ECONOMIC

* Direct economic value generated (revenue) and operating costs includes SRC’s revenues and operating costs from its investments in capital markets and in Hermosa Ecozone Development Corporation (HEDC).

Direct Economic Value Discussion on Impact, Risks, and Management Approach

Seafront Resources Corporation (SPM or SRC) was registered with the Securities and Exchange Commission (SEC) on April 16, 1970 as an oil exploration and production company. On October 18, 1996, the Company amended its Articles of Incorporation which provides for the revision of its primary purpose from engaging in the business of oil exploration and production into a holding company.

On January 31, 1997, the Company entered into a Project Shareholders’ Agreement with five other companies led by Investment and Capital Corporation of the Philippines and Penta Capital Investment Corporation to develop 500 to 600 hectares of raw land in Hermosa, Bataan (through Hermosa Ecozone Develoment Corporation or HEDC) into a new township consisting of industrial estates, residential communities, a golf and country club and a commercial center. SRC holds 11.3% shares interest in HEDC.

HEDC started its land development in 2002 and has developed a total of 163 hectares in the industrial area The remaining 360 hectares are allocated for leisure area. Initial sale of lot was at Php1,400/sqm in 2007 Sales started to pick up from 2017 to 2022 From 2017 to 2022, HEDC sold a total of 1,034,103 sqm of lots for a gross revenue of Php3.691 billion

HEDC has already declared and paid a total of Php1.049 million of dividends, wherein SRC received its share in the amount of Php119 million.

SRC’s management and administration are done by its affiliate Company, PetroEnergy Resources Corporation (PERC). PERC oversees the financial, treasury, legal, and administrative functions of SRC. As a holding company, SRC has very minimal to no environmental and social impact. However, its generated economic value, which include taxes paid to government, indirectly contributes to social development projects of host local government units where it operates.

SRC recognizes the following risks and implements several management approaches to mitigate the identified risks.

(1) Political, Economic, and Legal Risks in the Philippines

As an emerging market, the Philippines is exposed to various political and economic risks that may affect the Company. Over the years, the country was met with political instability brought by mass demonstrations, military coup, and election-related issues. These scenarios undeniably affect the Philippine economy resulting in negative impact such as decline in Peso, higher interest rates , increased unemployment, greater volatility and lower value of stock market, lower credit rating of the country, and the reduction of the country’s foreign currency reserves. Any negative impact may also pose a negative effect to SRC’s financial performance.

(2) Equity Partnership Risk

The Company entered into a Project Shareholder’s Agreement with five other companies led by Investment and Capital Corporation of the Philippines and Penta Capital Investment Corporation to develop 500-600 hectares of raw land in Hermosa, Bataan into a township consisting of industrial estates, residential communities, a golf and country club and a commercial center. This situation may involve special risks associated with the possibility that the equity partner (i) may have economic or business interests or goals that are inconsistent with those of the Company; (ii) take actions contrary to the interests of the Company; (iii) be unable or unwilling to fulfill its obligations under the Project Shareholder’s Agreement; or (iv) experience financial difficulties. These conflicts may adversely affect the Company’s operations.

(3) Financial Risk

The main financial risks arising from the Company’s financial instruments are liquidity risk, market risk and interest rate risk

Liquidity risk is the risk that the Company is unable to meet its financial obligation when due. The Company has substantial investments in shares of stock which are not listed in the Philippine Stock Exchange and may not be readily convertible to liquid assets necessary to meet any potential additional liquidity requirements of the Company.

Market risk is the risk of loss on future earnings, on fair values or on future cash flows that may result from changes in market prices. The value of a financial instrument may change as a result of changes in interest rates, foreign currency exchanges rates, commodity prices, equity prices and other market changes. The Company’s market risk emanates from its holdings in debt and equity securities.

The Company’s exposure to market risk for changes in fixed interest rates relates primarily to the Company’s money market placements and debt securities.

(4) Risks due to health crisis or pandemic

Health crisis, such as the COVID-19 pandemic which started in late 2019 has also negatively affected the financial markets. SRC is exposed to this risk because of its investments in HEDC shares of stocks. On the other hand, as Company with limited or very little on-site operations, SRC was also able to perform its corporate function despite many disruptions in many businesses.

To mitigate these risks, SRC closely monitors global and national economic and political issues that may have impact to the Company. In addition, it also establishes and cultivates good relationship and mutual respect among its partners to ensure that equity risk is mitigated.

To manage health-related risks, SRC will ensure unhampered operations by employing business continuity practices and tools.

To manage its financial risks, SRC continuously monitors its cash position and overall liquidity position. The Company maintains a level of cash and cash equivalents deemed sufficient to finance operations and to mitigate the effects of fluctuation in cash flows.

SRC also closely monitors the prices of its debt and equity securities as well as macroeconomic and entity- specific factors which could directly or indirectly affect the prices of these instruments. In case of an expected decline in its portfolio of equity securities, the Company readily disposes or trades the securities for replacement

Discussion on Opportunities

To further improve the economic value of SRC, the Company recognizes other opportunities in capital market by building up on its reputation as a profitable holding company. SRC also expects to increase its direct and indirect economic impact when HEDC is fully developed and operated.

Climate-related risks and opportunities

As a holding Company, SRC is not directly at risk of climate-related threats. However, the SRC Board of Directors is tasked to primarily manage the overall risks and opportunities by establishing the Board Risk Oversight Committee (BROC).

At present the Company has no formal climate-related risk strategies and metrics. Nonetheless, the Company will consider adopting a formal enterprise risk management program.

Procurement

The current operations of SRC does not involve spending on local suppliers.

Anti-corruption

Incidents of Corruption

Number of incidents when contracts with business partners were terminated due to incidents of corruption

Anti-Corruption

SRC’s Board of Directors participate in annual seminar on Corporate Governance to be abreast of the best practices in corporate governance. No corruption incidents were reported in 2022.

Environment

Over the years, SRC’s investee, HEDC follows best practices in environmental management and adheres to the highest environmental protection standards. It likewise implements waste reduction and proper disposal protocols to ensure that impact to environment is managed and mitigated. HEDC also encourages and welcomes locators who are into the renewable energy business. In 2016, an all-Filipino solar company, YH Green Energy Company, started to generate electricity from its 14.5 MW utility scale solar power project located in HEDC. This project does not only contribute to power stability in the country, but most importantly help combat GHG emissions. Resource

Materials used by the organization

Ecosystems and biodiversity (whether in upland/watershed or coastal/marine)

Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas

Habitats protected or restored N/A

IUCN1 Red List species and national conservation list species with habitats in areas affected by operations

Environmental impact management

This section is not applicable directly to SRC since the Company has no employees. The data presented in this section pertains to the HEDC’s which SRC owns 11.33% interest.

2 Employees are individuals who are in an employment relationship with the organization, according to national law or its application (GRI Standards 2016 Glossary)

3 Attrition are = (no. of new hires – no. of turnover)/(average of total no. of employees of previous year and total no. of employees of current year)

*Vulnerable sector includes, elderly, persons with disabilities, vulnerable women, refugees, migrants, internally displaced persons, people living with HIV and other diseases, solo parents, and the poor or the base of the pyramid (BOP; Class D and E).

Workplace Conditions, Labor Standards, and Human Rights

Occupational Health and Safety

Do you have policies that explicitly disallows violations of labor laws and human rights (e.g. harassment, bullying) in the workplace?

Supply Chain Management

Do you have a supplier accreditation policy? If yes, please attach the policy or link to the policy: cite reference in the supplier policy

Do you consider the following sustainability topics when accrediting suppliers?

Relationship with Community Significant Impacts on Local Communities

Operations with significant (positive or negative) impacts on local communities (exclude CSR projects; this has to be business operations)

Location Vulnerable groups (if applicable)*

Does the particular operation have impacts on indigenous people (Y/N)?

Customer Management

Customer Satisfaction

Collective or individual rights that have been identified that or particular concern for the community

Mitigating measures (if negative) or enhancement measures (if positive)

Disclosure Score Did a third party conduct the customer satisfaction study (Y/N)?

No. of complaints addressed #

*Substantiated complaints include complaints from customers that went through the organization’s formal communication channels and grievance mechanisms as well as complaints that were lodged to and acted upon by government agencies.

Marketing and labelling

No. of substantiated complaints on marketing and labelling*

No. of complaints addressed #

*Substantiated complaints include complaints from customers that went through the organization’s formal communication channels and grievance mechanisms as well as complaints that were lodged to and acted upon by government agencies.

Customer privacy

No. of customers, users and account holders whose information is used for secondary purposes

*Substantiated complaints include complaints from customers that went through the organization’s formal communication channels and grievance mechanisms as well as complaints that were lodged to and acted upon by government agencies.