LIPPO-MAPLETREE - Lippo Malls Indonesia Retail Trust - Investor ...

DistributionsThe distributable income of LMIR Trust (“Distributable Income”) is substantially based on the cash flow ofLMIR Trust.The cash flow generated by the Indonesian SPCs, from owning and letting out spaces in the Retail Mallsand the Retail Spaces, will be received by the Singapore SPCS in the form of (1) dividend income; (2)repayment of principal on the shareholders’ loans extended by the Singapore SPCs to the respectiveIndonesian SPCs and (3) interest payment on the shareholders’ loans. The amount of principal repaymenton the shareholders’ loans will be mainly equivalent to the total amount of depreciation expense of theProperties, thereby extracting such cash trapped in the Indonesian SPCs.Thereafter, the cash flow will be received by LMIR Trust from the Target Singapore SPCs in the form of(1) tax-exempt dividends; and (2) proceeds from redemption of the redeemable preference shares in theTarget Singapore SPCs.The Manager’s distribution policy is to distribute 100.0% of the tax-exempt income (after deduction ofapplicable expenses) and capital receipts of LMIR Trust for the Forecast Period 2007, Projection Year2008 and Projection Year 2009 and at least 90.0% of the tax-exempt income (after deduction of applicableexpenses) and capital receipts of LMIR Trust thereafter. The tax-exempt income comprises dividendsreceived from the Target Singapore SPCs, which are ultimately paid out of income derived by theIndonesian SPCs from the leasing of the Properties. The capital receipts comprise amounts receivedby LMIR Trust from the redemption of redeemable preference shares in the Target Singapore SPCs.The Manager believes that it is appropriate to distribute 100.0% of the tax-exempt income (after deductionof applicable expenses) and capital receipts of LMIR Trust for the Forecast Period 2007, Projection Year2008 and Projection Year 2009 given that in relation to the Retail Spaces, the Master Lessee under each ofthe Master Lease Agreements is responsible for all repair and replacement works in relation to themechanical and electrical equipment which are of a capital nature for the first 30 months of the lease term.In addition, asset enhancement works are currently being carried out at The Plaza Semanggi and haverecently been completed at Bandung Indah Plaza, Mal Lippo Cikarang and Ekalokasari Plaza, and theManager expects the capital expenditure required for each of these Retail Malls subsequent to thecarrying out of asset enhancement works to be low for the period leading up to the end of Projection Year2009.The Manager’s distribution policy for the period subsequent to the Projection Year 2009 is intended toprovide for some flexibility in the retention of some of the tax-exempt income (after deduction of applicableexpenses) and capital receipts of LMIR Trust for the benefit of LMIR Trust.The actual level of distribution will be determined at the Manager’s discretion. The actual proportion of taxexemptincome and capital receipts to be distributed to Unitholders beyond Projection Year 2009 may begreater than 90.0% if the Manager believes it to be appropriate, having regard to LMIR Trust’s fundingrequirements, other capital management considerations and ensuring the overall stability of distributions.Distributable Income is generally calculated as follows:Indonesian SPCs level:Consolidated net profit from operations is calculated by:a) Adding all NPI of the Indonesian SPCs to arrive at consolidated NPI;b) Deducting general and administrative expenses (non property-related) and all relevant domestictaxes (if any), including but not limited to final income tax on rental income received and Indonesianwithholding tax on offshore interest and dividend payable at the Indonesian SPCs level; andc) Adding or deducting (as the case may be) the difference (if any) between the amount of rent due forthe relevant period and the amount recorded as rental revenue arising from amortisation of rent freeperiods.91