Investment Research Report on Link REIT (0823.HK)

Investment Research Report on Link REIT (0823.HK) By the Champion Team of Hong Kong Final of CFA Institute Research Challenge 2019-20 (hosted by The Hong Kong Society of Financial Analysts), The Hong Kong University of Science and Technology

Submission Date: 12 May 2020

The Hong Kong University of Science and Technology

The CFA Institute Research Challenge is a global competition that tests the equity research and valuation, investment report writing, and presentation skills of university students. The following report was submitted by a team of university students as part of this annual educational initiative and should not be considered a professional report.

Disclosures: Ownership and material conflicts of interest The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company. The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the content or publication of this report. Receipt of compensation Compensation of the author(s) of this report is not based on investment banking revenue. Position as an officer or a director The author(s), or a member of their household, does not serve as an officer, director, or advisory board member of the subject company. Market making The author(s) does not act as a market maker in the subject company’s securities. Disclaimer The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with The Hong Kong Society of Financial Analysts, CFA Institute, or the CFA Institute Research Challenge with regard to this company’s stock.

The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020

Link REIT (0823.HK)

Recommendation: BUY Target Price: HK$101.50 Upside: +25.77% Valuation Date: January 8, 2020 Current Price: HK$80.70 (as of Jan.8, 2020) Exchange: Hong Kong Stock Exchange

Sector: Financials Industry: Real Estate Sub-Industry: REIT Ticker Symbol: SEHK.823 Bloomberg: 823 HK EQUITY Reuters: 823.HK

Investment Summary Figure 1: Market Profile Snapshot Equities Hong Kong Property

823.HK BUY Defensive buy amidst market turbulence; Resilient, vast portfolio and Target Price HK$101.50 visible growth trajectory in APAC Upside % 25.77% • Largest Asia REIT; consumer staples mix portfolio positioned to face macro headwinds Current Price HK$80.70 • Policy on consumption and cooling off of US-China trade war favors China rental growth (as of Jan. 8, 2020) 52-Week Range HK$99.80 – 78.25 • Oversea expansion unlocks value; proven track record of value accretive projects Market cap. HK$171B/US$21.9B

Enterprise Value HK$199B/US$25.6B We initiated coverage of Buy rating on Link REIT with the target price of $101.50, tantamount Units Outstanding 2.09B to 25.77% upside from the close price of $80.70 on January 8, 2020. Our target price is pegged Free float % 100% to the average of our Dividend Growth Model and Discounted Cash Flow model. Dividend Yield 3.49%

We like Link REIT’s resilient portfolio, offering a defensive investment choice amidst the P/B Ratio 0.89x volatile market arising from trade uncertainty and social unrest; coupled with their transparent Beta 0.47 growth trajectory in AUM across the APAC region. We forecasted Link’s Net Property Income Avg. Vol. (3M) 6.12M Source: Bloomberg, MarketWatch, Yahoo! Finance and DPU to grow at a 5-Year CAGR of 8.1% and 8.8% from FY20E – FY25F driven by 1) Leasing at Quayside and efficient AEI projects, 2) Value accretive oversea acquisitions in Figure 2: Link rel. HSI Share Price Movement

Japan/Singapore/Australia/United Kingdom, 3) Robust rental growth of China retail properties. 200

We share management’s view of reaching high single-digit CAGR in AUM by FY25F. Link’s 150 plan to construct a diversified portfolio with more geographical exposure and assets unlocks 100 their secular value. Their recent acquisition of Sydney 100 Markets Grade-A office building and Unit buyback program have underpinned our confidence in their long-term DPU growth (Fig.3). 50

2, Indexed(Jan. 2017=100) 0 Standing at a FY20E dividend yield of 3.8% and FY21F Forward dividend yield spread of 2.0%, 2017-Jan 2018-Jan 2019-Jan 2020-Jan which are at historical average and 0.5SD above historical average respectively, Link now trades Hang Seng Index 0823.HK at an undemanding valuation after the share price adjustment from HK$94 to HK$80 in the Source: Yahoo! Finance span of 3 months arising from HK social unrest and market projection of potential rate cut next Figure 3: Distribution per Unit (DPU) HK$ year. Unit repurchase should offer support to the share price. The attractive spread compared 4.12 4.36 to US 10-Y Treasury has reached 2.1%, 0.8% ahead of the average from FY16A – FY18A (Fig. 3.66 3.84 3.11 5). We initiate with a Buy recommendation as we believe it is the right timing for bottom-fishing. 2.71 2.85 2.28 2.50 2.06 1.83 How is our view different from the market: The bears have evangelized the retail sales and social unrest pressure on Link while we expect 1) Consumer staples related business of Link will serve as a cushion to mitigate the near-term pressure from social unrest, 2) Oversea acquisition being the next catalyst to DPU growth and 3) Rental uptrend of China retail leasing market will boost their NPI (Fig.4). Source: Team Analysis, Company Data

Market View: We believe the market has already largely priced in weakening HK retail sales, Figure 4: Net Property Income (NPI) HK$B 11.88 reversion rate downtrend and the bearish tenant sales, leading to downside risk in Link’s earnings. 11.44 10.11 10.82 8.49 7.66 7.69 8.06 Table 1: Key Financials 6.51 6.99 5.67 Key Financials (in HK$M) 2018A 2019A 2020E 2021F 2022F 2023F 2024F 2025F Operations Turnover 10,023 10,037 10,722 11,460 13,636 14,620 15,533 16,205 % growth 0.1% 6.8% 6.9% 19.0% 7.2% 6.2% 4.3% Net Property Income 7,663 7,689 8,058 8,485 10,106 10,819 11,439 11,875 % margin 76.5% 76.6% 75.2% 74.0% 74.1% 74.0% 73.6% 73.3% Net profit 5,180 5,412 5,665 5,949 7,189 7,702 8,124 8,374 Source: Team Analysis, Company Data % margin 53.9% 52.8% 51.9% 52.7% 52.7% 52.3% 51.7% Earnings Figure 5: Link’s 1Y Forward Dividend Number of units 2,150 2,097 2,050 2,050 2,050 2,050 2,050 2,050 Yield – US 10Y Treasury Rate EPS (HK$) 2.41 2.58 2.76 2.90 3.49 3.76 3.96 4.08 4.0% P/E 33.50 31.27 29.20 27.81 23.12 21.48 20.36 19.76 DPU (HK$) 2.50 2.71 2.85 3.11 3.66 3.84 4.12 4.36 3.0% % growth 9.6% 8.6% 5.2% 8.9% 17.8% 4.9% 7.3% 5.8% Distributable income 5,431 5,723 5,916 6,368 7,499 7,863 8,438 8,930 2.0% % distributable amount growth 5.4% 3.4% 7.6% 17.8% 4.9% 7.3% 5.8% Financials 1.0% NPI ROE (%) 5.53% 4.29% 4.26% 4.58% 5.43% 5.85% 6.18% 6.42% Net interest-bearing debt to equity (%) 7.87% 9.21% 13.70% 14.10% 15.19% 15.64% 17.92% 19.81% 0.0% Net interest-bearing debt to asset (%) 6.51% 7.68% 11.18% 11.46% 12.14% 12.37% 13.83% 15.01% 2013 2014 2015 2016 2017 2018 2019 Source: Team Analysis, Company Data Source: Refinitiv 1 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Sore year under flat HK retail sales; Yet, Link’s buoyant portfolio yields Figure 7: HK Retail Portfolio Trade Mix We like Link’s vast retail portfolio mix with non-discretionary nature, primarily on daily by Monthly Rent necessities like F&B/Supermarkets/Markets retails at 29%/21%/13% (Fig. 7) and their track Valuable Goods record of constantly distributing income to unitholders through dividend and unit buybacks. 1% Welfare 1% Others Under the backdrop of HK social unrest, tenant sales of Link REIT (Apr. 19 – Sep. 19) stood 18% F&B at +1.4% YOY, 13.6% ahead of the Hong Kong retail sales, cementing our view on their 29% elasticity over its peers in an economic slowdown. We believe the market has already priced in Personal Care the double-digit decline of retail sales, but they overlooked the resiliency of Link REIT. We agree 6% with the rising possibility of a structural decline in Hong Kong retail sales and the potential Services downside risk from rising unemployment. However, we see limited downside in 2020 as, 11% Supermar historically, retail sales of consumer staples business like F&B/Supermarkets/Cooked Food ket were less sensitive to the rising unemployment rate (Fig. 8). Markets 21% 13%

We believe the recent stagnant retail sales were caused by lower inbound tourists and thus the plummeting consumer discretionary sales. Therefore, we believe the worst situation was factored Source: Company 2019/2020 Interim Report in and Link’s tenant sales in 2H FY20E should remain at the moderate growth rate as 1H FY20E. However, we forecast that it could take 12 – 18 months for retail sales downtrend Figure 8: Relationship between HK Retail to bottom out based on the past protest happened in 2015 – 2016 and the Global Financial Sales and Unemployment Rate (2006-2018) Crisis in 2008 – 2009. We expect retail sales to be under pressure in 2020 and rebound in 1H 50 0 2021 benefiting from low base factor, favoring the retail rent growth in FY22F/FY23F. 40 1 30

We see the retail rental reversion rate decelerating to 15% in FY20E, aligned with the 2 Unemployment (%) Rate management guidance of mid-10% in FY20E while we forecast the occupancy rate to remain at 20 97% in FY20E (Fig. 9). We expect a mild 3% growth in FY20E – FY21F in Hong Kong Retail 10 3 Segment, offset by the harvest of AEI projects and leasing of the Grade-A Office projects 0 06 07 08 09 10 11 12 13 14 15 16 17 18 4 (Quayside/T.O.P) despite the lingering stagnant HK retail sales. In 2018, the demand and supply -10 growth of the HK Car Park Segment were at 2.3% and 1.5% respectively. The ratio of parking 5 -20 lots to private vehicles in Hong Kong has dropped from 1.4x in 2008 to 1.1x in 2018, we believe Retail of Growth SalesYOY(%) Type the demand-supply trend will should also drive the monthly parking fee and create incremental -30 6 revenue for Link REIT in the long run. The divestments of the non-core retail assets and the All retail outlets average 15%+ ROI of AEI projects underscored the excellent execution capabilities of Link’s Food, alcoholic drinks and tobacco (other than supermarkets) management, backing their delivery of high single-digit CAGR in AUM by FY25F. Supermarkets

Jewellery, watches and clocks, and valuable gifts Figure 6: Hong Kong Retail Sales YOY Growth Rate (%) Hong Kong Unemployment Rate (RHS) 40 Source: Hong Kong Census and Statistics Department

30 Figure 9: Occupancy Rate of Link’s HK Retail Portfolio 20 98%

96% 97% 10 97% 96%96% 94% 95% 94% 0 94% 92% 93% 92% 90% -10 91% 90% 88% 89% 2008 Global Financial -20 2016 anti- 2003 SARS Outbreak Crisis parallel protest 86% 87% in Sheung Shui 2019 Anti-Extradition 1997 Financial Crisis -30 Bill Movement 84%

Source: Team Analysis, Hong Kong Census and Statistics Department, Refinitiv Source: Company Data

Solid reversion rate of China portfolio; Capturing organic growth from Figure 10: HK Private Cars Demand and Parking Lots Supply Ratio rising rent 800,000 1.6 Link REIT possesses 5 properties (1 office, 4 retail malls) across 5 tier-1 cities in Mainland. China Retail Sales has recorded an 8% YOY increase in Nov-19. We expect a high single-digit growth 700,000 1.4 of China Retail Rent foreseeing the policy stimulus inclined towards consumption, like 3% VAT 600,000 1.2

Cut before amidst macro slowdown. Yet, the trade war cooling off should favor retail rent. 500,000 1.0 Ratio

400,000 0.8 Units Link’s China portfolio reversion rate has arrived at 31.5% in 1H FY20E. We see the NPI will be 300,000 0.6 primarily contributed by the latest acquisition of Roosevelt Plaza and Central Walk in 200,000 0.4 FY20E/FY21F. We forecast the China segment’s revenue growing at a 5-Year CAGR of 9.3% 100,000 0.2 on robust retail reversion rate and occupancy rate, driving DPU growing at 5-Year CAGR of

8.8% from FY20E to FY25F. 0 0.0

2010 2014 2009 2011 2012 2013 2015 2016 2017 2018 2008 The China portfolio mix of Link favors them to elude the weak office rental growth in FY20E No. of verhicles (Demand) – FY21F. Their investment plan has targeted at the retail malls in tier-1 cities and the Greater No. of parking lot (Supply) Ratio (LHS) Bay Area, mitigating the negative impact of macro headwinds on the China office leasing market. Source: LegCo.gov.hk (Document: CB(4)850/18-19(06)) 2 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Foraying into foreign markets turns Link REIT into a more well- diversified player; Expecting more value-accretive projects Figure 11: Top 10 Retail REITs Globally Simon Prop. 44.3 In the latest earnings conference, Link’s management has laid out its plan to acquire more foreign Link REIT 21.7 properties in developed markets like JP/UK/SG/AU to sustain the AUM and DPU growth in URW 21.6 FY20E – FY25F. Link has recently announced their acquisition of a Sydney Grade-A office Scentre 14.3 building, for AU$24,062/sqm based on the Internal Floor Area, which is expected to generate British Land 7.5 Capitaland 6.7 >AU$26.7M/year revenue for Link REIT with a 4% annual rental increments and weighted Vicinity Centres 6.6 average lease expiry (WALE) of 8.45 Years. We view the 3.9% net yield of the property as Mapletree 5.9 accretive considering the FY20E forward yield of 3.8%. JRF 5.6 Shaftesbury 3.8 We see this as a low-risk investment with less required resources allocation and our forecasted 0 10 20 30 40 50 Market Cap. (in US$B) accretive effect to DPU will be at +1.5% to +2.0% for FY21F. The continuous portfolio Source: Refinitiv optimization and diversification will be the key catalyst to unlocking long-term value and boost the DPU growth of Link REIT. More are expected to come in light of their healthy net gearing ratio at 13% in 1H FY20E. Compared with the average yield of the Retail REITs in SG/JP/UK Figure 12: Link REIT’s Portfolio Mix at 5.02%/4.19%/6.43%, We believe the upcoming acquisition will be the impetus to DPU Total Asset Value: HK$224B growth as value-accretive acquisition projects. The outstanding management capabilities will China Office, Sydney compensate for the inexperience in cross-border acquisition to create shareholder value for Link 3.2% Office, 1.6% REIT. China HK Office, Retail, 3.9% Business Description 9.1%

HK Car Link is the largest REIT in Asia and the second-largest Retail-REIT globally (Fig. 11). Its primary Park, 16.7% focus is to provide tenants an effective platform to service the daily needs of the local HK Retail, communities, leveraging the proximity of retail malls and public housing estates as the 65.5% competitive advantage. Listed as Hong Kong’s first REIT in 2005 on the Hong Kong Stock Exchange (0823.HK), Link was created to privatize most retail assets from the government and has been a constituent of Hang Seng Index since 2014. Unique to other Asian peers, Link is the only REIT that self-manages its assets (i.e. AEIs, capital recycling) through Link Asset Source: Company Data Management Limited.

Diversified and defensive portfolio across rental facilities and locations Figure 13: Link 5-Y Portfolio Mix and Value 250 Link invests and operates a portfolio of retail facilities, car parks and grade-A offices across 218 224 APAC, valuing at HK$224B (Fig. 12). Since 2015, Link has been in property development 203 200 through The Quayside JV project with Nan Fung and was completed in 2019. Within the Hong 174 161 Kong retail mix which takes up 2/3 of Link’s total portfolio, 63.2% of trades relate to consume 138 staples and offer rental income stability. Link segregates retail malls into 3 categories: Destination, 150 Community and Neighborhood, with the latter considered as non-core assets (Fig. 14). 100

Strategically enhance portfolio quality by foreign acquisition spree and (inAssetHK$B) Value Total 50 capital recycling 0 Link defined Vision 2025 to actively pursuit inorganic growth to deliver high single-digit AUM 2015 2016 2017 2018 2019 2020 growth through: HK Retail HK Car Park HK Office • Acquisition: Link made 7 out of the 8 total acquisitions over its history in the past 5 years China Retail China Office Sydney Office Source: Company Data across Hong Kong (1), Mainland China (5) and Australia (1). All acquisitions flow through a robust selection framework (i.e. good connectivity, limited competition, sizeable catchment, and long-term prospect). Figure 14: Link’s HK Retail Assets Portfolio Total Non-Carpark Asset No.: 96 • Capital recycling: Link divested a record 12 non-core assets in the 2018/2019 with a 32.1% premium. While disposal remains a viable value creation, management expressed diminishing intention in the coming year. Destination 7% Recent Highlights: Major growth and ESG sustainability breakthrough towards Vision 2025 First overseas acquisition with 100 Market Street in Sydney, Australia in Q4 2019. Link Communi Neighbou ty refined its Vision 2025 expansion strategy after the acquisition to include a 10% overseas rhood 35% portfolio mix goal, while expressing interests in stable, liquid, and regulatory favorable countries 58% such as Australia, Japan, Singapore and the UK.

Pioneer issuer of green convertible bonds globally in the real estate sector: Link raised HK$4B at 1.6% p.a. to reaffirm its sustainability commitment and fulfil the Visionary Creativity strategic objective in Vision 2025. Source: Company Data

3 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Figure 15: Rent-to-Sales Ratio of Industry Overview Link’s Overall HK Portfolio 20% 14.4% Hong Kong has a sizable retail market despite shrinking retail sales 15% 12.9% 13.5% Hong Kong retail sales market size was at HK$485bn in 2018. The addressable market of Link 11.7% 12.1% REIT is now at around HK$70bn with reference to Link’s 14-15% rent-to-sales ratio, we 10% estimate the size of rental income to reach HK$70B (Fig. 15). The steady economic 5% development and many Mainland visitor’s inflow have contributed to strong and healthy HK retail sales growth in the past few years. Despite the trend of e-commerce has gone viral globally, 0% we are seeing a smaller impact on retail sales in Hong Kong when compared to that of China FY16 FY17 FY18 FY19 FY20-1H Source: Company Data and the US due to the lagging-behind development in the area. Also, retail sales types like F&B, supermarket and food market have shown strong elasticity during the economic downturn. The Figure 16: Link’s Rental Revenue Breakdown non-discretionary trade mix strengthens the defensive characteristic of Link’s portfolio. We by Tenant Types think mass retail shopping malls owned by Link would be mildly affected during this rough time. 100% 11% 10% 11% 11% 11% 11% 11% 11% 11% 11% 80% Competitive Positioning 15% 14% 15% 14% 14% 14% 14% 15% 15% 15% 60% 23% 23% 24% 23% 23% 23% 22% 21% 22% 21% Resilient and diversified local tenant mix for Hong Kong Retail amid 40% turbulent times 20% Link’s retail rental resilience has been consistently supported by stable exposure into non- 25% 25% 25% 25% 25% 25% 26% 28% 28% 28% discretionary F&B, Supermarkets, Cooked Food Stalls and Services segments (26%, 22%, 14%, 0% and 11% respectively on a 10-Year monthly rent basis between FY10A – FY19A (Fig. 16), and FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19 is evidenced by the outperformance to Hong Kong retail market in F&B and Supermarkets on Services Markets/Cooked Food Stalls YOY Growth in Gross Sales per square foot of 5.1% and 5.0% respectively in FY19A. Link’s Supermarket and Foodstuff Food and Beverage ability is further highlighted by the recent social unrest in Hong Kong, where Link recorded Source: Company Data

1.4% in overall sales growth while the market was down by 9.8% in 1H FY20E. Figure 17: Link’s Retail Rental Revenue

10 Overall retail rental income has seen a 10-Year CAGR of 6.09% (Fig. 17) and resilience is demonstrated in excess returns during down markets where Link outperformed HSI and 8 6.69 6.66 HSREIT indices by 11.73% and 6.61% on a 10-Y average basis respectively (Fig. 18). 6.10 6.35 5.71 6 5.33 4.87 4.45 4.02 Stable “3A” Credit Rating supports lower financing costs and potential 3.69 4

debt-funded acquisitions Revenue (in HK$B) Revenue With solid asset base in Hong Kong and acquisitions in China to drive asset and NPI growth, 2 Link has maintained a “3A” credit rating from S&P Global, Moody’s and Fitch Ratings. allowing 0 Link to access financing with low financing cost currently at 3.23%, while its 10-Y average stands FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19 at 3.11% (Appendix C-4). We believe the prudent asset and capital management has enabled Retail Rental Revenue

Link to achieve its targeted retail IRRs and AEIs to enhance property income and capital values which prepares them for property exits and return capital to unitholders. Figure 18: Link’s Stock Performance vs. HIS and HSREIT indices 50% Link has maintained ample room on credit outlook safety and leverage expansion. Total Debt- 38% to-Asset Ratio currently stands at 13.5%, well below the 30% requirement from Moody’s and 40% 28% management’s target of 20%. The current EBITDA coverage ratio and Total Debt-to-EBITDA 30% 23% are at 8.4x and 2.7x, below its 10-Y historical average of 9.46x and 3.45x respectively (Appendix 17% 31% 20% 12% C-4).We believe the prudent capital management allows room for Link to further leverage 8% 22%8% 19% acquisitions for expansion. 10% 3% 12% -5% 0% -6% 4% 1% 3% -10% -1% Experienced Management Team to deliver DPU growth and AEI targets -5% Link’s management team has been exercising a consistent approach in asset management, -20% -15% enhancement and recycling to achieve portfolio growth and maintaining DPU target. Since its FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19 inception, Link’s retail occupancy has achieved a 10-Y average of 95% with composite reversion LINK REIT - HSI rate reaching a 10-Y average of 23% (Appendix C-3). AEIs have also been designed as a core LINK REIT - HS REIT component in enhancing asset value as well as a good opportunity in adjusting tenant mix, Figure 19: Link’s Historical NPI Margin thereby increasing the DPU potential. Coupled with the acquisition strategy in China and overseas gateway cities (e.g. Sydney) to seek greater NPI growth, Link has been consistently 80% outperforming its DPU growth targets, recording an 8.7% YOY growth in FY19A. 76% 72.55% 72% Stable Net Profit Margin in supporting DPU growth Across Hong Kong and China portfolio, Link has maintained stable property management and 68% expense control to optimize their operating efficiency. Link’s focus on adopting technology for 64% utility savings, tenant and community engagement, and cost control has allowed them to mitigate 60%

energy costs, rising minimum wages, and government rates and rent. NPI margin increases

2011 2012 2013 2014 2015 2016 2017 2018 2019 consistently across 10 years with an average 10-Y rate of 72.55% (Fig. 19). The stability and 2010 effective retail property management have allowed Link to support its DPU growth while NPI Margin 10-Y Average acquiring more properties in China and overseas.

4 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020

Financial Analysis Figure 20: Link REIT’s Revenue Projection Strong DPU growth supported by resilient retail portfolio and by Category opportunistic office investment 20 16.2 By our forecast we expect Link to sustain a robust DPU growth (FY20E – FY25F CAGR: 8.8%) 15.5 14.6 on opportunistic office portfolio (FY19E – FY25F Revenue CAGR: 13.0%) in overseas and 15 13.6 11.5 their stable retail portfolio (FY20E – FY25F Revenue CAGR: 9.1%). Link REIT targets office 10.7 10.0 10.0 segment representing ~15-20% of AUM as per management guidance post-acquisition of 100 10

Market Street in Sydney. We treat the acquisition as a better capital allocation as it can enhance (in HK$B) Revenue the growth trajectory and DPU growth of Link REIT in the next 5 years. 5 Based on our research, we believe the upside of Link REIT’s Hong Kong retail portfolio mainly hinges on the rising average unit rent for Hong Kong properties (FY20E – FY25F Revenue 0 18A 19A 20E 21F 22F 23F 24F 25F CAGR: 7.4%) with a flattish occupancy rate. We see the followings bolstering their retail rental Retail rentals Car parks rentals growth: 1) Historically Successful AEI projects yield >20% increase in rent, 2) Management Office rentals Other revenue Capability of maintaining >15% reversion rate for new lease contracts and 3) Adequate Source: Team Analysis, Company Data negotiating power to carry rent adjustment for existing leases to match with a higher price. Figure 21: Link REIT’s 2025F Revenue Mix Table 2: Key Financials Ratios Office Other Key Financials Ratios 2017A 2018A 2019A 2020E 2021F 2022F 2023F 2024F 2025F rentals revenue Profitability 4% 4% NPI margin (%) 75.6% 76.5% 76.6% 75.2% 74.0% 74.1% 74.0% 73.6% 73.3% Adjusted(1) net income margin (%) 54.4% 51.7% 53.9% 52.8% 51.9% 52.7% 52.7% 52.3% 51.7% NPI return on investment properties (%) 4.0% 4.1% 3.6% 3.6% 3.8% 4.5% 4.7% 4.9% 5.0% NPI return on equity (%) 5.5% 5.5% 4.3% 4.3% 4.6% 5.5% 5.8% 6.2% 6.4% Car parks Liquidity rentals Cash(2)-to-revenue ratio (%) 7.4% 116.6% 67.6% 22.9% 15.3% 15.3% 18.0% 19.5% 18.9% 16% Cash ratio (%) 16.9% 161.8% 83.5% 31.0% 21.9% 24.5% 32.1% 30.2% 29.0% Quick ratio (%) 29.4% 171.7% 95.0% 42.1% 34.5% 38.1% 47.5% 43.5% 42.2% Financial Leverage Net interest-bearing debt to equity (%) 19.4% 7.9% 9.2% 13.7% 14.1% 15.2% 15.6% 17.9% 19.8% Retail Net interest-bearing debt to asset (%) 15.2% 6.5% 7.7% 11.2% 11.5% 12.1% 12.4% 13.8% 15.0% rentals Interest coverage ratio (x) 11.7x 10.9x 12.2x 12.4x 12.2x 14.0x 14.2x 13.9x 13.1x 76% NPI / net interest-bearing debt (%) 26.1% 54.4% 44.1% 31.7% 32.5% 36.0% 37.4% 34.6% 32.5% Unitholder Ratios Adjusted net income per unit (in HKD) 2.27 2.41 2.58 2.76 2.90 3.51 3.76 3.96 4.09 Distribution per unit (in HKD) 2.28 2.50 2.71 2.85 3.11 3.67 3.84 4.12 4.36 Growth in DPU 10.7% 9.6% 8.6% 5.2% 8.9% 18.3% 4.4% 7.3% 5.8% Source: Team Analysis, Company Data Source: Team Analysis (1) Adjusted for gain / loss from disposal and change in fair value of investment properties (2) “Cash” represents cash on hand and bank deposits Figure 22: Link REIT’s Revenue Distribution Normalized cash and leverage position post repurchases and by Country 100% discretionary distribution 10% 10% 12% 13% Link has disposed 17 properties in Nov 2017 and 12 properties in Mar 2019. The proceeds have 14% 13% 14% 14% significantly honed Link’s cash and leverage position even after the acquisition of Beijing 80% Jingtong Roosevelt Plaza in Beijing and Central Walk in Shenzhen in 2019. Yet, we forecast Link 60% REIT’s cash-to-revenue ratio will drop significantly from 67.6% in FY19A to 22.9% in FY20E 90% 90% after finishing the remaining 47 million units repurchasing for c.HK$3.8B and the discretionary 40% 83% 84% 84% 83% 81% 80% dividend distribution of HK$0.14 in the next 3 years. 20% Increasing net gearing ratio (net interest-bearing debt to equity) due to 0% strategic geographical diversification 18A 19A 20E 21F 22F 23F 24F 25F Management has indicated the Vision 2025 expansion plan into China and gateway cities (Sydney, Hong Kong China Overseas

Melbourne, Seoul, Tokyo, Singapore, London) and their rising net gearing ratio on their strategic Source: Team Analysis, Company Data geographical diversification. Distributing more than 100% of the total distributable amount.

Considering their actual payout ratio of more than 100% and the committing capital for schedule AEI projects, Link will soon have insufficient cash balance to finance their acquisition plan. We have forecasted the future acquisition amounted at the latest capitalization rate will be funded entirely by interest-bearing liabilities.

Vision 2025 has offered growth visibility of Link for us and investors. Yet, we are cautiously optimistic over the target on management guidance of maintaining a healthy gearing ratio. It will be quite challenging for Link to fund the acquisition under such guidance and the legal requirement of >20% net gearing ratio. The existing interest coverage ratio of 13.1x will enable Link to maintain the current credit rating.

Diminishing NPI margin due to inorganic expansion Diminishing NPI margin due to inorganic expansion as the management has no explicit guidance over the NPI margin, we expect the NPI margin for each category to be flattish. Aligned with the Vision 2025 plan, Link will invest in additional properties in China and oversea cities, the NPI will decline as the NPI margin in China (66.8%) is lower than that in Hong Kong (76.3%) while not affecting the DPU growth.

5 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Valuation

We arrive at our target price HK$100.60 for Link REIT under our base case scenario, taking the average from Dividend Discount Model (DDM) and Discounted Cash Flow (DCF) models, implying a 24.4% upside from the date of issued.

Link REIT is now trading at FY20E (Consensus) Dividend Yield of 3.8% The dividend yield spread with US10Y has widened to 2%, which is 0.4SD Higher than the average since 2013. Recent headwinds in geopolitical events such as US-Iran, US-China Trade war has masked confidence over the global equity market along with global rates edging lower, hampering on investment sentiments and potentially widen on the yield spread. A risk-averse market environment makes yield players attractive so we believe a premium for yield player will be accorded by investors. Link REIT’s DPU 5-Year CAGR of 8.8% from FY20E to FY25F is justifiable as for the historical avereage dividend yield and the further widening yield spread.

Dividend Discount Model (DDM) DDM was built to estimate the intrinsic unit price of Link by forecasting its distributable amounts from net profits. Under the Code of Real Estate Investment Trust, Link is required to payout at least 90% of its net income after tax as distributions to unitholders. Link has developed a strong dividend payout track record of X% across period X and exercised discretionary distribution, which enhances the distribution payout above 100%.

The DDM has calculated a unit price of $102.2. We have calculated a discount rate/cost of equity at 4.43% at the terminal using CAPM.

Terminal Assumptions Figure 23: Valuation Assumptions • Risk-free rate: We have adopted US 10 Year Treasuries as our benchmark. A dynamic risk- TERMINAL ASSUMPTIONS free rate approach was used based on the existing market consensus. Referring to the Risk free rate 2.50% consensus, one more rate cut is expected in 2020 while one more to go in 2021 and 2022 each, hitting 2.5% eventually as our terminal risk-free rate. Market risk premium 6.08% • Market risk premium: We have adopted MSCI Asia 10Year Yield as the yardstick at 6.08%. Beta 0.54 • Beta: 0.54, from Refinitiv data Terminal discount rate 4.43% • Terminal Growth: 0.3% - We consider the GDP growth is less relevant to Link ‘s REIT as Terminal growth 0.30% their tenants are mostly operating businesses relevant to consumption stables. GDP growth Source: Team Analysis, Refinitiv is more positively associated with consumer discretionary. We have come up with the 10-

Year average Inflation rate in Hong Kong as our benchmark. Yet, we assume after 2025, Link REIT will enter a steady rate while the occupancy rate will be stable. As per management guidance, we assume near all the major AEI will be completed, and Link will capture most of the rent increment. There will still be ~2 AEI Projects each year

(~HK$200mn/Year)., which require capital expenditure. Thus, we believe the long-term growth rate would not be fully channeled to the unitholders as dividend and we have revised down the terminal growth rate.

Discounted Cash Flow (DCF) Model A DCF model was used to estimate the intrinsic value of Link’s due to the predictability of its cash flows in relation to their growth and profitability. We have adopted a 2-stage model in evaluation of Link’s risks, setting a forecast window of 5 years to reflect our medium-term Figure 24: Retail REITs Peers Relative outlook in implementing Vision 2025 and derive the terminal value at a steady state. Valuation (as of Jan 8, 2020)

Price-to- Price-to- Price-to- DCF has calculated a unit price of $100.7 and derived the terminal WACC at 4.16%. Name NAV FFO AFFO (LTM) (LTM) (LTM) CAPITALAND 15.61% 23.54 27.71 Weighted Average Cost of Capital (WACC) COMMERCIAL TRUST We hold the same view on the cost of equity and debt for Link to be used in our DCF model. CAPITALAND MALL 22.50% 26.78 38.69 The cost of equity is derived with CAPM, with risk-free rate, beta and market risk premium TRUST being identical to that with DDM assumptions. The cost of debt is taken at 2.88% at the current MAPLETREE 40.59% 8.43 8.97 effective interest rate. We have factored in the effective tax rate at 17.50% and target D/E ratio COMMERCIAL TRUST at 20%, as per discussion during a company presentation. MAPLETREE NORTH ASIA COMMERCIAL (19.58%) 20.54 24.36 TRUST Terminal Growth of 0.3% is in line with our trajectory of DDM to capture part of the long-term inflation growth. FORTUNE REIT (46.35%) 16.91 20.96

Relative Valuation CHAMPION REIT (57.02%) 8.38 8.50 We have adopted different valuation multiples like P/FFO, P/NAV, EV/EBITA to value Link Comparable Averages (7.38%) 17.43 21.53 REIT with its peers (Top 3 commercial REIT in Singapore and Hong Kong respectively). However, the relative valuation does not generate a meaningful valuation as the selected REIT Implied Valuation 83.90 49.20 53.01 peers does not have similar underlying properties and market capitalization. Thus, we have to for Link (HK$) adopt DCF and DDM as our core valuation methodology (Fig. 20). Source: Team Analysis, Refinitiv

6 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020

Scenario Analysis

Bull Case (Target Price: HK$120.0) We assume the political movement to have a less-than-expected negative impact on Hong Kong Retail Sales(Staples: Supermarket).

We assume its overall Hong Kong retail occupancy rate mildly dropping to 95.5% as per management guidance in 2H FY20E and rebound to 96.5% in 1H FY21F which is close to the 3-Y average. Annualized rental growth drops from 5.1% in 1H FY20E to 4.0% in 2H FY20E and 1H FY21F as per management guidance for the short-term downside on reversion rate. However, we expect the reversion rate bottoms out in 2H 2021F which LINK’s proven tenant management capability as evidenced by the 20% average reversion rate in the 2008 financial crisis. For the China portfolio, we assume the retail occupancy rate to maintain at 99.0% and the office occupancy rate to rise back to 99.0% in 1H FY22F in a stronger-than-expected economic environment and bolstering foreign business sentiments on easing trade tension. As a result, our research team has arrived at a target price of HK$[120.0] at the terminal growth of 0.6%.

Base Case (Target Price: HK$101.5) We expect LINK’s overall HK retail rent growth to slow down in the next [6] months. We assume LINK’s retail overall occupancy rate to deteriorate to 93.6% in 1H2021 and gradually rebound to 96.5% in 1H2022 as we expect the retail sales pressure to last for at most 18 months which ends in 1H2022 concerning previous recovery trend during 2003 SARS, 2008 financial crisis and 2016 protest in Sheung Shui, which dragged longer for Hong Kong retail than the 2014 Occupy Movement. For carparks, we expect the monthly rental fee growth to remain intact and pegged to the inflation rate as we forecast a low single-digit growth of both parking demand and supply for LINK carpark properties. Regarding the China performance, we see the retail reversion rate in 2H2020 to be similar to 1H2020 factoring in the sluggish economic growth. The AEI completion of Shenzhen will boost the reversion rate in 2H2020. The target price stands at HK$[101.50] with a terminal growth of 0.3%.

Bear case (Target Price: HK$75.7) We expect the political overhang exacerbates and drags down the Hong Kong retail sales and employment rate. Hong Kong retail sales will take at least 24 months to resolve the social unrest and for the overall business and consumer sentiments to pick up. As a result, we assume the reversion to be 0.0% for the next 24 months for the worst possible case and the occupancy rate to drop to 90.0%, close to the historical lowest of Hong Kong retail occupancy, 89.3% during the 2003 SARS. For China, we expect the retail reversion to drop substantially to 15% in FY21F due to the over-supply of retail properties and penetration of the e-commerce/food delivery platform. As a result, we arrive at a target price of HK$[75.7] with a terminal growth of 0.0%.

Summary of key operating assumptions for 2H FY20E, 1H FY21F and 2H FY21F are as follow:

Table 3: Summary of Key Assumptions for Scenario Analysis Summary of Key Assumptions (2H2020 – 2H2021) Bear Base Bull Hong Kong Retail Average occupancy 90.7% 94.7% 96.3% Unit Rent CAGR (1.7%) 8.7% 11.6% China Retail Average occupancy 95.0% 96.7% 99.0% Unit Rent CAGR 2.4% 3.3% 4.2% Hong Kong Office Average occupancy 70.0% 80.0% 86.7% Unit Rent CAGR 6.7% 2.7% 6.7% China Office Average occupancy 90.0% 92.3% 97.0% Unit Rent CAGR 0.8% 2.2% 3.1% Source: Team Analysis Figure 25: Scenario Analysis of Link’s Share Price Movement 120.0 (+48%) 120

100 101.5 (+25%) 81.5 80 75.5 (-7%) 60

0 2017-Jan 2017-Jul 2018-Jan 2018-Jul 2019-Jan 2019-Jul 2020-Jan 2020-Jul 2021-Jan Source: Team Analysis, Company Data 7 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Scenario Analysis (con’t)

Despite the fact that we have adopt a relatively prudent assumptions for our valuation, we have set up a sensitivity test for both of our valuation methodology as we would like to know the sensitivity of our TP to the Terminal growth and Discount Rate.

DDM Valuation Our sensitivity test reflected that our investment recommendation will turn to HOLD only if the Terminal discount rate rose by 60bps and the terminal growth decrease by 20bps in case of 40bps increase in Terminal Discount Rate

Terminal Growth 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 3.8% 108.6 111.1 113.8 116.6 119.6 122.8 126.1

4.0% 104.1 106.4 108.8 111.3 114.0 116.8 119.8 4.2% 100.0 102.1 104.3 106.6 109.0 111.5 114.2 4.4% 96.3 98.2 100.2 102.3 104.5 106.7 109.2 4.6% 92.9 94.7 96.5 98.4 100.4 102.4 104.6

Terminal Terminal 4.8% 89.8 91.4 93.1 94.8 96.6 98.5 100.5

Discount Rate Discount 5.0% 87.0 88.4 90.0 91.6 93.2 95.0 96.8 Source: Team Analysis

DCF Valuation Our sensitivity test reflected that our investment recommendation will turn to HOLD only if the Terminal discount rate rose by 40bps.

Terminal Growth 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 3.5% 108.5 111.6 114.9 118.4 122.2 126.2 130.4

3.7% 103.0 105.7 108.7 111.8 115.1 118.6 122.4 3.9% 98.0 100.5 103.2 105.9 108.9 112.0 115.3 4.1% 93.5 95.8 98.2 100.7 103.3 106.1 109.1 4.3% 89.5 91.5 93.7 96.0 98.4 100.9 103.5

Terminal Terminal 4.5% 85.8 87.6 89.6 91.7 93.9 96.1 98.5

Discount Rate Discount 4.7% 82.4 84.1 85.9 87.8 89.8 91.9 94.0 Source: Team Analysis

8 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Figure 26: Corporate Governance Scorecard Corporate Governance Overall Score: 80.8% (Excellent)

Audit We believe Link upholds a high reporting standard on corporate governance and excel in terms 100 80 of Audit, Board Structure, Remuneration, and Shareholders’ Rights (Appendix E-4). 60 40 20 Shareholder Board 0 Favorable and protected free float and flat shareholder structure Rights Structure Unlike most Asian REITs (Fig. 27), Link follows a 100% free float share structure wholly owned by private and institutional investors, which attracts institutional investors with lower volatility from trading. Link has no significant unitholder as at Q4 2019 (Fig. 28), with the top 4 Remuneration unitholders being BlackRock, Inc. (9.14%), The Capital Group Companies, Inc. (7.02%), State Source: Team Analysis (see Appendix E-4) Street Corporation (6.02%), and Stichting Pensioenfonds ABP (5.41%). Link unitholders are entitled to a one-unit-one-vote policy. The dilution and discount limit to issue shares are Figure 27: Asian Retail REITs Free Float % protected by Rule 12.2 of the REIT Code at 20%, as instructed by SFC. Link REIT 100 Independent, quasi-diversified, sophisticated Board Structure and URW 100 competent Management Team; COO departed without replacement SCA Property 99 Link’s Board of Directors consists of 12 members, including 9 Independent Non-Executive Mapletree 98 Directors (75%), 1 Non-Executive Director, and 2 Executive Directors (CEO and COO). Link Scentre 96 follows HKEX’s Guidance for Boards and Directors to set up 4 Committees: Audit and Risk Capitaland 96 Management, Remuneration, Nomination, and Finance and Investment (not mandatory). Board JRF 94 members possess a pool of diverse skills in the real estate sector, including urban planning, Kenedix 93 finance, architecture and legal. While all Committees are chaired by INEDs, no women serve Frontier 90 the leadership role in the Board despite 33% Board members are female. The average age of the Charter Hall 82 Board is at 59.7, much higher than the H-share average of 53.8. Link sets a 9-year maximum Vicinity… 82 term limit to INED, and the current INED tenure is at 4 years (Appendix E-2). We believe Aeon 76 these factors offer Link sufficiently diverse perspectives. BWP Trust 74 Viva Energy 64 In terms of Link management, following the official departure of COO Andy Cheung in Aventus 54 December 2019 with no replacement, Link management will collectively share Cheung’s 0 50 100 responsibility. We believe the operation risks to implement strategy could be mitigated with Free Float % Link’s well-structured and seasoned management team (CEO, CFO, CSO, and 8 Directors each Source: Team Analysis, Refinitiv responsible for one function). All the executives possess over 20 years of experience in their specific fields. The management’s average age is at 51.7 with 5.18SD, while the years of affiliation Figure 28: Link REIT’s Unitholder Structure average at 5.9 with 4.28SD. Thus, the plenty competency will allow Link to untangle the mess. Capital Group BlackRock 7% 9% Quasi-Blackbox non-financial KPIs linked remuneration scheme leaves State Street concern over the long-term successful realization of ESG initiatives 6% Link has clearly disclosed the remuneration scheme of Directors and Executives with a clearly APG Asset Management defined vesting period of 50% in year 2 and year 3 respectively, satisfied through purchasing 5% through open market. All rewards to INEDs and NED are non-target linked. While Executives Others JPMorgan Chase are evaluated based on financial (i.e. NPI and DPU) and non-financial targets (ESG initiatives), 61% 4% no specific measurement was disclosed. Moreover, non-financial KPIs are not mentioned as part Vanguard Group of the metric in the 2017 Long-Term Incentive Scheme. Since the outcomes of ESG initiatives 4% are realized over time, Link’s remuneration scheme incentivizes Executives to pursuit for short- Dimensional Bank of New Fund Advisors term non-financial KPIs instead of creating legacy communal impacts (Appendix E-3). York Mellon 2% 2%

Source: Refinitiv (see Appendix E-1)

9 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Investment Risks Figure 29: Fed Fund Probability Distribution

100% Market Risk – Slowdown on China and Hong Kong growth outlook due 90% to economic downcycle 80% Link’s strong performance in managing China and Hong Kong Retail portfolio is shown through 70% its occupancy, occupancy cost and reversion metrics in both economies. Though non- 60% discretionary in nature, worse-than-expected China and Hong Kong economic growth would 50% 40% put pressure on retail sales performance, adding difficulty in retaining high operating metrics 30% from previous years, though expectedly more resilient than peers. 20% 10% In medium to longer term, as Link diversifies away from Hong Kong portfolio (currently at 0% 86.1% post-Sydney Grade-A office acquisition) and seeks additional growth in China/gateway cities (UK/Japan/Australia), we see the investment as incremental for maintaining higher growth in DPU accrediting assets where market growth is comparatively higher than Hong Kong. 29 Jan 2020 10 Jun 2020 16 Dec 2020 Source: CME Group (CME FedWatch Tool) Market Risk - Hong Kong Retail continues to face pressure from the local uncertain political situation We acknowledge the ongoing social unrest in Hong Kong may place stress on local retail (65.5% Figure 30: Link Investment Risks Matrix

of Link's portfolio). We believe Link is well-positioned to provide resilience as 1) Majority of

h g

Link’s malls are not in the vicinity of major protest sites, 2) Tenant mix is non-discretionary and i tends to provide better performance in market downturns and 3) Social events discourage H outdoor spending and attract footfall back into local malls which are less protest-exposed. MR 4 MR 1

i p

Market Risk - Revaluation due to Economic Cycle d IR 1 MR 2

m I Link’s property cap rates are expected to fluctuate along with economic conditions to the M exposed markets (Hong Kong/Mainland China/Australia). As QE from central banks is ER 1 MR 3 expected to continue in the near future, and fundamental growth is to be affected with ongoing

U.S-China Trade War and geopolitical events, Link may face lower cap rates for its properties w o and hence lower asset values. L

Low Medium High Expansion Risk - Over-aggressive acquisitions to put pressure on credit Probability Source: Team Analysis rating outlook With management expected to add China/Overseas exposure into L ink’s portfolio, the debt- funded acquisition is guided as the preferred financing strategy. Over-aggressive/High-premium Figure 31: Link Risk Mitigation acquisitions may limit Link’s ability to maintain low financing costs due to lower IRR and higher RISKS MITIGATING FACTORS gearing ratio. MARKET RISKS Slowdown on China and Eyeing Investment in China Hong Kong growth Tier-1/ gateway cities with Interest Rate Risk - U.S. Monetary Policy to significantly weigh on outlook due to economic higher market growth HIBOR borrowing costs downcycle Hong Kong Retail Property locations not We expect the federal funds rate to be put hold after 3 interest rate cuts by 75bps in 2019. continues to face pressure nearby to affected areas Though with current on-hold or one-cut scenario (Fig. 28) adverse hike in interest rates by the from the local uncertain Non-discretionary retail political situation tenant mix Federal Reserve would raise HIBOR borrowing costs in a more sensitive manner due to the Revaluation due to lower base and diminishing yield spread on UST Current 10Y Benchmark (Fig. 5). Link’s current Economic Cycle Diversifying asset base in China Tier-1/gateway cities exposure into floating rate facilities only amounts to 27.22% as of FY19, hence the effect on Unemployment with higher market growth short-term borrowings (<5 years) would be limited. INTEREST RATE RISK Limited exposure into Market Risk – Unemployment risk U.S. Monetary Policy to floating rate facilities significantly weigh on Usage of Interest Rate Swaps In the course of social unrest, Hong Kong Retail sales have been in a dire situation. If the social HIBOR borrowing costs to protect against rate unrest lingers and exacerbates, we expect HK GDP to be further dragged down and lead to a fluctuations higher unemployment rate. We concluded that HK retail sales growth has an inverse relationship EXPANSION RISK Over-aggressive Prudent Capital Management with the unemployment rate, with consumer discretionary sales being affected the most. Despite acquisitions to put pressure exercised by Link on credit rating outlook consumer staples sales being less sensitive and volatile, we believe that a higher unemployment Source: Team Analysis rate would still hamper the consumer staples sales growth and in turn hurting Link’s rental rate.

10 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Table of Contents

Appendix A: Financials Appendix A-1: Income Statement Appendix A-2: Balance Sheet Appendix A-3: Cashflow Statement

Appendix B: Business Description Appendix B-1: Link REIT Share Price Movement and News Flow Appendix B-2: Relationship between HK GDP and Consumer Staples Sales Appendix B-3: Relationship between HK GDP and Consumer Discretionary Sales Appendix B-4: Continuous Sales Growth of Link’s Hong Kong Retail Portfolio

Appendix C: Industry Overview Appendix C-1: Link REIT Return to Hong Kong Benchmarks Appendix C-2: Retail Rental Revenue Contribution % by Monthly Rent Appendix C-3: Composite Reversion Rate and Occupancy by Tenant Mix Appendix C-4: Credit Metrics Appendix C-5: Retail Rental Revenue CAGR Growth

Appendix D: Valuation Appendix D-1: Revenue Projection Breakdown Appendix D-2: Hong Kong Retail Rental Build-up Appendix D-3: Hong Kong Mixed Rental Build-up Appendix D-4: Hong Kong Carparks Rental Build-up Appendix D-5: China Rental Build-up Appendix D-6: Overseas Rental Build-up Appendix D-7: Acquisition Assumptions Bull Case Base Case Bear Case Incremental revenue under base case schedule Cap rate benchmark Appendix D-8: Key Assumptions (Base Case) Appendix D-9: Distributable Income and DDM Appendix D-10: Free Cash Flow and DCF

Appendix E: Financials Appendix E-1: Unitholder Structure with Substantial Interests Appendix E-2: Board of Directors and Executive Management Team Analysis Appendix E-3: ESG and Corporate Sustainability KPIs and Initiatives Analysis Appendix E-4: Corporate Governance Assessment Metric

11 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Appendix A: Financials

Appendix A-1: Income Statement INCOME STATEMENT (in HKDmm) 2017A 2018A 2019A 2020E 2021F 2022F 2023F 2024F 2025F Total Revenue 9,255 10,023 10,037 10,722 11,460 13,574 14,620 15,533 16,205 Retail rentals 6,592 7,220 7,290 7,911 8,530 10,334 11,139 11,756 12,246 Car parks rentals 1,940 2,046 1,979 1,955 2,046 2,170 2,283 2,408 2,540 Office rentals 322 334 358 398 394 490 576 712 733 Other revenue 401 423 410 459 491 580 622 658 687 Property operating expenses (2,261) (2,360) (2,348) (2,664) (2,975) (3,510) (3,801) (4,094) (4,330) Net property income 6,994 7,663 7,689 8,058 8,485 10,064 10,819 11,439 11,875

General and administrative expenses (342) (417) (405) (468) (497) (586) (638) (680) (721) Change in fair values of investment properties 11,494 35,493 12,269 0 0 0 0 0 0 Gains on disposals of investment properties 1,387 7,306 2,761 0 0 0 0 0 0 Gains on disposals of PP&E 0 0 0 0 0 0 0 0 0 Interest income 4 19 85 18 14 15 22 25 25 Finance costs (567) (665) (598) (614) (656) (679) (719) (777) (855) Profit before taxation and transactions with Unitholders 18,970 49,399 21,801 6,994 7,346 8,814 9,484 10,007 10,325 Taxation (1,057) (1,420) (1,359) (1,328) (1,398) (1,659) (1,782) (1,883) (1,952) Profit for the year, before transactions with Unitholders 17,913 47,979 20,442 5,665 5,949 7,156 7,702 8,124 8,373 Unitholders 17,711 47,761 20,329 5,637 5,917 7,119 7,662 8,082 8,329 Non-controlling interest 202 218 113 29 31 37 40 42 44 Source: Team Analysis, Company Data

Appendix A-2: Balance Sheet BALANCE SHEET (in HKDmm) 2017A 2018A 2019A 2020E 2021F 2022F 2023F 2024F 2025F Current assets 1,265 12,502 7,834 3,449 2,876 3,352 4,049 4,512 4,615 Trade and other receivables 503 715 933 881 1,003 1,152 1,260 1,328 1,391 Deposits and prepayments 77 97 106 109 119 139 150 159 166 Derivative financial instruments 0 1 6 6 6 6 6 6 6 Bank deposits 150 8,525 4,095 2,024 1,290 1,513 2,048 2,397 2,402 Cash and cash equivalents 535 3,164 2,694 429 458 543 585 621 648 Non-current assets 174,675 203,902 219,103 223,926 225,123 228,222 230,061 235,104 239,099 Goodwill 466 416 433 433 433 433 433 433 433 Investment properties 174,006 203,091 218,496 223,284 224,442 227,488 229,266 234,230 238,129 Property, plant and equipment 87 115 138 173 213 265 327 405 501 Derivative financial instruments 116 280 36 36 36 36 36 36 36 Total assets 175,940 216,404 226,937 227,375 228,000 231,574 234,110 239,616 243,713

Current liabilities 4,046 7,225 8,126 7,922 7,980 8,466 8,202 10,005 10,533 Trade payables 175 157 192 198 232 267 293 313 332 Receipts in advance 243 245 285 283 314 365 397 420 439 Accruals 1,452 2,060 2,108 2,228 2,394 2,828 3,050 3,238 3,380 Security deposits 1,494 1,665 1,751 1,826 1,975 2,326 2,512 2,665 2,783 Provision for taxation 305 420 321 321 321 321 321 321 321 Current portion of long-term incentive schemes provision 76 87 102 132 147 177 196 217 233 Interest bearing liabilities 300 2,589 3,367 2,934 2,596 2,183 1,433 2,830 3,045 Derivative financial instruments 1 2 0 0 0 0 0 0 0 Non-current liabilities 33,397 30,111 29,485 34,002 34,842 38,098 40,867 44,671 48,568 Long-term incentive schemes provision 37 50 98 99 125 140 161 175 190 Interest bearing liabilities 27,197 23,196 20,850 24,932 25,270 27,975 30,149 33,327 36,575 Derivative financial instruments 498 375 246 246 246 246 246 246 246 Deferred tax liabilities 2,417 2,893 3,191 3,520 3,885 4,303 4,755 5,237 5,733 Amount due to non–controlling interest 2,618 2,897 3,552 3,658 3,768 3,885 4,008 4,138 4,276 Non–controlling interest put option obligation 630 700 790 790 790 790 790 790 790 Retention amount for acquisition of a business 0 0 758 758 758 758 758 758 758 Total liabilities 37,443 37,336 37,611 41,924 42,822 46,564 49,069 54,676 59,101

Non-controlling interest 256 474 587 616 647 684 724 766 810 Net assets attributable to Unitholders 138,241 178,594 188,739 184,836 184,531 184,326 184,317 184,174 183,802 Total Equity and Liabilities 175,940 216,404 226,937 227,375 228,000 231,574 234,110 239,616 243,713 Source: Team Analysis, Company Data

12 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Appendix A-3: Cashflow Statement CASHFLOW STATEMENT (in HKDmm) 2017A 2018A 2019A 2020E 2021F 2022F 2023F 2024F 2025F

OPERATING ACTIVITIES Profit before taxation and transactions with Unitholders 18,970 49,399 21,801 6,994 7,346 8,814 9,484 10,007 10,325 Long–term incentive schemes awards 111 126 174 174 197 229 243 258 269 Depreciation charge 27 20 22 29 35 44 54 67 82 Gains on disposals of investment properties (1,387) (7,306) (2,761) 0 0 0 0 0 0 Gains on disposals of PP&E 0 0 0 0 0 0 0 0 0 Interest income (4) (19) (85) (18) (14) (15) (22) (25) (25) Finance costs 567 665 598 614 656 679 719 777 855 Exchange difference (23) 56 (49) 0 0 0 0 0 0 Change in fair values of investment properties (11,494) (35,493) (12,269) 0 0 0 0 0 0 Change in trade and other receivables, deposits and prepayments (79) (168) (90) 50 (133) (169) (120) (77) (70) Change in trade payables, receipts in advance and accruals 92 (51) (296) 124 231 520 280 232 179 Change in security deposits 92 169 8 75 150 350 187 153 117 2007 LTI Plan paid (7) (9) (10) (10) (10) (10) (10) (10) (10) Income tax paid (788) (904) (1,102) (1,000) (1,033) (1,240) (1,330) (1,401) (1,456) Net cash generated from operating activities 6,077 6,485 5,941 7,031 7,426 9,203 9,484 9,980 10,267

INVESTING ACTIVITIES Acquisition of businesses (Properties & goodwill) (5,319) (4,496) (7,085) 0 0 0 0 0 0 Proceeds from disposals of investment properties 7,288 22,988 12,010 0 0 0 0 0 0 Proceeds from disposals of PP&E 0 0 0 0 0 0 0 0 0 Cash additions to investment properties (1,480) (1,998) (2,623) (835) (840) (420) 0 0 0 Additions to property, plant and equipment (39) (39) (49) (64) (74) (95) (116) (145) (178) Interest income received 4 7 92 18 14 15 22 25 25 Decrease/(increase) in bank deposits with original maturity of more than three months (32) (8,375) 4,430 2,071 734 (222) (535) (350) (5) Net cash generated from investing activities 422 8,087 6,775 1,189 (166) (722) (629) (470) (158)

FINANCING ACTIVITIES Proceeds from interest bearing liabilities, net of transaction costs 24,400 19,585 14,804 3,367 2,934 2,596 2,183 1,433 2,830 Repayment of interest bearing liabilities (23,472) (21,345) (19,124) (3,367) (2,934) (2,596) (2,183) (1,433) (2,830) Increase in amount due to non-controlling interest 115 211 559 0 0 0 0 0 0 Interest expenses paid on interest bearing liabilities (739) (810) (648) (813) (863) (897) (950) (1,036) (1,152) Distributions paid to Unitholders (4,898) (5,254) (5,517) (5,916) (6,368) (7,499) (7,863) (8,438) (8,930) Units bought back for cancellation (1,697) (4,349) (3,216) (3,758) 0 0 0 0 0 Net cash used in financing activities (6,291) (11,962) (13,142) (10,486) (7,231) (8,396) (8,813) (9,474) (10,082)

Net (decrease)/increase in cash and cash equivalents 208 2,610 (426) (2,265) 30 85 42 37 27 Cash and cash equivalents at 1 April 336 535 3,164 2,694 429 458 543 585 621 Effect on exchange rate changes on cash and cash equivalents (9) 19 (44) 0 0 0 0 0 0 Cash and cash equivalents at 31 March 535 3,164 2,694 429 458 543 585 621 648 Source: Team Analysis, Company Data

13 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Appendix B: Business Description

Appendix B-1: Link REIT Share Price Movement and News Flow 120

100 12

80 9 11 8 10

60 7 4 5 6 40 2

Link Share (in Share PriceLink HK$) 3

20 1

0823.HK Event

Link acquired the shopping mall portion of Nan Fung Plaza with parking facilities in Hang Hau, from Nan Fung Group mid 1 2010 for a total of $1.17 billion.

2 Link acquired The Lions Rise Mall with parking facilities in Wong Tai Sin, from Kerry Properties, for a total of $1.38 billion.

3 Link REIT was included in the Hang Seng Index

Link took its first step in purchasing by government land auction when it partnered with Nan Fung Group to buy land lot NKIL 4 6512 in Kwun Tong for a total of $5.86 billion, the property built is now known as Quayside.. Link surprised the market by successively making its first two purchases in mainland China, when it acquired Beijing EC Mall, for 5 a consideration of ¥2.5 billion; it acquired two commercial buildings in Shanghai for ¥6.6 billion. A subsidiary of the Link purchased the Trade and Industry Department Tower in Mong Kok (formerly the Argyle Centre Tower 6 II) from the government for a sum of HK$5.91 billion.

7 Link announced intention to dispose 5 non-core properties by private tender for HK$3.64bn

8 Link acquired Metropolitan Plaza in Guangzhou for Rmb4.07bn

Link intended to dispose 17 non-core retail properties for HK$23bn to Gaw Capital 9 led consortium. Proceeds were used for unit buybacks to offset DPU dilution.

10 Link announced acquisition of Beijing Jingtong Roosevelt Plaza for Rmb2.56bn

11 Link announced completion of portfolio review and disposal of 12 HK retail properties for HK$12bn.

12 Link agreed to acquire Central Walk in Shenzhen for Rmb6.6bn

13 Link announced a 60M shares buyback

Source: Team Analysis, Bloomberg Finance L.P., Company Data

14 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Appendix B-2: Relationship between HK GDP and Consumer Staples Sales 14 8

12 6

10 Rate GDP Growth(%) 4 8

6 2 Sales(%) 4 0 2 -2 0

06 07 08 09 10 11 12 13 14 15 16 17 18 YOY Growth in Staples Consumer in YOY of TypesGrowth -2 -4

Food, alcoholic drinks and tobacco (other than supermarkets) Supermarkets Hong Kong GDP Final YY (RHS)

Source: Hong Kong Census and Statistics Department

Appendix B-3: Relationship between HK GDP and Consumer Discretionary Sales 50 8

40 6

30 Rate GDP Growth(%) 4 20

10 2

Sales(%) 0 06 07 08 09 10 11 12 13 14 15 16 17 18 0 -10 -2

-20 YOY Growth in Staples Consumer in YOY of TypesGrowth -30 -4

Jewellery, watches and clocks, and valuable gifts Motor vehicles and parts Hong Kong GDP Final YY (RHS)

Source: Hong Kong Census and Statistics Department

Appendix B-4: Continuous Sales Growth of Link’s Hong Kong Retail Portfolio

6% 4.5% 4% 2.1% 2% 1.4% -0.6% 0% Food & beverage Supermarkets & foodstuff General retail Overal -2% -1.00% -4% -6% -6.20% -8% -10% -9.80% -12%

-14% -13.20% -16%

Apr 19 - Sep 19 (Link) Apr 19 - Sep 19 (HK)

Source: Company Data

15 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Appendix C: Industry Overview

Appendix C-1: Link REIT Return to Hong Kong Benchmarks Annual Return 10Y 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (PR) Average Link REIT 54.84% 21.85% 18.43% 35.31% (2.84%) 29.12% (4.43%) 8.62% 43.75% 9.45% 4.04% 19.83% HSI 52.02% 5.32% (19.97%) 22.91% 2.87% 1.28% (7.16%) 0.39% 35.99% (13.61%) 9.07% 8.10% HS REIT 53.51% 37.18% (12.68%) 35.94% (3.42%) 9.66% 0.69% 4.69% 21.41% (2.91%) 1.34% 13.22% Link REIT - HSI 2.82% 16.53% 38.40% 12.41% (5.71%) 27.84% 2.73% 8.23% 7.76% 23.07% (5.03%) 11.73% Link REIT - HS REIT 1.34% (15.33%) 31.11% -0.62% 0.58% 19.46% (5.12%) 3.93% 22.34% 12.37% 2.70% 6.61% Source: Refinitiv

Appendix C-2: Retail Rental Revenue Contribution % by Monthly Rent Retail Rental Revenue 10Y Contribution % by Monthly Rent 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Average Food and Beverage 25% 25% 25% 25% 25% 25% 26% 28% 28% 28% 26% Supermarket and Foodstuff 23% 23% 24% 23% 23% 23% 22% 21% 22% 21% 22%

Markets/Cooked Food Stalls 15% 14% 15% 14% 14% 14% 14% 15% 15% 15% 14% (Including Single Operator Market)

Services 11% 10% 11% 11% 11% 11% 11% 11% 11% 11% 11% Source: Company Data

Appendix C-3: Composite Reversion Rate and Occupancy by Tenant Mix 10Y Composite Reversion Rate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Average Retail 24% 21% 23% 25% 26% 23% 29% 23% 31% 21% 25% Markets/Cooked Food Stalls 28% 52% 15% 28% 25% 12% 10% 27% 13% 29% 24% Education/Welfare, Ancillary and Office 2% 3% 14% 10% 14% 20% 14% 21% 15% 10% 12% Overall 12% 19% 22% 25% 26% 22% 26% 24% 29% 23% 23%

Occupancy Retail 92% 95% 95% 96% 97% 97% 97% 97% 97% 97% 96% Markets/Cooked Food Stalls 81% 81% 81% 82% 82% 86% 89% 90% 93% 92% 87% Education/Welfare, Ancillary and Office 93% 80% 85% 86% 86% 87% 92% 91% 97% 100% 91% Overall 90% 92% 93% 94% 94% 95% 96% 96% 97% 97% 94% Source: Company Data

Appendix C-4: Credit Metrics 10Y Credit Metrics 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1H2020 Average Effective Interest Rate 4.30% 3.72% 3.35% 3.07% 2.77% 2.66% 2.57% 2.65% 2.89% 3.12% 3.23% 3.11% Gearing Ratio 19.70% 15.10% 15.90% 13.60% 11.00% 11.90% 16.50% 15.60% 11.90% 10.70% 11.90% 14.19% Fixed Rate Debt / Total 69% 60% 57% 70% 52% 59% 63% 61% 76% 69.80% 64.70% 63.70% Debt Average Fixed Rate Debt 3.8 3.7 5.0 6.0 6.2 7.2 6.9 6.3 5.3 4.8 5.1 5.5 Maturity Total Debt / Total Assets 19.70% 15.10% 16.00% 13.60% 11.00% 11.90% 16.50% 17.40% 11.90% 10.70% 11.90% 14.38% FFO / Debt 21.56% 25.20% 26.00% 26.60% 39.30% 29.60% 17.80% 16.60% 21.20% 22.80% 22.60% 24.67% EBITDA Interest Coverage 5.9 6.6 8.6 9.6 12.6 13.6 10.0 8.5 8.5 10.7 8.4 9.5 Total Debt / EBITDA 4.5 3.0 3.2 3.0 2.5 3.2 4.4 4.8 3.5 2.4 - 3.5 Source: Company Data

Appendix C-5: Retail Rental Revenue CAGR Growth Rental Revenue By 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1H 10Y Category (HKD millions) 2020 Average Retail Shops 2911 3179 3575 3974 4338 4638 4974 5140 5460 5420 2778 6.41% Markets/Cooked Food Stalls 572 600 624 640 695 767 805 893 905 925 451 4.92% Education/Welfare, Office and 115 121 129 128 137 145 147 147 149 137 70 1.77% Ancillary Mall Merchandising 91 115 123 130 156 161 169 172 177 178 91 6.94% Others 196 Retail Rental Revenue 3689 4015 4451 4872 5326 5711 6095 6352 6691 6660 3586 6.09% Growth (%) 13% 9% 11% 9% 9% 7% 7% 4% 5% 0% Source: Company Data 16 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Appendix D: Valuation

Appendix D-1: Revenue Projection Breakdown REVENUE BREAKDOWN 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Hong Kong 4,544 4,595 4,440 4,571 4,575 4,630 4,765 5,177 5,689 6,074 6,275 6,392 6,569 6,681 6,863 6,979 Retail rentals 3,324 3,367 3,268 3,392 3,390 3,463 3,551 3,916 4,359 4,728 4,864 4,976 5,082 5,189 5,297 5,408 Car parks rentals 1,022 1,024 988 991 988 967 1,008 1,038 1,085 1,085 1,141 1,141 1,204 1,204 1,270 1,270 Monthly 769 768 745 751 759 765 800 800 839 839 887 887 941 941 998 998 Hourly 253 256 243 240 229 202 209 238 246 246 254 254 263 263 271 271 Office 0 0 0 0 0 120 129 137 139 141 143 145 147 149 152 154 Expenses recovery and other miscellaneous revenue 198 204 184 188 197 199 205 223 245 262 270 275 283 288 296 301

China 399 485 490 536 757 761 752 767 861 950 967 985 1,132 1,152 1,172 1,192 Retail rentals 232 297 298 332 527 531 527 536 616 631 643 656 735 750 763 777 Office 158 176 178 180 199 199 195 199 208 282 286 290 354 358 364 369 Expenses recovery and other miscellaneous revenue 9 12 14 24 31 31 31 32 36 37 38 39 43 44 45 46

Australia 95 96 98 100 102 157 160 244 249 381 389 Office rentals 95 96 98 100 102 157 160 244 249 381 389 Total revenue 4,943 5,080 4,930 5,107 5,332 5,605 5,742 6,180 6,789 7,267 7,542 7,682 8,092 8,231 8,567 8,713 Source: Team Analysis, Company Data

Appendix D-2: Hong Kong Retail Rental Build-up HONG KONG RETAIL RENTALS BUILDUP 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Retail Portfolio Breakdown Average vacancy 3.7% 3.3% 3.7% 3.7% 3.0% 3.9% 6.4% 5.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% Average rent 64.8 67.3 69.6 72.3 70.5 70.7 72.4 79.9 88.9 96.4 99.2 101.5 103.7 105.9 108.1 110.3 7.7% 7.1% 7.7% (4.9%) 0.5% 5.1% 21.6% 23.9% 17.6% 5.8% 4.7% 4.3% 4.3% 4.2% 4.2% Destination 615 502 635 628 674 712 777 806 834 851 871 891 910 929 948 968 Base rental revenue (excluding AEI gain / loss) 763 749 806 834 851 871 891 910 929 948 968 Total Internal Floor Area (’000 sq. ft.) 1,325 1,220 1,280 1,280 1,280 1,438 1,438 1,438 1,438 1,438 1,438 1,438 1,438 1,438 1,438 1,438 Occupancy rate 96.9% 96.7% 94.3% 93.9% 96.0% 95.0% 92.0% 94.0% 95.5% 95.5% 95.5% 95.5% 95.5% 95.5% 95.5% 95.5% Average monthly base rent 79.9 71.0 87.7 87.1 91.4 93.1 94.4 99.4 101.2 103.3 105.6 108.1 110.4 112.7 115.1 117.5 Rental revenue post AEI gain 763 777 806 834 851 871 891 910 929 948 968 Average monthly effective rent (post 93.1 97.9 99.4 101.2 103.3 105.6 108.1 110.4 112.7 115.1 117.5 Rental revenue post AEI loss 712 777 806 834 851 871 891 910 929 948 968

Community 1,591 1,590 1,631 1,774 1,825 1,861 1,854 1,929 2,037 2,135 2,184 2,234 2,282 2,330 2,378 2,428 Base rental revenue (excluding AEI gain / loss) 1,862 1,861 1,930 2,039 2,108 2,184 2,234 2,282 2,330 2,378 2,428 Total Internal Floor Area (’000 sq. ft.) 3,970 3,870 3,829 3,829 4,056 4,059 4,059 4,059 4,059 4,059 4,059 4,059 4,059 4,059 4,059 4,059 Occupancy rate 96.9% 97.3% 97.4% 97.4% 97.1% 97.2% 94.0% 95.0% 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% Average monthly base rent 69.0 70.4 72.9 79.3 77.2 78.6 81.3 83.4 86.2 89.1 92.3 94.4 96.4 98.4 100.5 102.6 Rental revenue post AEI gain 1,897 1,881 1,957 2,066 2,135 2,184 2,234 2,282 2,330 2,378 2,428 Average monthly effective rent (post 80.1 82.2 84.6 87.3 90.2 92.3 94.4 96.4 98.4 100.5 102.6 Rental revenue post AEI loss 1,861 1,854 1,929 2,037 2,135 2,184 2,234 2,282 2,330 2,378 2,428

Neighbourhood 809 861 756 779 800 811 1,054 1,307 1,600 1,633 1,673 1,712 1,748 1,785 1,822 1,861 Base rental revenue (excluding AEI gain / loss) 793 814 1,070 1,363 1,636 1,673 1,712 1,748 1,785 1,822 1,861 Total Internal Floor Area (’000 sq. ft.) 3,249 3,249 2,713 2,713 2,682 2,674 2,674 2,674 2,674 2,674 2,674 2,674 2,674 2,674 2,674 2,674 Occupancy rate 95.4% 96.0% 95.7% 96.0% 97.3% 95.0% 94.0% 94.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% Average monthly base rent 43.5 46.0 48.6 49.9 51.1 52.0 54.0 70.9 88.5 106.2 108.6 111.1 113.5 115.8 118.3 120.7 Rental revenue post AEI gain 811 1,054 1,310 1,603 1,636 1,673 1,712 1,748 1,785 1,822 1,861 Average monthly effective rent (post 53.2 69.9 86.9 104.1 106.2 108.6 111.1 113.5 115.8 118.3 120.7 Rental revenue post AEI loss 811 1,054 1,307 1,600 1,633 1,673 1,712 1,748 1,785 1,822 1,861

Properties divested 213 333 156 123 0 0 0 0 0 0 0 0 0 0 0 0 Mall Merchandising 96 81 90 88 91 97 100 110 122 133 136 140 143 146 149 152 Source: Team Analysis, Company Data

17 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Appendix D-3: Hong Kong Mixed Rental Build-up HONG KONG MIXED-USE BUILDUP 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Mixed Use Portfolio Breakdown Total Destination Retail Area (’000 sq. ft.) 158 158 158 158 158 158 158 158 158 158 158 Total Car Park Addition (Units) 400 400 400 400 400 400 400 400 400 400 400 Total Office Revenue 120 129 137 139 141 143 145 147 149 152 154

The Quayside Retail IFA (’000 sq. ft.) 50 50 50 50 50 50 50 50 50 50 50 No. of carpark 400 400 400 400 400 400 400 400 400 400 400

Office revenue 97 104 111 112 113 115 117 119 120 122 124 Total Office Floor Area (’000 sq. ft.) 565 565 565 565 565 565 565 565 565 565 565 Occupancy rate 75.0% 80.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% Average monthly rent 38.0 38.2 38.4 38.8 39.3 39.9 40.5 41.1 41.7 42.4 43.0

T.O.P This Is Our Place / 700 Nathan Road Retail IFA (’000 sq. ft.) 108 108 108 108 108 108 108 108 108 108 108 No. of carpark 0 0 0 0 0 0 0 0 0 0 0

Office revenue 23 25 27 27 27 28 28 29 29 30 30 Total Office Floor Area (’000 sq. ft.) 100 100 100 100 100 100 100 100 100 100 100 Occupancy rate 75.0% 80.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% Average monthly rent 52.0 52.3 52.5 53.0 53.8 54.6 55.4 56.3 57.1 58.0 58.8 Source: Team Analysis, Company Data

Appendix D-4: Hong Kong Carparks Rental Build-up HONG KONG CARPARK BUILDUP 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H

Total number of carparks 60,864 60,864 56,094 56,094 56,540 56,978 56,978 56,978 56,978 56,978 56,978 56,978 56,978 56,978 56,978 56,978 Destination 4,165 4,165 4,165 4,165 4,165 4,165 4,165 4,165 4,165 4,165 4,165 4,165 4,165 Properties with carpark (excluding mixed proj) 5 5 5 5 5 5 5 5 5 5 5 5 5

Community 21,995 23,345 23,345 23,345 23,345 23,345 23,345 23,345 23,345 23,345 23,345 23,345 23,345 Properties with carpark 33 35 35 35 35 35 35 35 35 35 35 35 35

Neighbourhood 29,934 29,030 29,068 29,068 29,068 29,068 29,068 29,068 29,068 29,068 29,068 29,068 29,068 Properties with carpark 87 86 86 86 86 86 86 86 86 86 86 86 86

Monthly rental 769 768 745 751 759 765 800 800 839 839 887 887 941 941 998 998 Average monthly rental fee (in HKD) 2,713 2,713 3,039 3,039 3,410 3,410 3,565 3,565 3,738 3,738 3,954 3,954 4,195 4,195 4,450 4,450 # carparls slots 47,235 47,173 40,858 41,187 37,099 37,387 37,387 37,387 37,387 37,387 37,387 37,387 37,387 37,387 37,387 37,387 % of total 77.6% 77.5% 72.8% 73.4% 65.6% 65.6% 65.6% 65.6% 65.6% 65.6% 65.6% 65.6% 65.6% 65.6% 65.6% 65.6%

Hourly 253 256 243 240 229 202 209 238 246 246 254 254 263 263 271 271 Average hourly rental fee (in HKD) 15.9 16.0 16.1 16.3 16.4 16.4 16.9 16.9 17.5 17.5 18.0 18.0 18.6 18.6 19.2 19.2 # carparls slots 13,629 13,691 15,237 14,908 19,441 19,591 19,591 19,591 19,591 19,591 19,591 19,591 19,591 19,591 19,591 19,591 % of total 22.4% 22.5% 27.2% 26.6% 34.4% 34.4% 34.4% 34.4% 34.4% 34.4% 34.4% 34.4% 34.4% 34.4% 34.4% 34.4% Source: Team Analysis, Company Data

Appendix D-5: China Rental Build-up CHINA RENTAL BUILDUP 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H

China retail rental revenue 232 297 298 332 527 531 527 536 616 631 643 656 735 750 763 777 Total Internal Floor Area 151,52 151,52 151,52 151,52 302,97 302,97 302,97 333,26 333,26 366,59 366,59 (sqm) 4 4 4 4 0 302,970 0 0 7 333,267 7 333,267 4 366,594 4 366,594 Average daily rent per sqm 8.81 10.94 11.06 12.36 9.76 9.93 10.06 10.25 10.48 10.68 10.89 11.10 11.32 11.54 11.75 11.96

China office rental revenue 158 176 178 180 199 199 195 199 208 282 286 290 354 358 364 369 Total Internal Floor Area 118,21 118,21 (sqm) 75,780 75,780 75,780 75,780 75,780 75,780 75,780 75,780 75,780 98,514 98,514 98,514 7 118,217 7 118,217 Average monthly rent 11.81 12.99 13.19 13.82 15.34 15.52 15.67 15.86 16.09 16.33 16.57 16.82 17.06 17.30 17.55 17.82

Total Revenue 390 473 476 512 726 730 721 735 824 913 929 946 1,089 1,108 1,127 1,146 Source: Team Analysis, Company Data

18 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Appendix D-6: Overseas Rental Build-up AUSTRALIA RENTAL BUILDUP 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Australia office rental revenue (in HKD) 95 96 98 100 102 157 160 244 249 381 389 Total Net Lettable Area (sqm) 28,385 28,385 28,385 28,385 28,385 28,385 42,578 42,578 63,867 63,867 95,800 95,800 Average monthly rent (per sqm in AUD) 101.97 103.99 106.05 108.15 110.29 112.48 114.71 116.98 119.29 121.66 124.07 126.52 AUD/HKD 5.34 5.34 5.34 5.34 5.34 5.34 5.34 5.34 5.34 5.34 5.34 5.34 Source: Team Analysis, Company Data

Appendix D-7: Acquisition Assumptions Bull Case We assume that Link will be aggressive in pursuing the Vision 2025 acquisition strategy and the healthy NPI growth is able to support leverage expansion for potential acquisitions. ACQUISITION SCHEDULE 2020 2H 2021 1H 2021 2H 2022 1H 2022 2H 2023 1H 2023 2H 2024 1H 2024 2H 2025 1H 2025 2H China retail 0.0% 0.0% 0.0% 20.0% 0.0% 0.0% 0.0% 20.0% 0.0% 0.0% 0.0% China office 0.0% 0.0% 0.0% 40.0% 0.0% 0.0% 0.0% 40.0% 0.0% 0.0% 0.0% Overseas (AU/SG/KR) 0.0% 0.0% 100.0% 0.0% 0.0% 50.0% 0.0% 50.0% 0.0% 50.0% 0.0% Source: Team Analysis, Company Data

Base Case We assume that Link will partly complete its Vision 2025 as the acquisition plan is restricted by the capability in raising additional interest- bearing liabilities in order to maintain a healthy net gearing ratio. ACQUISITION SCHEDULE 2020 2H 2021 1H 2021 2H 2022 1H 2022 2H 2023 1H 2023 2H 2024 1H 2024 2H 2025 1H 2025 2H China retail 0.0% 0.0% 0.0% 10.0% 0.0% 0.0% 0.0% 10.0% 0.0% 0.0% 0.0% China office 0.0% 0.0% 0.0% 0.0% 30.0% 0.0% 0.0% 20.0% 0.0% 0.0% 0.0% Overseas (AU/SG/KR) 0.0% 0.0% 0.0% 0.0% 0.0% 50.0% 0.0% 50.0% 0.0% 50.0% 0.0% Source: Team Analysis, Company Data

Bear Case We assume that Link will not be able to conduct any acquisition under the bear case scenario. ACQUISITION SCHEDULE 2020 2H 2021 1H 2021 2H 2022 1H 2022 2H 2023 1H 2023 2H 2024 1H 2024 2H 2025 1H 2025 2H China retail 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% China office 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Overseas (AU/SG/KR) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Source: Team Analysis, Company Data

Incremental revenue under base case schedule We assume that the newly acquired properties will perform similarly as the existing portfolio in China and overseas. REVENUE INCREMENTAL DUE TO ACQUISITION (in HKDmm) 2020 2H 2021 1H 2021 2H 2022 1H 2022 2H 2023 1H 2023 2H 2024 1H 2024 2H 2025 1H 2025 2H China retail 0 0 0 37 0 0 0 45 0 0 0 Going in Cap-rate 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% China office 0 0 0 0 44 0 0 40 0 0 0 Going in Cap-rate 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% Overseas Office 0 0 0 0 0 52 0 81 0 127 0 Going in Cap-rate 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% Acquisition valuation 0 0 0 965 1,327 1,423 0 4,575 0 3,464 0 Source: Team Analysis, Company Data

Cap rate benchmark

Source: CBRE

19 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Appendix D-8: Key Assumptions (Base Case) HONG KONG RETAIL RENTAL ASSUMPTION 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Tenancy Destination Occupancy rate 96.9% 96.7% 94.3% 93.9% 96.0% 95.0% 92.0% 94.0% 95.5% 95.5% 95.5% 95.5% 95.5% 95.5% 95.5% 95.5% Community Occupancy rate 96.9% 97.3% 97.4% 97.4% 97.1% 97.2% 94.0% 95.0% 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% Neighbourhood Occupancy rate 95.4% 96.0% 95.7% 96.0% 97.3% 95.0% 94.0% 94.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% Rents Reversion rate by category Shops 28.5% 31.2% 20.4% 21.0% 18.9% 16.0% 12.0% 12.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% Markets/Cooked food stalls 12.8% 12.9% 26.7% 28.7% 12.5% 12.0% 8.0% 8.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% Education/Welfare and Ancillary 14.4% 15.0% 12.9% 9.6% 14.0% 13.0% 8.0% 8.0% 12.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% Portfolio segmentation (% of total area) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Shops 83.6% 83.6% 84.0% 84.0% 84.5% 84.5% 84.5% 84.5% 84.5% 84.5% 84.5% 84.5% 84.5% 84.5% 84.5% 84.5% Markets/Cooked food stalls 9.2% 9.2% 9.1% 9.1% 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% Education/Welfare and Ancillary 7.2% 7.2% 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% Contractual Increment Annualized increase in rent 3.3% 3.3% 3.3% 3.3% 3.3% 2.5% 2.0% 2.3% 2.5% 2.7% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

HONG KONG OFFICE RENTAL ASSUMPTION 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H The Quayside Occupancy rate 75.0% 80.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% Annualized increase in rent 2.0% 1.0% 1.0% 2.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% T.O.P This Is Our Place / 700 Nathan Road Occupancy rate 75.0% 80.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% Annualized increase in rent 2.0% 1.0% 1.0% 2.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

HONG KONG CARPARK RENTAL ASSUMPTION 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Occupancy rate Hourly rental 65.0% 65.0% 55.0% 55.0% 40.0% 35.0% 35.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% Rental fee % growth in average monthly rental fee 0.0% 12.0% 0.0% 12.2% 0.0% 4.5% 0.0% 4.9% 0.0% 5.8% 0.0% 6.1% 0.0% 6.1% 0.0% % growth in average hourly rental fee 3.3% 0.0% 3.3% 0.0% 3.3% 0.0% 3.3% 0.0% 3.3% 0.0% Average daily occupancy (by hour) 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10

CHINA RENTAL ASSUMPTION 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Retail Rent Contract Renewal Old rent of contract to be renewed / average market rate 50.3% 51.7% 53.5% 66.5% 65.2% 68.5% 69.0% 58.0% 57.5% 67.9% 67.9% 67.9% 67.9% 67.9% 67.9% 67.9% Retail reversion rate 46.4% 45.0% 43.2% 30.2% 31.5% 30.0% 30.0% 40.0% 40.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% Contractual Increment Annualized increase in rent 3.3% 3.3% 3.3% 3.3% 3.3% 1.5% 1.0% 2.0% 2.5% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1%

Office Rent Contract Renewal Old rent of contract to be renewed / average market rate 79.5% 83.4% 96.5% 72.9% 83.2% 85.5% 86.0% 85.5% 84.9% 84.9% 84.9% 84.9% 84.9% 84.9% 84.9% 84.9% Office reversion rate 17.2% 13.3% 0.2% 23.8% 13.5% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% Contractual Increment Annualized increase in rent 3.3% 3.3% 3.3% 3.3% 3.3% 1.5% 1.0% 1.5% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1%

Occupancy Retail Occupancy rate 96.5% 99.5% 98.8% 98.5% 99.0% 98.0% 96.0% 96.0% 98.0% 98.5% 98.5% 98.5% 98.5% 98.5% 98.5% 98.5% Office Occupancy rate 98.1% 99.3% 98.9% 95.5% 95.1% 94.0% 91.0% 92.0% 95.0% 97.4% 97.4% 97.4% 97.4% 97.4% 97.4% 97.4%

AUSTRALIA RENTAL ASSUMPTION 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Occupancy Retail Occupancy rate n/a 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Office Occupancy rate 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Contractual Increment Annualized increase in rent 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Source: Team Analysis, Company Data

20 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Appendix D-9: Distributable Income and DDM As we do not forecast any non-operation/non-cash profit and loss during the calculation of net profit, e.g. the change in fair value of investment properties. Therefore, we do not need to adjust for non-cash items during the calculation of distributable income. DISTRIBUTABLE INCOME 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 (in HKDmm) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Net property income 3,870 3,934 4,104 4,344 4,861 5,100 5,389 5,396 5,778 5,771 6,119 6,111 General and administrative expenses (201) (267) (202) (295) (234) (352) (270) (368) (285) (395) (301) (419) Other revenue and cost (298) (315) (327) (327) (336) (352) (345) (380) (372) (419) (410) Taxation (664) (686) (712) (819) (840) (899) (883) (952) (931) (987) (965) % of (NPI - GA expense) in the year 50.0% 49.1% 50.9% 49.3% 50.7% 50.4% 49.6% 50.5% 49.5% 50.5% 49.5% % attributable to Unitholders 99.5% 99.5% 99.5% 99.5% 99.5% 99.5% 99.5% 99.5% 99.5% 99.5% 99.5% Profit for the year attributable to Unitholders 6,742 2,691 2,886 2,995 3,462 3,554 3,848 3,780 4,140 4,052 4,389 4,294

Adjustments: – Deferred taxation on fair values attributable to Unitholders 65 115 98 102 97 99 119 117 125 122 125 123 – Others (3,986) 0 0 0 0 0 0 0 0 0 0 0

Discretionary distribution 145 143 143 143 143 143 0 0 0 0 0 0 Discretionary distribution per unit 0.07 0.07 0.07 0.07 0.07 0 0 0 0 0 0 Total Distributable Amount 2,966 2,950 3,128 3,240 3,703 3,796 3,967 3,896 4,264 4,174 4,514 4,416 Source: Team Analysis, Company Data We assume Link to complete its unit repurchase. DIVIDEND DISCOUNT MODEL VALUATION (in HKDmm) 2020E 2021F 2022F 2023F 2024F 2025F Future Distribution 2,950 6,368 7,499 7,863 8,438 8,930 % growth 17.8% 4.9% 7.3% 5.8% No. of units (mm) 2,097 2,050 2,050 2,050 2,050 2,050 2,050 DPU (HKD) 1.44 3.11 3.66 3.84 4.12 4.36 Terminal Value 105.72 Discount rate for the year 4.09% 4.09% 4.20% 4.20% 4.32% 4.43% Risk free rate 1.75% 1.75% 2.00% 2.00% 2.25% 2.50% Market risk premium 6.08% 6.08% 6.08% 6.08% 6.08% 6.08% Beta 0.54 0.54 0.54 0.54 0.54 0.54 FV at the end of year 104.08 106.84 108.10 108.83 109.52 110.08 Discount period (from period end date to 08-Jan-2020) 0.45 Fair value (HKD) 102.21 Source: Team Analysis, Company Data TARGET ENTERPRISE VALUE Number of units outstanding (mm) 2,086 Target Price (HKD) 102.21 Equity value (HKDbn) 213.2 + Debt 27.9 + Non-common unit securities 5.3 - Cash and cash equivalence (6.8) Target Enterprise value (HKDbn) 239.6 Source: Team Analysis, Company Data

Appendix D-10: Free Cash Flow and DCF We assumed Link to hold 4% revenue as required cash for its operation by referring the minimum cash-to-revenue ratio in the past 5 years (3.84% in FY2016). FCF CALCULATION (in HKDmm) 2020E 2021F 2022F 2023F 2024F 2025F EBIT 7,590 7,988 9,478 10,181 10,759 11,155 (-) Tax on EBIT (1,328) (1,398) (1,659) (1,782) (1,883) (1,952) (+) Depreciation and Amortization 29 35 44 54 67 82 (-) Change in NWC 173 99 351 160 155 109 (-) Capital Expenditure (899) (914) (515) (116) (145) (178) (-) Change in required cash (27) (30) (85) (42) (37) (27) UFCF 5,537 5,780 7,615 8,454 8,916 9,189 Y-o-Y Growth 4.4% 31.7% 11.0% 5.5% 3.1%

Terminal Value 238,492

Discount Rate (WACC) 3.88% 3.88% 3.96% 3.96% 4.02% 4.09% Cost of Equity 4.1% 4.1% 4.2% 4.2% 4.3% 4.4% Cost of Debt 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% Tax Rate 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% D/E Ratio 13.7% 14.1% 15.2% 15.6% 17.9% 19.8%

PV at beginning of year 228,212 231,536 234,730 236,416 237,313 237,943 Source: Team Analysis, Company Data EQUITY VALUE Enterprise value (HKDbn, at 08-Jan-2020) 233 - Debt (28) - Non-common unit securities (5) + Excess Cash 6 Equity value (HKDbn) 206 Number of units outstanding (mm) 2,086 Fair value (HKD) 98.88 Source: Team Analysis, Company Data

21 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 Appendix E: Corporate Governance

Appendix E-1: Unitholder Structure with Substantial Interests

Part XV of the Securities and Futures Ordinance (SFO) requires the disclosure of interests to the Stock Exchange and investors on any substantial unitholders with interest of 5% or more. Link executives must also disclose their personal interests (see Appendix E-2). Overall, Link does not have a significant unitholder with the aggregated top 4 unitholders interests at around one-fourth of total issued units.

COMPANY TYPE Q4 2019 UNIT % Q1 2019 UNIT % Q4 2018 UNIT % 9.10% (Long) 9.02% (Long) 8.33% (Long) BlackRock, Inc. Interests of Controlled Corporations 0.04% (Short) 0.04% (Short) 0.00% (Short) The Capital Group Companies, Inc. Interests of Controlled Corporations 7.02% 7.04% 6.20% State Street Corporation Investment Manager 6.02% 5.95% 5.88% Stichting Pensioenfonds ABP Investment Manager 5.41% 5.37% 5.37% Interests of Controlled Corporations/ 5.70% (Long) Investment Manager/Trustee/ Personal JPMorgan Chase & Co. / 0.62% (Short) Having A Security Interests in / 3.28% (Lending pool) Shares/Approved Lending Agent TOTAL SUBSTANTIAL UNITHOLDER % 27.59% 37.02% 25.78% Source: Company Data

Appendix E-2: Board of Directors and Executive Management Team Analysis

BOARD OF DIRECTORS Affiliated Position Name Age Holdings Tenure Career Description Years - INED of 5 firms, including CLP Holdings, Lenovo Group Mr. Nicholas - Past INED of Hysan Development Company Chairman Charles 64 0.0065% 3 3 - Retired as Partner of PwC in 2007 INED ALLEN(3)(4) - Awarded Directors of the Year 2017 by The Hong Kong Institute of Directors - Expert in accounting, auditing, securities and regulation Mr. George - Director of all Link subsidiaries CEO Kwok Lung - Chairman of Supervisory Committee of Tracker Fund of Hong Kong 57 0.1959% 9 10 ED HONGCHOY - Named Harvard Business Review's 100 Best Performing CEOs in the World 2018 (3)(4) - Expert in finance, investment banking and real estate investment - Director of all Link subsidiaries Mr. Andy COO - Past ED and CFO of Paul Y. Engineering Group Limited CHEUNG Lee 52 0.0748% 1 9 ED - Ming Past ED of Hopewell Holdings Limited - Expert with 27 years of experience in business development, finance and audit Mr. Ian Keith - Founder and Chairman of Aedas, a top 10 architectural practice globally NED GRIFFITHS 64 0.0042% 12 12 - Expert in high density urban planning and high-rise building, airports and civic (4) facilities design Mr. - Co-founder of Brooke Husband Limited, a HK real estate consulting practice Christopher - Global President and Chair of the Governing Council of Royal Institution of INED 50 0.0005% 1 1 John Chartered Surveyors BROOKE(4) - Past senior executive at CBRE - NED of Treasury Wine Estates Limited Mr. Ed CHAN - INED of Yum China Holdings, Inc. INED Yiu Cheong 56 0.0011% 3 3 - Operating Partner for SoftBank Investment Advisers (2)(4) - Past President and CEO of Walmart China - Past senior executive of Dairy Farm Group Mr. Blair - INED of 2 firms: Principal Financial Group, Inc., Dah Sing Banking Group Limited Chilton - Past Chairman of Nikko Asset Management Co., Ltd. INED 62 0.0011% 3 3 PICKERELL - Past CEO of HSBC Investments (now HSBC Global Asset Management) (2)(3) - Past MD and Asia CEO of Morgan Stanley - Past Managing Partner and Asia Chairman of Baker & McKenzie Ms. Poh Lee - Founder and Director of Mighty Oaks Foundation Limited INED 60 0.0019% 4 4 TAN(1)(3) - Founding Board of Independent Schools Foundation - Expert in M&A, PE transactions in APAC - INED of 3 firms: CLP Holdings, HSBC Insurance Limited and HSBC Life Limited Ms. May Siew INED 63 0.0061% 6 6 - Past ED and CEO of Standard Chartered Bank Boi TAN(1)(2)(3) - Past Chairman of The Hong Kong Association of Banks Mr. Peter TSE - INED of Hong Kong Aircraft Engineering Company Limited INED 68 0.0020% 5 5 Pak Wing(1) - Past ED and NED of CLP Holdings Limited - INED of 3 firms: Wheelock and Company Limited, DBS Bank Limited and HSBC Ms. Nancy INED 66 0.0018% 5 5 Provident Fund Trustee Limited TSE Sau Ling(1) - Past CFO and Director of Finance and IT Services of Hospital Authority - INED of Ascott Residence Trust Management Limited Ms. Elaine - Co-founder of Shama, a boutique serviced apartment brand INED Carole 54 0.0015% 6 6 - Co-founder of a co-living brand TULU based in Shanghai YOUNG(2)(4) - Expert in real estate and hospitality across Asia

22 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 EXECUTIVE MANAGEMENT TEAM

Affiliated Position Name Age Responsibilities and Career Description Years Mr. George Kwok CEO Lung 57 10 See above ED HONGCHOY(3)(4) Mr. Andy COO CHEUNG Lee 52 9 See above ED Ming - Oversees finance, treasury and insurance, risk management and research and data analytics Mr. NG Kok CFO 47 1 - Past senior executive of CapitaLand Limited Siong(4) - Expert in Asian real estate in finance, investment, corporate development and business technology Mr. Eric YAU Siu - Oversees development, execution of corporate strategy, external affairs and stakeholder management CSO 45 9 Kei - Expert in investment banking, investor relations, sustainability, marketing and corporate finance Director - Oversees corporate communication, branding, marketing and customer experience management and (Corporate Ms. Lorraine Chan 50 1 engagement Affairs and Kuen Kuen - Marketing) Past Head, Managing Director of Corporate Communications at HKEX, tenure of 20 years Director - Oversees legal and company secretarial affairs and regulatory compliance (Legal) and Mr. Ricky CHAN 60 9 - Company Ming Tak 35 years of experience in legal profession with real estate, corporate finance, listing and corss-border Secretary transactions Director Mr. Gary FOK Yip - Oversees management of China properties, including leasing, property management and asset upgrade (China Asset 52 5 Sang - Management) 27 years of experience in asset management in China and Hong Kong Director Ms. Christine - Oversees asset investment, including acquisition, new market development, market study and research 44 6 (Investment) CHAN Suk Han - 20 years of experience in real estate and fund management Director - Oversees asset management and leasing of Hong Kong asset portfolio. Ms. Peionie (HK Asset 49 14 - KONG Po Yan 26 years of experience in real estate industry, especially in retail and commercial leasing and Management) implementation of large-scale renovation projects and trade-mix repositioning exercises. Director Mr. William LAI - Oversees property management, including management and operations of car parks. (Property 56 1 Hon Ming - Management) 30 years of experience in Hong Kong real estate industry. Director - Oversees the formulation and execution of asset enhancement projects, and the management of Mr. Max WONG (Project and 54 6 operation and maintenance functions to realize the full potential of the portfolio Hon Keung Operations) - 27 years of experience in major residential and commercial projects in Hong Kong and Macau Director Ms. Phyllis NG - Oversees human resources, learning and development and general administration 55 3 (HR) Yuen Fan - 17 years at UBS AG as senior HR, started own consulting business in 2013 Source: Team Analysis, Company Data Notes: (1) Audit and Risk Management Committee: Chaired by Mr. Peter TSE Pak Wing (3) Nomination Committee: Chaired by Mr. Nicholas Charles ALLEN (2) Remuneration Committee: Chaired by Mr. Blair Chilton PICKERELL (4) Financial & Investment Committee: Chaired by Mr. Nicholas Charles ALLEN

Appendix E-3: ESG and Corporate Sustainability KPIs and Initiatives Analysis

Defined in “Vision 2025” as “Visionary Creativity”, Link drafted a value creation model to measure ESG successes through several KPIs. In the following table, we assess its various KPIs and whether Link has the right initiatives in place to attaining the targets.

KPI INITIATIVES BENEFICIARIES RESULTS - 300 participants in 2018/2019 - Share best practices Tenant Academy - 33 tenants awarded Tenant Excellence Award - Join in-depth business trainings Tenant sales growth Introduced the first - 36,000 members - Participate in sales-driven promotions outperforms market loyalty programme - Engaged 70% tenants “LIKE Link’s Shop - 300 tenants from 68 malls - 1st HK tenants’ employee appreciation event Staff” - 1,500 shop staff participants - 86,000 votes cast, 55,000 Park and Dine app downloads - 75 marketing events - Tenants “Souper Kitchen” promoted food upcycling and family including festive bonding; all sales were donated to Food Angel Customer satisfaction - General public and community - “Stanley Plaza Finnish Christmas Wonders” attracted score >70% - Visitors programmes 300,000 visitors Perception Audit - Link REIT - +7% YOY favourable brand perception Major Project Fund - 9 Projects approved in 2018/2019 totalling HK$14.4M - Youth, active aging, and general public & Link University - 0.25% net property income funds charitable projects - 190 university scholarship awardees Link Together Scholarships annually Initiatives creates Food Angel – Love - Link’s fresh markets and shopping centres - HK$3.2 social benefits created for each HK$1 invested ≥HK$2 social benefit and Food Sharing - People in need of food redistribution Music for everyone - 1,400 underprivileged children - HK$1.5 social benefits created for each HK$1 invested @ Link Optimize building - Cumulative 28.1% reduction in energy use since 2010 energy efficiency Reduce energy “Low Carbon - Link - Made a pledge with the Business Environment Council consumption by Charter” - supporting the transition towards a low carbon future 35% by 2020 General public - Identified 29 properties for installation; conducting Solar PV systems feasibility assessment in 2019/2020 at 4 properties CONNECTION - 60 participants across value chain (tenants, - Soon create a pilot programme on “single-use plastic” Conference Government, contractors, suppliers, NGOs) Zero organic waste to - Donated 148.9 tonnes of surplus food and collected landfill - Link’s fresh markets Food donation 190.8 tonnes of raw/packaged food from other sources - 1.9M targeted beneficiaries per year - Redistributed or used to produce 1.2M meals to needy Source: Team Analysis, Company Data

The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020 23 Appendix E-4: Corporate Governance Assessment Metric

We adopted the Institutional Shareholder Services (ISS) ESG Governance QualityScore framework to evaluate Link’s overall corporate governance quality with a data-driven approach segmented into 4 critical themes (56 questions). The following table summarizes the analysis:

CORPORATE GOVERNANCE QUALITY SCORECARD SCORE WEIGHT RESULT 1. AUDIT & RISK OVERSIGHT 10/10 25% 25% 1.1. AUDIT CONTROVERSIES 10/10 a. No regulator enforcement actions against Link or any Directors b. All Audit Committee members are financial experts c. No late filing of Annual Report according to SFC 1.2. EXTERNAL AUDITOR 10/10 a. No adverse opinion b. No non-audit fees 2. BOARD STRUCTURE 8.3/10 30% 25% 2.1. BOARD CONTROVERSIES 10/10 a. No problematic practices that reduce shareholder rights b. Lowest vote support received by directors in AGM was 99.8% 2.2. DIVERSITY 5.5/10 a. 33% women are on the Board, but none serves Committee leadership roles b. Director tenure SD at 3.19 (max directorship tenure: 9 years) c. Director age averages at 59.7 with 5.79 SD (H-share average: 53.8) d. Only 1 NED serves a lengthy tenure (Mr. Ian Griffiths at 12 years) 2.3. INDEPENDENCE 9.1/10 a. 12 Directors (75% INEDs; 17% EDs; 8% NED) b. Board Chair and all Committee Chair are INEDs c. CEO sits in the Nominating Committee; other Committees ran by INEDs d. No appointment of Senior / Lead Independent Director 2.4. POLICIES 9/10 a. Related-party transaction involving CEO of only HK$11,000 to HKIoD 2.5. PRACTICES 7.9/10 a. Fully disclosure of Director attendance, with only 1 attended <75% b. All Board members own Link units c. 7/12 Directors served on outside Boards; all are INEDs 3. COMPENSATION & REMUNERATION 6.3/10 15% 9.4% 3.1. DISCLOSURE 3.6/10 a. Fully disclosure of Director and Executives’ remuneration b. Brief disclosure of financial and non-financial KPIs for short-term incentive c. Very brief performance measure disclosure on long-term equity/cash awards d. No disclosure on E&S performance measures on short/long-term incentive 3.2. EQUITY RISK MITIGATION 5.3/10

a. 2 to 3-year vesting period (50% on 2nd year, 50% on 3rd year) b. No specific measures disclosure on executive stock award plans 3.3. NON-EXECUTIVE PAY 10/10 a. Directors enjoy no performance-linked remunerations 3.4. USE OF EQUITY 8.3/10 a. Outstanding equity-based plans towards share capital at only 0.12% b. Pricing condition for stock award through open market purchase 4. SHAREHOLDER RIGHTS & TAKEOVER DEFENSES 7.1/10 30% 21.4% 4.1. MEETING AND VOTING 4.7/10 a. No classes of stocks with different voting rights b. No cumulative voting for director election (Link uses winner-take-all polling) 4.2. SHARE PROTECTION 8.7/10 a. Dilution limit to issue share at 20% indicated by Rule 12.2 of the REIT Code b. Discount limit to issue share at 20% indicated by SFC under the trust deeds 4.3. TAKEOVER DEFENSES 10/10 a. No controlling shareholder TOTAL CORPORATE GOVERNANCE SCORE 8.1/10 100% 80.8% Legend: 10 – Low risk to shareholders 5 – Moderate risk to shareholders 0 – High risk to shareholders HIGHLIGHTS & KEY TAKEAWAYS 1. Audit & Risk Oversight – Excellent auditing practices overseen by experienced Audit Committee whilst fully complying with regulatory standards. 2. Board Structure – Reputable and independent with fair diversity but is overage. 7/9 INEDs serve on outside boards, some excessively (up to 5). 3. Compensation & Remuneration – Disclosure on financial/non-financial performance measures lacks clarity associated with short and long-term incentive. 4. Shareholder Rights & Takeover Defenses – While adopting a one-unit-one-vote policy with no different voting rights, Link has no controlling/significant unitholder and is resilient to takeover. Unitholders are also protected by REIT Code and SFC regulations. Source: Team Analysis 24 The Hong Kong University of Science and Technology CFA Institute Research Challenge 2020