Investor’s Forum
Good morning.
We are here today to present to you the Pag-IBIG Housing Bonds 2007 issue. As you know the Pag-BIG Fund Board of Trustees approved on July 3 last year the P2 Billion Pag-IBIG Housing Bonds, to be issued this year. This will be our fourth Pag-IBIG Housing bonds issue, following our successful bond flotations on 2000, 2001 and 2005.
This year’s bond flotation, which will also be called the “Kaunlaran ng Bayan” or “KaBayan” Bonds, is intended to raise additional funds for the Pag-IBIG Fund’s housing program.
The Housing Bonds shall be issued at par, with a term of up to five years and one day from issue date. For this issue, the coupon rate will be a fixed interest rate based on the prevailing market rate at the time of issuance. This will be tax exempt. The bonds will be secured by an HGC guaranty up to the amount of Principal and Interest.
This year we are opening the bonds to retail investors, with a minimum participation of P10,000. Of course, we will still have the raffle draws, where eligible bondholders may win a house and lot worth up to P1 million. We will give away up to a maximum of 10 house and lot packages.
The details of the Housing Bonds will be presented in full later on. What I would like to present to you is an overview of the Pag-IBIG Fund itself, to give you a better idea of what you will, hopefully, be investing in.
The Pag-IBIG Fund is now on its 26 th year of service as an institution built on the twin mandates of generating savings for its members, and mobilizing funds for housing purposes.
The Fund came into existence as a corporation on December 1980 through P.D. 1752, or the Home Development Mutual Fund Law. The Fund was established primarily to perform two equally important mandates, those of generating savings through membership in an integrated nationwide savings system? and mobilizing the provident funds of its members for housing purposes. Following the change in leadership as a result of the first People Power Revolution, President Corazon Aquino issued E.O. 90 on January 1987, temporarily placing Pag-IBIG contributions on a voluntary basis. It resumed its mandatory coverage for all private and government employees on June 1994 with the passage of R.A. 7742. The same law also provided that at least 70 percent of Pag-IBIG’s investible funds be devoted to home financing and related pursuits.
The powers and functions of the Fund are exercised by its Board of Trustees, headed by the Chairman of the Housing and Urban Development Coordinating Council (HUDCC) as Chair, the secretary of the Department of Finance as ViceChair.
As of December 2006 the Pag-IBIG Fund has a total of 6.48 million members. Of this, 70 percent or about 4.56 million are private employees? 25 percent or about 1.63 million are government employees? while the rest are Overseas Filipino Workers, self employed individuals or other working groups and cooperatives or nonworking spouses. We address the varying needs of our members through our network of offices totaling nine in the NCR, 25 in the provinces and nine other extension offices, all strategically located to ensure that our services reach our members.
The Pag-IBIG Fund is part of the housing sector. It is one of the key finance agencies, along with the SSS and the GSIS. At the same time, it is one of the key shelter agencies along with the NHMFC, the NHA, the HLURB and the HGC.
The sector’s support agencies in the government include the NEDA, the DBM, the DOF, the PMS, the MMDA, the DPWH and the DBP. On the private sector side, we have the developers, bankers, contractors, professionals and the low-income beneficiaries.
Among the government financial institutions (GFIs), the PagI-BIG Fund has the biggest contribution to housing finance. As of December 2005, our housing related assets totaled to P101.8 billion, or 36.68 percent of the total financing released by all the GFIs.
Since its inception up to December 2006, Pag-IBIG has financed a total of 721,009 housing units.
The Pag-IBIG Fund is a key player in the National Shelter Program, which aims to provide adequate and decent shelter to Filipinos through marketing, production, finance and regulation.
The Fund’s role is to provide housing finance. Its shelter program is divided into two: the enduser home financing and institutional loans.
Under our enduser home financing, qualified members may borrow up to P2 million, to be repaid at a maximum term of 30 years. We adopted the lowest interest rate in the market. We likewise reduced the equity requirements of borrowers, and even eliminated them altogether in the lower housing loan packages. The result is a friendlier home financing scheme that benefits Fund members belonging to the low to middle economic levels.
Pag-IBIG Fund’s shelter financing support is not only for endusers. We also provide funding support to private developers through our institutional loan programs.
Our institutional loan programs include:
Developmental Loan Program, which aims to create additional housing inventories by providing financing to developers and proponents of housing projects.
The Group Land Acquisition and Development Program (GLAD), which provides financial assistance to organized groups of formally employed Pag-IBIG members for the acquisition and development of land as housing sites.
Pag-IBIG City, which provides for the construction of housing projects to be called Pag-IBIG Cities, is available
to our members at affordable prices.
The Credit Facility for Developers provides a liquidity mechanism to allow developers to continue constructing their projects pending the takeout of complete housing loan applications.
And of course, there is our program promoting the development of Medium/High Rise Buildings or MHRB. In Metro Manila where the scarcity of land makes it impossible to put up new subdivision projects, our MHRB Program allows the vertical development of projects, thus, giving the working class a chance to experience affordable condominium living in areas near their work place.
Our shelter financing program has been growing significantly in recent years, both in terms of loan value and the number of units.
In 2006, we approved a total of P16.1 billion in enduser housing loans and 2.3 billion in institutional loans, financing an aggregate of 43,222 housing units.
Pag-IBIG generates its funds from four sources: member’s contributions, short-term loan amortizations, housing loan amortizations and the income from its investments.
These funds are used for our members’ provident benefits—which include short-term loans, provident claims and death benefits and for our housing finance programs for endusers and developers.
For 2006, we accumulated a total of P58.31 billion of funds from our various sources. Our fund usage amounted to P47.35 billion, which breaks down to P17.81 billion for provident benefits and P29.54 billion for housing finance.
The Pag-IBIG Fund’s asset base has been growing consistently in the last five years. As of December 2006, we have already built up our total assets to P191.55 billion.
We have consistently shown strong income growth since 2000. In 2006, our net income reached a record high P7.7 billion, surpassing the record we have set the previous year at P7.4 billion.
The vigorous performance of the Fund in the past years has benefited members nationwide. Under the law, the Fund is required to set aside an amount equivalent to 70 percent of its annual net income and declare this as dividends. These are later credited proportionately to the members’ total savings. For 2005, we declared P5.4 billion in dividends to our members, which allowed an individual dividend rate of 4.73 percent. Meanwhile, we are looking at declaring P6.2 billion in dividends for 2006, subject to the approval of our board.
We are able to maintain our record growth despite the fact that we have to pay taxes because, unlike other GFIs, Pag-IBIG is not tax exempt. From 2001 to 2006, we have paid a total of P10.99 billion in tax payments. For income tax alone, we have paid P700 million in 2005, and P1.3 billion in 2006.
As the leading source of shelter finance in the country today, the Pag-IBIG operates using internally generated funds. To ensure that it is able to meet the growing demand for housing finance, the Fund initiated innovative schemes meant to raise additional funds.
In 1997, we carried out securitization of 3,600 mortgages and was able to issue Mortgage Backed Securities amounting to P435 million. The effort was undertaken in cooperation with the Citibank N.A./PNB, which served as our financial advisor. The Philippine National Bank was our trustee bank.
In 2000 we floated the Pag-IBIG Housing Bonds for the first time. The 2000 issue was worth P4 billion at a fixed interest rate of 8.25% per annum, and this had been fully paid on April 4, 2005. In 2001, we floated P2 billion worth of retail housing bonds at a fixed interest rate of 8% per annum, which matured on November 2006. In 2005, we floated our P7 billion housing bonds with a fixed interest rate of 8.75% per annum.
Today the Pag-IBIG Fund is recognized as a highly stable, well-managed corporation. This has been given independent confirmation by the Philippine Ratings Services Corporation, or Philratings, when it granted the Fund a “Triple A minus” credit rating in 2005. It recognizes Pag-IBIG’s performance as a consistently profitable company, with a well-managed investment portfolio and with a highly assured liquidity to meet all of its obligations to members and contractual conditions alike.
The Fund has been going through rating confirmation proceedings, and I am glad to say that we have maintained our standing.
PagIBIG has also remained one of the top income earning corporations in the Philippines. In 2005, we ranked 8 th among the country’s top 1000 corporations in terms of net income.
Last year, the Fund received an important recognition for our shelter program and its contribution to the global campaign for human settlements. The United Nations Human Settlements Programme, or UNHabitat, named PagIBIG as one of the winners of the United Nations Scroll of Honour Award, the most prestigious human settlements award in the world today. I myself received our plaque during the awarding ceremony on October 4, 2006 in Kazan, Russia which was part of the global celebration of World Habitat Day.
Also last year, our “Tapat sa PagIBIG” advertising campaign won a bronze award in the 2006 Araw Values Advertising Award. We were given the award in the multimedia campaign category for promoting respect for law and authority as well as the cornerstone value of self-discipline. This was awarded by the Advertising Board of the Philippines last December 11 at the Carlos P. Romulo Auditorium of the RCBC Plaza in Makati.
With the help of investors like you, we hope to continue making more of these accomplishments for the benefit of our members, and our country as a whole.
Ladies and gentlemen, that is how the PagIBIG Fund stands today as we prepare for yet another, hopefully successful, Housing Bonds issue.
Thank you very much for your time. We are looking forward to your investments in the Pag-IBIG Housing Bonds.