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7/30/2019 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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4 SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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5SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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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6 SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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7SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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
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
90 -
80 -
70-
60 -
50 -
40 -
30 -
20 -
10 -
0 -
90 -
80 -
70-
60 -
50 -
40 -
30 -
20 -
10 -
0 -
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
25 -
20 -
15 -
10 -
5 -
0 -
25 -
20 -
15 -
10 -
5 -
0 -
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8 SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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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9SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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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10 SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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
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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11SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
OurvisionistoconnuetoenrichtheFilipinolifestylethroughourdevelopments.Asweremaincommiedtothis
vision,wehopethemarketwillconnuetowelcomeournew
productoerings.
Grace Residences
Grace Residences
Breeze Residences
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12 SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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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13SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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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14 SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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
HenryT.Sy,Jr. Member
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
HenryT.Sy,Jr. Member
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.
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15SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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
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16 SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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
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17SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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
(IndependentDirector)
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
(IndependentDirector)
ElizabethT.Sy Member
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18 SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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.
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19SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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.
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20 SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012
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
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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
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONSM DEVELOPMENT CORPORATION AND SUBSIDIARIES
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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SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012 23
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONSM DEVELOPMENT CORPORATION AND SUBSIDIARIES
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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SM DEVELOPMENT CORPORATION ANNUAL REPORT 201224
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONSM DEVELOPMENT CORPORATION AND SUBSIDIARIES
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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SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012 25
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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SM DEVELOPMENT CORPORATION ANNUAL REPORT 201226
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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SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012 27
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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SM DEVELOPMENT CORPORATION ANNUAL REPORT 201228
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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SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012 29
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
See accompanying Notes to Consolidated Financial Statements.
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SM DEVELOPMENT CORPORATION ANNUAL REPORT 201230
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMESM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Years Ended December 31
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
See accompanying Notes to Consolidated Financial Statements.
Years Ended December 31
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
Balance at end o year 13,433,597,654 13,433,597,654 8,505,270,332
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
Balance at end o year 6,000,000,000 1,500,000,000 1,500,000,000
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)
Balance at end o year 8,544,476,059 9,404,312,133 7,061,849,215
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
Balance at end o year 2,888,945,814 2,641,754,870 2,176,397,180
P40,138,223,766 P35,408,033,278 P25,655,839,270
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
SM DEVELOPMENT CORPORATION AND SUBSIDIARIES
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SM DEVELOPMENT CORPORATION ANNUAL REPORT 2012 31
Years Ended December 31
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