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

Risk factorsSingapore. As a general rule, the place where a company’s control and management is exercised andhence the tax residence of the company is the place where the directors of the company hold theirmeetings. The board of directors of the Singapore SPCs will endeavour to ensure that the control andmanagement of each of the Singapore SPCs is exercised in Singapore so that each would be considered atax resident of Singapore. The Singapore SPCs are the beneficial owner of the shares in the IndonesianSPCs and of the loans to the Indonesian SPCs. Therefore, they should be considered as the beneficialowner of the interest and dividend income received from the Indonesian SPCs. Nevertheless, it remainsuncertain as to whether the Indonesian tax authorities will view the Singapore SPCs as the beneficialowners of the interest and dividends. If the Singapore SPCs are not viewed as the beneficial owners, itshould still be possible to obtain the reduced withholding tax rate to the extent that Singapore tax residents(or any other jurisdiction with the same tax rate under their respective double tax treaty) are theUnitholders of LMIR Trust. If the higher withholding tax rate of 20.0% would apply to the dividend andinterest payments from the Indonesian SPCs, this will accordingly lower the income paid to the SingaporeSPCs and in turn may adversely affect the financial results of LMIR Trust and its distributions toUnitholders.The Indonesian legal system is subject to considerable discretion and uncertainty.Indonesia’s legal system is a civil law system based on written statutes in which judicial and administrativedecisions do not constitute binding precedents and are not systematically published. Indonesia’scommercial and civil laws are historically based on Dutch law as in effect prior to Indonesia’sindependence in 1945. Some of these laws have not been revised to reflect the complexities ofmodern financial transactions and instruments. There may be uncertainty in the interpretation andapplication of legal principles in Indonesia. The application of legal principles in Indonesia dependsupon subjective criteria such as the good faith of the parties to the transaction and principles of publicpolicy, the practical effect of which is difficult or impossible to predict. Indonesian judges have very broadfact-finding powers and a high level of discretion in relation to the manner in which those powers areexercised. As a result, the administration and enforcement of laws and regulations by Indonesian courtsand Indonesian governmental agencies may be subject to considerable discretion and uncertainty.Indonesian legal principles relating to the rights of debtors and creditors, or their practical implementationby Indonesian courts, differ materially from those that would apply in, for example, Singapore, the UnitedStates or the European Union. As a result, it may be more difficult for the Trustee, on behalf of LMIR Trust,to pursue a claim against the tenants of the Retail Malls or the Master Lessee in Indonesia than it would bein other jurisdictions, such as in Singapore. This may adversely affect or eliminate entirely LMIR Trust’sability (and indirectly, the ability of its Unitholders) to obtain and/or enforce a judgment against the MasterLessee in Indonesia.The operations of the Properties may be adversely affected by earthquakes, tsunamis, floodsor other natural disasters.The Indonesian archipelago is one of the most active volcanic regions in the world. As it is located in theconvergence zone of three major lithospheric plates, it is subject to significant seismic activity that can leadto destructive earthquakes and tidal waves. On 26 December 2004, an underwater earthquake off thecoast of Sumatra resulted in a tsunami that devastated coastal communities in Indonesia, Thailand and SriLanka. In Indonesia, more than 220,000 people died or were recorded as missing in the disaster.Aftershocks from the December 2004 tsunami have also claimed casualties. In March 2007, apowerful earthquake hit the Indonesian island of Sumatra, flattening hundreds of buildings and killingat least 70 people. On 12 September 2007, a strong earthquake occurred in Sumatra which causedsignificant aftershocks in the surrounding regions.The operations of the Properties may be affected by floods. In February 2007, incessant rain caused riversto overflow across Jakarta. As a result, homes, government buildings, retail malls and businesses wereflooded. The authorities were forced to cut off electricity and water supplies in certain areas.There can be no assurance that future geological occurrences will not significantly impact the operationsof the Properties. An earthquake or other geological disturbance in any of Indonesia’s more populatedcities and financial centres could disrupt the Indonesian economy and the operations of the Properties,82