GOVERNMENT OF GUAM Management s Discussion and Analysis, Continued Year Ended September 30, 2006 Government-wide Financial Statements The government-wide statements report information about GovGuam as a whole using accounting methods similar to those used by private-sector companies. The statement of net assets includes all of the government s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report GovGuam s net assets and how they have changed. Net assets - the difference between GovGuam s assets and liabilities - is one way to measure GovGuam s financial health or position. Over time, increases or decreases in GovGuam s net assets are an indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of GovGuam you need to consider additional non-financial factors such as changes in GovGuam s tax base, the condition of GovGuam s roads and infrastructure, and the quality of services. The government-wide financial statements of GovGuam are divided into two categories: Primary government - this grouping comprises governmental activities, which includes most of GovGuam s basic services such as education, public safety, health, finance, judiciary, and general administration. Local sourced tax revenues and other federal grants finance most activities of the primary government. Discretely presented component units - GovGuam includes numerous other entities in its report. Although legally separate, these component units are important because GovGuam is financially accountable for them. Fund Financial Statements The fund financial statements provide more detailed information about GovGuam s most significant funds - not GovGuam as a whole. Funds are accounting devices that GovGuam uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by enabling legislation. GovGuam establishes other funds to control and manage money for particular purposes (like Solid Waste Operations Fund) or to show that it is properly using certain grants (like federal grants reported in the Federal Grants Fund). GovGuam has two kinds of funds: Governmental funds - Most of GovGuam s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of GovGuam s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance GovGuam s programs. 4

73 GOVERNMENT OF GUAM Management s Discussion and Analysis, Continued Year Ended September 30, 2006 Fund Financial Statements, Continued Fiduciary funds - GovGuam is the trustee, or fiduciary, for other assets that because of trust arrangement, can be used only for the trust beneficiaries. GovGuam is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All of GovGuam s fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of change in fiduciary net assets. We exclude these activities from GovGuam s government-wide financial statements because GovGuam cannot use these assets to finance its operations. A FINANCIAL ANALYSIS OF GOVGUAM AS A WHOLE Net assets may serve over time as a useful indicator of a government s financial position. At the end of fiscal year 2006, GovGuam s liabilities exceeded assets by $157.5 million. However, all these net assets are either restricted as to the purpose they can be used for or are invested in capital assets. GovGuam uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although GovGuam s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate the liabilities. The summary of Net Assets (condensed) presented below, with comparable balances for fiscal year 2005, as restated, discloses this relationship: GovGuam s Net Assets As of September Current and other assets $ 219,412,142 $ 218,050,110 Capital assets 698,960, ,343,116 Total Assets 918,372, ,393,226 Long-term liabilities 417,071, ,905,118 Other liabilities 658,765, ,397,771 Total Liabilities 1,075,836, ,302,889 Net assets: Invested in capital assets, net of related debt 470,718, ,666,531 Restricted net assets 66,601,805 83,926,153 Unrestricted net assets (694,784,337) (494,502,347) Total net assets $ (157,464,236) $ 64,090,337 At the end of fiscal year 2006, GovGuam s unrestricted net assets showed a deficiency of $694.8 million, an increase of $200.3 million (or 40.5%) from the prior year unrestricted net asset deficiency. This deficiency is the result of having long-term commitments that are greater than currently available resources. Specifically, GovGuam did not include in past annual budgets the full amounts needed to finance future liabilities arising from outstanding bonds payable and other loans as well as to pay for unfunded pension liabilities, closure and post closure costs of the Ordot Dump, and unused employee leave balances. GovGuam will include these amounts in future years budgets as they become due. 5

74 GOVERNMENT OF GUAM Management s Discussion and Analysis, Continued Year Ended September 30, 2006 Changes in Net Assets For the year ended September 30, 2006, net assets of the primary government decreased by $221.6 million, a decrease of 345.7% from the prior year s net assets, as restated, of $64.1 million. This result indicates that GovGuam s financial condition, as a whole, decreased from the prior year. For the year ended September 30, 2006, net assets of the primary government changed as follows, with comparable amounts for fiscal year 2005: GovGuam s Changes in Net Assets For the Year Ended September Revenues: Program revenues: Charges for services $ 38,235,392 $ 38,062,638 Operating grants and contributions 223,160, ,760,325 General revenues: Taxes 416,815, ,267,503 Investment earnings 5,700,936 5,556,348 Other 4,989,865 2,778,329 Total revenues 688,902, ,425,143 Expenses: General government 96,408,217 85,600,345 Protection of life and property 94,531,452 82,818,103 Public health 86,558,390 64,134,787 Community services 32,564,953 34,362,282 Recreation 5,386,831 6,208,877 Individual and collective rights 46,878,905 44,328,485 Transportation 35,711,970 27,553,740 Public education 239,103, ,547,641 Environmental protection 9,090,493 10,089,734 Economic development 13,715,987 9,364,630 Interest expense (unallocated) 14,075,896 15,797,611 Transfers to persons 1,405,798 4,912,336 Payments to autonomous agencies 75,460,187 79,854,886 Payments to private purpose trusts - 1,123,529 Interest on tax refunds 2,032,527 2,247,188 Capital projects 3,503,737 4,653,137 Other 14,227,688 13,759,647 Total expenses 770,656, ,356,958 Deficiency before special and extraordinary items (81,753,610) (36,931,815) Special items - - Extraordinary items ( 139,800,963) 28,278,927 Change in net assets $ ( 221,554,573) $ (8,652,888) GovGuam s revenues from governmental activities, including local revenues, totaled $688.9 million in fiscal year The cost of governmental activities totaled $772.7 million; the deficiency of $81.8 million plus extraordinary items of $139.8 million representing an overall decrease in net assets of $221.6 million. 6

75 GOVERNMENT OF GUAM Management s Discussion and Analysis, Continued Year Ended September 30, 2006 Graphs 1 and 2 below show the major components of revenues and cost of governmental activities. Graph 1 GovGuam s Revenue Sources For the Year Ended September 30, % 9% 6% 1% 23% 29% Gross receipts tax Income tax Other taxes Federal & other grants Charges for services Other As in prior years, local sourced tax revenues and federal and other grants are the major sources of revenue for GovGuam, which comprises of 61% and 32%, respectively, of the total revenues for fiscal year Graph 2 GovGuam s Cost of Governmental Activities For the Year Ended September 30, 2006 Public education 30% 31% Protection of life & property Payments to autonomous agencies Individual & collective rights 11% 6% 10% 12% Public health Other Other expenses that make up a portion of the costs of governmental activities include general government expenses ($96.4 million), community services ($32.6 million), environmental protection ($9.1 million), economic development expenses ($13.7 million), unallocated interest expense ($14.1 million), transportation expenses ($35.7 million), recreation ($5.4 million), transfer to persons ($1.4 million), capital-related expenses ($3.5 million), interest payments on tax refunds ($2.0 million), and miscellaneous payments ($14.2 million). 7

76 GOVERNMENT OF GUAM Management s Discussion and Analysis, Continued Year Ended September 30, 2006 Graphs 3 and 4 below show a comparison of the major components of revenues and cost of governmental activities for fiscal years 2005 and Graph 3 GovGuam s Revenue Sources For the Years Ended September 30 Revenue Type Grants & contributions Gross receipts tax Income tax Other taxes Charges for services Other Dollars ($ millions) Graph 4 GovGuam s Cost of Governmental Activities For the Years Ended September 30 Expense Category Public education Protection of life & property Payments to autonomous agencies Individual & collective rights Public health Community services Other Dollars ($ millions) Other expenses in fiscal year 2006 included general government expenses of $96.4 million, up from $85.6 million (or 12.6%) in fiscal year 2005, transportation expenses of $35.7 million, up from $27.6 million (or 29.6%) in fiscal year 2005, economic development expenses of $13.7 million, up from $9.4 million (or 46.5%) in fiscal year 2005, unallocated interest expense of $14.1 million, down from $15.8 million (or 10.9%) in fiscal year 2005, and transfers to persons of $1.4 million, down from $4.9 million (or 71.4%) in fiscal year

77 GOVERNMENT OF GUAM Management s Discussion and Analysis, Continued Year Ended September 30, 2006 FINANCIAL ANALYSIS OF GOVGUAM S FUNDS As noted earlier, GovGuam uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. As of the end of fiscal year 2006, GovGuam s governmental funds reported a combined fund deficit of $422 million, which represents an increase of $213 million (or 101.9%) in comparison with the fiscal year 2005 combined fund deficit of $209 million. This decrease is primarily attributable to the increase in the fund deficit of the general fund of $175.7 million, and decreases in fund balance of the special revenue funds, capital projects funds and debt service funds of $19.8 million, $10.9 million and $6.6 million, respectively. Of this total combined fund deficit, $159.3 million is reserved to indicate that it is not available for new spending because it has already been committed: 1) to liquidate contracts and purchase orders of the prior period ($83.9 million); 2) to fund debt servicerelated activities ($32.7 million); 3) to liquidate continuing appropriation commitments ($26.5 million); or 4) for a variety of other restricted purposes. The combined unreserved fund deficit of GovGuam s governmental funds is $581.3 million, an increase of $155.1 million (or 36.4%) from fiscal year This deficit will be funded through future budgetary surpluses. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets GovGuam s investment in capital assets for its governmental activities as of September 30, 2006 amounted to $940.5 million, net of accumulated depreciation of $241.5 million, leaving a net book value of $699 million. GovGuam s capital assets include land, infrastructure, buildings, machinery and equipment, and various projects under construction. (See table below). This represents a decrease of $12.4 million (or 10.2%) from fiscal year GovGuam s Capital Assets September 30, 2006 and Non-depreciable: Land $ 11,454,623 $ 11,271,444 Construction in progress 12,015,277 17,289,392 23,469,900 28,560,836 Depreciable: Infrastructure 561,532, ,506,435 Buildings 308,010, ,010,799 Machinery and equipment 44,785,754 44,785, ,018, ,302,987 Accumulated depreciation (241,527,820) (209,520,707) 675,490, ,782,280 Total capital assets, net $ 698,960,489 $ 711,343,116 Major capital asset additions for fiscal year 2006 were as follows: $2.1 million for the purchase of Fire Truck Rescue units $12 million for ongoing road construction and restoration Additional information on GovGuam s capital assets can be found in note 1L to the basic financial statements. 9

78 GOVERNMENT OF GUAM Management s Discussion and Analysis, Continued Year Ended September 30, 2006 Long-term Debt The Organic Act authorizes GovGuam to borrow for such purposes as approved by the Legislature. GovGuam has entered into seven separate long-term debt obligations, as indicated below. No new longterm debt obligations were incurred by GovGuam during the year ended September 30, 2006 with overall long-term debt obligations decreasing by $23 million (or 8.7%) in fiscal year GovGuam s Outstanding Debt September 30, 2006 and Limited Obligation (Section 30) Bonds, 2001 Series A $ 53,007,715 $ 57,530,000 General Obligation Bonds, 1993 Series A 117,485, ,685,000 General Obligation Bonds, 1995 Series A - 2,085,000 Limited Obligation Highway Refunding Bonds, 2001 Series A 31,070,000 35,505,000 Limited Obligation Infrastructure Improvement Bonds, 1997 Series A 51,320,000 55,825,000 Judicial Building Fund 3,716,723 4,291,545 General Fund - Note payable 6,682,479 7,364,634 $ 263,281,917 $ 286,286,179 Additional information on GovGuam s long-term debt can be found in note 3 to the basic financial statements. ECONOMIC FACTORS AND NEXT YEAR BUDGET AND RATES Guam represents the westernmost American community in the Pacific Ocean and is in close proximity to the heart of Asia. Guam is a strategic military location and is home to many U.S. companies, local, domestic and international corporations that serve our community, tourists and military markets and related wholesale and retail industries. Guam is an unincorporated territory of the United States, its primary language spoken is English, and is the southernmost of the Marianas Islands. In 2002, Guam suffered from the effects of the Gulf/Iraq war, Asian SARS epidemic, typhoon Chata an in July, and super-typhoon Pongsona in December. The immediate consequences of these natural events resulted in the loss of private sector jobs, fewer tourist arrivals and an increased expenditure in reconstruction efforts and FEMA subsidies. Although Guam has not experienced significant natural disasters since 2002, uncertainties about homeland security and the international war on terror have impeded a robust local economic recovery. Now, the expectation of an increased military presence on Guam promises a healthy, positive economic and financial future for Guam, with massive infrastructure improvements and direct investments in manpower and capital equipment planned well into the next decade. Guam will generate increased tax revenues as a direct consequence of this military buildup, but will have to cope with the strain on its infrastructure, population density and environment in the years to come. 10

79 GOVERNMENT OF GUAM Management s Discussion and Analysis, Continued Year Ended September 30, 2006 Employees on payroll across all industries totaled 59,360, in the 4 th quarter 2006, 1,960 more as compared to the same period in Although, the private sector saw a net increase of 1,680 paid employees, their average weekly earnings increased by only $7.08 over this same time period. The unemployment rate for Guam was 6.9% as of March 2006, a decrease of 10.4%, when compared to 7.7% for March In December 2005, there were 4,740 construction, 1,640 manufacturing, 5,010 transportation and utilities, 12,050 retail trade, and 15,840 service workers employed. The federal government employed 3,460, whereas the Guam government employed 11,740 workers in December Guam s consumer price index, which measures the average change in prices of goods and services consumed by households, is reported at for the 4 th quarter of 2006, a 29.3% increase since the same period in The market basket costing $ in 1996 (the base year), now cost $ The purchasing power of the dollar in the 4 th quarter of 2006 is $0.71. Moreover, Guam s inflation rate has risen from 2.1% in 2002 to 12.09% in Visitor arrivals totaled 1,214,676 in 2006, a 5.1% increase since Japan, Korea, Taiwan and CNMI/Micronesia make up 81%, 9%, 2% and 3% of the visitors coming to Guam. Visitors, on average, spend 2.7 days on Guam and contribute $18.60 in Hotel Occupancy Taxes and another $28.00 in Gross Receipts Taxes. The number and aggregate value of building and construction permits issued on Guam for the 2006 are 1,197 permits valued at $195,431,000, a decrease of 11% permits and an increase of 93% in aggregate construction value since On average, the value of construction costs per permit was $163,000 in 2006, whereas in 2004 it was $75,000. Only upon acquiring an occupancy permit are newly constructed or added facilities occupied for its intended use. Guam imports have remained relatively stable since 2004, averaging $170,627,000 (for months January, April, July & October) over three years through Guam exports have remained flat as well, averaging $52,270,000 annually for the same time period. Guam trade counts imports and exports intended for sale or trade cleared through Guam Customs Agency, and excludes local and federal government, recreational or personal items. On September 19, 2006, the Governor signed the budget bill into law through Public Law for Education and September 29, 2006 for the remainder of the agencies for fiscal year The authorized budget included General fund revenues and expenditures of $456,347,999. The budget law was later revised and signed on May 07, 2007 through Public Law The amended authorized budget included General fund revenues and expenditures of $469,346,347. CONTACTING GOVGUAM S FINANCIAL MANAGEMENT This financial report is designed to provide a general overview of the Government of Guam s finances for all of Guam s citizens, taxpayers, customers, and investors and creditors. This financial report seeks to demonstrate the Island s accountability for the money it receives. Questions concerning any of the information provided in this report or request for additional information should be addressed to: Division of Accounts, Attention: Katherine B. Kakigi, Acting Controller, P.O. Box 884, Hagatña, Guam Telephone No: (671) /1260 Facsimile: (671) Website Address: 11

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

125

126

127

128

129