COVER SHEET

5 6 9 0
SEC Registration Number

S M

D E V E L O P M E N T

C O R P O R A T I O N

A N D

S U

B S I D I A R I E S B

(Companys Full Name)

O N E b o r

E - C o m D r i v e ,

C e n t e r M a l l C i

, o f t y

1 0 t H A s I a 1 3 0 0

F l o o r

H a e x ,

C o m p l

C B P - 1 A , 0

P a s a y

(Business Address: No. Street City/Town/Province)

Mr. Ponciano S. Carreon, Jr.

(Contact Person)

857-0100
(Company Telephone Number)

1 2
Month

3 1
Day

1 7 - Q
(Form Type)

0 4
Month

Day

(Fiscal Year)

(Annual Meeting)

(Secondary License Type, If Applicable)

Dept. Requiring this Doc.

Amended Articles Number/Section Total Amount of Borrowings

Total No. of Stockholders

Domestic

Foreign

To be accomplished by SEC Personnel concerned

File Number

LCU

Document ID

Cashier

STAMPS Remarks: Please use BLACK ink for scanning purposes.

SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-Q QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER 1. For the quarterly period ended June 30, 2010 2. Commission Identification Number 00056909 3. BIR Tax Identification Number 320-000-601-470 4. Exact name of Registrant as specified in its charter: SM DEVELOPMENT CORPORATION 5. Province, country or other jurisdiction of incorporation or organization: 6. Industry Classification Code : _____________. (SEC Use Only) 7. Address of principal office: ONE E-Com Center, 10 Floor, Harbor Drive Mall of Asia Complex, CBP-1A, Pasay City 8. Registrants Telephone Number: 632-857-0100
th

PHILIPPINES

9. SM Corporate Offices, Bldg. A, 1000 Bay Blvd., SM Central Business Park, Bay City, Pasay City Former name, former address and former fiscal year, if changed since last report : 10. Securities registered pursuant to Sec. 8 & 12 of the SRC, or Sec.4 & 8 of the RSA Title of each class Number of Shares of Common Stock Outstanding & Amount of Debt Outstanding Common stock, P1 par value 11. 5,496,276,465 / N.A.

Are any or all of these securities listed on the Philippine Stock Exchange YES ___/___ NO ______ If yes, state the name of such stock exchange and the classes of securities listed therein: Philippine Stock Exchange All Common Shares

12.

Fill in whether the registrant: (a) has filed reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Section 26 and 141 of The Corporation Code of the Philippines during the precedent twelve (12) months (or such shorter period that the registrant was required to file such reports); YES ___/__ NO _____

(b) has been subject to such filing requirement for the past 90 days. YES _____ NO ___/__

TABLE OF CONTENTS Page No. PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Interim Balance Sheets as at June 30, 2010 and December 31, 2009 Consolidated Interim Statements of Income for the Period Ended June 30, 2010 and 2009 Consolidated Interim Statements of Comprehensive For the Period ended June 30, 2010 and 2009 Consolidated Interim Statements of Changes in Stockholders Equity for the Six Months Period ended June 30 and 2009 Consolidated Interim Statements of Cash Flows for the Period ended June 30, 2010 and 2009 Notes to Financial Statements Managements Discussion and Analysis of Financial Condition and Results of Operations

7 8 10

Item 2.

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PART II OTHER INFORMATION Item 3. Other Matters and Signatures

30 31

PART 1 FINANCIAL INFORMATION

Item 1.

Financial Statements Notes to Financial Statements

SM DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS

June 30, 2010 (Unaudited) ASSETS Cash and Cash Equivalents (Notes 4 and 14) Trade and Other Receivables (Notes 5 and 14) Investments Held for Trading (Notes 6 and 14) Available-for-Sale Investments (Notes 7 and 14) Condominium Units for Sale (Note 8) Land and Development (Note 8) Advances for Project Development (Notes 14) Investment Property (Note 9) Deferred Tax Assets (Note 16) Other Assets - net (Notes 10) P10,406,572,091 = 5,445,216,028 401,030,630 2,918,711,829 764,271,865 12,178,410,528 1,121,521,546 764,891,347 57,522,713 2,332,696,041 P36,390,844,618 = P715,865,365 = 4,960,507,360 334,088,736 2,827,662,394 1,017,223,058 7,866,092,699 1,301,510,831 785,212,107 57,522,712 788,614,671 P20,654,299,933 = December 31, 2009 (Audited)

LIABILITIES AND EQUITY Liabilities Loans payable (Notes 11 and 14) Accounts payable and other liabilities (Notes 12 and 14) Income tax payable (Note 16) Dividends payable Deferred tax liability (Note 16) Long term debt (Note 11) Total Liabilities Equity Capital stock (Note 13) Additional paid-in capital (Note 13) Retained earnings (Note 13) Unrealized mark-to-market gain on available-for-sale investments - net of deferred tax Total Equity P192,000,000 = 7,069,694,994 29,084,460 36,324,526 418,160,737 12,000,000,000 19,745,264,717 5,496,276,466 3,622,462,450 6,794,140,217 732,700,768 16,645,579,901 P36,390,844,618 =
See accompanying Notes to Consolidated Financial Statements.

P2,013,485,433 = 5,188,854,836 95,642,565 22,250,737 396,844,284 2,000,000,000 9,717,077,855 4,122,207,350 204,912,695 5,979,871,180 630,230,853 10,937,222,078 P20,654,299,933 =

SM DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME

For the Six Months Period Ended June 30 2010 2009 REVENUE Sale of real estate Unrealized mark-to-market loss on investments held for trading Gain on sale of investments held for trading and availablefor-sale investments Interest Dividends Management fee Others COSTS AND EXPENSES Cost of real estate sold Brokerage fees and commissions Interest expense (Note 11) Marketing expenses Salaries wages and benefits Taxes and licenses Rentals and utilities (Note 14) Entertainment, amusement and recreation Management and professional fees Depreciation Others INCOME BEFORE INCOME TAX PROVISION FOR (BENEFIT FROM) INCOME TAX Current Deferred NET INCOME EARNINGS PER SHARE - ANNUALIZED (Note 17) 2,286,591,335 240,392,846 176,563,524 126,808,477 66,823,527 43,077,824 17,545,595 13,884,170 5,383,687 5,311,530 33,368,297 3,015,750,812 1,316,389,521 42,142,741 20,275,624 62,418,365 P1,253,971,156 = P0.456 = 1,176,203,965 128,738,822 42,889,212 74,090,141 43,307,579 35,778,741 1,284,169 8,455,998 2,856,602 7,872,932 25,231,041 1,546,709,202 1,073,848,855 51,929,634 9,425,948 61,355,582 P1,012,493,273 = P0.494 = P4,107,400,007 = 74,917,810 7,440,953 72,852,571 10,631,193 12,442,212 46,455,587 4,332,140,333 P2,317,018,048 = (50,942,484) 253,687,973 30,865,284 31,610,950 11,966,196 26,352,090 2,620,558,057

See accompanying Notes to Consolidated Financial Statements.

SM DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME

For the Quarter Ended June 30, 2009 June 30, 2010 REVENUE Sale of real estate Unrealized mark-to-market loss on held for trading Gain on sale of investments held and available-for-sale investments Interest Dividends Management fee Others COSTS AND EXPENSES Cost of real estate sold Brokerage fees and commissions Interest expense (Note 11) Marketing expenses Taxes and licenses Salaries wages and benefits Rentals and utilities Entertainment, amusement and recreation Depreciation Management and professional fees Others INCOME BEFORE INCOME TAX PROVISION FOR (BENEFIT FROM) INCOME TAX Current Deferred NET INCOME 1,296,389,017 153,700,200 92,426,485 52,972,209 20,469,665 29,605,068 8,239,447 7,346,003 3,257,467 3,507,472 17,611,502 1,685,524,535 652,225,069 14,683,350 15,945,205 30,628,555 P 621,596,514 =
See accompanying Notes to Consolidated Financial Statements

P2,181,980,224 = investments 77,121,275 for trading 1,215,199 34,297,640 10,598,632 4,939,836 27,596,796 2,337,749,604

P986,435,183 = (45,429,105) 253,687,973 20,149,726 31,610,950 4,823,274 18,993,798 1,270,271,799

460,961,542 54,221,547 23,413,450 42,160,787 23,374,655 23,962,907 (1,269,455) 4,900,496 5,440,491 (307,587) 15,006,408 651,865,241 618,406,558 28,287,156 (3,298,768) 24,988,388 P593,418,170 =

SM DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Six Months Ended June 30 2009 2010

NET INCOME OTHER COMPREHENSIVE INCOME (LOSS) net of tax Unrealized gain on available-for-sale investments TOTAL COMPREHENSIVE INCOME

P1,253,971,156 =

P1,012,493,273 =

732,700,768 P1,986,671,924 =

133,055,925 P1,145,549,198 =

SM DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended June 30 2009 2010

NET INCOME OTHER COMPREHENSIVE INCOME (LOSS) net of tax Unrealized gain on available-for-sale investments TOTAL COMPREHENSIVE INCOME

P621,596,514 =

P593,418,170 =

31,148,734 P652,745,248 =

200,173,288 P793,591,458 =

SM DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Capital Stock (Note 13) At December 31, 2009 (Audited) Issuance of shares of stocks through stock rights offering Cash Dividends Changes in fair value of available-for-sale investments Net income At June 30, 2010 (Unaudited) P4,122,207,350 = 1,374,069,116 P5,496,276,466 =

Additional Paid-in Capital P204,912,695 = 3,417,549,755 P3,622,462,450 =

Retained Earnings (Note 13) P5,979,871,180 = (439,702,119) 1,253,971,156 P6,608,703,227 =

Unrealized Markto-Market Gain on Available for Sale Investments (Note 7) P630,230,853 = 102,469,915 P732,700,768 =

Treasury Stock (Note 13)

Total Equity P10,937,222,078 = 4,791,618,871 (439,702,119) 102,469,915 1,253,971,156 P16,645,579,901 =

At December 31, 2008 Cash Dividends Changes in fair value of available-for-sale investments Net income At June 30, 2009

P4,122,207,350 = P4,122,207,350 =

P121,744,133 = P121,744,133 =

P4,323,899,161 = (204,727,348) 1,012,493,273 P5,131,665,086 =

P61,932,621 = 133,005,925 P194,938,546 =

P (23,323,959) = P (23,323,959) =

P8,606,459,306 = (204,727,348) 133,005,925 1,012,493,273 P9,547,231,156 =

See accompanying Notes to Consolidated Financial Statements.

SM DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30 2009 2010 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Unrealized mark-to-market loss on investments held for trading (Notes 8 and 20) Interest income (Note 16) Dividend income (Note 7 and 16) Interest expense (Notes 13 and 16) Depreciation (Note 12) Gain on sale of investments held for trading and available-for-sale Decrease (increase) in: Trade and other receivables (Note 7) Condominium units for sale (Note 10) Increase in accounts payable and other liabilities (Note 12) Net cash provided by operations Interest received (Note 16) Income tax paid (Note 18) Net cash provided by in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Dividends received Land and development Advances to project development Proceeds from sale of investments held for trading and available for sale (Notes 8 and 9) Decrease (increase) in other assets (Note 12) Net cash provided by (used) in investing activities (Forward)

P1,316,389,522 =

P1,073,848,855 =

(74,917,810) (72,852,571) (10,631,193) 176,563,524 28,795,240 (7,440,953) (484,708,668) 252,951,194 1,754,377,628 2,878,525,913 72,852,571 (108,700,845) 2,842,677,639

50,942,484 (30,865,284) (31,610,950) 42,889,212 7,872,932 (253,687,973) (38,110,593) (1,558,925) 94,371,967 914,091,725 30,865,284 (76,342,613) 868,614,396

10,631,193 (4,312,317,830) 179,989,285

31,610,950 (668,321,857) (923,789,178)

26,801,537 (1,552,555,849) (5,647,451,664)

1,065,663,242 (388,985,680) (883,822,523)

-2For the Six Months Ended June 30 2009 2010 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from: Loans (Note 13) Stock rights offering Payments of: Cash dividends (Note 15) Interest (Note 13) Loans (Note 13) Borrowing cost Net cash provided by financing activities NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS AT END OF PERIOD

10,000,000,000 4,791,618,871 (425,628,329) (176,563,524) (1,600,000,000) (93,946,267) 12,495,480,751

2,820,000,000

(176,606,946) (52,519,833) (1,830,000,000) (67,430,144) 693,443,077

9,690,706,726

678,234,950

715,865,365

648,449,340

P10,406,572,091 =

1,326,684,290

See accompanying Notes to Consolidated Financial Statements.

SM DEVELOPMENT CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information SM Development Corporation (the Parent Company) is incorporated in the Philippines and registered with the Philippine Securities and Exchange Commission (SEC). The Parent Company and its wholly-owned subsidiaries, collectively referred to as the Company, are involved in real estate development and investments in various securities. The registered office address of the Parent Company is 10th Floor, One E-com Center, Harbor Drive, Mall of Asia Complex, CBP-1A, Pasay City. As of June 30, 2010 and December 31, 2009, the Parent Company is 65.0%-owned by SM Land, Inc. (formerly Shoe Mart Incorporated), a company incorporated in the Philippines. SM Investments Corporation (SMIC), a company incorporated in the Philippines which listed its common shares of stock with the Philippine Stock Exchange in 2005, is the ultimate parent company. On September 8, 2009, the Parent Companys Board of Directors (BOD) approved the rights offering consisting of 1,374,069,116 common shares to be offered to existing shareholders of the Parent Company. Also, on the same date, the BOD approved the subscription of SM Land, Inc. of 887,408,341 shares and any unsubscribed portion of the stock rights offer. On December 17, 2009, the Parent Company and SM Land, Inc. entered into a Subscription Agreement for the subscription of the 887,408,341 shares for a consideration of P3,105.9 million or P3.50 per share. = = The stock rights offering was completed on January 8, 2010.

2. Basis of Preparation and Statement of Compliance Basis of Preparation The consolidated financial statements have been prepared on a historical cost basis except for financial instruments held-for-trading (HFT) and available-for-sale (AFS) investments that have been measured at fair value. The consolidated financial statements are presented in Philippine peso, which is the Companys functional and presentation currency under Philippine Financial Reporting Standards (PFRS). Amounts are rounded off to the nearest peso unit, except, when otherwise indicated. Statement of Compliance The accompanying consolidated financial statements have been prepared in compliance with PFRS. PFRS includes standards named PFRS and Philippine Accounting Standards (PAS), including interpretations issued by the Financial Reporting Standards Council. Basis of Consolidation The consolidated financial statements include the financial statements of the Parent Company and its subsidiaries as of December 31 each year.

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Following is a list of the subsidiaries as of December 31, 2009, 2008 and 2007:
Company SM Synergy Properties Holdings Corporation (SM Synergy) SM_Residences Corp. (SMRC, formerly SM_Homebuilders, Inc.) Landfactors Incorporated (Landfactors) Place of Incorporation Philippines Philippines Philippines Ownership Interest 2008 2007 2009 100% 100% 100% 100% 100%

The financial statements of the subsidiaries are prepared for the same reporting year as the Parent Company, using consistent accounting policies. All intra-company balances, transactions, income and expenses and profits and losses resulting from intra-company transactions are eliminated in full. Subsidiaries are consolidated from the date of acquisition or incorporation, being the date on which the Company obtains control, and continue to be consolidated until the date such control ceases. 4. Cash and Cash Equivalents This account consists of: June 30, 2010 P 1,857,838,227 = 8,548,733,864 P10,406,572,091 = Dec. 31, 2009 = P217,975,731 497,889,634 = P715,865,365

Cash on hand and in banks Temporary investments

Cash in banks earns interest at the respective bank deposit rates. Temporary investments are made for twelve months or less depending on the immediate cash requirements of the Company, and earn interest at the respective temporary investment rates.

5. Trade and Other Receivables This account consists of: June 30, 2010 P4,593,107,142 = 723,189,728 112,709,504 10,223,578 5,986,075 P5,445,216,028 = Dec. 31, 2009 P4,113,218,157 = 693,791,211 138,532,791 10,223,578 4,741,623 P4,960,507,360 =

Sales of real estate Advances to contractors Receivables from related parties (see Note 18) Dividends Interest (see Note 18)

Receivable from sale of real estate is subject to interest with market rates ranging from 13% to 18% per annum.

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6. Investments Held for Trading This account consists of investments in listed common shares with a fair value of P401.0 million = as of June 30, 2010 and P334.1 million as of December 31, 2009. = The Company recognized unrealized gains (losses) on changes in fair values amounting to = P74.9 million and P(50.9) million in June 30, 2010 and 2009 respectively. Realized gain on the = sale of HFT investments amounted to P87,687 and P253 million as of June 30, 2010 and 2009 = = respectively.

7. Available-for-Sale Investments This account consists of the following: June 30, 2010 = P 252,700,000 2,454,325,330 211,686,499 2,666,011,829 P2,918,711,829 = Dec. 31, 2009 = P 260,155,000 2,355,820,895 211,686,499 2,567,507,394 = P2,827,662,394

Investments in bonds Investments in shares of stock: Listed Unlisted

a. Investments in bonds consist of peso-denominated retail treasury bills with fixed interest rate of 8.5% as of June 30, 2010. The investment in bonds will mature on September 8, 2010. b. Investments in shares of stock consist of investments in listed and unlisted common shares of stock. Unlisted common stocks are unquoted and there are no other reliable sources of their fair market values, therefore, they are stated at cost. Management intends to dispose AFS investments, both listed and unlisted, when the need arises. The Company recognized unrealized gains (losses) on changes in fair values amounting to P732.7 = million in June 30, 2010 and P53.6 million in December 31, 2009. Realized gain on the sale of = AFS investments amounted to P7.4 million in June 2010. = 8. Land and Development and Condominium Units for Sale In January 2009, the Parent Company started the construction of Phase One for two new projects, Field Residences and Sea Residences. Field Residences is a residential condominium project. Phase One of Field Residences has a market take up of 73.8% valued at = P1,473.3 million and total estimated cost to complete amounting to P2,852.6 million as of = June 30, 2010. Construction of the other phases of the Field Residences has not started as of June 30, 2010. Sea Residences is a residential/commercial condominium project composed of six buildings. Phase One has a market take up of 88.2% valued at P2,651.0 million and estimated cost to = complete amounting to P240.1 million as of June 30, 2010. Phase Two started construction on = December 1, 2009 and has a market take up of 79.6% valued at P1,858.0 million and estimated = cost to complete amounting to P434.8 million as of June 30, 2010. Phase Three started =
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construction on June 2010 and has a market take up of 33.8% valued at P928.0 million and = estimated cost to complete amounting to P402.0 million as of June 30, 2010. = In March 2008, the Parent Company started the construction of the Berkeley Residences, a residential/commercial condominium project. As of June 30, 2010, it has a market take up of 98.0% valued at P2,468.1 million and total estimated cost to complete amounting to P200.0 = = million as of June 30, 2010. Also, in March 2008, the Parent Company started the construction of the Grass Residences, another residential/commercial condominium project composed of three towers. Tower One started construction in March 2008. Tower One has a market take up of 91.3% valued at = P3,463.4 million. Tower Three which started construction in May 2010 has a market take up of 92.0% valued at P3,746.4 million as of June 30, 2010. The total estimated cost to complete the = project amounts to P2,133.9 million as of June 30, 2010. = In October 2006, the Parent Company started the construction of the Mezza Residences, a residential/commercial condominium project. As of June 30, 2010, it has a market take up of 98.4% valued at P4,111.6 million. Construction of the Mezza Residences has been completed as = of December 31, 2009. In 2003, SM Synergy commenced construction of its condominium project - the Chateau Elysee, a French Mediterranean-inspired condoville in Paraaque City composed of six clusters. Cluster One of the project broke ground on September 29, 2003, with market take-up of 96.1% valued at = P427.6 million as of June 30, 2010. Construction of Cluster Two started in 2005, with market take-up of 98.0% valued at P518.9 million as of June 30, 2010. Construction of Cluster Three = started in 2006, with market take up of 100.0% valued at P704.7 million as of June 30, 2010. = Construction of Cluster Six started in 2007, with market take up of 94.0% valued at P662.4 = million as of June 30, 2010. Construction of Cluster Five started in 2008, with market take-up of 68.0% valued at P583.3 million as of June 30, 2010. Construction of Cluster One, Two, Three, = Five and Six has been completed as of December 31, 2009. Construction of Cluster Four has started April 2010 and it has a market take up of 2% valued at P20.5 million as of June 30, 2010. = The total estimated cost to complete Cluster Four amounts to P9,416.8 as of June 30, 2010. = Four residences were launched during the 4th quarter of 2009 namely Sun Residences, Light Residences, Jazz Residences and Wind Residences. Construction of the projects will commence in 2010. In April 2010, the construction of Light Residences, a residential condominium project in Mandaluyong City, has commenced. Its has a total market take up of 22.2% valued at = P1,697.2 million as of June 30, 2010. The total estimated cost to complete as of June 30, 2010 amounts to P3,987.6 million. = In May 2010, the construction of Jazz Residences, a residential condominium project in Makati City, has commenced. It has a total market take up of 71.3% valued at P2,630.7 million as of June = 30, 2010. The total estimated cost to complete Tower A and Tower B as of June 30, 2010 amounts to P9,657.8 million. = Condominium units for sale amounting to P764.3 million and P1,017.2 million as of June 30, 2010 = = and December 31, 2009, respectively, pertain to completed clusters of the Chateau Elysee and the Mezza Residences.
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In 2009, the Parent Company acquired Landfactors for P300.0 million and became its wholly = owned subsidiary. The purchase of Landfactors was accounted for as an acquisition of asset. Landfactors owns a parcel of land which will be developed into a commercial/residential condominium project, the Light Residences. The details of the sharing method for the revenue of the Light Residences have not been finalized as of June 30, 2010. The Company finances its project development through availment of loans. Capitalized borrowing costs amounted to P93.9 million in June 2010 and P222.0 million in 2009. = = The condominium units for sale and land and development are stated at cost as of June 30, 2010 and December 31, 2009. 9. Investment Property This account consists of building and improvements, portion of the Mezza Residences, that are being leased to third and related parties. June 30, 2010 P819,566,541 = 54,675,194 P764,891,347 = Dec. 31, 2009 = P819,566,541 34,354,434 = P785,212,107

Cost Accumulated depreciation Carrying value

Management believes the fair value of the investment property approximates its carrying amount and did not change significantly as of June 30, 2010 since the construction of the property has just been completed during the year. The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arms-length transaction at the date of valuation. The investment property is depreciated on a straight-line basis over 25 years. Rent income, included as part of Other income account, generated from the investment property amounted to P18.1 million and P10.6 million in June 30, 2010 and 2009 respectively. = = 10. Other Assets This account consists of: June 30, 2010 P1,394,063,285 = 303,784,574 368,299,445 129,526,415 Dec. 31, 2009 = P392,210,537 212,692,408 85,690,116 57,518,135

Cash in escrow Prepaid expenses Input tax Deposits Office furniture and equipment (net of accumulated depreciation of P24.2 million = in June 30, 2010 and P15.8 million in Dec. = 31, 2009) Creditable withholding tax Others (see Note 19)

103,161,728 32,558,165 1,302,429 P22,332,696,041 =

22,608,387 17,895,088 = P788,614,671

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Cash in escrow pertains mainly to the amounts collected from customers resulting from sale of units from projects under temporary license to sell as required by the Housing and Land Use Regulatory Board (HLURB). Prepaid expenses include rent, taxes and others. This account also includes prepaid interest resulting from the assignment of receivables on a without recourse basis, which interest is being amortized over the discount period. Input tax represents value-added tax (VAT) paid to suppliers and contractors that can be claimed as credit against the Companys VAT liabilities. 11. Loans Payable This account includes short-term loans from BDO, related parties, and other financial institutions amounting to P192.0 million and P1,792.0 as of June 30, 2010 and December 31, 2009 = = respectively, with fixed annual interest rates ranging from 5.4% to 6.71% in the first quarter of 2010 and 4.8% to 5.4% in 2009. The BDO loans are secured with the Parent Companys investments in bonds with a carrying value of P252.7 million and P260.2 million as of June 30, 2010 and December 31, 2009 = = respectively (see Note 7). This account also includes secured and unsecured long-term loans obtained from local financing institutions amounting toP10.0 billion and P2.0 billion as of June 30, 2010 and December 31, 2009 = = respectively. The loans, with fixed annual interest rates at 8.7% and floating interest rates ranging from 4.7% to 6.0%, are payable quarterly starting January 2011. In June1, 2010, the company issued 3-year 6.8% and 5-year 7.7% Fixed Rate Corporate Notes amounting to P10 billion to not more than 19 institutional creditors. 12. Accounts Payable and Other Liabilities This account consists of: June 30, 2010 P2,062,390,091 = 2,365,552,672 1,950,405,438 344,733,928 179,629,029 125,282,379 35,253,362 6,448,095 P7,069,694,994 = Dec. 31, 2009 = P143,991,387 1,892,283,236 2,676,625,234 199,685,735 183,548,388 61,156,209 15,622,725 15,941,922 = P5,188,854,836

Trade Payable arising from acquisition of land (see Note 10) Customers deposit Deferred output VAT Deferred rent income (see Note 18) Accrued expenses Taxes payable Others

Trade payables, accrued expenses, sales commission payables are noninterest bearing and are normally settled on a 30-day term. Customers deposits represent nonrefundable reservation fees paid to the Company by prospective buyers which are to be applied against the receivable upon recognition of revenue. This account
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also includes excess collections from buyers over the related revenue recognized based on the percentage of completion method. Payable arising from acquisition of land will be settled within one year. Accrued expenses include accruals for salaries, commission, interest, rent and utilities. 13. Stockholders Equity Capital Stock The details and movements are as follows:
Number of Shares Authorized June 30, 2010 Dec. 31, 2009 Capital stock - P1 par value = Balance at beginning of year Stock Rights Offering Balance at end of year 8,000,000,000 8,000,000,000 8,000,000,000 8,000,000,000 Issued and Subscribed June 30, 2010 Dec. 31, 2009 4,122,207,350 1,374,069,116 5,496,276,466 4,122,207,350 4,122,207,350

The Company completed the stock rights offering last January 8, 2010 for which 1.4 billion shares of stock were issued at P3.50 per share. Net proceeds received amounted to P4.8 billion which = = yielded additional paid in capital of P3.4 billion. = Retained Earnings The details and movements are as follows:
Unappropriated Balance beginning of year Net income Cash dividends: Balance at end of year June 30, 2010 P4,479,871,180 = 1,068,534,165 (439,702,117) P5,108,703,227 = Dec. 31, 2009 P2,823,899,161 = 1,860,699,368 (204,727,349) P4,479,871,180 = June 30, 2010 P1,500,000,000 = P1,500,000,000 = Appropriated Dec 31, 2009 P1,500,000,000 = P1,500,000,000 =

The Companys retained earnings includes the accumulated equity in net earnings of subsidiaries amounting to P616.8 million and P620.0 million as of June 30, 2010 and December 31, 2009 = = respectively, which is not available for dividend declaration until such time that the subsidiaries declares the dividends. Also, the retained earnings include unrealized mark-to-market gain on HFT investments amounting to P117.9 million P43.0 million as of June 30, 2010 and December 31, 2009, = = respectively, which is restricted as to dividend declaration. The details of the Companys declaration of cash and stock dividends are as follows:
2010 April 26 P0.08 = May 26 June 21 2009 April 27 P0.05 = May 27 June 23

Date of BOD approval Amount of cash dividends per share Record date Payment date

16

Movements in treasury shares are as follows:

2009 27,619,146 (27,619,146)

Balance at beginning of year Sale Balance at end of year

The sale of 27,619,146 treasury shares in 2009 resulted in additional APIC of P83.2 million. = 14. Related Party Transactions Transactions with related companies have been entered into at terms no less favorable than could have been obtained if the transactions were entered with unrelated parties. The amounts included in the consolidated financial statements with respect to these transactions follow: The Company holds certain bank accounts, available-for-sale investments and investments held for trading in BDO, an associate of SMIC, and earn interest based on prevailing market interest rates. The Company also has loans payable to Banco de Oro (see Note 11). A summary of the Companys outstanding balance and transactions with Banco de Oro, as follows: June 30, 2010 P10,360,039,765 = 252,700,000 5,986,075 192,000,000 Dec. 31,2009 = P669,341,163 260,155,000 1,012,857 702,735,902

Cash and cash equivalents Available for sale investments Accrued interest receivable Loans payable

The Company entered into receivable financing arrangements with BDO on a with and without recourse basis. Related receivables financed with recourse as of June 30, 2010 and December 31, 2009 amounted to P89.9 million and P217.3 million respectively. As of June = = 30, 2010 and December 31, 2009, financed receivables on a without recourse basis amounted to P2,478.8 million and P2,445.4 million, respectively. Accordingly, the related receivables = = were derecognized in the Companys books. The Company holds certain bank accounts and investments held for trading in China Bank, an associate of SMIC, and earn interest based on prevailing market interest rates. The Company also has loans payable to China Bank (see Note 11). A summary of the Companys outstanding balance and transactions with China Bank are as follows: June 30, 2010 Dec. 31, 2009 Cash and cash equivalents P856,645 = P322,313 = Investments held for trading 401,030,630 326,112,820 Loans payable 300,000,000 4,158,510

17

The Company has investments held for trading and available for sale investments with related parties. Set out below is a comparison of the carrying values and fair values of the investments with related parties. June 30, 2010 P989,173,308 = P989,173,308 = Dec. 31, 2009 = P1,124,942,193 14,497,275 7,975,916 = P1,147,415,384

Highlands Prime, Inc. SMIC SM Prime Holdings, Inc.

In 2007, the Company entered into a development agreement with Intercontinental Development Corporation (ICDC), a company owned by the stockholders of the SM Group of Companies, whereby the Company will act as project manager and marketing arm for the development and sale of the Lindenwood Project. Management income recognized from the agreement amounted to P16.9 million and P12.0 million in June 30, 2010 and 2009 = = respectively. On December 8, 2008, the Company assigned to SMIC its receivable from ICDC amounting to P178 million to partially liquidate the liabilities of Bellevue Properties, Inc. (Bellevue), a = related party, to SMIC. The assignment is part of an agreement between the Company and Bellevue, wherein the Company paid an exclusive and irrevocable option price, to purchase a parcel of land owned by Bellevue amounting to P178.0 million. A deed of absolute sale was = signed on June 1, 2010 between Bellevue and SMDC to finalize the purchase of the parcel of land with a total cost of P224 million. =

The Advances for Project Development account includes advances made to related parties amounting to P1,121.5 million and P1,292.8 million as of June 30, 2010 and December 31, = = 2009, for the acquisition of land for future development. The BOD ratified the advances and the plan to transfer the ownership of the acquired land to the Company. In 2009, advances amounting to P639.8 million were liquidated through the transfer of the = absolute voting rights in SMRC in favor of the Parent Company. Consequently, SMRC became a wholly owned subsidiary of the Parent Company. The transaction was accounted for as an acquisition of asset. SMRC owns a parcel of land which is being developed into a commercial/residential condominium project, the Sea Residences. The Advances for Project Development account also includes advances to Tagaytay Resources Development Corporation, a company owned by stockholders of the SM Group of Companies, amounting to P7.5 million as of June 30, 2010 and December 31, 2009 for the = purchase of real property.

The Company has lease agreements with Supervalue, Inc. and BDO, for the lease of its investment property for a period of 10 years and 5 years, commencing in March 2009 until February 2019 and April 2014, respectively. Deferred rent income amounted to P173.5 = million and P183.5 million as of June 30, 2010 and December 31, 2009 respectively. Future = minimum rental receivables under non-cancelable lease are as follows:

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Year Within one year Over one year but within 5 years Over five years but within 10 years Lease agreements include fixed and variable terms.

Amount = P20,207,874 80,732,357 82,608,156

The Company has an agreement with SMIC for the lease of its office, renewable every year upon mutual consent of the parties. Rental payments amounted to P14.4 million and P13.3 = = million for the three months ended June 30, 2010 and 2009 respectively.

` 15. Pension Plan The Parent Company is a participant to the SM Corporate and Management Companies Multi-Employer Pension Plan. The Plan is a funded, noncontributory defined benefit pension plan covering all its regular full-time employees determined using the projected unit credit actuarial valuation method. Plan assets are composed of cash and cash equivalents, investments in government securities and other similar debt instruments. The principal assumptions used in determining pension and benefit obligations of the pension plan are shown below:
2009 11.31% 6.00% 11%

Discount rate Expected return on plan assets Salary projection rate

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

16. Income Tax The components of the Companys net deferred tax assets (liabilities) are as follows: June 30, 2010 P55,102,632 = 1,824,192 595,888 P57,522,712 = Dec. 31, 2009 = P55,102,632 1,824,192 595,888 = P57,522,712

Deferred rent income Deferred income on sale of real estate to SM Synergy NOLCO

19

Unrealized gross profit on sale of real estate Capitalized borrowing costs Pension asset Unrealized foreign exchange gain

June 30, 2010 (P387,468,198) = (28,183,880) (1,354,193) (1,154,466) (P418,160,737) =

Dec. 31, 2009 (P353,601,898) = (40,733,727) (1,354,193) (1,154,466) (P396,844,284) =

17. Basic/Diluted Earnings Per Share June 30, 2010

Net income attributable to equity holders of the parent (a) Common shares issued Less weighted average number of treasury shares acquired during the year Weighted average number of common shares outstanding (b) Earnings per share - annulized (a/b X 2) June 30, 2009

P1,253,971,156 =
5,496,276,465

P1,012,493,273 =
4,122,207,350

5,496,276,465

23,323,959 4,098,883,391

P0.456 =

P0.494 =

18. Segment Information The Company conducts its business in the following segments:
June 30, 2010 Investments in Various Securities Revenue Inter-segment revenue Total revenue Segment results: Income before income tax Provision for income tax Net income Segment assets (excluding deferred tax assets) Segment liabilities (excluding deferred tax liabilities) = P133,347 = P133,347 = P133,347 = P133,347 P3,319,743 = = P36,324 Real Estate Development P4,132,591 = 81,789 P4,214,380 = P1,058,206 = 62,418 P1,120,624 = P34,951,942 = P20,861,577 =

Eliminations P(6,382) = (9,205) P(15,587) = P= P= P(1,938,363) = P(1,152,636) =

Consolidated P4,259,556 = 72,584 P4,332,140 = P1,191,553 = 62,418 P1,253,971 = 36,333,322 P19,745,265 =

(Amounts in Thousands)

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December 31, 2009 Investments in Various Securities Revenue Inter-segment revenue Total revenue Segment results: Income before income tax Provision for income tax Net income Segment assets (excluding deferred tax assets) Segment liabilities (excluding deferred tax liabilities) = P315,368 = P315,368 = P289,415 = P289,415 = P3,779,816 = P22,251 Real Estate Development = P5,405,094 165,796 = P5,570,890 = P1,734,863 168,529 = P1,566,334 = P18,632,161 = P10,363,315

Eliminations (P51,248) = (26,228) (P77,476) = = P4,950 = P4,950 (P1,815,200) = (P1,065,333) =

Consolidated = P5,669,214 139,568 = P5,808,782 = P2,029,228 168,529 = P1,860,699 = P20,596,777 = P9,320,233

(Amounts in Thousands)

Inter-segment income pertains to commission from sale of real estate and interest income from loans. Commission is based on a certain percentage of the selling price and interest is based on prevailing market rates.

19. Classification of Balance Sheet Accounts and Significant Financial Ratios The current portions of assets and liabilities are as follows: June 30, 2010 Assets: Cash and cash equivalents Trade and other receivables Investments held for trading Available-for-sale investments Condominium units for sale Advances for project development Other assets = P10,412,323,766 2,329,937,376 401,030,630 2,918,711,829 764,271,865 1,121,521,546 1,925,749,740 P19,873,546,752 = Dec. 31, 2009 = P715,865,365 2,453,668,053 334,088,736 820,619,770 1,017,223,058 1,301,510,831 629,792,227 = P7,272,768,040

Liabilities: Loans payable Accounts payable, customer deposits, and other liabilities Income tax payable Dividends payable

= P192,000,000
7,069,694,994 28,771,010 36,324,526 P7,326,790,530 =

= P2,103,485,433 5,188,854,836 95,642,565 22,250,737 = P7,410,233,571

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The significant financial ratios are as follows: June 30, 2010 Current ratio (Current assets over current liabilities) Debt-to-equity ratio (Interest bearing debt over total equity) Net debt-to-equity ratio (Interest bearing debt less cash and cash equivalents over total equity) Return on assets (Net income over total assets) Return on Equity (Net income over total equity) 2.71:1.00 0.74:1.00 Dec. 31, 2009 0.98:1.00 0.37:1.00

0.11:1.00 3.45% 7.53%

0.30:1.00 9.0% 17.0%

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ITEM 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

FINANCIAL POSITION JUNE 30, 2010 vs. JUNE 30, 2009 (Unaudited) June 30, 2010 10,406,572,091 5,445,216,028 401,030,630 2,918,711,829 764,271,865 12,178,410,528 1,121,521,546 764,891,347 57,522,713 2,332,696,041 P36,295,104,996 = = P 192,000,000 7,188,479,605 28,771,010 36,324,526 389,386,944 12,000,000,000 P19,834,962,085 = P 5,496,276,466 = 3,622,462,450 6,608,703,227 732,700,768 P16,460,142,911 = June 30, 2009 = P1,326,684,290 2,595,655,942 271,659,234 2,392,585,337 144,411,254 7,072,393,922 1,804,214,849 344,166,866 47,821,978 266,921,295 = P16,288,305,437 1,582,000,000 3,022,261,244 28,586,441 36,026,898 422,199,700 1,650,000,000 = P 6,741,074,283 = P4,122,207,350 121,744,133 5,131,665,086 194,938,546 (23,323,959) = P9,547,231,155 % Change 684% 110% 48% 22% 429% 72% -38% 122% 20% 774% 123% -88% 134% 2% 1% -1% 627% 193% 33% 2875% 32% 276% -100% 74%

Cash and Cash Equivalents Trade and Other Receivables Investments Held for Trading Available-for-Sale Investments Condominium Units for Sale Land and Development Advances for Project Development Investment Property Deferred Tax Assets Other Assets Total Assets Loans Payable Accounts Payable and Other Liabilities Income Tax Payable Dividends Payable Deferred Tax Liability Long Term debt Total Liabilities Capital Stock Additional Paid-in Capital Retained Earnings Unrealized Mark-to-Market Gain on Available-for-Sale Investments Treasury Stock Total Stockholders' Equity

Financial Condition as at June 30, 2010 compared to as at June 30, 2009: The Companys resources as of June 30, 2010 reached P36.3 billion, 123% or P20.1 billion higher = = than end June 30, 2009 level of P16.3 billion. = 684% Increase in Cash and Cash Equivalents The increase of 684% is mainly attributable to the P4.8 billion proceeds of stock rights offering = last January 2010 and proceeds from issuance of P10 billion corporate notes during the month of = June 2010.
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110% Increase in Trade and Other Receivables The significant increase of P2.8 billion is mainly due to the high sales take-up and higher = completion rate of ongoing project construction resulting to substantial booking of sales for Grass Residences, Sea Residences, Field Residences, Berkeley Residences, Mezza Residences and Cluster 5 of Chateau Elysee. 48% Increase in Investments Held for Trading The increase of 48% is mainly due to the appreciation in the market value of equity shares under Held for Trading. 22% Increase in Available-for-Sale Investments The increase was due to appreciation in the market values of equity investments under available for sale portfolio. 429% Increase in Condominium Units for Sale The increase is due to the completion of Chateau Elysee Cluster 5 by the end of 2009. 72% Increase in Land and Development The increase is due to the newly acquired properties in various locations within Metro Manila and the high completion rate on construction of Berkeley Residences, Grass Residences, Sea Residences, Chateau Elysee, and Field Residences. 38% decrease in Advances for Project Development The decrease is primarily due to the application of advances and deposits made in connection with land acquisitions. 122% Increase in Investment Properties The increase was due to the reclassification of the cost of completed commercial area from Land and Development to Investment Property at the end of 2009. 20% Increase in Deferred Tax Assets The increase is primarily due to the temporary difference from advance rental received from the lease in Mezza Commercial Area. 774% Increase in Other Assets The increase is due to additional funds transferred to escrow account as required by HLURB for projects with temporary license to sell and additional input taxes arising from project construction. 88% decrease in Loans Payable The decrease is due to payments of short term loans during the first quarter of 2010. 134% Increase in Accounts Payable and Other Liabilities Bulk of the increase represents liabilities to various contractors, customer deposits, and land acquisitions. 627% Increase in Long Term Debt The increase is due to the issuance of P10 billion fixed rate corporate notes in June 2010.

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33% Increase in Capital Stock and 2,875% Increase in Additional Paid in Capital The increases were due to the stock rights offering last January 2010 wherein the Company issued additional 1.4 billion shares at P3.5 per share. = 100% decrease in Treasury Stock The decrease was due to the sale of P27.6 million treasury shares in 2009 resulting to an additional = paid in capital of P83.2 million. = 276% Increase in Unrealized Mark-to-Market Gain on Available-for-Sale Investments The increase was brought about by the take up of unrealized mark-to-market gain due to the appreciation in market values of traded investment in stocks under Available for Sale portfolios. RESULTS OF OPERATIONS JUNE 30, 2010 vs. JUNE 30, 2009 (Unaudited) June 30, 2010 (Six months) P4,107,400,007 = 74,917,810 72,853,672 10,631,193 7,440,953 12,442,212 46,455,587 P4,332,140,333 = P2,027,265,548 = 240,392,846 176,563,524 126,808,477 66,823,527 43,077,824 17,545,595 13,884,170 5,311,530 5,383,687 33,368,297 P3,015,750,812 =
62,418,365

Sale of Real Estate Unrealized Mark-to-Market Gain on Investments Held for Trading Interest Dividends Gain on Sale of Investments Held for Trading and Available-for-Sale Investments Management Fee Others Total Revenues Cost of Real Estate Sold Brokerage Fees and Commissions Interest Expense Marketing Expenses Salaries Wages and Benefits Taxes and Licenses Rentals and Utilities Entertainment and Representation Depreciation Management and Professional Fees Others Total Costs and Expenses Provision for Income Tax Net Income

June 30, 2009 (Six months) = P2,317,018,048 (50,942,484) 30,865,284 31,610,950 253,687,973 11,966,196 26,352,090 = P2,620,558,057 = P1,176,203,965 128,738,822 42,889,212 74,090,141 44,859,276 35,778,741 1,284,169 8,455,998 7,872,932 1,304,905 25,231,039 = P1,546,709,200 61,355,582 = P1,012,493,273

% Change 77% -247% 136% -66% -97% 4% 76% 65% 94% 87% 312% 71% 49% 20% 1266% 64% -33% 313% 32% 95% 2% 24%

P1,253,971,156 =
25

Results of Operations for the six months ended June 30, 2010 compared to six months ended June 30, 2009. The Company posted a net income of P1.3 billion, 24% higher compared to same period for 2009. = 65% Increase in Revenues The increase is driven mainly by high sales take up from and high completion rates of Berkeley Residences, Grass Residences, and Sea Residences and the completion of Building 1 of Field Residences, Cluster 5 of Chateau Elysee, and Towers 1 to 4 of Mezza Residences. 95% Increase in Costs and Expenses The increase in costs and expenses by 95% compared to the same period last year is directly related to higher sales volume in 2010. Consequently, Marketing Expenses and Brokerage Fees and Commissions also increased by 71% and 87%, respectively. To support the growing operations, more personnel were hired and a bigger office space was leased, hence, the increase in Salaries Wages and Benefits by 49% and increase in Rentals and Utilities by 1266%. Taxes and licenses also increased due to higher business taxes and real property taxes. Lastly, Interest expense increased due to additional borrowings in June 2010.

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FINANCIAL POSITION JUNE 30, 2010 VS. DECEMBER 31, 2009 June 30, 2010 (Unaudited) P10,412,323,766 = 5,083,730,104 401,030,630 2,918,711,829 764,271,865 12,438,356,852 1,121,521,546 764,891,347 57,522,713 2,332,744,344 P36,295,104,996 = = P 192,000,000 7,069,694,994 28,771,010 36,324,526 389,386,944 12,000,000,000 = P19,745,264,717 = P 5,496,276,466 3,622,462,450 6,608,703,227 732,700,768 = P16,460,142,911 Dec. 31, 2009 % Change (Audited) = P715,865,365 1354% 4,960,507,360 10% 334,088,736 20% 2,827,662,394 3% 1,017,223,058 -25% 7,866,092,699 55% 1,301,510,831 -14% 785,212,107 -3% 57,522,712 0% 788,614,671 196% = P20,654,299,933 76% = P2,013,485,433 5,188,854,836 95,642,565 22,250,737 396,844,284 2,000,000,000 = P9,717,077,855 = P 4,122,207,350 204,912,695 5,979,871,180 630,230,853 = P10,937,222,078 -90% 36% -70% 63% -2% 500% 103% 33% 1168% 11% 16% 50%

Cash and Cash Equivalents Trade and Other Receivables Investments Held for Trading Available-for-Sale Investments Condominium Units for Sale Land and Development Advances for Project Development Investment Property Deferred Tax Assets Other Assets Total Assets Loans Payable Accounts Payable and Other Liabilities Income Tax Payable Dividends Payable Deferred Tax Liability Long Term debt Total Liabilities Capital Stock Additional Paid-in Capital Retained Earnings Unrealized Mark-to-Market Gain on Available-for-Sale Investments Total Stockholders' Equity

Financial Condition as at June 30, 2010 compared to as at December 31, 2009 The Companys total resources as of June 30, 2010 reached P36.4 billion, 76% or P15.7 billion = higher than December 31, 2009 level of P20.6 billion. = 1354% Increase in Cash and Cash Equivalents The increase of 1354% is mainly attributable to the P4.8 billion proceeds of stock rights offering = last January 2010 and proceeds from issuance of P10 billion corporate notes during the month of = June 2010.

27

10% Increase in Trade and Other Receivables The increase of P123.2 million is mainly due to the high sales take-up and higher completion rate = of ongoing project construction resulting to substantial booking of sales for Grass Residences, Sea Residences, Field Residences, Berkeley Residences, Mezza Residences and Cluster 5 of Chateau Elysee. 20% Increase in Investments Held for Trading The increase of 20% is mainly due to the appreciation in the market value of equity shares under Held for Trading. 25% decrease in Condominium Units for Sale The increase is due to the completion of Chateau Elysee Cluster 5 by the end of 2009. 55% Increase in Land and Development The increase is due to the newly acquired properties in various locations within Metro Manila and the high completion rate on construction of Berkeley Residences, Grass Residences, Sea Residences, Chateau Elysee, and Field Residences. 196% Increase in Other Assets The increase is due to additional funds transferred to escrow account as required by HLURB for projects with temporary license to sell and additional input taxes arising from project construction. 90% decrease in Loans Payable The decrease is due to payments of short term loans during the first quarter of 2010. 39% Increase in Accounts Payable and Other Liabilities Bulk of the increase represents liabilities to various contractors, customer deposits, and land acquisitions. 500% Increase in Long Term Debt The increase is due to the issuance of P10 billion fixed rate corporate notes in June 2010. 33% Increase in Capital Stock and 1,668% Increase in Additional Paid in Capital The increases were due to the stock rights offering last January 2010 wherein the Company issued additional 1.4 billion shares at P3.5 per share. = 16% Increase in Unrealized Mark-to-Market Gain on Available-for-Sale Investments The increase was brought about by the take up of unrealized mark-to-market gain due to the appreciation in market values of traded investment in stocks under Available for Sale portfolios.

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RESULTS OF OPERATION JUNE 30, 2010 vs. DECEMBER 31, 2009 June 30, 2010 (Unaudited) P4,107,400,007 = 74,917,810 7,440,953 72,853,672 10,631,193 12,442,212 46,455,587 P4,332,140,333 = P2,027,265,548 = 240,392,846 176,563,524 126,808,477 66,823,527 43,077,824 17,545,595 13,884,170 5,311,530 5,383,687 33,368,297 P3,015,750,812 =
62,418,365

Sale of real estate Unrealized mark-to-market gain on investments Gain on sale of investments held for trading and available-for-sale investments Interest Income Dividends Management fee Others Total Revenues Cost of real estate sold Brokerage fees and commissions Interest expense Marketing expenses Salaries wages and benefits Taxes and licenses Rentals and utilities Entertainment, amusement and recreation Depreciation Management and professional fees Others Total Cost and Expenses Provision for Income Taxes Net Income

Dec. 31, 2009 (Audited) = P5,261,816,589 11,487,018 253,687,973 79,898,377 50,193,497 33,103,326 107,325,895 5,797,512,675 2,849,815,882 256,464,448 83,426,309 247,840,107 95,910,870 79,345,576 41,137,882 19,538,251 39,208,600 3,534,752 52,062,191 3,768,284,868 168,528,439 = P1,860,699,368

% Change -22% 552% -97% -9% -79% -62% -57% -25% -29% -6% 112% -49% -30% -46% -57% -29% -86% 52% -36% -27% -63% -19%

P1,253,971,156 =

Results of Operations for the six months ended June 30, 2010 compared to year ended December 31, 2009: SMDC expects surpass the 2009 operating results. The projected higher revenues and bottomline figures for 2010 will come from the high sales take-up of big four projects launched near the end of 2009 and the new SMDC brand launched in 2010, and the fast paced completion rates of existing projects. Cost control measures are being strictly observed to ensure that increase in operating expenses is regulated to efficiently complement generation of revenues.

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PART II OTHER INFORMATION ITEM 3. Other Required Disclosures 1) The Company and its Subsidiaries had no interim operations which are seasonal or cyclical in nature. 2) There were no unusual or material items affecting assets, liabilities, equity, net income or cash flows of the Company, other than those already disclosed. 3) There were no changes in estimates of amounts reported in prior interim periods of the current financial year or changes in estimates of amounts reported in prior financial years. 4) There were no material events subsequent to the end of June 30, 2010 that was not reflected in the financial statements for that period. 5) There were no material commitments for capital expenditures except as disclosed in the Notes to Financial Statements. 6) There are no known trends, events or uncertainties that have a material favorable or unfavorable impact on net sales/revenues/income from continuing operations. 7) There are no seasonal aspects that had a material effect on the financial condition or results of operations. 8) The attached interim financial reports were prepared in accordance with accounting standards generally accepted in the Philippines. The accounting policies and methods of computation followed in these interim financial statements are the same compared with the audited financial statements for the period ended December 31, 2009. 9) Except as reported in Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A), there were no unusual items affecting assets, liabilities, equity, net income or cash flows for the period ended June 30, 2010. There were no other issuances, repurchases and repayments of debt and equity in securities. 10) There were no changes in the composition of the Company during the interim such as business combination, acquisitions or disposal of subsidiaries and long-term investments, restructuring and discontinuing operations. 11) The Company and its Subsidiaries has no contingent liabilities or contingent assets since June 30, 2010. 12) There exist no material contingencies and other material events or transactions affecting June 30, 2010. 13) The Company has no other information or material events that needs to be reported which was not previously reported in SEC Form 17-Q.

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SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this report is true, complete and correct. This report is signed in the City of Pasay on August 2, 2010.

Issuer:

SM DEVELOPMENT CORPORATION

Signature and Title:

ROGELIO R. CABUAG President and Chief Operating Officer Date Signed: 2 August 2010

Accounting Officers Signature and Title:

MARY GERALDINE G. RELATIVO Vice President Finance and Controllership Date Signed: 2 August 2010

31