SM PRIME HOLDINGS, INC. 2011 ANNUAL REPORT Creating Value at All Times PRIME Creating Value HOLDINGS, INC. In just over five decades, SM as a company has grown from a mere shoe store to become at All Times one of the Philippines’ most dominant names in business. Alongside it, SM Prime grew to become the Philippines’ largest mall developer and operator in a little over two and a half decades. As a brand, SM has evolved into a household name earned in time by continuing to serve and deliver the best value products and services, to fulfill aspirations, and to provide a better life for its millions of customers. Behind such growth and wide recognition is the vision, the leadership, prudent use of resources, innovation, and dedication of the men and women within the whole SM organization. Their focused intent creates value at all times in businesses that they know best to operate. Such value is backed by hard assets that bear the mark of product quality and service excellence. Behind such value too is the heart that cares for its customers, communities, and its environment to ensure sustainable growth and progress. Moving forward, expect greater value to be created, because SM is determined to serve millions more. www.smprime.com Annual Report 2011 V I S I O N . L E A D E R S H I P . I N N O V A T I O N . F O C U S . H A R D W O R K . I N T E G R I T Y . P R U D E N C E . SM MALL TIMELINE Company Headquarters JP Morgan Chase Bank SM Prime Holdings, Inc. Land Bank of the Philippines Mall of Asia Arena Annex Building Maybank Group Coral Way cor. J.W. Diokno Boulevard Metropolitan Bank & Trust Company Mall of Asia Complex, Brgy. 76, Zone 10 Mega International Commercial Bank CBP-1A, Pasay City Mizuho Corporate Bank, Ltd. 1300 Philippines Philippine Business Bank Philippine National Bank Legal Counsel Rizal Commercial Banking Corporation 1985 1990 1991 1993 1995 1997 1997 1999 2000 2000 2001 2001 2002 2002 2003 2003 2003 2004 2004 2005 SyCip, Salazar, Hernandez and Gatmaitan Law Offices Security Bank Corporation North EDSA, Q.C. Sta. Mesa, Manila Megamall, Pasig Cebu Southmall, Las Piñas Bacoor Fairview, Q.C. Iloilo Manila Pampanga Sucat, Parañaque Davao Cagayan de Oro Bicutan, Parañaque Lucena Baguio Marilao Dasmariñas Batangas San Lazaro, Manila Gonzales Batiller David Leabres & Reyes Standard Chartered Bank 424,691 sqm 133,327 sqm 346,789 sqm 274,236 sqm 205,120 sqm 120,202 sqm 188,681 sqm 105,953 sqm 167,812 sqm 132,484 sqm 98,106 sqm 78,735 sqm 87,940 sqm 113,671 sqm 78,655 sqm 107,950 sqm 107,950 sqm 94,285 sqm 80,350 sqm 178,516 sqm Pacis & Reyes Sumitomo Mitsui Banking Corporation Puno and Puno Law Offices The Bank of Tokyo-Mitsubishi UFJ, Ltd. Tarriela Tagao Ona & Associates The Hongkong and Shanghai Banking Corporation Tan Acut Lopez & Pison Law Offices Union Bank of the Philippines Fortun Narvasa Salazar Picazo Buyco Tan Fider and Santos Stockholder Inquiries SM Prime Holdings, Inc.’s common stock is listed and traded in the External Auditor Philippine Stock Exchange under the symbol “SMPH”. SyCip Gorres Velayo & Co. Inquiries regarding dividend payments, account status, address changes, Bankers stock certificates, and other pertinent matters may be addressed to the Allied Banking Corporation company’s transfer agent: Asia United Bank Australia and New Zealand Banking Group Limited Stock Transfer Service, Inc. Banco De Oro Unibank, Inc. Unit 34-D Rufino Pacific Tower, 6784 Ayala Avenue, Makati City 1200 Bank of the Philippine Islands Philippines Barclays Bank PLC Tel. (632) 403.2410 Fax (632)403.2414 China Banking Corporation Chinatrust (Philippines) Commercial Bank Corporation Investor Relations 2005 2005 2006 2006 2006 2006 2006 2007 2007 2007 2008 2008 2008 2009 2009 2009 2010 2010 2010 2010 2011 Citibank, N.A. Please contact : Teresa Cecilia H. Reyes Valenzuela Molino Sta. Rosa Clark Mall of Asia, Pasay Pasig Lipa Bacolod Taytay Muntinlupa Marikina Rosales Baliwag Naga Las Piñas Rosario Tarlac San Pablo Calamba Novaliches, Q.C. Masinag 70,681 sqm 52,061 sqm 86,463 sqm 101,840 sqm 406,961 sqm 29,602 sqm 77,301 sqm 71,752 sqm 98,928 sqm 54,292 sqm 178,485 sqm 63,330 sqm 61,262 sqm 74,275 sqm 40,267 sqm 59,326 sqm 101,629 sqm 59,643 sqm 67,384 sqm 60,560 sqm Antipolo City, Rizal Credit Agricole CIB Vice President 90,261 sqm Deutsche Bank AG Manila Branch Development Bank of the Philippines Telephone : (632) 831.1000 First Metro Investment Corporation E-mail : [email protected] CHINA MALLS ING Bank Website : www.smprime.com 2001 2005 2006 2009 2011 Xiamen Fupu (Jinjiang) Chengdu Lifestyle Center, SM Xiamen Suzhou 128,203 sqm 167,830 sqm 166,665 sqm 109,922 sqm 72,522 sqm SM PRIME HOLDINGS, INC. • ANNUAL REPORT 2011 Our Vision Our Mission SM Prime envisions to be a leader in SM Prime commits to the following To be an employer of choice, offering world-class mall development, committed mission: comprehensive opportunities for career to deliver the daily needs of millions growth and enhancement; by offering a total mall experience and To constantly provide customers with a creating a richer, better quality of life. fresh and world-class mall experience To deliver sustainable long-term growth through innovative and state-of-the-art and increasing shareholder value; and facilities and services; To uphold its role as a catalyst for To undertake wide-ranging corporate economic development. social responsibility initiatives that provide greater service for customers with special needs, and ensure environmental sustainability through various programs on energy, water and air conservation; 1 SM PRIME HOLDINGS, INC. • ANNUAL REPORT 2011 TABLE OF CONTENTS Chairman’s Message President’s Henry Sy, Sr. shares his Report thoughts on the performance Hans T. Sy reports and plans of SM Prime on SM Prime’s Holdings, Inc. 4 2011 Performance 6 Philippine Mall Events 10 Mall Philippine Locations 12 Malls 13 2 SM PRIME HOLDINGS, INC. • ANNUAL REPORT 2011 TABLE OF CONTENTS Mall Expansion Program 14 Sustainability Report A look at the SM Cares Program 24 35 Management’s Discussion and Analysis or Plan of Operation 37 Report of the Audit and Risk Management Committee 39 Statement of Management’s FACES Responsibility for Financial Statements SM Prime’s Board of Directors and 40 Independent Auditors’ Report Executive Officers 32 IBC Corporate Information 3 SM PRIME HOLDINGS, INC. • ANNUAL REPORT 2011 PRESIDENT’S REPORT In the Philippines, our Thevision outstanding takes us now to performanceurban centers of thesuch SM as Cebu, Davao, and key Groupcities over nationwide, the past where year, a yearopportunities touted by formany growth to be difficultexist. Thisand supportschallenging, our is aoptimism testament and to expectations the group’s abilityof a tostronger build on Philippine its strengthseconomy. and reinforce its synergies. 4 SM PRIME HOLDINGS, INC. • ANNUAL REPORT 2011 MESSAGE TO STOCKHOLDERS am pleased to inform you that SM Prime exceeded its target in 2011 with its 15% growth in net income and 13% growth in revenues. This is significant in light of a more challenging environment for the industry brought about by tempered consumer spending. SM Prime malls continue to draw strength from the goodwill which it has built over the years with its customers and tenants, as well as through the dedication of the professionals working within the organization. SM Prime has also built a reputation for innovation and new concepts aimed at addressing the aspirations of its consumers. More importantly, SM Malls have evolved nationwide into prime destinations for shopping and leisure. Over the years, SM Prime has also invested much of its resources toward environmental sustainability. Structures are built based on earth-friendly designs and architecture that enable the recycling and re-use of water, energy savings, and waste management. SM malls have also been equipped with provisions to assist the elderly, nursing mothers and customers with special needs. Even with 45 malls now holding 5.6 million square meters of gross floor area in the Philippines and China, SM Prime still sees much room for expansion. As such, we continue to invest heavily in both countries. Our budget for 2012 earmarks an investment of Php14 billion for the Philippines and Php7 billion for China. In the Philippines, our vision takes us now to urban centers such as Cebu, Davao, and key cities nationwide, where opportunities for growth exist. This supports our optimism and expectations of a stronger Philippine economy. Clearly, better governance in the public sector and the continued productivity of the Filipino people both in and outside of the country encourage steady growth in the consumer sector, most especially, the expanding mid-income market. We are also participating in the economic growth in China where personal incomes continue to rise. We already see our existing Xiamen and Jinjiang malls reaping the benefits of the focus, dedication and the innovative approach put in by the management team. In 2012, we expect to open our fifth mall in Chongqing, which is one of the largest cities in China. Finally, I would like to thank everyone who has contributed to yet another excellent year for SM Prime – the members of the Board, the management, our contractors and consultants, and of course, our tenants who have grown with us over the years. We also thank our investors for their invaluable trust and confidence. Most of all, we thank our millions of customers to whom we dedicate our growth and our continuous efforts towards innovation and sustainable development.