What are the key terms of the Security Bank – 5-Year Fixed Rate Bonds (“SBC Bonds”)?

The 5-Year Fixed Rate Bonds will be issued on August 20, 2024, with a tenor of 5 years and 1 month, to mature on September 20, 2029. The minimum investment amount is PHP100,000 and multiples of PHP10,000 thereafter. The coupon or interest payment will be made quarterly. The principal investment plus the interest calculated for the last interest period will be paid on the Maturity Date.
 

What is the interest rate of the SBC Bonds?

The interest rate has been adjusted upward, from 5.70% p.a. to 6.05% p.a. (the “New SBC Bond Rate”)

Why did Security Bank adjust the interest rate of the Bonds?

With unprecedented demand for the bonds and recent market conditions, we saw the opportunity to improve the already attractive returns with a higher coupon. Ultimately, we are able to offer clients a more competitive and sustainable investment option that aligns with their financial goals.

What is the effective coupon yield for individual investors? Are there any other charges or fees when investing in the SBC Bonds?

Individual investors will earn a coupon yield of 5.80% p.a., higher than the previously offered coupon yield of 5.60% p.a., if the investment is held until maturity. The adjusted 5.80% p.a. coupon yield is derived as follows:

Bond interest rate: 6.05% p.a. minus the adjusted Trust fees of 0.25% p.a. =  5.80% p.a.

Even if the trust fee rate was adjusted from 0.10% p.a. to 0.25% p.a., the resulting coupon yield on your investment in the Bonds will still be higher by 0.20% p.a., from 5.60% p.a. to 5.80% p.a.
 

The Trust fees will be deducted every interest payment date when TAMG credits the net earnings from investment in the Bonds on each payment date.

The full tax exemption on the interest from the Bonds investment will only apply for individual investors who hold the investment until maturity.

What is the effective coupon yield if the investor is a corporate or institutional client? Are there any other charges or fees when investing in the SBC Bonds?

Corporate or institutional investors will earn a coupon yield of 4.59% p.a., higher than the previously offered coupon yield of 4.46% p.a., if the investment is held until maturity. The adjusted 4.59% p.a. coupon yield is derived as follows:

Bond interest rate: 6.05% p.a. less the 20% final withholding taxes (“FWT”), minus the adjusted Trust fees of 0.25% p.a. =  4.59% p.a.

Even if the Trust fee rate was adjusted from 0.10% p.a. to 0.25% p.a., the resulting coupon yield on the corporate/institutional investors’ investment in the SBC Bonds will still be higher by 0.13% p.a., from 4.46% p.a. to 4.59% p.a.
 

The FWT and the Trust fees will be deducted every interest payment date when TAMG credits the net earnings from investment in the Bonds on each payment date.

Why was Trust Fee Rate adjusted?

The record volume of orders at the original coupon necessitated an adjustment in our fees to ensure service and operational quality.

As an Individual Investor, what will happen if I liquidate the Bond investment before the Maturity Date?

If you liquidate the Bonds before Maturity Date, we will calculate the applicable taxes from Day 1 of your investment (or from August 20, 2024), based on the actual holding period, until the liquidation date:

The term of the Bonds is 5 years and 1 month. When do I expect interest payment on my investment?

Security Bank, as the Issuer of the Bonds, will pay interest quarterly on these dates: November 20, February 20, May 20 and August 20. If any of these payment dates fall on a non-banking day, the payment will be made on the next banking day without adjustment in interest. Because the tenor of the Bonds is 5 years and 1 month, the last and final interest period will be from August 20, 2029 to September 20, 2029.

As an Individual Investor, how will my interest be calculated?

1. First, we calculate the interest in your investment using 90/360 days. To illustrate:

Principal amount of investment: PHP1,000,000.00

PHP1,000,000.00 x 6.05% p.a. x 90/360 = PHP15,125.00

2. Next, we calculate the Trust fees based on the actual number of days elapsed during the interest payment period/actual number of days in the current calendar year. To illustrate, we will use the information for the first interest payment period of the Bonds:  

First interest payment period: August 20 to November 20, 2024

Actual number of days: 92 days

Actual number of days this year 2024: 366

PHP1,000,000.00 x 0.25% p.a. x 92/366 = PHP628.42

3. Then, the final calculation is the final amount of interest, net of fees:

Net interest amount minus Trust fees

PHP15,125.00 – PHP628.42 = PHP14,496.58

The amount of PHP14,496.58 will be credited to your nominated Security Bank CASA on the interest payment date.

Can foreigners invest in the SBC Bonds? If so, are they entitled to the relevant tax exemption?

Yes, foreigners can invest in the Bonds and are entitled to tax exemption (when the bond investment is held until maturity) on condition that the foreigner is 1) a resident of the Philippines; or 2) a non-resident of the Philippines but engaged in trade or business in the Philippines.  If neither, investment may still be made but interest income from this investment will be subject to 25% final withholding taxes.

Who can I reach out to for investment liquidation or pre-termination of the SBC Bonds?

Reach out to your Wealth Manager or your branch of account. As with any bonds, the SBC Bonds will be subject to prevailing market rate at the time of the pre-termination and the availability of interested buyers. There will also be costs and fees charged by counterparties for pre-termination.  The prevailing market rate of the Bonds plus the costs and fees will be shared with you when the request for pre-termination is received by TAMG. We will only execute the pre-termination of your investment in the Bonds upon your written instruction.

If I already signed the DIMA Kit and the Unified LOI for my investment in the SBC Bonds, do I need to sign again because of the change in the interest rate of the SBC Bonds and the Trust fee?

Only the Unified LOI will be signed again which will reflect the New SBC Bond Rate and the Trust Fee of 0.25% p.a. If you have submitted the Unified LOI already with the unadjusted SBC Bond Rate, we will cancel this and the new Unified LOI reflecting the New SBC Bond Rate and the Trust Fee of 0.25% p.a. will be the official LOI for your directed investment in the SBC Bonds.

When do we need to submit the DIMA Kit and the Unified LOI for my investment in the SBC Bonds? To whom should we submit these?

You may submit the duly accomplished and signed DIMA Kit (if you are new to DIMA client) and the Unified LOI (if you are new or existing DIMA client) to your branch of account or your Wealth Manager on or before the Settlement Dates, i.e. August 14 to August 16, 2024. We highly encourage you to submit the DIMA Kit and the Unified LOI earlier than these dates to allow our branch personnel or the Wealth Manager to check these forms.

What will I receive when the SBC Bonds are issued on August 20,2024?

You will receive a Confirmation Advice that will reflect the directed investment in the Bonds to include the following information:

•          Principal/Face Value of the Investment: The amount confirmed to be invested in SBC Bonds
•          Interest Rate: 6.05% p.a. (the New SBC Bond Rate)
•          Term: 5 years and 1 month
•          Issue Date: August 20, 2024
•          Maturity Date: September 20, 2024
•          Trust Fee: 0.25% p.a.

For additional questions, please email us at trustmarketing@securitybank.com.ph, reach out to your Wealth Manager, or visit your Security Bank branch.