SM Investments : Integrated Report 2023

Committed to Our Customers

2023 Integrated Report

Table of Contents

We are SM

Our Vision
Our Commitment to Our Customers
Our Board's Report	2
Our President's Report	4
Our Businesses	7
Our Business Footprint	8
Our Financial Highlights	10
Awards and Recognitions	12

SM to Our Customers	13
Our Brand of Customer Service	14
Our Business Stories	15
SM to Our Stakeholders	35
How We Create Shared Value	36
Our Valued Resources	38
Summary of Survey and Materiality	40
Our Reports	41
Sustainability Data	42
Our Corporate Governance	44
Our Board	45
Financial Statements	57
Report Index	72
Restatement of Our Sustainability Performance	74
Our Report Framework	75
List of Member Associations	76

WE ARE SM

Our Vision

It is our vision to build an ecosystem of sustainable

businesses that are catalysts for responsible development in the communities we serve.

We are committed to partner with our host communities to provide a consistently high standard of service to our customers, look after the welfare of our employees and deliver sustainable returns to our shareholders, at all times upholding the highest standards of corporate governance and environmental stewardship in all our businesses.

Our Commitment to

Our Customers

Serving customers has been at the heart of our business for 65 years. At SM, we are proud to have grown from a single shoe store to where we are today. Millions of Filipinos count on us daily and we look forward to serving more as we continue to expand across the nation.

Our success is based on understanding our customers' wishes and then meeting their every expectation. SM's many stores, wide range of products and dedicated staff all strive to live up to this standard.

In fulfilling our customers' needs, we improve lives. In turn, we ourselves grow and improve the way we do our businesses.

We never take our customers' loyalty lightly. Instead, we do everything we can to earn it.

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SM INVESTMENTS

Founded by Henry Sy, Sr., our company started as a small retailer in 1958 and has since grown to serve millions of Filipinos through our ecosystem of businesses.

Our success is built on our commitment to providing our customers with the best possible experience, making their daily lives more convenient and enjoyable.

RetailProperties

Banking

Portfolio

Investments

Journeying with Our Customers

Our network of retail businesses spans our 74 Department Stores, 1,660 Specialty Stores, 65 Supermarkets, 54 Hypermarkets, 1,692 minimarts and other e-commerce formats, making us one of the largest players in the industry.

This year, The SM Store, SM Markets and Toy Kingdom have been recognized for their exceptional customer service, solidifying our commitment to delivering outstanding experiences. We are grateful for the unwavering support of our customers, who have been with us throughout our journey and continue to appreciate our dedication to serving them.

Aspiring with

Our Customers

Tracing our entrepreneurial and customer service roots from retail, we have successfully built our business into various sectors of the property industry. Through our 85 malls and 22 lifestyle cities to 10 hotels, 8 convention centers and trade halls and 18 offices, we continue to innovate and create spaces that meet our customers' evolving needs and aspirations.

In expanding our property portfolio, we remain committed to sustainable development to positively impact the environment and communities we serve. With an extensive landbank of 2,324 hectares strategically located in emerging progressive cities, we are well positioned for future growth.

Partnering with

Our Customers

Our banks are committed to partnering with our customers to support them with their financial goals. We take pride in serving the banking needs of Filipinos, particularly small businesses, contributing to the growth of the Philippine MSME sector. We do all these as we strive for financial inclusion by empowering the unbanked and increasing access to financial services.

BDO is the largest bank in the country and has the largest distribution network, with more than 4,800 ATMs nationwide and 1,720 operating branches and offices. BDO Network Bank has 500+ branches in provinces, while Cash Agad has 9,700+ partners in remote areas.

China Bank continues to provide financial assistance to expanding businesses effectively through its 648 branches and 1,069 ATMs nationwide.

Evolving with

Our Customers

We make strategic investments in high-growth sectors in the Philippines, in companies that benefit from being part of the SM ecosystem. We aim to deliver substantial value for all stakeholders. Today, our portfolio has evolved through our diverse but related investments in logistics, renewable energy, commercial property, food manufacturing, leisure and mining.

With a commitment to elevating industry standards and contributing to the dynamic growth of our nation, we continue to make an impact across multiple sectors.

2023 Integrated Report | Committed to Our Customers

1

Our Board's Report

Amando M. Tetangco, Jr.	Teresita T. Sy	Henry T. Sy, Jr.
Chairman / Independent Director	Vice Chairperson	Vice Chairman

To Our Stakeholders,

We are pleased to report another remarkable year for the SM group in 2023, reflecting the underlying strength of the Philippine economy and the resilience of Filipino consumers.

Our performance reflects the high customer focus present in every one of our businesses and our status as a leading proxy for the country.

In 2023, we experienced steady earnings growth in each of our core businesses of retail, banking and property. Although inflation and interest rates remained elevated, Filipino consumers remained buoyant in their spending, particularly in discretionary categories and we continued to innovate and work hard to meet their needs. Meanwhile our portfolio investments also continued to grow and contribute significantly to our earnings.

This year, our focus remains on responsible growth. Good governance and transparency, looking after our many stakeholders and protecting the environment remain the way we do business.

While global uncertainties continue to exist, we are optimistic about our outlook for 2024 and the continuation of our strong all-round performance.

In 2023, we experienced strong earnings growth in each of our core businesses of retail, banking and property.

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Our focus remains on responsible growth. Good governance and transparency, looking after our many stakeholders and protecting the environment remain the way we do business.

We would like to extend our thanks to Mr. Jose T. Sio, who this year took up the position of Chairman Emeritus of SM Investments after over three decades of service as Chief Finance Officer and, later, Chairman of the holding company. His contributions have been many and invaluable over the years and our thanks to him are both professional and personal.

Lastly, we would like to thank our leadership and our people for their unwavering dedication, our private and public sector partners for their continued support and our customers for their continued loyalty. We would also like to thank our Board members for their guidance and our shareholders for their confidence in us.

Above all, we remain committed to our customers. We look forward to serving more Filipinos.

Jose T. Sio, Chairman Emeritus, was the Chairman of the Board of SMIC until June 16, 2023

Amando M. Tetangco, Jr. / Chairman / Independent Director

Teresita T. Sy / Vice Chairperson

Henry T. Sy, Jr. / Vice Chairman

2023 Integrated Report | Committed to Our Customers

3

Our President's Report

2023 marked another successful year across the SM group. Each of our business areas contributed to consolidated revenue growth of 11% and earnings growth of 25%, even as we continued to invest in expansion across the country and in new high-growth sectors.

To Our Stakeholders

I am delighted to report that 2023 marked another successful year across the SM group. Each of our business areas contributed to consolidated revenue growth of 11% and earnings growth of 25%, even as we continued to invest in expansion across the country and in new high-growth sectors. We achieved this by staying close to our customers and by working to ensure positive benefits for all our stakeholders.

Philippine GDP grew by 5.6%, supporting strong consumption spending. Filipino consumers benefited from a record-low unemployment rate of 3.1% and ongoing positive growth in overseas Filipino worker remittances of 2.9%.

Inflation averaged 6.0%, ending the year at 3.9%, largely driven by rising energy and food costs. Against this, we worked hard to ensure our products and services continued to meet our customers' needs, whatever their wallet size.

Our banks delivered the largest portion of our earnings last year as they benefited from higher margins and broad economic growth. Meanwhile, our malls experienced high foot traffic and strong consumer activity, especially in F&B, entertainment and services. Similarly, in our retail businesses, discretionary spending was high, particularly in categories such as fashion, footwear, children, pets and health and beauty.

Our long-term policy of financial prudence ensured that, as a group, we were not adversely impacted by high interest rates. Our balance sheets remain strong, with our banks well capitalized and all businesses able to invest in their growth.

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Expanding to Serve More Filipinos

In 2023, we opened 419 new retail stores, 78 new bank branches and expanded our mall footprint by three malls in the Philippines. The vast majority of this expansion was outside of Metro Manila, intentionally expanding our presence into new provinces, where economic growth typically exceeds the national average. Many Filipinos today remain underserved by modern retailing, banking services and integrated property development.

As one of the largest players in these sectors, our strategy continues to be to expand coverage nationwide and create new markets, even as we deepen how we serve our existing customers.

In this vein, SM Prime, our property arm, announced a goal to achieve a milestone of 100 malls in the Philippines by the end of 2027 from 85 today.

Alfamart, our minimart grocery format, intends to increase its expansion from 250 new stores a year to at least 400 commencing in 2024.

Meanwhile, in BDO, we continued to focus on branch expansion in the Visayas-Mindanao regions through BDO Network Bank. In China Bank, we enhanced financial inclusion by improving the accessibility and convenience of digital banking services.

PHP616.3bn

Revenues

11%

Revenue Growth

PHP77.0bn

Net Income

We also aim to develop our presence in newer and higher growth sectors through active investments by our parent company. Our portfolio of investments now accounts for 9% of the group's earnings, with a medium-term goal to increase this into the mid-teens. Last year, we increased our stake in the leading logistics company, 2GO, to 67.2% after de-listing it from the stock exchange. After several years of investment and business turnaround, 2GO is now profitable. In 2023, the company also acquired two new ships to add to its fleet of 8 ROPAX (roll-on/roll-off passenger) vessels and one freighter, enabling it to serve more routes.

Meanwhile, following our acquisition of Philippine Geothermal Production Company (PGPC) in late 2022, last year we undertook the exploration of six new steam field areas in Northern and Southern Luzon with the aim to double our 300 megawatts of steam production from our two existing fields over the next five years.

We intend to invest more in the logistics and renewable energy sectors going forward and also to look for similarly high growth opportunities in other sectors where there are strong synergies within our ecosystem of SM businesses.

2023 Integrated Report | Committed to Our Customers

5

Inclusive and Responsible Growth

Last year SM celebrated its 65th anniversary and it was marked by many events to reconnect with our customers, tenants and the many MSMEs who have grown with our brand over the years. Today, we continue to operate with our Founder's fundamental belief that business growth and the good of our stakeholders go hand in hand. As we grow, we work hard to ensure shared value creation.

To this end, in 2023, we continued to champion workplace inclusivity for our 131,000 people and we deepened our support for the over 100,000 MSMEs among our tenants and suppliers. Through our Foundations, we undertook school building and scholar programs, constructed healthcare facilities nationwide and supported a number of farmer training. Our medical missions achieved the milestone of serving over one million Filipinos.

In our environmental advocacy, we ensured that each of our businesses has a comprehensive long-term sustainability roadmap and is looking to manage their environmental impact. We continue to support the UN Global Compact and 17 Sustainable Development Goals, the UN Women's Empowerment Principles, the Taskforce for Climate-related Financial Disclosures, the Carbon Disclosure Project and the Global Reporting Initiative principles.

In addition to our parent company's investments in renewable energy, our bank, BDO Unibank, is one of the largest funders of the local renewable energy sector, supporting 59 large-scale projects nationwide.

Recognitions

We are grateful to be recognized by a number of leading local and international awards bodies last year. The categories in which we were cited align well with our priorities. Our list of recognitions includes the following:

Several group companies were recognized in the Philippines' Best Customer Service 2023 awards, including the SM Store, Toy Kingdom, BDO Unibank, SM Markets and SM Cinemas.

Forbes magazine recognized SM as one of the World's Best Employers in 2023. Leading ESG rating company, Sustainalytics, again regarded SM Investments as Top Rated both among diversified financial companies globally and among all companies in Asia Pacific.

In governance, 10 SM companies were recognized by the Institute of Corporate Directors last year and as a group, we also garnered six regional awards by the ASEAN Corporate Governance Scorecard.

Our Thanks

On behalf of the SM group, I'd like to extend our thanks to our numerous stakeholders nationwide for their unwavering trust and support. This includes our dedicated people, our many supportive partners, our host communities and, in particular, our millions of customers. Your confidence inspires us to continue to grow, to do so responsibly and to serve more Filipinos.

We look forward to 2024 and the many opportunities ahead.

Thank you.

President and CEO

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Our Businesses

Our businesses work together as an ecosystem that serves our customers' needs. With a diverse portfolio spanning retail, property development, banking and more, we aim to provide a comprehensive range of products and services that cater to their needs, fostering convenience, innovation and sustainable growth.

Our Business Footprint

	SM Retail
	77.3%	1,692
	Effective Interest	Alfamart
	PHP415.0bn	65
	Revenues	SM Supermarket
	74	54
	The SM Store	SM Hypermarket
	219	88
	Savemore	Waltermart
	1,660	1
	Specialty Stores	MindPro

	SM Prime
	49.7%	24
	Effective Interest	Leisure Homes
	PHP128.1bn	18
	Revenues	Office Buildings
	22	10
	Integrated Lifestyle Cities	Hotels
	85	6
	Malls in the Philippines	Convention Centers
	8	2
	Malls in China	Trade Halls
	67	1
	Primary Residences	Arena

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