SPECIAL ISSUE INVESTMENTS CORPORATION www.sminvestments.com Investor Annual Report 2006 SM moves to merge EXCLUSIVE BDO and EPCIB INTERVIEW SM Independent Director VINCE PEREZ All Roads Lead to SM BAYCITY Unmasking a Jewel Big, Bright called HAMILO and Beautiful: Lega-SY of Henry Sr. SM Mall of Asia ShoppingMall Operations Malls Shopping Malls • Banking and Finance • Retail Merchandising • Real Estate Development and Tourism Vision Real Estate SMIC atains growth in new initiatives through leadership, risk management, and a DevelopmentProperty thorough understanding of its market and business environment. Banking and and Tourism BankingFinancial Services Innovation SMIC maintains growth in its ongoin endeavors through strategic differentiation, operational agility and prudent incorporation of advanced technologies and methodologies. RetailRetail MerchandisingMerchandising Value SMIC sustains growth into the future through financial discretion, methodical expansion, and a relationship of responsibility and integrity towards its stakeholders. This is SM Investments Corporation. SMIC Master.indd 2-1 4/19/07 12:51:25 AM ...to a WORLD of possibilities. Shopping Malls Shopping Malls • Banking and Finance • Retail Merchandising • Real Estate Development and Tourism Retail Merchandising • Mall Operations • Banking • Property Vision Real Estate SMIC atains growth in new initiatives through leadership, risk management, and a Development Vision SM attainsthorough growth inunderstanding new initiatives of through its market thought and businessleadership, environment. risk management, Banking and and Tourism Financial and a thorough understanding of its market and business environment. Services Innovation SMIC maintains growth in its ongoinInnovation endeavors through strategic differentiation, SMoperational maintains growthagility and in its prudent ongoing incorporation endeavors throughof advanced strategic technologies differentiation, and operational agility and prudent methodologies.incorporation of advanced technologies and methodologies. Retail Merchandising Value SMIC sustains growth into the futureValue through financial discretion, methodical SMexpansion, sustains growthand a relationship into the future of responsibility through financial and integritydiscretion, towards methodical its stakeholders. expansion, and a relationship of responsibility and integrity towards its stakeholders. This is SM Investments Corporation. This is SM Investments Corporation. SMIC Master.indd 2-1 4/19/07 12:51:25 AM From Shopping... 2006 ANNUAL REPORT 20 HERE COME THE 60 UNMASKING A JEWEL cALLED FeatureS SUPERMARKETS AND HAMILO HYPERMARKETS SM showcases the Philippines’ The story behind the acquisition natural beauty with the development of SM Supermarkets and SM of Hamilo’s Pico de Loro Cove. Hypermarkets 36 BIG, BRIGHT, AND BEAUTIFUL Sm mALL OF AsIA It’s performed beyond expectations drawing millions of people every week. So, what makes SM Mall of Asia tick? 66 URBAN lIVING IN mEZZA Urban living comes to life in Mezza, SM’s rising condo buildings just 46 DANCING WITH BEARS, beside SM City Sta. Mesa. SWIMMING WITH SHARKS: m&A IN THE pHILIPPINES BY pETER HOFLICH, tHE AsIAN BANKER 68 SPECIAL FEATURE JOURNAL Mr. Sy has consistently seen After the much talked about merger viable and valuable opportunities of BDO and EPCIB, the story where others would have seen landed on the cover of The Asian the contrary. This and other traits Banker. which made him grow SM’s many businesses are featured in this story 56 ALL rOADS lEAD TO Sm that talks about his LegaSy. BAYCITY Read about a business district rising by the Manila Bay 74 SPOTLIGHT: vINCE pEREZ A Q&A with SM’s independent director Vince Perez 2006 ANNual REPORT SM Corporate Information Updated as of 1/11/2007 by SMIC (DND) Company Headquarters SM Investments Corporation SM Corporate Offices, Building A 1000 Bay Boulevard, SM BayCity, Pasay 1300 Investor Philippines Legal Counsel Andres Marcelo Padernal Guerrero & Paras Law Offices Pacis & Reyes Ponce Enrile Reyes & Manalastas (Pecabar) SyCip, Salazar, Hernandez and Gatmaitan Law Offices Villaraza & Angangco Law Offices SM INVESTMENTS INVESTMENTS SPECIAL ISSUE External Auditor INVESTMENTS SyCip, Gorres, Velayo & Co. CPAs CORPORATION Vision. www.sminvestments.com C Investor Bankers ORPORATION Annual Report 2006 Innovation. ABN AMRO Bank Value. Banco de Oro Universal Bank Bank of the Philippine Islands China Banking Corporation Citibank, N.A. RETAIL MERCHANDISING Investor Deutsch Bank, A.G. Equitable PCIBank Hongkong and Shanghai Bank The ING Bank, N.V. JP Morgan Chase Bank, N. A. SHOPPING MALLS Metropolitan Bank & Trust Company Annual Report 2006 Report Annual Standard Chartered Bank Makings Stockholder Inquiries SM moves to merge SM Investments Corporation common stock is listed and traded For decades, SM Investments Corporation has BANKING AND FINANCIAL SERVICES EXCLUSIVE in the Philippine Stock Exchange under the symbol ‘SM’. comprehensively met the needs of its market in BDO and EPCIB INTERVIEW retail merchandising, shopping malls, banking SM Independent Director and financial services, and real estate and tourism VINCE PEREZ Inquiries regarding dividend payments, account status, address development. And whether we’re building homes, All Roads Lead to SM BayCity of a New malls or businesses, we manage every endeavor changes, stock certificates, and other pertinent matters may be with the vision to identify opportunities; the Unmasking A Jewel innovation to make each project bigger, bolder, Big, Bright addressed to he company’s transfer agent: better; and a commitment to create value. REAL ESTATE DEVELOPMENT called HAMILO AND TOURISM and Beautiful: Lega-SY of Henry, Sr. SM Mall of Asia Stock Transfer Service, Inc. www.sminvestments.com Publication 8th Floor, Phinma Plaza SMIC Cover.indd 1 4/18/07 12:39:59 PM 39 Plaza Drive, Rockwell Center Makati City 1200 Philippines Tel. (632) 898.7555 Fax (632) 898.7597 lot of excitement went into re-designing our 2006 Annual Report. SEC Form 17-A There was a consensus among those involved that the standard The Financial information in this report, in the opinion of annual report format couldn’t quite capture the life, the color and Management, substantially conforms with the information required in the “17-A Report” submitted to the Securities and the dynamism within SM Investments and its many companies. Exchange Commission. Copies of this report may be obtained Consequently, we thought of adhering to the company’s innovative and free of charge upon written request addressed to the Office of the Corporate Secretary. Acreative approach to doing business, We thought of abandoning the old and ushering in the new: The INVESTOR, which adopts a real magazine look and feel to our Institutional Investor Inquiries SM Investments Corporation welcomes inquiries from analysts, annual report. the financial community, and institutional investors. Please This opened many avenues for creative expression for the group. It gave us the contact: freedom and inspiration to write some of the most interesting stories that transpired, SM Investments Corporation – Investor Relations Department SM Corporate Offices, Building A not just during the year, but also other stories and interviews that feature personalities 1000 Bay Boulevard who willingly gave their thoughts about SM, the way it has grown over time, and SM BayCity, Pasay 1300 Philippines the way it does business. The INVESTOR is also a showcase of events, places, and Tel.: (632) 831 1000 ext. 1157/1159 activities through many photographs bursting with life and color; it is a witnessing. Email: [email protected] More importantly, The INVESTOR is about transparency and going beyond Website: www.sminvestments.com mere reporting. It’s a complete discussion and a chronicle of the company’s 2006 The INVESTOR is produced by the Investor Relations performance and audited financial statements. The INVESTOR is our new paradigm Department of the SM Investments Corporation in annual reporting. Designed by: Studio 5 Designs, Inc. Photography: Wig Tysmans (for the Board of Directors photographs) Tonette Jacinto John Tronco ON tHE cOVER: In this issue, we salute the men and women steering the growth and development of SM Investments Corporation and its core subsidiaries: Lito Lopez Standing at the Central Entrance of the SM Mall of Asia (MOA), first row (left-right): ANNIE S. GARCIA President - Shopping Center Management Corporation JOSE T. SIO Executive Vice President/Chief Financial Officer - SM Investments Corporation Copyright © 2007 Under no circumstances shall The INVESTOR JORGE T. MENDIOLA Senior Vice President, Operations - Shoemart, Inc. content be copied or reproduced in any form without the NESTOR V. TAN President - Banco De Oro written permission of the publishers. back row (left-right): Printed in the Philippines JOSEFINO C. LUcaS Executive Vice President for Properties - SM Investments Corporation JEffrEY C. LIM Executive Vice President - SM Prime Holdings, Inc. GREgorY L. DOMINgo Executive Director - SM Investments Corporation SM INVESTOR Regulars 6 Message to Stockholders: A sharing of 24 Letters from Suppliers: Let’s hear what 52 Property toughts, vision, and directions from SM’s store suppliers have to say about dealing Expectations with Jess Lucas top three members of the Board to the with SM Executive Vice President for the property Company’s stakeholders group of SM talks of the various SM 28 Store locations projects and his group’s plans to unlock 8 President’s