The relationships between employees, shareholders and Directors of the Manager are examined annually to identify any potential conflict of interest. There were no employees of the Manager who were (i) substantial shareholders of the Manager or substantial Unitholders of ESR-REIT, or (ii) immediate family members of a director or the CEO or a substantial shareholder of the Manager, or a substantial Unitholder of ESR-REIT, and whose remuneration exceeded S$100,000 during FY2025. During FY2025, save for termination benefits made to certain KMP, there were no other retirement or postemployment benefits granted to the Directors and the KMP (including the CEO). The Board is cognisant of the requirements stated within the CG Code, its related practice guidance and the “Notice to all Holders of a Capital Markets Services Licence for Real Estate Investment Trust Management” to disclose the exact remuneration amount of each individual Director and the CEO on a named basis and the remuneration of at least the top five KMP (who are neither Directors nor the CEO) in bands of S$250,000 on a named basis. In the event of non-disclosure of the aforementioned, the Manager is required to provide reasons for such non-disclosure. The Board has assessed and decided not to disclose the remuneration of the top five KMP (excluding the CEO) of the Manager in bands of S$250,000. In arriving at its decision, it took into account the following: i. the remuneration of all the Manager’s personnel is paid by the Manager out of the fees that it receives (of which the quantum and basis have been disclosed within the Financial Statements), rather than by ESRREIT. Remuneration of the Directors and the KMP of the Manager (including CEO) is paid wholly in cash, save for the LTI portion, where applicable; ii. the remuneration of all the Manager’s employees is not linked to the Manager’s profitability; iii. in view of the sensitivity and confidential nature of remuneration matters and the intense competition for talents in the industry, it is not in the best interest of ESR-REIT and the Unitholders to disclose the remuneration of the KMP in bands of S$250,000. It is important for the Manager to retain talent for the long-term interests of ESR-REIT and the Unitholders, and ensure stability and continuity of business operations with a competent and experienced management team in place; and iv. the non-disclosure of the remuneration of the KMP (excluding the CEO) in bands of S$250,000 does not compromise the ability of the Manager to meet the requirements of good corporate governance as the NRC reviews the remuneration package of the KMP based on their roles and responsibilities to ensure that the KMP are fairly remunerated. The Manager is of the view that despite this partial deviation from Provision 8.1 of the CG Code, the above disclosures are consistent with the intent of Principle 8 of the CG Code and would provide sufficient information and transparency to the Unitholders on the Manager’s remuneration policies, the level and mix of remuneration accorded to the KMP, and enable the Unitholders to understand the relationship between the REIT’s performance, value creation and the remuneration of the KMP. For the reasons above, Unitholders’ interests are not prejudiced by the partial deviation. ACCOUNTABILITY AND AUDIT Principle 9: Risk Management and Internal Controls The Board is responsible for the overall risk governance and oversees the Manager in the design, implementation and monitoring of the risk management and internal controls systems. The ARCC supports the Board by determining the nature and extent of the significant risks which ESR-REIT is willing to take in achieving its strategic objectives and value creation, including providing dedicated oversight of risk management at the Board level, and the setting up of a robust internal control system, and establishing enterprise-wide risk management policies and processes to ensure proactive management of key risks (including strategic, financial and economic, operational and asset management, compliance, people, technology, as well as environmental, social and governance controls) to safeguard Unitholders’ interests and ESR-REIT’s assets. Risk Management Framework and Internal Control System The Manager has in place an Enterprise Risk Management (“ERM”) framework to mitigate any risk exposures through appropriate risk management strategies and internal controls. The ERM framework consists of tools such as ERM Risk Appetite Statements, Key Risk and Control Matrix and Compliance Matrix which are dynamic and evolve with the business, thus providing the Manager with a holistic and consistent process for the continuous identification of key risks, management and monitoring of risks as well as regular reporting of the risks to both the ARCC and the Board. The Board, through the ARCC, reviews the adequacy and effectiveness of the internal control policies and procedures, at least annually, to ensure robust risk management and that internal control systems are maintained. The internal and external auditors also conduct reviews on the adequacy and effectiveness of risk management and internal control systems. Any material non-compliance or lapses together with corrective measures recommended by the internal and external auditors are reported to and reviewed by the ARCC. The ARCC also reviews the adequacy and effectiveness of the measures taken by the Manager in relation to the recommendations made by the internal and external auditors and ensures the timely and proper implementation of all required corrective, preventive or improvement measures. More information on the ERM framework can be found in the “Risk Management” section on pages 86 to 90 of the Annual Report. 105 ESR-REIT ANNUAL REPORT 2025
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