2019 SUSTAINABILITY REPORT VISION MISSION VALUES To build world-class businesses that We will partner with our host Leadership are catalysts for development in the communities to provide a Sustainability communities we serve consistently high standard of Innovation service to our customers, look Accountability after the welfare of our employees Integrity and deliver sustainable returns Hard Work to our shareholders, at all times upholding the highest standards of corporate governance in all our businesses VALUES Leadership Sustainability Innovation Accountability Integrity Hard Work CONTENTS 2 An Overview of Our Business 4 Our Board’s Vision for SM’s Sustainability 6 Our President’s Report on Our Sustainability Progress 9 Our Financial Management Strategy for Growth 10 Our Value Creation Story 12 SM’s Path to Sustainable Growth 18 Focusing on What Matters 22 Driving Meaningful Performance Our People in Our Dynamic World Our Green Responsibility The Communities We Serve 32 Sharing the Value We Generate SM Retail | Transforming the Philippine Retail Landscape THE SM STORE | Providing Excellent Stakeholder Experience SM Markets | A Bonus for the Filipino Family SM Prime | The Defining Difference of Resilience SMDC | Redefining Urban Living BDO | Finding Creative Ways Towards Financial Inclusion China Bank | 100 Years of Sustainable Banking Relationships 52 Together Towards a Sustainable Philippines UNGC – GRI Sustainability Summit 54 Our Governance Culture 58 In Pursuit of Continuous Improvement About this Report | GRI Content Index 2 2019 SUSTAINABILITY REPORT An Overview of Our Business SM Investments Corporation (SM) is one of the largest Philippine conglomerates that is invested in market leading businesses in retail, property and banking. It also invests in ventures that can capture high growth opportunities in the emerging Philippine economy. Our businesses serve as catalysts for development in the communities we serve and create long- term shared value for all our stakeholders. PHP1.26tn 2019 Year-End Market Capitalization Percent Ownership 77% 50% 45% 23% SM Retail SM Prime BDO China Bank 26% 30% 34% 63% Belle Corp. 2GO Atlas Mining Philippines Urban Living Solutions, Inc. (PULS) 95% 34% 34% 35% Neo Buildings CityMall Goldilocks GrabPay Our Equity Investments A developer of premium One of the largest tourism and leisure producers of copper destinations in the concentrate in the Philippines Philippines PULS is a leading developer The largest integrated and operator of urban supply chain enterprise dormitory spaces under in the Philippines the MyTown brand SM INVESTMENTS CORPORATION 3 Our Core Businesses The country’s leading retailer with a nationwide One of the largest integrated property developers portfolio of department stores, supermarkets and in Southeast Asia that develops innovative and specialty stores sustainable lifestyle cities comprising malls, residences, offices, hotels and convention centers TOTAL NUMBER TOTAL NUMBER OF STORES 19% 38% OF DEVELOPMENTS Contribution to Contribution to SMIC's Net Income SMIC's Net Income 65 74 7 THE SM STORE Malls in the Malls in PHP366.79bn PHP1.22tn Philippines China Revenue Market Capitalization 52 70 SM Hypermarket PHP118.31bn Residential Projects Revenue 58 12 SM Supermarket Office Buildings 201 60 8 Savemore WalterMart Hotels 754 1,609 4 3 Alfamart Specialty Stores Convention Trade Centers Halls The largest bank in the Philippines in terms of Incorporated in 1920 as the first privately owned market capitalization, consolidated resources, local commercial bank in the Philippines assets under management and capital TOTAL NUMBER TOTAL NUMBER OF BRANCHES PHP692.22bn 43% PHP67.28bn OF BRANCHES Market Capitalization Consolidated BDO Market Capitalization and China Bank 1,434 2 Contribution to 631 Philippines Foreign PHP119.9bn SMIC’s Net Income PHP26.1bn Philippines Net Interest Income Net Interest Income 4,466 PHP60.6bn PHP8.4bn 1,002 ATMs ATMs Other Income Other Income 4 2019 SUSTAINABILITY REPORT OUR BOARD'S VISION FOR SM'S SUSTAINABILITY Dear Stakeholders: The responsibility of corporates to under these principles and we manage their businesses sustainably welcome this trend. and for the greater good of all their stakeholders has increased Our long-standing vision is to in recent years. Customers, build world-class businesses that employees, investors, regulators are catalysts for development and business partners have high in the communities we serve. expectations that leading companies Our sustainability principles, will be responsible and follow an our corporate policies, how we integrated approach to running their have embedded them in our businesses and creating shared operations and how we report them value. At SM, we have long operated transparently are all aligned with this. SM INVESTMENTS CORPORATION 5 We help address the unmet needs of millions of Filipinos and their communities, driving national development and creating value. Building World Class Serving as a Catalyst Compact (UNGC), of which we were Businesses for Development particularly honored to co-host the first joint UNGC-Global Reporting OUR BOARD'S We recognize that SM has a We carry the legacy of our Initiative (GRI) Sustainability Summit significant role in the Philippines due founder Henry Sy, Sr. that social in the Philippines. to its extensive assets, footprint and development and business growth VISION FOR the number of people we touch every go hand in hand. Our developments As we carry on in our sustainability day. The group is responsible for must continue to energize local journey, we commit to making real SM'S SUSTAINABILITY creating over 157,000 jobs this year communities and advance social concerted efforts across the SM throughout our businesses, provides inclusion. We make sure that we group to create significant impact opportunities for entrepreneurs do this responsibly throughout towards sustainable development. through our supply chain and our employment practices, supply serves millions of customers. As we chain management and resource continue to grow, we bring our goods utilization. Through our foundations, and services to new parts of the we also promote social development country, build modern lifestyle city by providing better access to JOSE T. SIO developments and create inclusive education, healthcare, food security Chairman access to financial markets. All and shelter wherever we are together, we help address the unmet present. needs of millions of Filipinos and their communities, driving national We will pursue our vision in line development and creating value. with the principles of our founder. TERESITA T. SY-COSON In doing so, we are aware that we Vice-Chairperson Furthermore, we ensure that also have a role as a leader and our businesses are built on good an advocate in driving sustainable corporate governance practices development in our country. adhering to global standards and That being so, last year we signed advancing our compliance to the on to uphold the Ten Principles HENRY T. SY, JR. ASEAN Corporate Governance of the United Nations Global Vice-Chairman Scorecard initiative. 6 2019 SUSTAINABILITY REPORT OUR PRESIDENT'S REPORT ON OUR SUSTAINABILITY PROGRESS In 2019, we made significant income by 10% to PHP12.5 billion progress, both as a growing as we opened 412 new stores, 68% business and as a responsibleMESSAGE of which FROM are outside Metro Manila. sustainability partner, particularly Our Property group, SM Prime, in areas that are most materialTHE to CHAIRMANposted revenue growth of 14% to our ability to create stakeholder PHP118.3 billion and net income value. growth of 18% to PHP38.1 billion. While our Banking businesses Our business delivered PHP501.7 posted a 35% growth in net income billion in revenues, representing to PHP44.2 billion for BDO Unibank growth of 12% over 2018 and net and 24% to PHP10.1 billion for income growth of 20% to PHP44.6 China Bank, as we rolled out billion. Results were strong across branch expansion plans. all three of our core businesses. Our Retail business grew revenues Underpinning these strong results by 9% to PHP366.8 billion and net is our integrated thinking to SM INVESTMENTS CORPORATION 7 business sustainability: pursuing bank agents, making banking small and medium enterprise (SME) our customer-centric approach convenient for unbanked segments mall tenants also bounce back while addressing the unmet in the far-flung provinces of the faster, SM Prime launched the SM development needs of the Filipino Philippines. BDO was recognized Resilience Center in SM City Clark through our core businesses - more at the Asian Banking and Finance which serves as a data storage equitable access to organized Awards in Singapore for this facility and a capacity building retailing for micro, small and breakthrough. center. To date, 1,627 SMEs have medium enterprises (MSMEs), availed of this complimentary inclusive financial products and The country faces rapid service. On a national scale, we services, and city developments urbanization with populations partnered with the National that support the national economic predicted to live increasingly Resilience Council in its “Adopt-a- agenda. in cities in the next 20 years. City” campaign focusing on building Our residential group, led by local government units' capacity to First, we leveraged the synergies SM Development Corporation, mitigate climate risks. of our businesses, stimulating continued to meet the demand local economic activity wherever for quality urban housing options.