REACHING NEW HEIGHTS INTERIM REPORT 2022 ESR Group Limited (Incorporated in the Cayman Islands with limited liability) Stock Code: 1821
SPACE AND INVESTMENT SOLUTIONS FOR A SUSTAINABLE FUTURE ESR is APAC’s leading real asset manager powered by the New Economy. On the back of the accelerating advancement, broad-based adoption and high frequency usage of technology, we are witnessing a once-in-a-multi-generation change in real estate and our vision is to deliver a fully integrated solution to leading global capital partners and customers. As part of this continuous pursuit, we will leverage our scale, extensive offerings, capabilities and resources to provide a suite of best-in-class real estate development products and real asset investment solutions that spur meaningful, long-term sustainable growth of the business, the economy and the environment. We are fully focused on contributing to a positive impact for our employees, customers, investors and the communities around us. Visit esr.com for more information. FUND MANAGEMENT We manage a broad range of funds and investment vehicles that invest in a portfolio of premium real assets in various stages of the property life cycle, providing a single interface with multiple investment opportunities for our capital partners. NEW ECONOMY DEVELOPMENT Our development platform with an end-to-end integrated suite of technical capabilities and services covers every stage of the development cycle including land sourcing, design, construction and leasing. INVESTMENT Our investment platform includes completed properties held on our balance sheet, our co-investments in the funds and investment vehicles and the public REITs we manage, as well as other investments.
CONTENTS 2 1H2022 Financial Highlights 4 1H2022 Operational Highlights 6 Overview of ESR Group 8 Key Trends to Support Our Growth Strategies 10 Management Discussion & Analysis 18 Corporate Governance and Other Information 41 Auditor’s Independent Review Report 42 Unaudited Condensed Consolidated Financial Information 95 Non-IFRS Measures End Corporate Information
1H2022 FINANCIAL HIGHLIGHTS CORE PATMI1,2 US$389 MILLION 133%* ASSETS UNDER MANAGEMENT3 US$149 BILLION 312%* MARKET CAPITALISATION4 US$12 BILLION EARNINGS PER SHARE1 (US$) 9.2 cents DIVIDEND PER SHARE (US$) 1.6 cents5 WEIGHTED AVERAGE INTEREST COST 3.8% TOTAL PATMI1 US$412 MILLION 93%* TOTAL SEGMENTAL RESULT US$727 MILLION 75%* * Year-on-Year (“YoY”) Change % represents a comparison between the first half of current year (1H2022) and the first half of last year (1H2021) Notes: 1. Excludes amortisation of intangibles and transaction costs relating to ARA and M&A related items such as bargain purchase and financial instruments in relation to certain associates 2. Excludes fair value on completed investment properties, share-based compensation expense and tax effects of adjustments. Refer to non-IFRS measures reconciliation in page 95 3. Based on constant FX translation as of 31 December 2021 for a like-for-like comparison. Based on FX translation as of 30 June 2022, total AUM would be US$138 billion (US$11 billion FX translation impact). Includes ESR Data Centre Fund 1 which was disclosed in a news release dated 25 July 2022 4. Based on 4,464,008,466 of total outstanding issued shares as at 30 June 2022 5. On 25 August 2022, the board of directors declared an interim dividend of HK$12.5 cents (approximately 1.6 US cents per share) per ordinary share for the financial year ending 31 December 2022, amounting to a total of approximately US$70 million R E A C H I N G N E W H E I G H T S 2
Notes: 6. Adjusted EBITDA is calculated as profit before tax, adding back depreciation and amortisation, exchange loss/(gain), finance costs, share-based compensation expenses, and the listing expenses, and eliminating the effect of interest income, and fair value gains on completed investment properties and investment properties under construction and transaction costs relating to ARA 7. Net debt is calculated as bank and other borrowings less cash and bank balances 8. Excludes transaction costs and amortisation relating to intangible assets (net of tax) arising from the acquisition of ARA # EBITDA, Adjusted EBITDA and Core PATMI are non-IFRS measures. These measures are presented because the Group believes they are useful measures to determine the Group’s financial condition and historical ability to provide investment returns. EBITDA, Adjusted EBITDA and Core PATMI and any other measures of financial performance should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net profit or indicators of the Group’s operating performance on any other measure of performance derived in accordance with IFRS. Because EBITDA, Adjusted EBITDA and Core PATMI are not IFRS measures, these may not be comparable to similarly titled measures presented by other companies. Refer to non-IFRS measures reconciliation in page 95 Adjusted EBITDA6 (US$ million) FY2020 FY2019 FY2021 359 1H2021 366 431 215 508 1H2022 FY2020 FY2019 FY2021 1H2021 1H2022 357 388 404 432 204 Revenue (US$ million) FY2020 FY2019 FY2021 278 1H2021 315 4108 4518 230 1H2022 Profit after Tax (US$ million) BALANCE SHEET (US$ million) Full Year Ended 31 December Six Months Ended 30 June FY2019 FY2020 FY2021 1H2021 1H2022 Total assets 6,352 7,687 9,338 8,550 16,388 Cash and bank balances 884 1,515 1,638 1,133 2,015 Bank and other borrowings 2,571 3,295 4,248 3,753 4,949 Net debt7 1,687 1,780 2,610 2,620 2,934 Net debt/total assets 26.6% 23.2% 27.9% 30.6% 17.9% FY2020 FY2019 FY2021 1H2021 1H2022 Total Segmental Result (US$ million) New Economy Development Investment Fund Management 256 132 245 633 289 148 226 663 235 199 342 777 135 97 183 415 229 288 211 727 136%* 111%* 75%* 96%* E S R G R O U P L I M I T E D I N T E R I M R E P O R T 2 0 2 2 3
1H2022 OPERATIONAL HIGHLIGHTS STRONG FUNDRAISING FROM CAPITAL PARTNERS CAPITAL RECYCLING RAISED US$3.9 billion1 > 80% New Economy focused RECORD DIVESTMENTS US$1.4 billion2 of balance sheet assets >2x annual target DRY POWDER US$17.9 billion1 of undrawn capital available to be deployed GROWTH SUPERCHARGED BY NEW ECONOMY NEW ECONOMY AUM US$67 billion1,3 RECORD LEASING 2.0 million sqm4 of logistics space leased across portfolio E-COMMERCE AND 3PLS REMAIN KEY DEMAND DRIVERS REPRESENTING 76%4 of new leases signed in 1H2022 Notes: 1. Includes ESR Data Centre Fund 1 which was disclosed in a news release dated 25 July 2022 2. Includes the sell-down of RMB4.9 billion China balance sheet portfolio as announced on 3 July 2022 3. Based on constant FX translation as of 31 December 2021 for a like-for-like comparison. Based on FX translation as of 30 June 2022, New Economy AUM would be US$63 billion (US$4 billion FX translation impact) 4. New Economy assets only. Based on stabilised assets on balance sheet and portfolio assets held in the funds and investment vehicles as at 30 June 2022 5. Weighted by AUM of each respective country R E A C H I N G N E W H E I G H T S 4
ESR Yokohama Sachiura Distribution Centre 1, Japan STRONG PORTFOLIO FUNDAMENTALS4 96% Portfolio Occupancy 5.8%5 Portfolio rental reversion 4.9 years Well-staggered portfolio weighted average lease expiry (by income) MARKET LEADING NEW ECONOMY DEVELOPMENT PIPELINE4 WORK-IN-PROGRESS US$12.0 billion APAC’s largest development workbook >90% focused on high value projects in key gateway cities US$3.5 billion of development starts US$2.0 billion of development completions E S R G R O U P L I M I T E D I N T E R I M R E P O R T 2 0 2 2 5
US/EUROPE US$21 BILLION AUM INDIA US$2 BILLION AUM SOUTHEAST ASIA US$9 BILLION AUM GREATER CHINA US$32 BILLION AUM SOUTH KOREA US$14 BILLION AUM JAPAN US$32 BILLION AUM AUSTRALIA & NEW ZEALAND US$25 BILLION AUM APAC US$14 BILLION AUM OVERVIEW OF ESR GROUP ABOUT ESR GROUP ESR is APAC’s largest real asset manager powered by the New Economy and the third largest listed real estate investment manager globally. With US$149 billion1 in total assets under management (AUM), our fully integrated development and investment management platform extends across key APAC markets, including China, Japan, South Korea, Australia, Singapore, India, New Zealand and Southeast Asia, representing over 95% of GDP in APAC, and also includes an expanding presence in Europe and the U.S. We provide a diverse range of real asset investment solutions and New Economy real estate development opportunities across our private funds business, which allow capital partners and customers to capitalise on the most significant secular trends in APAC. ESR is the largest sponsor and manager of REITs in APAC with a total AUM of US$45 billion. Our purpose – Space and Investment Solutions for a Sustainable Future – drives us to manage sustainably and impactfully and we consider the environment and the communities in which we operate as key stakeholders of our business. APAC’S #1 REAL ASSET MANAGER POWERED BY THE NEW ECONOMY Logistics Listed REITs Infrastructure / Others Data Centres Traditional RE Funds GREATER CHINA 33% JAPAN 10% SOUTH KOREA 12% AUSTRALIA / 20% NEW ZEALAND SOUTHEAST ASIA 11% INDIA 5% APAC 6% US/EUROPE 3% GFA2 by region R E A C H I N G N E W H E I G H T S 6
Notes: 1. Based on constant FX translation as of 31 December 2021 for a like-for-like comparison. Based on FX translation as of 30 June 2022, total AUM would be US$138 billion (US$11 billion FX translation impact) and New Economy AUM would be US$63 billion (US$4 billion FX translation impact). Includes ESR Data Centre Fund 1 which was disclosed in a news release dated 25 July 2022 2. Excludes assets managed by associates 3. Includes ESR-LOGOS REIT and ESR Kendall Square REIT 4. Excludes the AUM of associates (Cromwell and Kenedix) as of 30 June 2022 5. Includes the AUM of associates (Cromwell and Kenedix) as of 30 June 2022 6. As of 30 June 2022 APAC’S LARGEST REAL ASSET MANAGER AUM1 Composition Region Sector4 Fund Type US/Europe India Southeast Asia Australia /New Zealand South Korea Japan Greater China APAC Logistics3 Data Centres Listed REITs Traditional RE Funds Infrastructure / Others Balance Sheet Other Funds Perpetual + Core + REITs 11% 7% 26% 2% 53% 14% 1% 6% 18% 10% 21% 21% 9% 63% 35% 2% ESR GROUP’S ROBUST SCALE, VASTLY EXPANDED CAPABILITIES AND DEEPER BREATH OF OFFERINGS WILL DEFINE THE FUTURE OF APAC REAL ESTATE #1 REAL ASSET MANAGER IN APAC POWERED BY THE NEW ECONOMY WITH A FULL SUITE OF INVESTMENT SOLUTIONS AND A GLOBAL FOOTPRINT WITH A LEADING APAC PRESENCE US$149 BILLION1 AUM US$67 BILLION1 NEW ECONOMY AUM 42 MILLION SQM OF GFA2 28 COUNTRIES; ~84% OF ASSETS ALLOCATED IN APAC US$45 BILLION PUBLIC REITS >1,200MW DATA CENTRE PIPELINE6 63% PERPETUAL + CORE CAPITAL5 WITH 13 LISTED REITS 12 of Top 20 GLOBAL LP RELATIONSHIPS E S R G R O U P L I M I T E D I N T E R I M R E P O R T 2 0 2 2 7
GLOBAL TRENDS OUR COMPETITIVE STRENGTHS ASIA PACIFIC LOGISTICS – LARGEST SECULAR GROWTH OPPORTUNITY IN ASIA Rapid rise of New Economy Financialisation of real estate in APAC Real Asset Investment Manager Powered By The New Economy ESR is APAC’s largest real asset manager powered by the New Economy and the third largest listed real estate investment manager globally. With US$149 billion in total assets under management (AUM), our fully integrated development and investment management platform extends across key APAC markets, including China, Japan, South Korea, Australia, Singapore, India, New Zealand and Southeast Asia, representing over 95% of GDP in APAC, and also includes an expanding presence in Europe and the U.S. Fully Integrated Closed-Loop-Solutions Ecosystem Offering a full suite of both public and private investment solutions, ESR has created the only fully integrated closed-loop-solutions ecosystem for real estate globally. The platform allows global capital partners to increase allocation to New Economy real estate where they are still significantly underweight. Leveraging an expanded network of capital partners and resources, ESR Group will further expand and diversify its product offerings. Well-established fund management platform that facilitates AUM growth Designed to provide us with long-term operational control of our assets and sustainable fees across the full asset life-cycle, our fund management platform supports AUM growth and generate multiple sources of fund fee income. Network of high-quality tenants and best-in-class capital partners The size and scale of our capital partners combined with their longterm approach provide us with access to capital while we maintain strong and long-standing relationships with our network of high quality tenants. Proven ability to grow organically and execute opportunistic M&A transactions to expand our capabilities Our strategy is to create long-term, scalable logistics platforms with proven development capabilities and we partner with strong local leadership for expansion into new markets. Strong management team and backed by reputable shareholders We are co-founded and are led by an experienced management team that has pioneered the asset class in every major market in Asia. Our key and strategic shareholders have provided us with the ability to leverage their capabilities, access to capital, strategic land holdings and tenant relationships. 1 2 3 4 5 6 Growth in real assets KEY TRENDS TO SUPPORT OUR GROWTH STRATEGIES R E A C H I N G N E W H E I G H T S 8
FOCUS PRIORITIES Capitalise on significant market opportunities across Asia Pacific • Further develop our markets and build logistics infrastructure for the modern economy • Build on our network of high quality tenants • Leverage on our integrated fund platform by using our robust deal sourcing and development capabilities and capital pool • Actively evaluate opportunities in new markets through potential partnerships and selective acquisitions in high growth markets • Deepen our regional connectivity by offering logistics solutions in multiple cities in multiple markets in our portfolio • Focus on building and strengthening long-term tenant relationships • Global institutional investor base and capital recycling model • Inject select completed properties into our core/core-plus funds • Pursue acquisition opportunities for listed fund platforms and selectively expand existing REIT vehicles • Harness the network effect to attract capital partners across Asia Pacific • Tap on our ecosystem of shareholders, capital partners, local teams and tenants to penetrate adjacent businesses Leverage our scale and geographic presence to expand into new growth markets Expand our fund management platform and attract new capital partners while bringing existing capital partners across markets Strategically explore and expand into adjacent businesses and investment products within Asia 1 2 3 4 E S R G R O U P L I M I T E D I N T E R I M R E P O R T 2 0 2 2 9
MANAGEMENT DISCUSSION & ANALYSIS BUSINESS REVIEW During 1H2022, ESR continued to deliver stellar financial and operational results on the back of strong secular trends such as sustained e-commerce demand amidst pandemic-led supply disruptions and accelerated growth of data consumption. ESR’s outstanding set of results is a testament to the Group’s strong business fundamentals, as well as unmatched scale and breadth of our APAC-focused investment platform and New Economy infrastructure as an enlarged Group, combined with the recent successful acquisition and integration of ARA and LOGOS (the "Enlarged Group"). The comparative financial information for 1H2021 set out in this report are based on the Company’s consolidated financial results for 1H2021 as reported in the Company’s announcement dated 19 August 2021. As announced on 20 January 2022, the Company completed the acquisition of ARA on 20 January 2022, following which the financial results of ARA have been consolidated into the accounts of the Company. A comparison of the Group’s 1H2022 financial information with the unaudited pro forma consolidated statement of profit or loss and other comprehensive income of the Enlarged Group for 1H2021 as set out in the Company’s circular dated 18 October 2021 and the unaudited pro forma consolidated statement of financial position of the Enlarged Group as of 31 December 2021 as set out in the Company’s 2021 annual report published on 29 April 2022 are included in the Company’s 1H2022 financial results presentation, which is available on the Company’s website at www.esr.com and which can also be accessed through the QR code below. Supported by its well-established fund management platform and ongoing fundraising growth momentum, the Group’s total AUM increased 312% year-on-year to US$149 billion1. On a pro forma Enlarged Group basis, the Group's total AUM increased 14% year-on-year, while New Economy AUM accelerated 23% year-on-year to US$67 billion1. Following the successful accretive acquisition of ARA, EPS2 growth was 31.8% year-on-year despite the enlarged share base. Maiden Dividend Declaration The Board declared a maiden interim dividend of HK$12.5 cents per share (approximately 1.6 US cents per share) (which implies a 1.3%3 yield) for the financial year ending 31 December 2022, amounting to approximately US$70 million, which will be paid to Shareholders on Friday, 30 September 2022. The distribution of a dividend follows the announcement of the adoption of the Group’s Dividend Policy in July 2022, underscoring the Group's commitment to deliver returns and continued growth to its shareholders. Exceptional fund management performance fuelled by strong capital support ESR Fund Management segment continued to record new highs in terms of performance, given the strong capital entrustment from its capital partners. Fund management EBITDA2,4 increased 196.4% to US$288 million, driven by high recurring fee revenue from higher AUM, record development, leasing fees and solid promote fees. This was even a stronger result as the first half 2021 Fund Management EBITDA (on a pro forma Enlarged Group basis) was a very robust period for comparison given that it delivered higher EBITDA than in the second half of 2021 (on a pro forma Enlarged Group basis). Segment growth was driven by the exceptional growth momentum of the Group’s fund AUM which rose 14% to US$146 billion1 on a normalised basis as well as the record development starts and leasing fees. New Economy AUM grew 23% year-onyear to US$67 billion1. The Group continues to see strong capital flows into logistics from global institutional investors who are seeking to strategically rebalance their portfolios into New Economy sectors. Supported by the deep capital partner relationships and track record the Group has established, the Group raised US$3.9 billion through 15 new or upsized funds and mandates, representing a 56% year-on-year growth, of which over 80% of new capital Notes: 1. Based on constant FX translation as of 31 December 2021 for a like-for-like comparison. Based on FX translation as of 30 June 2022, total AUM would be US$138 billion (US$11 billion FX translation impact), total Fund AUM would be US$135 billion (US$11 billion FX translation impact), and New Economy AUM would be US$63 billion (US$4 billion FX translation impact). Includes ESR Data Centre Fund 1 which was disclosed in a news release dated 25 July 2022 2. Excludes amortisation of intangibles and transaction costs relating to ARA and M&A related items such as bargain purchase and financial instruments in relation to certain associates. 3. Based on closing share price of HK$19.12 as of 24 August 2022; on an annualised basis 4. Reclassification of Cromwell under Investment segment to reflect the current asset heavy nature of the investment esr.com Investor Relations Presentations & Webcast R E A C H I N G N E W H E I G H T S 10
raised focused on New Economy. This includes the newly launched Pan Asia discretionary development vehicle and the Group’s inaugural US$1 billion APAC data centre fund which comprises a development pipeline of eight seed projects with 260 megawatts of capacity. ESR also entered into a US$1 billion joint venture with a leading global institutional investor following the sell down of ESR’s balance sheet assets in China, and in South Korea, ESR also upsized its second development joint venture with APG and Canada Pension Plan Investment Board (“CPP Investments”) by up to US$1 billion for investment in and development of a best-in-class industrial and warehouse logistics portfolio. As of 30 June 2022, the Group had US$17.9 billion (includes ESR Data Centre Fund 1 which was disclosed in a news release dated 25 July 2022) of dry powder capital to deploy in new investments. Record development starts fuel APAC’s largest development workbook ESR has over 42 million sqm of GFA in operation and under development across its portfolio which includes a sizeable landbank of over 4.4 million sqm for future development as of 30 June 2022. Given the record low vacancy rates across the portfolio, the Group had substantially increased its development starts by 109% year-on-year to US$3.5 billion. This was further complemented by US$2.0 billion in development completions, an increase of 51% year-on-year. On the back of that continued progress, the Group has US$12 billion in development work-in-progress, the largest development workbook in APAC. • In Japan, the Group is developing the ESR Yokohama Sachiura Logistics Park in Greater Tokyo. The multiphase development provides approximately 720,000 sqm logistics space over four phases, set to be the largest logistics park (by value) in Japan and one of the largest ever developed (by value) in APAC upon completion. Its second phase, ESR Yokohama Sachiura Distribution Centre 2, commenced construction in June 2021 and is scheduled for completion in January 2023. • The Group is developing a US$1.5 billion multi-phase logistics park, ESR Kawanishi Distribution Centre, on a 505,647 sqm site in Greater Osaka, unveiling one of the largest and most significant urban rezoning developments to accommodate Japan’s ongoing expansion in e-commerce driven New Economy real estate. Note: 5. New Economy assets only. Based on stabilised assets on balance sheet and portfolio assets held in the funds and investment vehicles as of 30 June 2022 • LOGOS and its partners are in the process of developing the US$3 billion Moorebank Logistics Park, Australia’s largest intermodal logistics facility at Moorebank in south-western Sydney, into high quality industrial property and infrastructure including initial approval for 850,000 sqm of warehouse opportunities directly adjacent to key rail intermodal facilities being developed by Qube Holdings Limited with direct linkage to Port Botany and the regional New South Wales and interstate rail networks. • In Singapore, ESR is partnering with PGIM Real Estate in a built-to-suit redevelopment to build a 64,490 sqm logistics facility for POKKA, which has signed a 10-year lease to commit a minimum of 70% of the building space. Key development starts in 1H2022 included the Sime Darby JV (Malaysia), Moorebank Phase II (Australia), Busan New Port (South Korea), ESR Green Link Estate (Australia) and Kunshan Zhonggang (China). Key development completions included ESR Yokohama Sachiura Distribution Centre 1 in Greater Tokyo and Phases 1 and 2 of Opo Logistics Park in Greater Seoul. ESR KendallSquare, ESR’s South Korean platform, completed a total of 520,000 sqm of Class A logistics space in South Korea during the first half of 2022, constituting approximately half of the Group’s completions. The logistics space was fully pre-leased to high quality tenants, including of the largest e-commerce companies in Korea and the logistics arm of a major electronics provider amongst others. Strong operational and robust leasing performance with near zero vacancy rates in mature markets The Group achieved strong leasing progress for 1H2022 with a record of over 2.0 million sqm of space leased. This was primarily driven by e-commerce acceleration and supply chain resilience which continues to generate demand for modern, institutional-grade logistics facilities in key gateway markets. Portfolio occupancy reached an all-time high at 96% (99% ex-Greater China)5, with close to full occupancies in most markets. High occupancy rates are underpinning strong rental growth in many of the markets in which we operate, as the Group achieved an overall positive weighted average portfolio rental reversion of 5.8%5 across the New Economy E S R G R O U P L I M I T E D I N T E R I M R E P O R T 2 0 2 2 11
MANAGEMENT DISCUSSION & ANALYSIS portfolio. The Group’s portfolio has a weighted average lease expiry (“WALE”) (by income) of 4.9 years5 and coupled with relatively subdued supply in many of the markets in which it operates, the Group expects to be able to continue to capture strong rental reversions. 40% of ESR’s expiring leases are due within the next 30 months, positioning the Group well to benefit from the outsized rental growth across its major markets. Strong commitment to a robust balance sheet and an accelerating asset light strategy The Group continues to take a disciplined approach to financial positioning with a well-capitalised balance sheet with US$2.0 billion of cash, and a low net gearing of 17.9%6. The Group continues to expand and proactively diversify its funding and capital structure. • In November 2021, the Group closed its first Sustainability-Linked Loan (“SLL”) of US$700 million which was subsequently upsized to US$1 billion at Libor plus 2.25% and Libor plus 2.75% for three-year and five-year tranches respectively. • In January 2022, the Group closed a five-year JPY28 billion SLL which was upsized to JPY32.5 billion at Tibor plus 1.8%. • In May 2022, the Group closed a five-year S$300 million SLL at SORA plus 1.65% The Group remains focused on its capital recycling strategy and asset-light approach. In 1H2022, the Group divested over US$1.4 billion of its balance sheet investments primarily in China to ESR managed funds, exceeding the Group’s annual capital recycling target. The sell down of over 873,000 sqm portfolio in China represented the Group’s largest self-developed balance sheet sell down to date. The Group also executed on the successful tender of its 18.16% holding in China Logistics Property Holdings Co., Ltd (CNLP; SEHK Stock Code: 1589) in May 2022, receiving US$349 million in proceeds, and crystalising a strong return on this four-year investment. Best-in-class practices to drive Environmental, Social and Governance (“ESG”) initiatives across the Enlarged Group The Group has made great progress on its ESG efforts set out in the ESG 2025 Roadmap. To date, the Group has closed a total of approximately US$2.5 billion in SLL, reinforcing the Group’s sustainable financing and operations, as it continued to integrate ESG into its financial management, operations and future planning. In June 2022, ESR became a signatory to the United Nations-supported Principles for Responsible Investment (“PRI”), reinforcing its commitment to adopting and promoting responsible investment practices. On diversity and inclusion, the Group continues to have strong female representation of over 40% across its workforce and 60% of its independent non-executive directors who are women. Sustainability features are increasingly being incorporated in the development of ESR’s assets. The Group is working to increase the deployment of rooftop solar power generation across the portfolio, with a target of 50% increase in solar power generation by 2025. Approximately 100 MW of rooftop solar capacity is being set up, including projects planned for this year. To further such commitment and efforts, the Group has commissioned ongoing thirdparty solar feasibility studies to increase renewable energy performance across the portfolio, leading to improved efficiency of tenants’ operations. In June 2022, the Group signed a memorandum of understanding with CLP Power Hong Kong Limited and CLPe Group to leverage their energy and infrastructure solutions expertise to develop sustainable data centres and logistics centre in Hong Kong. In addition, ESR is the first real asset manager to work with Enerbank in Japan to provide environmental value to tenants with the country’s authorised Green Energy Certificate system, with ESR’s self-generated solar power from its facilities now recognised as part of the power grid in Japan in exchange for renewable energy consumption. LOOKING AHEAD The Group remains confident in the strong fundamentals and future prospects for real assets. E-commerce acceleration and digital transformation will continue to drive demand for logistics infrastructure and data centres. Moreover, global investors are increasingly consolidating their relationships towards a limited number of large-scale managers and allocating more capital to a smaller roster of platforms. Capitalising on these trends, ESR is firmly focused on accelerating its growth in size, scale and offerings. Globally, especially in Asia Pacific, economies are rebounding as many pandemic related restrictions have been eased. The Group will continue to focus on meeting the outsized demand for logistics, industrial and life science space as a part of a renewed push by governments to onshore key activities. Additionally, the Group will continue to scale up its data centre efforts to deliver on the critical need for digital infrastructure across APAC. With its unique multi-asset class exposure and market leadership positions in APAC, the Group is poised to deliver a fully integrated one-stop solution to leading global capital partners and customers. While the Group remains cautious about the changing external environment, the Group is in a strong position to weather any unforeseen headwinds and further capitalise on opportunities that may present themselves. Note: 6. Net Debt / Total Assets as of 30 June 2022 R E A C H I N G N E W H E I G H T S 12
FINANCIAL REVIEW ESR has continued its strong momentum and delivered outstanding performance during 1H2022 as below: • Revenue increased by 111.2% from US$204.4 million in 1H2021 to US$431.7 million in 1H2022; • EBITDA increased by 70.6% from US$373.4 million in 1H2021 to US$637.1 million in 1H2022; • Adjusted EBITDA increased by 136.6% from US$214.8 million in 1H2021 to US$508.2 million in 1H2022; and • PATMI (adjusted)7 increased by 92.6% from US$213.9 million in 1H2021 to US$412.0 million in 1H2022. As of 30 June 2022, the Group had a robust and wellcapitalised balance sheet with US$2.0 billion in cash and net debt over total assets of 17.9%. REVENUE The Group’s revenue grew 111.2% from US$204.4 million in 1H2021 to US$431.7 million in 1H2022. Total group revenue (ex-construction) increased by 142.9% from US$177.7 million in 1H2021 to US$431.6 million in 1H2022, mainly from higher management fee. Management fee increased by 199.5% from US$123.9 million in 1H2021 to US$371.0 million in 1H2022. This is driven by AUM growth and contribution from the ARA acquisition. Construction revenue were from outstanding projects executed after the disposal of construction arm by ESR Australia in September 2020. Overall construction revenue decreased by 99.4% from US$26.7 million in 1H2021 to US$0.1 million in 1H2022. Accordingly, cost of sales also dropped correspondingly from US$30.9 million in 1H2021 to US$9.3 million in 1H2022. Geographically, the Group’s top markets in Greater China, Japan, South Korea, Southeast Asia and Australia and New Zealand accounted for 94.7% of the Group’s revenue for 1H2022. The other markets, including India, made up the remaining 5.3% of revenue for 1H2022. INVESTMENT 14% FUND 86% MANAGEMENT GREATER CHINA 28% JAPAN 13% SOUTH KOREA 17% AUSTRALIA / 22% NEW ZEALAND SOUTHEAST ASIA 15% INDIA 1% OTHERS 4% 1H2022 Revenue Contribution By Region* 1H2022 Revenue Contribution By Segment PATMI AND EBITDA EBITDA increased by 70.6% from US$373.4 million in 1H2021 to US$637.1 million in 1H2022. PATMI (adjusted)7 grew 92.6% from US$213.9 million in 1H2021 to US$412.0 million in 1H2022. Higher PATMI (adjusted)7 and EBITDA were driven by the growth in the Group’s fund management AUM as well as co-investments in associates and joint ventures. The Group recorded fair value gain on investment properties of US$162.9 million for 1H2022 (1H2021: US$165.9 million), contributed from the Group’s assets in China and Japan. Note: 7. Excluding costs related to ARA acquisition of US$23,091,000 and amortisation relating to intangible assets arising from acquisition of ARA (net of tax effects) of US$8,329,000. PATMI (adjusted) is non-IFRS measures * Excludes construction revenue E S R G R O U P L I M I T E D I N T E R I M R E P O R T 2 0 2 2 13
MANAGEMENT DISCUSSION & ANALYSIS The Group’s share of profits from joint ventures and associates increased by 85.5% from US$78.1 million in 1H2021 to US$145.0 million in 1H2022. The increase is mainly due to higher share of profits from the Group’s investments in China and Australia, as well as contributions from ARA’s joint ventures and associates to the Group’s results subsequent to their acquisition. The Group’s weighted average interest rate cost as of 30 June 2022 was 3.8% as compared to 4.6% as of 30 June 2021. Overall finance cost increased by 24.4% from US$79.8 million in 1H2021 to US$99.3 million in 1H2022 in line with the increase in total borrowings from US$3.7 billion as at 30 June 2021 to US$4.9 billion as at 30 June 2022, mainly arising from consolidation of ARA. Administrative expenses increased by 146.9% from US$96.8 million in 1H2021 to US$238.9 million in 1H2022. The increase is primarily from consolidation of ARA’s administrative expenses and transaction costs related to the acquisition of ARA. SEGMENT RESULTS Investment segment results increased by 15.1% from US$183.1 million in 1H2021 to US$210.8 million in 1H2022, supported by higher co-investment income, rental growth and dividend income. Higher 1H2022 investment segment results contributed by higher dividend income and addition of share of associates’ profits subsequent to ARA acquisition; partially offset by reduced share of coinvestment income due to sell down of Korea assets into K-REIT in 2H2021 and lower relative fair value gain from existing balance sheet assets (including Cosmosquare). Fund management segment results increased by US$190.8 million or 196.4% from US$97.1 million in 1H2021 to US$287.9 million in 1H2022. The increase was driven by higher recurring fee revenue from higher AUM, record development and leasing fees and solid promotes. The Group’s fund management segment also benefitted from ARA’s recurring and stable fee revenue. New Economy development segment results increased by 69.1% from US$135.3 million in 1H2021 to US$228.7 million in 1H2022. The increase was underpinned by growth of record work-in-progress that yield significant contributions from fair value gains on projects under development, share of development profits of joint ventures and associates and substantial development completions (US$2 billion). This was further enhanced by a disposal gain of Kemps Creek, an Australian development asset to an ESR-managed fund. 1H2022 Segmental Results (EBITDA) INVESTMENT 29% FUND 40% MANAGEMENT NEW ECONOMY 31% DEVELOPMENT Segmental Results EBITDA 1H2022 1H2021 Variance* US$ million % US$ million % US$ million % Investment 211 29% 183 44% 28 15% Fund Management 288 40% 97 23% 191 196% New Economy Development 229 31% 135 33% 93 69% * Year-on-Year (“YoY”) change % represents a comparison between the first half of current year (1H2022) and the first half of last year (1H2021). R E A C H I N G N E W H E I G H T S 14
ASSETS The Group had a robust and well-capitalised balance sheet with US$2.0 billion in cash and bank balances. As of 30 June 2022, the Group had cash and bank balances that were denominated in foreign currencies. The cash and bank balances are primarily denominated in USD, HKD, SGD, RMB, JPY and AUD. Total assets increased from US$9.3 billion as of 31 December 2021 to US$16.4 billion as of 30 June 2022. The increase in total assets was mainly driven by the acquisition of ARA in January 2022. Investment properties decreased by 14.5% to US$3.2 billion as of 30 June 2022 (31 December 2021: US$3.7 billion). The decrease was mainly due to reclassification of the Group’s portfolio of logistics and warehousing facilities in China to be disposed of to a new China Income Venture as disclosed in the announcement made on 3 July 2022. Investment in joint ventures and associates increased by 101.0% to US$2.7 billion as of 30 June 2022 (31 December 2021: US$1.3 billion). The increase is mainly contributed by the Group’s acquisition of the investments in joint ventures and associates held by ARA. Increase in goodwill from US$0.5 billion as of 31 December 2021 to US$3.4 billion as of 30 June 2022 is mainly attributed to the goodwill arising from the acquisition of ARA. Financial assets at fair value through other comprehensive income (“FVOCI”) increased by 28.7% to US$1.0 billion (31 December 2021: US$0.8 billion). The increase is mainly from ARA’s investments in FVOCI, offset by the disposal of shares in China Logistics Property Holdings Co., Ltd. in May 2022. LIABILITIES Total bank and other borrowings as of 30 June 2022 were US$4.9 billion compared to US$4.2 billion as of 31 December 2021. With cash and bank balance of US$2.0 billion, the net debt to total assets as at 30 June 2022 were 17.9% (31 December 2021: 27.9%). During the period, the Group continued to expand and diversify its funding and capital structure with additional major borrowings below to support the Group’s investments and ongoing development: • In November 2021, the Group closed its first SLL of US$700 million which was subsequently upsized to US$1 billion at Libor plus 2.25% and Libor plus 2.75% for three-year and five-year tranches respectively. • In January 2022, the Group closed a JPY28 billion SLL which was upsized to JPY32.5 billion at Tibor plus 1.8% for a five-year tranche. • In May 2022, the Group closed a five-year S$300 million SLL at SORA plus 1.65%. E S R G R O U P L I M I T E D I N T E R I M R E P O R T 2 0 2 2 15
MANAGEMENT DISCUSSION & ANALYSIS TOTAL EQUITY Total equity increased from US$4.4 billion as of 31 December 2021 to US$9.4 billion as of 30 June 2022. This is primarily due to the increase in share premium by US$4.3 billion from the issuance of new shares for ARA acquisition, consolidation of perpetual securities issued by ARA and net profits for the six months ended 30 June 2022 of US$419.7 million. The above increases are partially offset by currency translation losses on the Group’s operations in Japan, China and Korea during the period due to the strengthening of US dollars against the respective local currencies; as well as mark-to-market losses adjusted based on quoted market prices relating to the Group’s investments (classified as financial assets through other comprehensive income). CAPITAL MANAGEMENT ESR adopts a proactive and disciplined capital management approach, and regularly review its debt maturity profile and liquidity position. The Group maintains a well-capitalised balance sheet, and actively diversifies its funding sources through a combination of facilities with both local and international banks, and capital market issuances in optimising its costs of debt. The Group’s total borrowings as at 30 June 2022 were US$4.9 billion. The Group continues to take a disciplined approach to financial positioning with a well-capitalised balance sheet with US$2.0 billion of cash, and a low net gearing of 17.9% as of 30 June 2022.The Group continues to expand and proactively diversify its funding and capital structure. The Group monitors its debt maturity profile regularly. It also ensures sufficient cash reserves are maintained and disciplined in refinancing existing borrowings to meet the Group’s short-term obligations, ongoing developments, and investment opportunities. As at 30 June 2022, the Group’s weighted average debt maturity is approximately 4.8 years. As of 30 June 2022, the Group’s weighted average interest rate was 3.8%; and 15% of the Group's borrowings was on fixed rate while the remaining 85% was on floating rate basis. R E A C H I N G N E W H E I G H T S 16 ESR Yatomi Kisosaki Distribution Centre, Japan
Debt Maturity Profile (US$ million) As at 30 June 2022 < 12 months Between 12 to 24 months Between 3 to 5 years > 5 years 13% 12% 69% 6% CHARGE OF ASSETS As of 30 June 2022, certain of the Group’s assets were pledged to secure bank and other borrowings granted to the Group. The details of charged assets are disclosed in Note 15 to the unaudited condensed consolidated financial information. Except for the aforementioned charges, all the Group’s assets are free from any encumbrances. CONTINGENT LIABILITIES As at 30 June 2022, neither the Group nor the Company had any significant contingent liabilities. Cash and Bank Balances As at 30 June 2022 United States dollars 20% Hong Kong dollars 17% Singapore dollars 17% Renminbi 15% Japanese Yen 11% Australian dollars 10% South Korean Won 8% Others 2% Bank and Other Borrowings As at 30 June 2022 United States dollars 43% Singapore dollars 22% Japanese Yen 16% Renminbi 11% Australian dollars 5% Others 3% The Group has exposures to foreign exchange rate fluctuations from subsidiaries, associates and joint ventures from China, Japan, South Korea, Australia, Southeast Asia and India. The Group manages its foreign currency exposures by natural hedges at both project and corporate levels. Operating and development activities of each countries are mainly funded through project level debts and operating income that are in their respective local currencies. At the corporate level, the Group currently funds some of its investments through corporate borrowings in the currency of the country in which the investment is located. In managing the interest rate profile, the Group considers interest rate outlook and holding periods of its investment profile. The Group continues to closely monitor the interest and exchange rates movements and evaluate such impact to its portfolio. The Group will consider using financial derivatives as additional tools when appropriate to manage foreign currency and interest rate exposures. As at 30 June 2022, currency profile of the Group’s cash and bank balances; and bank and other borrowings are as below: 638 603 3,424 284 E S R G R O U P L I M I T E D I N T E R I M R E P O R T 2 0 2 2 17
CORPORATE GOVERNANCE AND OTHER INFORMATION DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES As at 30 June 2022, the interests and short positions of the Directors and chief executives of the Company in the ordinary shares (the “Shares”), underlying Shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)) (i) as recorded in the register required to be kept under section 352 of the SFO; or (ii) as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (“Stock Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (“Model Code”) are as follows: Interests in the Company Name of Director Capacity/nature of interest Number of Shares held (Note 1) Approximate percentage of shareholdings as at 30 June 2022 Mr Jinchu Shen Interest of controlled corporations (Note 2) 319,658,645(L) (Note 3) Beneficial owner (Notes 6 & 7) 1,171,500(L) 320,830,145(L) 7.19% Mr Stuart Gibson Interest of controlled corporations (Note 4) 453,272,219(L) (Note 5) Interest of spouse 73,000(L) Beneficial owner (Notes 6 & 7) 1,171,500(L) 454,516,719(L) 10.18% Mr Charles Alexander Portes Interest of controlled corporations (Note 4) 453,272,219(L) (Note 5) 10.15% Mr Hwee Chiang Lim Interest of controlled corporations (Note 8) 203,969,969(L) Beneficial owner 8,402,959(L) 212,372,928(L) 4.76% Ms Jingsheng Liu Beneficial owner 69,200(L) 0.00% Mr Robin Tom Holdsworth (retired on 1 June 2022) Beneficial owner 8,000(L) 0.00% Notes: 1. The Letter “L” denotes the long position in the Shares. 2. Laurels Capital Investments Limited directly holds the Shares of the Company and is wholly owned by The Shen Trust. In respect of The Shen Trust, the settlor is Rosy Fortune Limited (the sole shareholder of which is Mr Jinchu Shen). Mr Jinchu Shen has a deemed interest under the SFO in the Shares held by The Shen Trust solely in his capacity as the sole shareholder of the settlor of The Shen Trust. 3. Inclusive of the interest in 7,799,856 Shares underlying the share options pursuant to the Tier 1 ESOP. 4. Redwood Investment Company, Ltd. directly holds 420,521,337 Shares of the Company and is owned as to 42% and 58% by Kurmasana Holdings, LLC and Redwood Investor (Cayman) Limited respectively, of which Kurmasana Holdings, LLC is wholly-owned by Redwood Investor (Cayman) Limited and the voting rights of Redwood Investor (Cayman) Limited are controlled as to 50% and 50% by Mr Charles Alexander Portes and Mr Stuart Gibson, respectively. Hence, each of Mr Charles Alexander Portes, Mr Stuart Gibson, Redwood Investor (Cayman) Limited and Kurmasana Holdings, LLC will be deemed to be interested in the Shares held by Redwood Investment Company, Ltd.. Besides, as at 30 June 2022, 32,750,882 Shares (inclusive of the interest in 16,899,687 Shares underlying the share options pursuant to the Tier 1 ESOP, which are physically settled unlisted derivatives) were held by Redwood Consulting (Cayman) Limited (“Redwood Consulting”) as beneficial owner. Redwood Consulting is owned as to 50% and 50% by Mr Charles Alexander Portes and Mr Stuart Gibson, respectively. Hence, each of Mr Charles Alexander Portes and Mr Stuart Gibson are deemed to be interested in Shares held by Redwood Consulting (Cayman) Limited. 5. Inclusive of the interest in 16,899,687 Shares underlying the share options pursuant to the Tier 1 ESOP, which are physically settled unlisted derivatives. R E A C H I N G N E W H E I G H T S 18
6. This represents 192,000 options to subscribe for Shares granted under the Post-IPO Share Option Scheme to each of Mr Jinchu Shen and Mr Stuart Gibson. The options granted to Mr Jinchu Shen are physically settled unlisted derivatives, and the options granted to Mr Stuart Gibson are unlisted derivatives which are not physically or cash settled. 7. This represents 979,500 Shares underlying the PSUs under the Long Term Incentive Scheme granted to each of Mr Jinchu Shen and Mr Stuart Gibson. All the Shares granted to Mr Jinchu Shen and Mr Stuart Gibson are unlisted derivatives which are not physically or cash settled. The number of shares underlying the PSUs is based on 150% of the initial number of Shares subject to the PSUs. The vesting of the PSUs is subject to fulfilment of relevant performance conditions and the final number of Shares subject to the PSUs can vary from 0% to 150% of the initial number of Shares subject to the PSUs. 8. JL Investment Group Limited and JL Investment Group II Limited directly holds 101,984,984 Shares and 101,984,985 Shares respectively, and both companies are 100% controlled by Mr Hwee Chiang Lim. Save as disclosed above, as at 30 June 2022, none of the Directors and chief executives of the Company has any interests and short positions in the Shares, underlying Shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) (i) as recorded in the register required to be kept under section 352 of the SFO; or (ii) as otherwise notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO or the Model Code. SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES As at 30 June 2022, so far as the Directors and chief executives of the Company are aware, other than the interests of the Directors and chief executives of the Company as disclosed in the section titled “Directors’ and Chief Executives’ Interests and Short Positions in Shares, Underlying Shares and Debentures”, the following persons had, or were deemed to have, interests or short positions in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were required to be recorded in the register required to be kept under section 336 of the SFO: Name of Shareholder Capacity/nature of interest Number of Shares / underlying Shares held (Note 1) Approximate percentage of shareholdings as at 30 June 2022 Warburg Pincus & Co. Interest of controlled corporations (Note 2) 591,440,160(L) 13.25% Warburg Pincus China GP, L.P. Interest of controlled corporations (Note 2) 591,440,160(L) 13.25% Warburg Pincus China, L.P. Interest of controlled corporations (Note 2) 591,440,160(L) 13.25% Warburg Pincus Partners GP LLC Interest of controlled corporations (Note 2) 591,440,160(L) 13.25% Warburg Pincus Partners II, L.P. Interest of controlled corporations (Note 2) 591,440,160(L) 13.25% Warburg Pincus Private Equity XII, L.P. Interest of controlled corporations (Note 2) 591,440,160(L) 13.25% Warburg Pincus XII, L.P. Interest of controlled corporations (Note 2) 591,440,160(L) 13.25% WP Global LLC Interest of controlled corporations (Note 2) 591,440,160(L) 13.25% Alexandrite Athena GroupCo Ltd Interest of controlled corporations (Note 2) 591,440,160(L) 13.25% Alexandrite Gem Holdings Limited Beneficial owner (Note 2) 503,733,253(L) 11.28% Alexandrite Gem TopCo Ltd Interest of controlled corporations (Note 2) 503,733,253(L) 11.28% OMERS Administration Corporation Beneficial owner 456,221,943(L) 10.22% Mr Stuart Gibson Interest of controlled corporations, interest of spouse and beneficial owner (Notes 3, 5, 6) 454,516,719(L) 10.18% E S R G R O U P L I M I T E D I N T E R I M R E P O R T 2 0 2 2 19
CORPORATE GOVERNANCE AND OTHER INFORMATION Name of Shareholder Capacity/nature of interest Number of Shares / underlying Shares held (Note 1) Approximate percentage of shareholdings as at 30 June 2022 Mr Charles Alexander Portes Interest of controlled corporations (Note 3) 453,272,219(L) 10.15% Redwood Investor (Cayman) Limited Interest of controlled corporations (Note 3) 420,521,337(L) 9.42% Kurmasana Holdings, LLC Interest of controlled corporation (Note 3) 420,521,337(L) 9.42% Redwood Investment Company, Ltd. Beneficial owner (Note 3) 420,521,337(L) 9.42% Mr Jinchu Shen Interest of controlled corporations and beneficial owner (Notes 4, 5, 6) 320,830,145(L) 7.19% Rosy Fortune Limited Founder of a discretionary trust (Note 4) 319,658,645(L) 7.16% Tricor Equity Trustee Limited Trustee (Note 4) 319,658,645(L) 7.16% Laurels Capital Investments Limited Beneficial owner (Note 4) 319,658,645(L) 7.16% The Capital Group Companies, Inc. Interest of controlled corporations (Note 7) 230,275,553(L) 5.16% Notes: 1. The letter “L” denotes the long position in the Shares. 2. Alexandrite Gem Holdings Limited (“Gem Holdings”) and Athena Logistics Holdings Ltd. (“Logistics Holdings”) held as to 503,733,253 and 87,706,907 Shares respectively. Gem Holdings and Logistics Holdings are wholly owned subsidiary of Alexandrite Gem TopCo Ltd (“Gem TopCo”) and Athena Logistics TopCo Ltd. (“Logistics TopCo”) respectively. Both Gem TopCo and Logistics TopCo are wholly owned subsidiary of Alexandrite Athena GroupCo Ltd. (“Alexandrite Athena GroupCo”). Alexandrite Athena GroupCo is owned as to 41.46% and 35.19% by Warburg Pincus China, L.P. (“WP China”) and Warburg Pincus Private Eqiuty XII, L.P. (“WPP Equity”) respectively. WP China and WPP Equity are wholly owned subsidiary of Warburg Pincus China GP, L.P. (“WP China GP”) and Warburg Pincus XII, L.P. (“WP XII”) respectively. Both WP China GP and WP XII are wholly owned by WP Global LLC. The managing member of WP Global LLC is Warburg Pincus Partners II, L.P. (“WPP II”). The general partner of WPP II is Warburg Pincus Partners GP LLC (“WPP GP”), the managing member of which is Warburg Pincus & Co. Accordingly, each of Gem TopCo, Logistics TopCo, Alexandrite Athena GroupCo, WP China, WPP Equity, WP China GP, WP XII, WP Global LLC, WPP II, WPP GP and Warburg Pincus & Co. are deemed to be interested in the underlying Shares held by Gem Holdings and Logistics Holdings. 3. Redwood Investment Company, Ltd. (“Redwood Investment”) is owned as to 42% and 58% by Kurmasana Holdings, LLC and Redwood Investor (Cayman) Limited, respectively, of which Kurmasana Holdings, LLC is wholly-owned by Redwood Investor (Cayman) Limited and the voting rights of Redwood Investor (Cayman) Limited are controlled as to 50% and 50% by Mr Charles Alexander Portes and Mr Stuart Gibson, respectively. Hence, each of Mr Charles Alexander Portes, Mr Stuart Gibson, Redwood Investor (Cayman) Limited and Kurmasana Holdings, LLC is deemed to be interested in the Shares held by Redwood Investment. Besides, as at 30 June 2022, 32,750,882 Shares (representing 0.73% of the total issued shares of the Company then and inclusive of the interest in 16,899,687 Shares underlying the share options pursuant to the Tier 1 ESOP, which are physically settled unlisted derivatives) were held by Redwood Consulting (Cayman) Limited (“Redwood Consulting”) as the beneficial owner. Redwood Consulting is owned as to 50% and 50% by Mr Charles Alexander Portes and Mr Stuart Gibson, respectively. Hence each of Mr Charles Alexander Portes and Mr Stuart Gibson is deemed to be interested in Shares held by Redwood Consulting. 4. Laurels Capital Investments Limited is wholly owned by The Shen Trust. The settlor of The Shen Trust is Rosy Fortune Limited, the sole shareholder of which is Mr Jinchu Shen. The trustee of The Shen Trust is Tricor Equity Trustee Limited. Rosy Fortune Limited has a deemed interest under the SFO in the Shares held by The Shen Trust in its capacity as settlor of The Shen Trust, Mr Jinchu Shen has a deemed interest under the SFO in the Shares held by The Shen Trust solely in his capacity as the sole shareholder of the settlor of The Shen Trust and Tricor Equity Trustee Limited has a deemed interest under the SFO in the Shares held by The Shen Trust in its capacity as trustee of The Shen Trust. As at 30 June 2022, 319,658,645 Shares of the total issued shares of the Company (inclusive of the interest in 7,799,856 Shares underlying the share options pursuant to the Tier 1 ESOP) were held by Laurels Capital Investments Limited as the beneficial owner. 5. The Shares held as beneficial owner represented the 192,000 options to subscribe for Shares which are granted under the Post-IPO Share Option Scheme to each of Mr Jinchu Shen and Mr Stuart Gibson. The options granted to Mr Jinchu Shen are physically settled unlisted derivatives, and the options granted to Mr Stuart Gibson are unlisted derivatives which are not physically or cash settled. R E A C H I N G N E W H E I G H T S 20
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