COVER SHEET for SEC FORM 17-A SEC Registration Number A S 0 9 4 - 0 0 0 0 8 8 Company Name S M P R I M E H O L D I N G S , I N C . A N D S U B S I D I A R I E S Principal Office (No./Street/Barangay/City/Town/Province) 1 0 t h F l o o r , M a l l o f A s i a A r e n a A n n e x B u i l d i n g , C o r a l W A y c o r . J . W . D i o k n o B l v d . , M a l L o f A s i a C o m p l e x , B r g y . 7 6 , Z O n e 1 0 , C B P - 1 A , P a s a y C i t y , P h i l i p p i n e s Form Type Department requiring the Secondary License Type, If report Applicable 1 7 - A COMPANY INFORMATION Company’s Email Address Company’s Telephone Mobile Number Number/s 8831-1000 Annual Meeting Fiscal Year No. of Stockholders Month/Day Month/Day 2,395 December 31 CONTACT PERSON INFORMATION The designated contact person MUST be an Officer of the Corporation Name of Contact Person Email Address Telephone Mobile Number Number/s Mr. John Nai Peng C. Ong [email protected] 8831-1000 Contact Person’s Address 10th Floor, Mall of Asia Arena Annex Building, Coral Way cor. J.W. Diokno Blvd., Mall of Asia Complex, Brgy. 76, Zone 10, CBP-1A, Pasay City, Philippines Note : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated. TABLE OF CONTENTS Page No. PART I - BUSINESS AND GENERAL INFORMATION Item 1. Business 1 Item 2. Properties 7 Item 3. Legal Proceedings 29 Item 4. Submission of Matters to a Vote of Security Holders 29 PART II - OPERATIONAL AND FINANCIAL INFORMATION Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters 30 Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 7. Financial Statements 49 Item 8. Information on Independent Accountant and Other Related Matters 49 PART III - CONTROL AND COMPENSATION INFORMATION Item 9. Directors and Executive Officers of the Registrant 50 Item 10. Compensation of Directors and Executive Officers 62 Item 11. Security Ownership of Certain Beneficial Owners and Management 63 Item 12. Certain Relationships and Related Transactions 64 PART IV – CORPORATE GOVERNANCE Item 13. Corporate Governance 66 PART V - EXHIBITS AND SCHEDULES Item 14. a. Exhibits 69 b. Reports on SRC Form 17-C (Current Report) 69 INDEX TO EXHIBITS 70 INDEX TO AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES 71 INDEX TO ADDITIONAL DISCLOSURES 72 SIGNATURES 183 PART I - BUSINESS AND GENERAL INFORMATION ITEM 1. Business Business Development and Principal Products or Services SM Prime Holdings, Inc. (“SMPH” or “the Parent Company”) was incorporated in the Philippines and registered with the Securities and Exchange Commission (SEC) on January 6, 1994. SMPH and its subsidiaries (collectively known as “the Company” or “SM Prime”) are incorporated to acquire by purchase, exchange, assignment, gift or otherwise, and to own, use, improve, subdivide, operate, enjoy, sell, assign, transfer, exchange, lease, let, develop, mortgage, pledge, traffic, deal in and hold for investment or otherwise, including but not limited to real estate and the right to receive, collect and dispose of, any and all rentals, dividends, interest and income derived therefrom; the right to vote on any proprietary or other interest on any shares of stock, and upon any bonds, debentures, or other securities; and the right to develop, conduct, operate and maintain modernized commercial shopping centers and all the businesses appurtenant thereto, such as but not limited to the conduct, operation and maintenance of shopping center spaces for rent, amusement centers, movie or cinema theatres within the compound or premises of the shopping centers, to construct, erect, manage and administer buildings such as condominium, apartments, hotels, restaurants, stores or other structures for mixed use purposes. Its registered office and principal place of business of SMPH is 10 th Floor, Mall of Asia Arena Annex Building, Coral Way cor. J.W. Diokno Blvd., Mall of Asia Complex, Brgy. 76, Zone 10, CBP-1A, Pasay City, Philippines. SMPH’s shares of stock are publicly traded in the Philippine Stock Exchange (PSE). SM Investments Corporation (SMIC), the ultimate parent company, is a Philippine corporation which listed its common shares with the PSE in 2005. SMIC and all its subsidiaries are herein referred to as the “SM Group”. The subsidiaries of the Parent Company follow: Date and Place of Percentage of Company Incorporation Ownership A. MALLS First Asia Realty Development Corporation (FARDC) September 7, 1987, 74. 2 Philippines Premier Central, Inc. and Subsidiary March 16, 1998, 100.0 Philippines Consolidated Prime Dev. Corp. March 25, 1998, 100.0 Philippines Premier Southern Corp. April 7, 1998, 100.0 Philippines San Lazaro Holdings Corporation March 7, 2001, 100.0 Philippines Southernpoint Properties Corp. June 10, 2008, 100.0 Philippines First Leisure Ventures Group, Inc. (FLVGI) March 28, 2007, 50.0 Philippines CHAS Realty and Development Corporation and October 17, 1997, 100.0 Subsidiaries Philippines Springfield Global Enterprises Limited September 6, 2007, 100.0 British Virgin Islands Simply Prestige Limited and Subsidiaries April 23, 2013, 100.0 British Virgin Islands SM Land (China) Limited and Subsidiaries August 9, 2006, 100.0 Hong Kong Rushmore Holdings, Inc. April 14, 1994, 100.0 Philippines Prime_Commercial Property Management Corp . and November 6, 2009 100.0 Subsidiaries Philippines 1 Date and Place of Percentage of Company Incorporation Ownership Magenta Legacy, Inc. November 30, 2006, 100.0 Philippines Associated Development Corporation May 26, 1950, 100.0 Philippines Prime Metroestate, Inc. and Subsidiary June 1, 1995, 100 .0 Philippines SM Arena Complex Corporation March 15, 2012, 100.0 Philippines Mindpro Incorporated (Mindpro) July 3, 1970, 70.0 Philippines A. Canicosa Holdings, Inc. October 10, 2008, 100.0 Philippines AD Canicosa Properties, Inc. October 10, 2008, 100.0 Philippines Cherry Realty Development Corporation October 28, 1977, 10 0.0 Philippines Supermalls Transport Services, Inc. January 25, 2017, 100.0 Philippines B. RESIDENTIAL SM Development Corporation and Subsidiaries July 12, 1974, 100.0 (SMDC) Philippines Highlands Prime, Inc. February 15, 2001, 100.0 Philippines Costa del Hamilo, Inc. and Subsidiary September 26, 2006, 100.0 Philippines C. COMMERCIAL Tagaytay Resort and Development Corporation August 29, 1988, 100.0 Philippines MOA Esplanade Port Inc. December 5, 2014 100.0 Philippines Premier Clark Complex, Inc. May 29, 2019, 100.0 Philippines SM Smart City Infrastructure and Development August 27 ,2019 100.0 Corporation Philippines D. HOTELS AND COVENTION CENTERS SM Hotels and Conventions Corp. and Subsidiaries April 2, 2008, 100.0 Philippines 2 The Company has four business units (or segments), namely, malls, residential, commercial and hotels and convention centers. The contribution of each of the business units as of and for the year ended 2020 are as follows: Hotels and Convention Consolidated Mall Residential Commercial Centers Eliminations Balances (In Thousands) Revenue: External customers P=28,133,013 P=47,476,884 P=4,709,187 P=1,580,214 P=– P=81,899,298 Inter -segment 129,575 – 69,958 2,672 (202,205) – P=28,262,588 P=47,476,884 P=4,779,145 P=1,582,886 (P=202,205) P=81,899,298 Segment results: Income before income tax P=3,397,809 P=16,910,196 P=3,629,553 (P=1,019,638) (P=454,179) P=22,463,741 Provision for income tax (1,053,609) (3,089,875) (180,520) – – (4,324,004) Net income P=2,344,200 P=13,820,321 P=3,449,033 (P=1,019,638) (454,179)) P=18,139,737 Net income attributable to: Equity holders of the Parent P=2,210,183 P=13,821,113 P=3,449,033 (P=1,019,638) (P=454,179) P=18,006,512 Non -controlling interests 134,017 (792) – – – 133,225 Segment assets P=393,412,575 P=254,869,649 P=61,567,161 P=14,067,315 (P=1,557,775) P=722,358,925 Segment liabilities P=258,218,748 P=147,833,429 P=6,230,590 P=916,305 (P=1,557,775) P=411,641,297 Other information: Capital expenditures P=26,033,777 P=24,823,848 P=7,393,535 P=1,337,054 P=– P=59,588,214 Depreciation and amortization 8,872,299 149,450 680,133 639,729 – 10,341,611 Further details relating to business segment data are disclosed in Note 4 of the attached consolidated financial statements. As of December 31, 2020, the Company had a market capitalization of P=1,112 billion. Enterprise Risk Management The Board, through its Risk Oversight Committee (ROC), is responsible for the oversight of the Company’s Enterprise Risk Management system to ensure its functionality and effectiveness. At the management level, the Enterprise Risk Management (ERM) is headed by the Chief Risk Officer (CRO). The CRO is responsible in leading the formulation of risk management policies, methodologies, and metrics in alignment with the overall business strategy of the Company, ensuring that risks are prudently and rationally undertaken. The CRO and the ERM team facilitate risk management learning programs and promote best practices on an enterprise-wide basis.