Lippo-Mapletree Indonesia Retail Trust

CORPORATE GOVERNANCE

Lippo-Mapletree Indonesia Retail Trust Management Ltd, (the "Manager") of Lippo-Mapletree Indonesia Retail Trust (LMIR Trust) is committed to good corporate governance as it believes that such self-regulatory are essential to protect the interest of the Unitholders, as well as critical to the performance of the Manager.

The Manager uses the Code of Corporate Governance (the "Code") as its benchmark for its corporate governance policies and practices. The following segments describe the Manager's main corporate governance policies and practices.

THE MANAGER OF LMIR TRUST

The Manager has general powers of the management over the assets of LMIR Trust.

The Manager's main responsibility is to manage LMIR Trust's assets and liabilities for the benefit of Unitholders. The Manager's key financial objectives is to provide Unitholders of LMIR Trust with a competitive rate of return for their investment by ensuring regular and stable distributions to Unitholders and to achieve long-term growth in net asset value of LMIR Trust.

The primary role of the Manager is to set strategic direction and risk management of LMIR Trust and give recommendations to HSBC Institutional Trust Services (Singapore) Limited, as trustee of LMIR Trust (the "Trustee"), on the acquisition, divestment and enhancement of assets of LMIR Trust in accordance with its stated investment strategy.

Other main functions and responsibilities of the Manager include:

Using its best endeavors to carry on and conduct its business in a proper and efficient manner and to conduct all transactions with, or on behalf of, LMIR Trust at arm's length.
Preparing property plans on a regular basis, which may contain proposals and forecasts on net income, capital expenditure, sales and valuations, explanations of major variances to previous forecasts, written commentary on key issues and underlying assumptions on inflation, annual turnover and any other relevant assumptions. The purpose of these plans is to explain the performance of LMIR Trust's assets.
Ensuring compliance with the applicable provision of the Securities and Futures Act, Chapter 289 of Singapore and all other relevant legislation, the Listing Manual issued by SGX-ST, the Code on Collective Investment Schemes issued by Monetary Authority of Singapore ("MAS"), including the Property Funds Guidelines, the Trust Deed, the tax ruling dated 27 August 2007 issued by Inland Revenue Authority of Singapore and all relevant contracts.
Attending to all regular communications with Unitholders.

LMIR Trust, constituted as a trust, is externally managed by the Manager and accordingly, it has no personnel of its own. The Manager appoints experienced and well-qualified management to handle the day-today operations of the Manager. All directors and employees of the Manager are remunerated by the Manager, not LMIR Trust.

BOARD OF DIRECTORS OF THE MANAGER

Role of the Board

The Board of Directors of the Manager (the "Board") is entrusted with the responsibility of overall management of the Manager. The Board is responsible for the overall corporate governance of the Manager including establishing goals for management and monitoring the achievement of these goals. All Board members participate in matters relating to corporate governance, business operations and risks, financial performance, and the nomination and review of Directors.

The Board meets to review the Manager's key activities. Board meetings are held once every quarter (or more often if necessary) to discuss and review the strategies and policies of LMIR Trust, including any significant acquisitions and disposals, the annual budget, the financial performance of LMIR Trust against previously approved budget, and to approve the release of the quarterly, half year and full year results. The Board also reviews the risks to the assets of LMIR Trust, and acts upon any comments from the auditors of LMIR Trust. Where necessary, additional Board meetings would be held to address significant transactions or issues. The Articles of Association (the "Articles") of the Manager provides for Board meetings to be held by way of telephone conference and/or videoconference.

The Board is supported by the Audit Committee that provides independent supervision of management. The Board has adopted a set of internal controls, which sets out approval limits on capital expenditure, investments and divestments and bank borrowings as well as arrangement in relation to cheque signatories. The Board believes that the internal controls system adopted is adequate and appropriate delegations of authority have been provided to the management to facilitate operational efficiency.

Changes to regulations, policies and accounting standards are monitored closely. Where the changes have an important impact on LMIR Trust or have an important bearing on the Manager's or Directors' disclosure obligations, the Directors will be briefed either during Board meetings or at specially-convened sessions involving relevant professionals. Management also provides the Board with complete and adequate information on a timely manner through regular updates on financial results, market trends and business developments. Newly appointed directors would be briefed by management on the business activities of LMIR Trust and its strategic directions.

Nine Board meetings were held during the financial period 2008.

Board Composition and Balance

The Board presently consists of seven Directors, of whom three are Non-Executive Independent Directors. The Chairman of the Board is Mr Tan Bar Tien. The Chief Executive Officer is Ms Viven Gouw Sitiabudi. The other members of the Board are Mr Lim Ho Seng, Mr Lok Vi Ming, Mr Yeo Cheow Tong, Mr Tan Boon Leong and Mr Wong Mun Hoong.

The Board comprises business leaders and professionals with fund management, property, banking and finance backgrounds. The Board considers the present Board size appropriate for the nature and scope of LMIR Trust' operations. The profiles of the Directors are set out on pages 10 and 11 of this Annual Report.

The composition of the Board is determined using the following principles:-

The Chairman of the Board should be a non-executive Director;
The Board should comprise Directors with a broad range of commercial experience, including expertise in funds management and the property industry;
At least one-third of the Board should comprise of Independent Directors; and
The composition of the Board is reviewed regularly to ensure that the Board has the appropriate size and mix of expertise and experience.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

The positions of Chairman of the Board and Chief Executive Officer are separately held by two persons. The Chairman, Mr Tan Bar Tien is an Independent Director while the Chief Executive Officer, Ms Viven Gouw Sitiabudi is an Executive Director. This is so to maintain an effective oversight and clear segregation of responsibilities.

The Chairman is responsible for the overall management of the Board as well as ensuring that members of the Board work together with management in a constructive manner to address strategies, business operations and enterprise issues. The Chief Executive Officer has full executive responsibilities over the business directions and operational decisions concerning the management of LMIR Trust. She works closely with the Board to implement the policies set by the Board to realise the Manager's vision.

The majority of the Directors are non-executive and independent of management. This enables management to benefit from their external, diverse and objective perspective on issues that are brought before the Board. It also enables the Board to work with management through robust exchange of ideas and views to help shape the strategic process. This, together with a clear separation of the roles between the Chairman and Chief Executive Officer, provides a healthy professional relationship between the Board and management, with clarity of roles and robust oversight as they deliberate on business activities of the Manager.

The Board has separate and independent access to senior management and the company secretary at all times. The company secretary attends to corporate secretarial administration matters and attends all Board meetings. The Board also has access to independent professional advice where appropriate.

AUDIT COMMITE

The Audit Committee is appointed by the Board from among the Directors and is composed of three members, all of whom (including the Chairman of the Audit Committee) are Independent Directors.

Presently, the Audit Committee consists of the following:

The role of the Audit Committee is to monitor and evaluate the effectiveness of the Manager's internal controls. The Audit Committee also reviews the quality and reliability of information prepared for inclusion in financial reports, and is responsible for the nominations of external auditors and reviewing the adequacy of external audits in respect of cost, scope and performance.

The Audit Committee's responsibilities also include:

monitoring the procedures established to regulate Related Party Transactions, including ensuring compliance with the provisions of the Listing Manual relating to "interested person transactions" (as defined therein) and the provisions of the Property Funds Guidelines relating to "interested party transactions" (as defined therein) (both such types of transactions constituting "Related Party Transactions");
reviewing external audit reports to ensure that where deficiencies in internal controls have been identified, appropriate and prompt remedial action is taken by management;
reviewing internal audit reports at least twice a year to ascertain that the guidelines and procedures established to monitor Related Party Transactions have been complied with;
ensuring that the internal audit function is adequately resourced and has appropriate standing with LMIR Trust;
monitoring the procedures in place to ensure compliance with applicable legislation, the Listing Manual and the Property Funds Guidelines;
nominating external auditors;
reviewing the nature and extent of non-audit services performed by the external auditors;
reviewing, on an annual basis, the independence and objectivity of the external auditors;
meeting with external and internal auditors without presence of the Executive Officers at least on an annual basis;
examining the effectiveness of financial, operating and compliance controls;
reviewing the financial statements and the internal audit report;
investigating any matters within the Audit Committee's terms of reference, whenever it deems necessary; and
reporting to the Board on material matters, findings and recommendations.

The Audit Committee has full access to and co-operation from management and enjoys full discretion to invite any director and executive officer of the Manager to attend its meetings. The Audit Committee has full access to reasonable resources to enable it to discharge its functions properly.

The Board of Directors has accepted Audit Committee's recommendation to outsource the Manager's Internal Audit functions. The Audit Committee had also conducted a review of all non-audit services provided by the external auditors and is satisfied that the extent of such services will not prejudice the independence and objectivity of the external auditors. The amount paid to external auditors as reporting accountants amounted to S$900,000, in connection with the listing exercise. The Audit Committee recommends to the Board of Directors, the nomination of the external auditors for re-appointment. Three Audit Committee meetings were held during the financial year 2008. The attendance at the Audit Committee meetings held is set out in page 51.

INTERNAL AUDIT

The Manager has put in place a system of internal controls of procedures and processes to safeguard LMIR Trust's assets, Unitholders' interest as well as to manage risk.

The internal audit function of the Manager is out-sourced to KPMG LLP . The internal auditors report directly to the Audit Committee. The Audit Committee is of the view that the internal auditor has adequate resources to perform its functions.

DEALINGS IN LMIR TRUST UNITS

The Board has adopted an internal compliance code of conduct to provide guidance to its officers dealing in LMIR Trust's units ("Units"). Directors are required to give notice to the Manager of his acquisition of units or changes in the number of units he holds or in which he has an interest, within two Business Days after such acquisition or occurrence.

In general, the Manager's policy encourages directors and employees of the Manager to hold Units but prohibits them from dealing in such Units:

during the period commencing one month before the public announcement of LMIR Trust's annual, semi-annual results and (where applicable) property valuation and two weeks before the public announcement of LMIR Trust's quarterly results, and ending on the date of announcement of the relevant results or property valuation; and
at any time whilst in possession of price sensitive information.

The Directors and employees of the Managers are also prohibited from communicating price sensitive information to any person.

In addition, the Manager has given an undertaking to the MAS that it will announce to the SGX-ST the particulars of its holdings in the Units and any changes thereto within two business days after the date on which it acquires or disposes of any Units, as the case may be. The Manager has also undertaken that it will not deal in the Units during the period commencing one month before the public announcement of LMIR Trust's annual results and (where applicable) property valuation and two weeks before the public announcement of LMIR Trust's quarterly results, and ending on the date of announcement of the relevant results or property valuation.

MANAGEMENT OF BUSINES RISK

Effective risk management is a fundamental part of LMIR Trust's business strategy. Recognising and managing risk is central to the business and to protecting Unitholders' interests and value. LMIR Trust operates within overall guidelines and specific parameters set by the Board. Each transaction is comprehensively analysed to understand the risks involved. Responsibility of managing risk lies initially with the business unit concerned, working within the overall strategy outlined by the Board.

The Board meets quarterly or more often, if necessary and reviews the financial performance of the Manager and LMIR Trust against a previously approved budget. The Board will also review the business risks of LMIR Trust, examine liability management and will act upon any comments from the auditors of LMIR Trust. In assessing business risk, the Board considers the economic environment and risk relevant to the property industry. The Board reviews management reports and feasibility studies on individual development projects prior to approving major transactions. Management meets regularly to review the operations of the Manager and LMIR Trust and discuss any disclosure issues.

DEALING WITH CONFLICT OF INTEREST

The Manager has instituted the following procedures to deal with potential conflicts of interest issues, which the Manager may encounter, in managing LMIR Trust:

The Manager will not manage any other real estate investment trust which invests in the same type of properties as LMIR Trust;
All executive officers will be employed by the Manager;
All resolutions in writing of the Directors in relation to matters concerning LMIR Trust must be approved by a majority of the Directors, including at least one Independent Director;
At least one-third of the Board shall comprise Independent Directors; and
In respect of matters in which the Sponsor and/or its subsidiaries have an interest, direct or indirect, any nominees appointed by the Sponsor and/or its subsidiaries to the Board to represent its/their interest will abstain from voting. In such matters, the quorum must comprise a majority of the Independent Directors and must exclude the nominee Directors of the Sponsor and/or its subsidiaries.
In respect of matters in which the Mapletree Investments Pte Ltd and/or its subsidiaries have an interest, direct or indirect, any nominees appointed by the Mapletree Investments Pte Ltd and/or its subsidiaries to the Board to represent its/their interest will abstain from voting. In such matters, the quorum must comprise a majority of the Independent Directors and must exclude the nominee Directors of the Mapletree Investments Pte Ltd and/or its subsidiaries.

It is also provided in the Trust Deed that if the Manager is required to decide whether or not to take any action against any person in relation to any breach of any agreement entered into by the Trustee for and on behalf of LMIR Trust with a related party of the Manager, the Manager shall be obliged to consult a reputable law firm (acceptable to the Trustee) which shall provide legal advice on the matter. If the said law firm is of the opinion that the Trustee has a prima facie case against the party allegedly in breach under such agreement, the Manager shall be obliged to take appropriate action in relation to such agreement. The Directors will have a duty to ensure that the Manager so complies. Notwithstanding the foregoing, the Manager shall inform the Trustee as soon as it becomes aware of any breach of any agreement entered into by the Trustee for and on behalf of LMIR Trust with a related party of the Manager and the Trustee may take any action it deems necessary to protect the right of Unitholders and/or which is in the interest of Unitholders. Any decision by the Manager not to take action against a related party of the Manager shall not constitute a waiver of the Trustee's right to take such action as it deems fit against such related party.

WHISTLE BLOWING POLICY

The Audit Committee has put in place procedures to provide employees of the Manager with well defined and accessible channels to report on suspected fraud, corruption, dishonest practices or other similar matters relating to LMIR Trust or the Manager, and for the independent investigation of any reports by employees and appropriate follow up action. The aim of the whistle blowing policy is to encourage the reporting of such matters in good faith, with the confidence that employees making such reports will be treated fairly, and to the extent possible, be protected from reprisal.

RELATED PARTY TRANSACTIONS

In general, the Manager has established procedures to ensure that all Related Party Transactions will be undertaken on normal commercial terms and will not be prejudicial to the interests of LMIR Trust and the Unitholders. As a general rule, the Manager must demonstrate to its Audit Committee that such transactions satisfy the foregoing criteria, which may entail obtaining (where practicable) quotations from parties unrelated to the Manager, or obtaining one or more valuations from independent professional valuers (in accordance with the Property Funds Guidelines).

In addition, the following procedures will be undertaken:

transactions (either individually or as part of a series or if aggregated with other transactions involving the same related party during the same financial year) equal to or exceeding S$100,000.00 in value but below 3.0% of the value of LMIR Trust's net tangible assets will be subject to review by the Audit Committee at regular intervals;
transactions (either individually or as part of a series or if aggregated with other transactions involving the same related party during the same financial year) equal to or exceeding 3.0% but below 5.0% of the value of LMIR Trust's net tangible assets will be subject to review and prior approval of the Audit Committee. Such approval shall only be given if the transactions are on normal commercial terms and are consistent with similar types transactions made by the Trustee with third parties which are unrelated to the Manager; and
transactions (either individually or as part of a series or if aggregated with other transactions involving the same related party during the same financial year) equal to or exceeding 5.0% of the value of LMIR Trust's net tangible assets will be reviewed and approved prior to such transactions being entered into, on the basis described in the preceding paragraph, by the Audit Committee which may, as it deems fit, request advice on the transactions from independent sources or advisers, including obtaining valuations from independent professional valuers. Further, under the Listing Manual and the Property Funds Guidelines, such transactions would have to be approved by the Unitholders at a meeting of Unitholders.

Where matters concerning LMIR Trust relate to transactions entered into or to be entered into by the Trustee (as trustee of LMIR Trust) with a related party of the Manager or LMIR Trust, the Trustee is required to consider the terms of such transactions to satisfy itself that such transactions are conducted on arm's length basis and on normal commercial terms, are not prejudicial to the interests of LMIR Trust and the Unitholders, and are in accordance with all applicable requirements of the Property Funds Guidelines and/or the Listing Manual relating to the transaction in question. Further, the Trustee (as trustee of LMIR Trust) has the ultimate discretion under the Trust Deed to decide whether or not to enter into a transaction involving a related party of the Manager or LMIR Trust. If the Trustee (as trustee of LMIR Trust) is to sign any contract with a related party of the Manager or LMIR Trust, the Trustee will review the contract to ensure that it complies with the requirements relating to interested party transactions in the Property Funds Guidelines (as may be amended from time to time) and the provisions of the Listing Manual relating to interested person transactions (as may be amended from time to time) as well as such other guidelines as may from time to time be prescribed by the MAS and the SGX-ST to apply to real estate investment trusts.

Role of the Audit Committee for Related Party Transactions

All Related Party Transactions will be subjected to regular periodic reviews by the Audit Committee. The Manager's internal control procedures are intended to ensure that Related Party Transactions are conducted on arm's length basis and on normal commercial terms and are not prejudicial to the interest of Unitholders.

The Manager will maintain a register to records all Related Party Transactions (and the bases, including any quotations from unrelated third parties and independent valuations obtained to support such bases, on which they are entered into) which are entered into by LMIR Trust. The Manager will incorporate into its internal audit plan a review of all Related Party Transactions entered into by LMIR Trust. The Audit Committee shall review the internal audit reports to ascertain that the guidelines and procedures established to monitor Related Party Transactions have been complied. In addition, the Trustee will also have the right to review such audit reports to ascertain that the Property Funds Guidelines have been complied with. The Audit Committee will periodically review all Related Party Transactions to ensure compliance with the Manager's internal control procedures and with the relevant provisions of the Property Funds Guidelines and/or the Listing Manual. The review will include the examination of the nature of the transactions and its supporting documents or such other data deemed necessary by the Audit Committee.

If a member of the Audit Committee has an interest in a transaction, he is required to abstain from participating in the review and approval process in relation to that transaction.

The Manager will disclose in LMIR Trust's annual report the aggregate value of Related Party Transactions entered into during the relevant financial year.

COMMUNICATION WITH UNITHOLDERS

The Listing Manual of the SGX-ST requires that a listed entity disclose to the market matters that would be likely to have a material effect on the price of the entity's securities. The Manager strives to uphold a strong culture of timely disclosure and transparent communication with the LMIR Trust Unitholders and the investing community.

The Manager's disclosure policy requires timely and full disclosure of all material information relating to LMIR Trust by way of public releases or announcements through the SGX-ST via SGXNET at first instance and then including the release on LMIR Trust's website at www.lmir-trust.com

BOARD COMPOSITION AND AUDIT COMMITE

The Manager believes that contributions from each Director can be reflected in ways other than the reporting of attendances at Board and Audit Committee meetings. A Director of the Manager would have been appointed on the principles outlined earlier in this statement, and his ability to contribute to the proper guidance of the Manager in its management of LMIR Trust.

The matrix of the Board members and Audit Committee members attendance at meetings held in the year 2008 is as follows:

Notes:

Appointed on 3 May 2007.
Appointed on 15 June 2007.