LMIR Trust contended with challenging macro-economic conditions in FY2008 and emerged financially stable with low gearing, defensive and steady revenues and a well-balanced, diversified portfolio of retail properties located within high population urban middle-class catchment areas.

Dear Unitholders,

On behalf of the Board of Directors of Lippo-Mapletree Indonesia Retail Trust Management Ltd, manager of LMIR Trust, we are pleased to share with you the key milestones and progress that LMIR Trust has made in the Financial Year ended December 31, 2008.

Year in Review

FY2008 was a historical year which saw unprecedented volatility in the global financial markets. Indonesia's economy displayed resilience in the face of the global downturn, registering GDP growth of 6.1% for FY2008, helped by increased government fiscal expenditure and lower inflation.

As at September 2008, the total retail space in Jakarta increased slightly by 0.27 million square metres to 3.37 million square metres from 3.10 million square metres in June 2008. The overall occupancy rate for the industry held steady at 84.6% as at December 31, 2008.

LMIR Trust's resilient operational performance for FY2008 was supported by our portfolio of defensive suburban malls and retail spaces strategically located in high population urban middle-class catchment areas in Greater Jakarta, Bandung and Medan, a sound balance sheet and strong management team.

FY2008 witnessed LMIR Trust's maiden acquisition of Sun Plaza, one of the largest shopping centres in Medan, North Sumatra at a purchase price of approximately S$146.7 million, which increased our total portfolio NLA by approximately 20% since our IPO. As at December 31, 2008, our total NLA stands at 402,632 sqm.

Against the challenging backdrop of high inflation and slowdown in discretionary consumer spending, gross revenues in FY2008 came to S$101.8 million, 8% higher than forecasted due mainly to contribution from the acquisition of Sun Plaza.

However, property operating expenses for FY2008 was high at S$13.5 million, due mainly to allowance for impairment of S$7.0 million in outstanding receivables comprising outstanding rent from wholesaler tenants. In addition, we wrote off S$2.8 million of arrangement fee and the corresponding legal fee of S$0.5 million relating to the balance S$225 million loan to be syndicated in 2009. We undertook these as measures of prudence given the increasingly challenging credit environment. DPU came to 5.60 cents for FY2008.

Although we had to contend with an increasingly challenging economic climate, our retail malls achieved a high average occupancy rate of 95.7% as at December 31, 2008, which is above the industry average of 84.6%.

Capital Management

LMIR Trust benefits from an optimal capital structure in the face of the tightening credit market. As at December 31, 2008, LMIR Trust's gearing ratio remains at a conservative 12.4%, which is below the aggregate leverage limit as set out in the guidelines for REITs in Appendix 2 of the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore. Our current gearing is mainly from a S$125 million loan with a five-year tenure and all-in interest rate of 6.42% p.a. Due to a delay in getting the consents from BOT (Build Operate Transfer) grantors for two of LMIR Trust's malls to enter into the loan documents, Manager is currently in discussion with the lending bank to extend the period in getting these BOT consents to the end of the year. This restructuring of the current S$125 million five year loan, may result in a reduction of the loan tenure by one year and restructuring fee of around S$1.5 million in return for an extension on the delivery of the two underlying BOT consents by 31 Dec 2009. No other borrowings have been incurred since December 31, 2008. We expect that the relevant consents will be obtained by the end of 2009.

We will continue to focus on prudent capital management strategy by conserving cash through tight controls over operating and capital expenditure.

Asset enhancement progress

We are pleased to report positive progress of our asset enhancement initiatives (AEI). Our AEI plans are designed to add value to our existing malls and increase shopper traffic to maximise their growth potential from Indonesia's expanding urban middleclass segment.

Istana Plaza's AEI is progressing with the conversion of an ice skating rink into new cafeterias, restaurants and an expanded food court. About 653 sqm of additional NLA will be derived from the 950 sqm proposed area.

Going forward, we will continue to look at achieving an optimal balance between AEI and a need to conserve cash, for greater financial flexibility.

Defensive earnings in uncertain times

LMIR Trust's property portfolio comprises retail malls and retail spaces located in Indonesia's major cities with large urban middle-class population catchment areas that are easily accessible via major transportation routes and highways. The strong average occupancy of the properties, coupled with well diversified tenant mix where no particular trade sector accounts for more than 17% of total NLA and no single property constitutes more than 21% of total net property income, ensures defensive earnings for the Trust during the current uncertain times.

The main shopper traffic at our retail malls and spaces comprises Indonesia's domestic urban middle-income to upper-middle-income consumer segments, which have greater resilience to inflation in consumer staple prices. LMIR Trust's malls are also deemed as "everyday malls" for daily essentials, food outlets and family entertainment. Whilst these defensive qualities provide stability to LMIR Trust's income and cashflow, we will continue to monitor developments in the macroeconomic environment and their potential impact on our business.

Update on utilisation of IPO proceeds

LMIR Trust raised gross proceeds of S$848.3 million upon listing. This amount has been fully applied for payment of the purchase consideration for the acquisition of all the ordinary shares and redeemable preference shares of the Singapore companies (which in turn owns the Indonesian companies which wholly own the retail malls and retail spaces in Indonesia), and the issue costs related to the IPO.

Outlook

We anticipate 2009 to be a challenging year, with retail space demand expected to weaken and competition among landlords to intensify. In addition, rental trends in Indonesia are expected to come under pressure. Our strategy is to continue to focus on organic growth, whilst exercising prudence in asset enhancements and acquisitions. In addition, through proactive asset management, we will do our utmost to maintain good occupancy and balanced property and tenant diversification across our retail malls and spaces for steady, defensive earnings.

Acknowledgements

LMIR Trust's resilient performance is due to the unrelenting support provided by its tenants, shoppers, business partners and employees. On behalf of the Board of Directors, we are privileged to extend our sincere thanks and appreciation to them and to you, our Unitholders, for your invaluable contribution, belief and confidence in our business.

Mr Tan Bar Tien
Non-Executive Chairman

Ms Viven Gouw Sitiabudi
Chief Executive Officer & Executive Director