SM Prime : 2023 17-A Annual Report

COVER SHEET

for

SEC FORM 17-A

SEC Registration Number

								A S 0 9 4 - 0 0 0 0 8 8
						Company Name
S M	P R I M E	H O L D I N G S ,	I N C .	A N D	S U
B	S I	D I A R I	E S
			Principal Office (No./Street/Barangay/City/Town/Province)
7	/ F	M O A	S q u a r e ,	S e a s h e l l		L a n e
c o r .	C o r a l	W a y ,	M a l l	o f	A s i a	C
o m p l e x ,	B r g y .	7 6	Z o n e	1 0 ,	C B P
1 - A ,	1 3 0 0	P a s a y	C i t y ,	M e t r o	M a
n i l a ,	P h i l	i p p i n e s

Form Type	Department requiring the	Secondary License Type, If
	report	Applicable
1 7 - A
	COMPANY INFORMATION
Company's Email Address	Company's Telephone	Mobile Number
	Number/s
	8831-1000
	Annual Meeting	Fiscal Year
No. of Stockholders	Month/Day	Month/Day
2,330		December 31

CONTACT PERSON INFORMATION

The designated contact person MUSTbe an Officer of the Corporation

Name of Contact Person	Email Address	Telephone	Mobile Number
		Number/s
John Nai Peng C. Ong	[e-mail]	8831-1000
	Contact Person's Address

7/F MOA Square, Seashell Lane cor. Coral Way, Mall of Asia Complex, Brgy. 76 Zone 10,

CBP 1-A, 1300 Pasay City, Metro Manila, Philippines

Note: In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated.

SECURITIES AND EXCHANGE COMMISSION

SRC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17

OF THE SECURITIES REGULATION CODE

1. For the calendar year ended DECEMBER 31, 2023

1. SEC Identification Number AS094-000088
2. BIR Tax Identification No. 003-058-789
3. Exact name of registrant as specified in its charter SM PRIME HOLDINGS, INC.

5.	PHILIPPINES	6.			(SEC Use Only)
	Province, Country or other jurisdiction of		Industry Classification Code:
	incorporation or organization

7. 7/F MOA Square, Seashell Lane cor. Coral Way, Mall of Asia Complex, Brgy. 76 Zone

10, CBP 1-A, Pasay City, Metro Manila, Philippines	1300
Address of principal office	Postal Code
8. (632) 8831-1000
Registrant's telephone number, including area code

1. 10th Floor, Mall of Asia Arena Annex Building, Coral Way cor. J.W. Diokno Blvd., Mall of Asia Complex, Brgy. 76, Zone 10, CBP-1A, Pasay City, Philippines
   Former name, former address, and former fiscal year, if changed since last report.
2. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA

		Number of Shares of Common Stock
	Title of Each Class	Outstanding and Amount of Debt Outstanding
	Common Shares	28,879,231,694
	Retail Bonds	P135,432,740,000
11. Are any or all of these securities listed on a Stock Exchange.
Yes [X]	No [ ]
If yes, state the name of such stock exchange and the classes of securities listed therein:
Philippine Stock Exchange	Common Shares

12. Check whether the registrant:

1. has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding 12 months (or for such shorter period that the registrant was required to file such reports);

Yes [X] No [ ]

(b) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

13. Aggregate market value of the voting stock held by non-affiliates: P330,372,828,055

	TABLE OF CONTENTS
		Page No.
PART I - BUSINESS AND GENERAL INFORMATION
Item 1.	Business	1
Item 2.	Properties	10
Item 3.	Legal Proceedings	12
Item 4.	Submission of Matters to a Vote of Security Holders	12
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 5.	Market for Registrant's Common Equity and
	Related Stockholder Matters	13
Item 6.	Management's Discussion and Analysis of
	Financial Condition and Results of Operations	15
Item 7.	Financial Statements	32
Item 8.	Information on Independent Accountant and
	Other Related Matters	32
PART III - CONTROL AND COMPENSATION INFORMATION
Item 9.	Directors and Executive Officers of the Registrant	33
Item 10.	Compensation of Directors and Executive Officers	46
Item 11.	Security Ownership of Certain Beneficial Owners
	and Management	47
Item 12.	Certain Relationships and Related Transactions	48
PART IV - CORPORATE GOVERNANCE
Item 13.	Corporate Governance	50
PART V - EXHIBITS AND SCHEDULES
Item 14.	a. Exhibits	54
	b. Reports on SEC Form 17-C (Current Report)	54
	c. Integrated Report	54
INDEX TO EXHIBITS	55
INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY SCHEDULES	56
INDEX TO ADDITIONAL DISCLOSURES	57
SIGNATURES

PART I - BUSINESS AND GENERAL INFORMATION

ITEM 1. Business

Business Development and Principal Products or Services

SM Prime Holdings, Inc. (SMPH or the Parent Company) was incorporated in the Philippines and registered with the Securities and Exchange Commission (SEC) on January 6, 1994. SMPH and its subsidiaries (collectively known as the Company or SM Prime) are incorporated to acquire by purchase, exchange, assignment, gift or otherwise, and to own, use, improve, subdivide, operate, enjoy, sell, assign, transfer, exchange, lease, let, develop, mortgage, pledge, traffic, deal in and hold for investment or otherwise, including but not limited to real estate and the right to receive, collect and dispose of, any and all rentals, dividends, interest and income derived therefrom; the right to vote on any proprietary or other interest on any shares of stock, and upon any bonds, debentures, or other securities; and the right to develop, conduct, operate and maintain modernized commercial shopping centers and all the businesses appurtenant thereto, such as but not limited to the conduct, operation and maintenance of shopping center spaces for rent, amusement centers, movie or cinema theatres within the compound or premises of the shopping centers, to construct, erect, manage and administer buildings such as condominium, apartments, hotels, restaurants, stores or other structures for mixed use purposes.

SMPH's shares of stock are publicly traded in the Philippine Stock Exchange (PSE).

The Company's ultimate parent company is SM Investments Corporation (SMIC). SMIC is a Philippine corporation whose common shares is listed with the PSE in 2005. SMIC and all its subsidiaries are herein referred to as the "SM Group".

The registered office and principal place of business of the Parent Company is at 7/F MOA Square, Seashell Lane cor. Coral Way, Mall of Asia Complex, Brgy. 76 Zone 10, CBP 1-A, 1300 Pasay City, Metro Manila, Philippines.

The subsidiaries of the Parent Company are as follows:

	Date and Place of	Percentage of
Company	Incorporation	Ownership

Mall

A. Canicosa Holdings, Inc.	October 10, 2008,	100.0
	Philippines
AD Canicosa Properties, Inc.	October 10, 2008,	100.0
	Philippines
Associated Development Corporation	May 26, 1950,	100.0
	Philippines
Britannia Trading Corp. and Subsidiaries	June 15, 2001	100.0
	Philippines
CHAS Realty and Development Corporation and Subsidiaries	January 31, 1995,	100.0
	Philippines
Cherry Realty Development Corporation	October 28, 1977,	100.0
	Philippines
Consolidated Prime Dev. Corp.	April 7, 1998,	100.0
	Philippines
Magenta Legacy, Inc.	November 30, 2006,	100.0
	Philippines
Premier Central, Inc. and Subsidiary	March 16, 1998,	100.0
	Philippines
Premier Southern Corp.	March 25, 1998,	100.0
	Philippines
Prime Metroestate, Inc. and Subsidiary	June 1, 1995,	100.0
	Philippines
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	Date and Place of	Percentage of
Company	Incorporation	Ownership
Prime_Commercial Property Management Corp. and	November 6, 2009,	100.0
Subsidiaries	Philippines
Rushmore Holdings, Inc.	April 14, 1994,	100.0
	Philippines
San Lazaro Holdings Corporation (SLHC)	March 7, 2001,	100.0
	Philippines
Simply Prestige Limited and Subsidiaries	April 23, 2013,	100.0
	British Virgin Islands
SM Arena Complex Corporation	March 15, 2012,	100.0
	Philippines
SM Land (China) Limited and Subsidiaries	August 9, 2006,	100.0
	Hong Kong
Southernpoint Properties Corp.	June 10, 2008,	100.0
	Philippines
Springfield Global Enterprises Limited	September 6, 2007,	100.0
	British Virgin Islands
Supermalls Transport Services, Inc.	January 25, 2017,	100.0
	Philippines
First Asia Realty Development Corporation	September 7, 1987,	74.2
	Philippines
Mindpro, Incorporated	July 3, 1970,	70.0
	Philippines
First Leisure Ventures Group Inc. (FLVGI)	March 28, 2007,	50.0
	Philippines
Residential
SM Development Corporation and Subsidiaries (SMDC)	July 18, 1974,	100.0
	Philippines
Costa del Hamilo Inc. and Subsidiary (CDHI)	September 26, 2006,	100.0
	Philippines
Highlands Prime, Inc. and Subsidiary	February 15, 2001,	100.0
	Philippines
Commercial
MOA Esplanade Port, Inc.	December 5, 2014,	100.0
	Philippines
Premier Clark Complex, Inc.	May 29, 2019,	100.0
	Philippines
SM Smart City Infrastructure and Development Corporation	August 27,2019,	100.0
(SM Smart City)	Philippines
Tagaytay Resort Development Corporation	August 29, 1988,	100.0
	Philippines
Hotels and Convention Centers
SM Hotels and Conventions Corp. and Subsidiaries	April 2, 2008,	100.0
	Philippines

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to the various enterprise risks include mitigate, transfer, tolerate, and avoid or terminate. Specific action plans relating to these four (4) responses include investment in innovations or new technology, provision of further training to employees, management review and monitoring, performance of regular audits, establishment and implementation of policies, constant partnerships with various stakeholders, and designing and implementing controls, among others.

SM Prime follows an eight-step Risk Management Approach, which starts from the identification and prioritization of risks, to the assessment of risk interrelationship and analysis of the sources of risks, then to the development of risk management strategies and action plans, and ultimately, to the monitoring and continuous improvement of the risk management process. To ensure that controls and risk treatment plans are in place and functioning effectively as intended, independent reviews are regularly carried out by Internal Audit, external auditors, and regulatory examiners.

SM Prime Key Risks

Safety and Security Risk	SM Prime prioritizes safety and security in all its properties and requires
	all its Business Units to have Emergency Response Procedures in place.
	The safety and security system implemented in malls' properties is
	audited annually by third parties. This gives the Company confidence that
	risks related thereto are adequately mitigated, and any area that needs
	improvement is identified and addressed.
	With regard to safety risk management, the Company has instituted
	several programs aimed at promoting the health and well-being of the
	employees and the public. Health and safety programs include
	institutional annual physical exams, health bulletins, wellness talks,
	onsite retainer doctors and nurses, among others. To complement the
	presence of medical practitioners, the Customer Relations Services
	(CRS) introduced the SM Emergency Response Team (SMERT). The
	SMERT members are trained first-aiders who can assist employees and
	the public whenever there is an emergency. The Company regularly
	participates in Fire Safety and Earthquake Drills conducted by different
	government agencies.
Climate Risk	The Company's Board of Directors place an emphasis on mitigating
	Climate Risk and has instituted numerous programs to improve its
	climate disaster risk reduction and resiliency. The Company continued
	investing in disaster-resilient buildings and allocated capital expenditure
	for sustainable design and other disaster risk reduction-related
	investments. The Company aims to reduce greenhouse gas emissions by
	shifting its demand for electricity sources to renewable energy sources
	and to institute other programs by reducing energy and water
	consumption in its properties.
	SM Prime demonstrates its commitment in its innovations on energy and
	carbon emission reduction. By operating with less use of energy, it
	decreases the need for fossil fuels, which lowers atmospheric carbon
	dioxide levels. Thus, it contributes in curbing the impact of climate
	change such as heat waves, droughts, rising sea levels, unusual weather
	patterns, and a heightened probability of natural disasters.
	In compliance with RA 11285 or the "Energy Efficiency and
	Conservation Act", the Company has measures to improve the energy
	efficiency and conservation of its facilities. SM Supermalls achieved an
	energy efficiency index below the recommended ASEAN standards for
	retail establishments. Through the conduct of an energy audit, this helped
	create baseline energy indicators and identify energy efficiency
	opportunities such as procurement of energy-efficient equipment and
	increase in the adoption of renewable energy sources.
	4

	Further, the Company integrated passive design concepts in its
	properties, such as infiltration protection control, and addition of plants
	to surrounding areas on the properties which contribute to cooling effect,
	and in turn, reduce the need for cooling energy produced by air-
	conditioning systems.
	SM Prime also led in the installation of the Electric Vehicle Charging
	Stations (EVCS) in multiple properties, to support and align with
	Republic Act 11697 (Electric Vehicle Industry Development Act or
	EVIDA). As of 2023, malls and commercial property group have EVCS
	installed throughout the nation to promote the use of electric vehicles.
	Ultimately, this program contributes to lowering carbon emissions with
	the transition of traditional car users to an environmentally friendly
	alternative.
Operational Process Risk	The Business Process Management Team reviews business processes and
	initiates the creation of tools that enhance operational efficiency. The
	Company adopts globally recognized quality standards, which drive
	operational excellence through revenue and expense management.
	Further, it is committed to continue improving on currently existing
	effective and efficient processes to ensure operational efficiency of all
	Business Units.
	Policies are established to institutionalize best practice and ensure these
	are accepted by all process owners. Memoranda are also regularly issued
	to address any ambiguity on policies, reiterations, or adjustments when
	circumstances require. Improvements to processes are regularly
	examined and implemented by the Business Units to support and cater to
	the people who participate in it better. This is reflected in the various
	automation systems and portals to centralize, elevate efficiency, and
	streamline work to increase quality of life and outputs.
Economic Risk	The Company strives to maintain competitive in the industry by focusing
	on innovative developments and expanding market share while
	maintaining a customer-centric approach. Diversification of target
	markets to minimize exposure and building of rapport and relationship
	with local and national bodies are also undertaken to address market
	instability and uncertainty of local and national policies.
	In addressing inflation, the Company's internal engineering group
	performs weekly construction review meeting, ensuring continuous
	research for new materials, technologies and methodologies, implements
	physical hedging for owner-supplied materials, contingency allowances,
	continuous strong partnership with suppliers, phasing of project
	developments to manage the cash flow, etc.
Financial Risk	The Company also manages credit risk in its customer transactions. This
	is done in line with policies and procedures established relating to the
	handling of credit risk. Typically, the management of credit risk involves
	the assessment of quality of customer's credit, and defining limits based
	on such assessment.
	A conservative approach is applied to manage Financial Risks
	specifically Foreign Exchange and Interest Rates. Majority of SM Prime
	loans are fixed interest rate loans, which shields the Company against the
	effects of fluctuating interest rates. The management of foreign exchange
	risk is done by utilizing derivative financial instruments serving as hedge
	to exposures in variability in cash flows attributable to foreign currency
	risk in firm commitment. Similarly, the same instruments are used to
	5

		hedge interest rate risks. The Company's derivative financial instruments
		include cross currency swaps, principal only swaps, interest rate swaps
		and foreign exchange forward swaps.
Information Security and	The Board stresses the importance of prudent Information Technology
Information	Technology	(IT) risk management. The CRO reports to the Board the status of risk
Risk		management, risk mitigation plans and issues, if any, of the Company
		particularly on the implementation of its continuity plans, backup
		procedures, protection against damaging code and malicious activities,
		defined and specific system access control, information rights
		management, IT accounts governance, endpoint protection, incident
		management and reporting, among others. Through periodic risk
		assessments, threats to assets are identified, vulnerability to and
		likelihood of occurrence are evaluated, and potential impact are estimated
		in the areas of network, operating system, application and database in
		production. Specifically, system vulnerability assessments and
		penetration testing are performed regularly. This is critically important in
		proactively detecting and addressing threats and vulnerabilities, and
		enhancing system's defenses.
		In terms of cyber security management, the Company has adopted
		globally accepted standards to employ a similar global approach of cyber
		security strategies within the organization. Moreover, Security
		Operations Center is in place to monitor, prevent, detect, investigate, and
		respond to cyber threats to various attack surfaces, which can potentially
		impact SM Prime. In coordination with Human Resources, risk
		awareness campaigns and learning programs including various
		information security modules, and risk management best practices are
		effectively communicated through various internal channels to
		employees.
Social Risk		Social Risks are managed by continuously engaging our customers and
		the community through satisfaction surveys, maximizing social media
		communications and demographic analysis. Through these channels of
		engagement, the Company has a better understanding of how to serve the
		community such as promotion of equal opportunities and inclusivity for
		persons with special needs, senior citizens, women and indigenous
		people. For business partners, employment practices are based on criteria
		that places value on quality of service, cost efficiency, moral standing
		and compliance with related laws.
Regulatory	Compliance	Compliance risk is addressed and managed by the compliance function
Risk		and its component system and programs. The Company continuously
		strives to comply with all regulatory requirements both on the local and
		national level and uses a risk-based approach to monitor, evaluate and
		improve its ability to ensure compliance in a landscape that is subject to

disruption and rapid change. Compliance functions are carried out by the Compliance Office through its various business units' lead and is headed by the Chief Compliance Officer, who is not a member of the Board of Directors. Each business segment considers the impact to operations and business risk of noncompliance. Overall enforcement is through self- regulation within the business units, and independent reviews conducted by the Compliance Office and Internal Audit.

The Corporate Compliance Group (CCG) promotes adherence to and awareness of laws, rules and regulations by electronically posting information and documents, and maintains a monitoring database that is accessible to all employees. Regular meetings are conducted to discuss the impact of new regulations and decide on the required compliance measures. Through continued liaison and dialogue with regulators, CCG

6

		ensures the prompt dissemination of new regulations and other
		developments affecting Company operations. Further, specialized teams
		are utilized to leverage on compliance risk management, showing how
		current teams are maximized to integrate compliance functions and
		promote compliance.
		As a company engaged in the development of real property for sale or
		lease, the Company is a covered person of the Anti-Money Laundering
		Act (AMLA). SM Prime dutifully completed the registration process and
		adopted a Money Laundering and Terrorist Financing Prevention
		Program (MTPP) that was duly approved by the Board of Directors. In
		line with this, the "Capacity Building Learning Modules for Designated
		Non-Financial Businesses and Professions (DNFBPs)" training was
		conducted for front liners with key support functions to implement the
		program. The module includes: (a) Fundamentals of Money Laundering
		and Terrorism Financing, (b) Risk Management System and Preventive
		Measures and (c) Money Laundering and Terrorism Financing
		Prevention Program (MTPP).
		SM Prime has also established a comprehensive Data Privacy Program
		utilizing a combination of policies, organizational structure, access
		controls and technologies designed for risk reduction. The Board-
		appointed Data Protection Officer (DPO) oversees data privacy
		compliance and manages data protection risks for the organization
		consistent with the Data Privacy Act rules and regulations, issuances by
		the National Privacy Commission and other applicable laws. The
		Company recognizes that anti-money laundering and information risks
		are inherent in its operations throughout its multiple Units.
Property	Damage and	To manage risks that arise and are inherent to managing properties and
Business	Disruption	conducting business on these properties, the Company secures various
Risk		types of insurance. The Company's insurance function primarily aims to
		ensure adequate coverage on its properties and activities, with risks to
		operational and financial positions. This coverage includes material
		damage caused by natural threats or disasters and even manmade threats.
		In line with the scope of insurance, the Company engages a reputable
		insurance broker and insurance companies duly accredited by the
		Insurance Commission.
		The Company has implemented a Business Continuity Management
		System (BCMS). This system assures tenants, suppliers, and other
		external or internal stakeholders in two (2) areas: (a) processes are in
		place that aims to prevent property damage that may lead to business
		disruptions for the Company and the stakeholders; (b) should property
		damage occur and the damage results in business disruption, the
		Company's operations team has the required competencies to handle,
		respond, and continue operations in the occurrence of such disruptive
		events. The Company has continued to cascade and implement BCMS to
		all its malls to ensure it continuously meets its commitments and provide
		continued operation of critical business functions when circumstances
		necessitate it. Annually, the Company's malls undergo ISO 22301
		(BCMS) Certification. The Company engages a third-party assessor,
		TÜV SÜD PSB Philippines, to assess the organization's compliance with
		the ISO 22301:2019 standard.
		As of 2023, a total of seventy-seven (77) malls have been BCMS-
		certified. The roll out of the BCMS is consistently within the set target
		based on the Five-Year Roadmap, wherein the specific targets on the
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