To Our Fellow Shareholders,

SM Prime Holdings, Inc. approaches its 30th anniversary as a public company this 2024. We reflect on 2023 with a sense of gratitude and pride in the resilience and achievements of our people and our various businesses. SM Prime, despite the global economic slowdown has continued to forge a path toward expansion and innovation, resulting in a substantial growth unlike any we have seen since the pandemic.

It is with honor and duty that we hold our stakeholders’ trust, assets and aspirations in our hands. This responsibility drives us to adhere to the highest governance and sustainable development standards, ensuring that we not only meet but exceed their expectations.

As a result, we weathered the year’s economic challenges and set new benchmarks in our business sector. We launched groundbreaking projects and enhanced customer experiences across business platforms, reinforcing our role as a pivotal contributor to the overall economic growth of our country.

Performance Overview

SM Prime’s consolidated revenues saw a significant increase in 2023, underscored by the rise in retail activities and the successful launches of new malls, residential projects, and the enhancement of our commercial, leisure, and hotel properties.

We posted a PHP40.0 billion consolidated net income in 2023, 33% higher than PHP30.1 billion in 2022. Our consolidated revenues reached PHP128.1 billion, 21% greater than last year’s PHP105.8 billion. Consolidated operating income grew by 24% to PHP61.3 billion from PHP49.2 billion.

SM Prime’s mall business, which accounts for 56% of our consolidated revenues, posted a robust 30% growth, reaching PHP71.9 billion from PHP55.4 billion in 2022, buoyed by a 24% increase in mall rental income of PHP61.3 billion. Our retail presence now spans 85 malls in the Philippines and eight in China.

SM Prime’s residential business group, led by SMDC,recorded an 8% growth in revenues to PHP43.1 billion in 2023 from PHP40.1 billion in 2022. Residential group’s gross profit rose by 15% to PHP25.4 billion in 2023 from PHP22.1 billion in 2022. Reservation sales stood at PHP102.1 billion in 2023. This translates to more than 21,000 residential units sold in 2023.

SM Prime’s other key business companies, which include offices, hotels, and convention centers, made up the 10% of our consolidated revenues and has reported PHP13.1 billion in revenues in 2023, a 26% increasefrom PHP10.3 billion in 2022. Our office unit posted PHP6.8 billion in revenues, while our hotels and convention centers unit reached PHP6.3 billion in 2023.

This positive outcome is a testament to the confidence awarded to us by our communities. We have guarded optimism about our outlook into 2024 as we execute our strategic expansion initiatives across our principal business segments, notably within our mall and residential property divisions. With a vision set on a PHP100 billion capital expenditure for 2024, we will further enhance our various integrated property developments this year.

Expansion and Innovation

Our malls continue to serve as vibrant centers of community life, fostering entrepreneurship and social connections. In 2023, we opened SM City Bataan, SM Center San Pedro, and SM City Sto. Tomas, boosting our retail spaces and enriching customer experiences. We’re also enhancing anchor malls like SM City North Edsa, SM City Cebu, and SM Mall of Asia, highlighting our pledge to architectural innovation and resilience against disasters.

SMDC is pioneering new concepts in our residential segment with projects like Ice Residences, which combines residential units with office spaces, a first in our Mall of Asia Complex. Moreover, our collaboration with Federal Land on The Estate in Makati highlights our venture into luxury living, promising unmatched city vistas and privacy.

We also solidified our partnership with Radisson Hotel Group and Lanson Place Hospitality Management Limited (LPHML) to broaden our portfolio. This growth aligns with our overarching strategy to spark economic development, generate more jobs, offer premium accommodations, and cater to the increasing demand for leisure and business facilities nationwide.

Sustainability and Corporate Social Responsibility

As society increasingly looks to the private sector to tackle broader societal challenges, we continued investing in innovative technologies, infrastructure resilience, community development, and environmental sustainability.

SM Prime is dedicated to achieving Net Zero carbon emissions by 2040, emphasizing the importance of science-based targets in our growth strategy. To date, we’ve partnered with various renewable energy suppliers to further support the Department of Energy’s goal to increase the renewable energy share to 35% by 2030. Additionally, our ongoing work with the World Wide Fund (WWF) for Nature- Philippines focuses on verifying our commitment to reducing greenhouse gas emissions.

In water efficiency, we have significant water recycling measures that recycled over 4.4 million cubic meters in 2023 alone. We also prioritize sustainable sourcing, supporting local farmers to enhance food security and promote sustainable agricultural practices. Our commitment extends to our hotels and restaurants, where we adopt practices to minimize food waste. Furthermore, we advocate for eco-friendly transportation by enhancing pedestrian and bicycle infrastructure around our commercial centers.

For its part, SM Supermalls’ SM Cares and SMDC’s The Good Guys continue to serve different communtiies through partnerships with various sectors of the societyto further improve the lives of the many. Included in these activities are coastal clean-ups, donation of school buildings, fire trucks, and hosting eco-camp for youth, which aimed to empower environmental stewards among the youth sector.

In terms of fostering an inclusive culture where everyone can find fulfillment, in 2023, SM Cares and The Good Guys hosted various advocacies including community disaster preparedness, support for senior citizens and PWDs, livelihood generation and entrepreneurship, among many others. To date, 67% of our mall tenants are MSMEs (micro, small, and medium entrepreneurs) bringing new perspective and color to retail industry.

Our combined efforts delivered us new milestones that served as testament to our unwavering commitment of providing etticient and friendly developments and management to people and environment. In 2023, we received 5 Golden Arrow Award from the Insitute of Corporate Directors (ICD) at the ASEAN Corporate Governance Scorecard (ACGS) Golden Arrow Recognition and Asia’s Best Employer Brands from CMO Asia, which served as attestation to our stronger foundation of building a trusted company. Our Company was also recognized at the Steward Leadership 25 for demonstrating resolute action to drive profitable growth by addressing the social and environmental challenges that threaten humanity.

Strategic Focus and Future Outlook

Our achievements for 2023 would not have been possible without the dedication and excellence of our workforce. We extend our most profound appreciation to our employees for their hard work and commitment to our vision. To our customers, your loyalty inspires us to improve and innovate to meet your evolving needs continuously. To our shareholders, your trust and support motivate us to dream bigger and work harder to create more shared values benefitting more Filipinos.

As we prepare to celebrate three decades of groundbreaking success, we pay tribute to the visionary leadership of our founder, Henry Sy, for inspiring our company to redefine the real estate landscape in the Philippines. Through his pioneering spirit, we have extended our reach beyond urban centers, facilitated inclusive economic growth, and touched more lives.

Our flagship developments, such as the Mall of Asia Complex exemplify SM Prime’s bold vision of the future. More than commercial successes, these integrated property developments embody our holistic approach to urban regeneration, where innovation and sustainability converge to enhance the quality of life.

Our journey at SM Prime is a testament to the power of dreaming big. It showcases the remarkable outcomes achievable when we pursue those dreams with dedication, faith, and hard work. This animating force for positive change is at the heart of our long-term growth strategy as we look toward the future, committed to introducing world-class developments to the Philippines with the firm belief that our best achievements are still ahead of us.

Thank you for being an invaluable part of our continuing journey.