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

StrategyActive asset enhancement and management strategyThe Manager intends to implement pro-active measures, subject to approval by the relevant Indonesianauthorities, to enhance the returns from the existing and future properties in LMIR Trust’s portfolio. Suchmeasures include:• addition and alteration works, including work carried out for the purpose of expanding size and capacityand mall layout efficiency;• leveraging and enhancing the properties’ competitive strengths to optimise rentals and enhancementprojects to maintain the competitive positioning of such properties;• promoting a niche position for the properties in LMIR Trust’s portfolio / raising the profile of theproperties in LMIR Trust’s portfolio through retail marketing strategies, mall positioning and branding;and• in relation to properties to be acquired by LMIR Trust, obtaining contractual rent escalations under longtermleases, backed by security deposits consisting of irrevocable letters of credit or cash, most of whichwill cover at least six months of initial monthly minimum rents. Additional security will be providedtypically by covenants regarding minimum working capital and net worth, liens on accounts receivableand other operating assets, and various provisions for cross-default, cross-collateralisation, whenappropriate.Capital and risk management strategyWhile LMIR Trust will not be drawing down on the Debt Facilities as at the Listing Date, in the event thatLMIR Trust incurs any future borrowings, the proposed objectives of the Manager in relation to capital andrisk management will be to:• maintain a strong balance sheet by adopting and maintaining a target gearing ratio;• secure diversified funding sources from financial institutions and capital markets as LMIR Trustcontinually assesses expansion and acquisition opportunities;• adopt a proactive strategy to manage risks related to interest rate fluctuations; and• manage foreign exchange exposure through hedging, where appropriate.By doing so, the Manager believes that LMIR Trust will optimise Unitholders’ returns while maintainingoperating flexibility when considering capital expenditure requirements.The Manager will, in the event that LMIR Trust incurs any future borrowings, periodically review LMIRTrust’s capital management policy with respect to its Aggregate Leverage and modify the policy as itsmanagement deems prudent in light of prevailing market conditions. If LMIR Trust takes on debt, theManager’s strategy will generally be to match the maturity of LMIR Trust’s indebtedness with the maturityof LMIR Trust’s investment assets, and to employ long-term, fixed-rate debt to the extent practicable inview of market conditions in existence from time to time.The key aspects of the proposed capital and risk management strategy are as follows:• To maintain an Aggregate Leverage within permitted limitsThe Manager will aim to maintain the Aggregate Leverage of LMIR Trust comfortably within borrowinglimits allowable under the Property Funds Guidelines. Furthermore, by achieving the right ratio of debtand equity, the Manager will be able to minimise LMIR Trust’s cost of capital and maximise returns toUnitholders.• To secure diversified funding sources from financial institutions and capital markets as LMIRTrust continually assesses expansion and acquisition opportunitiesIn order to finance acquisitions and refurbishment of properties, in addition to any bank borrowings, theManager will consider accessing the debt capital markets through the issuance of bonds and/or notes todiversify its sources of funding. The debt market provides LMIR Trust with the ability to secure longer116