Issuu

COVER SHEET 4 0 9 7 9 SEC Registration Number

S E A F R O N T

R E S O U R C E S

C O R P O R A T I O N

(Company’s Full Name)

7 T H / F

J M T

O R T I G A S

B L D G . ,

C E N T E R ,

A D B

A V E N U E ,

P A S I G

C I T Y

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

MILAGROS V. REYES

637-2917

(Contact Person)

(Company Telephone Number)

Form Type

1 2

3 1

Month

Day

1 7 - A

(Fiscal Year)

0 5

3 0

Month

Day

(Annual Meeting)

(Secondary License Type, If Applicable)

Dept. Requiring this Doc.

Amended Articles Number/Section Total Amount of Borrowings

4,706 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 I7.A

ANNUAL REPORT PURSUANT TO SECTION I7 OF THE SECURITIES REGULATION CODE AND SECTI OF THE CORPORATION CODE OF THE PHILIPPI L

For the fiscal year ended December 3 1. 20 I 8

SEC Identification Number

Exact name ofissuer as specified in its charter Seafront Resources Corporation

Metro Manila. Philippines (SEC Use Only) Province, Country or otherjurisdiction of incorporation or organization

40979

t$t** .S::

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3. BIR Tax Identification

o[-_-l I

ndustry Classifi cation Code:

7th F. JMT Bldg.. ADB Avenue. Ortigas Center. PasigCitv Address of principal office

605 Postal Code

(632) 637-2er7 Issuer's telephone number, including area code

Not Applicable Former name, former address, and former fiscal year, if changed since last report.

10. Securities registered pursuant to Sections 8 and l2 ofthe SRC, or Sec. 4 and 8 ofthe RSA Title of Each Class

Number of Shares of Common Stock Outstandine and Amount of Debt Outstandins

Common (par value of F I .00/share

163.000-000

)

I t. Are any or all ofthese securities listed on a Stock Exchange.

Yes

[X]

Ifyes,

No [ ]

state the name

ofsuch stock exchange and the classes ofsecurities listed therein:

Philippine Stock Exchange 12. Check whether the issuer:

(a)hasfiledall reportsrequiredtobefiledbySection lToftheSRCandSRCRule 17. I thereunderor Section I I ofthe RSA and RSA Rule I l(a)-l thereunder, and Sections 26 and l4l ofThe Corporation Code of the Philippines during the preceding twelve registrant was required to file such reports);

Yes [X]

2) months (or for such shorter period that the

No[]

(b) has been subject to such filing requirements for the past ninety (90) days. Yes [X] No [ ]

13. As of March 27,2019 prior to the filing of SEC l7-A,

the aggregate market value of the voting stock held by non-affiliates of the Company is equivalent to Three Hundred Eighteen Million Sixty Thousand Five

Hundred Eighteen Pesos and 40/100. (P318,060,518.40) or 132,525,216 shares at P2.4g/share.

ll t

DOCUMENTS INCORPORATED BY REFERENCE  2018 Audited Financial Statements (AFS)

TABLE OF CONTENTS Page No. PART I – BUSINESS AND GENERAL INFORMATION Item 1. Item 2. Item 3. Item 4.

Business Development Properties Legal Proceedings Submission of Matters to a Vote of Security Holders

5 8 9 9

PART II – OPERATIONAL AND FINANCIAL INFORMATION Item 5. Item 6. Item 7. Item 8.

Market for Registrant’s Common Equity and Related Stockholder’s Matters Management’s Discussion and Analysis or Plan of Operation Financial Statements Changes and Disagreements with Accountants on Accounting and Financial Disclosure

10 12 16 16

PART III – CONTROL AND COMPENSATION INFORMATION Item 9. Item 10. Item 11. Item 12.

Directors and Executive Officers of the Registrant Executive Compensation Security Ownership of Certain Beneficial Owners and Management Certain Relationships and Related Transactions

17 20 21 22

PART IV – EXHIBITS AND SCHEDULES Item 13.

Item 14.

Exhibits and reports a. 2018 and 2017 Financial Statements with Management Responsibility b. Supplementary information and disclosures required on SRC Rule 68 and 68.1 as amended c. General form for Financial Statements (GFFS) d. Reports on SEC Form 17-C(Current Report) e. Reports on SEC Form 17-Q (Quarterly Report) General Notes to Financial Statements

SIGNATURES

23 24

PART I - BUSINESS AND GENERAL INFORMATION Description of Business Item 1 - Business Development Seafront Resources Corporation (the “Company”) 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 and to include oil exploration and production business as one of its secondary purposes. The Company’s shares of stock were listed on May 7, 1974 and are currently traded at the Philippine Stock Exchange. The registered office address of the Company is 7th Floor, JMT Building, ADB Avenue, Ortigas Center, Pasig City. Business of Issuer A. Investments in Financial Assets at Fair Value through Profit and Loss (FVTPL) (Note 8 of the AFS) The Company maintains a portfolio of investments in stocks traded in the Philippine Stock Exchange and investment in Government Securities. These financial assets at FVPL are carried at fair value as follows: Listed securities: Equity securities

2018

2017

P =44,850,901

P =62,845,291

B. Investment in Financial Assets at Fair value through other comprehensive income (FVOCI) (Note 8 of the AFS) Financial assets at FVOCI consist of quoted and unquoted shares of stock held for long-term investment purposes and are carried at fair value. The carrying values of these investments are as follows 2018 Listed equity securities: PetroEnergy Resources Corporation (PERC) Benguet Corporation Non-listed equity security: Hermosa Ecozone Development Corporation (HEDC) Investment in Government Securities

2017 (as restated)

P =13,479,075 3,761,406 17,240,841

P =23,492,102 4,338,155 27,830,257

393,710,068 5,402,780 P =416,353,329

392,564,818 8,535,131 P =428,930,206

Investment in HEDC 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 into a new township consisting of industrial estates, residential communities, a golf and country club and a commercial center. As of December 31, 2018 and 2017, the Company has outstanding subscriptions payable to HEDC which amounted = P12.35 million. The subscriptions payable are due on demand (Note 8 of the AFS). Investment in HEDC is presented in the statement of financial position at fair value net of subscription payable. The fair value of investment in HEDC is determined using the adjusted net asset method wherein the assets of HEDC consisting mainly of parcels of land are adjusted from cost to its fair value. The valuation of the parcels of land was performed by an accredited independent valuer as at December 31, 2018 and 2017. This measurement falls under Level 3 in the fair value hierarchy.

Fair value measurement disclosures for the determination of fair value of unquoted equity securities are provided in Note 14 of the AFS. Products The Company has its investments in stocks (as discussed in the “Business of the Issuer”) as its principal product. Total revenue as of December 31, 2018 amounted to P13.362 million, bulk of which is from the dividend income from the investment in HEDC. Other than discussed, the Company has no principal product which contributes 10% or more to sales or revenues. No government approval is needed for its principal product. Percentage of sale or revenue and net income contributed by foreign sales There are no revenues from foreign sales. Distribution Method Not applicable Status of publicly –announced new product or service The Company has no new product or service. Competition The Company itself has no competitor because it is a holding company. Its major investment, HEDC has competitors such as Clark Development Corporation, Subic Gateway Park and other nearby industrial zones. Sources and Availability of Raw Materials and Names of Principal Suppliers The Company is not into manufacturing and has no need for raw materials for its business. Dependence on a single customer or few customers The Company is not dependent upon a single customer or a few customers. Transaction with and/or dependence on related parties Not applicable Summary of principal terms and expiration dates of all patents, trademarks, copy rights, licenses, franchises, concessions and royalty agreements The Company has no existing patents, trademarks, copyrights, licenses, franchises, concessions or royalty agreements. Need for Government approvals of Principal Products and effect of existing or probable governmental regulation No government approval is needed for its principal product. Research and development activities No amount of money was spent for development activities for the last three fiscal years. The Company does not intend to acquire additional properties in the next twelve (12) months. However, the Company can sustain its need for operating expenses in the ordinary course of business. Total number of employees The Company has no employees; PERC provides administrative, accounting and legal services to the Company. The Company does not anticipate any special undertaking that would warrant hiring some people for regular employment. Risk Factors Political, Economic and Legal Risks in the Philippines The Philippines has, from time to time, experienced military instability, mass demonstrations, and similar occurrences, which have led to political instability. The country has also experienced periods of slow growth, high inflation and significant depreciation of the Peso. The regional economic crisis which started in 1997 negatively affected the Philippine economy resulting in the decline of the Peso, higher interest rate, increased unemployment, greater volatility and lower value of the stock market, lower credit rating of the country and the reduction of the country’s foreign currency reserves. There has also been growing concerns about the unrestrained judicial intervention in major infrastructure project of the government. 6

There is no assurance that the political environment in the Philippines will be stable and that current or future governments will adopt economic policies conducive to sustained economic growth. The general political situation in and the state of the economy of the Philippines may influence the growth and profitability of the Company. Any future political or economic instability in these countries may have a negative effect on the financial results of the Company. 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. To date, the Company has not experienced any significant problems with respect to its equity partners. Financial Risk Management Objectives and Policies (Note 14 of AFS) The Company’s financial instruments comprise cash and cash equivalents, receivables, financial assets, accounts payable and accrued expenses and subscriptions payable. The main purpose of these financial instruments is to fund its own operations and capital expenditures. The BOD reviews and approves policies for managing these risks. Also, the Audit Committee of the BOD meets regularly and exercises oversight role in managing these risks. Financial Risks The main financial risks arising from the Company’s financial instruments are liquidity risk, market risk and credit risk. a. Liquidity 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. Investments in unquoted equity securities classified as financial assets at FVOCI amounted to P =393.71 million and P =392.56 million, net of subscription payable, as of December 31, 2018 and 2017, respectively (Note 8). The Company monitors its cash position and overall liquidity position in assessing its exposure to liquidity risk. 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. The Company’s accounts payable and accrued expenses are all settled on a monthly basis. Subscriptions payable are payable on demand and are non-interest bearing. Please refer to Note 14 of the AFS for the maturity profile of the Company’s financial assets and liabilities. b. Market Risk 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 closely monitors the prices of its debt and equity securities as well as macroeconomic and entityspecific 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 with more viable and less risky investments.

Equity Price Risk The Company closely monitors the prices of its debt and equity securities as well as macroeconomic and entityspecific 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 with more viable and less risky investments. Such investment securities are subject to price risk due to changes in market values of instruments arising either from factors specific to individual instruments or their issuers, or factors affecting all instruments traded in the market. Interest Rate Risk 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. There is no other impact on the Company’s equity other than those already affecting net income. c. Credit Risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. With respect to credit risk arising from cash and cash equivalents, receivables, financial assets at FVTPL and financial assets at FVOCI, the Company’s exposure to credit risk is equal to the carrying amount of these instruments. The Company limits its credit risk on these assets by dealing only with reputable counterparties. For cash and cash equivalents, the Company applies the low credit risk simplification where the Company measures the ECLs on a 12-month basis based on the probability of default and loss given default which are publicly available. The Company also evaluates the credit rating of the bank and other financial institutions to determine whether the debt instrument has significantly increased in credit risk and to estimate ECLs. The Company considers its cash and cash equivalents as high grade since these are placed in financial institutions of high credit standing. Accordingly, ECLs relating to these debt instruments rounds to nil. The Company’s receivables are aged current as of December 31, 2018 and 2017. No receivables are considered credit-impaired. As of December 31, 2018 and 2017, the carrying values of the Company’s financial instruments represent maximum exposure as of reporting date. (see Note 14) Capital Management (Note 15 of the AFS) The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholders' value. The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders or issue new shares. The Company monitors capital using a debt-to-equity ratio, which is total debt divided by total equity. The Company includes within total debt the following: accounts payable, accrued expenses and subscriptions payable. Total equity includes capital stock, net unrealized gains (losses) on financial assets at FVOCI and retained earnings (deficit). The Company has no externally imposed capital requirements as of December 31, 2018 and 2017. Please refer to Note 15 of the AFS for the table of the debt-to-equity ratios of the Company as of December 31, 2018 and 2017, respectively: There were no changes in the objectives, policies or processes for the years ended December 31, 2018 and 2017. Item 2 - Properties Aside from the investments in Financial Assets discussed above, the Company owns two parking lot spaces in Tektite Tower in Ortigas City. This property is accounted as investment property of the Company. In 2013, the 8

Company fully depreciated the investment. Fair value of this investment is still estimated at ₱600,000 - ₱800,000 per slot. Item 3 - Legal Proceedings There are no pending legal proceedings to which the Company is party or which any of its property is the subject. Item 4 - Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

PART II - OPERATIONAL AND FINANCIAL INFORMATION Item 5 - Market for Registrant’s Common Equity and Related Stockholder Matters a)

Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters 1.

Market Information Stock Market Price and Dividend on Registrant’s Common Equity (last 2 years)

ParValue

1st Quarter 2018 2017

2nd Quarter 2018 2017

3rd Quarter 2018 2017

4th Quarter 2018 2017

1st Q 2019

P1.00

High

2.87

4.92

2.62

3.14

2.83

3.00

2.60

3.34

2.79

Low

2.53

2.21

2.55

2.61

2.20

2.52

2.25

1.61M

8.12M

1.29M

6.67M

0.194M

4.57M

0.239M

Volume

2.14M

31.49M

Holders As of December 31, 2018, the Company has 4,706 stockholders. Hereunder is the list of the top 20 Stockholders (as of 31 December 2018): Stockholders

Title of Class

1. PCD Nominee Corporation (Filipino) 2. Pan Malayan Mgnt & Inv. Corp.(PMMIC) 3. Alsons Consolidated Resources, Inc. 4. China Banking Corporation T/A-SCA-#0010 5 China Banking Corporation T/A-SCA-#0011 6. House of Investments, Inc. 7. Yuchengco, Alfonso T. 8. Hydee Management & Resources Corporation 9. China Banking Corporation T/A-SCA-#0013 10. China Banking Corporation T/A-SCA-#0012 11 PCD Nominee Corporation (NF) 12. Ong, Clemente 13. Pacific Basin Sec. Co., Inc. 14. Floreindo, Antonio O. 15. Paz, Wenceslao R. de la 16. A.T. Yuchengco, Inc. 17. Pua Yok Bing 18. Reyes, Vicenta S. 19. Santiago, Violeta G. 20. Kensigton Management Corporation Sub-Total Others Grand Total

Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common

1. 2. 3. 4.

No. of Shares

Percent of Class

66,458,524 30,469,858 15,544,911 14,178,625 10,204,120 4,697,613 1,283,348 1,042,093 571,427 556,122 294,417 287,644 271,248 214,104 195,594 186,637 159,799 147,850 147,655 138,207 147,049,796 15,950,204 163,000,000

40.77% 18.69% 9.54% 8.70% 6.26% 2.88% 0.79% 0.64% 0.35% 0.34% 0.18% 0.18% 0.17% 0.13% 0.12% 0.11% 0.10% 0.09% 0.09% 0.08% 90.21% 9.79% 100%

None of the holders of the Company’s common shares registered under the name of PCD owns more than 5% of the Company’s common shares. The corporate acts of PMMIC are carried out by its Board of Directors and Management. Ms. Helen Y. Dee is the current Chairman of the Company. The corporate acts of Alsons Consolidated Resources Inc. are carried out by its Board of Directors. Mr. Tomas I. Alcantara is the current President of the Company. CBC T/A-SSC#0010 and T/A-SSC#0011 are Trust Accounts between China Banking Corporation as Trustee. The Corporate acts of CBC are carried out by its Board of Directors and Management. Mr. William C. Whang is the current CBC President and COO.

As of December 31, 2018, the Company has a total of 163,000,000 shares issued and outstanding. Of the total outstanding common capital stock, 162,197,986 shares or 99.51% are owned by Filipino citizens, while 802,014 shares or 0.49% are owned by foreigners. 3.

Minimum Public Ownership The Company is compliant with the required Minimum Public Ownership of at least 10% of the total issued and outstanding capital stock, as mandated by Section 3, Article XVIII of the Continuing Listing Requirements of the Listing and Disclosure Rules. As of December 31, 2018, the Company’s public float was 81.30%.

Dividends In accordance with the Corporation Code of the Philippines, the Company intends to declare dividends (either in cash or stock or both) in the future. Shareholders of the Company are entitled to receive a proportionate share in cash dividends that may be declared by the Board of Directors out of surplus profits derived from the Company’s operations. The same right exists with respect to a stock dividend, the declaration of which is subject to the approval of stockholders representing at least two-thirds (2/3) of the outstanding shares entitled to vote. The amount of dividend will depend on the Company’s profits and its capital expenditure and investment requirements at the relevant time. The Company did not declare any cash or stock dividends in the last two (2) fiscal years 2018 and 2017. The last stock dividend (15%) was paid in 1997. Prior to 1997, the last cash/stock dividend paid was in 1990.

5. b)

Recent sale of Unregistered Securities There was no sale of unregistered securities for the past three years.

Description of Registrant’s Securities 1. Common Stock The details of the Company’s capital stock are as follows: No. of Shares

Authorized (P 1.00 par value) Issued and outstanding 2. Debt Securities - Not Applicable

388,000,000 163,000,000

3. Stock Options - Not Applicable 4. Securities Subject to Redemption call – Not Applicable 5. Warrants – Not applicable 6. Market Information for Securities Other than Common Equity – Not Applicable 7. Other Securities – Not Applicable

Amount P388,000,000.00 P163,000,000.00

Item 6 - Management’s Discussion and Analysis or Plan of Operation Management’s Discussion and Analysis of Financial Conditions and Results of Operations 1. Financial Condition (As of December 31, 2018 and 2017)

ASSETS Cash & cash equivalents Financial assets at fair value through profit or loss Receivables Other current assets Financial assets at fairvalue through other comprehensive income Investment properties TOTAL ASSETS

31-Dec-18

31-Dec-17 (as restated)

P10,402,418

P8,651,880

20.23%

2.14%

44,850,901 12,537,600 981,625 416,353,329

62,845,291 261,858 900,200 428,930,206

-28.63% 4687.94% 9.05% -2.93%

9.25% 2.58% 0.20% 85.82%

485,125,873

501,589,435

0.00% -3.28%

0.00% 100.00%

654,816 45,901,439 46,556,255

710,754 45,729,651 46,440,405

-7.87% 0.38% 0.25%

0.13% 9.46% 9.60%

438,569,618 P485,125,873

455,149,030 P501,589,435

-3.64% -3.28%

90.40% 100.00%

% Change % in Total Asset

LIABILITIES AND EQUITY Accounts payable and accrued expenses Deferred tax liability TOTAL LIABILITIES EQUITY TOTAL LIABILITIES AND EQUITY

Total assets amounted to P485.126 million and P501.589 million as of December 31, 2018 and December 31, 2017, respectively. The decline is mainly due to the fair value re-measurement of the investment in HEDC shares based on current market valuation (of the land held for sale of HEDC). The Company’s cash and cash equivalents amounted to P10.402 million and P8.652 million as of December 31, 2018 and 2017, respectively. The 20.23% net increase was due to maturity of investment in Government Security which were previously accounted under Investment in AFS. Financial assets at fair value through profit or loss amounted to P44.851 million and P62.845 million as of December 31, 2018 and as of December 31, 2017, respectively. The 28.63% net decrease is due to downward movement in the market values of investments in stocks traded at PSE. Receivables account as of December 31, 2018 amounted to P12.538 million compared to P0.262 million as of December 31, 2017. The P12.27 million increase pertains to HEDCs dividend declaration on August 2018; payable on January 2019. Other current assets consists of prepayments, prepaid taxes and input tax carry-overs. This amounted to P0.982 million and P0.900 million as of December 31, 2018 and 2017, respectively. The 9.05% net increase in this account mainly represents additional input taxes recorded during the period. Financial Assets at fair value through other comprehensive income account as of December 31, 2018 amounted to P416.353 million as compared to December 31, 2017 of P428.930 million. The net decrease pertains to the downward movement of the investment in stocks (see Note 8 of the AFS). Investment properties (see Note 10 of the AFS). Accounts payable and accrued expenses amounted to P0.655 million and P0.711 million as of December 31, 2018 and December 31, 2017, respectively. The 7.87% net decrease in this account is due to lower accrual of 12

professional fees and other expenses during the period. The Company recognized deferred tax liability amounting to P45.901 million and P45.730 million relative to the 15% deferred tax on unrealized gains on untraded shares of stock classified as AFS financial assets. Total Stockholders’ Equity as of December 31, 2018 amounted to P438.570 million or P2.69 book value per share as compared to December 31, 2017 of P455.149 million or P2.79 book value per share. 2. Results of Operations (For the years ended December 31, 2018, 2017 and 2016)

31-Dec-18 REVENUES Dividend income Interest income Other income-net Foreign exchange gain Net gains on fair value changes on financial assets at fair value through profit or loss TOTAL REVENUES COST AND EXPENSES General & administrative Net loss on fair value changes on financial assets at fair value through profit or loss TOTAL EXPENSES Income/(Loss) before income tax Provision for income tax NET INCOME (LOSS)

31-Dec-17

31-Dec-16

% Change % in Total 2018 vs. 2017 Revenue

12,885,767 117,951 352,337 5,573

294,713 96,516 352,337 -

353,401 124,711 352,337 -

4272.31% 22.21% 0.00% 100.00%

96.44% 0.88% 2.64% 0.04%

13,361,628

15,387,048 16,130,614

6,803,522 7,633,971

-100.00% -17.17%

0.00% 100.00%

2,217,206 17,994,390

1,451,900 -

1,326,412 -

52.71% 100.00%

16.59% 134.67%

20,211,596 (6,849,968) 7,047 (6,857,015)

1,451,900 14,678,714 7,047 14,671,667

1,326,412 6,307,559 7,047 6,300,512

1292.08% -146.67% 0.00% -146.74%

151.27% -51.27% 0.05% -51.32%

The Company posted a net loss of P6.857 million in December 31, 2018 as compared to net income of P14.672 million or P0.09 earnings per share as of December 31, 2017. The downturn in the bottom-line figure is mainly due to the negative movements of the market values of the investments in stocks traded in the PSE. The significant increase in dividend income from P0.295 million in 2017 to P12.886 million in 2018 is mainly due to HEDC’s declaration of Dividends in August 2018, payable January 2019, none in 2017. Interest income amounted to P0.118 million and P0.097 as of December 31, 2018 and December 31, 2017, respectively. The increase is attributed to higher interests from the RCBC trust account during the year. Other income as of December 31, 2018 and 2017 pertains to recurring service income for accounting services rendered by the Company to HEDC and rental income. The changes in market values (of investment in stocks at FVPL) amounted to net loss of P17.994 million loss and net gain of P15.387 million as of December 31, 2018 and 2017, respectively. The downturn is mainly due to the negative movements of the market values of the investments in stocks traded in the PSE. General and administrative expenses amounted to P2.217 million and P1.452 million as of December 31, 2018 and December 31, 2017, respectively. The 52.71% increase is due to payment of the Company’s share in the Plug and Abandonement (P&A) of TARA South-1 Well that the Department of Energy required for funding. As a result, SRC paid its original corresponding share in the P&A amounting to $13,702.41 (P735,545). Provision for income tax pertains to the Minimum Corporate Income Tax (MCIT) set-up. The Company set-up MCIT rather than the 30% regular tax because most of its income are from unrealized market changes of investments and passive income subject to final tax.

3. Financial Conditions (As of December 31, 2017 and 2016) Total assets amounted to P501.589 million as of December 31, 2017 compared to P209.974 million as of December 31, 2016. The significant increase is mainly due to the fair value re-measurement of the investment in HEDC shares based on current market valuation (of the land held for sale of HEDC). The Company’s cash and cash equivalents amounted to P8.652 million and P11.725 million as of December 31, 2017 and 2016, respectively. The 26.21% net decrease was due to incurred expenses for the year and additional investment in Government Securities. Financial assets at fair value through profit or loss amounted to P62.845 million and P47.454 million as of December 31, 2017 and as of December 31, 2016, respectively. The 32.43% net increase is due to positive movement in the market values of investments in stocks traded at PSE. Receivables account as of December 31, 2017 amounted to P0.262 million compared to P0.314 million as of December 31, 2016. The 16.58% net decline accounts for the collection of outstanding receivables. Other current assets consists of prepayments, prepaid taxes and input tax carry-overs. This amounted to P0.900 million and P0.826 million as of December 31, 2017 and 2016, respectively. The 8.97% net increase in this account mainly represents additional input taxes recorded during the period. Financial assets at fair value through other comprehensive income account as of December 31, 2017 amounted to P428.930 million as compared to P149.655 million in 2016. The bulk of the increase pertains to the fair value measurement of the HEDC shares. The Company recognized an additional P270.566 million unrealized gain on fair value changes of the investment in Hermosa. Accounts payable and accrued expenses amounted to P0.711 and P0.564 million as of December 31, 2017 and December 31, 2016, respectively. The 26.10% net increase in this account is due to higher accrual of professional fees and other expenses. The Company recognized deferred tax liability amounting to P45.73 million relative to the 15% deferred tax on unrealized gains on untraded shares of stock classified as AFS financial assets. Total Stockholders’ Equity as of December 31, 2017 amounted to P455.149 million or P2.79 book value per share as compared to P209.411 million or P1.285 book value per share as of December 31, 2016. 4. Results of Operations (For the years ended December 31, 2017 and 2016) The Company posted a net income of P14.672 million or P0.09 earnings per share as of December 31, 2017 as compared to P6.301 million or earnings per share of P0.0387 as of December 31, 2016. Net gains in the changes in market values (fair value changes in on financial assets at fair value through profit or loss investments) amounted to P15.387 million and P6.804 million as of December 31, 2017 and 2016, respectively. The 126.16% net increase pertains to positive market value changes in the investments in stocks traded in the PSE. Dividend income declined from P0.353 million in 2016 to P0.295 million in 2017. The 16.61% decline is mainly due to lower dividends declared from the investments in stocks during the period. Interest income amounted to P0.097 million and P0.125 million as of December 31, 2017 and December 31, 2016, respectively. The decline is attributed to lower balance of the reinvested cash equivalents. Other income as of December 31, 2017 and 2016 pertains to recurring service income for accounting services rendered by the Company to HEDC and rental income. General and administrative expenses amounted to P1.452 million and P1.326 million as of December 31, 2017 and December 31, 2016, respectively. The 9.46% increase is due to higher expenses during the period. Provision for income tax pertains to the Minimum Corporate Income Tax (MCIT) set-up. The Company set-up MCIT rather than the 30% regular tax because most of its income are from unrealized market changes of investments and passive income subject to final tax. 14

Except for items discussed above, there are no more changes in the financial statements that will reach the materiality threshold of 5%. The Philippine economy is still affected by economic crisis, resulting in fluctuating foreign exchange rates and increase stock market uncertainties. Uncertainties remain as to whether the country will continue to be affected by regional trends in the coming months. The financial statements do not include any adjustments that might result from these uncertainties. Related effects will be reported in the financial statements, as they become known and estimable. Key Performance Indicators (KPI) Please refer to Financial Soundness Indicators Plan of Operations A. Investment in AFS not traded in the market (Investment in HEDC) As of December 31, 2018 the Company holds 11.3% interest in its investment in Hermosa Development Corporation (HEDC). The Management of HEDC is taking all efforts to sell portion of its saleable property, proceeds of which will be used to finance the development of the undeveloped portions of the property. B. Investment in Financial Assets at FVPL and FVOCI traded in the market The Company will continue to closely monitor the prices of its securities as well as those specific factors which could directly or indirectly affect the prices of these instruments. Because such investments are subject to price risk due to changes in market values, an expected decline in the portfolio will prompt the Company to dispose or trade the securities for replacement with more viable and less risky investments in the future. With the Company’s current cash position, it can sustain its needs for its operating expenses. Its only possible material commitment is a cash call from HEDC, of which is not expected to call in the next twelve months. Thus, it does not intend to raise additional funds. Aside from the Company’s investments stated above, there are no other researches or development plans, and purchase or sale of significant equipment that the Company expects perform. Liquidity management 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. Investment in unquoted securities included in financial assets at FVOCI amounted to P393.710 million and P392.565 million as of December 31, 2018 and 2017. Management of liquidity requires a flow and stock perspective. Constraint such as political environment, taxation, foreign exchange, interest rates and other environmental factors can impose significant restrictions on firms in management of their financial liquidity. Seafront has considered the above factors and paid special attention to its cash flow management. The Company identifies all its cash requirements for a certain period and invests unrestricted funds to maximize interest earnings, i.e. money market placements. Commitments The only material commitment of the Company is the balance on its subscription to HEDC in the amount of P12.354 million. This was called and settled by the Company in the 1st quarter 2019. Aside from the subscription payable to HEDC, there are no known trends, demands, commitments, events or uncertainties that will have material impact on the Company’s liquidity.

Except for a possible cash call from HEDC, the Company has no commitment for the purchase of property, plant and equipment. Item 7 - Financial Statements The 2018 AFS of the Company are incorporated herein by reference. The schedules listed in the accompanying index to Supplementary Schedules are filed as part of this Form 17-A. Item 8 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Information on Independent Auditor The external auditor of the Corporation is the auditing firm SyCip Gorres Velayo & Co. (SGV). The same accounting firm has been endorsed by the Audit Committee to the Board. The Board, in turn, approved the endorsement and will nominate the reappointment of the said auditing firm for the stockholders’ approval at the scheduled annual stockholders’ meeting. The said auditing firm has accepted the Company’s invitation to stand for re-election this year. Audit services of SGV for the calendar year ended December 31, 2018 are the examination of the financial statements of the Company, review of income tax returns and other services related to filing of reports made with the Securities and Exchange Commission and Bureau of Internal Revenue. Pursuant to SRC Rule 68 Paragraph 3 (b) (1V) (Re: Rotation of External Auditors), the Company has not engaged Ms. Ana Lea Bergado, partner of SGV & Co., for more than five (5) years. She was engaged by the Company for examination of the Company’s 2018 AFS. The company is compliant with the Rotation requirement of its external auditor’s certifying partner as required under SRC Rule 68 (3)(b) (1V). A two year cooling off period shall be observed in the re-engagement of same signing partner or individual auditor. Disagreements with Accountants on Accounting and Financial Disclosures As of December 31, 2018, there are no disagreements with Accountants on Accounting and Financial Disclosure. Audit and audit- related fees External audit fees amounted to P349,272 (inclusive of VAT) as of December 31, 2018. Said fees are for the audit and review of registrant’s annual financial statements and other services rendered in connection with filing of said financial statements with the government institution such as SEC and BIR. There were no fees paid or accrued for the last two years relative to tax accounting, compliance, advice, planning and any other form of tax services. The Audit Committee approved the above fees based on the services rendered and the amount paid from the previous year’s audit. It is the policy of the company that all audit findings are presented to its Audit Committee which reviews and make recommendations to the Board on actions to be taken thereon. The Board of Directors of the Company passes upon and approves the Audit Committee’s recommendations. The members of the Audit Committee are as follows: Nicasio I. Alcantara

Medel T. Nera Ernestine Carmen Jo D. Villareal-Fernando

Chairman Independent Director Member Member Independent Director

PART III - CONTROL AND COMPENSATION INFORMATION Item 9 - Directors and Executive Officers of the Registrant Roberto Jose L. Castillo Milagros V. Reyes Ernestine Carmen Jo Villareal-Fernando Nicasio I. Alcantara Raul M. Leopando Victor V. Benavidez Yvonne S. Yuchengco Perry Y. Uy Medel T. Nera Officers: Milagros V. Reyes Perry Y. Uy Samuel V. Torres Arlan P. Profeta

Chairman of the Board President and Director Independent Director Independent Director Director Director Director Treasurer and Director Director President Treasurer Corporate Secretary Asst. Corporate Secretary

a) Board of Directors Seafront’s Board of Directors is composed of nine (9) members elected by and from among the Company’s stockholders. The Board is responsible for providing overall management and direction to the Company. Board meetings are held on a quarterly basis or as often as required to discuss the Company’s operations, business strategy, policies and other corporate matters. A brief background of each member of the Company’s Board of Directors is provided below: Directors: Name of Director Roberto Jose L. Castillo Milagros V. Reyes Perry Y. Uy Raul M. Leopando Yvonne S. Yuchengco Nicasio I. Alcantara Victor V. Benavidez Medel T. Nera Ernestine Carmen Jo D. Villareal-Fernando

Age

Position

Nationality

Tenure

65 77 73 67 65 76 67 63 57

Chairman of the Board Director/President Director/Treasurer Director Director Independent Director Director Director Independent Director

Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino

2018 to present 1999 to present 2007 to present 2017 to present 2000 to present 1995 to present 2017 to present 2011 to present 2012 to present

Age 77 73 54 45

Position President Treasurer Corporate Secretary Asst. Corporate Secretary

Nationality Filipino Filipino Filipino Filipino

Tenure 1999 to present 2007 to present 2006 to present 2008 to present

Executive Officers: Name of officer Milagros V. Reyes Perry Y. Uy Atty. Samuel V. Torres Atty. Arlan P. Profeta

The members of the Board are elected at the Annual Stockholders’ Meeting to hold office until the next Annual Stockholders’ Meeting and until their respective successors have been appointed or elected and qualified.

Below is the list of the members of the Board and the corporate officers, and their business experience during the past five (5) years: Mr. Roberto Jose L. Castillo, 65, Filipino, is presently the President & CEO of EEI Corporation, an 87-year old company that provides construction services in the Philippines, the Middle East, South Pacific and Africa. Mr. Castillo also oversees EEI subsidiaries namely: Equipment Engineers, EEI Construction and Marine, Inc., EEI Power Corporation, Al Rushaid Petroleum Investment Company in Saudi Arabia, EEI Realty Corporation and Gulf Asia International Corporation. EEI is a member of the Yuchengco Group of Companies. He is also a Director of the following: PetroWind Energy, Inc., PetroGreen Energy Corporation, PetroSolar Corporation, Brightnote Assets Corporation, Hermosa Ecozone Development Corporation, Kubota-Kasui Philippines Corporation, SQ Resources, Inc., SN Resources, Inc., Somerset Hospitality Holdings Philippines, Inc., Ascott Hospitality Holdings Philippines, Inc. and Tong Hsing Electronics Philippines, Inc. He is also Chairman of the Advisory Board, Carmelray Industrial Corporation and Chairman CJC Corporation. Educational Background: Master’s degree in Business Administration, Wharton Graduate School of the University of Pennsylvania, Bachelor of Science in Commerce, University of Santo Tomas, Bachelor of Arts, University of Santo Tomas. Professional Qualification: Certified Public Accountant (CPA) Ms. Milagros V. Reyes, 77, Filipino, is presently the Chairman/President of PetroGreen Energy Corporation, Chairman of Maibarara Geothermal, Inc. She is also the President of PetroEnergy Resources Corporation, an oil exploration and development company She is also a Director of Ipeople, Inc., Director/Treasurer of Hermosa Ecozone & Development Corporation. She was formerly a Director/Consultant of PNOC-EC and a Senior Vice President of Basic Petroleum and Minerals, Inc. Educational Background: Bachelor of Science in Geology and Physical Sciences (Double Degree) from the University of the Philippines. She pursued various technical trainings from the National Iranian Oil Co., University of Illinois and Ajman Fields in U.A.E. Mr. Perry Y. Uy, 73, Filipino, is presently the President of Manila Memorial Park. He is a Director of La Funeraria Paz, Sucat. He is also an Ex-Com member of Manila Memorial Park and La Funeraria Paz, Sucat. He is formerly a member of the Board of Directors of various companies such as: RCBC Realty Corp., EEI Corporation, I People, Inc., Landev Corp., Hi-Esai, First Malayan Leasing, Subic Power Corporation, Malayan Colleges Laguna, Inc., Honda Cars, Inc. in Quezon City/Kalookan and Isuzu Manila. Educational Background: Bachelor of Science in Mechanical Engineering from De La Salle University, Master’s Degree in Business Administration at Wharton Graduate School of the University of Pennsylvania. Mr. Raul M. Leopando, 67, Filipino, He is the Chairman of RCBC Securities, Inc., President and Director of Investment Houses Association of the Phils. (IHAP), Consultant of RCBC Capital Corporation, Director, Bankard, Inc. He is also formerly Chairman of the Board and Nominee of Philippine Stock Exchange, Inc and formerly President and CEO of RCBC Capital Corporation. Educational Background: Bachelor of Arts in Economics from the University of the Philippines and Bachelor of Science in Commerce-Accounting from San Beda College. Ms. Yvonne S. Yuchengco, 65, Filipino, is the President/Director of Malayan Insurance Company, Inc., Mico Equities, Inc., Philippine Integrated Advertising Agency, Inc., Alto Pacific Corporation, RCBC Land, Inc. She also holds the position of Chairperson of First Nationwide Assurance Corporation, The Malayan Plaza Cond. Owners Association, Inc., RCBC Capital Corporation and XYZ Assets Corporation. Chairperson/President of Royal Commons, Inc., Y Tower II Office Cond Corp., Yuchengco Tower Office Condominium Corp. Director/Treasurer and CFO of Pan Malayan Mgm’t. & Inv’t. Corp., Director and Treasurer PetroEnergy Resources Corporation; Honda Cars Kalookan, Mona Lisa Development Corporation, Asst. Treasurer, Enrique T. Yuchengco, Inc.; Member, Board of Trustees AY Foundation, Inc, Mapua Institute of Technology, Inc., Phil-Asia Assistance Foundation, Inc., Yuchengco Museum, Inc. She is a member of Advisory Committee of Rizal Banking Corporation. She also sits in the board of several companies such as: House of Investment, Inc., HYDee Management and Resource Corp., iPeople, inc., La Funeraria Paz, Inc.-Sucat, Luisita Industrial Park Corp., Malayan College Laguna, Inc., Malayan Colleges, Inc., Malayan High School of Science, Inc., Malayan Insurance (H.K.), Malayan International Insurance Corp., Manila Memorial Park, Inc., National Reinsurance Corporation of the Pilippines, Pan Malayan Express, Inc., Pan Malayan Realty Corporation, Asia-Pac Reinsurance Co., Ltd., AY Holdings, Inc., DS Realty, Inc., Pan Pacific Computer Center, Inc.,Shayamala Corporation and YGC Corporate Services, Inc. Educational Background: Bachelor of Arts in Interdisciplinary Studies from the Ateneo De Manila University.

Mr. Nicasio I. Alcantara, 76, Filipino, He is presently the Chairman of Conal Corporation and Vice-Chairman of Aviana Development Corporation. He is a member of the Board of Directors of various companies such as: Aces Technical Services, Inc., Acil Corporation, Alcor Transport Corporation, Alsing Power Holdings, Inc., Alsons Aquaculture Corporation, Alsons/AWS Information System, Inc. Alsons Corporation, Alsons Development & Investments Corp., Alsons Insurance Brokers Corp., Alsons Land Corporation, Alsons Power Holdings Corporation, Alsons Properties Corporation, Alsons Security Co., Inc., Aquasur Resources Corporation, BDO Private Banks, Inc., Buayan Cattle, Inc. Conal Holdings Corporation, Finfish Hatcheries, Inc., Indophil Resources NL, The Philodrill Corporation, San Ramon Power, Inc., Sarangani Agricultural Co., Inc., Sarangani Energy Corporation, Seawood Holdings Incorporated, Sunfoods Agri. Ventures, Inc., Site Group International, Ltd. Southern Philippines Power Corporation and Western Mindanao Power Corporation. . Educational Background: Bachelor of Science in Business Administration from the Ateneo de Manila University, Master’s in Business Administration from Sta. Clara University, California, USA. Mr. Victor V. Benavidez, 67, Filipino, He is the Nominee of Alakor Securities Corporation, Director of Boulevard Holdings, Inc. Formerly: General Manager of Alakor Securities, Inc, Director, Mariwasa Siam Holdings, Anglo Philippines Holdings Corporation, VP and Director Mabuhay Holdings Corporation and Tagaytay Properties & Holdings Corporation, Columnist, The Daily Globe, Investment Research Consultant of James Capel, Manager/Corplan of Banco Filipino and Manager/Investment Research of Anselmo Trinidad & Co. Educational Background: Bachelor of Science in Economics from the University of Sto. Tomas, Master’s Degree in Economics from the University of Sto. Tomas, Professional Development Program from CRC. Mr. Medel T. Nera, 63, Filipino, is the President and CEO of House of Investments, Inc. and President of RCBC Realty Corporation. He serves as Director of House of Investments and its significant subsidiaries and associates. He also serves as Director of Rizal Commercial Banking Corporation and National Reinsurance Corporation of the Philippines. He was former senior partner of Sycip, Gorres, Velayo and Co., CPAs where he served as Financial Service Practice Head. He also serves as Director and Treasurer of CRIBS Foundation, Inc. Educational Background: Master in Business Administration from Stern Schoool of Business, New York Univesity, USA and Bachelor of Science in Commerce from Far Eastern University, Philippines, International Management Program from Manchester Business School, United Kingdom, Pacific Rim Program from the University of Washington, USA. Atty. Ernestine Carmen Jo Villareal-Fernando, 57, Filipino, is the Director of various corporation such as: Country Bankers Insurance Corporation, Country Bankers Life Insurance Corporation, Director and Treasurer of Jose E. Desiderio, Inc., Guesst Evaluator of Center for Asian Culinary Studies and Café Ysabel Group, Managing Director of Fernando Villareal Books, Legal Counsel, Committee on Art Auction, Ateneo Alumni Association, Senior Partner, Platon Martinez Flores San Pedro Leano Fernando Panagsagan Bantilan Law Office. Educational Background: Bachelor of Laws from the University of the Philippines, A.B. Economics-College Scholar, Dean’s Medal from the University of the Philippines, Certificate in Math and Computer Programming at Michigan State University, Computer Center. Atty. Samuel V. Torres, 54, Filipino, is the Gen. Counsel/Corporate Secretary of AY Foundation, Alto Pacific Company, Inc. (Formerly: The Pacific Fund, Inc.), Bankers Assurance Corp., FBIA Insurance Agency, Inc., Bluehounds Security & Invt. Agency, Enrique T. Yuchengco, Inc., First Nationwide Assurance Corp., GPL Holdings, Inc. GPL Cebu Tower Office Cond. Corp., GPL Holdings, Inc., Grepaland, Inc., Grepa Reality Holding Corporation, Hexagon Integrated Financial & Insurance Agency, Hi-Eisai Pharmaceutical, Inc., Honda Cars Kalookan, Inc, House of Investments, Inc., Hexagon Integrated Fin. Ins. Agency, Inc., Hexagon Lounge, Inc., iPeople, Inc., Investment Managers, Inc., Landev Corporation, La Funeraria Paz-Sucat, Inc., Malayan High School of Science, Inc., Malayan Insurance Co., Inc., Mico Equities, Inc., Malayan Colleges, Inc., Malayan Colleges Laguna, Inc., Malayan Securities Corporation, Mapua Information Technology Center, Inc., MJ888 Corporation, Mona Lisa Development Corporation, Pan Malayan Management & Investment Corporation, Pan Malayan Realty Corporation, Pan Malayan Express, Inc., Pan Pacific Computer Center, Inc., People eServe Corporation, PetroEnergy Resources Corporation, Philippine Integrated Advertising Agency, Inc., Royal Commons, Inc., RCBC Forex Corporation, RCBC Realty Corporation, RCBC Land, RCBC Securities, Inc., RCBC Bankard Services Corporation, RCBC Securities, Inc., RP Land Development Corporation, Seafront Resources Corporation, Sun Life Grepa Financial, Inc., Yuchengco Museum, YGC Corporate Services, Inc., Y Realty Corporation, Y Tower II Office Condominium Corp., Yuchengco Tower Office Condominium Corp. and Xamdu Motors, Inc. Educational Background: Bachelor of Science in Business Economics from the University of the Philippines and Bachelor of Laws from Ateneo de Manila University.

Atty. Arlan P. Profeta, 45, Filipino, is the the AVP for Legal and Administration/Asst. Corporate Secretary of PERC. He is the Corporate Secretary of Maibarara Geothermal, Inc., PetroGreen Energy Corporation and PetroSolar Corporation. He is AVP for Legal and Contracts/Corporate Secretary of PetroWind Energy, Inc. and formerly Tax Manager of Punongbayan and Araullo. Educational Background: Bachelor of Science in Accountancy from San Beda College. He is a Certified Public Accountant. He took his Bachelor of Laws degree from the Arellano University School of Law. Significant Employees Other than the aforementioned Directors and Executive Officers identified in the item on Directors and Executive Officers in this report, there are no other employees of the Company who may have significant influence in the Company’s major and/or strategic planning and decision-making. The Corporation values its human resources. It expects each employee to do his share in achieving the Corporation’s set goals. There is no significant employee of the registrant that is expected to make significant contribution to the business. The Directors of the Company are elected at the annual stockholders’ meeting to hold office until the next succeeding annual meeting and until their respective successors have been elected and qualified. Officers are appointed or elected annually by the Board of Directors at its first meeting following the Annual Meeting of Stockholders, each to hold office until the next annual stockholders’ meeting or until a successor shall have been elected, appointed or shall have qualified. Family Relationship There are no family relationships known to the Company. Involvement in Certain Legal Proceedings For the past five (5) years, none of the Directors or Executive Officers was involved nor has any such officer or director has been involved in any legal cases under the Insolvency Law or the Philippine Revised Penal Code either as defendant or accused, nor has any such officer or director been the subject of any court order, judgment or decree barring, suspending or otherwise limiting him from engaging in the practice of any type of business including those connected with securities trading, investments, insurance or banking activities. Certain Relationships and Related Transactions Please refer to Note 13 of the 2018 AFS for the disclosure of the related party transactions. Aside from the disclosure in the Audited Financial Statements, there were no other related transactions or proposed transactions during the last two (2) years to which the registrant was or is to be a party. Item 10 - Executive Compensation Compensation of Directors and Executive Officers Summary Compensation Table (CEO and Top 4 Highest Paid Executive Officer) Name Milagros V. Reyes Perry Y. Uy Atty. Samuel V. Torres Atty. Arlan P. Profeta

Designation President Treasurer Corporate Secretary Asst. Corporate Secretary

Summary Compensation Table (All Directors as a group)

Compensation * -

Particulars

Year

Salary

2016 2017 All Directors as a group* 2018 2019**

Bonuses

Other Annual Compensation

Total

75,000 85,000 175,000 175,000

*all executive officers of the company do not receive any compensation. ** 2019 projected per diem during BOD meetings. There is no employment contract between the registrant and the Chairman and all others Executive Officers. There are no other arrangements pursuant to which any director of the company was compensated, or is to be compensated, directly or indirectly. Item 11 - Security Ownership of Certain Record and Beneficial Owners and Management (as of December 31, 2018) a) Security Ownership of Certain Record and Beneficial Owners. The following table sets forth information with respect to a record or beneficial owner directly or indirectly owning more than 5% of the Company’s Capital Stock as of December 31, 2018. Title of Class Common

Common

Common Common

Common

Name, Address of Record Owner PCD Nominee Corp. MSE Building, Ayala Ave., Makati City PMMIC 10th Floor, GPL Building, Buendia Ave., Makati City Alsons Cons. Res., Inc. 2286 Pasong Tamo Ext. Makati City CBC T/A-SCA#0010 CBC Building, Trust Dept. Paseo de Roxas, Makati City CBC T/A-SCA#0011 CBC Building, Trust Dept. P. de Roxas, Makati City

Relationship with Issuer

Name of Beneficial Owner

Stockholder

Various clients (Note 1)

Stockholder

Stockholder Stockholder

Pan Malayan Management and Investment Corporation (Note 2) Alsons Consolidated Resources, Inc.(Note 3)

China Banking Corp. (Note 4)

-do-

Stockholder

Others Total

Citizenship

No. of shares held

Percentage of Ownership

Filipino

66,752,941 *

40.95%

Filipino

30,469,858

18.69%

Filipino

15,544,911

9.54%

Filipino

14,178,625

8.70%

Filipino

10,204,120

6.26%

25,849,545

15.86%

163,000,000

100.00%

NOTE: 1. None of the holders of the Company’s common shares registered under the name of PCD Nominee owns more than 5% of the company’s common shares. 2. The corporate acts of PMMIC are carried out by its Board of Directors and Management. Mrs. Helen Y. Dee is the Chairman of PMMIC. 3. The Corporate acts of Alsons Cons. Res., Inc. are carried out by its Board of Directors. Mr. Tomas I. Alcantara is the current president of the Company. 4. CBC T/A-SSC#0010 and T/A-SSC#0011 are Trust Accounts with China Banking Corporation as Trustee. The Corporate acts of CBC are carried out by its Board of Directors and Management. Mr. William C. Whang is the current CBC President and COO. * PCD total shares include Filipino and Non-Filipino.

b) Security Ownership of Management as of December 31, 2018. The following are the number of shares owned of record by the Directors, the Chief Executive Officer and each of the key officers of the Company and the percentage of shareholdings of each: Title of Class

Name of Beneficial Owner Name and Position

Amount and Nature of Beneficial Ownership

Citizenships

Percent of Class

1 “Direct”

Filipino

1 “Direct”

Filipino

1 “Direct”

Filipino

1 “Direct” 425 “Direct” 2,834 “Indirect”

Filipino

1 “Direct”

Filipino

Common

Roberto Jose L. Castillo Chairman of the Board Milagros V. Reyes President and Director Perry Y. Uy Director/Treasurer Yvonne S. Yuchengco Director Nicasio I. Alcantara Independent Director Medel T. Nera Director

Common

Ernestine Carmen Jo D. Villareal-Fernando Independent Director

1 “Direct”

Filipino

Common

Raul M. Leopando Director

661 “Indirect”

Filipino

Common

Victor V. Benavidez Director

1,000 “Direct”

Filipino

Common

Samuel V. Torres Corporate Secretary

Filipino

Common

Arlan P. Profeta Asst. Corporate Secretary

Common Common Common Common Common

Total

4,926 shares

Filipino

0 .00%

As of December 31, 2018, the Company’s directors and executive officers owned an aggregate of 4,926 shares equivalent to 0.003% of the Company’s outstanding shares. None of the members of the Company’s directors and management owns more than 2% or more of the outstanding capital stock of the Company. Voting Trust Holders of 5% or more-The Company is not aware of any voting trust or similar arrangement among persons holding more than 5% of a class of shares. Changes in Control - There had been no change in the control of the Company since the beginning of the last fiscal year. The Company has no existing voting trust or change in control agreements. Item 12 - Certain Relationships and Related Transactions There were no related transactions or proposed transactions during the last two (2) years to which the registrant was or is to be a party.

PART IV - EXHIBITS AND SCHEDULES Item13 - Exhibits and Reports a. b. c. d. e.

2018 and 2017 Audited Financial Statements Supplementary Information and Disclosures required on SRC Rule 68 and 68.1 as amended Organizational Structure (not applicable) Reports on SEC Form 17-Q (1stQuarter, 2nd Quarter, 3rd Quarter) Reports on SEC Form 17-C 1. January 05, 2018 - Change in Directors and Officers 2. May 21, 2018 - Results of Organizational Meeting of Board of Directors after the Annual Stockholders’ Meeting May19, 2018 3. May 21, 2018 - Results of Annual Stockholders’ Meeting 2018 4. June 13, 2018 - General Information Sheet 2018

Item 14- General Notes to Financial Statements 1.

Assets subject to Lien and Restrictions on Sales of Assets As of December 31, 2018, there were no assets mortgaged, pledged or otherwise subject to lien.

Subsequent Events There were no subsequent events that required adjustments on the December 31, 2018 Audited Financial Statements.

Defaults -None

The following are not applicable in the preparation of this report. a. Adjustments made that lead to the revenue recognition but which adjustments cannot be properly supported. b. Changes in estimates without proper disclosure which have the impact of improving results of operations. c. Non-Application or misapplication of accounting principles and standards, misstatements, omissions, etc. d. Other cases involving accounting and auditing matters resulting to possible concealment of a fraud or the creation of a risk for the commission of fraud.

The Company has no liability guaranteed by others.

There were no assets pledged against secured liabilities.

Events after the date of Statement of Financial Position. a. Dividends There is no dividend proposal or declaration neither after the Statement of Financial Position date nor before the financial statements are authorized for issue. b.

Discontinuing Operations There were no significant events after the Statement of Financial Position date but before the financial statements are authorized for issue that may warrant suspension of the Corporation’s operations.

Earnings per share There are no significant events after the Statement of Financial Position date that will affect the computation of earnings per share.

SIGNATURES: The President acts as the Principal Operating Officer and Principal Executive Officer; and the Treasurer as the Principal Financial Officer of the Company. 23

SIGNATURES is Pursuant to the requirements of Section 17 of the Code and Section 141 of the Corporation Code, this report of the CitY duly authorized, the issuer by the undersigned, thereunto signed on behalf

SEAFRONT RESOURCES CORPORATION Issuer

MTLAGROS V. REYqS PresidenVCEO/COO .\ ttr

PERRY Y. UY Principal Financial Offi cerlTreasurer

SAMUELV. TORRES Corporate Secretary

2019,at APR I 1 2019 day of SUBSCRIBED AND SWORN to before me this (TIN) beside indicated Number . Affiant(s) exhibiting to me their Tax Identification

PASIS

each name.:

CITY

TIN

NAMES MILACROS V. REYES PERRY Y. UY

100-732-775

SAMUELV. TORRES

r33-734-895

&S : --F: PaseNo' Bo;k No.--Z: Doc.

No.

Series

l0r-563-055

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?tq SEAFRONT RESOURCES CORPORATION

COVER SHEET auDttEo F||{altcnt ararEl||rrYa

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R E

'R|lc|r^!oFr|clieifuiifuA.4/ioMPDfu)

B 3

FA?n

fr dordqh@dll'I&rmddecq.i6

7th

Flon JMT Blitdi.g, ADB Av..o.,

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scl/ INDEPf I\'DENT AUDITOR'S REPORT

ofDiEclos lnd Stocklolde6 Resourc* Co$ordrion S.a6onr 7rh Floor,JMTBujlding, ADB Avenuc Thc Boatd

R.pon or tb. Audil of lh.

Fi..!ci.l S&l.o..ir

Wc have oudncd $c finrncicl sbcm.nl5 of Safro.t R4ou*cs CoDodion (1h. Cohpey), rhich compriseth.shr.m.nGoifli.nci.lpdlitioneatDcc.nb.31,2013dd201?,ind e sk(enent of .omprehensive inoom., suleBenrs olchonges in cqujty a.d slalements olcdh nows lo! each oflhe rhrer roa^ in rhe psriod erd.d D.ccnber 31,2013, and nor.s ro rh.limcial nabn.its, includin!rsunnat)

olsignifi cam accounling policics.

pEe

fanly, in dl m .ti!l Esp.6, lhc fin.ncial In our opinion. rn sconp.nyiry fimcial shr.n.na posnion arth. compst a D6.6b.I 3l, 20 | 3 and 20 | 7, od is finscirl p.rfomue dd its lloss fo. ach ofrh. thrc. y.r^ in rh. p.riod .nd.d D.c.nb.r I l. 2013 iD iccodrico wirh Philippinc

{

Fi.ecili

Reponirs Slotrd6d, (PFRst

\ ..onduded odraudit! in acco.dance unh Phi Eeponsibiliri.5 und.rrhos. sFndrids m funh of tla Ftnarctal 9atenedr *tion oI ou rtpo srhrh.Co&ofErhr.r lor Prca.s'oml A...unrba i dhicll Equim.Dc tnd F El.vd ro our audn of r hr!. tulfrll.d our orh.r .thic.l GpoNibiliri.s in lccod.n€ Ethics. wc bclieE lhlt dE ludil cvid.nc. h.v. obLin.d is sumci.d ind

rppopirk

po!id.

K.y audn maneB e. ihoc nar!.B rha! in o$ prcfc$ionlljudsmenr *eE ofno,l sisnincance rn our .udn of$.frnd.i.l i!l.n.nBofth.cutrmrp.riod. Thcat matu6 $eE.ddE$.d in rh. conrexr ofour .udirofrh. finrcirl s!r.n.nt!s, *hoL, dd in foming our opinion rh.Eo. ond s.do not p6id. a s.p.d.atinion onrh.s. matu6. For rh. nat.r b.lo*, ou. d*ndion ofhos ou rudit addBed rh. mae. n pdidcd in rhll conrcxl

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rhe rcspomibiiities dscribed in the,lrlir,rt,Reryo,tibillti.tforthe,4tlitaftht Stoten.nB *ctiol ol ov Epon. includin3 in Elrlon ro $is manq Acoodinely, ou.udit Finoncial perfomd.i of pmc.dDrcs d.sign.d to rcspond b ou of rhc ftkr of includ.d $. mislt.t.ndrof rh.Iinmcillst tcr.nb $cE ulBof ourrudnpd.duEs includinAthcprc.cduEs p.r]bm.d to ddB tie mrlLr bclos, prcvid. th. bdsG for our aldn opiniot on dE &mDpoying

W. have fulfilled

6.$n.

Y.lwtto,

wqud.d

nrtirl

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onpany h6 o inv.shc in rhe unq uored .qu jty so. urity of Hem ost Ecozone Developmeir Corpolarion (HEDC)qhich h cei.d ar rh. esiimat d irir value ofPl9l.7l nillion a of D.c.nb.r 3 l, 2013 Epks.nrin3 3 | .I 5% of it roll 6!ats. This noitd is sigific.rr to our audir bs'u& .rimlri's rh. fan vrtue of.r uDquo&d .9uiry i.{rumc't is inherendy subj.crit. 6 ir inyolK rh. rpplic.lion of sigrificurjudgd.nr iD elcriry rh. v.lunion tchnique od in usirg vllurion inputs th0r .rc nol obEmble in rh. muk.t.

Th.

Th. Conpuyt dis.losuEs abour

unquored.quity inv.nmen. in UEDC arc included inNoe

$ th.

W. involvcd our intnrl sp..i.lkr in th. Evi.s ol lh. scop., b6cs, mc$odolo3r asunpiions u$d in rr!. vrlu.rion ed 6ults olrh. wort by rhc Componyl .xroal appais.. Th. asunDrions includ. conD.rrliv. eles pri€ of sukrito& pDpedid ..d c61 10 d.v.lop rfie pG.lr of ltnd of HIDC bt Ef.rcnc. b hnbricrl rd nr&.r drh on codp.tabl. pop.ni6. We rcvi.q.d rh. Compmti d hclosu rcs on de sens iriviq of thc fiir v alu. m.!rurcm..! b . h&8es in u nobscdable inpuls. W! rto coisidcrcd th. compdcncc, crpabiLilie! $dobjecriviq ofmanaEemenfr cxr.n.l.ppr{is* sho prcpdrcd

is rsp.nsibl. fo. thc odEr irfomdion. Th. orh.r infonation enpris.s rh. infomrioi includ.d in th. SEC Fon 20lS (D.linirile lnf.mltion Sbtm.nr), SEC fom I 7-A ud Annuol R.pon aor rh. v.r.nd.d Deobq 31.2017. bur does nor includothe finucialihrmcnb rd our audiror's rcpon rhercon. Tlre sEC Form 20.15 (Definni!.lnfom.rion Sbr.men0, SEC Fom l7.A and Annlll Rrpon ioi rh. y*ended Declmber rl,20l7 arc cxp.cred & be md. ovrilabt ro us ans$. dat olrhh

Me.g.ncnt

tin6ci.l n.|.D.nts dos fom of 6u@c. concllsion rhcFon. Our opinion on rhc

nol cov., th.

o$d infomolion md w. * ill rcr .xpr6s iny

wirh or .diB olrhc findcill M.m.nts. our Espo6ibilny i! to Erd lhc orhct infomlrion idenrified rbov. th.n n b.&nes rilabl. rnd, in doing sd, comidd qhdher the othcr idfomarion isoatiorly inconsisle wnh thc nnancillstllemenrs orourknowl.d3e oblaired ir rh. audiB. o!oteRke app€d! ro b. nate'ially di3$ ed

c.n.*tion

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Rapo$ibiliri€ ol M.!.g.ndr ..d Ttos Ch.r!.d wlrb Gd.tu.rc. lor

lL Fh.lcirl

..b.ra

is 6po$ibl. lor dE pEF@rion lnd fiit pEscnhrion oflnc finrncill luLDena iD wirh PFRSi $d for such inlenil &ntrcl G nM.g.mdt d.rcmji6 k nec$ary ro .nrble rh. ore@rion of linoncill *deneft thr e. fft. fab .a&nd Dkn!tmc'1. whcrhor du. ro fraud o.

Mlnag.ndr

amrdse

In pr.p.ring $. financial sutemenb. mragemrnt is rcsponsible for as$inglhc Compey s $ility b oolri.ue 6rsoins.oiccn, disclcinE, a applhdbl., mad.is r.latd b goi4 conc.n dd using rhe goiig con*m bsh of..countiDg unls mml!.m.nt cidor i'tnds to liquidlrc ric Conpmy or ro cca. op.Brions, o' ha no rc.lbric ahcniiiv€ bur ro do $

e Kponsibl. for o!.6cinA rh. Conpdyt firncirl Audlort R6Dorribillria forr[. ud of rh. Fi'!'cirl Stt.m.nb Thosc cheged

vitn gov.d!n*

aponins

prr.$.

our obledivs are lo obein rcaso.able !$uene about wh.lherthe nnoncial sk!.n.ns s a wliolc are iee ion mlleial mi$r.rcm.d, *hethfl due rd fraud or .tror, and to issue d aldnofs r.pon rhat indud.souropinion. R.enable 6suFnc. is 0 high l.v.l of ssumc., bul is nor ! gudele. rha!.i

rud{condu\rdm&.ord.n..snhPSA.sillrlsr)tddlcrrnrreridlm"!cr.n. {h.nre\iJ. Misbtoens cd ris. from tlud o! cmr .3Ar.Cra, rh.y 4uld Eaonrblt b. exp€ b!\is orrhek finincial rbr.m.iL

,/-%l].i. .\ ".n

A3 D.d ot

audn in

!4ordlncc

; oMl j udsncnr and 6a'nla

profesional skeptickm rhrouglo

ldenoi

and

as.$

rh! risls of

nf,fi!,1

anrof

rhef'ns.is nd.m.ds,sherherduerofmud

k sutncienr rd ipprcpri.r. ro prorid. i b6is for our opilion. Th.nskolnotd.t.dingasdri.l niss@m.nt GauhinS from nrud is higner firn for o& rsulring non .rcr a frlud my involv. coll6ion, fol8lry, inr..rion.l onisaons, misEpEs? dionsorrh.owrid.ofi mdconhl.

un!.nhdint of intmal conrbl rcl.v.nr to thc oudn in order to d.sig! ludir p'@duEs lnat @ lppopriltc ii rh. eircumsbc.s. bur nor for rhc purpose ofexpc$ingrn opinion on rhc Ohhin an

rfeciive'es

of thc

Conrany\ inEmal contbL

Evoluderhcapprcprialelc$ of occouniigpolicirs

.nimb rd

Elatd dkcldufts

made by

usod ard the

ns4.n.nr

reAonrblen*s oia(ounring

Con.lud. on th. lppbpriat..cs of smlgam.nfs ofrh. g.ing conc.m bsh ofaccounrins dd. b.scd on th. ludir cvid.nc. obrain d. vhdh.r i mrtcrinl trx@inry erGb clotcd lo crcDs or condnios dnr nay cst si9ificanr doubt dn rh. Conplnyt abili.y ro anrinu. a ! goins conc.m Ifs.concludcrh0r r m lrcnal uncerlainly cristsi w.E aqliEdbdw ancdion in ou audibr's rcp.n b L\. rclir.d dhclosuEs iD the fimcirl sbtemcnt or. ifsuch disdorucs aE imd.qu&, to modiry ouropinion Ourconclusions are bas.d on thc audn.videise obriin.d up rorh! ddr.ofou' auditorsrcpoft. Ho*cv.r, futuE event orcondiiiors may.ause rh. Comprny ro c.o* lo conrinue

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tivaluatetheo!{ lprcs.trrarian.{rucrureand.o.nrorthetinan.iaIsrdrc'ncns,incLudingrhc di$losuEs. snd rhcthc rhd financill$otcncN rcprcsenr fte underlrin3 hnsadions and eretb manne' rhd achi.t.s fri. pEsenbtion

we connunicac Bnh rho* chsrged $nh sov.man.c rcgardine. snone orltr ntdc6. rhe planncd scoPc rnd riniigofthcaudi and siSnificanr iudir lindingt includinsdy risnificdnr dcficienci6 in inrem'l 0otrtolrhat \e idenriry duirrg oufaudn. chrged w ih Sovflnonce wirh a io.e'netrr thar *e havc co'nplied wnh ELevuir dhi.ilrcquLrenens rcsading iddcpciden.c. and locommunicrte sirh rhcm aLlrclriionships and other nitreE rhd m.y re$onoblr b. $oud,t ro b.d on our indcP€ndence. and !h*c applicablc, rclucd we

aLso provide those

\ith rhN chatgcd *i$ govsmuc., w d.r.nnin. rhose manc6 rhar From.h. 'nrnc6coflnu.ic.td q.rc ofnon sisnificrnc. in th. audn of$e fiMNialiarcm.nrsofrhccurenr period,nd d theEfor. rl$ kcy audn mane6 Wcdcscriberhe*fraresinoraudirorsrpofruil.shsottegularioi pr.. udes ptrblic dndd$trc.bouihc mr!.i or*hoi, in circmdy rarc.t{um$Ns, *e dete.mMe Er marershould nor bc comhun cdsd in our rcpod bc{mNe rhe advene con$q$.nce! ofdoing so would easonably be expedcd ro our*ei8h the public intrcnb.netiaofsrh comDnn'.,.on

R.pon or rbe SuDpl.Dcnt.rJ lrromrrion R.qulFd UnderR.verle n.guhriom No

lstolo

h. slpnlemcnury infom ion r.quiEd under R.wnue Regularions \o. I 5.20 | 0 fo. pu.pes of filing *irh fte Bureau oflm.mdlRcv.nue is pGenrcd byrlt mlnasemenr dfSslfionr Resources Co+onron in a scp.rare scheduh Rc!cnus Resulalions No l5-20l0rcquLresrheiniomuionrobepresen(edinlhc nores ro finsnciaL naMEns. Such Lifomnon iridrarcquned panofrhe bas. tiraNLalnateneds Th. infoma.ioi lsalsoior cq!ired by Secu ies R.guLarion CodeRul.6l, As Ahrnded(2011) Osr opitrion on rhe bdic financirlna.emens is nor altccrcd by fte pEvnr.rion ot$. irfonatiotr Li

hr engagcmed

SYCIP GORRES

prnn r or rh.

VEL

andir Esulrin-! in this mdcpendcni audirois tuDon n

na Lea C.

B.rsrdo.

YO & CO

ALc'+*J lccredihrion \o. 0660-AR.l (G{up A). March 2,101r. vaLid utrriLMrrch 1.2010 T6i ldcnrifi .dion No. 102.032.6r0 lJlR Ac!iednatioi No 08-001993-61 2013. FcbD14 l4,2013, vaLid unrilFebruary 13.l02l PTR No. 7ll2529, Jdnuary 1. 2019, Vakari Cirr SCC

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SEAFRONT RESOURCES CORPORATION STATEMENTS OF FINANCIAL POSITION

201s__l

December

31,

(As restated, Note 3)

2018

ASSETS

Current Assets Cash and cash equivalents (Notes 6,7 , 8 and 14) Financial assets at fair value through profit or loss (Notes 8 and 14) Receivables (Notes 8, 9 and l4)

Other cunent assets Total Cunent Assets

Noncurrent Assets Financial assets at fair value throueh other co (Notes 3, 8 and 14) Investment oropertv (Note 10 Total Noncurrent Assets

P10,402,418

F8,651,880

44,850,901 12,537,600 981.625 68,772.544

62,845,291 261,858 900.200 72.659.229

lncome

416,353,329

428,930,206

iilBl8'3,T? 428"930

TOTAL ASSETS

P501,589,435

LIABILITIES AND EQUITY Current Liabilities Accounts payable and accrued expenses (Notes 13 and 14)

Noncurrent Liability Deferred tax liabilitv CNote l2) Total Liabilities

P654,816

?710,754

45,901,439 46,556,255

45,729,65r

163,000,000

263,345,540 12,224,078

273,067,937

438,569,618

455,149,030

46,440,405

Equity Capital stock - Fl par value Q.{ote l5) Authorized - 388,000,000 shares Issued and outstanding - 163,000,000 shares Net unrealized gains on financial assets at fair value through other comprehensive income (Notes 8 and 15) Retained earnings CNote l5)

TotalEquiry

TOTAL LIABILITIES AND EQUITY See accompanying Notes to

19,081,093

F485,125,873

P501,589,435

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SEAFRONT RESOURCES CORTORATION STATEMENTSOTCOMPREHENSIVEINCOME

(^s Esbr.d,

Nd sainr on rrn

d@ cias.s

on finmcjd

rair valu. rhrcush prcfir or lo$(Noc 3)

CI]^RCES ^ND .xF!6 Nc I I ) dd .dniii@tiv. Nd l6s fr fln v!lu. chans6 on finEhl lss ran du. tircud @rtr or ros (]{oc 3) EXPENSIS

c!n6l

coitf, r^x

FRovrsror{ FoRr

OTHER COMPREIJENSIVE INC

hed

actBltcd

p'ort d t

ll.<d) o fi nru. ,}'dgh a'rw onp'lh

Nd undli4d 3ri6

ii(oft. i.' ord (N*r ror {L cov

PREH

J md

rlsrvE rNcoME

(Los.)

(fl6.5'0,!rD

F:!5,-.3,)3,

B.'i. .nd DirlBt errnidgr (Lr$) P.. Sr'irt

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SEAFRONT RESOURCES CORPORATION STATEMENTS OF CHANGES IN EQUITY

Net Unrealized Gains (Losses) on Financial Assets at Fair Value through

Other Comprehensive Capital Stock Income (Notes 8 (Note 15) and 15)

BALANCES AT DECEMBER Net income Other comprehensive income Total comprehensive income

BALANCES AT DECEMBER

31,2015

f165,549,598

6,300,512

6,300,512 37,560,537

37,560,537

31,2016

37,560,537 6,300,512 163,000,000 42,001,221 4,409426

43,861,049 209,410,647

14,671,667

reported

Total comprehensive income, as

Total

P163,000,000 P4,440,684 (P1,891,086)

Net income Other comprehensive income, as previously Fair value adiustment (Note 3) Other comprehensive income, as

Retained

Earnings (Deficit) (Note lS)

restated restated

14,671,667

317,741,216 (86,674,500)

317

231,066,716

231,066,716 14,671,667

245,738,383

,741,216 (86,674,500)

BALANCES AT DECEMBER 3I, 2017, AS RESTATED

BALANCES AT DECEMBER 31,2017, AS PREVIOUSLY REPORTED

*163,000,000 ?273,067,937

PI9,081,093

*455,149,030

*359,742,437

+19,081,093

P541,823,530

P163,000,000

Fair value adjustment CNote 3)

(86,674,500)

273,067,937

19,081,093 455,149,030 (6,857,015) (6,857,015)

(9,722,397)

(9,722,397) (16,579,412\

BALANCES AT DECEMBER 3I, 2017, AS RESTATED

163,000,000

Net loss Other comprehensive loss Total comprehensive loss

BALANCES AT DECEMBER See accompanying Notes to

31,2018

(9,722,397) (6,857,015) P163,000,000 P263,345,540 *12,224,078

f438,569,618

Financial Statements.

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SEAFRONT RESOURCES CORPORATION STATEMENTS OF CASH FLOWS

Years Ended December 3l 20t7 20r6

2018 CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) before income tax Adjustments for: Net losses (gains) on fair value changes on financial assets at fair value through profit or loss (Note 8) Dividend income (Note 9) Interest income (Note 6) Operating loss before working capital changes Decrease (increase) in: Receivables Other current assets Increase (decrease) in accounts ble and accrued ex Cash used in operations Interest received Net cash used in

(P6,849,969)

17,994,390

(12,885,767) (117,951)

?14,678,714

F6,307,559

(15,397,049) (294,713) (96,516)

(6,803,522) (353,401)

(1,859,296) (1,099,563) (35,388) (88,425)

(r24.7rr\ (974,075) (24,437) (56,959)

99,859

24r.099 (8t4,372)

I I1.163

(74,065) t40.067 (933,702) 67.532

645,t54

275,877

384,713

55,938

(2,032,047)

I 19.201

CASH FLOWS FROM INVESTING ACTIVITIES Dividends received (Note 9) Proceeds from disposal (Acquisitions) ofi Financial assets at fair value through profit or loss (Note 8)

(4,522)

Financial assets at fair value through other complehensiye income (Note 8) Net cashplgvldqd by(used in) investing

activities

NET INCREASE (DECREASE) rN CASH AND CASH

EQUIVALENTS

cAsH AND CASH EQUIVALENTS AT BEGINNING OF

YEAR

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 6) See accompanying Notes to

3,671,422

(2,478,543\ (2,207,188\

1,750,539

(3,073,359)

3,026,268

384.7r

(3 10,45 8)

8,65I,880 11,725,238 PI0,402,418

F8,651,880

12,035,696

Fl 1.725.239

Financial Statements,

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SEAFRONT RESOURCES CORPORATION NOTES TO FINAIICIAL STATEMENTS

Corporatelnformation Seafront Resources Corporation (the Company or SRC) was registered with the Securities and Exchange Commission (SEC) on April 16, 1970 as an oil exploration and production company. On October I 8, I 996, 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 and to include oil exploration and production business as one of its secondary purposes. The Company's shares of stock were listed on May 7, 1974 and are currently traded at the Philippine Stock Exchange.

The registered office address

of the Company is 7th Floor, JMT Building, ADB Avenue,

Ortigas Center, Pasig City. The accompanying company financial statements were approved and authorized for issue by the Board of Directors (BOD) on April 10, 2019.

2. Basis of Preparation Basis of Preparation

The accompanying financial statements of the Company have been prepared under the historical cost basis, except for the financial assets at fair value through profit or loss (FVTPL) and financial assets at fair value through other comprehensive income (FVOCD, which have been measured at fair value. The Company's financial statements are presented in Philippine Peso (F), which is also the Company's functional and presentation currency. The transactions and balances of the Companf line basis with the Company. The trust Company, using consistent accountin Standards (PFRSs). Statement of Compliance The financial statements of the Company ha

are consolidated on a line by reporting year as the

ine Financial Reporting

ance with PFRSs.

..,,:."

Changes in Accounting Policies and Disclosures The Company adopted the following new accounting pronouncements starting January 1,2018. Except as specifically stated, the adoption of these new accounting pronouncements have no impact on the

Company's financial statements.

Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-based Payment Transactions

The amendments to PFRS 2 address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled. Entities are required to apply the

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-2amendments to: (1) share-based payment transactions that are unvested or vested but unexercised as of Janu ary 1,2018, (2) share-based payment transactions granted on or after January | ,201 8 and

to (3)

modifications

share-based payments that occurred

on or after January l, 2018. if it is possible to do

Retrospective application is permitted if elected for all three amendments and so without hindsight.

The Company has no share-based payment transaction with net settlement features for withholding tax obligations and had not made any modifications to the terms and conditions of its share-based payment transaction. Therefore, these amendments do not have any impact on the Company's

financial statements.

PFRS g, Financial Instruments, replaces PAS 39, Financial Instrument; Recognition and Measurement, for annual periods beginning on or after January 1,2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The Company has applied PFRS 9 retrospectively with the initial application date of January 1, 2018 and adjusting the comparative information for the period beginning January 1, 2017. The Company did not present its statement of financial position as of December 31, 2016 since the adoption of PFRS 9 affected only one type of financial asset included under one line item in the statement of financial position.

The impact of the adoption is described below:

(a) Classification and measurement Under PFRS 9, debt instruments are subsequently measured at FVTPL, amortized cost, or FVOCI. The classification is based on two criteria: the Company's business model for managing the assets; and whether the instruments' contractual cash flows represent 'solely payments of principal and interest' (SPPI) on the principal amount outstanding. The assessment of the Company's business model was made as of the date of initial application, January 1,2018. The assessment of whether contractual cash flows on debt instruments are solely comprised of principal and interest was made based on the facts and circumstances as at the initial recognition of the assets.

Following are the impact of the classification and measurement requirements of PFRS 9 on the Company's financial assets: Cash and cash equivalents and receivables previously classified as loans and receivables as at December 31,2017 are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. These are classified and measured as financial assets at amortized cost beginning January 1,2018. There was no change in the measurement of these financial assets.

Quoted debt instruments previously classified as AFS furancial assets are now classified and measured as debt instruments at fair value through OCI. The Group expects not only to hold the assets to collect contractual cash flows, but also to sell a significant amount on a relatively frequent basis. The Group's quoted debt instruments are regular government and corporate bonds that passed the SPPI test.

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-3Listed equity investments previously classified as AFS financial assets are now classified and measured as FVOCI. The Company elected to classiff inevocably its listed equity investments under this category as it intends to hold these investrnents for the foreseeable future. There were no impairment losses recognized in profit or loss for these investments in prior periods. There was no change in the measurement of these financial assets. Equity investment in a non-listed company previously classified as AFS financial asset is now classified and measured as equity instrument designated at FVOCL The Company elected to classif, irrevocably its non-listed equity investment under this category as it intends to hold this investment for the foreseeable future. There were no impairment losses recognised in profit or loss for this investment in prior periods. The adoption of PFRS 9 resulted to a downward adjustment in the fair value of the financial asset by F86.67 million (seeNote8),netofdefenedincometaxofPl5.30millionasofDecember3l,20lT. Other comprehensive income in 2017 and net unrealized gains on financial assets at FVOCI also decreased by F86.67 million. The Company has not designated any financial assets and financial liabilities as at FVTPL. There are no changes in classification and measurement for the Company's financial liabilities.

In summary, upon the adoption of PFRS 9 with the initial application date of January 1,2018, the Company had the following required or elected reclassifications: PAS

measurement

assets category cash Loans and equivalents receivables

Financial

Original Carrying

under PAS 39 Amount

Cash and

Receivables

Loans and receivables

Debt

AFS financial assets

insuuments

New Carrying PFRS 9 measurement cateqory Financial assets at

P8,651,880

amortized cost

FVTPL

PFRS 9 F8,651,990

Financial assets at

261,858

amortized cost

261,859

Financial assets at FVOCI 8,535,131

Equity investments AFS financial assets Financial assets Financial assets at

Amount under

522,365,075 Financial 62,845,291 Financial

assets at FVOCI

8,535,131 420,395,075

FVTPL

62,845,291

assets at

The adoption of PFRS t has no impact on the Company's results of operations, operating, investing and financing cash flows.

(b) Impairment

t has fundamentally changed the Company's accounting for impairment losses for financial assets by replacing PAS 39's incurred loss approach with a forward-looking expected credit loss (ECL) approach. PFRS 9 requires the Company to recogniz,e an allowanse for ECLs for all debt instruments not held at FVTPL. The adoption of PFRS

For cash and cash equivalents, management evaluated that these financial assets have low credit risk. Hence, the Company measured ECL on these instruments on a 12-month basis applying the low credit risk simplification. The Company uses external credit ratings both to determine whether the cash and cash equivalents and restricted cash has significantly increased in credit risk and to estimate ECL.

The adoption of PFRS 9 did not have any significant impact on the Company's provision for impairment on its financial assets.

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-4Amendments to PFRS 4, Applying PFRS 9 Financial Instruments with PFRS 4 Insurance Contracts

The amendments address concerns arising from implementing PFRS 9, the new financial instruments standard before implementing the new insurance contracts standard. The amendments introduce two options for entities issuing insurance contracts: a temporary exemption from applying PFRS 9 and an overlay approach. The temporary exemption is first applied for reporting periods beginning on or after January 1, 2018. An entity may elect the overlay approach when it first applies PFRS 9 and apply that approach retrospectively to financial assets designated on transition to PFRS 9. The entity restates comparative information reflecting the overlay approach if, and only if, the entity restates comparative information when applying PFRS 9.

PFRS 15, Revenue from Contracts with Customers, supersedes PAS 18, Revenue, and related Interpretations and it applies, with limited exceptions, to all revenue arising from contracts with customers. PFRS l5 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

PFRS l5 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a conftact and the costs directly related to fulfilling a contract. In addition, the standard requires relevant disclosures.

The Company adopted PFRS 15 using the full retrospective approach of adoption with January 1,2017 as the date of initial application.

The adoption of PFRS l5 did not have a material impact on the Company's financial statements since its revenues are derived primarily from its investments in financial assets, which is outside the scope of PFRS 15. Amendments to PAS 2S,Investments in Associates and Joint Ventures, Measuring an Associate or Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle)

The amendments clarifu that an entity that is a venture capital organization, or other qualifuing entity, may elect, at initial recognition on an investment-by-investment basis, to measure its investments in associates and joint ventures at fair value through profit or loss. They also clarifo that if an entity that is not itself an investment entity has an interest in an associate or joint venture that is an investment entity, the entity ffi&y, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate's or joint venture's interests in subsidiaries. This election is made separately for each investment entity associate or joint venture, at the later of the date on which (a) the investment entity associate or joint venture is initially recognized; (b) the associate or joint venture becomes an investment entity; and (c) the investment entity associate or joint venture first becomes a parent. Retrospective application is required. Amendments to PAS 40,Investment Property, Transfers of Investment Property

The amendments clarifr when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management's intentions for

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-5the use of a property does not provide evidence of a change in use. Retrospective application of the amendments is not required and is only permitted if this is possible without the use of hindsight. Philippine Interpretation IFRIC-22, Foreign Curuency Transactions and Advance Consideration The interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognizes the nonmonetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the date of the transaction for each payment or receipt of advance consideration. Retrospective application of this interpretation is not required. Pronouncements issued but not yet effective are listed below. Unless otherwise indicated, the Company does not expect that the future adoption of the said pronouncements will have a significant impact on its financial statements. The Company intends to adopt the following pronouncements when they become effective.

Effective beginning on or after January I, 2019 r Amendments to PFRS 9, Prepayment Features with Negative Compensation Under PFRS 9, a debt instrument can be measured at arnortized cost or at fair value through other comprehensive income, provided that the contractual cash flows are 'solely payments of principal and interest on the principal amount outstanding' (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to PFRS 9 clariff that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. The amendments should be applied retrospectively and are effective from January 1,2019, with earlier application permitted. These amendments have no impact on the financial statements of the Company.

PFRS 16, Leases

l6 sets out the principles for the recognition, measuremento presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under PAS 17, Leases. The standard includes two recognition exemptions for lessees leases of 'low-value' assets (e.9., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a PFRS

lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.9., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under PFRS 16 is substantially unchanged from today's accounting under PAS 17. Lessors will continue to classiff all leases using the same classification principle as in PAS l7 and distinguish between two types of leases: operating and finance leases.

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-6PFRS

l6 also requires

lessees and lessors to make more extensive disclosures than under PAS 17.

lessee can choose to apply the standard using either a full retrospective retrospective approach. The standard's transition provisions permit certain reliefs.

or a

modified

Amendments to PAS 19, Employee Benefits, Plan Amendment, Curtailment or Settlement

The amendments to PAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments speciff that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to: Determine current service cost for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event

Determine net interest for the remainder of the period after the plan amendment, curtailment or settlement using: the net defined benefit Iiability (asset) reflecting the benefits of;flered under the plan and the plan assets after that event; and the discount rate used to remeasure that net defined benefit liability (asset). The amendments also clarifu that an entity first determines any past service cost, or a gain or loss on settlement, without considering the effect of the asset ceiling. This amount is recognized in profit or loss. An entity then determines the effect of the asset ceiling after the plan amendment, curtailment or settlement. Any change in that effect, excluding amounts included in the net interest, is recognized in other comprehensive income. The amendments apply to plan amendments, curtailments, or settlements occurring on or after the beginning of the first annual reporting period that begins on or after January l, 2019, with early application permitted. These amendments have no impact on the financial statements of the Company. Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

clariff that an entity applies PFRS 9 to long-term interests in an associate orjoint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant The amendments

because it implies that the expected credit loss model in PFRS 9 applies to such long-term interests.

The amendments also clarified that, in applying PFRS 9,an entity does nottake accountof any losses of the associate or joint venture, or any impairment losses on the net investment, recognized as adjustments to the net investment in the associate or joint venture that arise from applying PAS 2S,Investments in Associates and Joint Ventures. The amendments should be applied retrospectively and are effective from January 1,2019, with early application permitted. These amendments have no impact on the financial statements of the Company.

Philippine Interpretation IFzuC-23 , Uncertainty over Income Tax Treatments

The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of PAS 72, Income Taxes, and does not apply to taxes or

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-7

levies outside the scope of PAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.

The interpretation specifically addresses the following: o Whether an entity considers uncertain tax treatments separately . The assumptions an entity makes about the examination of tax treatments by taxation authorities I How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates o How an entity considers changes in facts and circumstances

An entity must determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed.

The Company is currently assessing the impact of adopting the interpretation on its financial statements.

Annual Improvements to PFR^Ss 2015-2017 Cycle

Amendments to PFRS 3, Business Combinations, and PFRS I l, Joint Arrangements, Previously Held Interest in a Joint Operation The amendments clarifu that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation.

A parfy that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in PFRS 3. The amendments clarifr that the previously held interests in that joint operation are not remeasured. An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1,2019 and to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after January 1,2019, with early application permitted. These amendments are currently not applicable to the Company but may apply to future transactions.

Amendments to PAS 12, Income Tax Consequences of Payments on Financial Instruments Classified as Equity The amendments clarifu that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore' an entity recognizes the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.

An entity applies those amendments for annual reporting periods beginning on or

after January 1,2019, with early application is permitted. These amendments are not relevant to the

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8Company because dividends declared by the Company do not give rise to tax obligations under the current tax laws.

Amendments to PAS 23, Borrowing Costs, Boruowing Costs Eligiblefor Capitalization The amendments clarifr that an entity treats as part of general borrowings any bonowing originally made to develop a qualiffing asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.

An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after January 1,2019, with early application permitted. These amendments have no impact on the financial statements of the Company.

Effective beginning on or after January I, 2020 o Amendments to PFRS 3, Definition of a Business

The amendments to PFRS 3 clariS the minimum requirements to be a business, remove the assessment of a market participant's ability to replace missing elements, ild n€urow the definition of outputs. The amendments also add guidance to assess whether an acquired process is substantive and add illustrative examples. An optional fair value concentration test is introduced which permits a simplified assessment of whether an acquired set of activities and assets is not a business.

An entity applies those amendments prospectively for annual reporting periods beginning on or after January 1,2020, with earlier application permitted. These amendments

will apply on future business combinations of the Company.

Amendments to PAS l, Presentation of Financial Statements, and PAS 8, Accounting Policies, Changes in Accounting Estimates and Eruors, Definition of Material The amendments refine the definition of material in PAS I and align the definitions used across PFRSs and other pronouncements. They are intended to improve the understanding of the existing requirements rather than to significantly impact an entity's materiality judgements.

An entity applies those amendments prospectively for annual reporting periods beginning on or after January 1,2020, with earlier application permitted. Effective beginning on or after January o PFRS 17, Insurance Contracts

I, 202I

PFRS l7 is a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, PFRS l7 will replace PFRS 4, Insurance Contracfs. This new standard on insurance contracts applies to all types of insurance contracts (i,e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply. The overall objective of PFRS l7 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in PFRS 4, which are largely

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-9

based on grandfathering previous local accounting policies, PFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. The core of PFRS l7 is the general model, supplemented by: A specific adaptation for contracts with direct participation features (the variable fee approach) A simplified approach (the premium allocation approach) mainly for short-duration contracts

o o

PFRS I 7 is effective for reporting periods beginning on or after January 1 ,2021, with comparative figures required. Early application is permitted.

Deferred ffictivity Amendments to PFRS 10, Consolidated Financial Statements, and PAS 28, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments address the conflict between PFRS l0 and PAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate orjoint venture. The amendments clarif, that a full gain or loss is recognized when a transfer to an associate orjoint venture involves a business as defined in PFRS 3. Any gain or loss resulting from the sale or contribution of assets that does not constitute a business, however, is recognized only to the extent of unrelated investors' interests in the associate or joint venture. On January 13,2016, the Financial Reporting Standards Council deferred the original effective date of January 1,2016 of the said amendments until the International Accounting Standards Board

(IASB) completes its broader review of the research project on equity accountingthat may result in the simplification of accounting for such transactions and of other aspects of accounting for associates and

joint ventures.

Summary of Significant Accounting Policies Cash and Cash Eryivalents Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three (3) months or less and that are subject to an insignificant risk of changes in value.

Financial Instruments

Initial recognition and subsequent measurement A financial instrument is any contract that gives rise to a financial liability or equity instrument of another entity.

asset

of one entity and a financial

Financial assets - Initial recognition and measurement Financial assets are classified, at initial recognition, as subsequently measured at amortized cost; FVOCI; and FVTPL. The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow sharacteristics and the Company's business model for managing them. The Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.

In order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it needs to give rise to cash flow that are 'solely payments of principal and interest (SPPD' on the

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-10principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Companyos business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Sub s e q uent m e as ur e m e nt

For purposes of subsequent measurement, financial assets are classified in four categories: a o a

Financial assets at amortized cost (debt ins0uments) Financial assets at FVOCI with recycling of cumulative gains and losses (debt instruments) Financial assets designated at FVOCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) Financial assets at FVTPL

Financial assets at amortized cost (debt instruments) The Company measures financial assets at amortized cost if both of the following conditions are met:

o .

The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecogn ized, modified or impaired. The Company's financial assets at amortized cost includes cash and cash equivalents, receivables and restricted cash.

Financial assets at FWPL Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated as at FVTPL on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch. Financial assets at FVTPL are carried in the statement of financialposition at fair value with net changes in fair value recognised in the statement of profit or loss.

This category includes derivative instruments and listed equity investments which the Company had not irrevocably elected to classifu at fair value through OCI. Dividends on listed equity investments are also recognised as other income in the statement of profit or loss when the right of payment has been established.

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The Company's financial assets at FVTPL consists of investments in listed equity securities held for trading. Financial assets designated at FVOCI (equity instruments) Upon initial recognition, the Company can elect to classifu irrevocably its equity investments as equity instruments designated at FVOCI when they meet the definition of equity under PAS 32 and are not held for trading. The classification is determined on an instrument-by-instrument basis. Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in profit or loss when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at FVOCI are not subject to impairment assessment.

The Company's financial assets at FVOCI include quoted and unquoted equity securities and quoted government securities. Impairment offinancial ass ets The Company recognizes an allowance for ECLs for all debt instruments not held at FVTPL. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next l2-months (a l2-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

The Company may consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. Financial Liabilities - Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All

financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

Sub

equent measurement

The measurement of financial liabilities depends on their classification, as described below:

r r

Financial liabilities at FVTPL Loans and borrowings

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-t2Loans and botowings After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortiz.ation process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of comprehensive income.

The Company's loans and borrowings include accounts payable and accrued expenses, excluding statutory liabilities. Derecognition of Financial Assets and Financial Liabilities

Financial assets A financial asset (or where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when: a a

the rights to receive cash flows from the asset have expired; the Company retains the rights to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a "pass-through" arrangement; or

the Company has transferred its right to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asseto the asset is recognized to the extent of the Company's continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.

Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged, cancelled or has expired.

Where an existing financial liability is replaced by another from the saine lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss. Offs etti ng of F inanc i al Ins trum ent s Financial assets and financial liabilities are set off and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to oflset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability, or

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In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All

assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

o o I

Level I - Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. Operating Lease Company as a Lessor Leases where the Company does not transfer substantially all the risks and rewards of ownership of the assets are classified as operating leases. Lease payments received are recognized in profit or loss as income on a straight-line basis over the lease term.

Capital Stock Capital stock is measured at par value for all shares issued. Incremental costs incurred directly attributable to the issuance of new shares are shown in equity as a deduction from proceeds, net of tax. When the Company purchases its own capital stock (treasury shares), the consideration paid, including any attributable incremental costs, is deducted from equity until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related tax effects is included in equity. Retained Earnings

Retained earnings represent accumulated earnings of the Company less dividends declared and with consideration of any changes in accounting policies and other adjustments applied retroactively. The retained earnings of the Company are available for dividends only upon approval and declaration of the BOD. Earnings Per Share (EPS)

Basic earnings per share are computed on the basis of the weighted average number of

outstanding during the year after giving retroactive effect for any stock dividends declared in the current year.

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t4Diluted earnings per share, if applicable, is computed on the basis of the weighted average number of shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. There are no dilutive potential common shares that would require disclosure of diluted earnings per common share in the financial statements. Revenue Recognition Revenue from contracts with customers is recognised when control of the services is transfened to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. The Company has concluded that it is the principal in its revenue affangement since it is the primary obligor in all revenue ilrangements, has pricing latitude and is also exposed to credit risk.

Dividend income Dividend income is recognized when the Company's right to receive the payment is established, which is generally when the BOD approves the dividend declaration. Interest income Interest income is recognized as the interest accrues taking into account the effective yield on the asset. Service income The Company recognizes revenue from services over time, using an input method to measure progress towards complete satisfaction of the service, because the customer simultaneously receives and consumes the benefits provided by the Company. Rental Income

Rental income under noncancellable leases is recognized in the on a straight-line basis over the lease terms or based on a certain percentage of the gross revenue of the tenants, as provided under the terms of the lease contract. General and Adminisfative Expenses

Expenses are recorded when administering the business.

incurred. General and administrative

expenses constitute costs

Income Tax Curuent tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the reporting date.

Defeted tax Deferred tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Defened tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits from excess minimum corporate income tax (MCIT) over regular corporate income tax and unused net operating losses carryover (NOLCO), to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits from excess MCIT and unexpired NOLCO can be utilized.

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The carrying amount of defened tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred ta< asset to be utilized. Unrecognized defened tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profit will allow the defened tax asset to be recovered.

Defened tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting date. Provisions and Contingencies Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation, Where the Company expects a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Contingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but are disclosed when an inflow of economic benefits is probable. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become vinually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements. Events After the Reporting Date Post year-end events up to the date of auditors' report that provide additional information about the Company's situation at the reporting date (adjusting events) are reflected in the financial statements, if any. Post year-end events that are not adjusting events are disclosed in the notes when material.

Significant Accounting Judgments, Estimates and Assumptions The preparation of the accompanying financial statements requires management to make judgments, estimates and assumptions that affect amounts reported in the financial statements and related notes. The judgments, estimates and assumptions used in the financial statements are based upon management's evaluation of relevant facts and circumstances as of the date of the Company's financial statements. Actual results could differ from such estimates. Judgments and estimates are contractually evaluated and are based on historical experience and other

factorso including expectations

of future events that are believed to be reasonable

under the

circumstances.

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16Judgments In the process of applying the Company's accounting policies, management has made the following judgrnents, apart from those involving estimations, which has the most significant effect on the amounts recognized in the financial statements:

Recognition of deferred tax assets The Company's deferred tax assets pertain to the carryforward benefits of NOLCO and excess MCIT over RCIT. Judgment is required to determine the amount of deferred tax assets that can be recogn ized, based upon the likely timing and level of future taxable profits together with future tax p[nning strategies.

The Company did not recognize defened tax assets amounting to F3.96 million and F3.18 million as of December 3 | , 201 8 and 2017 , respectively (see Note l2). Management believes that it may not be probable that sufficient taxable income will be available against which the income tax benefits can be realized prior to their expiration.

Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the statements of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimation offair value of unquoted equity securities classified as financial assets at FVOCI The Company uses its judgment to select the most appropriate valuation methodology to value its unquoted equity investments and make assumptions that are mainly based on market conditions existing at each reporting period. As of December 31,2018 and 2017,the Company valued the unquoted equity securities classified as financial assets at FVOCI using the adjusted net asset method which is a combination of the market and income approaches. It involves directly measuring the fair value of the assets and liabilities of the investee company. Assets of the investee company consist mainly of parcels of land for sale which is adjusted to its fair value. The fair value adjustments arising frorn changes in fair value of unquoted equity securities are fully disclosed in Note 8.

Cash and Cash Equivalents

Cash in banks (Note 7) Cash

2018

20t7

P6,lg7,4lg

P5,379,556

uivalents fNote

3.273.324 F10,402,419

F8.651.990

Cash in banks earn interest at the prevailing bank deposit rates. Cash equivalents are short-term investments that are made for varying periods of up to three months depending on the immediate cash requirements of the Company and earn interest at the prevailing short-term placement rates.

Interest income earned on cash

banks and cash equivalents amounted

F0.10 million and F0.12 million in 2018,2017 and20l6,respectively.

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7. Investment in Trust Funds The Company established trust funds (the Trust) which are being administered by a local bank under two trust agreements. The details of the trust funds based on the financial statements issued by the trustee bank as of December 3l follow: 2018

20r7

?4,268,251

?923,957 22,044,497

Assets Cash and cash equivalents (Note 6) Financial assets at FVTPL (Note 8) Financial assets at FVOCI - government securities (Note 8) Receivables CNote 9)

12,648,482 5,402r780 70,560

8,535,131

62,101 31,565,686

22,390,073

Liabilities Accounts payable and ascrued

Equity Principal

expenses

fund

(90,389) ?22,299,684

F3 1,502,958

P28,056,417

?28,056,417

(62,728',)

Accumulated trust fund income (loss) at

beginning of year Trust fund income (loss) for the Accumulated tnrst fund income (loss) at end of

year

(3,619,033) 7,065,574 3,446,541 P31,502,958

31446,541 (912031274\

(5,756,733) ?22,299,684

The assets, liabilities and performance of the fund are consolidated in the applicable accounts of the Company for financial statement presentation purposes.

8. Financial

Assets

The Company's financial assets are summarized by measurement categories as follows:

Cash and cash equivalents (Note 6)

Receivables (Note 9) Financial assets at FVTPL (Note 7) Financial assets at FVOCI (see Note 3)

2018 P10,402,418 12,537,600 44,850,901 416,353,329

*484,144,248

20t7 F8,651,880 261,858 62,845,291 428,930,206 F500,699,235

Financial Assets at FVTPL Details of financial assets at FVTPL consisting of listed equity securities follow:

20t7

2018

Fair value

Acquisition cost

F44,850,901

P62,945,291 49,100,916

48,100,916

The net loss on fair value changes on financial assets at FVTPL amounted to F17.99 million for the year ended December 31, 2018, while the net gain on fair value changes amounted to Fl5.39 million and F6.80 million for the years ended December 3 l, 2017 and 2016, respectively.

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- 18 The movements in financial assets at FVTPL for the years ended December 3l follow: 20t7 ?47,453,721

2018 Balance at beginning of year Fair value gain (loss) recognized during the year

?62,845,291 (17,994,390)

15,387,049 4.522

Additions Balance at end

Financial Assets at FVOCI Financial assets at FVOCI consist of quoted and unquoted shares of stock held for long-term investment purposes and are carried atfair value. The carrying values of these investments are as follows:

20r7 (As restated, Note 3

Listed equity securities: PetroEnergy Resources Corporation (PERC) Benguet Corporation

*13,479,075 761.406

?23,492,102 4.33 8.1 55

27,830.257

Non-listed equity security (Note 3): Hermosa Ecozone Development Corporation (HEDC) Subscription payable to HEDC

406,063,952 12,353,894 393.71

404,919,702 12,353,994 392.564.818

Investments in government securities (Note

P416,353,329

P429,930.206

The movements in financial assets at FVOCI for the years ended December 3l follow: 2017 (As restated,

Balance at beginning of

year

p149,655,296

?428,930,206

Additions

2,479,543

Disposals Fair value gain (loss) recognized durine the vear Balance at end of vear

(3,026,269)

F416,353,329

276.796.367 P429,930.206

Movements in the net unrealized gains on financial assets at FVOCI are as follows:

20t7 (As restated,

Balance at beginning of year Unrealized gain (loss) recognized in other

ive income CNote Balance at end

?273,067,937

?42,001,221

9.722

23r.066.716

*263

?273.067.937

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Investment in HEDC On January 3l , 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 into a new township consisting of industrial estates, residential communities, a golf and country club and a commercial center.

As of December 31,2018 and 2017 ,the Company has outstanding subscriptions payable to HEDC which amounted to P12.35 million. The subscriptions payable are due on demand (see Note l4). The investment in FIEDC is presented in the statement of financial position at fair value net of subscription payable.

The fair value of investment in FIEDC is determined using the adjusted net asset value method wherein the assets of HEDC consisting mainly of parcels of land are adjusted from cost to its fair value. The valuation of the parcels of land was performed by an Securities and Exchange Commission accredited independent valuer as at December 3 1 , 201 8 and 201 7. This measurement falls under Level 3 in the fair value hierarchy. Fair value measurement disclosures for the determination of fair value of unquoted equity securities are provided in Note 14.

Receivables

Dividends receivable Accrued interest receivable Rent receivable Receivable from HEDC

2018 ?121422,217

P18l,604

70,323 23,408

63,534 16,720

2017

2l F26l,g5g

Dividend income earned on

its

investments amounted

to F12.89 million, ?0.29 million

and

P0.35 million in 2018, 2017 and 2016, respectively, Dividend receivable from HEDC amounting million was subsequently collected in January 2019.

"12.23 10. Other Income 2018 Service income (Note Rental income

l3)

?267,857 480 7

20t7 ?267,957 84.480 P352.337

20r6 ?267,957 84.490 P352,337

Service income pertains to accounting services rendered by the Company to HEDC (see Note l3). Rental income pertains to rentals earned from the two (2) parking slots owned by the Company which

are classified as investment property. As of December 31, 2018 and 2017, the cost of tire fullv

depreciated parking slots amounted to ?207,598.

The fair value of the investment property ranges from F600,000 to F800,000 and F600,000 to F700,000 per slot as of December 31,2018 and 2017, respectively. This has been determined on the

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basis of recent sales of similar properties in the same area as the investment properfy and taking into account the economic conditions prevailing at the time the valuation was made. There are no related costs for the operations of the investment property.

General and Administrative Expenses

Professional fees and services

Stockholders' meeting expenses Stock listing maintenance fees Stock transfer expenses

Directors'fees

2018 F1,085,946 378,930

20t7

20t6

F318,750 302,149

264,116

265,660

253,539 175,000

259,513 85,000 37,722 10,704

F318,750 265,341 253,000 260,050 75,000 93,224

Taxes and licenses

32,7 49

Advertising IT services

10,212 6,516

Insurance expense

9,000

22,245

3,682

16l,g57 3,592

6.853

13.409

Miscellaneous

17,393

12. Income Taxes

The provision for income tax for the years ended December 31,2018, 2017 and20l6 represents MCIT.

As of December 31,2018 and2017, the Company did not recognize defened tax assets on the carryforward benefits of the following NOLCO and excess MCIT over RCIT as management assessed that there will be no future available taxable income against which the defened tax assets can be utilized prior to their expiration. 2018 F3,939,030

NOLCO MCIT

20t7 ?3,162,213

2l,l4l

The details of unexpired MCIT and NOLCO are as follows: 2018

Year incurred

MCIT

NOLCO

2018 2017

P7,047 7,047 7.047

P1,864,869 1,099,563

20t6

Pzl,l4l Year incurred

20r7 20r6 20r5

20t7 MCIT P7,047 7,047 7.047

December 31, 2021 December 31, 2020 December 31. 2019

F3.g3g

NOLCO P1,099,563

974,599 1.088,052

December 3 1, 2020 December 31, 2019 December 3 l. 2018

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Rollforward of NOLCO follows: 20r8

20r7

*3,162,213 F3,205,994 1,864,969 1,099,563

Balances at beginning of year

Additions

Expirations

(1,088,052)

Balanses at end of vear

(1,143,244\

P3,939,030

P3.t62.2t3

2018

20t7

P2l,l4l

Pzl,lg4

Rollforward of MCIT follows:

Balances at beginning of year

Additions

7,047

lons Balances at end

7.1 00

?2l.l4l

Pzt.t4l

As of December 31,2018 and 20l7,the Company recognized deferred tax liability amounting to F45.90 million and F45.73 million, respectively, which pertains to the setup of 15% defened tax on unrealized gains on unquoted shares of stock classified as financial assets at FVOCI. The reconciliation of the income tax computed at the statutory tax rate to the provision for income tax as shown in the statements of comprehensive income follows:

20r8 Income tax at statutory tax rate of 30% Add (deduct) reconciling items: Movement in unrecognized DTA Interest income subjected to final tax

Dividend income Net loss (gains) on fair value changes on financial assets at FVTPL Provision for income tax

20r7

2016

P4,403,614

?1,992,269

564,935

336,916

299,269

(35,385) (3,865,730)

(88,414)

(F2,054,990)

(37,4t3)

(28,955)

4.676.714 ?7.047

(106,020)

2,041,05

?7.047

13. Related Party Transactions Related party relationship exists when one party has the ability to control, directly, or indirectly through one or more intermediaries, the other party or exercise significant influence over the other party in making financial and operating decisions. Such relationship also exists between and/or among entiiies, which are under common control with the reporting enterprises and its key management personnel, directors, or its shareholders. In considering each related party relationship, attention is directed to the substance of the relationship, and not merely the legal form. The Company in its regular conduct of business has entered into the following transactions with related parties consisting of reimbursement of expenses and management and accounting services agreements.

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-22 The Company's financial statements include the following amounts resulting from transactions with

related parties:

2018

Nature of transaction

PERC

Reimbursements Accounting services

HEDC

AmounU Volume

Receivables/ (Accounts

Conditions Noninterest bearing, payable when due and demandable

?123,667 267.857

P39r 20r7 Receivables/ (Accounts

Reimbursements Accounting services

?7t.625

(?71,625)

Noninterest bearing, payable when due

Unsecured,

and demandable

no impairment

267.8s7 F339.482

The Company has no employee. PERC provides administrative support to the Company. Therefore, no compensation and short-term bnefits for key management personnel were charged in profit or loss for the years ended December 31, 2018, 2017 and 2016. Terms and conditions of transactions with related parties Outstanding balances at year-end are to be settled in cash. There have been no guarantees provided or received for any related parry receivables or payables.

14. Financial lnstruments Categories and Fair Values of Financial Instruments

The methods and assumptions used by the Company in estimating the fair values of the financial instruments are: Cash and cash equivalents and receivables Due to the short-term nature of the instruments, carrying amounts approximate fair values as of the reporting date. Government securities

Fair values are generally based on quoted market prices at reporting date. This is under Level of the fair value hierarchy.