FIRST PUERTO RICOA A A F I X E D I N C O M E F U N D , I N C .

Annual Reportand Investment PerformanceReview for the Year Ended

March 31, 2014

June 12, 2014

Dear Shareholder:

We are pleased to present the Annual Report to shareholders of the First Puerto Rico AAA Fixed Income Fund, Inc.(the “Fund”) for the year ended March 31, 2014. During this year, we continued to face recurrent challenges inmanaging the Fund’s portfolio, including a volatile interest rate environment, fluctuating oil prices, and global politicaland economic challenges. Despite these challenges, we have continued to work diligently towards achieving the Fund’sinvestment objectives.

PERFORMANCE OF THE FUND

For the period from March 31, 2013 to March 31, 2014, the net assets value (NAV) decreased from $9.89 to $9.22. Forthe same period, the Fund’s total rate of return decreased from 4.26% to (2.37)%, respectively. (These returns assumethe reinvestment of dividends and are before the imposition of a sales load.)

The Fund made thirteen dividend payments during the 12-month period ended March 31, 2014, including a specialdividend of 6.48% gross / 5.832% net declared on March 31, 2014, payable on April 16, 2014.

FACTORS AFFECTING THE FUND’S PERFORMANCE

U.S. economic growth for the fiscal year highlighted a significant reversal in economic activity relative to the prioryear, expanding by 2.0% during the period. As a result of the strong economic tailwinds, the Federal Reserve decidedto gradually reduce its long-term asset purchase program at their most recent policy committee meeting.

Fundamentals improved sharply during the year, with most of the economic sectors surging with the exception ofgovernment outlays. Consumer spending, which accounts for a significant portion of economic activity, surged by2.5%, whereas gross private investment increased at a rate of 3.7%. Also, a stalemate in Congress with respect to theapproval of the federal budget was avoided, paving the way for a less restrictive fiscal policy environment for 2014.

Against this backdrop, the risk-free yield curve steepend and credit markets reacted favorably to the gradual rise inrates, with the Markit CDX North American IG Index decreasing by approximately 21 bps, from 90.81 to 69.16. TheUS treasury curve steepend by 69 basis points with the 2-year Treasury note increasing by 0.176% and the 10-yearTreasury note yield increasing by approximately 87 basis point, from 1.849% to 2.719%. Within sectors, the Corporatesector outperformed on a relative basis during the period with return of 1.47%. On the other hand, U.S. Agency MBS,Taxable Municipals, and Treasuries underperformed on a relative basis, increasing by 0.20%, and dropping by 1.17%and 1.26% respectively for the year.

Notwithstanding the uncertain impact of higher long-term interest rates in the real estate market, there are encouragingsigns that the economy will slowly continue to heal, but with unabated support from the U.S. central bank. Specifically,the continued deleveraging at the household level, strong corporate balance sheets, a highly accommodative monetarypolicy and an expansion in the real estate market should gradually help propel the economy towards full employment.The latter factor in our opinion is the key to a vigorous recovery at the household level and the financial system and asubsequent sustained economic recovery without the dependency of highly accommodative monetary policies.

In summary, the economic expansion in the U.S. is being supported by the Fed’s aggressive monetary policy stand, butthe deleveraging process at the household and government level will continue to lead to below potential output in 2014.SAM will continue monitoring the investment portfolios and the markets on a daily basis in order to seize opportunitiesthat may arise due to market inefficiencies. SAM will remain vigilant of any changes in the interest rate andgeopolitical environment in order to make appropriate adjustments that are consistent with long-term objectives.

On behalf of all of us associated with First Puerto Rico AAA Fixed Income Fund, Inc., we thank you for yourinvestment. We look forward to meeting your investment needs.

Sincerely,

Fredy MolfinoChairman of the Boardand President

Paul Hopgood, CFASenior Vice President & Chief Investment OfficerSantander Asset Management

Growth of a $10,000 investment since inception (July 3, 2008) ofFirst Puerto Rico AAA Fixed-Income Fund, Inc.

30.83%

26.26%

$12,626**NAV

$13,083***NAV

$9,000

$14,000

$13,000

$12,000

$11,000

$10,000

Mar

-14

Nov

-13

Mar

-13

Jul-

13

Nov

-12

Jul-

12

Mar

-12

Jul-

11

Nov

-11

Mar

-11

Nov

-10

Jul-

10

Mar

-10

Nov

-09

Nov

-08

Jul-

09

Mar

-09

Jul-

08

Cumulative Returns*1 Year w/load: (5.78)%**Life of Shares w/load: 26.26%**1 Year w/o load: (2.37)%***Life of Shares w/o load: 30.83%***

* The total returns assume reinvestment of all dividends at the net asset value (“NAV”) of the Fund’s shares and an initialinvestment of $10,000 since commencement of operations on July 3, 2008. All of the data in this report represents pastperformance which cannot be used to predict the Fund’s future returns. Share price and return can fluctuate widely. An invest-or’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a share-holder would pay on Fund distributions or on the sale of Fund shares.

** Performance based on NAV including the front end sales charge of 3.50%.

*** Performance based on NAV without including the front end sales charge of 3.50%.

First Puerto Rico AAA Fixed Income Fund, Inc.Investment Portfolio

March 31, 2014

FaceAmount Issuer Coupon

MaturityDate

FairValue

Puerto Rico Securities—81.0%(a)Freddie Mac(d)—5.7%

$ 1,364,010 # Freddie Mac (Pool B70789) 4.00% 06/01/2039 $ 1,422,000

Total Freddie Mac (cost $1,405,270) 1,422,000

Fannie Mae(b)—68.9%

1,559,901 # Fannie Mae (Pool 576565) 7.50% 02/01/2031 1,819,6253,836,772 # Fannie Mae (Pool 909211) 5.50% 07/01/2038 4,239,6492,112,840 # Fannie Mae (Pool 909219) 5.50% 08/01/2038 2,335,637

231,768 # Fannie Mae (Pool 953104) 5.50% 04/01/2038 255,491658,046 # Fannie Mae (Pool 953113) 5.50% 07/01/2038 725,372653,183 Fannie Mae (Pool AC0877) 4.50% 08/01/2025 702,218

2,005,439 # Fannie Mae (Pool AE1216) 3.50% 01/01/2041 2,021,2742,834,712 # Fannie Mae (Pool AE1260) 3.50% 08/01/2041 2,857,180

576,935 Fannie Mae (Pool 2009-12 CI) 6.44% 03/25/2036 116,128704,265 Fannie Mae (Pool 2009-12 DS) 7.24% 04/25/2039 176,603

9,115,051 Fannie Mae (Pool 2006-60 YI) 6.42% 07/25/2036 1,890,106

Total Fannie Mae (cost $16,411,547) 17,139,283

Collateralized Mortgage Obligations(c)—6.4%

458,740 Credit Suisse Mortgage Capital Certificates, Series 2007-5,Class 8A2 6.00% 10/25/2024 482,549

24,589 Deutsche Mortgage Securities, Series 2006-PR1, Class 2AF 0.55%& 04/15/2036 22,659100,628 Deutsche Mortgage Securities, Series 2006-PR1, Class 4AF2 0.63%@ 04/15/2036 83,23612,589 Prime Mortgage Trust, Series 2006-DR1, Class 1A1 5.50% 05/25/2035 13,0545,235 Prime Mortgage Trust, Series 2006-DR1, Class 1A2 6.00% 05/25/2035 5,472

973,930 Prime Mortgage Trust, Series 2006-DR1, Class 2A1 5.50% 05/25/2035 973,315

Total Collateralized Mortgage Obligations (cost $1,482,399) 1,580,285

Total Puerto Rico Securities (cost $19,299,216) 20,141,568

U.S. Securities—123.0%(a)GNMA(e)—55.2%

13,285,809 GNMA Tax(Pool P752871) 3.85% 07/15/2036 13,753,430

Total GNMA (cost $13,813,812) 13,753,430

Fannie Mae(b)—41.6%

4,909,486 # Fannie Mae (Pool AB9704) 4.00% 06/01/2043 5,067,2525,121,602 # Fannie Mae (Pool MA1510) 4.00% 07/01/2043 5,284,935

Total Fannie Mae (cost $10,334,991) 10,352,187

Collateralized Mortgage Obligation(c)—0.1%

29,646 Bear Stearns Adjustable Rate Mortgage Trust, Series 2004-8,Class 14A1 5.24%^ 11/25/2034 29,036

Total Collateralized Mortgage Obligation (cost $29,646) 29,036

The accompanying notes are an integral part of the financial statements.

4

First Puerto Rico AAA Fixed Income Fund, Inc.Investment Portfolio

March 31, 2014(concluded)

Face/NotionalAmount Issuer/Counterparty Coupon

MaturityDate

FairValue

U.S. Securities (continued)Corporate Bond—26.1%

$ 7,500,000 # Microsoft Corporation 3.50% 11/15/2042 $ 6,488,430

Total Corporate Bond (cost $7,443,158) 6,488,430

Total U.S. Securities (cost $31,621,607) 30,623,083

Total Investment Portfolio (cost $50,920,823)(f), 204.0% 50,764,651

Interest Rate Swaps—(7.0)%(a)13,400,000 JP Morgan Chase Bank, N.A.* 09/01/2024 (1,733,911)

Total Interest Rate Swaps (1,733,911)

Interest Rate Floor Contract—(0.4)%(a)13,400,000 JP Morgan Chase Bank, N.A.* 09/01/2014 (105,339)

Total Interest Rate Floor Contract (105,339)

Other Assets and Liabilities, net (96.6)%(a) (24,043,673)

Net Assets, 100.0% $ 24,881,728

(a) Percentages are based on net assets.

(b) Fannie Mae—Mortgage-backed securities guaranteed by the Federal National Mortgage Association. These obligations aresubject to principal paydowns as a result of prepayments or refinancing of the underlying mortgage instruments. As a result, theaverage life of these securities may be substantially less than their original maturity.

(c) Collateralized Mortgage Obligations—Represents obligations guaranteed by the underlying mortgage backed securities, whichin turn are guaranteed by mortgage loans. These obligations are subject to principal paydowns as a result of prepayments orrefinancing of the underlying collateral. As a result, the average life of these securities may be substantially less than theiroriginal maturity.

(d) Freddie Mac—Mortgage-backed securities guaranteed by the Federal Home Loan Mortgage Corporation. These obligations aresubject to principal paydowns as a result of prepayments or refinancing of the underlying mortgage instruments. As a result, theaverage life of these securities may be substantially less than their original maturity.

(e) GNMA—Mortgage-backed securities guaranteed by the Government National Mortgage Association. These obligations aresubject to principal paydowns as a result of prepayments or refinancing of the underlying mortgage instruments. As a result, theaverage life of these securities may be substantially less than their original maturity. GNMA securities are mortgage backedsecurities guaranteed by the full faith and credit of the U.S. Government.

(f) The aggregate identified cost for income tax purposes is substantially the same. Fair value includes net unrealized depreciationin which there was an excess of tax cost over fair value of $156,172.

# This security, or a portion thereof, has been pledged as collateral for reverse repurchase agreements, interest rate swaps or floorcontract.

* Agreement may be called before its maturity date.

& Variable interest based on one-month U.S. dollar LIBOR Index plus 27 basis points.

@ Variable interest based on one-month U.S. dollar LIBOR Index plus 35 basis points.

^ Variable interest based on the weighted average coupon of the collateral.

The accompanying notes are an integral part of the financial statements.

5

First Puerto Rico AAA Fixed Income Fund, Inc.Statement of Assets and Liabilities

March 31, 2014

Assets

Investments, at fair value (cost $50,920,823) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50,764,651

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,961

Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,654

Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,340

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,085,606

Liabilities

Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 242,088

Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,993,000

Interest payable on securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . 5,450

Floor contract, at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,339

Swap contract, at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,733,911

Interest payable on swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,951

Accrued investment advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,721

Accrued administration fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,447

Accrued directors' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000

Accrued distribution fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,776

Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,195

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,203,878

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,881,728

Net Assets

Net assets consist of :

Par value of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,989

Paid-in capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,267,538

Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,843,035

Accumulated net realized loss from investment transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,300)

Net unrealized depreciation on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (156,172)

Net realized loss on swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,451,629)

Net unrealized depreciation on swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,733,911)

Net realized loss on options (including floor contract) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (871,893)

Net unrealized depreciation on floor contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (105,339)

Net realized gain on futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,410

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,881,728

Net asset value ($24,881,728 divided by 2,698,865 Class A shares of common stock outstanding,$0.01 par value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.22

The accompanying notes are an integral part of the financial statements.

6

First Puerto Rico AAA Fixed Income Fund, Inc.Statement of Operations

For the Year Ended March 31, 2014

Investment Income

IncomeInterest* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,603,937

ExpensesInterest and leverage related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88,883Investment advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321,410Administration fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,567Transfer agency fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,285Sub-transfer agency fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,025Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,786Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,171Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,337Distribution fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,675Printing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,223Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,914

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 762,276Fees waived by Investment Adviser** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,551)

Total expenses after waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 731,725

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,872,212

Net Realized and Unrealized Gain (Loss) from Investments, Swaps, Floor Contract and Futures Contracts:

Net realized loss from investment transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61,414)Net unrealized depreciation on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,486,448)Net realized loss on swap contracts^ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (299,805)Net unrealized appreciation on swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 744,313Net realized loss on floor contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (247,357)Net unrealized appreciation on floor contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,984Net realized gain on futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253,978Net unrealized appreciation on futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,157

Net loss from investments, swaps, floor contract and futures contracts . . . . . . . . . . . . . . . . . . . . . . (2,827,592)

Net decrease in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (955,380)

* As disclosed in Note 2, realized loss on mortgage-backed security paydowns amounting to $102,562 is recorded as anadjustment to interest income.

** The fees waived are subject to recoupment by the Investment Adviser as provided in Note 3.

^ As disclosed in Note 2, net interest resulting from swap contracts not designated for hedge accounting amounting to $461,479 isrecorded as an adjustment to realized loss on swap contracts.

The accompanying notes are an integral part of the financial statements.

7

First Puerto Rico AAA Fixed Income Fund, Inc.Statements of Changes in Net Assets

For theYear Ended

March 31, 2014

For theYear Ended

March 31, 2013

Increase (decrease) in net assets:

Operations:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,872,212 $ 2,128,098

Net realized (loss) gain from investment transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61,414) 405,661

Net unrealized (depreciation) appreciation on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,486,448) 164,279

Net realized loss on swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (299,805) (404,035)

Net unrealized appreciation (depreciation) on swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . 744,313 (1,702)

Net realized loss on floor contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (247,357) (241,443)

Net unrealized appreciation on floor contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,984 183,702

Net realized gain (loss) on futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253,978 (152,568)

Net unrealized appreciation (depreciation) on futures contracts . . . . . . . . . . . . . . . . . . . . . . . 41,157 (41,157)

Net (decrease) increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . (955,380) 2,040,835

Distributions to shareholders from:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,741,807) (1,974,060)

Decrease in net assets from Fund share transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,221,560) (8,592,341)

Decrease in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,918,747) (8,525,566)

Net assets, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,800,475 47,326,041

Net assets, end of year (including undistributed net investment income of $1,843,035 and$1,712,630, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,881,728 $38,800,475

The accompanying notes are an integral part of the financial statements.

8

First Puerto Rico AAA Fixed Income Fund, Inc.Statement of Cash Flows

For the Year Ended March 31, 2014

Increase / (Decrease) in Cash

Cash flows from operating activities:

Net decrease in net assets from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (955,380)

Adjustments to reconcile net decrease in net assets fromoperations to net cash provided by operating activities:Purchases of portfolio securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,225,962)Proceeds from sales of portfolio securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,217,514Proceeds from paydowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,349,965Accretion of discount on investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478,674Decrease in interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,495Decrease in futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,422Increase in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,025)Increase in interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,791Decrease in accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,302)Net unrealized depreciation on investments, swaps contract and floor contract . . . . . . . . . . . . 2,514,151Net realized loss from investment transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,414

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,518,757

Cash flows from financing activities:Redemptions of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,476,077)Net decrease in borrowings and leverage related transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,983,000)Dividends and distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,245,202)

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,704,279)

Cash:Net decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (185,522)Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247,483

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,961

Supplemental disclosure of cash flows information:Cash paid for interest and leverage related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 85,665

Non cash activities:Dividends reinvested by common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 254,517

Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 242,088

The accompanying notes are an integral part of the financial statements.

9

First Puerto Rico AAA Fixed Income Fund, Inc.Financial Highlights

The following table includes selected data for a share outstanding throughout the year and other performance information derivedfrom the financial statements.

For the Years Ended:2014 2013 2012 2011 2010

Net asset value, beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . $9.89 $9.92 $9.94 $10.44 $10.00

Income from investment operations:Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.77^ 0.56^ 0.57^ 0.92^ 0.91^Net realized and unrealized (loss) gain on investments, swaps,

options and futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.92)^ (0.14)^ 0.00^ (0.69)^ 0.31^

Total (loss) income from investment operations . . . . . . . . . . . . . . . . . (0.15) 0.42 0.57 0.23 1.22

Less distributions from:Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.52) (0.45) (0.59) (0.73) (0.78)

Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9.22 $9.89 $9.92 $9.94 $10.44

Total return (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.37)% 4.26% 6.51% 2.96% 11.73%

Ratios/Supplemental Data:Net operating expenses to average net assets (c) . . . . . . . . . . . . . . . 1.99% 1.92% 1.93% 1.90% 1.81%Net operating expenses to average daily net assets (b) . . . . . . . . . . 1.00% 1.00% 1.00% 1.00% 1.00%Interest and leverage related expenses to average net assets (f) . . . 0.28% 0.32% 0.22% 0.23% 0.20%Total expense ratio (c) (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.27%^ 2.24%^ 2.15%^ 2.13%^ 2.01%^Net investment income ratio (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.80%^ 4.85%^ 6.60%^ 8.20%^ 8.75%^Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21% 9% 29% 28% —

Net assets, end of year (in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . $24,882 $38,800 $47,326 $32,723 $46,000

(a) The total return assumes reinvestment of all dividends at net asset value and does not reflect the imposition of a sales charge.Total return would have been lower in the absence of a waiver.

(b) The net operating expense ratio is based on the average daily net assets as disclosed in Note 3 and includes fees waived by theInvestment Adviser. The net operating expense ratio, excluding fees waived by the Investment Adviser would have been 1.05%,1.02% and 1.03% for the years ended March 31, 2014, 2011 and 2010, respectively. For the years ended March 31, 2013 and2012, there were recouped fees.

(c) Based on average net assets attributable to common shareholders of $32,270,092; $43,856,821; $39,813,175; $42,895,130 and$44,411,599 for the years ended March 31, 2014, 2013, 2012, 2011 and 2010, respectively.

(d) The total expense ratio includes the fees waived by the Investment Adviser. The total expense ratio, excluding fees waived bythe Investment Adviser, would have been 2.36%, 2.17%, and 2.07% for the years ended March 31, 2014, 2011 and 2010,respectively. For the years ended March 31, 2013 and 2012, there were recouped fees.

^ The net investment income, net realized (loss) gain on swaps and total expenses reflect the reclassification of net settlementsmade under swaps not designated for hedge accounting for the years ended March 31, 2014, 2013, 2012, 2011 and 2010.

The accompanying notes are an integral part of the financial statements.

10

First Puerto Rico AAA Fixed Income Fund, Inc.Notes to Financial Statements

Note 1. Organization. First Puerto Rico AAA Fixed Income Fund, Inc. (the “Fund”) is a non-diversified, open-end managementinvestment company registered under the Puerto Rico Investment Companies Act. The Fund was incorporated on May 2,2008 and commenced operations on July 3, 2008. The investment objective of the Fund is to provide shareholders with theopportunity to obtain current investment income, consistent with the preservation of capital, its investment policies andprudent investment management.

Note 2. Significant Accounting Policies. The preparation of financial statements in accordance with accounting principlesgenerally accepted in the United States of America requires management to make estimates and assumptions that affect thereported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The followingis a summary of significant accounting policies followed by the Fund:

Net Asset Value Per Share. The net asset value per share of the Fund is determined by the Administrator on a daily basisafter the close of trading on the New York Stock Exchange (NYSE), or if such day is not a business day in New York Cityand Puerto Rico, on the next succeeding business day. The net asset value per share is computed by dividing the assets ofthe Fund less its liabilities, by the number of outstanding shares of the Fund.

Security Valuation. The fair value of the securities is determined in good faith by the Administrator on the basis of thevaluations provided by dealers or independent pricing services, when such prices are available, with the assistance of theInvestment Adviser, under the guidelines approved by the Board of Directors. Equity securities are valued at the officialclosing price of, or the last reported sales price on, the exchange or market on which such securities are traded, as of theclose of business on the day the securities are being valued, or lacking any sales, at the last available bid price. Certainsecurities of the Fund for which quotations are not readily available from any source, are valued at fair value by or under thedirection of the Investment Adviser utilizing quotations and other information concerning similar securities obtained fromrecognized dealers. Short-term securities having a maturity of 60 days or less are valued at amortized cost, whichapproximates fair value. All Puerto Rico fixed income securities valuations provided by broker-dealers are priced using theaverage of two quotes, if available. The Investment Adviser can override any price that it believes is not consistent with themarket conditions, using quotes from other broker-dealers.

The Fund follows Financial Accounting Standards Board Accounting Standards Codification No. 820 (“ASC 820”), “FairValue Measurements and Disclosures”. ASC 820 defines fair value as the price that would be received to sell an asset orpaid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, ASC820 establishes disclosures about fair value measurements in financial statements based on hierarchical levels directlyrelated to the amount of subjectivity associated with the inputs used to determine the fair value of financial instruments. Thevarious inputs that may be used to determine the value of the Fund’s investments are summarized in three broad levels. Theinputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing inthose securities.

Level 1—Quoted prices in active markets for identical instruments.

Level 2—Prices determined using other significant observable inputs. Observable inputs are inputs that other marketparticipants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepaymentspeeds, credit risk and others.

Level 3—Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputsare unavailable or deemed less relevant (for example, when there is little or no market activity for an instrument at the endof the period), unobservable inputs may be used.

The following table summarizes the Fund’s investments as of March 31, 2014, based on the inputs used to value them:

Assets: Level 1 Level 2 Level 3 Total

Puerto Rico SecuritiesFreddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 1,422,000 $ — $ 1,422,000Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 17,139,283 — 17,139,283Collateralized Mortgage Obligations . . . . . . . . . . . . . . . . . — 1,580,285 — 1,580,285

U.S. SecuritiesGNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 13,753,430 — 13,753,430Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 10,352,187 — 10,352,187Collateralized Mortgage Obligation . . . . . . . . . . . . . . . . . . — 29,036 — 29,036Corporate Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,488,430 — 6,488,430

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $50,764,651 $ — $50,764,651

11

First Puerto Rico AAA Fixed Income Fund, Inc.Notes to Financial Statements

(continued)

Liabilities: Level 1 Level 2 Level 3 Total

Interest rate floor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 105,339 $ — $ 105,339Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,733,911 — 1,733,911

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 1,839,250 $ — $ 1,839,250

No transfer in or out of Level 1, 2 or 3 fair value measurements occurred during the year ended March 31, 2014.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value on arecurring basis and classified as Level 2.

Puerto Rico securities:

Freddie Mac and Fannie Mae—Fair value for these securities is obtained from third-party pricing service providers that usea pricing methodology based on observable market inputs. Market inputs used in the evaluation process include all or someof the following: reported trades, benchmark securities, bid/offer price or spread, two sided markets, broker/dealers quotes,benchmark curves including but not limited to Treasury benchmarks, LIBOR and swap curves, discount rates, market datafeeds from commercial data vendors, loan level information, investor reports, prepayment speeds and trustee reports.

Collateralized Mortgage Obligations—Quoted prices for these securities are obtained from third-party pricing serviceproviders and from broker-dealers. Third-party pricings are based on some of the following: benchmark yields, reportedtrades, issuer spreads, prepayment speeds, benchmark securities, bids, offers and market indicators. Broker-dealers pricingsare based on the characteristics of the collateral and on a bond’s theoretical value for similar obligations defined by creditquality and market sector and for which fair value incorporates an option adjusted spread. The option adjusted spreadincludes prepayment and volatility assumptions, ratings and spread adjustments. The Deutsche Mortgage Securities,Series 2006-PR1 Class 2AF is valued using a broker dealer quote, determined by management to be a market participantand considered to be an estimate of fair value that is indicative of market transactions. Market inputs for this security arebased on the characteristics of the collateral, prepayment speeds, benchmark curves, option adjusted spread (OAS) levels,TBA (to be announced) spreads, and/or spreads to cash and future LIBOR curves.

U.S. securities:

GNMA and Fannie Mae—Fair value for these securities is obtained from third-party pricing service providers that use apricing methodology based on observable market inputs. Market inputs used in the evaluation process include all or some ofthe following: reported trades, benchmark securities, bid/offer price or spread, two sided markets, broker/dealers quotes,benchmark curves including but not limited to Treasury benchmarks, LIBOR and swap curves, discount rates, market datafeeds from commercial data vendors, loan level information, investor reports, prepayment speeds and trustee reports.

Collateralized Mortgage Obligation—Fair value for this security is obtained from a broker-dealer indicative quote,determined by management to be a market participant and considered to be an estimate of fair value that is indicative ofmarket transactions. The price is based on prepayment speeds, benchmark curves, Option Adjusted Spread (OAS) levels,TBA (to be announced) spreads, and/or spreads to cash and future LIBOR curves.

Corporate Bond—Fair value for this security is obtained from third-party pricing service providers that use a pricingmethodology based on observable market inputs. Market inputs used in the evaluation process include all or some of thefollowing: benchmark yields, reported trades, dealer quotes, observed market movements, benchmark quotes, individualissuer creditworthiness and sector news or events.

Interest rate floor contract/swap contracts:

Interest rate floor contract and swap contracts are traded in over-the-counter active markets. These derivatives are indexedto an observable interest rate benchmark, such as LIBOR, and are priced using an income approach based on present valueand option pricing models using observable inputs. The non-performance risk is determined using models that consider thecollateral held, the remaining term, and the creditworthiness of the entity that bears the risk. The fair value of the liabilitiesrelated to the interest rate swaps and floors entered into by the Fund takes into consideration the non-performance risk of theFund. The limitations established in the Puerto Rico Investment Company Act and related regulations issued by the PuertoRico Commissioner of Financial Institutions for the use of leverage by the Fund, result in a significant amount of assetsavailable to pay liabilities of the Fund. Accordingly, no significant adjustment for nonperformance risk was considerednecessary when fair valuing such swaps and floor contracts at March 31, 2014.

12

First Puerto Rico AAA Fixed Income Fund, Inc.Notes to Financial Statements

(continued)

The Board of Directors of the Fund has established a Pricing Committee to assist with the oversight of the valuation of theFund’s securities and to oversee the implementation of the Fund’s valuation policies and procedures. The PricingCommittee is comprised of top management from Santander Asset Management LLC (“SAMLLC”), the investment adviserand administrator of the Fund. The Pricing Committee’s responsibilities include unchanged price review, illiquid securities,market movement, and/or providing recommendations for approval to the Board of Directors, in accordance with the Fund’svaluation policies.

The Pricing Committee primarily employs a market-based approach which may use related or comparable assets orliabilities, recent transactions, market multiples, book values, and other relevant information for the investments todetermine the appropriateness of the fair value of the investments. Valuation reviews may be based upon current marketprices of securities that are comparable in coupon, rating, maturity and industry. SAMLLC is responsible for monitoringdevelopments that may impact Level 3 fair values and discuss at least on a quarterly basis with the Pricing Committee andinform to the Board of Directors. The appropriateness of Level 3 fair values is assessed based on results of unchanged pricereview and consideration of macro or security specific events and back testing.

In addition, management has internally established materiality thresholds to monitor and investigate material deviations inprices obtained from pricing providers as well from broker-dealers on a daily basis. The investment adviser compares pricesto other sources, such as Bloomberg or broker-dealer quotes, and analyzes the prices trends to evaluate reasonableness ofprices in case the direction of the price changes by more than 5% and challenge any prices deemed not to be representativeof fair value. Also a control department, which report to the Chief Executive Officer of SAMLLC, compares the prices onevery purchase and sale executed by the trading department against an alternate pricing source to monitor variances.

Share Class. On November 22, 2011, the Board of Directors of the Fund approved the discontinuation of the public offeringof the Class A shares in order to protect shareholders from a possible yield dilution under the current interest rateenvironment and to promote the creation of a more stable asset base and the continued efficient management of the Fund.Effective as of the close of business on December 13, 2011, the Fund discontinued the public offering of its shares ofClass A common stock. Thereafter, Class A shares will only be issued to current Class A shareholders pursuant to theFund’s Automatic Dividend Reinvestment Plan. All dividends on the outstanding Class A shares will continue to bereinvested automatically in Class A shares, unless such shareholders have elected to have dividends and capital gainsdistributions paid in cash. Shares will continue to be redeemable on a daily basis. The Board of Directors reserves the rightto reopen the Fund for subscriptions at a future date.

Securities Sold Under Agreements to Repurchase (Reverse Repurchase Agreements). Under these agreements, the Fundsells securities, receives cash in exchange and agrees to repurchase the same or substantially the same securities at amutually agreed upon date and price. Ordinarily, the counterparties with which the Fund enters into these agreementsrequire delivery of collateral. These transactions are treated as financings and recorded as liabilities. Therefore, no gain orloss is recognized on the transaction and the securities pledged as collateral remain recorded as assets of the Fund.

Securities Purchased Under Agreements to Resell (Repurchase Agreements). Under these agreements, the Fund advancescash and receives delivery of underlying securities, the fair value of which at the time of purchase is required to be anamount equal to at least 102% of the resale price, and agrees to resell the same or substantially the same securities at amutually agreed upon date and price. In the event of default, bankruptcy or insolvency of the seller, additional delays andcosts may be incurred. At March 31, 2014, there were no repurchase agreements outstanding.

Swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. TheFund currently utilizes interest rate swaps to fix the rate on the expected rollover of the instruments in the Fund’s leverageprogram and to economically hedge the Fund’s exposure to prepayment risk on certain fixed-rate investments. By enteringinto the swap, the principal amount of the hedged item would remain unchanged but the interest payment streams wouldchange. Interest rate swaps are marked to market daily based upon quotations received from independent sources and thechange, if any, is recorded as unrealized appreciation or depreciation in the statement of operations. The Fund could beexposed to market risk due to unfavorable changes in interest rates or to the risk that a counterparty may default on itsobligation to the Fund. Net interest incurred under swap contracts not designated for hedge accounting are recorded as acomponent of net realized loss on swap contracts in the statement of operations. For the year ended March 31, 2014, netinterest incurred under swap contracts not designated for hedge accounting amounted to $461,479. At March 31, 2014, therewere no swap contracts outstanding designated for hedge accounting treatment.

Options. The Fund may purchase or write option contracts to manage exposure to market risk and interest rate risk.Exchange-traded options are valued on a weekly basis using the last sale price or, in the absence of a sale, at the meanbetween the last reported bid and asked prices. Options traded over-the-counter are valued on a weekly basis using dealer-supplied valuations. Changes in value, if any, are recorded as unrealized appreciation or depreciation in the statement ofoperations. Realized gain or loss is recognized when the option contract is exercised, expires or is closed.

13

First Puerto Rico AAA Fixed Income Fund, Inc.Notes to Financial Statements

(continued)

When the Fund writes an option, the premium received is recorded as a liability and is subsequently adjusted to the currentfair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund onthe expiration date as realized gains. The difference between the premium and the amount paid for a closing purchase,including brokerage commissions, is also recorded as a realized gain/loss. If a written call option is exercised, the premiumreceived is added to the proceeds from sale of the underlying security in determining whether the Fund has realized a gain orloss. If a written put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. AtMarch 31, 2014, there were no option contracts outstanding, except for the interest rate floor contract discussed below.

A Fund as a writer of an option has no control over whether the underlying instrument may be sold (call) or purchased (put)and as a result bears the market risk of an unfavorable change in the price of the instrument underlying the written option.The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasingoptions which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlyinginvestment transaction to determine the realized gain or loss.

An interest rate floor is an option that protects the buyer or holder from declines in short-term interest rates by receiving apayment when an underlying interest rate falls below a specified strike rate. When the Fund purchases an interest rate floor,the premium paid is recorded as an asset and is subsequently adjusted to the current fair value. When the Fund writes aninterest rate floor, the premium received is recorded as a liability and is subsequently adjusted to the current fair value. AtMarch 31, 2014, there was one interest rate floor contract outstanding.

Premiums paid for purchased options that expire unexercised are treated by the Fund on the expiration date as realizedlosses.

Futures. From time to time, the Fund may seek to hedge its investment portfolio with futures for a variety of reasons,including convexity, prepayment, market and interest rate risk. There is a risk that the correlation of futures contracts andthe securities being hedged may be different than that expected at the time of the hedge, which could result in a loss to theFund. Buying futures tends to increase the Fund’s exposure to the underlying instrument. Selling futures tends to decreasethe Fund’s exposure to the underlying instrument, therefore, serving as a hedging vehicle to other fund investments. Futurescontracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they aretraded. Accordingly, they are classified as Level 1 in the fair value hierarchy. Upon entering into a futures contract, theFund is required to deposit either in cash or securities an amount (“initial margin deposit”) equal to a certain percentage ofthe nominal value of the contract. Subsequent payments are made or received by the Fund each day, depending on the dailyfluctuation in the fair value of the underlying index or security, and are recorded as unrealized appreciation or depreciationby the Fund. A gain or loss is realized when the contract is closed or expires. There was no futures contract outstanding asof March 31, 2014.

Transfers of Financial Assets. The Fund accounts for transfers of financial assets in accordance with ASC Topic 860, whichprovides that a transfer of financial assets in which the transferor surrenders control over those financial assets shall beaccounted for as a sale to the extent that consideration other than beneficial interests in the transferred assets is received inexchange. A transferor has surrendered control if all of the following conditions are met: (a) the transferred assets have beenisolated from the transferor—put presumptively beyond the reach of creditors, even in bankruptcy; (b) each transferee hasthe right to pledge or exchange the assets it received and no condition constrains the transferee from taking advantage of itsright to pledge or exchange; and (c) the transferor does not maintain effective control over the transferred assets througheither (i) an agreement that both entitles and obligates the transferor to repurchase or redeem them before their maturity or(ii) the ability to unilaterally cause the holder to return specified assets, other than through a cleanup call. When the Fundtransfers financial assets and the transfer fails any one of the ASC Topic 860 sales criteria, the Fund is not permitted toderecognize the transferred financial assets.

Security Transactions and Related Investment Income. Security transactions are recorded by the Fund as of the date thetrades are executed. Dividend income is recognized on the ex-dividend date, and interest income is recognized on an accrualbasis. The Fund uses the identified cost method to determine realized gain or loss on investments for both financial and taxreporting bases, adjusted for the accretion and amortization of purchase discounts and premiums during the respectiveholding periods. Accretion and amortization are calculated using the effective interest method.

Mortgage-Backed Securities. Realized gains or losses on mortgage-backed security paydowns are recorded as an adjustmentto interest income as required by accounting principles generally accepted in the United States of America. For the yearended March 31, 2014, the Fund decreased interest income in the amount of $102,562 related to the realized loss onmortgage-backed security paydowns. The Fund declares and pays monthly dividends from net investment income. Forpurposes of dividend distributions and for the determination of compliance with the 90% distribution requirement (see“Taxation of the Fund” below), net investment income excludes the effect of gains or losses related to mortgage-backedsecurity paydowns.

14

First Puerto Rico AAA Fixed Income Fund, Inc.Notes to Financial Statements

(continued)

Distribution of Income and Gains. Distributions of net investment income will be declared and paid monthly to holders ofcommon stock as of the record date. From and after the issuance by the Fund of commercial paper and other debtinstruments and/or shares of preferred stock, monthly distributions to holders of common stock normally will consist of allnet investment income remaining after the payment of interest on the commercial paper or other debt securities orborrowings or dividends on the preferred stock. Net realized long-term or short-term capital gains, if any, will be retained bythe Fund, unless the Board of Directors determines that the capital gains must be distributed to holders of common stockand of preferred stock, if any, in order to ensure an advantageous tax treatment for the Fund.

Taxation of the Fund. In general, Section 1112.01(a)(2) of the Internal Revenue Code for a New Puerto Rico (the “PuertoRico Code”) provides that the Fund will be exempt from Puerto Rico income tax for a taxable year if it distributes to itsshareholders at least 90% of its net investment income for the taxable year excluding net capital gains and exempt incomeother than dividends from industrial development income. The Fund intends to meet the 90% distribution requirement to beexempt from Puerto Rico income tax under the Puerto Rico Code. Accordingly, the income earned by the Fund will not besubject to Puerto Rico income tax at the Fund level. In the opinion of the Fund’s legal counsel, based on the Fund’srepresentations, the Fund is not required to file a U.S. federal income tax return. The Fund is subject to a municipal licensetax for any investment income or realized gains not distributed to its shareholders with the exception of interest incomederived from obligations of the Commonwealth of Puerto Rico, its instrumentalities and municipalities and obligations ofthe U.S. Government and its instrumentalities and political subdivisions.

Note 3. Investment Advisory Agreement. SAMLLC (in its capacity as investment adviser, the “Investment Adviser”, and in itscapacity as administrator, the “Administrator”) is a wholly-owned subsidiary of SAM Puerto Rico Holdings, Inc.(hereinafter “SAM PR Holding”), a corporation duly organized and validly existing under the laws of the Commonwealth ofPuerto Rico, which in turn is a wholly-owned subsidiary of SAM Investment Holdings Limited (Jersey) (“SAM HoldingsJersey”), a privately held company organized under the laws of Jersey, United Kingdom. SAM Holdings Jersey is owned inpart (50%) by SAM UK Investment Holdings Limited, which is owned directly and indirectly by Banco Santander S.A., apublic company traded on the New York Stock Exchange. SAM Holdings Jersey is also owned in part (50%) by SherbrookeAcquisition Corp SPC., a segregated portfolio company incorporated in the Cayman Islands, controlled jointly by WarburgPincus, LLC and General Atlantic, LLC. Banco Santander, S.A. owns 100% of Santander BanCorp, which in turns owns100% of Santander Securities LLC (the “Distributor”). Santander BanCorp owns 100% of Banco Santander Puerto Rico (inits capacity as transfer agent, the “Transfer Agent”).

The Fund has entered into an investment advisory agreement with the Investment Adviser, under which agreement theInvestment Adviser is entitled to an annual fee equal to 0.50% of the average daily net assets of the Fund. “Average dailynet assets” means the average daily value of the total assets of the Fund, including the liquidation preference of anyoutstanding preferred stock, and the aggregate outstanding amount of any debt securities of the Fund, minus the sum ofaccrued liabilities of the Fund (excluding outstanding leverage), any accrued and unpaid interest on outstanding commercialpaper, debt securities and other borrowings, and accumulated dividends on outstanding shares of preferred stock. For theyear ended March 31, 2014, investment advisory fees amounted to $321,410. For the first 24 months of operations of theFund, and annually thereafter, the Investment Adviser has voluntarily agreed to waive its fees and, if necessary, toreimburse the Fund to the extent that total operating expenses, excluding financing expenditures such as interest, taxes andleverage related expenses, exceed 1.00% of the average daily net assets on an annual basis. For the year ended March 31,2014, the Investment Adviser waived fees in the amount of $30,551. This amount is subject to recoupment by theInvestment Adviser before March 31, 2016. For the year ended March 31, 2013, the Investment Adviser recouped fees inthe amount of $11,959. The Investment Adviser may waive additional fees at its discretion.

Administration, Transfer Agent, Custody and Sub-Transfer Agent Agreements. The Fund has entered into anadministration agreement with the Administrator, under which agreement the Fund pays the Administrator an annual fee of0.13% of the average daily net assets of the Fund, computed daily and payable monthly. The Administrator performs, orarranges for the performance of, the administrative services necessary for the operation of the Fund. For the year endedMarch 31, 2014, the Administrator earned fees of $83,567.

The Fund pays the Transfer Agent a total annual fee of 0.03% of the average daily net assets of the Fund, computed dailyand payable monthly. For the year ended March 31, 2014, the Transfer Agent earned fees of $19,285.

The Transfer Agent has engaged Bank of New York Mellon Asset Servicing (“BNY Mellon”), to act as sub-transfer agentof the Fund. BNY Mellon acts as the Fund’s agent in administering the dividend reinvestment plan of the Fund. For the yearended March 31, 2014, BNY Mellon earned sub-transfer agency fees of $35,025.

The Fund has engaged Citibank, N.A. to act as custodian of the Fund. The Fund pays fees to the custodian and has agreed toreimburse its expenses. For the year ended March 31, 2014, Citibank, N.A. earned custodian fees of $41,786.

15

First Puerto Rico AAA Fixed Income Fund, Inc.Notes to Financial Statements

(continued)

Distribution Agreements. The Board of Directors of the Fund has adopted plans of distributions of its shares. The Fund isauthorized to pay the Distributor an annual fee equal to 0.25% of the daily net assets of the fund for the services that itprovides in connection with the promotion, account maintenance and distribution of Fund shares. For the year endedMarch 31, 2014, the Distributor earned fees of $80,675.

Affiliated Transactions. The Fund is not registered under the U.S. Investment Company Act of 1940, therefore it is notsubject to the restrictions contained therein regarding, among other things, transactions between the Fund, SantanderSecurities LLC and Banco Santander Puerto Rico or their affiliates (“Affiliated Transactions”). The Board of Directors ofthe Fund adopted procedures for Affiliated Transactions in an effort to address potential conflicts of interest that may arise.It is anticipated that Affiliated Transactions will continue in the future and that all Affiliated Transactions will be subject tothe procedures adopted by the Board of Directors.

The total amount of affiliated and unaffiliated transactions (in thousands), during the year ended March 31, 2014 was asfollows:

Investments:Securities Sold

Under Agreementsto RepurchasePurchases % Sales % %

Affiliated Parties . . . . . . . . . . . . . . . . . . $ — —% $ — —% $ 36,618 2%Unaffiliated Parties . . . . . . . . . . . . . . . . . 13,226 100% 31,218 100% 2,246,408 98%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,226 100% $31,218 100% $2,283,026 100%

Board of Directors. The business and affairs of the Fund are conducted by, or under the direction of its Board of Directors.The Fund pays each Independent Director an annual fee of $350 payable quarterly plus $400 per regular Board meeting,$175 per special Board meeting, $500 per Audit Committee meeting, $175 per special Audit Committee meeting and $100per Dividend Committee meeting attended, together with such Director’s actual out-of-pocket expenses related toattendance at meetings. The terms of all contracts for services with the Fund are approved by the Board of Directors. For theyear ended March 31, 2014, directors’ compensation amounted to $24,337.

Note 4. Fund Shares. The Fund is authorized to issue 100,000,000 Class A shares of common stock, 25,000,000 Class B shares ofcommon stock, 50,000,000 Class C shares of common stock, 20 Class Q shares of common stock and 50,000,000 Class Zshares of common stock, for a total of 225,000,020 shares of common stock, $0.01 par value per share and 20,000,000shares of Preferred Stock, $0.10 par value per share.

Class A common stock transactions during the years ended March 31, 2014 and 2013 were as follows:

2014 2013Shares Amount Shares Amount

Shares outstanding: . . . . . . . . . . . . . . . . . . . . . . . . . . .Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,922,088 $ 38,516,087 4,771,869 $47,108,428Reinvestment of distributions . . . . . . . . . . . . . . . . . . . 27,348 254,517 32,710 330,161Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,250,571) (11,476,077) (882,491) (8,922,502)

End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,698,865 $ 27,294,527 3,922,088 $38,516,087

Note 5. Purchases, Sales and Redemptions of Securities. For the year ended March 31, 2014, purchases, sales and redemptions ofinvestment securities, excluding repurchase agreements, were as follows:

Purchases SalesCalls/

Paydowns

Puerto Rico Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,687,873 $ — $2,274,027U.S. Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,538,089 31,217,514 4,075,938

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,225,962 $31,217,514 $6,349,965

16

First Puerto Rico AAA Fixed Income Fund, Inc.Notes to Financial Statements

(continued)

Note 6. Securities Sold Under Agreements to Repurchase: At March 31, 2014, the Fund had outstanding $23,993,000 in reverserepurchase agreements.

Weighted-average interest rate at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.34%Maximum aggregate principal balance outstanding at any time during the year . . . . . . . $38,470,045Average balance outstanding during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,968,538Weighted-average interest rate during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.27%

At March 31, 2014, the interest rate on securities sold under agreements to repurchase with maturities up to April 9, 2014,ranged from 0.20% to 0.40%.

At March 31, 2014, investment securities amounting to $25,194,542 were pledged as collateral for securities sold underagreements to repurchase. The counterparties under such agreements to repurchase have the right to sell or repledge theinvestment securities. Interest payable on securities sold under agreements to repurchase amounted to $5,450 at March 31,2014.

Note 7. Interest Rate Swap Contracts/Floor Contract:

The following swaps were outstanding at March 31, 2014:

To be Received To be Paid

Counterparty

NotionalAmount(in 000’s)

Rate at3/31/2014

F (Fixed) orV (Variable)

Rate at3/31/2014

F (Fixed) orV (Variable)

ExpirationDate

JP Morgan Chase Bank, N.A. $13,400 0.15%^ V 3.49% F 09/01/2024a

^ 1 month USD-LIBOR-BBa The counterparty has the option to terminate this swap agreement the 1st day of each quarter commencing Sep-

tember 1, 2014.

At March 31, 2014, investment securities amounting to $2,025,464 were pledged as collateral for swaps with a fair value of$1,733,911 (liability position). The counterparties have the right to sell or repledge the assets during the term of the swapagreements.

The following interest rate floor contract was outstanding at March 31, 2014:

Counterparty

NotionalAmount(in 000’s)

StrikeRate

ExpirationDate

JP Morgan Chase Bank, N.A. $13,400 2.00% 09/01/2014

This option of $13.4 million with maturity date on September 1, 2014, was written during fiscal year 2008, together with aforward interest rate swap to enhance the Fund’s income.

At March 31, 2014, investment securities amounting to $123,051 were pledged as collateral for the interest rate floorcontract with a fair value of $105,339 (liability position). The counterparties have the right to sell or repledge the assetsduring the term of the option.

Note 8. Concentration of Risk. The Fund must invest at least 20% of its total assets in securities issued by Puerto Rico entities.Therefore, the Fund is more susceptible to factors adversely affecting these entities than an investment company that doesnot have such a concentration of Puerto Rico securities. At March 31, 2014, the Fund had investments with a fair value of$20,141,568 in Puerto Rico securities which are not guaranteed by the U.S. Government.

Note 9. Investment and Other Requirements and Limitations. The Fund is subject to certain requirements and limitations relatedto investments and leverage. Some of these requirements and limitations are imposed by statute or by regulation whileothers are procedures established by the Board of Directors. The most significant requirements and limitations are discussedbelow.

The Fund is required to invest at least 20% of its total assets in Puerto Rico obligations, and may invest not more than 80%of its total assets in U.S. taxable debt and other fixed income obligations.

17

First Puerto Rico AAA Fixed Income Fund, Inc.Notes to Financial Statements

(concluded)

Under its leverage program, the Fund may issue, from time to time, commercial paper or other debt securities includingdollar rolls and reverse repurchase agreements and shares of preferred stock to Puerto Rico residents, representing not morethan 50% of the Fund’s total assets immediately after such issuance. The use of leverage by the Fund creates theopportunities for increased net income for holders of the common stock and a potentially higher return. At the same time,leverage creates certain risks for common shareholders, including higher volatility of both the net asset value and the fairvalue of the common shares.

In addition, the Fund may borrow money in an amount up to 5% of its total assets in order to meet repurchase requests, forother cash management purposes, to fund the purchase of portfolio securities for a period of no longer than 30 days or forother temporary, emergency or defensive purposes. Interest payments and fees incurred in connection with borrowings willincrease the Fund’s expense ratio and will reduce any income the Fund otherwise has available for the payment ofdividends.

Note 10. Dividend Payable. On March 31, 2014, the Dividend Committee of the Fund’s Board of Directors declared taxabledividends of $0.0357 and $0.054 per common share, totaling $96,349 and $145,739, payable on April 15, 2014 andApril 16, 2014, respectively, to common shareholders as of record date April 3, 2014.

Note 11. Subsequent Events. Management has evaluated events occurring subsequent to March 31, 2014 through June 12, 2014, thedate the financial statements were available to be issued, to determine if any such events should either be recognized ordisclosed in the financial statements. Management has determined that there are no material events or transactions thatwould affect the Fund’s financial statements or require disclosure in the Fund’s financial statements through such date,except as indicated below.

On May 8, 2014, the Dividend Committee of the Fund’s Board of Directors declared a taxable dividend of $0.0357 percommon share, totaling $96,366 payable on May 15, 2014, to common shareholders as of record date May 6, 2014.

On June 10, 2014, the Dividend Committee of the Fund’s Board of Directors declared a taxable dividend of $0.0357 percommon share, totaling $94,130 payable on June 16, 2014, to common shareholders as of record date June 5, 2014.

18

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and ShareholdersFirst Puerto Rico AAA Fixed Income Fund, Inc.:

We have audited the accompanying financial statements of First Puerto Rico AAA Fixed Income Fund, Inc. (the “Fund), whichcomprise the statement of assets and liabilities, including the investment portfolio, as of March 31, 2014, and the related statements ofoperations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period thenended, and the financial highlights for each of the five years in the period then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements and financial highlights inaccordance with accounting principles generally accepted in the United States of America; this includes the design, implementation,and maintenance of internal control relevant to the preparation and fair presentation of financial statements and financial highlightsthat are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conductedour audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that weplan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are freefrom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements andfinancial highlights. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of materialmisstatement of the financial statements and financial highlights, whether due to fraud or error. In making those risk assessments, theauditor considers internal control relevant to the Fund’s preparation and fair presentation of the financial statements and financialhighlights in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Fund’s internal control. Accordingly, we express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements and financial highlights.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financialposition of First Puerto Rico AAA Fixed Income Fund, Inc. as of March 31, 2014, the results of its operations, its cash flows, thechanges in its net assets, and financial highlights for the respective stated periods, in accordance with accounting principles generallyaccepted in the United States of America.

June 12, 2014

Stamp No. E95876affixed to original.

19

First Puerto Rico AAA Fixed Income Fund, Inc.Common Stock

Santander Securities, Distributor

First Puerto Rico AAA Fixed Income Fund, Inc.Santander Tower, 16th FloorB-7 Tabonuco StreetGuaynabo, PR 00968-3028

Address Service Requested