SMDC Annual Report 2012

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2012ANNUAL REPORT

DEVELOPMENTCORPORATION

We Build to Serveor a Brighter Tomorrow


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For more than fty years, SM stood strong amidst the highs

and lows o the Philippine economy, successully branching

out rom a small shoe store into a wide range o services. Its

real estate developing arm, SM Development Corporation has

emerged as a ormidable player in the industry as it continues

to build homes that oer a personal and unique experience

and creates value by oering a better and much more

convenient liestyle at aordable prices.

With the Philippines now on a wave o sustained economicgrowth, SMDC will urther expand its product oerings to

continue to uplit the lives o Filipinos.

At SMDC, we build to serve or a brighter tomorrow.

We Build to Serveor a Brighter Tomorrow


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CHATEAU ELYSEEParaaque City

2003SEA RESIDENCES

Pasay City

2008LIGHT RESIDENCES

Mandaluyong City

2009

MEZZA RESIDENCESQuezon City

2006

SUN RESIDENCESQuezon City

2009

BREEZE RESIDENCESPasay City

2012

GRASS RESIDENCESQuezon City

2008

JAZZ RESIDENCESMakati City

2009

BERKELEY RESIDENCESQuezon City

2008

FIELD RESIDENCESParaaque City

2008

PRINCETON RESIDENCES

Quezon City

2009

GREEN RESIDENCESManila

2011

SHELL RESIDENCESPasay City

2011

ROSE RESIDENCESPasig City

2011

GRACE RESIDENCESTaguig City

2012

BLUE RESIDENCESQuezon City

2011

WIND RESIDENCES

Tagaytay City2009


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Our Mission

Ensuring that its homebuyers enjoy the best

value or their investment with an upscale

liestyle, best location, generous amenities,

and a sae, secure, and riendly neighborhood

yet aordable;

Providing an excellent ater-sales and

maintenance service that will preserve andenhance the long-term value o its residences;

Delivering sustainable long-term growth and

increasing shareholder value by exercising

prudence in resource management based

on the principles o good corporate

governance and good planning;

Becoming an employer o choice, oering

comprehensive opportunities or career

growth and enhancement, perormance

reward and incentives; and,

Assisting and nurturing the communities in

which it operates by progressively building

on its role as a responsible corporate

citizen.

Core ValuesV IS ION L EADERSH IP INNOVAT ION FOCUS HARD WORK IN T EGR I TY PRUDENCE

Our Vision

We envision SM Development Corporation to be a leading developer of world-class

residences in the Philippines, uplifting Filipino lifestyles into one that is convenient,upscale yet aordable, and environment-riendly.

DEVELOPMENTCORPORATION

SM Development Corporation will realize its vision by:


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2 SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012

Banking

04 Chairmans Message

06 Chief Executive Ofcers Report

08 Year in Review

10 2013 New Projects

12 Corporate Social Responsibility

TABLE OF CONTENTS

08


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3SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012

13 FACES - Board of Directors

15 Executive Ofcers

16 Corporate Governance

20 Corporate Inormation

21 Financial Statements

10

15


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HENRY SY, SR.Chairman

HENRY SY, JR.Vice Chairman

TERESITA SY-COSON

Vice Chairperson

M E S S A G E T O S T O C K H O L D E R S

IN 2012,SM DEVELOPMENT

CORPORATION

REPORTED EXCELLENT

GROWTH IN SALES AND

INCOME WHICH REINFORCED

ITS POSITION AS A MAJOR

PLAYER IN THE INDUSTRY.

Given the markets keen interest amid a booming economy,

SMDC saw real estate revenues surge 33% in the past year to

Php21.6 billion, which helped push net income higher by 18% to

Php4.9 billion.

Ourresidenalprojectsconnuedtoenjoybrisktake-upwith

thevalueofpre-soldunitsgrowingby21% toPhp31.7billion.

Bytheendof2012,SMDChad15ongoingresidenalprojectsin

QuezonCity,Paranaque,Manila,Maka,Pasay,Pasig,Taguigin

theMetroManilaareaandoneinTagaytayCity.

In 2013, SMDC plans to launch new and expand exisng

projectstomeetrisingdemandinMetroManila.Wehavebeen

increasing our capital expenditure budget to support the needs

ofagrowingmarketandtobroadenourlandbankfurther.Witha strong economy that equalizes the market, we are constantly

strivingtoposionourselvesattheforefrontofthemarketsever-

evolvingneeds. SMDCwillconnue tofocuson thepremium

mid-rangemarket due to its size and inherent strength while

remainingonthelookoutforsignicanttrendsinothermarket

niches.Wewillconnuetoinnovateondesignsandconceptsin

ourprojectsasweconstantlyaimtofulllaspiraons,improve

lifestyles and promote environmental sustainability.

Finally, I would like to thank our SMDC team for the companys

remarkable growth and for the support of the members of the

Board and senior management. I also express my thanks to

our contractors, consultants, our investors and creditors who

connuetohelpSMDCachieveandexceeditstargets.Mostofall,

IwouldliketothankourresidentsfortheircondenceinSMDC.Webuildtoserveyou.

HENRY SY, SR.Chairman


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C H I E F E X E C U T I V E O F F I C E R S R E P O R T

I AM VERY PLEASED TO REPORT THAT2012 WAS ANOTHER LANDMARK

YEAR FOR SM DEVELOPMENTCORPORATION.

Not only did it deliver strong results but it also maintained

itsdominantposioninthePhilippineresidenaldevelopment

businessaeritrankedasthetopsellingresidenalcondominium

developer in Metro Manila with a market share of 23% according

toColliersInternaonalPhilippines.Ournancialperformance

connuedtoberobustaerwepostedconsolidatednetincome

growth of 18% to Php4.9 billion. Revenues from real estate sales

rose sharply 33% to Php21.6 billion, from Php16.2 billion in the

previousyear.Earningsbeforeinterest,taxes,depreciaonand

amorzaonamountedtoPhp5.6billion.ThesenumbersrearmourbeliefthatthePhilippineshasahugeunderservedresidenal

marketthataspiresforaordablehomes,abeerlifestyle,and

theconveniencesofstrategically-locatedresidences.

Notably, SMDCs asset base expanded 49% to Php80.2

billion.AsofDecember2012,netdebttoequityraoremained

conservaveataraoof29%netdebtto71%equityasweagain

adopted prudence to guard the company against cyclical risks

inherent to the real estate business.

Beyond prudence, and a good business model, SMDCs

projectsenjoyedthemarketsstrongsupportasthenumberof

units sold during the year increased 8% to 12,614 units from

11,726unitsin2011.Pre-salesincreased21%toPhp31.7billion

in 2012, from Php26.3 billion in the previous year, which exceeded

ourtargets. Thesustainedstronginterestof numerous home

buyersinSMDCsvariousresidenalcondominiumprojectswas

matchedbya freshsupplyofaracveprojects.Wearermly

commied toaddress the needsand aspiraons of a market

that is likely to grow even further with the improvement in the

economymarked by growingOFWremiancesand improved

consumerandinvestorcondence.

Most of the units sold during the year were from Shell

Residences in the Mall of Asia Complex, Green Residences along

TaAvenue,Jazz ResidencesinMaka,LightResidencesalong

EDSA, Sun Residences in Quezon City, Grass Residences, also in

QuezonCity,andWindResidencesinTagaytayCity.Bytheendof

theyear,SMDChad15ongoingresidenalcondominiumprojects

alloverMetroManila,withtheexceponofWindResidencesin

Tagaytay.Wealsolaunchedin2012GraceResidencesinTaguig,

our newest suburban sanctuary which consists of four towers and

is strategically located near three of the countrys lifestyle and

business districts.

Your company also launched Breeze Residences in Pasay City,

whichisa38-storeydevelopmentthatisveryneartheSMMallofAsia,andtheCulturalCenterofthePhilippines.Wehavealso

expandedJazz Residencesin Maka,Wind Residences, andM

[email protected]

6,878unitstooursalesinventory.Withthesenewandexpansion

projects,SMDCaimsto strengthenitsposion inthepremium

mid-range market and rearm its commitment to provide

Filipinohomebuyerswithstrategicallylocated,high-qualitybut

aordablehomes.

For2013,weplantolaunchfournewprojectsandexpand

three exisng developments in Metro Manila. The current

economic expansion that can lead to higher savings and

disposable incomes anda greaterneed fora beerqualityof

lifeshouldconnue tounderpindemandforprojects inprime

locaons. Moving forward, we will endeavor to build more

homes that will provide comfort and a balanced environment for

ourcommunies.

Asweremainopmisconourgrowthprospectsfor2013,

we thank you our shareholders, investors, contractors, employees

and most of all our residents for your support.

HENRY T. SY, JR.Vice Chairman andChiefExecuveOcer

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2011in Php Billion

2011in Php Billion

2012in Php Billion

2012in Php Billion

Total Assets53.92Total Liabilities18.52Stockholders Equity35.41

Total Assets80.20Total Liabilities40.06Stockholders Equity40.14

Revenues from Real Estate16.18

Consolidated Net Income4.18

EBITDA4.91

Revenues from Real Estate21.58

Consolidated Net Income4.90

EBITDA5.62

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Year in Review

Wearegraedbythemarketscondenceinourprojectsthisyear.ThisisatestamenttotheconnuingresonanceinthemarketofSMDCsvalueproposionofoeringhomesthatarenotonlystrategicallylocatedandofhigh-quality,butarealsoaordablewhichaccordingtoaColliersInternaonalPhilippinessurveyrepresentsthelargestmarketshareinMetroManilaat23%asofend-2012.

HENRY T. SY, JR.Vice Chairman and

ChiefExecuveOcer

EFREN L. TANVice President, Sales

JOSE T. GABIONZAVice President

Business Development

GEMA O. CHENGChiefFinanceOcer


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SMDevelopmentCorporaon(SMDC)connuedtodominatethe

residenalcondominiummarketin2012.Homebuyerswarmly

receivedthecompanysoeringsasreectedbythestrongtake-

upofSMDCsprojects.Pre-salesfor2012rose21%toPhp31.7

billion from Php26.3 billion in the previous year.

Wearegraedbythemarketscondenceinourprojectsthis

year.Thisisatestamenttotheconnuingresonanceinthe

marketofSMDCsvalueproposionofoeringhomesthatare

notonlystrategicallylocatedandofhigh-quality,butarealso

aordablewhichaccordingtoaColliersInternaonalPhilippines

survey represents the largest market share in Metro Manila at

23%asofend-2012.

As proof of the markets support, the number of units sold during

theyearincreased8%to12,614unitsfrom11,726unitsin2011.

Bytheendoftheyear,SMDChad15ongoingresidenal

condominiumprojectsinMetroManilaincludingoneprojectin

Tagaytay.NewoeringsinTaguigandPasaywerealsolaunchedinthelaerpartof2012.Construconremainedontrackfor2012

giventherateofcompleonsforeachproject.

Wearealsokeenlyawareofthevalueproposionsoflocaons

weoerforeachdevelopment.SMDCdevelopedBlue

ResidencesatthecornerofKapunanAvenueandAurora

Boulevard.Thesingle-towerproject,whichsitsrightbeside

AteneodeManilaUniversityandMiriamCollege,spans57,013

squaremeters(sqm)ingrossoorarea(GFA)andwas68%

completedatyear-end.Take-upofBlueResidenceshasbeen

strong,with76%or1,217unitssold.

Behind SM City North EDSA is Grass Residences with a GFA of

205,335sqm.Oftheprojectsthreetowers,Tower1hadbeen

completed,whileTowers2and3wereparallycompletedat64%and98%,respecvely,asofyear-end.Take-uphadbeenvery

strongwith97%oftheprojectstotal5,997unitssold.

LightResidencesiscentrallylocatedinEDSA-Mandaluyongand

directlylinkedtotheMetroRailTransitstaon.WithaGFAof

148,281sqm,itsTower1was92%complete,whileTowers2and

3wereat56%and73%compleon,respecvely.Lightenjoyed

healthymarketappetewith91%oftotal4,227unitssold.

Aerthesuccessofourveryrsthighriseresidenal

condominium development Mezza Residences, comes Mezza II

Residences, located along Aurora Boulevard. Mezza II Residences

soars 40 storeys high providing a sweeping view of Metro Manila.

Asingle-towerstructurewithaGFAof49,038sqm,MezzaIIwas

at37%compleonattheendofyear.MezzaIIalsoenjoyedbrisk

take-upwith53%ofits1,324unitssold.

Inaddiontotheseprojects,whichareundertheSMResidences

brand, SMDCs M Place brand caters to a younger market and

oersevengreateraordability.MPlace@SouthTriangle,

itslatestoering,hasagrossoorareaof108,731sqm,and

consistsoffourtowers.Asofyear-end,Towers1,2,3,and4were

at91%,84%,48%,and37%compleon,respecvely.MPlace@

SouthTrianglehassold2,289or67%ofthe3,437unitsthatwere

launched for sale.

In Manila, we built Sun Residences, which is situated at the

gateway of Manila and Quezon City with a GFA of 139,243 sqm.

ItsTowers1and2wereat91%and75%compleonattheend

oftheyear.Outofits4,039unitslaunchedforsale,3,132or78%

had been sold.

Green Residences, with a GFA of 102,468 sqm, is located along

TaAvenueconvenientlybesideDeLaSalleUniversityManila.

Startedinlate2011,theprojectwas18%completedasofyear-

end.Asoftheendoftheyear,ithassold2,700unitsor80%ofits

3,378total.

SeaResidences,ontheotherhand,isamoderntropical-inspired

mid-risecondominiumlocatedrightattheheartoftheMallof

AsiaComplex,withaGFAof117,299sqm.Theprojectsbuildings

wereallcompletedatyear-end.Some95%oftheprojectstotal

2,899 units had been sold.

ShellResidences,SMDCssecondprojectintheMallofAsia

complexaerSeaResidences,hasatotalGFAof127,587sqmandwillbecomposedoffourmid-risebuildings.Atotalof86%or

2,668unitsoftheprojects3,093totalunitshadbeensold.

SMDCalsodevelopedprojectsulizingitsextensivelandbank

inPasig,MakaandParanaque.LocatedalongMeralcoAvenue,

inOrgasCenterinPasigisSMDCsRoseResidencesspanning

40,942sqminGFA.Construconofthesingle-towerRose

Residencesonlycommencedlatelastyearbuttheprojecthas

alreadysold41%ofits1,172totalunits.

JazzResidences,isalsoveryclosetotheMakaBusinessDistrict

andhasaGFAof208,968sqm.Atyear-end,TowerAofthe

projectwas93%complete,whileitsTowersB,C,andDwereat

54%,72%,and52%compleon,respecvely.Ithassold72%or

3,861unitsofits5,367total.

ForFieldResidencesinParanaque,atotalof1,748unitswere

sold,represenng89%oftheprojects1,974unitslaunchedfor

sale.Onfullcompleon,FieldResidenceswillhavetentowers

with a total GFA of 162,929 sqm. As of the end of December

2012,Towers1,2,3,and8werefullycompleted,whileTower7

was 65% complete.

SMDCsrstforayoutsideofMetroManilaisthroughWind

ResidencesinTagaytayCity,oneofthemostpopulartourist

desnaonsinthePhilippines.WindResidenceswillhaveten

towersuponfullcompleon,withatotalGFAof372,201sqm.As

ofDecember2012,Tower1wasat95%compleon,whileTowers

2 and 3 were 96% and 61% complete. Approximately 86% of the

projects2,874unitshadbeensold.

Asthemarketsappetefornewproductoeringsremainrobust,

SMDCwillposionitselftotakeadvantageofopportuniesto

uplithelifestylesofFilipinosandcreatemorevaluewithinthe

communiesitserves.


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Takingofromthesuccessofitsongoingprojects,SMDC

rolledouttwonewresidenalcondominiumprojectsand

expandedthreeofitsexisngdevelopments.

Theseprojects,liketheirpredecessors,willprovideresidentswith the unique mix of architectural excellence, comfort,

convenience,andsafetyforwhichSMDCisknownfor.These

projectswilloeratotalof6,878newunitsforsale.

OurvisionistoconnuetoenrichtheFilipinolifestyle

throughourdevelopments.Asweremaincommiedtothis

vision,wehopethemarketwillconnuetowelcomeournew

productoerings.

OneofthecompanysnewestoeringsisGraceResidences.

Afour-tower,3,560-unitdevelopment,GraceResidenceswill

rise on a 2.6 hectare property along Cayetano Boulevard in

TaguigCity,strategicallylocatednearthreeofthecountrys

premierlifestyleandbusinesscenters--BonifacioGlobalCity,

theOrgasCenterandtheMakaCentralBusinessDistrict.Withagrossoorarea(GFA)ofabout170,000squaremeters

(sqm),GraceResidenceswillconsistofa12-storeytowerand

three20-storeytowers.

ResidentswillenjoyGraceResidencesgenerousamenies,

whichincludeabasketballcourt,swimmingpools(adultand

kiddie),ajoggingpath,andachildrensplaygroundamong

others. Grace Residences will feature gardens providing a

relaxing contrast to the hustle and bustle of the surrounding

area.Beyonditsrecreaonalameniesandlandscaped

gardens,GraceResidenceswilloerconveniencewithinits

connes--retailestablishments,includingaSaveMorestore,

will be housed in one of the towers to service its residents

andthoseofnearbycommunies.

Unittypesavailableare1-bedroomunitswithabalcony,with

sizesrangingbetween27sqmand31sqm.Construconis

settobegininthelaerpartof2013andturnoveroftherst

two towers is slated for 2016.

AnotherexcingoeringisBreezeResidences.Breeze

Residencesisa38-storeydevelopmentthatwillstandona

6,028 sqm property along Roxas Boulevard, within easy reach

ofshopping,dining,andentertainmentdesnaonssuchas

the Mall of Asia Complex and Star City. It also provides access

to arts and culture hubs such as the Cultural Center of the

A Snapshot of SMDCsNewProjects

PhilippinesandtheMuseoPambata;andgovernmentoces

such as the Senate and the Bangko Sentral ng Pilipinas.

WithaGFAofapproximately111,000sqm,BreezeResidences

willhave2,134residenalunits,consisngofstudioandone

bedroom units with sizes ranging from 21 sqm to 42 sqm,

whicharedesignedtocapitalizeonmagnicentviewsofboth

ManilaBayandtheMakacityscape.

Masterplanned to suit the needs and lifestyles of single young

professionalsandstarngfamilies,theameniesofBreeze

Residences include a grand lobby, adult pools, a kiddie pool,

landscaped gardens with gazebos, poolside lounge areas, a

childrensplaygroundandaSkyLoungeatthepenthouse,

where residents can unwind over panoramic views of Manila

Bay or the Manila skyline.

ShoppingfordailyessenalswillalsobeconvenientasBreeze

Residences will have a commercial area complete with a

SaveMorestore,onitsgroundoor.Construconisscheduled

formid-2013whileturnoverissetforlate2016.

InaddiontoGraceResidencesandBreezeResidences,SMDC

expandedthreeofitsexisngdevelopments,namely,Jazz

ResidencesinMaka,WindResidencesinTagaytay,andMPlace

@SouthTriangleinQuezonCity.

Theseexpansionprojectswillprovideatotalof3,395units

ofnewinventory.JazzResidences40-storeyTowerBwill

oer1,749addionalunits;the22-storeyTower4atWind

Residenceswillfeature726units;andthe27-storeyTowerD

[email protected]

expansiontoweratWindResidences,whichisexpectedtobe

completedin2016,thetwootherexpansionprojectsareslated

forcompleonin2015.

Withthelaunchofitsnewandexpansionprojectsin2012,

SMDCrearmsitscommitmenttoprovideFilipinohomebuyers

withstrategicallylocated,high-qualitybutaordablehomes,

both in the near term and for years to come.

NEW PROJECTS

Grace Residences Lobby


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OurvisionistoconnuetoenrichtheFilipinolifestylethroughourdevelopments.Asweremaincommiedtothis

vision,wehopethemarketwillconnuetowelcomeournew

productoerings.

Grace Residences

Grace Residences

Breeze Residences


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A Note fromSMFoundaon

SMFoundaonremainedsteadfastinreachingouttomorebeneciariesin2012throughits

advocaciesineducaon,healthandlivelihood.Theseadvocaciesconnuedtoshowsignicant

progress, backed by the fervent support ofSM and its subsidiaries and various donor

instuonsandindividuals.

Tosupportitseducaonadvocacy,SMFoundaonemployedatwo-prongedapproach--providecollegescholarshipstogivequalityeducaontothenancially-challengedyouthanddonateschool buildings to help address the classroom shortage in thecountry.Throughitsscholarshipprogram,SMFoundaonwasabletoproduceasignicantnumberofexceponalgraduates

whoreceivedLanhonorsandacademicdisncons.Manyofthegraduangscholarswhotookgovernmentboardexamshavealso landed on the top ten.

In2012,therewere1,200SMFoundaoncollegescholarsenrolledinvariouscourses.Therewere164collegegraduates,with76ofthemearninghonors.Todate,SMFoundaonhashelped 1,500 students graduate through its scholarship programwhich paved the way for employment both here and abroad.Addingtothisnumberwere93technical-vocaonalscholarsthatgraduated last year.

SMFoundaonalsodonatedtennewschoolbuildingsin2012topublicschoolsinMetroManila(NavotasCity),Cavite,Cagayande Oro, Quezon, and Pampanga. Combined, these school housesprovided 26 new classrooms. Some of these school buildingsweredonatedinpartnershipwithSMDevelopmentCorporaon,

SMPrimeHoldings,BDOFoundaonandDeutscheBank.Toenhancepublichealthamongindigentcommunies,SMFoundaonconducted85medicalmissionsin2012whichsurpasseditstargetfortheyear.Thesedirectlyservedover89,000beneciariesin2012.Sincetheprojectsbeginningsin2001,totalmedicalmissionsamountedto739,reachingatotalof600,203beneciaries.SMFoundaonsVirtualBloodBankprojectalsogarneredtheJoseRizalAward,thehighestrecogniongiventoanorganizaonbythePhilippineBloodCenter(PBC)oftheDepartmentofHealth(DOH).TheVirtualBloodBankistherstofitskindinthecountry.Thebloodcollected from employees is banked with the PBC and is availablefor SM employees and their families. Excess supply was donatedtovicmsoftheDengueoutbreakin2011and2012.

UnderitsFelicidadT.SyWellnessCentersprogram,SMFoundaonhaslikewiserefurbishedatotalofeightrundownpublichealthcentersbringingto77thetotalnumberofcentersthatwererestoredsincethestartoftheproject.Withregardtotrainingonsourcesoflivelihood,SM

Foundaon,throughtheKabalikatsaKabuhayanprogramprovidesfarmerswithtrainingoneecvewaysofproducinghighyieldingfruitsandvegetables.Throughthisundertaking,trainings to farmers in 10 provinces were provided, covering175barangaysand42municipalies.SM,inturn,supportsthefarmers by providing a market for their produce through thegroupsretailchains.SMFoundaontrainedatotalof1,245farmersbringingthetotaloffarmerbeneciariesto5,421sincetheprojectsincepon.

Notably,SMFoundaonconnuedtosupportcommunitydevelopmentiniavesinSMsagshipeco-tourismdevelopmentinNasugbu,Batangas.Iniavesaregearedtowardsskillstraining,mangroveplanngandlivestockraisingand dispersal.

SMFoundaonwasalsoquicktorespondtocalamityvicms

throughOperaonTulongExpress.WhentheSouthwestMonsoondisasterstruckinAugust2012,SMFoundaondistributedkalingapacksthatbeneedatotalof54,200families.IncooperaonwithSMCaresandSMFoodGroupandtheDepartmentofSocialWelfareandDevelopment,wealso distributed relief goods to 6,600 families in Compostela,New Bataan, Montevista and Moncayo in the province ofCompostelaValleyintheaermathofTyphoonPablo.Inaddion,theSMGroupofCompaniesdonatedPhp10millionto the Philippine Red Cross for the rebuilding of some ofthe 40,000 homes that were destroyed during the typhoon,purchaseoffoodandmedicinesforthevicmsandfortheprovision of a livelihood program.

TheseaccomplishmentswerearesultofthehardworkanddedicaonoftheteambehindSMFoundaon.Throughresolute partnerships with both the private and public sectors,

SMFoundaonwillconnuetocarryoutitsadvocaciestoservemorecommunies.

CORPORATE SOCIAL RESPONSIBILITY


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BOARD OF DIRECTORS

FACESMR. HENRY SY, SR.Chairman of the BoardMr.HenrySy,Sr.isthefounderof the SM Group of Companiesand the Chairman of SMInvestmentsCorporaon,SMPrimeHoldings,Inc.,SMLand,Inc.(formerlyShoemart,Inc.)andHighlandsPrime,Inc.HefoundedandopenedtherstShoemartstorein1958, which has evolved

into a dynamic group ofcompanieswithvelinesofbusinessesretail, shoppingmalls,nancialservicesandreal estate development,hotelsandconvenons.Mr.Sylikewise serves as the ChairmanEmeritus of BDO Unibank, Inc.andHonoraryChairmanofChinaBankingCorporaon.

MR. HENRY T. SY, JR.Vice Chairman and ChiefExecuveOcer

Mr.HenryT.Sy,Jr.graduatedwithaManagementdegreefromDeLaSalleUniversity.HeisresponsiblefortherealestateacquisionsanddevelopmentacviesofSM

Land,Inc.andSMDevelopmentCorporaonwhichincludetheidencaon,evaluaonandnegoaonforpotenalsiteaswell as the input of design ideas.HeservesasViceChairmanofSMInvestmentsCorporaon,ViceChairman and President of SMLand,Inc.andHighlandsPrime,Inc., and Director of SM PrimeHoldings,Inc.andBDOUnibank,Inc.HeisalsotheChairmanofPicoDeLoroBeachandCountryClub, Inc. and President of theNaonalGridCorporaonofthePhilippines.

MS. LEONORA V. DE JESUS*Independent Director

Ms.LeonoraV.DeJesusgraduatedfromthe University of the Philippines CumLaudewithadegreeofA.B.Psychology.She has a Master of Arts and a Ph.D. bothin Psychology from the University of thePhilippines.Ms.DeJesuslikewiseservesasIndependentDirectorofBDOLeasingandFinance, Inc., BDO Capital and InvestmentCorporaonandBDOEliteSavingsBank,Inc. She is also a S enior Consultant at theUrban and Social Development PhilippinesandaProfessorialLecturerattheUniversityof the Philippines in Diliman, Quezon City.

MS. ELIZABETH T. SYDirector

Ms.ElizabethT.SyprimarilyoverseestheSM Groups increasing involvement in thetourism and hospitality industry sector.She serves as Director of SM DevelopmentCorporaon,SMLand,Inc.andBDOPrivate Bank. Ms. Sy is also the PresidentofSMHotelsandConvenonsCorporaon,Adviser to the Board of SM Investments

Corporaon,SeniorVicePresidentforMarkengofSMPrimeHoldings,Inc.,VicePresidentofSMCommercialProperes,Inc.andCo-ChairmanofPicoDeLoroBeach and Country Club.


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ATTY. RICARDO J. ROMULO*Independent Director

Ay.RicardoJ.RomuloisaSeniorPartnerof Romulo Mabanta Buenaventura Sayoc &DeLosAngelesLawFirm.Currently,Ay.RomuloisalsoadirectorofBenecial-PNBLifeAssuranceCo.,Inc.,GouldsPumps(Phils.),Inc.,HondaPhilippines,Inc.,Johnson&Johnson(Phils.),Inc.,KraFoods(Phils.),Inc.,Maersk-Filipinas,Inc.,Phil.AmericanLife&General Insurance Co., Planters DevelopmentBankandZuelligPharmaCorporaon.Helikewise serves as Director and Chairman ofCebuAir,Inc.,DigitalTelecommunicaons,Inc., Federal Phoenix Assurance Co., Inc.,InterphilLaboratories,Inc.andManchesterInternaonalHoldingsUnlimitedCorp.

MR. JOSE T. SIOAdviser to the Board

Mr.JoseT.SioistheExecuveVicePresidentandChiefFinanceOcerofSMInvestmentsCorporaon.Heis also a Director of China BankingCorporaon,BelleCorporaon,SMKeppelLand,Inc.,ManilaNorthTollwaysCorporaon,andAtlas Consolidated Mining andDevelopmentCorporaonaswellas other companies within the SMGroup. Mr. Sio is also Adviser to the

Board of Directors of BDO Unibank,Inc. Mr. Sio holds a masters degreeinBusinessAdministraonfromNewYorkUniversity,isaceredpublicaccountant and was formerly a seniorpartneratSycipGorresVelayo&Co.(amemberpracceofErnst&Young).

MR. OCTAVIO V. ESPIRITU*Independent Director

Mr.OctavioV.Espirituisathree-termformerPresidentoftheBankersAssociaonofthePhilippines(BAP),formerPresidentandChiefExecuveOcerofFarEastBankandTrustCompany,andformerChairmanoftheBoardofTrusteesofAteneoDeManilaUniversity.HeisalsotheChairmanandPresidentofMAROVHoldingCompany,Inc. and Chairman of Delphi Group, Inc.

Mr. Espiritu likewise serves as I ndependentDirector of the Bank of the PhilippineIslands,DigitalTelecommunicaonsPhilippines,Inc.,InternaonalContainerTerminalServices,Inc.,Netvoice,Inc.andPueblo de Oro Golf and Country Club.

Audit and Risk Management Commiee

Octavio V. Espiritu Chairman, Independent

Director

HenryT.Sy,Jr. Member

Ay.RicardoJ.Romulo Member,Independent

Director

JoseT.Sio Member

Ay.CorazonI.Morando Member

LuisY.Benitez Member

Nominaon CommieeAy.RicardoJ.Romulo Chairman,Independent

Director

BOARD COMMITTEES


LeonoraV.DeJesus Member,IndependentDirector

ElizabethT.Sy Member

Compensaon and Remuneraon

Rosaline Y. Qua Chairman

Octavio V. Espiritu Member, Independent Director

LeonoraV.DeJesus Member,IndependentDirector

Execuve Commiee

HenrySy,Sr. Chairman


Rosaline Y. Qua Member

Octavio V. Espiritu Member, Independent

Director

TeresitaSy-Coson Member

HarleyT.Sy Member

Corporate Informaon Ocers

Jose T. Gabionza Corporate Informaon

Ocer

Rosaline Y. Qua Alternate Corporate

InformaonOcer

* Independent director the Company has complied with the Guidelinesset forth by SRC Rule 38, as amended, regarding the Nominaon andElecon of Independent Director. The Companys By-Laws incorporate the

procedures for the nominaon and elecon of independent director/s inaccordance with the requirements of the said Rule.

MS. TERESITA SY-COSONAdviser to the Board

Ms.TeresitaSy-CosonistheViceChairperson of SM InvestmentsCorporaon.Shehasvariedexperiencesin retail merchandising, malldevelopment and banking businesses.AgraduateofAssumponCollege,shewasacvelyinvolvedinShoemartsdevelopment. At present, she is theChairman of the Board of Directors ofBDO Unibank, Inc. She also holds boardposionsinseveralcompanieswithinthe SM Group.


18/61


EXECUTIVE OFFICERS

FACES

GEMA O. CHENG ChiefFinanceOcer

JOSE T. GABIONZA Vice President, Business Development

ATTY. EPITACIO B. BORCELIS, JR. Assistant Corporate Secretary

HENRY T. SY, JR.ViceChairmanandChiefExecuveOcer

ATTY. EMMANUEL C. PARAS Corporate Secretary

EFREN L. TAN Vice President, Sales


19/61


CORPORATE GOVERNANCE

Policies

SMDCsplaormofgovernanceisrootedinits

Manual on Corporate Governance and Code of

Ethics.Tofocusonspecicissuesandconcerns,

the Company has adopted and implemented

several corporate governance policies and

programs which support the Manual and Code.

SMDC regularly reviews and enhances these

policies to keep pace with corporate governance

bestpracce.

Manual on Corporate Governance

TheManualonCorporateGovernance

instuonalizestheprinciplesofgoodcorporate

governance,denestheCompanyscompliance

systemandidenestheresponsibiliesofthe

BoardofDirectorsinrelaontogoodcorporate

governance. It also states the Companys policieson disclosure and transparency, and mandates

theconductofcommunicaonandtraining

programsoncorporategovernance.TheManual

further provides for the rights of all shareholders

andtheproteconoftheinterestsofminority

stockholders.Itlikewisesetsthepenalesfor

non-compliancewiththeManual.

TherehavebeennodeviaonsfromtheManual

sinceitwasadopted.InJanuary2012,SMDC

submiedtotheSECitscercaonoffull

compliancewiththeManual,conrmingthatits

directors,ocersandemployeeshaveadopted

andfullycompliedwithallleadingpracces

and principles of good corporate governance

as provided for in the Manual on Corporate

Governance.(ToaccessthefullManualon

Corporate Governance, you may visit SMDCs

websiteatwww.smdevelopment.com)

Code of Ethics

TheCodeofEthicsrearmstheCompanys

commitment to the highest standards of ethics

and good corporate governance in the pursuit

of SMDCs mission and vision to serve the best

interestsofitsstakeholders.TheCodealsosets

SMDevelopmentCorporaonconnuestofoster

its culture of good corporate governance by

enhancingitslong-standing,governance-related

policies and programs and introducing new

iniavesbasedonglobalbestpracce.

daysbeforeandtwo(2)tradingdaysaerthe

disclosureofquarterlyandannualnancialresultsandanyothermaterialinformaon.To

ensure compliance with the policy, SMDC issues

reminderstoeveryoneintheorganizaonbefore

thereleaseofnancialreportsandthedisclosure

ofmaterialinformaon.

Related Party Transacons

SMDC discloses in detail, the nature, extent and

allothermaterialinformaonontransacons

withrelatedparesintheCompanysnancial

statements and quarterly and annual reports

totheSecuriesandExchangeCommission

(SEC)andPhilippineStockExchange(PSE).

Management regularly presents the details of

transaconsenteredintobytheCompanywith

relatedparesatthemeengsoftheAuditand

RiskManagementCommiee.Thisistoensure

thatSMDCconductsallrelated-partytransacons

on arms length basis.

Board of Directors

SMDCs Board of Directors ensures that the core

principles of corporate governance are observed

throughouttheorganizaon.ItistheBoards

responsibilitytoensurethelongtermnancialsuccess of the business in a manner that upholds

the principles of fairness, accountability and

transparency, and ensures that the best interests

of Company, its shareholders and various

stakeholders are adequately promoted and

protected.

Board Composion

TheBoardofDirectorsiscomposedof

seven(7)directors,three(3)ofwhomare

non-execuveindependentdirectors.As

provided for by SMDCs Manual on Corporate

Governance, an independent director must

possessallofthequalicaons,andnoneofthe

disqualicaons,ofaregulardirector.Hemust

alsobeindependentofManagement,substanal

shareholdingsandmaterialrelaons,whetherit

be business or otherwise, which could reasonably

be perceived to impede the performance of

independentjudgment.Furthermore,none

of SMDCs independent directors have served

theCompanyasaregulardirector,oceror

employee.

TheposionsoftheChairmanoftheBoardand

the President are held by separate individuals.

guidelinesfortheCompanysdirectors,ocers

andemployeesintheperformanceoftheirdues

andresponsibilies,andthemannerbywhich

they deal with investors, creditors, customers,

contractors, suppliers, regulators and the public.

TheCodestressestheimportanceofintegrity

intherelaonshipsanddealingswithbusiness

partners,theCompanysduesregarding

employee welfare, the rights of shareholders, the

proteconofCompanyinformaonassetsand

thepromoonofcorporatesocialresponsibility.

Guidelines on Acceptance of Gis

SMDCsdirectors,ocersandemployeesare

prohibitedfromsolicingoraccepnggisin

anyformfromanybusinesspartner.Theterm

gicoversanythingofvalue,suchasbutnot

limitedtocashorcashequivalent.Theguidelines

provideexceponssuchascorporategive-aways,tokensorpromoonalitemsofnominalvalue.

Whenitisdeemedimpropertorefuseagi,

the issue is elevated to Management for proper

disposion.

In the same manner, travel sponsored by

anycurrentorprospecvebusinesspartner

isprohibitedundertheGuidelinesonTravel

Sponsored by Business Partners.

Policy on Accountability, Integrity and Vigilance

Awhistleblowerpolicyhasbeeniniatedand

named, the Policy on Accountability, Integrity

andVigilance(PAIV).Itwasadoptedtocreate

an environment where concerns and issues may

be raised in good faith, and processed within the

organizaon.

Insider Trading Policy

Directors,ocersandemployeeswhohave

accesstomaterial,condenalandstock

price-sensiveinformaon(i.e.,informaonon

businesstransaconsthathavenotyetbeen

disclosedtothepublic)areprohibitedfrom

tradingtheCompanysshares,ve(5)trading


20/61


RegularDirectors Regular &Organizaonal Regular Regular Percentage

2/21/12 4/25/12 7/31/12 11/06/12

HenrySy,Sr. 100%

HenryT.Sy,Jr. 100%

RosalineY.Qua 100%

OctavioV.Espiritu 100%

RicardoJ.Romulo X 75%

ElizabethT.Sy X 75%

LeonoraV.DeJesus 100%

Audit and RiskManagementCommiee

Octavio V. Espiritu Chairman

(IndependentDirector)

RicardoJ.Romulo Member


JoseT.Sio Member

Corazon I. Morando Member

LuisY.Benitez Member

Theirfunconsandresponsibiliesareclearly

denedintheManualonCorporateGovernance.

ItistheCompanyspraccethatitsnon-execuve

directors meet at least once a year, without

thepresenceofanyexecuvedirectorsor

representavesofManagement.

BoardAendance

RegularmeengsoftheBoardareheld

quarterly,butspecialmeengsmaybecalled

by the Chairman, the President or Corporate

Secretaryattherequestofanytwo(2)directors.

Adirectorsabsenceornon-parcipaon

for whatever reason in more than 50% of all

meengs,bothregularandspecial,inayearis

agroundfortemporarydisqualicaoninthe

succeedingelecon.

BoardCommiees

Toaidinitscorporategovernancefuncons,the

Boardestablishedthree(3)commiees,namely

theNominaonCommiee,theCompensaon

andRemuneraonCommieeandtheAuditand

RiskManagementCommiee.Eachcommiee

hasadoptedaCharterwhichdenesits

composion,rolesandresponsibiliesbasedon

the provisions found in the Manual on Corporate

Governance.

TheNominaonCommiee

TheNominaonCommieereviewsand

evaluatesthequalicaonsofallcandidates

nominated to the Board of Directors, and those

nominatedtoposionsthatrequireBoard

approvalundertheCompanysBy-Laws.The

Commieeensuresthatthosenominatedtothe

Board meet the requirements set forth by the

Manual on Corporate Governance. Furthermore,

theCommieefacilitatestheannualperformance

evaluaonoftheBoardasawhole,itsrespecve

BoardCommiees,theindividualdirectorsand

thePresident.TheNominaonCommieeis

composedofthree(3)members,two(2)ofwhom are independent directors.

two(2)ofwhomareindependentdirectors,

namely,Ms.LeonoraV.DeJesusandMr.Octavio

V. Espiritu.

Board Remuneraon

Members of the Board of Directors receive a per

diemofP10,000(P20,000fortheChairmanand

ViceChairman)foreachregularorspecialBoard

meengorBoardCommieemeengaended.

Totalcompensaonpaidtodirectorsisdisclosed

annuallyintheDeniveInformaonStatement

senttoshareholders,togetherwiththeNoceof

theAnnualStockholdersMeeng.

The Audit and Risk Management Commiee

TheAuditandRiskManagementCommieeis

composedofve(5)members,two(2)ofwhomareindependentdirectors.TheCommiee

directly interfaces with the internal and external

auditorsintheconductoftheirduesand

responsibilies.Itsmandateincludesthe

reviewoftheCompanysnancialreportsand

subsequentrecommendaontotheBoardfor

approval.TheCommieealsoreviewsSMDCs

internalcontrolsystems,itsauditplans,auding

processesandrelatedpartytransacons.Under

itsamendedCharter,theCommieealsoreviews

andassessestheeecvenessoftheCompanys

riskmanagementsysteminthemigaonof

nancialandnon-nancialrisks.

Evaluaon of the Board and President

UndertheguidanceoftheNominaon

Commiee,theBoardistaskedtoconductan

annualperformanceevaluaon.Theevaluaon

isbasedontheduesandresponsibiliesofthe

BoardofDirectors,BoardCommiees,individual

directors and President as provided for by SMDCs

ManualonCorporateGovernanceandBy-Laws.

Directors are asked to rate the performance oftheBoard,theBoardCommiees,themselvesas

directors and the President, as the embodiment

of Management.

Directorsarealsoaskedtoidenfyareasfor

improvement,suchastraining/connuing

educaonprogramsoranyotherforms

of assistance that they may need in the

performanceoftheirdues.Theevaluaon

also includes items on support services given to

theBoard,suchasthequalityandmelinessof

informaonprovidedtothem,thefrequency

andconductofregular,specialorcommiee

meengsandtheiraccessibilitytoManagement,

theCorporateSecretaryandBoardAdvisors.The

Board then reviews and evaluates the results of

theevaluaon,discussespossiblechangesthat

may enhance the performance of the individual

directors, the support services given and the

Boardasacollecvebody.

The Compensaon and Remuneraon Commiee

TheCompensaonandRemuneraonCommiee

is tasked with the oversight of policies pertaining

tosalariesandbenets,aswellaspromoons

andotherformsofcareeradvancement.TheCommieeiscomposedofthree(3)members,

NominaonCommiee

RicardoJ.Romulo Chairman (IndependentDirector)

LeonoraV.DeJesus Member


ElizabethT.Sy Member


21/61


CORPORATE GOVERNANCE

Internal Audit

SMDCsInternalAudithasaCharterthatdenes

itsrolesandresponsibilies.UnderitsCharter

the primary purpose of Internal Audit is to

provideanindependent,objecve,reasonable,

systemacanddisciplinedevaluaonofthe

Companysriskmanagement,organizaonand

proceduralcontrols.TheCharterrequiresthe

Internal Audit to do the following:

Developanannualauditplanusingan

appropriaterisk-basedmethodology,

including any risks or control concerns

idenedbyManagement,andsubmit

such plan as well as periodic update

thereof, to the Audit and Risk Management

Commieeforreviewandapproval.

Implementtheapprovedannualaudit

plan,includingspecialtasksorprojects

mandated by the Audit and Risk

ManagementCommiee.

IssueperiodicreportstotheAuditand

RiskManagementCommieeandSenior

Management, summarizing results of

auditacvies.

Assistintheinvesgaonofsignicant

suspectedfraudulentacvieswithinthe

CompanyandnofyManagementandthe

AuditandRiskManagementCommiee

of the results.

Considerthescopeofworkofthe

external auditors and regulators, as

appropriate, for the purpose of providing

opmalauditcoveragetotheorganizaon

at a reasonable overall cost.

Tomaintainitsindependence,theInternal

AuditorreportsfunconallytotheBoard

of Directors, through the Audit and Risk

ManagementCommiee,andadministravelyto

thePresident.TheInternalAuditorisauthorized

tohaveunrestrictedaccesstoallfuncons,

records, property and personnel in the conduct of

hisdues,andfreeaccesstocommunicatewith

theAuditandRiskManagementCommieeand

Management.

Enterprise Risk Management (ERM)

TheBoardofDirectorsistaskedtooverseethe

risk management system of the Company throughtheAuditandRiskManagementCommiee.

In2012,theCommieetookthefollowing

iniaves:

Approvedthewhistleblowerpolicy

which has been named the Policy on

Accountability, Integrity and Vigilance

(PAIV).Itprovidesfortheprocessand

safeguardsofelevangconcernsto

Managementonpossibleviolaonsof

anyone in the Company with regard to the

Code of Ethics and other Company rules

andregulaons;

Establishedasuccessionplanforthe

commiee;

DeliberatedwiththeInternalAuditorand

the External Auditor, SGV & Co. on the

stateofrisk-basedinternalcontrols;

Priorizedandapprovedthe

comprehensiveITInformaonSecurity

Policy Framework;

Reviewedtheinialresultsofnancial,

operaons,complianceandhazardrisk

assessmentsandmigaonexercisesof

core business units;

TaskedManagementtoiniateanSM

Group-wideawarenessprogramonrisk

management;

Approvedtheroll-outoftheEnterprise

RiskManagementProgramulizingthe

Risk Register template as instrument in

documenngandmonitoringrisks;

Discussedthelegalandregulatoryrisks

of pending bills in Congress, rules from

regulators and bills enacted into law that

havesignicantimpacttotheCompany;

SuggestedtoManagementtolook

into the evolving ASEAN Corporate

Governanceiniavefromtheregulators

and advocacy groups and see what other

enhancements can be appropriately

pursued;

UndertooktheSEC-mandatedSelf-

Assessment of the Performance

oftheAuditCommieeunderSEC

Memorandum Circular No. 4, issued

in 2012 and approved the areas of

improvementandaconplanresulngfrom said exercise.

Disaster Preparedness Program

As part of its Enterprise Risk Management, SMDC

implements a disaster preparedness program

thataimstosafeguarditsworkforce,operaons

and customers against natural and manmade

disasters.Incoordinaonwithreandsecurity

agents, the Company conducts regular safety

drillsthroughouttheSMDCworkplace.These

drills, along with disaster management related

orientaonsandtrainingareconductedtoensure

acompetent,composedandecientresponse

from SMDCs workforce in the event of a disaster.

Furthermore, the Company has adopted a Call

Treeasameanstoeecvelycommunicatewith

and ensure the safety of its employees during an

emergency.

DisclosureandTransparency

As provided for in its Manual on Corporate

Governance,SMDCiscommiedtoprovidingits

shareholdersandthepublic,melyandaccurate

informaonontheCompanyanditsbusiness.In

accordance with this, SMDC regularly updates its

websiteandpraccesfullandpromptdisclosure

ofallmaterialinformaon.Thewebsitehas

aseparatecorporategovernanceseconthat

features among others, policies, programs andotherrelevantcorporategovernanceinformaon.

SMDC arranges teleconferences and site visits

forinvestors,andconductsannualnon-deal

roadshowsinvariouslocaonsthroughout

the world. Furthermore, SMDC also conducts

regularbriengsandmeengswithinvestors,

analysts and the press to keep them updated on

theCompanysvariousprojects,nancialand

operaonalresults.Thepresentaonmaterialsat

thesebriengs,aswellastheCompanysSECand

PSE reports and annual reports, may be viewed

anddownloadedfromthewebsite.(Pleasevisit

SMDCs website at www.smdevelopment.com

foraccesstodisclosures,write-upsandother

companyinformaon.)

Ownership Structure

SMDCregularlydisclosesitsbenecial

owners holding more than 5% of its shares,

the shareholdings of its directors and senior

management and its other top shareholders.

SMDCemploystheone-share,one-voteandonly

has one type of shares, common.


22/61


The Annual Stockholders Meeng

SMDCsAnnualStockholdersMeeng(ASM)

gives the Companys shareholders an opportunity

toraiseconcerns,givesuggesonsandvote

onrelevantissues.Vongmethodsareclearly

denedandexplainedtoshareholdersto

ensuretheobservanceoftheirvongrightsand

connuedparcipaoninthevongprocess.

Prior to the ASM, shareholders are furnished a

copyoftheannualreport,includingnancial

statements,andallrelevantinformaonabout

the current and nominated directors and key

ocers.Electeddirectorsholdoceforone(1)

yearunltheirsuccessorsareelectedfollowing

theproceduressetforthintheCompanysBy-

Laws.AllBoardmembersaredulyscreenedand

deemedeligibleandqualiedbytheNominaon

Commiee.

Proxyvongispermiedandfacilitatedthrough

proxy forms which are distributed to shareholders

prior to the ASM. Proxy forms may also be

downloadedfromtheCompanyswebsite.To

encourage shareholders to apply their right to

votethroughtheproxyforms,notarizaonof

the proxy forms is not required. Shareholders

are also given the opportunity to vote on certain

corporateactsinaccordancewithlaw.Theseresoluons,alongwithshareholderquesons

and the corresponding responses are recorded

intheminutesoftheASM.Toensurethatall

shareholders concerns are properly addressed,

the Chairman of the Board, Board Directors,

thePresident,BoardCommieeChairmenand

Members, Senior Management, the Corporate

Secretary and the Independent Auditors are

always present during the ASM.

Other Shareholder Rights

Minority shareholders are given the right to

proposetheholdingofameengaswellas

the right to propose items in the agenda of

themeeng,providedthattheitemsarefor

legimatebusinesspurposesandinaccordance

withlaw,jurisprudenceandbestpracce.

Minority shareholders are also given access

toinformaonrelangtomaersforwhich

Management is accountable.

Shareholders have the right to receive dividends

subjecttothediscreonoftheBoard.SMDCs

Manual on Corporate Governance protects the

shareholders rights to vote, inspect corporate

books and records, gain access to material

informaonandreceiveanequitableshareofthe

Companysprots.UndertheManual,theBoardis tasked to promote shareholder rights, remove

impediments to the exercise of these rights and

provideremediesforviolaonsofthesame.

Employee Welfare

SMDC aspires to be an employer of choice and

provides for the health, safety and welfare of its

employees.ThroughtheeortsofitsHuman

ResourcesDepartment(HRD),theCompanyhas

established policies and programs that promote a

safe and healthy work environment that caters to

all cultures and creeds and encourages employee

development and growth.

Wellness Program

TheCompanyencouragesgoodhealthand

wellnessthroughitsvarioussportsandtness

programs.EmployeescanenjoytheCompany-

ownedcourtsandtnessfaciliesaerwork.

EveryoneisencouragedtoparcipateinHRD

supportedaerobicanddanceacvies.The

Companyalsoconductsorientaonsandlearning

sessionsonhealth-relatedmaers,suchasbreast

andcervicalcancerawarenessanddetecon;

inuenzaandhepasBprevenonanddrugabuse awareness, to name a few. Furthermore,

theCompanyfacilitatesthedistribuonand

administraonofessenalvaccines,hasafully

funconingclinicandhasrecentlyemployedthe

servicesofa24-hourrovingambulanceservice.

Orientaons and Trainings

SMDC invests heavily in the development of its

directors,ocersandemployees.TheCompany

conductsvariousinternaltrainingacviesand

providesmembersofitsworkforceopportunies

toaendandparcipateinacviesoeredby

externalenes.(FordetailsonSMDCstraining

acvies,pleaserefertotheCompanyswebsite

atwww.smdevelopment.com)

ThroughtheHRDsOrientaonforNew

EmployeesofSM(ONESM),newemployees

are given an overview of SMDCs corporate

governance framework, policies and its various

components. It also covers the importance

of integrity and ethics in the business, the

Companys core values and the role that each

individual must play in the overall development

of the corporate governance culture. Also

includedintheorientaonarethesalientpoints

of the Code of Ethics, which focus on employee

rightsandobligaons,aswellasthepromoonofgood work ethics and values.

Corporate Social Responsibility (CSR)

SMDCrecognizestheimportanceofassisngand

nurturingthecommuniesitoperatesin,aswell

astheimpactithasontheenvironment.The

CompanyworkscloselywithSMFoundaon,Inc.,

the CSR arm of the SM Group of Companies, to

ensuretheconnueddevelopmentofitsvarious

educaon,civicandenvironmentalprograms.

(FormoreinformaonontheCompanysCSR

programs, please visit the Corporate Social

ResponsibilityseconoftheSMDCwebsiteat

www.smdevelopment.com.)

Citaons

SMDC was one of the Gold Awardees during the

InstuteofCorporateDirectors(ICD)Annual

Dinnerheldon30May2012.Theawardis

based on the Companys performance in the ICD

Scorecard.TheICDScorecardisaprojectofthe

ICD, PSE and SEC, which rates companies on their

corporategovernancepracces.

On30June2012,CorporateGovernanceAsia(CGAsia)awardedSMDCsViceChairman,Mr.

HenryT.Sy,Jr.withtheBestCEOforInvestor

Relaons.Hewasalsoamongthoseawarded

the Asian Corporate Director Award. CG Asia is

theonlypublicaonthatspecializesincorporate

governance in the region.

Moving Forward

SMDCconnuestostrengthenitscorporate

governancepracces,aswellassupportthe

iniavesofthepublicandprivatesectorsthat

espouse the development of good governance in

the country.


23/61


LegalCounsel

SyCip,Salazar,HernandezandGatmaitanLawOces4thFloor,SSHGLawOce105PaseodeRoxas,MakaCity

External AuditorSyCip, Gorres, Velayo & Co.

6760AyalaAvenue,MakaCity

Stockholder InquiriesSMDevelopmentCorporaonscommonstockislistedandtradedinthePhilippineStockExchangeunderthesymbolSMDC.

Inquiries regarding dividend payments, account status, address changes, stock

cercates,andotherpernentmaersmaybeaddressedtothecompanystransfer agent:

BDOUnibank,Inc.TrustandInvestmentsGroup15thFloorSouthTower,BDOCorporateCenter,MakaAvenue,MakaCityTel.(632)840.7000local6979Fax(632)878.4056

SECForm17-AThenancialinformaoninthisreport,intheopinionofManagement,substanallyconformswiththeinformaonrequiredinthe17-AReportsubmiedtotheSecuriesandExchangeCommission.CopiesofthisreportmaybeobtainedfreeofchargeuponwrienrequestaddressedtotheOceof the Corporate Secretary.

CORPORATE INFORMATION


24/61

SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012 21

MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONSM DEVELOPMENT CORPORATION AND SUBSIDIARIES

FINANCIAL POSITION

2012 vs. 2011

Dec. 2012 Dec. 2011 % ChangeCash and Cash Equivalents P8,176,966,683 P5,913,175,491 38%Trade and Other Receivables 26,539,189,285 16,193,071,444 64%Investments Held or Trading 579,476,898 384,002,340 51%Available-or-Sale Investments 4,974,322,706 4,727,131,762 5%Condominium Units or Sale 1,857,043,842 572,040,857 225%Land and Development 29,106,844,999 19,801,431,718 47%Advances or Project Development 3,126,232,680 1,121,565,385 179%Investment Property 734,656,092 707,288,148 4%Property and Equipment, net 457,957,302 244,487,948 87%Deerred Tax Assets 279,546,136 126,496,577 121%Other Assets 4,365,610,940 4,134,089,000 6%Total Assets P80,197,847,563 P53,924,780,670 49%

Loans Payable P24,713,776,921 P10,944,225,993 126%

Accounts Payable and Other Liabilities 14,742,750,698 7,156,864,178 106%Income Tax Payable 22,386,695 2,155,185 939%Dividends Payable 26,114,521 25,687,463 2%Deerred Tax Liability 554,594,962 387,814,573 43%Total Liabilities P40,059,623,797 P18,516,747,392 116%

Capital Stock P9,271,204,239 P8,428,368,621 10%Additional Paid-in Capital 13,433,597,654 13,433,597,654 0%Retained Earnings 14,544,476,059 10,904,312,133 33%Unrealized Mark-to-Market Gain on Available-or-Sale Investments 2,888,945,814 2,641,754,870 9%Total Stockholders Equity P40,138,223,766 P35,408,033,278 13%

SM Development Corporation (SMDC) is engaged in the development and sale o residential condominium units. As o December 31, 2012, SMDCcurrently has 19 residential projects. Included in the residential projects are Breeze Residences in Pasay City and Grace Residences in Taguig City whichwere both launched in 2012. The Company has acquired real properties in various locations during the same year with a total land area o 23 hectares

as a response to the escalating demand or residential dwellings.

Financial Condition as at December 31, 2012 compared to as at December 31, 2011

The Companys total resources as o December 31, 2012 reached P80.2 billion, 49% or P26.3 billion higher than December 31, 2011 level o P53.9billion.

38% Increase in Cash and Cash EquivalentsThe increase in Cash and Cash Equivalents was due to loans availed primarily or landbanking and development.

64% Increase in Trade and Other Receivables

The increase o P10.3 billion was attributable to a high sales volume rom new projects and construction accomplishments o existing projects.

51% Increase in Held or Trading InvestmentAn investment under this portolio both had an increase in equity shares due to stock split and increase in market value.

5% Increase in Available or Sale Investments

The increase o 5% was due to higher market prices o equity shares held under these portolios.

225% Increase in Condominium Units or SaleThe increase was due to the completion o Ready or Occupancy (RFO) units o Mezza Residences, Chateau Elysee, Berkeley Residences, Sea Residences,Grass Residences, and Field Residences.

47% Increase in Land and Development

The increase was due to the newly acquired land in various locations within Metro Manila and additional construction accomplishments o existingprojects.

179% Increase in Advances or Project Development

The increase was due to an ongoing acquisition o property or development.


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SM DEVELOPMENT CORPORATION ANNUAL REPORT 201222


4% Increase in Investment Property

The increase was due to new acquisitions o investment property.

87% Increase in Property and EquipmentThe increase was due to the additional costs o leasehold improvements or oce and showrooms.

121% Increase in Deerred Tax Assets

The increase was due to the eect o recognition o certain accrued expenses, net operating loss carryover, allowance or doubtul accounts, andminimum corporate income tax in 2012.

6% Increase in Other AssetsThe increase was mainly due to various deposits made in connection with the acquisition o real properties and recognition o input taxes rom capitalexpenditures.

126% Increase in Loans PayableThe increase was due to the long term and short term loans availed primarily or landbanking and development.

106% Increase in Accounts Payable and Other Liabilities

The increase was mainly due to accruals and actual progress billings related to on-going project development, reservations rom buyers o newlylaunched projects and obligations rom land acquisitions.

939% Increase in Income Tax PayableThe increase was due to higher taxable income in 2012 compared as a result o the expiration o income tax holiday incentives o certain projects.

43% Increase in Deerred Tax Liability

The increase was due to the eect o recognition o unrealized gross prot and borrowing costs.

10% Increase in Capital StockThe increase was due to the 10% stock dividends distributed in 2012.

9% Increase in Unrealized Mark-to-Market Gain on Available-or-Sale Investments

The increase was due to the appreciation in prices o equity shares held classied under this account.

RESULTS OF OPERATIONS2012 vs. 2011

Dec. 2012 Dec. 2011 % ChangeRevenue rom Real Estate Sales P21,578,437,825 P16,183,740,954 33%Interest Income 353,594,843 423,044,526 -16%Gain (loss) on Sale o Available-or-Sale Investments 101,333,465 -100%Dividend Income 33,913,390 29,337,606 16%Unrealized Mark-to-Market Gain on Investments Held or Trading 195,474,558 3,333,996 5763%Other Income 691,944,061 162,334,033 326%Total Revenues 22,853,364,677 16,903,124,580 35%

Cost o Real Estate Sold 13,534,983,227 9,674,492,156 40%Marketing and Selling Expenses 1,447,927,599 1,071,355,183 35%Brokerage Fees and Commissions 1,168,065,736 531,849,980 120%Interest Expense 700,997,225 727,733,344 -4%Salaries Wages and Benets 332,288,088 259,068,393 28%Rentals and Utilities 184,886,241 64,318,437 187%Taxes and Licenses 170,401,606 155,061,888 10%Depreciation 122,340,093 101,803,401 20%Provision or Doubtul Accounts 107,206,782 80,572,082 33%Representation and Entertainment 62,271,429 53,388,216 17%Management and Proessional Fees 31,387,533 25,300,299 24%Total Costs and Expenses 17,862,755,559 12,744,943,379 40%

Provision or Income Tax 86,191,141 (17,118,579) -603%

Net Income P4,904,417,976 P4,175,299,780 17%


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Results o Operations or the year ended December 31, 2012 compared to the year ended December 31, 2011.

The Company posted a net income o 4.9 billion, 17% higher compared to year o 2011. In a recent study done by the Advisory and Research Services

o Colliers International Philippines, SMDC captured the top spot in terms o number o units sold which corresponds to a 23% market share o theresidential condominium units that were sold by the industry during 2012. In addition, SMDC is among the top real estate developer o the residentialcondominium units sold in terms o value in the same year garnering 15% market share.

33% Increase in Revenue rom Real Estate Sales

The increase was due to higher sales volume base and higher construction accomplishments as o 2012 compared with 2011.

16% Decrease in Interest IncomeThe decrease was attributable to the lower interest income generated rom temporary money market placements.

100% Decrease in Gain on Sale o Investments Held or Trading and Available-or-Sale Investments

No equity shares were sold by the Company in 2012.

16% Increase in Dividend IncomeThe increase was due to higher cash dividends per share rom investments in equity shares.

5763% Increase in Unrealized Mark-to-Market Gain on Investments Held or Trading

The increase was due to increase in equity shares by stock split and higher market price o equity securities held under this account.

326% Increase in Other IncomeThe increase was due mainly to higher income in 2012 rom oreitures and recurring commercial activities.

40% Increase in Cost o Real Estate Sold

The cost o real estate sold grew due to the additional costs incurred in changing the design o certain condominium units.

35% Increase in Marketing and Selling ExpenseThe increase was attributable to the enhanced selling events and activities locally and abroad and also rom media communication spending.

120% Increase in Brokerage Fees and Commissions

The increase resulted rom the commission and incentives recognized as a result o higher sales volume generated, change in commission payment

milestones, and higher sales orce.

4% Decrease in Interest Expense

Despite the increase in loans, interest expense decreased as a result o higher capitalized borrowing costs.

28% Increase in Salaries and BenetsThe increase was attributable to the additional manpower complement to manage increased sales volume, new projects and customers.

10% Increase in Taxes and Licenses

The bulk o the increase was payment o real property taxes rom the newly acquired properties.

20% Increase in DepreciationThe increase was mainly due to the new leasehold improvements or the Companys oce and selling activities.

187% Increase in Rental and Utilities

The increase was due to billings or the new leased oce occupied in 2012.

33% Increase in Provision or Doubtul AccountsThe Company made additional provisions or its long outstanding customer accounts.

17% Increase in Representation and Entertainment

Representation and Entertainment expenses increased due to the expanded volume o sales o the company.

24% Increase in Management and Proessional FeesThe increase was primarily due to the proessional services availed in connection with the acquisition o real properties.

603% Increase in Provision or Income Tax

The increase was due to the higher taxable income in the current period brought about by the accounts with expiring income tax holiday incentivesand low realization o income rom the newly registered accounts rom the Board o Investments.


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KEY PERFORMANCE INDICATORS:

Ratios 2012 2011 2010

Current ratio 1.60:1.00 3.06:1.00 2.90:1.00Asset to equity ratio 2.00:1.00 1.52:1.00 1.70:1.00Debt-to-equity ratio 0.65:1.00 0.31:1.00 0.39:1.00Net debt-to-equity ratio 0.44:1.00 0.14:1.00 0.05:1.00Return on assets 6.1% 7.7% 6.9%Return on equity 12.2% 11.8% 11.8%Interest rate coverage ratio 8.1:1.00 6.71:1.00 8.26:1.00

PLAN OF OPERATIONS:

SMDC continuously responds to the increasing demand or aordable residential dwellings. For the year 2013 only, SMDC is targeting to launch atleast our new projects in various cities within Metro Manila and three expansion buildings o ongoing projects which will bring in over 12,000 newcondominium units in the market. Although the units to be marketed are inused with the latest innovations in housing development, they remain tobe aordable to potential buyers due to its value-engineering employed in the construction o projects.

There are adequate sources o landbanking, construction materials and services, and unds available or SMDC to execute the plans to deliver itsproduct in the market. SMDC is also equipped with a group o talented proessionals, sales orce, and key management personnel working together toulll the mission or its market, investors, and the community it serves.

In addition, SMDC maximizes its synergy with other companies with the SM Group to make the SM products and services available and accessible orall their target markets in the country. By carrying the SM brand, SMDC has an unsurpassed advantage over its competitors due to the recognition,integrity, and reliability the SM Group has earned throughout the years.

Material Event/s and Uncertainties:

a.) There were no events that will trigger direct or contingent nancial obligation that is material to the company, including any deault oracceleration o an obligation.

b.) There were no material o-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationshipso the company with unconsolidated entities or other persons created during the reporting period.

c.) There are no known trends, events, material changes, seasonal aspects or uncertainties that are expected to aect the companyscontinuing operations.


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REPORT OF THE AUDIT AND RISK MANAGEMENT COMMITTEESM DEVELOPMENT CORPORATION AND SUBSIDIARIES

The Audit and Risk Management Committee assists the Board o Directors in ullling its oversight responsibilities to ensure the integrity and adequacyo the nancial reporting process, the internal control system, the audit process, the companys risk management system and compliance with pertinentlaws, rules and regulations. The Committee likewise oversees special investigations as may be necessary and reviews its Charter annually.

In compliance with the Audit and Risk Management Committee Charter, the Manual on Corporate Governance and pertinent laws, rules and regulations,we conrm that:

The Audit and Risk Management Committee is composed o ve (5) members, two (2) o whom are independent directors, namely Atty.Ricardo J. Romulo and Committee Chairman, Mr. Octavio V. Espiritu;

We met three (3) times in 2012 (on February 21, July 31 and November 6);

Members 2/21/12 7/31/12 11/06/12 PercentageOctavio V. Espiritu 100

Jose T. Sio 100Corazon I. Morando 100

Luis Y. Benitez 100Ricardo J. Romulo X 67

Each member o the Committee possesses adequate knowledge and competence o nance and accounting processes; We have reviewed and approved the amended Audit and Risk Management Committee Charter consistent with the provisions in SEC

Memorandum Circular No. 4 on the Sel-Assessment o the Perormance o Audit Committees. Furthermore, we complied with the requiredsel-assessment and submission o the results to the SEC accordingly. Subject Charter was ratied by the Board o Directors; We have reviewed and approved the ollowing with regard to our Independent Auditor, SGV & Co. and our Internal Auditor:

- Their respective annual audit plans and strategic direction, scope, risk-based methods and time table;- The results o their examinations and action plan to address pending audit issues; and- The assessment o internal controls and quality nancial reporting;

We have received and reviewed the report o SGV & Co. on signicant accounting issues, changes in accounting principles, relevant pendingtax legislation which would impact the nancial statements o SM Development Corporation;

We have reviewed and approved all audit services provided by SGV & Co., and related audit ees; We have reviewed and ensured that the Companys related party transactions are conducted at arms length basis; We have discussed the status o the Enterprise Risk Management system roll-out across the listed companies o the SM Group, with initial

ocus on Financial, Inormation Technology, Operational and Compliance Risks; We have discussed with SGV & Co. the matters required to be discussed by the prevailing applicable Auditing Standards, and we have

received written disclosures and the letter rom SGV & Co. as required by prevailing applicable Independence Standards and have discussedwith SGV & Co., its independence;

We have reviewed the nancial statements o SM Development Corporation or the rst quarter ended March 31, 2012, six month period

ended June 30, 2012, and third quarter ended September 30, 2012; Based on its review and discussion, and subject to the limitations on the roles and responsibilities reerred to above, the Committeerecommended or Board approval, and the Board approved, the audited nancial statements o SM Development Corporation or the yearended December 31, 2012.

We have reviewed and discussed the perormance, independence and qualications o the Independent Auditor, SGV & Co., in the conducto their audit o the nancial statements o SM Development Corporation or the year. Based on the review o their perormance andqualications, the Committee also recommends the re-appointment o SGV & Co. as external auditors or 2013.

19 February 2013

OCTAVIO V. ESPIRITU*Chairman

ATTY. RICARDO J. ROMULO*Member

JOSE T. SIOMember

LUIS Y. BENITEZ

MemberATTY. CORAZON I. MORANDO

Member

ATTY. EMMANUEL C. PARAS

Corporate Secretary

*Independent Director


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STATEMENT OF MANAGEMENTS RESPONSIBILITY FOR FINANCIAL STATEMENTSSM DEVELOPMENT CORPORATION AND SUBSIDIARIES

The management o SM Development Corporation and its Subsidiaries is responsible or the preparation and air presentation o the consolidatednancial statements or the years ended December 31, 2012 and 2011, including the additional components attached therein, in accordance withPhilippine Financial Reporting Standards. This responsibility includes designing and implementing internal controls relevant to the preparation and air

presentation o the consolidated nancial statements that are ree rom material misstatement, whether due to raud or error, selecting and applyingappropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

The Board o Directors reviews and approves the consolidated nancial statements and submits the same to the stockholders.

SyCip Gorres Velayo & Co., the independent auditors, appointed by the stockholders has examined the consolidated nancial statements o the Companyin accordance the Philippine Standards on Auditing, and in its report to the stockholders, has expressed its opinion on the airness o presentation uponcompletion o such examination.

GEMA O. CHENG VIRGINIA A. YAP

Chie Financial Ocer Treasurer

HENRY T. SY, JR. HENRY SY, SR.

Vice Chairman and Chie Executive Ocer Chairman

SUBSCRIBED AND SWORN TO beore me this _____________________ in the city o _____________, aants exhibiting to me their CompetentEvidence o Identity.

Names CTC/CEI Date o Issue Place o IssueHenry Sy, Sr. Passport XX1846270 19 Aug 2008 Manila

Henry T. Sy, Jr. Passport EB1984540 25 Feb 2011 ManilaVirginia A. Yap Passport EB23196569 03 May 2011 Manila

Gema O. Cheng D/L N06-84-036923 12 Jan 2012 Quezon City

DOC NO. 189PAGE NO. 39BOOK NO. 12SERIES OF 2013


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INDEPENDENT AUDITORS REPORTSM DEVELOPMENT CORPORATION AND SUBSIDIARIES

The Stockholders and the Board o DirectorsSM Development Corporation15th Floor, Two E-Com Center

Harbor Drive, Mall o Asia ComplexCBP-1A, Pasay City

We have audited the accompanying consolidated nancial statements o SM Development Corporation and Subsidiaries, which comprise theconsolidated balance sheets as at December 31, 2012 and 2011, and the consolidated statements o income, statements o comprehensive income,statements o changes in equity and statements o cash fows or each o the three years in the period ended December 31, 2012, and a summary osignicant accounting policies and other explanatory inormation.

Managements Responsibility for the Consolidated Financial Statements

Management is responsible or the preparation and air presentation o these consolidated nancial statements in accordance with Philippine FinancialReporting Standards, and or such internal control as management determines is necessary to enable the preparation o consolidated nancialstatements that are ree rom material misstatement, whether due to raud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these consolidated nancial statements based on our audits. We conducted our audits in accordancewith Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perorm the audit to obtainreasonable assurance about whether the consolidated nancial statements are ree rom material misstatement.

An audit involves perorming procedures to obtain audit evidence about the amounts and disclosures in the consolidated nancial statements. Theprocedures selected depend on the auditors judgment, including the assessment o the risks o material misstatement o the consolidated nancialstatements, whether due to raud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparationand air presentation o the consolidated nancial statements in order to design audit procedures that are appropriate in the circumstances, but notor the purpose o expressing an opinion on the eectiveness o the entitys internal control. An audit also includes evaluating the appropriateness oaccounting policies used and the reasonableness o accounting estimates made by management, as well as evaluating the overall presentation o theconsolidated nancial statements.

We believe that the audit evidence we have obtained is sucient and appropriate to provide a basis or our audit opinion.

Opinion

In our opinion, the consolidated nancial statements present airly, in all material respects, the nancial position o SM Development Corporation andSubsidiaries as at December 31, 2012 and 2011, and their nancial perormance and their cash fows or each o the three years in the period endedDecember 31, 2012 in accordance with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Clairma T. Mangangey

Partner

CPA Certicate No. 86898SEC Accreditation No. 0779-AR-1 (Group A),

February 2, 2012, valid until February 1, 2015Tax Identication No. 129-434-867BIR Accreditation No. 08-001998-67-2012,

April 11, 2012, valid until April 10, 2015PTR No. 3669697, January 2, 2013, Makati City

February 19, 2013


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CONSOLIDATED BALANCE SHEETSSM DEVELOPMENT CORPORATION AND SUBSIDIARIES

December 31

2012 2011

ASSETS

Cash and Cash Equivalents (Notes 6, 19, 24, 25 and 26) P8,176,966,683 P5,913,175,491

Receivables and Advances (Notes 7, 19, 24, 25 and 26) 26,539,189,285 16,193,071,444

Investments Held or Trading (Notes 8, 19, 24, 25 and 26) 579,476,898 384,002,340

AvailableorSale Investments (Notes 9, 19, 24, 25 and 26) 4,974,322,706 4,727,131,762

Condominium Units or Sale (Notes 10 and 26) 1,857,043,842 572,040,857

Land and Development (Notes 10, 16 and 19) 29,106,844,999 19,801,431,718

Advances or Project Development (Notes 19 and 26) 3,126,232,680 1,121,565,385

Investment Property (Note 12) 734,656,092 707,288,148

Property and Equipment (Note 13) 457,957,302 244,487,948

Deerred Tax Assets (Note 21) 279,546,136 126,496,577

Deposits and Other Assets (Notes 14, 19, 20, 24, 25 and 26) 4,365,610,940 4,134,089,000P80,197,847,563 P53,924,780,670

LIABILITIES AND EQUITY

Liabilities

Loans payable (Notes 15, 19, 24, 25 and 26) P24,713,776,921 P10,944,225,993

Accounts payable and other liabilities (Notes 16, 19, 24, 25 and 26) 13,012,504,908 5,109,879,194

Customers deposits (Notes 17 and 26) 1,730,245,790 2,046,984,984

Income tax payable (Note 26) 22,386,695 2,155,185

Dividends payable (Notes 18, 24, 25 and 26) 26,114,521 25,687,463

Deerred tax liabilities (Note 21) 554,594,962 387,814,573

Total Liabilities 40,059,623,797 18,516,747,392Equity

Capital stock (Note 18) 9,271,204,239 8,428,368,621

Additional paid-in capital (Note 18) 13,433,597,654 13,433,597,654

Retained earnings (Note 18) 14,544,476,059 10,904,312,133

Unrealized mark-to-market gain on available-or-sale investments (Note 9) 2,888,945,814 2,641,754,870

Total Equity 40,138,223,766 35,408,033,278

P80,197,847,563 P53,924,780,670

See accompanying Notes to Consolidated Financial Statements.


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CONSOLIDATED STATEMENTS OF INCOMESM DEVELOPMENT CORPORATION AND SUBSIDIARIES

Years Ended December 31

2012 2011 2010

REVENUE FROM REAL ESTATE SALES (Notes 10 and 19) P21,578,437,825 P16,183,740,954 P9,118,069,504

COSTS OF REAL ESTATE SOLD (Note 10) 13,534,983,227 9,674,492,156 5,041,144,537

GROSS PROFIT 8,043,454,598 6,509,248,798 4,076,924,967

OPERATING EXPENSES

Marketing and selling expenses (Note 19) 1,447,927,599 1,071,355,183 498,565,299

Brokerage ees and commissions 1,168,065,736 531,849,980 386,845,487

Salaries, wages and benets (Note 20) 332,288,088 259,068,393 167,073,111

Rentals and utilities (Note 19) 184,886,241 64,318,437 63,319,260

Taxes and licenses 170,401,606 155,061,888 112,692,169

Depreciation (Notes 12 and 13) 122,340,093 101,803,401 66,330,571

Provision or doubtul accounts (Note 7) 107,206,782 80,572,082

Entertainment, amusement and recreation 62,271,429 53,388,216 31,352,272

Management and proessional ees 31,387,533 25,300,299 8,628,400

3,626,775,107 2,342,717,879 1,334,806,569

4,416,679,491 4,166,530,919 2,742,118,398

INTEREST EXPENSE (Notes 7, 15, 16 and 19) (700,997,225) (727,733,344) (436,462,009)

INTEREST INCOME (Notes 6, 7, 9, 14 and 19) 353,594,843 423,044,526 301,956,872

MARk-TO-MARkET GAINS ON INVESTMENTS HELD

FOR TRADING (Note 8) 195,474,558 3,333,996 95,578,405

DIVIDEND INCOME (Note 19) 33,913,390 29,337,606 39,956,622

MANAGEMENT FEE (Note 19) 25,550,785 39,766,664 28,774,427

GAIN ON SALE OF AVAILABLE-FOR-SALE INVESTMENTS (Notes 9 and 19) 101,333,465 349,434,031

FORFEITED DEPOSITS AND OTHER INCOME - Net (Notes 9, 12, 17 and 19) 666,393,275 122,567,369 49,152,903

INCOME BEFORE INCOME TAX 4,990,609,117 4,158,181,201 3,170,509,649

PROVISION FOR (BENEFIT FROM) INCOME TAX (Notes 21 and 27)

Current 72,460,311 40,887,114 168,827,380

Deerred 13,730,830 (58,005,693) (19,997,883)

86,191,141 (17,118,579) 148,829,497

NET INCOME P4,904,417,976 P4,175,299,780 P3,021,680,152

Basic/Diluted Earnings Per Share (Note 22) P0.53 P0.45 P0.42



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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMESM DEVELOPMENT CORPORATION AND SUBSIDIARIES


2012 2011 2010

NET INCOME P4,904,417,976 P4,175,299,780 P3,021,680,152

OTHER COMPREHENSIVE INCOMEUnrealized mark-to-market gain on

available-or-sale investments - net (Note 9) 247,190,944 465,357,690 1,546,166,327

TOTAL COMPREHENSIVE INCOME P5,151,608,920 P4,640,657,470 P4,567,846,479



2012 2011 2010

CAPITAL STOCk (Note 18)

Balance at beginning o year P8,428,368,621 P6,412,322,543 P4,122,207,350

Stock dividends 842,835,618 1,100,000,000

Collection (receivable) rom subscription 916,046,078 (916,046,078)

Stock rights issuance 3,206,161,271

Balance at end o year 9,271,204,239 8,428,368,621 6,412,322,543

ADDITIONAL PAIDIN CAPITAL (Note 18)Balance at beginning o year 13,433,597,654 8,505,270,332 204,912,695

Collection (receivable) rom subscription 4,928,327,322 (4,928,327,322)

Additions 13,228,684,959


RETAINED EARNINGS (Note 18)

Appropriated:

Balance at beginning o year 1,500,000,000 1,500,000,000 1,500,000,000

Additions 4,500,000,000


Unappropriated:

Balance at beginning o year 9,404,312,133 7,061,849,215 4,479,871,180

Net income 4,904,417,976 4,175,299,780 3,021,680,152Appropriation o retained earnings (4,500,000,000) Cash dividends - P0.05 per share in 2012,

P0.1 per share in 2011 and P0.08 per share in 2010 (421,418,432) (732,836,862) (439,702,117)

Stock dividends - 10% a share in 2012 and 15% a share in 2011 (842,835,618) (1,100,000,000)


14,544,476,059 10,904,312,133 8,561,849,215

UNREALIZED MARkTOMARkET GAIN ON AVAILABLEFORSALE

INVESTMENTS (Note 9)

Balance at beginning o the year 2,641,754,870 2,176,397,180 630,230,853

Other comprehensive income 247,190,944 465,357,690 1,546,166,327


P40,138,223,766 P35,408,033,278 P25,655,839,270


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

SM DEVELOPMENT CORPORATION AND SUBSIDIARIES


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2012 2011 2010

CASH FLOWS FROM OPERATING ACTIVITIESIncome beore income tax P4,990,609,117 P4,158,181,201 P3,170,509,649Adjustments or:

Interest expense 700,997,225 727,733,344 436,462,009Interest income (353,594,843) (423,044,526) (301,956,872)Mark-to-market gains on investments held or trading (Note 8) (195,474,558) (3,333,996) (95,578,405)Depreciation (Notes 12 and 13) 122,340,093 101,803,401 66,330,571Dividend income (Note 19) (33,913,390) (29,337,606) (39,956,622)Pension expense (Note 20) 16,088,412 9,352,030 13,881,857Unrealized oreign exchange loss (gain) (7,912,723) 5,469,737 (14,914,483)Gain on sale o available-or-sale investments (Notes 9 and 19) (101,333,465) (349,434,031)Impairment loss on available-or-sale investments (Note 9) 32,558,198

Operating income beore working capital changes 5,239,139,333 4,445,490,120 2,917,901,871Decrease (increase) in:

Receivables and advances (10,342,117,841) (8,272,842,828) (2,974,686,457)

Condominium units or sale (Note 28) 732,840,222 230,383,360 214,798,841Land and development (Note 28) (10,954,118,491) (2,904,079,345) (8,478,742,348)Advances or project development (2,004,667,295) 712,339 179,233,107

Increase (decrease) in accounts payable and other liabilities 7,458,358,541 (538,835,621) 2,471,643,424Contributions to pension plan assets (Note 20) (22,277,923) (17,118,363) (12,031,055)Cash used or operations (9,892,843,454) (7,056,290,338) (5,681,882,617)Interest received 349,594,843 423,122,187 306,620,834Income tax paid (52,228,801) (74,447,934) (228,753,940)Net cash used in operating activities (9,595,477,412) (6,707,616,085) (5,604,015,723)

CASH FLOWS FROM INVESTING ACTIVITIESIncrease in deposit and other assets (225,332,429) (916,214,834) (2,445,952,350)Additions to:

Investment property and property and equipment(Notes 12, 13 and 28) (117,037,250) (69,049,536) (126,611,487)

Available-or-sale investments (Notes 9, 19 and 28) (335,076,173) Proceeds rom:Sale o investments held or trading and available-or-sale

investments (Notes 8 and 9) 107,700,000 556,638,917Maturity o bonds 250,000,000

Dividends received 33,913,390 29,337,606 50,180,200Net cash used in investing activities (308,456,289) (1,183,302,937) (1,715,744,720)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds rom:Availments o loans (Note 15) 18,747,206,398 1,000,000,000 11,196,785,610Stock rights oering (Note 18) 5,844,373,400 10,590,472,830

Payments o:Loans (5,000,000,000) (5,285,781,161)Interest (1,166,402,854) (1,037,778,758) (740,424,823)

Cash dividends (420,991,374) (730,896,429) (438,205,824)Net cash provided by nancing activities 12,159,812,170 5,075,698,213 15,322,846,632

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND

CASH EQUIVALENT

SMDC Annual Report 2012

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Transcript of SMDC Annual Report 2012