SMPH Prospectus VFINAL

8/9/2019 SMPH Prospectus VFINAL

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SM PRIME HOLDINGS, INC.(A corporation duly organized and existing under Philippine laws)

P15,000,000,000

5.1000% p.a. Series A Bonds due 20205.2006% p.a. Series B Bonds due 20215.7417% p.a. Series C Bonds due 2024

Offer Price of 100% of Face Value

SM Prime Holdings, Inc. (the Issuer or SMPrime or the Company) is offering Fixed Rate Bonds (the Bonds) in theaggregate principal amount of P15,000,000,000 comprised of 5.5-year or Series A Bonds, 7-year or Series B Bonds and10-year or Series C Bonds due on 2020, 2021 and 2024 respectively, with an Over-subscription Option of up toP10,000,000,000 (the Offer). Assuming the Over-subscription Option is fully exercised, up to P25,000,000,000.00 inaggregate principal amount of the Bonds will be issued by the Company pursuant to the Offer on 01 September 2014 (theIssue Date).

The Series A Bonds shall have a term of five (5) years and six (6) months from the Issue Date, with a fixed interest rateequivalent to 5.1000% p.a. The Series B Bonds shall have a term of seven (7) years from the Issue Date, with a fixedinterest rate equivalent to 5.2006% p.a. The Series C Bonds shall have a term of ten (10) years from the Issue Date, witha fixed interest rate equivalent to 5.7417% p.a. Interest on the Series A Bonds, Series B Bonds and Series C Bonds shall bepayable quarterly in arrears starting on December 1, March 1, June 1 and September 1 of each year for each InterestPayment Date at which the Series A Bonds, the Series B Bonds and the Series C Bonds are outstanding, or the subsequentBusiness Day without adjustment if such Interest Payment Date is not a Business Day. The Maturity Dates of the Series ABonds, Series B Bonds and Series C Bonds shall be on 01 March 2020, 01 September 2021 and 01 September 2024,respectively, which will also be the last Interest Payment Dates for each respective series of the Bonds.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE

SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE.

ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE AND

SHOULD BE REPORTED IMMEDIATELY TO THE SECURITIES AND EXCHANGE

COMMISSION.

Joint Issue Managers and Joint Bookrunners

Joint Lead Underwriters

Participating Underwriters

Land Bank of the Philippines Philippine Commercial Capital, Inc. PNB Capital and Investment Corp.RCBC Capital Corporation SB Capital Investment Corp.

Prospectus dated 11 August 2014


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that describe SM Primes objectives, plans, and goals are also forward-looking statements. All forward-looking statementsare subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated bythe relevant forward-looking statements. Nothing in this Prospectus is or should be relied upon as a promise orrepresentation as to the future. The forward-looking statements included herein are made only as of the date of thisProspectus, and SM Prime undertakes no obligation to update such forward-looking statements publicly to reflectsubsequent events or circumstances.

Neither the delivery of this Prospectus nor any sale made pursuant to the Offer shall, under any circumstance, create anyimplication that the information contained or referred to in this Prospectus is accurate as of any time subsequent to thedate hereof. The Underwriters do not make any representation or warranty, express or implied, as to the accuracy orcompleteness of the information contained in this Prospectus.

The contents of this Prospectus are not to be considered as definitive legal, business or tax advice. Each prospectivepurchaser of the Bonds receiving a copy of this Prospectus acknowledges that he has not relied on the Underwriters in hisinvestigation of the accuracy of such information or in his investment decision. Prospective purchasers should consult theirown counsel, accountants or other advisors as to legal, tax, business, financial and related aspects of the purchase of theBonds, among others. Investing in the Bonds involves certain risks. For a discussion of certain factors to be considered inrespect of an investment in the Bonds, see the section entitled Risk Factorsfound on page 23 of this Prospectus.

No dealer, salesman or other person has been authorized by SM Prime and the Underwriters to give any information or to

make any representation concerning the Bonds other than as contained herein and, if given or made, any such otherinformation or representation should not be relied upon as having been authorized by SM Prime or the Underwriters.

SM Prime is organized under the laws of the Philippines. Its principal office address is at the 10thfloor, Mall of Asia ArenaAnnex Building, Coral Way corner J. W. Diokno Boulevard, Mall of Asia Complex, CBP-1A, Pasay City 1300, Philippines, withtelephone number +632 831 1000 and fax number +632 833 8991.

ALL REGISTRATION REQUIREMENTS HAVE BEEN MET AND ALL INFORMATION

CONTAINED HEREIN ARE TRUE AND CURRENT.

SM Prime Holdings, Inc.By:

HANS T. SYPresident

SUBSCRIBED AND SWORN to before me this __________ day of ___________________ 2014,affiant exhibiting to me his Philippine Passport no. __________________________ issued on

______________ at ___________________.

Doc. No. _______Book No. _______

Page No. _______Series of 2014.


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DEFINITIONS

In this Prospectus, unless the context otherwise requires, the following terms shall have the meanings setout below.

AFS Available-for-sale assets

BDG SM Primes Business Development Group

BDO Insurance BDO Insurance Brokers, Inc.

BDO Unibank BDO Unibank, Inc.

BDO Capital BDO Capital & Investment Corporation, an investment house and awholly-owned subsidiary of BDO

BIR the Bureau of Internal Revenue of the Philippines

Board or Board of Directors The board of directors of SM Prime

Bondholder a person or entity whose name appears, at any time, as a holder of theBonds in the Register of Bondholders

Bonds refers collectively to the Series A, Series B and Series C Bonds in theaggregate principal amount of P15,000,000,000, and an Over-subscriptionOption of up to P10,000,000,000, to be issued by SM Prime and which wilmature on 01 March 2020, 01 September2021 and 01 September 2024,respectively

B. P. 220 Batas Pambasa Blg. 220

BPI Capital BPI Capital Corporation

BSP Bangko Sentral ng Pilipinas, the Philippine Central Bank

Business Day means a day, other than Saturday, Sunday and public holidays, on whichfacilities of the Philippine banking system are open and available forclearing and banks are generally open for the transaction of business in thecities of Pasay and Makati

By-laws the By-laws of SM Prime

CAR A Certif icate Authorizing Registration from the BIR

CDHI Costa del Hamilo, Inc.

China Bank China Banking Corporation

Company or Issuer or SM Prime SM Prime Holdings, Inc. and its consolidated subsidiaries

DAR The Philippine Department of Agrarian Reform

DENR The Philippine Department of Environment and Natural Resources

DOT The Philippine Department of Tourism

Directors Members of the Board of Directors of SM Prime


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Financial Statements SM Primes audited consolidated financial statements and related notes asat and for the years ended 31 December 2011, 2012 and 2013, andunaudited consolidated financial statements and related notes as at and forthe three months ended 31 March 2014

FMIC First Metro Investment Corporation

GFA gross floor area

Government the Government of the Philippines

GSIS Government Service Insurance System

HLURB Housing and Land Use Regulatory Board

HPI Highlands Prime, Inc.

Joint Issue Managers andJoint Bookrunners

BDO Capital and FMIC

Joint Lead Underwriters BDO Capital, BPI Capital, China Bank and FMIC, pursuant to the IssueManagement and Underwriting Agreement dated 11 August 2014

LGU Local government unit

Maceda Law Republic Act No. 6552

Major Consignors Hardware Workshop, Home World, Baby Company, Signature Lines,Supplies Stat ion, Toy World, Watsons, Sports Central and Kultura

Majority Bondholders Holders of the Bonds representing not less than 51% of the outstandingBonds

Makro Prime Metro Estate, Inc.

Malls SM City North EDSA, SM Mall of Asia, SM Megamall, SM Aura Premier, SM CitySouthmall, SM City BF Paranaque, SM City Fairview, SM City San Lazaro, SM CityMarikina, SM City Manila, SM City Sta. Mesa, SM City Bicutan, SM City Sucat,SM Center Valenzuela, SM City Novaliches, SM Center Muntinlupa, SM CenterLas Pinas, SM Center Pasig, SM City Cebu, SM City Dasmarinas, SM LanangPremier, SM City Clark, SM City Pampanga, SM City Davao, SM City GeneraSantos, SM City Bacoor, SM City Baguio, SM City Iloilo, SM City Consolacion, SMCity Tarlac, SM City Taytay, SM City Marilao, SM City Masinag, SM City Cagayande Oro, SM City Sta. Rosa, SM City Batangas, SM City Lucena, SM City Lipa, SMCity Naga, SM City Bacolod, SM City Calamba, SM City Rosales, SM CityBaliwag, SM City Rosario, SM City San Pablo, SM Center Molino, SM CityOlongapo, SM City San Fernando

Management Companies companies that manage and operate the Malls, including the provisionof manpower, maintenance and engineering, security and promotionaactivities; and are controlled, directly or indirectly, by the Sy Family

Master Certificate of

Indebtedness

the certificate to be issued by the Issuer to the Trustee evidencing andcovering such amount corresponding to the Bonds


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Material Subsidiary SM Development Corporation, SM China Companies, and any Subsidiaryof the Issuer:

(a) whose gross revenues or (in the case of a Subsidiary which itself hassubsidiaries) consolidated gross revenues, as shown by its latestaudited income statement are at least 10% of the consolidated gross

revenues as shown by the latest published audited consolidatedincome statement of the Issuer and its Subsidiaries; or

(b) whose net income or (in the case of a Subsidiary which itself hassubsidiaries) consolidated net income before taxation andextraordinary items, as shown by its latest audited incomestatement is at least 15% of the consolidated net income beforetaxation and extraordinary items, as shown by the latest publishedaudited consolidated income statement of the Issuer and itsSubsidiaries; or

(c)

whose gross assets or (in the case of a Subsidiary which itself hassubsidiaries) gross consolidated assets, as shown by its latestaudited balance sheet are at least 10% of the amount which equals

the amount included in the consolidated gross assets of the Issuerand its Subsidiaries as shown by the latest published auditedconsolidated balance sheet of the Issuer and its Subsidiaries;

provided that, in relation to paragraphs (a), (b) or (c) above,

(i) in the case of a corporation or other business entity becoming aSubsidiary after the end of the financial period to which thelatest consolidated audited accounts of the Issuer relate, thereference to the then latest consolidated audited accounts of theIssuer for the purposes of the calculation above shall, unticonsolidated audited accounts of the Issuer for the financialperiod in which the relevant corporation or other business entitybecomes a Subsidiary are published, be deemed to be areference to the then latest consolidated audited accounts of theIssuer adjusted to consolidate the latest audited accounts(consolidated in the case of a Subsidiary which itself hasSubsidiaries) of such Subsidiary in such accounts;

(ii) if at any relevant time in relation to the Issuer or any Subsidiarywhich itself has Subsidiaries no consolidated accounts areprepared and audited, revenues, net income or gross assets ofthe Issuer and/or any such Subsidiary shall be determined onthe basis of pro forma consolidated accounts prepared for thispurpose by the Issuer and reviewed by the auditors for thepurposes of preparing a certificate thereon to the Trustee;

(iii)

if at any relevant time in relation to any Subsidiary, no accountsare audited, its revenues, net income or gross assets(consolidated, if appropriate) shall be determined on the basis ofpro forma accounts (consolidated, if appropriate) of the relevantSubsidiary prepared for this purpose by the Issuer and reviewedby the auditors for the purposes of preparing a certificatethereon to the Trustee; and

(iv)if the accounts of any Subsidiary (not being a Subsidiary referredto in proviso (i) above) are not consolidated with those of the


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Issuer, then the determination of whether or not such Subsidiaryis a Material Subsidiary shall be based on a pro formaconsolidation of its accounts (consolidated, if appropriate) withthe consolidated accounts (determined on the basis of theforegoing) of the Issuer; or

(d) to which is transferred the whole or substantially the whole of theassets of a Subsidiary which immediately prior to such transfer wasa Material Subsidiary, provided that the Material Subsidiary which sotransfers its assets shall forthwith upon such transfer cease to be aMaterial Subsidiary and the Subsidiary to which the assets are sotransferred shall cease to become a Material Subsidiary as at thedate on which the first published audited accounts (consolidated, ifappropriate) of the Issuer prepared as of a date later than suchtransfer are issued unless such Subsidiary would continue to be aMaterial Subsidiary on the basis of such accounts by virtue of theprovisions of (a), (b) or (c) above.

Merger The merger of SM Land and SM Prime pursuant to Title IX (Merger and

Consolidation) of the Corporation Code and Section 40(C)(2) of theNational Internal Revenue Code, as amended, with SM Prime as thesurviving entity

Metro Manila the metropolitan area comprising the cities of Caloocan, Las Pias,Makati, Malabon, Mandaluyong, Manila, Marikina, Muntinlupa, Navotas,Paraaque, Pasay, Pasig, Quezon, San Juan, Taguig and Valenzuela andthe municipality of Pateros, which together comprise the NationaCapital Regionand are commonly referred to asMetropolitan Manila

Mezza Mezza Residences

MOA Mall of Asia

Mountain Bliss Mountain Bliss Resort and Development Corporation

Offer the offer of the Bonds to the public by the Issuer under the terms andconditions as herein contained

Offer Period the period commencing within two Business Days from the date of theissuance of the SEC Permit to Sell Securities, during which the Bonds shalbe offered to the public

PAS Philippine Accounting Standards

Paying Agent Philippine Depository & Trust Corp., the party which shall receive the fundsfrom the Issuer for payment of principal, interest and other amounts dueon the Bonds and remit the same to the Bondholders based on the recordsshown in the Register of Bondholders

Payment Date each of the dates when payment of principal, interest and other amountsdue on the Bonds are due and payable to the Bondholders; provided that,in the event any Payment Date falls on a day that is not a Business Day, thePayment Date shall be automatically extended without adjustment tointerest accrued to the immediately succeeding Business Day


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PCD PCD Nominee Corporation

P.D. 957 Presidential Decree No. 957, as amended, also known as the Subdivisionand Condominium Buyers Protective Decree

PDEx Philippine Dealing & Exchange Corporation

PDTC the Philippine Depository & Trust Corporation, the central depository andclearing agency of the Philippines which provides the infrastructure forhandling the lodgment of the scripless Bonds and the electronic book-entrytransfers of the lodged Bonds in accordance with the PDTC Rules, and itssuccessor-in-interest

PDTC Rules the SEC-approved rules of the PDTC, including the PDTC OperatingProcedures and PDTC Operating Manual, as may be amended,supplemented, or modified from time to time

Person any individual, firm, corporation, partnership, association, joint venture,tribunal, limited liability company, trust, government or political subdivisionor agency or instrumentality thereof, or any other entity or organization

Pesos orP the lawful currency of the Philippines

PEZA The Philippine Economic Zone Authority

PFRS Philippine Financial Reporting Standards which includes statementsnamed PFRS and PAS issued by the Financial Reporting Standards Counciand Philippine Interpretations from International Financial ReportingInterpretations Committee (IFRIC)

Philippines the Republic of the Philippines

Property for Share Swap The issuance of SM Prime shares to SMIC in exchange for several real

estate properties of SMIC

PSE The Philippine Stock Exchange, Inc.

Public Debt means any present or future indebtedness in the form of, or representedby bonds, notes, debentures, loan stock or other securities that are at thetime, or are of the type customarily quoted, listed or ordinarily dealt in onany stock exchange, over the counter or other securities market

R.A. 4726 Republic Act No. 4726, as amended, also known as the Condominium Act

R.A. 7279 Republic Act No. 7279, also known as the Urban Development and HousingAct of 1992

R.A. 8799 or SRC Republic Act No. 8799, The Securities Regulation Code of the Philippines

Register of Bondholders the electronic record of the issuances, sales and transfers of the Bonds tobe maintained by the Registrar pursuant to and under the terms of theRegistry and Paying Agency Agreement

Registrar the Philippine Depository & Trust Corporation, being the registrarappointed by the Issuer to maintain the Register of Bondholders pursuantto the Registry and Paying Agency Agreement


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Reorganization The reorganization of certain companies and assets of the SM Group asdiscussed in the section Description of the Reorganization found onpage 74 of thisProspectus

ROA return on assets which measures the ratio of net income attributable toequity holders of the parent to average total assets

ROE return on equity which measures the ratio of net income attributable toequity holders of the parent to average total equity (excludingnon-controlling interest)

RTC Regional Trial Court

SEC the Securities and Exchange Commission of the Philippines

SEC Permit the Permit to Sell Securities issued by the SEC in connection with the Offer

Share for Share Swap The issuance of SM Prime shares to SMIC, Mountain Bliss and the Syfamily, in exchange for the latters shares in the Unlisted Real EstateCompanies

Shares common shares of the Issuer, which have a par value of =P1 per share

SM China Companies SM Shopping Center (Chengdu) Co. Ltd., Xiamen SM City Co. Ltd. andXiamen SM Mall Management Co. Ltd. (together, SM Xiamen) andSM International Square Jinjiang City Fujian (SM Jinjiang) andSM Shopping Center (Suzhou) Co. Ltd. (SM Suzhou)

SM Department Stores the retail department stores operated by the Group under the SMnamewhich presently include SM Quiapo, SM Makati, SM Cubao, SM Harrison,SM North EDSA, SM Sta. Mesa, SM Megamall, SM Cebu, SM Southmall,SM Bacoor, SM Fairview, SM Mandurriao, SM Manila, SM Pampanga, SMDavao, SM Cagayan de Oro, SM Bicutan, SM Lucena, SM Baguio, SM

Marilao, SM Dasmarias, SM Batangas, SM Delgado, SM San Lazaro, SMSucat, SM Sta. Rosa, SM Clark, SM Mall of Asia, SM Lipa, SM Bacolod, SMTaytay, SM Marikina, SM Baliwag, SM Naga, SM Rosales, SM Rosario, SMTarlac, SM San Pablo, SM Calamba, SM Novaliches, SM Masinag and SMOlongapo, SM Consolacion, SM Lanang, SM General Santos City, SM SanFernando, SM Aura, SM BF Paranaque

SMDC SM Development Corporation

SM Group The group of companies owned by SMIC

SM Hotels SM Hotels and Conventions Corp. (formerly SM Hotels andEntertainment Corp.)

SMIC SM Investments Corporation, the parent company of SM Prime

SMIC Real Estate Assets The Taal Vista Hotel, the Radisson Cebu Hotel, the Pico Sands Hotel, thePark Inn Davao, the SMX Convention Center, the Mall of Asia Arena, theMall of Asia Arena Annex, the SM corporate office in Pasay City, theTagaytay casino and waste water treatment plant and certain other landin Tagaytay and EDSA West, Quezon City


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SM Land SM Land, Inc. (formerly Shoemart, Inc.) which was merged with SMPrime in October 2013

SM Malls in China SM Xiamen and Xiamen/Lifestyle Center, SM City Jinjiang, SM CityChengdu, SM City Suzhou, and SM City Chongqing

SM Network suppliers, tenants and other merchants that do business with entitiesaffiliated with SMIC

SM Prime SM Prime Holdings, Inc.

sq. m. square meter

Subsidiary at any particular time, any company or other business entity which is thendirectly or indirectly controlled, or more than 50%, of whose issued equityshare capital (or equivalent) is then beneficially owned, by the Issuerand/or one or more of its Subsidiaries. For a company to be controlled byanother means that the other (whether directly or indirectly and whetherby the ownership of share capital, the possession of voting power, contractor otherwise) has the power to appoint and/or remove all or the majority ofthe members of the board of directors or other governing body of thatcompany or otherwise controls or has a power to control the affairs andpolicies of that company and control shall be construed accordingly

Sy Family Mr. Henry Sy, Sr., his wife, Mrs. Felicidad T. Sy, and their children TeresitaT. Sy, Elizabeth T. Sy, Henry T. Sy, Jr., Hans T. Sy, Herbert T. Sy and HarleyT. Sy

Tax Code the amended Philippine National Internal Revenue Code of 1997 and itsimplementing rules and regulations

TFG SM Primes Treasury Finance Group

Trustee Philippine National Bank Trust Banking Group, the entity appointed by theIssuer which shall act as the legal title holder of the Bonds and shallmonitor compliance and observance of all covenants of and performanceby the Issuer of its obligations under the Bonds and enforce all possibleremedies pursuant to such mandate

Underwriters the entities appointed as the Underwriters for the Bonds pursuant to theIssue Management and Underwriting Agreement

Unlisted Real Estate Companies Prime Metro Estate, Inc., Tagaytay Resort and Development Corporation,SM Hotels, SM Arena Complex Corporation, Rappel Holdings, Inc. andCosta del Hamilo, Inc.

US$ United States Dollars, the lawful currency of the United States of AmericaVAT Value-added tax

Waltermart Waltermart Supermarket, Inc.


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SUMMARY

The summary below is only intended to provide a limited overview of information described in more detailelsewhere in this Prospectus. As it is a summary, it does not contain all of the information that may beimportant to investors and terms defined elsewhere in this Prospectus shall have the same meanings whenused in this summary. Prospective investors should therefore read this Prospectus in its entirety.

OVERVIEW

SM Prime Holdings, Inc. was incorporated in the Philippines and registered with the Securities andExchange Commission on 6 January 1994. It is a leading integrated Philippine real estate company withbusiness units focused on malls, residential, commercial, hotels and convention centers, and leisure andresorts. SM Prime is the surviving company of a series of transactions involving the real estate companies ofthe SM Group. See Description of the Reorganizationfound on page 74 of this Prospectus.

As at 31 March 2014, SM Primes consolidated total assets stood at P340.9 billion, consolidated totalliabilities were at P167.2 billion, with net debt-to-equity ratio (being the ratio of aggregate consolidatedindebtedness over equity) of 32%.

The Company has four business segments, namely, malls, residential, commercial and hotel and conventioncenters. The table below sets out each business units contribution to SM Primes consolidated revenue forthe years ended 31 December 2011, 2012 and 2013 and the three months ended 31 March 2013 and 2014.

For the years ended 31 December

Audited

For the three monthsended 31 March

Unaudited

(in P million) 2011 2012 2013 2013 2014

Malls 26,877 30,652 34,452 7,830 9,184

Residential 17,507 22,761 20,916 6,016 5,029

Commercial 4,952 3,077 3,429 821 790

Hotels and Convention Centers 1,193 1,456 1,815 422 470

Eliminations (460) (730) (817) (140) (126)

Combined Total 50,069 57,215 59,794 14,949 15,346

The charts below display the composition of SM Primes combined revenue by segment and geographicalregion as of and for the year ended 31 March 2014.


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SM Prime is listed on the PSE and as at 31 March 2014 was 51.03% directly and indirectly owned by SMIC.SM Prime had a market capitalization of P447.3 billion as of 08 August 2014.

RISKS OF INVESTING

Before making an investment decision, investors should carefully consider the risks associated with aninvestment in the Bonds. These risks include:

Risks Relating to the Company

The Philippine property market is cyclical and can be affected by domestic and global economicconditions

SM Prime may face challenges of title to land

SM Prime will continue to compete with other mall operators and commercial and residentialdevelopers

SM Prime is exposed to risks associated with the operation of its malls and commercial businesses

SM Prime faces numerous risks including reputational risk and operational risks relating to itsresidential and commercial businesses

SM Prime is exposed to general risks associated with the ownership and management of real estate

SM Primes reputation may be affected by the operations of some of its affiliates

SM Prime may not be able to realize the anticipated benefits from the Reorganization and theReorganization may also expose SM Prime to uncertainties and risks that could adversely affect itsbusiness performance and financial condition

SM Prime may be subject to tax liabilities in relation to the Reorganization

SM Prime is effectively controlled by the Sy family and their interests may differ significantly fromthe interests of other shareholders

SM Prime has entered into and expects to continue to enter into material agreements and otherarrangements with the Sy family and its affiliated companies and persons

SM Primes leasing operations depend on key tenants, which are affiliates of the SM Group

SM Prime depends on retaining the services of its senior management team and its ability to attractand retain talented personnel

Malls and other commercial properties owned by SM Prime may be subject to an increase inoperating and other expenses

SM Prime faces risks relating to the management of its land bank

SM Prime operates in a highly regulated environment and it is affected by the development andapplication of regulations in the Philippines


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Zoning restrictions and local opposition may delay or preclude construction

Infringement of intellectual property rights could have a material adverse effect on SM Primesbusiness

Land and/or real property may be subject to compulsory acquisition

Fluctuations in interest rates, changes in Government borrowing patterns and Governmentregulations could have a material adverse effect on SM Primes and its customers ability to obtainfinancing

Construction defects and other building-related claims may be asserted against SM Prime, and SMPrime may be subject to liability for such claims

SM Prime may suffer material losses in excess of insurance proceeds

SM Prime faces property development risk

SM Prime will continue to face certain risks related to the cancellation of sales involving its

residential projects

The loss of certain tax exemptions and incentives for residential home sales may increase the priceof SM Primes residential units and may lead to a reduction in sales

SM Prime will be exposed to risks associated with in-house financing activities, including the risk ofcustomer default, and it may not be able to sustain its in-house financing program

A domestic asset price bubble could adversely affect the Companys business

Risks Relating to the Philippines

Substantially all of the Companys operations and assets are based in the Philippines; a slowdown ineconomic growth in the Philippines could materially adversely affect its businesses

Any political instability in the future may have a negative effect on SM Primes financial results

SM Primes businesses may be disrupted by terrorist acts, crime, natural disasters and outbreaks ofinfectious diseases or fears of such occurrences in Metro Manila or other parts of the Philippines

Volatility in the value of the Peso against the U.S. dollar and other currencies could adversely affectSM Primes businesses

Tensions with China and other neighboring countries may adversely affect the Philippine economyand business environment

Corporate governance and disclosure standards in the Philippines may differ from those in moredeveloped countries

Risks Relating to the Bonds

The priority of debt evidenced by a public instrument

An active trading market for the Bonds may not develop


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The Issuer may be unable to redeem the Bonds

Please refer to the section entitled Risk Factors found on page 23 of this Prospectus which, while notintended to be an exhaustive enumeration of all risks, must be considered in connection with a purchase ofthe Bonds.

COMPETITIVE STRENGTHS OF THE COMPANY

Integrated real estate platform with strong track record across segments

SM Prime benefits from a strong track record in the Philippine real estate industry, including being thenumber one shopping mall developer and operator in the Philippines based on both GFA and number ofmalls, a leading residential developer in the Philippines in terms of condominium units sold, and operatinggrowing office, hotel and leisure segments.

SM Prime possesses end-to-end capabilities across the integrated real estate value chain, encompassingland banking, master planning, construction, retailing and operations. SM Prime is able to leverage on thediverse skill sets of each of its business units while optimizing value through more efficient planning and

control over its developments. SM Prime believes it can maximize the existing plots of its retaildevelopments that may be underutilized or unutilized by adding residential, commercial and hospitalitydevelopments, thereby providing customers with an attractive live, work, play lifestyle.

SM Prime is the largest integrated real estate developer in Southeast Asia by market capitalization as of 31March 2014, and the largest listed real estate developer on the PSE by market capitalization, total assetsand net income as of 31 March 2014. SM Prime believes it is the largest shopping mall developer in thePhilippines in terms of gross leaseable area. According to Colliers International, SM Prime was the largestvertical residential developer in Metro Manila in terms of units sold over the past four years. SM Primebelieves that it is well positioned to take advantage of greater demand for residential homes resulting fromthe growth of the Philippine economy and increasing demand from expatriate Filipinos, among otherfactors.

Leading retail malls business

As of 31 March 2014, SM Prime was the largest mall operator in the Philippines, with 48 malls across 38cities in the Philippines and an additional 5 malls in the PRC. SM Primes track record of operating mallsdates back to 1985 when the first SM Mall was opened.

Drawing on its relationship with key tenants, SM Prime believes it is able to establish an appropriate mix oftenants in its malls and hence attract retail foot traffic. SM Prime enjoys long-standing relationships withanchor tenants such as SM Department Stores, SM Supermarkets, SM Hypermarkets, Bench, Jollibee andNational Bookstore in the Philippines and Walmart and Vanguard in the PRC. In addition, SM Prime haslong-term relationships with an extensive base of international and domestic tenants and has access to awide leasing network, with approximately 14,621 tenants in the Philippines and 1,359 tenants in the PRC

across multiple segments as of 31 March 2014. These tenants include well-known Philippine brands such asBench and Jollibee as well as international brands such as Uniqlo, Forever 21, H&M, Starbucks, McDonalds,Zara, Brooks Brothers, Muji and Yum Brands.

SM Primes diverse network of tenants allows it to pursue a dynamic leasing and marketing strategy. Forexample, international brands such as Uniqlo, Forever 21 and H&M have chosen SM Malls as the locations toopen their flagship stores in the Philippines. SM Primes diverse network of tenants generally also allows itto achieve high occupancy levels in a short period time following the opening of new malls. Significantdemand backlog gives SM Prime the flexibility to optimize its tenant mix, ensuring steady foot traffic and


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consistent same store sales growth at its malls.

SM Prime believes that over its 25 years of operating history, the SM Malls have established strong brandequity. SM City North EDSA, SM Megamall and SM Mall of Asia were each recognized with Readers DigestTrusted Brand Awards during the past three years.

SM Primes retail malls provide an anchor for its lifestyle city projects, generating steady foot traffic andenhancing the value of its mixed-use developments.

Access to a prime large-scale land bank

SM Prime aims to have a significant growth pipeline as underscored by its large and diversified land bankconsisting of retail, commercial, and residential land in prime locations across the Philippines. As of 31March 2014, SM Prime possessed a land bank of 9,750,171 sq. m. including around the MOA complex,South Road Properties in Cebu, Clark in Pampanga, North EDSA and SMDC properties in Metro Manila,among others, which SM Prime believes is among the largest land banks in the country. SM Prime hasaccess to approximately 180 hectares of unused lots in existing retail developments, which may beoptimized for mixed use development. For example, SM Prime was able to add 159,652 sq. m. of office andretail GFA by building SM Megamall buildings C and D on a 86,342 sq. m. old parking lot in front of SM

Megamall.

SM Prime believes that its well-established presence and reputation in the Philippines, as well as itsexpansion into China, enable it to gain access to additional quality land bank. SM Prime also has a trackrecord of implementing a proactive land banking strategy, for example by submitting a proposal to the localgovernment for development of a 300 hectare reclamation project adjacent to the MOA complex in Pasay.In addition, SMIC has granted a non-binding right of first refusal to SM Prime to purchase additional landfrom SMIC to support further development initiatives.

Strong balance sheet and access to capital

SM Prime believes that it has access to capital from a wide variety of sources and thus is not dependent onany one source for its funding needs. As a PSE-listed company, SM Prime has access to the Philippine andinternational capital markets for potential issuance of equity, debt or other securities. SM Prime is also ableto secure debt financing at what it believes to be competitive rates, including revolving bank loans andmedium-term notes.

SM Prime believes that its strong balance sheet boosted by a large asset and equity base ensures that it isable to move quickly to acquire real estate assets and additional land bank. As of 31 March 2014, SM Primehad consolidated total assets of 340.9 billion and a consolidated equity of 170.7 billion. As of 31 March2014, SM Primes consolidated net debt to equity ratio was 32%, providing sufficient debt headroomflexibility for current and future capital expenditure and expansion plans.

SM Prime believes that its stable real estate portfolio contributes to its liquidity and strong mix of recurringincome from its mall and office operations. In the three months ended 31 March 3014, 65% of SM Primes

consolidated revenue was derived from recurring sources. SM Prime believes that its long-term leases helpto create a steady stream of cash flow.

Experienced management team with strong corporate governance practices

SM Primes senior management team comprises Mr. Henry T. Sy, Jr. as Chairman of the Board, and Mr. HansT. Sy and Mr. Jeffrey Lim as President and Executive Vice President, respectively. Each of these individualshas been with SM Prime or its component businesses for at least 20 years.


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Following the Reorganization, SM Prime conducted a rigorous process to identify highly qualified andexperienced Business Heads and Unit CFOs to head each of its business units. These Business Heads andUnit CFOs have an average experience in the real estate sector of more than 15 years. Of the 10 BusinessHeads and Unit CFOs, all were previously with their respective business units prior to the Reorganization.The management of each business unit is incentivized to ensure cooperation across the entire SM Primenetwork.

SM Prime adheres to strong corporate governance practices, with three out of the eight members of itsBoard of Directors being independent directors. In recognition of SM Primes corporate governancepractices, SM Prime was named one of the top five listed companies on the PSE for corporate governancepractices in 2012, and also received the Category Merit Award (Corporate Governance) for 2011 and 2012from the Asia Pacific Real Estate Association and the 2011 Corporate Governance Scorecard for PubliclyListed Companies Gold Award from the Institute of Corporate Directors.

BUSINESS STRATEGIES

Continue to expand SM Primes land bank and develop integrated lifestyle cities

SM Prime intends to integrate all land banking functions into a centralized department while retaining the

highly successful culture that allowed the Company to reach its strong current land bank position. Goingforward, the key focus of SM Prime will be on acquiring land bank that is suitable for mid-to-large scalemixed-use master planned projects in fast growing areas of the Philippines. SM Prime also plans to continueacquiring a strategic land bank near its existing developments, select schools, mass transit stations andother areas which are expected to be significant beneficiaries of infrastructure development in the future.For example, SM Prime recently submitted a proposal to reclaim land adjacent to the MOA complex.

A successful land banking strategy creates the foundation for the next phase in the development of lifestylecity projects, being the master planning for an integrated township design. These lifestyle cities areanchored by SM Primes retail malls, supported by commercial, residential, hotel and convention centerdevelopments, creating a synergistic value enhancement across product classes and offering a completeselection of products to customers. For example, SM Prime aims to replicate the successful model of itsMOA complex, a 60 hectare master-planned bayside development in Pasay City. The MOA complex had atotal estimated land value of 58.3 billion according to CBRE as of February 28, 2013. SM Prime believesthat the success of the MOA complex is a result of the substantial synergies from each real estate offering inthe integrated development. For example, the MOA Arena has been a preferred venue for events due to itsproximity to the MOA, which in turn increased foot traffic at the MOA. SEA Residences has been one of SMPrimes fastest selling residential development projects in part due to its proximity to the MOA, while againproviding additional foot traffic to the MOA.

SM Prime has a large and diverse land bank suitable for projects that are modeled after the MOA complexand creating lifestyle cities across the Philippines. For example, SM Prime is planning to build a 30 hectaremixed use development project in Cebu City, the SM Seaside City. The mall in SM Seaside City is expected tobe that citys largest mall, with a gross floor area (GFA) of approximately 400,000 sq. m. It will consist ofa four-story complex featuring a cineplex, IMAX theater, bowling center and ice skating rink. Other potential

developments in SM Seaside City complex may include high-rise residential condominiums, office buildings,convention center and hotels. Development of the property started in 2012 with a 15-year developmenttimeframe.

Leverage retail malls to anchor lifestyle city developments

SM Prime expects mall operations to continue to be its primary focus going forward and is targeted toaccount for a majority of SM Primes net income for the foreseeable future. Expansion is expected to takeplace in major cities outside of Metro Manila, especially in areas where disposable income is expected to


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increase significantly and retail space is currently limited. Certain major cities have a per capita income andrent per sq. m. that are comparable to those within Metro Manila, driven by a shift in BPO demand toregional provinces. Over time, retail malls built in these cities could be converted into mixed usedevelopments by adding office, residential and hospitality components as the cities continue to grow.

SM Prime also plans to expand within Metro Manila on a selective basis, developing supercenters (malls

consisting of less than 100,000 sq. m.) that are situated between mega malls in Metro Manila. SM Primebelieves that the current demand backlog for leases in several of its developments provides an opportunityfor further mall expansion.

SM Prime plans to develop three to four malls in the Philippines each year for the near term, and also toopportunistically expand its presence in second and third tier cities in China by building one mall per yearfor the near term, in each case subject to market conditions. SM Prime is targeting to increase its overallmall GFA by 8-10% per year to approximately 7.2 million sq. m. in the Philippines and approximately 1.5million sq. m. in China by 2015. SM Prime believes it will be able to do this given its direct access to a largerland bank that should allow it to accelerate its mall development throughout the country.

Optimize existing properties by adding complementary developments

SM Prime will pursue a multi-pronged long-term strategy that is aimed to allow it to optimize the value ofexisting properties, developments and current land bank through an integrated real estate platform whileretaining flexibility to efficiently allocate capital among its various business units. SM Prime will embark onmore large scale mixed used developments throughout the Philippines in an effort to replicate the successof the MOA complex.

SM Prime intends to further expand these complimentary projects by adding retail, office, residential andleisure developments to its existing property projects, including those projects with underutilized plots orvacant land. For example, SM Prime has recently leased unused land near SM City Cebu and SM City Davaoto SM Hotel for the development of Radisson Blu Cebu and Park Inn Davao, respectively. SM Prime believesthat SM Megamall, SM North EDSA, and SM SRP still have significant under-utilized plot ratio that aresuitable for commercial, hospitality and residential developments.

Continue aggressive rollout of BPO office development

Taking advantage of the robust BPO sector outlook as well as increasing flight to quality from older BPOdevelopments, SM Primes strategic focus includes expanding its office portfolio with IT and BPO buildings.For example, SM Prime expects to complete Cyberwest in the second half of 2014 and Three E-Com in 2015.SM Prime plans to leverage the new companys enlarged and geographically diverse land bank to expand itsoffice space presence in second and third tier Philippine cities in Cebu, Davao, Pampanga and Iloilo, areaswhere BPO companies are currently expanding their operations due to favorable labor market conditions.

SM Prime plans to launch one to two BPO office buildings per year, both inside and outside the MOAcomplex, with a target of doubling total office GFA by 2015. SM Prime believes that its existing BPOdevelopments have enjoyed strong take-up, for example with Cyberwest already being 100% leased out

prior to its completion.

Focus on a one product-one market strategy for the residential business

SM Prime intends to capitalize on the increasing urbanization and economic development of the Philippinesto develop vertical residential projects in key urban centers such as Makati City, Pasay City, Quezon City,Batangas and Davao that target the Philippine mass middle market. By leveraging the already strong SMbrand and its leadership in the residential condominium segment, SM Prime believes it can aggressivelyroll-out new projects in the strategically placed land bank throughout Metro Manila and the rest of the


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country. SM Prime will focus its residential development on the low-to-middle income segments, which isunderpinned by resilient housing demand driven by a housing supply backlog, growing household creationand increasing urbanization. According to the Subdivision and Housing Developers Association, Inc., theaffordable income segment currently has a housing supply shortfall of 462,000 housing units. As of 31March 2014, SM Prime had 16 ongoing residential projects and 5 completed residential projects that it wasin the process of selling.

SM Prime plans to accelerate residential project launches in areas near existing SM Prime developments.Current plans for the second half of 2014 and full year 2015 include approximately 29,000 units to belaunched in Bay Area, Quezon City, Paraaque, Taguig, Makati, Manduluyong, Manila and Tagaytay, mostlyin areas near existing SM Malls.

Maintain a strong balance sheet, prudent risk and capital management and good governance

By maintaining a strong balance sheet, SM Prime believes it will be better able to withstand economic andfinancial cycles, while allowing the Company to achieve expansion quickly, as well as give it the flexibility toembark on acquisitions if and when opportunities arise. SM Prime intends to maintain prudent debt levelsand a sufficient equity buffer with a target net debt-to-equity ratio of no more than 50:50. SM Prime alsoplans to maintain a relatively long and well spread out debt maturity profile and continue to diversify its

sources of funding. SM Prime will take a disciplined approach to the allocation of capital across its projectswith strict application of hurdle rates and benchmarks for each investment.

Assuming that SM Prime wins its bid for the Pasay City reclamation project, SM Prime intends to pursue acapital expenditure program for 2014 totaling approximately 66.0 billion, with 59% for shopping malldevelopment, 29% for residential, 6% for commercial and 6% for hospitality, tourism and other segments,and a 2015 capital expenditure program totaling approximately 63.6 billion, with 56% for shopping malldevelopment, 28% for residential, 13% for commercial and 3% for hospitality, tourism and other segments.SM Prime plans to fund its capital expenditure plan through recurring income flows and external financing.SM Prime intends to apply global corporate governance standards and risk management best practices, aswell as embark on integrated sustainability and corporate social responsibility initiatives.


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SUMMARY FINANCIAL INFORMATION

The following tables set forth the summary consolidated financials of the Issuer as at and for the periods

indicated. The selected audited financial information presented below as at and for the years ended 31

December 2011, 2012 and 2013 and the selected unaudited financial information as at and for the first

three months ended 31 March 2013 and 2014 have been derived from the Issuers consolidated financial

statements. The information set out below should be read in conjunction with, and is qualified in its

entirety by reference to, the relevant consolidated financial statements of the Issuer, including the notes

thereto, included elsewhere in this Prospectus.

CONSOLIDATED BALANCE SHEETS1

As at 31 December As at 31 March

(in P thousands) 2011

Audited

2012

Audited

2013

Audited

2014

Unaudited

ASSETS

Current Assets

Cash and cash equivalents 17,345,309 21,299,366 27,141,506 22,862,710

Short-term investments 876,800 821,000 887,900 -Investments held for trading 1,196,956 1,338,777 1,151,464 1,141,304

Receivables 11,622,830 17,145,695 27,184,434 30,792,963

Condominium and residentialunits for sale

945,363 2,969,757 6,102,653 5,435,589

Land and developmentcurrentportion

5,780,360 11,673,553 13,281,246 13,885,376

Available-for-sale investments 1,000,000 1,000,000 - -

Prepaid expenses and othercurrent assets

11,394,881 12,014,185 9,936,120 9,038,318

Total Current Assets 50,162,499 68,262,333 85,685,323 83,156,260

Noncurrent Assets

Available-for-sale investmentsnet of current portion 16,052,509 23,303,128 23,369,074 26,229,318

Property and equipmentnet 1,180,653 1,597,066 1,578,893 1,447,654

Investment propertiesnet 129,972,301 147,854,289 171,666,409 177,123,116

Land and developmentnet ofcurrent portion

17,862,368 20,606,270 21,539,938 20,452,296

Derivative assets 115,619 109,979 1,778,810 2,010,464

Deferred tax assets - net 395,548 486,314 690,525 838,990

Other noncurrent assets 13,121,593 22,432,737 29,274,710 29,669,868

Total Noncurrent Assets 178,700,591 216,389,783 249,898,359 257,771,706

Total Assets 228,863,090 284,652,116 335,583,682 340,927,966

1 SM Prime Holdings, Inc. initiated a corporate restructuring in 2013 to consolidate all of the SM Groups real estate

companies and real estate assets under SM Prime. SM Land was merged with the Company, and certain unlisted realestate companies and real estate assets were acquired by the Company from SMIC and the Sy Family. The corporaterestructuring was approved by the SEC on 10 October 2013. The Companys consolidated balance sheet for the yearsended 31 December 2011 and 2012 were restated following the corporate restructuring. There is no restated unauditedconsolidated balance sheet for the three month period ending 31 March 2013.


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As at 31 December As at 31 March


Audited

2012

Audited

2013

Audited

2014

Unaudited

LIABILITIES AND EQUITY

Current Liabilities

Loans payable 2,387,000 8,973,500 3,250,000 2,700,000

Accounts payable and othercurrent liabilities

28,528,058 34,399,069 45,298,216 44,153,792

Current portion of long-termdebt

1,162,420 3,856,767 7,387,260 7,286,573

Income tax payable 627,064 662,805 946,593 1,196,685

Total Current Liabilities 32,704,542 47,892,141 56,882,069 55,336,050

Noncurrent Liabilities

Long-term debtnet ofcurrent portion

52,382,248 67,749,383 95,675,730 94,871,661

Tenants deposits 7,984,377 8,968,623 10,248,792 10,414,961

Liability for purchased landnet of current portion

1,682,368 4,202,128 1,117,809 1,027,210

Deferred tax liabilities 1,770,620 2,014,230 2,022,539 1,974,711

Derivative liabilities 237,980 244,330 159,974 159,356

Other noncurrent liabilities 3,039,795 3,119,296 3,255,244 3,400,453

Total Noncurrent Liabilities 67,097,388 86,297,990 112,480,088 111,848,352

Total Liabilities 99,801,930 134,190,131 169,362,157 167,185,402

Equity Attributable to Equity Holders of the Parent

Capital stock 29,691,565 33,166,300 33,166,300 33,166,300

Additional paid-in capital - net 17,732,721 19,668,994 22,303,436 22,280,423

Cumulative translationadjustment

897,925 607,237 1,381,268 1,256,429

Net unrealized gain onavailable-for-saleinvestments

13,323,397 19,781,021 19,958,330 22,818,574

Net fair value changes on cashflow hedges

- - 429,149 549,563

Remeasurement loss ondefined benefit obligation

(28,000) (61,088) 771 (5,006)

Retained earnings:

Appropriated 23,200,000 42,200,000 42,200,000 42,200,000

Unappropriated 45,825,366 36,250,679 47,807,664 52,386,115

Treasury stock (3,985,462) (3,985,462) (3,980,378) (3,979,446)

Total Equity Attributable toEquity Holders of the Parent

126,657,512 147,627,681 163,266,540 170,672,952

Non-controlling Interests 2,403,648 2,834,304 2,954,985 3,069,612

Total Equity 129,061,160 150,461,985 166,221,525 173,742,564

Total Liabilities and Equity 228,863,090 284,652,116 335,583,682 340,927,966


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CONSOLIDATED STATEMENTS OF INCOME

For the years ended 31 DecemberFor the three months ended

31 March


Audited

2012

Audited

2013

Audited

2013

Unaudited

2014

Unaudited

Revenue

Rent 25,208,474 28,951,727 32,195,285 7,629,278 8,555,730

Sales:

Real estate 17,359,748 22,575,692 20,775,195 6,013,070 5,016,368

Cinema ticket 3,051,717 3,477,262 3,740,030 760,985 1,064,191

Others 4,449,304 2,210,413 3,083,900 545,638 709,875

50,069,243 57,215,094 59,794,410 14,948,971 15,346,164

Costs and Expenses 30,771,982 35,145,277 35,658,865 8,827,640 8,818,504

Income from Operations 19,297,261 22,069,817 24,135,545 6,121,331 6,527,660

Other Income (Charges)

Interest expense (2,933,337) (3,064,825) (3,686,603) (815,945) (852,741)

Interest and dividend income 1,180,382 1,062,028 1,093,870 243,078 149,407

Restructuring costs - - (1,276,629) (348,172) -

Othersnet (501,464) 366,874 443,908 25,627 67,354

(2,254,419) (1,635,923) (3,425,454) (895,412) (635,980)

Income Before Income Tax 17,042,842 20,433,894 20,710,091 5,225,919 5,891,680

Provision for (Benefit from) Income Tax

Current 3,111,294 3,687,530 4,392,114 1,054,622 1,173,770

Deferred (70,585) 102,931 (407,951) (43,707) 24,1653,040,709 3,790,461 3,984,163 1,010,915 1,197,935

Net Income 14,002,133 16,643,433 16,725,928 4,215,004 4,693,745

Attributable to:

Equity holders of the Parent 13,628,870 16,202,777 16,274,820 4,107,497 4,578,451

Non-controlling interests 373,263 440,656 450,441 107,507 115,294

14,002,133 16,643,433 16,725,928 4,215,004 4,693,745

Basic/Diluted earnings pershare

P0.491 P0.584 P0.586 P0.148 P0.165


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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended 31 DecemberFor the three months ended

31 March


Audited

2012

Audited

2013

Audited

2013

Unaudited

2014

Unaudited

Net Income 14,002,133 16,643,433 16,725,928 4,215,004 4,693,745

Other Comprehensive Income (Loss)

Other comprehensive income(loss) to be reclassified toprofit or loss in subsequentperiods:

Unrealized gain due tochanges in fair value inavailable-for-saleinvestments

525,634 6,457,624 177,309 3,562,991 2,860,244

Net fair value changes oncash flow hedges

- - 429,149 (21,750) 120,414

Cumulative translationadjustment

308,225 (290,688) 774,031 216,570 (124,839)

833,859 6,166,936 1,380,489 3,757,811 2,855,819

Other comprehensive income(loss) not to be reclassifiedto profit or loss insubsequent periods:

Remeasurement income(loss) on defined benefitobligation

(28,000) (33,088) 61,192 60,774 (6,444)

Total ComprehensiveIncome

14,807,992 22,777,281 18,167,609 8,033,589 7,543,120

Attributable to:

Equity holders of the Parent 14,434,729 22,336,625 17,717,168 7,926,082 7,428,493

Non-controlling interests 373,263 440,656 450,441 107,507 114,627

14,807,992 22,777,281 18,167,609 8,033,589 7,543,120


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SUMMARY OF THE OFFERING

The following summary is qualified in its entirety by, and should be read in conjunction with, the moredetailed information appearing elsewhere in this prospectus.

Issuer SM Prime Holdings, Inc.

Issue / Issue Size Fixed rate Bonds in the aggregate principal amount of P15,000,000,000to be registered with the SEC

Oversubscription Option In the event of oversubscription, the Joint Issue Managers and JointLead Underwriters, in consultation with the Issuer, reserve the right toincrease the aggregate Issue Size by up to P10,000,000,000

Manner of Offer Public offering

Use of Proceeds The net proceeds of the Issue shall be used for capital expenditures forthe expansion of malls, offices and hotel operations (see Use ofProceeds)

Issue Price or Offer Price 100% of the face value of the Bonds

Form and Denomination of

the Bonds

The Bonds shall be issued in scripless form in minimum denominations

of P20,000.00 each, and in multiples of P10,000.00 thereafter, andtraded in denominations of P10,000.00 in the secondary market

Offer Period The offer of the Bonds shall commence at 9:00 am on 13 August 2014and end at 12:00 pm on 22 August 2014

Issue Date 01 September 2014

Maturity Date Series A : Five (5) years and six (6) months from Issue Date

Series B : Seven (7) years from Issue Date

Series C : Ten (10) years from Issue Date


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Interest Rate Series A : 5.1000% per annum

Series B : 5.2006% per annum

Series C : 5.7417%% per annum

Interest Computation &

Payment

Interest on the Bonds shall be calculated on a 30/360 day count basis

commencing on 01 September 2014. Interest on the Series A, Series Band Series C Bonds shall be paid quarterly in arrears on December 1,March 1, June 1 and September 1 of each year.

Optional Redemption Prior to final redemption of the Series B and Series C Bonds, the Issuershall have a one-time option, but shall not be obligated, to redeem inwhole, and not a part only, each outstanding series of the Series B andSeries C Bonds in accordance with the following schedule:

BondsOptional Redemption

Dates

EarlyRedemption

PriceSeries B Bonds Twenty first (21st) Interest

Payment Date101.0%

Twenty fifth (25th)Interest Payment Date

100.5%

Series C Bonds Twenty ninth (29th)Interest Payment Date

101.5%

Thirty third (33rd) InterestPayment Date

101.0%

Thirty seventh (37th)Interest Payment Date

100.5%

The Issuer shall give not less than thirty (30) nor more than (60)calendar days prior written notice of its intention to redeem the Bonds,which notice shall be irrevocable and binding upon the Issuer to effectsuch early redemption of the Bonds at the Interest Payment Datestated in such notice.

The amount payable to the Bondholders in respect of such redemptionshall be calculated based on the principal amount of the Bonds beingredeemed, as the sum of (i) the Early Redemption Price; and (ii)accrued interest on the Bonds on the Optional Redemption Date.

Final Redemption The Bonds shall be redeemed at 100% of face value on their respectiveMaturity Dates.

Trustee Philippine National Bank Trust Banking Group

Registrar & Paying Agent Philippine Depository & Trust Corp.


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Taxation Bond InterestInterest income derived by Philippine citizens or resident foreignindividuals from the Bonds is subject to income tax, which is withheldat source, at the rate of 20%. Interest on the Bonds received by

non-resident foreign individuals engaged in trade or business in thePhilippines is subject to a 20% final withholding tax while that receivedby non-resident foreign individuals not engaged in trade or business issubject to a 25% final withholding tax. Interest income received bydomestic corporations and resident foreign corporations is taxed at therate of 20%. Interest income received by non-resident foreigncorporations is subject to a 30% final withholding tax. The tax withheldconstitutes a final settlement of Philippine income tax liability withrespect to such interest.

Bondholders who are exempt from or are not subject to finalwithholding tax on interest income or are covered by a lower final

withholding tax rate by virtue of a tax treaty may claim such exemptionor lower rate, as the case may be, by submitting the necessarydocuments as required by the Bureau of Internal Revenue and theIssuer.

Listing The Bonds are intended to be listed in the Philippine Dealing &Exchange Corporation


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RISK FACTORS

Investment in the Bonds involves a number of risks. The price of securities can and does fluctuate, and anyindividual security may experience upward or downward movements, and may even become valueless.There is an inherent risk that losses may be incurred rather than profit made as a result of buying andselling securities. Past performance is not a guide to future performance. There may be a big difference

between the buying price and the selling price of these securities. An investor deals in a range ofinvestments, each of which may carry a different level of risk.

Prior to making any investment decision, prospective investors should carefully consider all of theinformation in this Prospectus, including the risks and uncertainties described below. The business, financialcondition or results of operations of SM Prime could be materially adversely affected by any of these risks.

Additional considerations and uncertainties not presently known to the Issuer or which the Issuer currentlydeems immaterial, may also have an adverse effect on an investment in the Bonds.

This risk disclosure does not purport to disclose all the risks and other significant aspects of investing inthese securities. An investor should undertake his or her own research and study on the trading ofsecurities before commencing any trading activity. He/she may request information on the securities andissuer thereof from the Commission which are available to the public.

An investor should seek professional advice if he or she is uncertain of, or has not understood any aspect ofthe securities to invest in or the nature of risks involved in trading of securities especially those high risksecurities.

This section entitled Risks Factors does not purport to disclose all of the risks and other significant aspectsof investing in these securities.

The risks enumerated hereunder are considered to be each of equal importance.

The means by which the Company plans to address the risks discussed herein are presented in the sectionsof this Prospectus entitled Description of the Issuer and the Group Strengths, Description of the Issuer

and the Group Strategies, and Managements Discussion and Analysis of Financial Position and FinancialPerformance.

RISKS RELATING TO THE COMPANY

The Philippine property market is cyclical and can be affected by domestic and globaleconomic conditions.

SM Prime derives a substantial portion of its revenue from rents and sales relating to its portfolio of malls,residential and commercial property developments and other leisure and mixed-use properties,substantially all of which are located in the Philippines. Accordingly, SM Prime is heavily dependent onconditions in the Philippine property market. In the past, the Philippine property market has been cyclical,and property values have been affected by the supply of and demand for comparable properties, the rate of

economic growth in the Philippines and political and social developments.

Since the second half of 2008, the global financial markets have experienced, and may continue toexperience, significant dislocations, which originated from the liquidity disruptions in the United States andthe European Union credit and sub-prime residential mortgage markets. These disruptions and other events,such as rising government deficits and debt levels, the sovereign credit ratings downgrades and ensuingpublic deficit and debt reduction measures of the United States and certain member states of the EuropeanUnion, the risk of a partial collapse of the Eurozone and slower rates of growth in the Chinese economyhave had and continue to have a significant adverse effect on the global financial markets. In particular, the


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global financial crisis in 2008 and 2009 resulted in a generally negative effect on real estate property pricesglobally, including in the Philippines, and continued uncertainty and volatility in global economic conditionsmay result in further adverse impacts to SM Prime. These adverse effects can result in, among others, lowerdemand and values for real estate in the Philippines, increased difficulties on the part of tenants in meetingtheir lease and other financial obligations, and greater difficulties for SM Prime in obtaining financing wherenecessary to fund the acquisition and development of their real estate projects.

SM Primes growth is largely dependent on its ability to construct profitable malls in new locations in thePhilippines. The substantial majority of the aggregate net leasable area in these malls is dedicated to retailuse, exposing SM Prime to risks relating to economic conditions in the Philippines such as trends inconsumer spending, exchange rates and spending patterns of OFWs and their dependents, and the supplyof, or demand from, tenants for retail space and other competing commercial malls. Declines in consumerspending and other factors that may result in lower demand for retail space could have a material adverseeffect on SM Primes ability to successfully operate and develop existing and futuremalls.

In addition, demand for new residential projects in the Philippines has fluctuated in the past as a result ofprevailing economic conditions in both the Philippines and in other countries, such as the United States(including overall growth levels and interest rates), the strength of overseas markets (as a substantialportion of demand comes from Overseas Filipino Workers (OFWs) and expatriate Filipinos), the political

and security situation in the Philippines and other related factors.

General cyclical trends in the Philippines and international property markets, as well as significantuncertainties and volatilities in the domestic, regional and global economic conditions affecting thoseproperty markets, are expected to continue, and accordingly SM Primes results of operations may fluctuatefrom period to period in accordance with those fluctuations. There can be no assurance that such varianceswill not have a material adverse effect on the business, financial condition and results of operations ofSM Prime.

SM Prime may face challenges of title to land.

While the Philippines has adopted a system of land registration which is intended to conclusively confirmland ownership, and which is binding on all persons (including the Government), it is not uncommon forthird parties to claim ownership of land that has already been registered and over which a title has beenissued. There have also been cases where third parties have produced false or forged title certificates overland. In particular, Quezon City, Metro Manila and the province of Cavite, have been known to experienceproblems with syndicates of squatters and forged or false title holders. Although SM Prime generallyconducts extensive title searches before it acquires any parcel of land, from time to time it has defendeditself against third parties who claim to be the rightful owners of land which has been either titled in thename of the persons selling the land to those companies or which has already been titled in thosecompanies names. In the event a greater number of similar third-party claims are brought againstSM Prime in the future or any such claims involve land that is material to SM Primes malls, residentialdevelopments and other real estate assets, SM Primes management may be required to devote significanttime and incur significant costs in defending against such claims. If any such claims are successful,SM Prime may have to either incur additional costs to settle such third-party claims or surrender title to land

that may be material in the context of SM Primes operations. In addition, title claims made by third partiesagainst SM Prime may have an adverse effect on its reputation.

Furthermore, transfer of title in the Philippines in connection with real estate sales involves a series ofregistrations and filings, which can require several months to complete. As a result, SM Prime may in someinstances occupy, operate or develop properties for which it has not yet completed all formalities in respectof perfecting title. There can be no assurance that third parties will not in the future challenge SM Primesrights to properties in similar circumstances where title has not yet been perfected.


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SM Prime will continue to compete with other mall operators and commercial and residentialdevelopers.

SM Prime competes with other developers and operators of shopping malls and other commercialproperties and residential properties for tenants, sales customers and land acquisition opportunities,among others.

SM Primes malls compete with other similarmalls. Increased competition could adversely affect incomefrom, and the market values of, the malls. The income from, and market values of, the malls are largelydependent on the ability of the malls to compete against other retail malls in their area in attracting andretaining tenants. In addition, tenants at the malls face increasing competition from specialty stores,general merchandise stores, discount stores, warehouse outlets and street markets, which may affect theability or willingness of such tenants to continue renewing their leases. Important factors that affect theability of retail malls to attract or retain tenants include the popularity of the malls with retail customers,which is a function the quality of the malls existing tenants and the attractiveness of the building and thesurrounding area. Attracting and retaining tenants and customers often involves refitting, repairing ormaking improvements to mechanical and electrical systems and outward appearance. If competing malls ofa similar type are built in the areas where the malls are located or similar malls in the vicinity of the mallsare substantially updated and refurbished, the value and net income of the malls could be reduced.

SM Primes income from, and market values of, its residential development projects is largely dependent onthese projects popularity when compared to similar projects in their areas, as well as on the ability ofSM Prime to gauge correctly the market for its projects. Important factors that could affect SM Primesability to compete effectively include a projects relative location versus that of its competitors, particularlyproximity to transportation facilities and commercial centers, as well as the quality of the housing andrelated facilities offered by SM Prime and the overall attractiveness of the project.

SM Primes commercial investment property business competes with a number of commercial developers.Competition from other developers of neighboring commercial centers and office spaces may adverselyaffect SM Primes ability to operate successfully its investment properties or attract and retain tenants, andcontinued development by these and other market participants could result in saturation of the market foroffice space. In addition, SM Primes major competitors may have greater experience, financial resourcesand more expertise in developing commercial properties and commercial leasing operations.

SM Primes future growth and development will also depend, in part, on its ability to acquire or enter intoagreements to develop additional tracts of land suitable for the types of mall, residential and commercialreal estate projects that SM Prime has developed over the years. SM Prime may experience difficultylocating parcels of land of suitable size in locations and at prices acceptable to SM Prime, particularlyparcels of land located in areas surrounding Metro Manila and in other urban areas throughout thePhilippines. In the event SM Prime is unable to acquire suitable land at acceptable prices, or at all, itsgrowth prospects could be limited and its business and results of operations could be adversely affected.

As a result of the foregoing, historical operating results of the malls may not be indicative of futureoperating results and historical market values of the malls may not be indicative of future market values. A

failure by SM Prime to compete effectively against other developers and operators of malls and othercommercial properties and residential properties could result in a loss of market share in the relevantsectors and corresponding decreases in revenues from rentals and property sales, which would in turnnegatively impact SM Primes businesses, financial condition and results ofoperations.

SM Prime is exposed to risks associated with the operation of its mall and commercialbusinesses.

The operations of SM Primes malls and commercial businesses are subject to risks relating to the


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ownership of properties for lease and the management of mall and commercial tenants. The performanceof SM Primes malls and commercial properties could be affected by a number of factors, including:

the national and international economic climate; trends in the Philippine commercial and retail industry; ability to attract leading names in the retail market to SM Primes mall and commercial

developments; ability to anticipate the future technological and infrastructure needs of Business Process

Outsourcing (BPO) tenants and effectively design properties to meet those needs; efficiency in collection, property management and tenant relations; non-renewal of expiring tenancies; amount of disposable income and consumer preference; competition for tenants; changes in market rental rates; the need to periodically renovate, repair and re-let space and the costs thereof; the quality and strategy of the management services provided; and SM Primes ability to provide adequate security, maintenance andinsurance.

In particular, SM Primes commercial development projects comprise three office buildings catering

primarily to tenants operating in the BPO industry. Adverse trends in the Philippines BPO industry andcompetitive environment could result in the inability of existing BPO tenants to honor their leasecommitments, as well as lower demand among potential BPO clients for vacant space.

If SM Prime is unable to lease its mall and commercial properties in a timely manner or collect rent atprofitable rates or at all, this could materially and adversely affect SM Primes business, financial conditionand results of operations.

SM Prime faces numerous risks including reputational risk and operational risks relating to itsresidential and commercial businesses.

SM Primes operations include the development and sale of residentialproperties and the development andlease of office and commercial properties. The property development business involves significant risksdistinct from those involved in the ownership and operation of established properties, including the risk thatSM Prime may invest significant time and money in a project that may not attract sufficient levels ofdemand in terms of anticipated sales or rentals at the expected take-up rate and which may not yield targetreturns as anticipated. In addition, obtaining required approvals and permits from various Philippineregulatory agencies may take substantially more time and resources than anticipated and construction ofprojects may not be completed on schedule or within budget.

The time and the costs involved in completing the development and construction of projects can beadversely affected by many factors, including shortages of materials, equipment and labor, adverse weatherconditions, peso depreciation, natural disasters, labor disputes with contractors and subcontractors,accidents, changes in laws or in Government priorities and other unforeseen problems or circumstances.

Any of these factors could result in project delays and cost overruns, which could negatively affect SM

Primes margins.

SM Primes reputation could also be adversely affected if projects are not completed on time or if projectsdo not meet customers requirements. If any of SM Primes projects experiences construction orinfrastructure failures, design flaws, significant project delays, quality control issues or otherwise, this couldnegatively affect its brand image and its ability to pre-sell its residential development projects. This wouldreduce cash flow and impair its ability to meet funding requirements.

Project delays, cost overruns and construction issues could also result in sales and resulting profits from a


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particular development not being recognized in the year in which it was originally expected to be recognized,which could adversely affect SM Primes results of operations. Further, the failure by SM Prime to completeconstruction of a project to its planned specifications or schedule may result in cost overruns and possibleabandonment of projects by contractors, as well as lower returns. Moreover, orders of the PhilippineDepartment of Agrarian Reform (the DAR) allowing conversion of agricultural land for development mayrequire a project to complete construction by a prescribed deadline. If SM Prime fails to complete

construction of a project by the stated deadline, the DAR may revoke its order allowing the use ofagricultural land for SM Primes intended purpose.

SM Prime is exposed to general risks associated with the ownership and management of realestate.

Real estate investments are generally illiquid, limiting the ability of an owner or a developer to convertproperty assets into cash on short notice with the result that property assets may be required to be sold ata discount in order to ensure a quick sale. Such illiquidity will also limit the ability of SM Prime to manage itsportfolio in response to changes in economic, real estate market or other conditions.

Property investment is also subject to risks incidental to the ownership and management of residential andcommercial properties including, among other things: competition for tenants; oversupply of, or reduced

demand for, retail, office and residential space; changes in market rents; inability to renew leases atfavorable rates or at all; inability to collect rents due to insolvency of tenants, or otherwise as a result oftheir inability or refusal to comply with lease commitments as a result of adverse business conditions orother factors; inability to dispose of major investment properties for the values at which they are recorded;increased operating costs; the need to renovate, repair and re-let space periodically and to pay theassociated costs; wars, terrorist attacks, riots, civil commotions and natural disasters; and other eventsbeyond SM Primes control.

SM Primes activities may also be impacted by changes in laws and governmental regulations in relation toreal estate, including those governing usage, zoning, taxes and government charges. Such revisions maylead to an increase in management expenses or unforeseen capital expenditure to ensure compliance.Rights related to the relevant properties may also be restricted by legislative actions, such as revisions tothe laws relating to building standards or town planning laws, or the enactment of new laws relating togovernment appropriation, condemnation and redevelopment. For example, several of SM Primesproperties are registered as a Philippine Economic Zone (PEZ), which entitles them to certain benefits forthe tenants that are located there, including tax advantages. If such properties were to lose their favorablePEZ status, these benefits may be lost. Any of these events could materially and adversely affect SM Primesbusinesses, financial condition and results of operations.

SM Primes reputation may be affected by the operations of some of its affiliates.

Actions taken that adversely impact the reputation of a given entity in the SM Group may also have anadverse impact on the SM Group as a whole. Several of the SM Group companies cross-sell products andcoordinate marketing campaigns that associate them with other affiliated entities. If the reputation orcorporate image of any of the companies in the SM Group were to suffer, the business, financial condition

and results of operations of other SM Group companies, including SM Prime, could be materially andadversely affected.

In addition, there are numerous other SM Group companies which conduct business across variedindustries, such as food and other retail merchandising and banking. Certain of these SM Group companiesare also leaders in their respective markets. If any of such SM Group companies encounters difficulties(financial or otherwise), negative publicity or other issues, SM Primes business reputation and financial condition may also be adversely affected.


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SM Prime may not be able to realize the anticipated benefits from the Reorganization and theReorganization may also expose SM Prime to uncertainties and risks that could adverselyaffect its business performance and financial condition.

SM Prime believes that the Reorganization represents an important transaction for SM Prime, allowing it torealize synergies among its various business lines, bolster its market position, improve its overall

competitiveness and achieve its long-term growth plan.

However, the Reorganization may not meet SM Prime's expectations and the realization of the anticipatedbenefits may be blocked, delayed or reduced as a result of numerous factors, some of which are outside ofSM Prime's control. These factors include, among other things:

unforeseen contingent risks or latent liabilities relating to the Reorganization that may becomeapparent in the future;

difficulties in managing a much larger business; loss of key personnel; and failure to carry out its strategies to capture value from the integrated business.

Any of the above factors could adversely impact SM Prime's anticipated benefits from the Reorganization

and could materially and adversely affect its future results of operations and financial condition.

SM Prime may be subject to tax liabilities in relation to the Reorganization.

In relation to the Reorganization, on 9 December 2013, the Company filed certain applications with the BIRfor rulings confirming the tax treatment of the transaction in the Reorganization as a tax-free mergerunder Philippine tax law and regulations. As of the date of this Prospectus, the ruling request is still pendingwith the BIR.

Previously, the BIR allowed the delegation of the authority to rule on this type of application to BIRsAssistant Commissioner, however, the new BIR administration that took over in 2010 has adopted a policythat this type of application must be signed off by the BIR Commissioner. This new policy has resulted in the

delayed issuance of BIR rulings. While SM Prime and its Philippine legal counsel believe that theReorganization is fully compliant with the requirements for tax-free status under the law and existingregulations, there can be no assurance that the requested tax rulings will be issued by the BIR in the nearfuture, or at all. In the event that no such tax ruling is issued, the BIR could issue tax assessments inconnection with the Reorganization subjecting the transfer of assets pursuant to the Reorganization to thepayment of applicable taxes. Although SM Prime believes that it would have sufficient grounds to challengean adverse tax ruling by the BIR, if SM Prime is forced to pay a tax assessment, it could be a substantialamount and could materially and adversely affect SM Primes financial condition and business reputation.

SM Prime is effectively controlled by the Sy family and their interests may differ significantly

from the interests of other shareholders.

As a result of the completion of the Reorganization, the Sy family currently holds voting power over 25.72%

of the issued share capital of SM Prime. In addition, members of the Sy family currently hold four seats onthe Board of Directors. As a result, the Sy family effectively controls SM Prime, including in relation to majorpolicy decisions such as its overall strategic and investment decisions, dividend plans, capital raisings andother financings, mergers and disposals, amendments to its Articles of Incorporation and By-laws, electionof members of its Board of Directors, appointment of its senior managers and other significant corporateactions.

The Sy family owns a variety of commercial interests aside from the controlling interest in SM Prime.Conflicts of interest may therefore arise between the Sy family, on the one hand, and SM Prime, on the


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other, in a number of areas, including:

major business combinations involving SM Prime; plans to develop the businesses of SM Prime; and business opportunities that may be attractive to both the Sy familys other interests and to SM

Prime.

There can be no assurance that the Sy family will not cause SM Prime to take actions which might differfrom the interests of other shareholders of SM Prime.

SM Prime has entered into and expects to continue to enter into material agreements andother arrangements with the Sy family and its affiliated companies and persons.

SM Prime has entered into and expects to continue to enter into a number of material agreements andother arrangements with companies controlled by members of the Sy family and affiliated companies andpersons. Transactions with related parties pose the risk of SM Prime entering into transactions on terms lessfavorable than could be obtained in arms-length transactions with unrelated parties. In particular, Syfamily-controlled companies operating in the retail and banking sectors account for a significant portion ofthe total rental revenue from SM Primes malls and other commercial properties. Moreover, the Sy family

could cause SM Prime to enter into transactions with SM Primes affiliates on terms less favorable than couldbe obtained in arms-length transactions with unrelated parties. Any such transactions could materiallyadversely affect SM Primes business, financial condition and results of operations. For more informationconcerning related party transactions, see Related Party Tr

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