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Reit takeovers

The Securities Industry Council (SIC) announced on June 8 2007 that it has decided to extend the Singapore Code on Takeovers and Mergers to property trusts structured as collective investment schemes (Reits).

The SIC's decision, which is in line with the regimes in the UK and Australia, would protect the interests not only of minority investors but also of the incumbent controlling unitholders. In the absence of a proper framework governing takeover and merger transactions of Reits, a party would be able to accumulate effective control of a Reit without having to make a general offer. In these circumstances, incumbent controlling unitholders might not be able to extract a control premium from that party. The SIC noted that a proper framework that ensures the fair and equal treatment of all unitholders would enhance the reputation of the Reit market in Singapore and add to its growth.

Also, concerns relating to proper governance and accountability equally apply to Reits. The SIC thinks that there is a strong basis for extending the Code to Reits.

To give effect to the extension of the Code to Reits, the Monetary Authority of Singapore, on the advice of the SIC, will introduce the appropriate changes to the Securities and Futures Act and the Code.

Until then, the SIC has advised parties engaged in takeover and merger transactions involving Reits to comply with the Code. This relates particularly to parties intending to acquire 30% or more of a Reit or to those already holding at least 30% but no more than 50% and acquiring more than 1% of a Reit in any six-month period. The SIC should be consulted in cases of doubt.

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