The development of Real Estate Investment Trusts (REITs) in October 2013

P.1 What is a REIT?

 A REIT (“Real Estate Investment Trust”) is a collective investment scheme constituted as a trust that invests primarily in real estate with the aim of providing investors with returns derived from rental income

 REITs originated in the United States in the 1960s, gradually gaining popularity in Australia and other parts of the world

 REITs are required to payout most of their income to unitholders in the form of distribution, usually > 90%

 REITs have restrictions on borrowing limits, use of financial instruments and development activities

P.2 Investment Advantages of REITs

Buying Physical Assets Buying Listed REITs Barrier to entry Medium to High Low Liquidity Low High Divisibility Low High Flexibility Low High Transparency Low High Profitability Stable to Fluctuate Stable Costs and High Low disbursements (HK property stamp duty: 1.5 – 8.5%; (Brokerage: ~1.0%; HK special stamp duty: 5 -20%; HK Stock Exchange trading fee: 0.005%; HK buyer stamp duty: 15%; SFC transaction levy: 0.003%; Estate agent commission; Solicitor fees; Investor compensation levy; etc Mortgages; Taxes; Government rate; (if applicable)) Insurance; etc (if applicable)) Day-to-day operational Required Not required management Risk exposure Concentrated Diversified

P.3

H-REIT Structure – Typically Externally Managed

Typical externally managed H-REITs

Sponsor Unitholders

Acquisition Assets Distributions Holding of units

Management Services Act on behalf of Unitholders Manager REIT Trustee Management Fees Trustee’s Fees

Net property income Ownership

Property Management Services

Property Manager Properties Property Management Fees

P.4

The Link REIT – Internally Managed

The Manager is stapled together as part of the REIT

Trustee Unitholders Custodian of assets

Trustee’s Fees HSBC Institutional Trust Ownership of Units Services (Asia) Limited THE LINK REIT

Manager Special Purpose Vehicles

Management Services The Link The Link Management Limited Holdings Limited Manager’s Fee on cost recovery basis 100%

182 Properties

The Link REIT is the only internally managed REIT in Asia P.5

Hong Kong Business Trust – Stapled Units Structure

Sponsor/ Controlling Unitholder Public Investors

Share Stapled Units 100%

Units Provision of trustee/ management service Trustee - Manager Trust Reimbursement of expenses

100% Ordinary Shares Preference Shares

Listco

Operating Business

P.6 H-REITs At a Glance

Name Year of Stock code Asset types Assets' Market cap IPO location (HK$ billion)* The Link 2005 823.HK Retail Hong Kong 87.6 Prosperity 2005 808.HK Office Hong Kong 3.3 Yuexiu 2005 405.HK Office China 10.6 Champion 2006 2778.HK Diversified Hong Kong 20.0 Sunlight 2006 435.HK Diversified Hong Kong 4.9 Regal 2007 1881.HK Hotel Hong Kong 7.4 Fortune 2010 778.HK Retail Hong Kong 11.7 Hui Xian 2011 87001.HK Diversified China 19.3 New Century 2013 1275.HK Hotel China 2.8

* Source: Data as at 30 Sep 2013, Bloomberg P.7 Hong Kong Lag Behind Singapore as Developing into a Regional Centre for REITs

 Development of the REIT market in Hong Kong began with the listing of The Link REIT in 2005, while Singapore REIT market was started in 2002 with the IPO of CapitaMall Trust

 To date, the development of the two markets are in stark contrast:

Number of REITs/ Total Market Cap Location of Types of Assets Business Trusts (@30/09/13) Assets

Retail, mixed, office, Hong Kong 9 ~US$22bn Hong Kong, PRC hospitality

Retail, mixed, office, Singapore, PRC, hospitality, industrial, Hong Kong, Singapore 33 ~US$46bn healthcare, India, Japan, apartment Malaysia

P.8 Comparison of Hong Kong and Singapore REIT Markets Growth of S-REIT Market Growth of H-REIT Market

Development of S-REITs Development of H-REITs 60 60

50

50

40

40

end (US$B)

-

end (US$B) - 30 30

20

20 Market cap at at Marketcap year

10 at Marketcap year 10

2005 2006 2007 2008 2009 2010 2011 2012 2013

Singapore REIT market has vastly outgrown Hong Kong REIT market by number of listings, size, diversity of asset type and diversity of geography

Source: Bloomberg ; Market cap of 2013 as at 30 September 2013 P.9 Regulatory Restrictions on REITs

Criteria US Australia UK France Netherlands Singapore Japan Hong Kong

Management Internal & Internal & Internal & Internal & Internal External External Internal & external external external external external

Property 75%+ Flexible 75%+ Flexible 100% 70%+ 75%+ 100% Investment

Overseas Yes Yes Yes Yes Yes Yes Yes Yes Investment Property Yes Yes Yes Yes Minimal Max. 10% Restricted No Development assets

Gearing Limit No limit No limit 1.25x No limit 60% 35% total No limit 45% interest total assets assets; 60% total assets cover test total assets if credit rating Distribution > 90% 100% > 90% > 85% 100% fiscal > 90% > 90% > 90% Percentage taxable taxable rental asset taxable earnings taxable taxable taxable income income income income income income income

Tax Yes Yes Yes Yes Yes Yes Yes No Transparency

Hong Kong’s REIT regulations are relatively more restrictive than other international markets

Source: “Implications for the Strategic Development of UK REITs from the Experience of LPTs in Australia”, IPF Research Programme 2006-2009 P.10 Key Issues of the Hong Kong REIT Market

Restrictions under Mandatory Provident Fund

Exclusion from

Preclusion from Development Activities

Uncertainties in REIT Regulations

P.11 Developing Hong Kong into a Regional Centre for REITs

 Potential for listing of PRC and other overseas REITs

 REIT as an investment choice for retail investors

 Cluster effect to attract REIT specialist analysts and global property investors

 Platform for developers to recycle capital by offloading non-core assets to REIT’s

 Most significantly, REIT is a heavy user of capital markets(1) leading to demand for rights issues, private placements, CMBS, bonds and loans, thus supporting Hong Kong’s financial services industry

Note (1): As REIT has to distribute at least 90% of its distributable income, it does not have retained earnings for acquisitions or capital expenditure and relies on the capital markets for funding.

P.12 REIT Indices Outperformed Broad Market Indices

350

300

250

200

150

based to 100 as at 1 Jan Jan 2009 1 at as 100 to based -

100 Indices re Indices 50

0 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13

Hang Seng REIT Index Straits Times REIT Index Hang Seng Index Straits Times Index REIT Indices Broad Market Indices

Source: Bloomberg

P.13 Outperformance of Retail REITs

400

350

300

250

200

150

based to 100 as at 1 Jan Jan 2009 1 at as 100 to based -

100

Unit Price re Price Unit 50

0 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13

The Link REIT Hang Seng REIT Index Retail REIT Source: Bloomberg

P.14 Hong Kong Retail Market

 Strong Retail sales growth

 Steady household income growth supports retail market

 Decentralisation of retailers drives retail space demand

 Limited new supply of retail space

P.15 Hong Kong Retail Market Growth

Year on Year Change of Retail Sales Value

50% YoY% 50% 46.6% 40% Global financial crisis 45%

30% 40% 36.1%

35% 32.0% 20% 30% 28.0% 24.9% Tech bubble burst 25% 10% 21.6% 20.2% 20% 18.3% 17.3% 16.4% 0% 14.2% 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12Jan12 - JulJan 13-Jul 13 15% 12.5% 9.8% 9.6% 10.3% 9.3% 9.7% 10% 7.2% 6.8% 7.6% 7.7% -10% 5.6% 5% 2.8% 2.5% SARS outbreak -20% 0% All retail Food, Supermarkets Clothing, Department Jewellery, Supermarkets outlets Alcoholic Footwear & Stores Watches, -30% Drinks & Allied Clocks & Jewellery Tobacco Products Valuable Gifts Asian financial crisis -40% Foods & alcoholic drinks Department stores 2010 2011 2012 Jan-Jul 13 Clothing

Source: Census and Statistics Department Source: CEIC Data Company Ltd (“CEIC”)

Daily necessities resilient over long run Continuous growth in retail sales P.16

Hong Kong Tourism Growth

Steady Tourist Arrival Growth Mainlanders’ Spending on Retail Sales

2008 2009 2010 2011 2012 Tourist Arrivals Contribution of Mainlanders’ 19% 24% 24% 27% 31% (Millions) Spending on Shopping to HK Retail Sales* 50 48.62 Mainland Tourist - 4,106 4,649 4,980 5,237 5,119 45 41.92 Per Capita Overall Spending (HK$) 40 HK$’B 36.03 34.91 500 35 450 30 28.10 400 25.37 $137 25 22.68 350 $111 300 20 18.82 $88 250 $52 $67 15 200 $309 10 150 $295 $237 100 $221 $208 5 50 0 - 0

2010 2011 2012 Jan-Jun 2013 2008 2009 2010 2011 2012 +

Total (Millions) Mainland China (Millions) Total Retail Sales HKD(HK$’B) bn Mainlanders' Spending (HK$’B)HKD bn

*Contribution (%) is estimated based on the Mainland tourists’ spending on shopping from HKTB as a fraction of HK Retail Sales from C&SD (The Link REIT’s Estimates)

Source: CEIC Source: CEIC, Hong Kong Tourism Board (“HKTB”)

Continuous growth in tourist arrival and mainlanders’ spending on retail sales P.17

Hong Kong Economic Growth

GDP & PCE Unemployment Rate

YoY% 2Q13 % YoY 9 14 8 12 +4.2% 7 10 6 8 +3.3% 5 4 6 3 4 2 2 1

0

0

04 11

08

05 06 07 10 12 13

04 07 09 10 11

05 08 12

- -

-

------

- - - - -

- -

-2 -

4Q05 2Q03 4Q03 2Q04 4Q04 2Q05 2Q06 4Q06 2Q07 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13

Jul Jul

Apr

Oct Oct

Jun Jan

Mar Mar

Feb

Dec Sep Nov Dec

Aug May -4 May Months Unemployment Rate -6 May 13 3.4% -8 Jun 13 3.3% GDP Private Consumption Expenditure Jul 13 3.3% 2013F 3.1% Source: Census and Statistic Department and Economist Intelligence Unit Source: Census and Statistic Department and Economist Intelligence Unit

Modest Growth in GDP & PCE with unemployment rate at near historic low supporting income growth P.18 Source: Census & Statistics Department P.18 Hong Kong Economic Growth

Household Income Growth

Median Monthly Household Income (including bonus) HK$ 2Q13 Median HH 2Q13 32,500 YoY Income (2Q13) 30,000 27,500 Public Rental Housing +10.0% HK$13,200 25,000 22,500 Subsidized Home +4.8% HK$24,000 20,000 Ownership Housing 17,500 Private Permanent 15,000 0.0% HK$30,000 12,500 Housing 10,000 Overall +6.3% HK$21,900

7,500

2Q06 2Q03 4Q03 2Q04 4Q04 2Q05 4Q05 4Q06 2Q07 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13

Private Permanent Housing Subsidized Sale Flats Overall Public Rental Housing

Source: CEIC

Public household income growth outpaced steady overall growth due to minimum wages and labour shortage P.19 Source: Census & Statistics Department P.19 Market Decentralisation

New Territories East Wo Che, Tai Wo, Choi Yuen New Territories West Leung King, Chung Fu, Yau Oi, On Ting

Tsuen Wan Tong Kwai Shing East, Shek Lei, Lok Fu, , Lung Cheung Kwai Fong Tseung Kwan O Hau Tak, Sheung Tak, Nan Fung

Expansion of international retailers forcing high street retailers to suburban locations

P.P.2020

The Link REIT - Portfolio Benefitting from Mainland Shoppers

Chung Fu Plaza Choi Yuen Plaza Tai Wo Plaza Lok Fu Plaza

Lung Cheung Plaza Butterfly Plaza

Wong Tai Sin Plaza Stanley Plaza

Presence with The Link REIT’s properties

P.21 The Link REIT - Asset Enhancement Investments

30 Completed Asset Enhancement Projects with a Total Capex of HK$2.7B

HK$’B 9 No. of Projects 1.40 9

8 1.20 7 1.00 6 6 5 5 5 5 0.80 5 4 4 1.30 0.60 4

3 0.40 0.78 0.59 0.60 2 0.48 0.49 0.20 1 0.22 0.12 0.00 0 Financial 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 and Year beyond

Total Reported Project Capex (HK$(HK$’'B)B) No. of Projects Completed Total Estimated Project Capex (HK$’B) No. of Projects Underway/ Pending Statutory Approval

Note: Data as at 31 March 2013 Continuous improvement of assets and service quality

P.22 The Link REIT - Continuous Improvement of Asset and Service Quality

Chung Fu – Established One-stop Shopping Centre in

From This… To This…

Asset Enhancement (Phase II) to be completed in 2013

P.23 The Link REIT - Continuous Improvement of Asset and Service Quality

Yau Oi and On Ting – A New Tuen Mun Flagship Upon Asset Enhancement Completion

From This… To This…

Estimated completion in late 2014

P.24 The Link REIT - Continuous Improvement of Asset and Service Quality

Tai Yuen Market – Pioneer Fresh Market Asset Enhancement Project

From This… To This…

Completed in 2011

P.25 The Link REIT - Business Model with Multiple Growth Drivers

Our Vision, Mission, Values ManagingTo Be a andWorld operating Class Realour Estate business Investor with andRespect, Manager Excellence,Serving and Integrity Improving and Teamworkthe Lives of Those Around Us Our Growth Drivers Asset Asset Asset Management Enhancement Investment

Our Strengths Real Estate Financial Strong Corporate Expertise Strength Governance

P.26 The Link REIT -

Aligning Vision and Strengthening Culture

To build a business with long term sustainable growth

P.27 The Link Real Estate Investment Trust

HEAD OFFICE 33/F, AXA Tower, Landmark East, 100 How Ming Street, , Kowloon, Hong Kong

Tel: +852 2175 1800 Fax: +852 2175 1900 Email: [email protected] Website: www.thelinkreit.com

P.28