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2021 SECOND QUARTER UNAUDITED FINANCIAL STATEMENTS AND DISTRIBUTION ANNOUNCEMENT

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Profit & Loss

Balance Sheet

Review of Performance

2Q 2021 vs 2Q 2020

Gross rental revenue increased to $29.6 million from $12.6 million in 2Q 2020. This was mainly due to lower discounts and rental relief given to tenants following a gradual recovery in the operating environment. During the malls' temporarily closure in 2Q 2020, no rental was billed to the tenants except to tenants in essential services and to tenants who elected to remain open to provide delivery services during the period and the billing was adjusted to the shortened mall opening hours. The increase is also due to contribution from Puri amounting to $6.5 million which was acquired on 27 January 2021. The increase is partially offset by the loss of income amounting to $1.3 million from Binjai Supermall and Pejaten Village which were divested in 3Q 2020.

Increase in car park revenue of $1.0 million from 2Q 2020 was in line with the recovery of the shopper traffic

Increase in service charge and utilities recovery of $4.2 million or 30.3% was mainly due to lower discounts and rental relief given to tenants following a gradual recovery in the operating environment. During the malls' temporarily closure in 2Q 2020, utilities were on recovery basis and 40% discount were given to tenants considering the services provided and the shortened opening hours. The increase is also due to contribution from Puri amounting to $3.0 million, which was acquired on 27 January 2021. The increase is partially offset by the loss of income amounting to $1.2 million from Binjai Supermall and Pejaten Village which were divested in 3Q 2020.

Due to the uncertainties in the current operating environment, there may be timing difference in the recognition of the revenue and the actual granting and recording of additional rental and service charge discount to the tenants due to delays in negotiations between such tenants and asset owners.

The increase in property management fee of $0.2 million or 20.7% was due to the higher revenue and higher net property income in 2Q 2021.

Increase in property operating and maintenance expenses of $3.3 million or 30.0% from 2Q 2020 was mainly due to the higher consumption of utilities as a result of longer operating hours of the malls. The increase is also due to contribution from Puri amounting to $1.3 million, which was acquired on 27 January 2021.

Increase in interest income of $0.6 million or 148.0% from 2Q 2020 was mainly due to higher cash balance within the Group and placed as fixed deposit.

Other losses refer to write-off of certain expenses upon divestments of Pejaten Village and Binjai Supermall.

Increase in finance costs of $3.4 million or 27.9% from 2Q 2020 is due to higher all in cost of the US$200.0 million bond issued in February 2021, which was used to refinance $175.0 million loan and $44.0 million revolving credit facilities. The increase in finance expenses by $1.1 million is also due to the additional loan of $120.0 million the Trust drawdown to partially fund the Puri acquisition.

Fair value of investment properties decreased by $30.5 million in 2Q 2021. This relates to the decrease in fair value of investment properties as at 30 June 2021, based on the assessment performed by the Managers well as a write-off of acquisition cost related to the acquisition of Puri in January 2021.

Lower realised foreign exchange adjustment losses in 2Q 2021 is mainly due to no cash repatriation from Indonesian subsidiaries during the period.

Amortisation of intangible assets increased by $1.4 million in 2Q 2020. It is mainly due to the intangible assets recognised upon acquisition of Puri, relating to the net property income (NPI) guarantee up to December 2024.

Increase in income tax expenses for 2Q 2021 of $1.7 million or 46.2% from 2Q 2020 was mainly due to the higher revenue generated in 2Q 2021, which is partially offset by the deferred tax benefit of $834K as a result of decrease in fair value of investment properties.

The Trust has various hedging contracts to mitigate its exposure on foreign currencies and interest rates movements. The unrealised gains/(losses) on derivatives is a non-cash item and does not affect the amount of distribution to unitholders.

Exchange differences on translating foreign operations relates to exchange differences arising from translating items denominated in Indonesia Rupiah in the statement of financial position of the respective Indonesian subsidiaries, principally the investment properties, into Singapore Dollar ("SGD") using the period end exchange rate.

A translation loss of $0.4 million was recorded in 2Q 2021 due to weakening of Indonesian Rupiah against SGD since the end of financial period of 2020.

The "net movement in other comprehensive (loss)/return" in relation to the foreign currency translation reserve are recorded in the condensed interim Statement of Changes in Unitholders' Funds and do not affect the calculation of the Distributable Income and Distribution per unit.

1H 2021 vs 1H 2020

Gross rental income increased to $56.1 million from $49.2 million a year ago in 1Q 2020 LMIR Trust's malls were fully operational and recorded $36.6 million gross rental income. However, to support the Indonesia government's objective to curb the spread the Covid-19 virus, LMIR Trust closed all its retail malls and retail spaces at the end of March 2020 and reopened gradually from mid May to early July by region. During the closure of retail malls and spaces, no rental was billed except to tenants in essential services (i.e. supermarket, pharmacies and clinics) and to tenants who elected to remain open (to provide delivery services) during the period and the billing was adjusted to the shorter mall operating hours. Therefore, the Trust only recorded a gross rental income of $12.6 million in 2Q 2020.

Gross rental income in 1H 2021 included $12.4 million from Puri since 27 January 2021 offset by the loss of income from Binjai Supermall and Pejaten Village amounting to $4.3 million in 1H 2020. On a like to like portfolio comparison, the malls' operations have shown a steady improvement in 1H 2021 with the reducing rental discount giving to tenants. The general rental discount offered to tenants was gradually reduced from 25% in January 2021 to 0% in June 2021. However, selected key tenants were offered additional discounts over and above the general discount to maintain occupancy and aid their business recoveries.

Service charge and utilities recovery decreased by $5.6 million or 14.3% in 1H2021. During 1Q 2020 LMIR Trust's malls were on full operations and recorded $25.3 million service charge and utilities recovery. Due to the temporary malls closures in 2Q 2020, service charge was billed at 40% discount given the shorter opening hours. Therefore, the Trust only recorded a service charge and utilities recovery income of $13.9 million in 1H 2021 which also included $4.6 million contribution from newly acquired mall Puri offset by loss of income from Binjai Supermall and Pejaten Village amounting to $3.2 million.

Due to the uncertainties in the current operating environment, there may be timing difference in the recognition of the revenue and the actual granting and recording of additional rental and service charge discount to the tenants due to delays in negotiations between such tenants and asset owners.

The decrease in property management fee of $0.6 million or 19.1% was due to the lower revenue and lower net property income in 1Q 2021. Property management fee in 1H 2020 included one off support from the Manager (reallocated from the Manager's base fee) amounting to $0.6 million to mitigate the potential negative impact on the mall operation due to the mall closure.

The increase in net allowance for impairment loss on trade receivables of $0.3 million is due to LMIR Trust setting aside a higher level of provisioning to account for potential defaults or non-collections of rental and service charge receivables from tenants affected by the slowdown in business due to impact of Covid-19.

Decrease in property operating and maintenance expenses of $3.3 million or 10.5% from 1H 2020 was mainly due to the higher consumption of utilities in 1Q 2020 while all the malls were on full operation. Although all malls' operations have shown a steady improvement in 1H 2021, the Trust remains cautious on cost management for non-critical repair and maintenances and other outsourced services.

Other losses refer to write-off of certain expenses upon divestments of Pejaten Village and Binjai Supermall.

Increase in finance costs of $5.8 million or 24.5% from 1H 2020 is due to higher all in cost of the US$200.0 million bond issued in February 2021, which was used to refinance $175.0 million loan and $44.0 million revolving credit facilities. The increase in finance costs of $1.9 million is also due to the additional $120 million loan the Trust drawdown to partially fund the Puri acquisition in January 2021 and an one off cost amounting to $0.3 million in relation to the written-off of unamortised cost when the $175.0 million loan was repaid early in February 2021.

Fair value of investment properties decreased by $30.5 million in 1H 2021. This relates to the decrease in fair value of investment properties as at 30 June 2021, based on the assessment performed by the Manager as well as a write-off of acquisition cost related to the acquisition of Puri in January 2021.

Lower realised foreign exchange adjustment losses in 1H 2021 is mainly due to no cash repatriation from Indonesian subsidiaries during the period.

Amortisation of intangible assets increased by $2.4 million in 1H 2021. It is mainly due to the intangible assets recognised upon acquisition of Puri, relating to the net property income (NPI) guarantee up to December 2024.

The Trust has various hedging contracts to mitigate its exposure on foreign currencies and interest rates movements. The unrealised gains/(losses) on derivatives is a non-cash item and does not affect the amount of distribution to unitholders.

Exchange differences on translating foreign operations relates to exchange differences arising from translating items denominated in Indonesia Rupiah in the statement of financial position of the respective Indonesian subsidiaries, principally the investment properties, into Singapore Dollar ("SGD") using the period end exchange rate.

A translation loss of $16.4 million was recorded in 1H 2021 due to weakening of Indonesian Rupiah against SGD since the end of financial period of 2020.

The "net movement in other comprehensive (loss)/return" in relation to the foreign currency translation reserve are recorded in the condensed interim Statement of Changes in Unitholders' Funds and do not affect the calculation of the Distributable Income and Distribution per unit.

Commentary

We refer to our announcements on 2 July 2021, 12 July 2021 and 21 July 2021, respectively, due to the rising Covid-19 cases in Indonesia, the government has imposed new emergency public activity restrictions, Pemberlakuan Pembatasan Kegiatan Masyarakat ("PPKM") Darurat, covering Java, Bali and certain provinces in Sumatra to contain the spread of the highly transmissible Delta variant.

The PPKM Darurat imposed in the affected areas in Indonesia, includes the shutdown of all malls, places of worship and parks, while restaurants can only provide takeaway and delivery services, grocery stores and supermarkets remain open but with restricted opening hours and capacity. As a result of the large-scale social restrictions, the Indonesian government has revised down its expected 2021 gross domestic product ("GDP") growth to 3.7% to 4.5% as compared to the previously expected growth of 4.5% to 5.3%[1].

Indonesia's Consumer Price Index ("CPI") recorded a 0.32% deflation in June from a 0.32% inflation in May on a month-on-month ("MoM") basis while annually, CPI inflation stood at 1.33% year-on-year ("YoY") in June compared with 1.68% of the preceding month. Core inflation decelerated from 0.24% in May to 0.14% in June MoM. On a YoY basis, core inflation stood at 1.49% in June up from 1.37% in May due to the normalisation of demand after the Ramadan and Eid-ul-Fitr festive period. However, persistently low core inflation is also largely due to weaker domestic demand, exchange rate stability, maintained international commodity prices, house rentals when public activity had restarted, and policy consistency by Bank Indonesia to anchor inflation expenses. Moving forward, Bank Indonesia remains committed to maintaining price stability with the inflation target range set between 1% and 3% for 2021[2]

Retail sales showed improvement in April, with the Retail Sales Index "RSI") increasing to 17.3% MoM from 6.1% in March, according to the latest Retail Sales Survey in June. Retail sales had improved in response to a seasonal spike in demand during Ramadan, supported by various retail sales promotions. Retailers predicted the strong sales performance to persist through May as indicated by the RSI growth of 1.6% in April MoM, despite declining compared with conditions one month earlier. Slower sales growth was primarily expected to impact Food, Beverages and Tobacco as well as clothing[3].

In compliance with the PPKM Darurat, as at the date of this announcement, 17 of the Trust's malls have been shut with only essential services operating while other retail outlets could only provide take-out or delivery services. During this lockdown period (which is currently scheduled to end on 2 August but may be extended by the government depending on the Covid-19 situation), the Trust will be extending rental waivers to tenants who are not permitted to operate, and extension of additional rental support and utilities and service charges discounts are being considered.

Since 2020, the Covid-19 pandemic has caused, and will continue to cause, disruptions to, and create uncertainty surrounding, the Trust's business. These uncertainties have impacted the Trust's operations and consequently the financial performance of the Trust, giving rise to difficulties in making an accurate assessment by the Manager of the future impact on the Trust. It is, however, reasonably likely that the pandemic will have an adverse effect on the Trust's income and return in near future, the extent of which will depend on how long the aftermath of the pandemic will last. Master leases with Lippo Mall Kuta and Lippo Plaza Kendari will also be expiring in December 2021 and June 2022, respectively. Given the continuing impact of Covid-19, the actual performance under the master leases areas is expected to fall short upon the expiration of the master lease agreements. Nevertheless, with sufficient financial resources to meet its near term financial obligations as and when they fall due (i.e. with only S$67.5 million of bank debts due in November 2022), the Trust will remain cautious and prudent in implementing its operational and distribution strategies.

As at the date of this announcement, over 85% of the property manager's employees and 70% of tenants have been vaccinated and the Trust will continue to adhere to stringent safety measures in the malls to protect the safety of its employees, tenants, shoppers and contractors.

Notes
[1] 5 July 2021, Reuters – Indonesia revises down 2021 GDP growth to 3.7%-4.5% – senior minister
[2] 1 July 2021, Bank Indonesia – Food price corrections prompt CPI deflation in June 2021
[3] 17 June 2021, Bank Indonesia – Retail Sales Survey – April 2021

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