ESR Group Limited Annual Report 2023 221 Notes to the Consolidated Financial Statements 31 December 2023 42. SHARE-BASED COMPENSATION PLAN (continued) B. Share Option Plan by a subsidiary of the Company On 20 January 2022, the Group completed the acquisition of 100% equity interests in ARA Group. ARA Group has the following share-based payment arrangement held by its subsidiary. In 2021, the subsidiary established an employee share option plan (“ESOP Plan”), subject to the subsidiary’s board of directors’ discretion, which entitles employees to purchase shares in the company. The ESOP Plan is intended to motivate, reward and retain certain members of the management team and the purpose is to promote the long-term growth of the subsidiary and drive strategic and economic alignment with shareholders. Under the ESOP Plan, subject to the subsidiary’s board of directors’ discretion, holders of vested options are entitled to purchase shares at an exercise price determined by the board of directors of the subsidiary having regard to the market value of an ordinary share at the date on which the options were granted. The ESOP Plan shall expire in September 2031. Provided that the holders remain in continuous employment at the subsidiary between the date of entry into the ESOP Plan and the relevant vesting date of the options, the holders are only entitled to exercise the vested options on the occurrence of an exit event stipulated in the ESOP Plan. In September 2021, a total of 790.13 options were granted under the ESOP Plan to certain eligible employees. These options vest equally in 4 tranches on 1 September 2021 and in December of each year from 2021 to 2023. In September 2022, a total of 102.20 options were granted under the ESOP Plan to certain eligible employees. These options vest equally in 5 tranches in September 2022 and in December of each year from 2022 to 2025. In August 2023, a total of 747.48 options were granted under the ESOP Plan to certain eligible employees. These options vest equally in 5 tranches in August 2023 and in December of each year from 2023 to 2026. The fair value of the share options has been measured using the Black-Scholes option-pricing model. The following table lists the inputs to the model used: As at 31 December As at 31 December 2023 2022 Expected dividend yield (%) — — Exercise price (US$) 33,453 33,453 Volatility (%) 26.9% 33.1% Risk-free interest rate (%) 4.49% 4.23% Expected life (years) 3.3 years 3.3 years CORPORATE GOVERNANCE FINANCIAL STATEMENTS STRATEGIC REPORTS
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