RES 2BE2 – Add-on Module for ICE Futures Singapore Set Two

Correct: According to the Singapore Code of Corporate Governance and MAS Guidelines on Risk Management Practices, the internal audit function must be independent of the activities it audits. To ensure this independence, the internal audit should report functionally to the Audit Committee (AC) and administratively to the CEO. Functional reporting to the AC includes the AC approving the internal audit charter, the audit plan, and the performance evaluation of the Head of Internal Audit. This structure prevents management, such as the CFO, from exerting undue influence over audit findings and ensures the Board receives an objective assessment of the risk management framework.

Incorrect: Reporting functionally to the CFO or CEO compromises the independence of the internal audit function, as these executives are responsible for the very operations being audited. Mandating attestations from the CFO does not resolve the structural conflict of interest. Outsourcing the function does not fix the issue if the reporting line remains directed at management rather than the Audit Committee. Increasing the frequency of meetings where the CFO presents findings is counterproductive, as it further embeds the CFO as a filter between the auditors and the Board.

Takeaway: The internal audit function must maintain functional independence by reporting directly to the Audit Committee to ensure the integrity of risk management oversight in Singapore financial institutions.

Correct: Under the SGX Listing Rules (Chapter 9 and Chapter 10), an acquisition from a sponsor is considered an Interested Person Transaction (IPT). Since the transaction value exceeds the 5% threshold of the group’s latest audited NTA (Chapter 9) and also exceeds the 20% threshold for a ‘Major Transaction’ (Chapter 10), the REIT is required to obtain unitholder approval. Furthermore, for such IPTs, an Independent Financial Adviser (IFA) must be appointed to advise whether the transaction is on normal commercial terms and is not prejudicial to the interests of the REIT and its minority unitholders.

Incorrect: Simply issuing an announcement is insufficient because the transaction exceeds the 5% IPT threshold and the 20% major transaction threshold, both of which trigger the requirement for a unitholder vote. Seeking a waiver from the MAS is incorrect as the SGX Listing Rules are administered by SGX RegCo, and a waiver for a standard major IPT is not a routine procedure. Increasing management fees is a matter governed by the Trust Deed and does not address the regulatory compliance requirements for transaction approval under the Listing Rules.

Takeaway: For S-REITs, transactions with interested persons exceeding 5% of NTA or major transactions exceeding 20% require mandatory unitholder approval and independent financial advice under SGX Listing Rules.

Correct: Under the Code on Collective Investment Schemes (CIS Code) issued by the Monetary Authority of Singapore (MAS), specifically Appendix 6 regarding Real Estate Investment Trusts, the REIT Manager has a fiduciary duty to act in the best interests of unitholders. In any situation where a conflict of interest arises between the unitholders and the manager or its related corporations (such as the Sponsor), the manager must give priority to the unitholders’ interests. This includes ensuring that Interested Person Transactions (IPTs) are conducted on normal commercial terms that are not detrimental to the REIT.

Incorrect: Prioritizing the Sponsor’s pipeline objectives or balancing the Sponsor’s interests equally with unitholders violates the fundamental regulatory requirement that unitholders’ interests must take precedence. While rental guarantees are common, they do not justify a failure to prioritize unitholder interests. Furthermore, the MAS does not provide transaction-specific price approvals or letters of no-objection for individual acquisitions; the responsibility for ensuring the transaction is fair and at arm’s length rests with the REIT Manager and the Trustee, subject to the Listing Rules and the CIS Code.

Takeaway: In any conflict of interest, the REIT Manager is legally and ethically obligated to prioritize the interests of unitholders over those of the Manager or the Sponsor.

Correct: In Singapore, Distribution Reinvestment Plans (DRPs) allow unitholders to receive units in lieu of cash. Under SGX Listing Rules and standard market practice, the issue price is typically set at a small discount (capped at 10%) to the volume-weighted average price (VWAP) of the units. From a risk management perspective, the Manager must consider the dilutive effect on unitholders who opt for cash, ensuring the plan is executed fairly and transparently in accordance with the Trust Deed and regulatory guidelines.

Incorrect: Option B is incorrect because pricing for listed REITs must be transparent and market-linked (VWAP), not arbitrarily set against NAV at high discounts. Option C is incorrect because a general mandate for unit issuance, typically obtained at the Annual General Meeting (AGM), is sufficient to cover DRP issuances; a special resolution every quarter is not required. Option D is incorrect because while the MAS Property Funds Appendix regulates leverage, it does not mandate DRPs as a compulsory or sole distribution method based on specific leverage thresholds.

Takeaway: DRPs in Singapore REITs require market-based pricing (VWAP) with capped discounts to balance the REIT’s capital needs against the potential dilution of non-participating unitholders.

Correct: According to Appendix 6 of the Code on Collective Investment Schemes (Property Funds Appendix) issued by the Monetary Authority of Singapore (MAS), property funds are subject to specific investment criteria for non-real estate assets. For unlisted debt securities, the fund is restricted to those issued by the Singapore Government (or its agencies) or those that have an investment-grade rating. This ensures that the non-real estate portion of the portfolio maintains a high level of credit quality and liquidity.

Incorrect: The suggestion that a REIT can invest up to 40% in unlisted debt securities is incorrect because at least 75% of a property fund’s deposited property must be invested in income-producing real estate. The claim that non-real estate assets are entirely prohibited is false, as REITs need to hold cash, government securities, or other liquid assets for operational and liquidity management. The idea that there are no credit rating restrictions for unlisted debt securities as long as they stay under a 15% NAV limit is incorrect, as the MAS specifically mandates quality requirements (investment grade or government-issued) for such instruments.

Takeaway: Singapore REITs must ensure that any investment in unlisted debt securities meets specific credit quality standards, such as being investment grade or government-issued, to comply with the MAS Property Funds Appendix.

Correct: Under SGX Listing Rule 904, an ‘Interested Person’ includes a director of the REIT manager. An ‘associate’ of such a director includes a company in which the director and his immediate family together have an interest of 20% or more. Similarly, the CIS Code (Property Funds Appendix) defines a ‘Related Party’ to include the manager, the trustee, and their associates (including directors). Since the director holds a 25% stake, the counterparty is an associate and must be classified as both an Interested Person and a Related Party.

Incorrect: Non-executive and independent directors are not exempt from the definitions of Interested Persons or Related Parties; their involvement still triggers these classifications to prevent conflicts of interest. The threshold for an entity to be considered an ‘associate’ of a director is generally 20% under SGX rules, not a 50% controlling interest. While independent valuations are required for such transactions under the CIS Code, they do not change the classification of the counterparty; they only serve as a procedural safeguard for the transaction itself.

Takeaway: In the Singapore REIT context, a counterparty is classified as an Interested Person or Related Party if a director of the manager holds at least a 20% interest in that entity.

Correct: According to Appendix 6 of the Code on Collective Investment Schemes (Property Funds Appendix) issued by the Monetary Authority of Singapore (MAS), the aggregate leverage of a property fund should not exceed 45% of its deposited property. However, this limit may be increased to a maximum of 50% if the property fund has a minimum adjusted interest coverage ratio (ICR) of 2.5 times. This regulatory framework shifted the focus from credit ratings to the ICR to ensure the REIT has sufficient cash flow to service its debt obligations.

Incorrect: The suggestion that a credit rating allows leverage up to 60% is incorrect as it reflects an outdated regulatory framework that has since been replaced by the ICR-based threshold. The idea that the limit is 35% for unrated REITs is also outdated. There is no regulatory provision for a waiver to 55% based on bank guarantees, nor is the leverage limit determined solely by SGX Mainboard listing status without consideration of the ICR.

Takeaway: S-REITs can only exceed the 45% aggregate leverage limit up to a 50% cap if they meet the mandatory minimum adjusted interest coverage ratio (ICR) of 2.5 times.

Correct: Under the Property Funds Appendix (Appendix 6 of the Code on Collective Investment Schemes) issued by the Monetary Authority of Singapore (MAS), a property fund must ensure that a valuer does not value the same property for more than two consecutive financial years. This mandatory rotation is a critical regulatory control designed to prevent over-familiarity and ensure that the valuation remains objective and independent.

Incorrect: Appointing a valuer with long-term non-valuation ties increases the risk of a conflict of interest rather than mitigating it. Providing target valuation figures to a valuer is a breach of independence as it may influence the valuer’s professional judgment. While professional membership in the Singapore Institute of Surveyors and Valuers (SISV) is required for the valuer, the annual valuation must be performed by an independent professional valuer, not by the REIT Manager’s internal staff, to comply with MAS requirements.

Takeaway: To ensure objectivity, Singapore REITs must rotate independent valuers so that no single valuer assesses the same property for more than two consecutive financial years.

Correct: Under Appendix 6 (Property Funds Appendix) of the Code on Collective Investment Schemes (CIS Code) issued by the Monetary Authority of Singapore (MAS), permissible investments include real estate-related assets. These are defined to include debt or equity instruments issued by unlisted entities that own real estate. For an S-REIT to invest in such unlisted equity, it generally requires a contractual or legal right to participate in the management of the entity to ensure the investment aligns with the REIT’s mandate.

Incorrect: Classifying the equity as a non-real estate-related asset is incorrect because the CIS Code specifically allows for real estate-related assets to include equity in property-owning entities. Stating that S-REITs are prohibited from holding anything other than 100% direct title is incorrect, as joint ventures and SPV structures are common and permitted under the Property Funds Appendix. Classifying a minority or joint stake as property development is a misunderstanding of the term; property development refers to the actual construction or significant enhancement of assets, not the corporate structure used to hold them.

Takeaway: Under the Singapore CIS Code, S-REITs can invest in unlisted property-owning entities as real estate-related assets, provided they maintain a level of management participation or control.

Correct: According to Appendix 6 (Property Funds Appendix) of the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore (MAS), when a REIT acquires assets from an interested party (such as the Sponsor or its subsidiaries), the acquisition fee must be paid in the form of units. Furthermore, these units should not be sold within one year from the date of their issuance to ensure the Manager’s interests remain aligned with the long-term performance of the REIT.

Incorrect: While independent valuations and arm’s length terms are standard requirements for interested party transactions, they do not permit the Manager to receive the acquisition fee in cash for such transactions. Waiving the fee entirely is a commercial decision but not a regulatory mandate under the Property Funds Appendix. Similarly, while the board and Trustee play oversight roles, they cannot override the specific regulatory requirement that fees for interested party acquisitions must be paid in units with a one-year lock-up period.

Takeaway: For REIT acquisitions from interested parties in Singapore, acquisition fees must be paid in units and held for at least one year to align the Manager’s interests with those of the unitholders.

Correct: In Singapore, for an S-REIT to enjoy tax transparency treatment, it must distribute at least 90% of its taxable income to unitholders. If the distribution falls below this 90% threshold, the tax transparency treatment is not granted for that year of assessment. Consequently, the trustee of the S-REIT will be taxed on the entire taxable income at the prevailing corporate tax rate, rather than the unitholders being taxed on the distributions.

Incorrect: The tax transparency treatment is an ‘all-or-nothing’ benefit regarding the 90% threshold; it is a common misconception that tax is only applied to the retained portion. While the Property Funds Appendix (Appendix 6 of the Code on Collective Investment Schemes) governs the operational aspects of REITs, the tax transparency rules are specifically mandated by IRAS and do not allow for MAS-granted waivers to bypass the 90% distribution requirement for tax purposes. Scrip dividends may count towards distribution, but the core requirement remains the 90% threshold of taxable income, and the scenario focuses on the consequence of failing to meet that threshold through retention.

Takeaway: To maintain tax transparency in Singapore, an S-REIT must distribute at least 90% of its taxable income, or face corporate tax on its total taxable income.

Correct: Under the Securities and Futures Act (SFA) and the MAS Guidelines on Licensing, an entity applying for a CMS license for REIT management must be a corporation. It is required to maintain a minimum base capital of S$1 million and must employ at least two full-time resident professionals in Singapore who meet the competency requirements to act as representatives for the regulated activity.

Incorrect: Option B is incorrect because while corporate governance and board independence are critical for listed REITs, the CMS license application itself requires the applicant to be a corporation but not necessarily a public company at the point of application. Option C is incorrect as there is no specific S$500 million AUM track record requirement for the parent company to obtain a license. Option D is incorrect because the CEO’s competency is assessed based on relevant experience in fund management or REITs, and there is no specific requirement for a 10-year tenure under the Financial Advisers Act (FAA) for a CMS license under the SFA.

Takeaway: To obtain a CMS license for REIT management in Singapore, a corporation must meet a minimum base capital requirement of S$1 million and employ at least two resident representatives.

Correct: In Singapore, the Trust Deed is the fundamental constitutive document for a REIT. Under the Securities and Futures Act (SFA) and the Code on Collective Investment Schemes (CIS Code), the Trust Deed creates the legal framework of the trust. It is a legally binding contract that sets out the fiduciary duties and responsibilities of the Trustee and the Manager, specifies the investment mandate, and defines the rights of unitholders as beneficiaries of the trust property held by the Trustee.

Incorrect: The Prospectus is a disclosure document for potential investors, but the Trust Deed is the actual legal instrument that constitutes the trust. Amendments to the Trust Deed are not at the sole discretion of the Manager; they typically require a supplemental deed and often an Extraordinary Resolution from unitholders unless the Trustee certifies the change is not materially prejudicial. While the Trust Deed may contain provisions related to distributions to meet tax transparency requirements, its primary legal significance is as the constitutive document under the SFA and CIS Code, not merely a tax agreement.

Takeaway: The Trust Deed is the primary constitutive legal document in Singapore that binds the Manager, Trustee, and unitholders, defining their respective rights and obligations under the SFA.

Correct: In Singapore, the SGX Listing Rules and the Code on Collective Investment Schemes require an IFA to be independent to provide an objective opinion on whether an IPT is on normal commercial terms and not prejudicial to the interests of the REIT and its minority unitholders. Accepting significant hospitality or entertainment from an interested party during an active mandate creates a conflict of interest and compromises the IFA’s perceived and actual independence. Declining the offer and informing the Audit Committee ensures transparency and upholds the integrity of the fairness opinion.

Incorrect: Partial reimbursement or paying for travel does not eliminate the conflict of interest arising from receiving hospitality from a party with a direct interest in the IFA’s upcoming opinion. Avoiding direct conversation at a table is insufficient to protect the appearance of independence. Relying solely on internal materiality thresholds is inappropriate when the entertainment is provided by a related party during a live transaction evaluation, as the ethical requirement for independence in such high-stakes roles transcends simple monetary limits.

Takeaway: An Independent Financial Adviser must strictly avoid any gifts or entertainment from interested parties that could compromise their objectivity or the perceived integrity of their evaluation of a Related Party Transaction (RPT).

Correct: According to Paragraph 5.2 of Appendix 6 (Property Funds) of the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore (MAS), a property fund should not acquire any property from an interested party unless two independent valuations are obtained and the purchase price is not more than the higher of those two valuations. This ensures that the transaction is conducted at arm’s length and protects the interests of unitholders.

Incorrect: Option b is incorrect because the current MAS requirement for increasing the aggregate leverage limit from 45% to 50% is based on the REIT having an interest coverage ratio (ICR) of at least 2.5 times, not a credit rating. Option c is incorrect because the standard limit for property development is 10% of the deposited property; it can only be increased to 25% if specific conditions are met, such as unitholder approval and the additional 15% being used for re-development of existing assets. Option d is incorrect because Appendix 6 requires a full valuation of the fund’s real estate assets to be conducted at least once a financial year, not every six months.

Takeaway: Under Singapore’s Appendix 6, interested party transactions require two independent valuations, and the purchase price must not exceed the higher of the two.

Correct: According to Section 295 of the Securities and Futures Act (SFA) and the Code on Collective Investment Schemes (CIS Code), the manager of a collective investment scheme (including a REIT) may be removed by a resolution passed by a simple majority of the unitholders present and voting at a meeting. The Trust Deed must contain provisions for the removal of the manager to ensure unitholder interests are protected.

Incorrect: Option b is incorrect because while MAS has regulatory oversight, the SFA specifically empowers unitholders to remove a manager via resolution. Option c is incorrect because the threshold for removing a REIT manager is typically a simple majority of those present and voting, not a 75% special resolution of all units in issue. Option d is incorrect because the Trustee’s power to remove the manager is generally governed by the Trust Deed and the SFA, usually requiring unitholder approval or specific triggers like a material breach, rather than absolute unilateral discretion without cause.

Takeaway: In Singapore, the Securities and Futures Act empowers unitholders to remove a REIT Manager through a simple majority vote of those present and voting at a duly convened meeting.

Correct: According to the MAS Code on Collective Investment Schemes (Property Funds Appendix), the aggregate leverage of a property fund includes its total borrowings, deferred payments, and all financial guarantees given by the fund. Furthermore, it must include the property fund’s share of borrowings and deferred payments of its unlisted sub-entities. This ensures that the leverage limit (currently 45%, or 50% with a credit rating) accurately reflects the fund’s total risk exposure, including off-balance sheet commitments.

Incorrect: Excluding guarantees for subsidiaries is incorrect because the MAS guidelines do not provide an exemption for internal group guarantees in the leverage limit calculation. Waiting for a high probability of a guarantee being called is incorrect as the regulatory definition requires the inclusion of the guarantee regardless of the likelihood of default. Relying solely on consolidated statements is insufficient because the Property Funds Appendix specifically requires the inclusion of the proportionate share of debt from unlisted sub-entities, which may not be fully captured in standard consolidated accounting if the entity is not controlled by the REIT.

Takeaway: In Singapore, REIT aggregate leverage must comprehensively include financial guarantees and the proportionate share of debt from unlisted sub-entities to ensure regulatory compliance with MAS limits.

Correct: The Compliance Officer’s role is to ensure the REIT Manager adheres to the MAS Code on Collective Investment Schemes (CIS Code). According to Appendix 6 of the CIS Code (Property Funds), the aggregate leverage of a property fund should not exceed 45% of the fund’s deposited property. This limit can be increased to a maximum of 50% only if the property fund has a credit rating from a major credit rating agency that is disclosed to the public. The Compliance Officer must ensure the Board is aware of these statutory constraints during the risk appetite review.

Incorrect: Delegating the assessment to internal audit is incorrect because the Compliance Officer is specifically tasked with advisory and monitoring of regulatory adherence. Approving a 48% limit without a credit rating would be a breach of the CIS Code, and notification to SGX does not waive MAS statutory limits. The claim that the CIS Code does not govern leverage limits is false, as Appendix 6 of the CIS Code is the primary regulatory source for REIT leverage restrictions in Singapore.

Takeaway: The Compliance Officer must ensure that a REIT’s risk appetite, particularly regarding leverage, stays within the mandatory limits set by the MAS CIS Code and SGX requirements.

Correct: Under the IRAS tax transparency treatment, an S-REIT is not taxed on its taxable income provided it distributes at least 90% of that income to unitholders in the same year in which the income was derived. While distributions to individuals are generally tax-exempt (unless received through a partnership), distributions made to foreign non-individual investors are subject to a reduced withholding tax rate of 10% rather than the prevailing corporate tax rate.

Incorrect: Tax transparency is not automatic; it is conditional upon the 90% distribution threshold, and while gearing ratios are a MAS regulatory requirement, they do not dictate IRAS tax transparency status. The required distribution threshold is 90%, not 100%. Furthermore, tax transparency does not mean the REIT itself pays a concessionary rate on retained earnings; rather, it means the REIT is not taxed on the distributed portion, while retained income is taxed at the normal corporate rate.

Takeaway: To maintain tax transparency in Singapore, an S-REIT must distribute at least 90% of its taxable income, which shifts the tax burden from the REIT to the unitholders based on their specific tax profiles.

Correct: In Singapore, a S-REIT is structured as a collective investment scheme which requires a manager to manage the assets and an independent trustee to hold the assets in trust for the unitholders. In contrast, a Business Trust (BT) is governed by the Business Trusts Act and utilizes a single-entity structure where the Trustee-Manager both holds the assets and manages the business operations.

Incorrect: The statement regarding distribution is incorrect because the 90% distribution requirement for tax transparency applies to S-REITs, not Business Trusts. The regulatory frameworks are also swapped in the third option; S-REITs follow the CIS Code (Appendix 6) while Business Trusts follow the Business Trusts Act. Finally, the leverage limits (gearing) are a hallmark of S-REIT regulation under the CIS Code, whereas Business Trusts do not have the same prescriptive leverage caps.

Takeaway: The key structural difference is that S-REITs utilize a dual-party (Manager and Trustee) governance model, while Business Trusts utilize a single-party (Trustee-Manager) model.

Correct: ICE Clear Singapore is classified as an Approved Clearing House (ACH) under the Securities and Futures Act (SFA) because it is a Singapore-incorporated entity that provides clearing facilities for the Singapore market. Under Section 51 of the SFA, MAS grants ACH status to entities that are critical to the systemic stability of Singapore’s financial system. This classification subjects the entity to the most stringent level of direct MAS supervision, including specific requirements for financial resources, risk management frameworks, and operational resilience. This distinguishes it from a Recognised Clearing House (RCH), which is typically a foreign-incorporated entity regulated in its home jurisdiction and recognized by MAS to provide services to Singapore-based participants.

Incorrect: Treating the entity as a Recognised Clearing House (RCH) is incorrect because RCH status is generally reserved for overseas clearing houses that are already subject to comparable regulation in their home jurisdictions; ICE Clear Singapore is a domestic entity. Classifying it under the Payment Services Act is a regulatory error, as the clearing and settlement of exchange-traded derivatives are specifically governed by the SFA, not the framework for retail payment systems. Assuming ACH status is automatically granted based on exchange linkage ignores the formal application and rigorous assessment process required by MAS under the SFA to ensure the clearing house can manage the specific risks of the contracts it clears.

Takeaway: ICE Clear Singapore’s status as an Approved Clearing House (ACH) under the SFA signifies it is a Singapore-incorporated entity subject to the highest level of direct MAS supervision and local prudential requirements.

Correct: In accordance with SGX Listing Rule 920, when a REIT obtains a general mandate for recurring Interested Person Transactions (IPTs), the Audit Committee (AC) holds the primary responsibility for oversight. The AC must ensure that the methods and procedures for determining transaction prices are adhered to and remain sufficient to ensure that the transactions are conducted on an arm’s length basis and are not prejudicial to the interests of the REIT and its minority unitholders. If the procedures become inappropriate, the REIT must revert to unitholders for a fresh mandate.

Incorrect: Requiring the Audit Committee to sign off on every individual transaction under a mandate is impractical and defeats the purpose of the mandate, which is to streamline recurring transactions. A general mandate does not allow managers to deviate from established procedures; any deviation would require specific unitholder approval or a new mandate. The Audit Committee cannot be exempted from its duties; under Singapore regulations, the AC must provide a statement in the Annual Report confirming whether the procedures are sufficient to ensure transactions are on normal commercial terms.

Takeaway: Under SGX rules, the Audit Committee must actively monitor and confirm that the procedures within a general mandate for recurring IPTs consistently protect minority unitholders’ interests.

Correct: According to Appendix 6 of the CIS Code (Property Funds), the total contract value of property development activities and investments in uncompleted property developments should not exceed 10% of the property fund’s deposited property. However, this limit may be increased up to 25% if the manager obtains the specific approval of unitholders and the property is intended to be held by the fund upon completion.

Incorrect: The suggestion regarding a 45% leverage limit is incorrect as the current aggregate leverage limit for Singapore REITs is 50% regardless of credit rating. The requirement for SGX waiver for projects exceeding 5% is not a provision of Appendix 6 of the CIS Code. The requirement for 50% pre-leasing is a commercial consideration but is not a regulatory threshold defined in Appendix 6 for increasing the development limit.

Takeaway: Under Appendix 6 of the CIS Code, Singapore REITs can increase their property development limit from 10% to 25% of deposited property subject to specific conditions including unitholder approval and intent to hold the asset long-term.

Correct: Under the MAS Guidelines on Fit and Proper Criteria (FSG-G01), honesty, integrity, and reputation are fundamental pillars. A failure to disclose relevant information, such as a civil judgment involving a breach of fiduciary duty, is a serious matter that directly impacts the assessment of an individual’s integrity. The REIT Manager, as a Capital Markets Services (CMS) licensee, has a continuous obligation to ensure its representatives are fit and proper. They must evaluate the gravity of the past conduct and the lack of candor in the initial declaration to determine if the individual remains suitable for the role.

Incorrect: The suggestion that an incident can be ignored after seven years is incorrect because MAS guidelines do not specify a fixed ‘expiry date’ for matters affecting honesty and integrity; the relevance is based on the nature of the act. Reporting only to the SGX is incorrect as the primary regulatory oversight for fit and proper status of CMS representatives lies with the Monetary Authority of Singapore (MAS). Allowing a fresh declaration to ‘cure’ the omission is insufficient because the initial non-disclosure itself is a factor that must be weighed in the assessment of the individual’s character and integrity.

Takeaway: The assessment of honesty and integrity under MAS Fit and Proper Guidelines is a continuous obligation that requires full disclosure of relevant past conduct, including civil judgments and non-disclosures.

Correct: In Singapore, REIT Managers must operate within the authority granted by unitholders. If a Distribution Reinvestment Plan (DRP) involves issuing units at a discount that exceeds the limits of the general mandate (typically capped at 10% for non-pro rata issuances under SGX Listing Rules), the manager must either adjust the terms to comply with the mandate or obtain specific unitholder approval. This ensures that the manager does not exceed its delegated authority and protects unitholders from unauthorized dilution.

Incorrect: Proceeding with a discount that exceeds the mandate is a breach of corporate governance and SGX Listing Rules, even if disclosed later. While the MAS Code on Collective Investment Schemes provides broad regulatory frameworks, the specific general mandate approved by unitholders acts as a legal limit on the manager’s power to issue units. Canceling the distribution entirely is an extreme measure that ignores the possibility of adjusting the DRP terms or paying out in cash, which would be the standard fallback.

Takeaway: REIT Managers must ensure that the pricing and issuance of units under a DRP strictly adhere to the limits of the general mandate or seek specific unitholder approval to comply with SGX requirements.

Correct: Under the Property Funds Appendix (Appendix 6 of the Code on Collective Investment Schemes) issued by the Monetary Authority of Singapore (MAS), where an acquisition is from an interested party or a divestment is to an interested party, the acquisition or divestment fee must be paid in the form of units issued by the property fund. Furthermore, these units should not be sold within one year from the date of their issuance to ensure the Manager’s interests remain aligned with those of the unitholders.

Incorrect: Paying the fee in cash for interested party transactions is prohibited under the Property Funds Appendix to prevent immediate cash extraction by the Manager in potentially conflicted deals. Allowing a discretionary mix of cash and units does not satisfy the specific regulatory requirement for 100% unit payment in interested party scenarios. Deferring the fee based on performance metrics is a commercial arrangement but is not the specific regulatory requirement mandated by the MAS for interested party transactions.

Takeaway: In Singapore, acquisition and divestment fees for interested party transactions must be paid in units and held for at least one year to align the Manager’s interests with unitholders.

Correct: According to the MAS Code on Collective Investment Schemes (Appendix 6), the aggregate leverage of a property fund (S-REIT) must not exceed 45% of the fund’s deposited property. A higher limit of 50% is only permissible if the REIT maintains a minimum Interest Coverage Ratio (ICR) of 2.5 times. Effective risk management involves maintaining a buffer below these limits and ensuring the ICR meets regulatory requirements to access the higher leverage tier.

Incorrect: Credit ratings do not provide an automatic exemption from leverage limits; the 50% cap is specifically tied to the Interest Coverage Ratio (ICR) under current MAS requirements. All borrowings and deferred payments must be included in the aggregate leverage calculation, so excluding unsecured debt is a regulatory violation. Furthermore, property valuations for the purpose of calculating leverage must be performed by independent professional valuers, not solely through internal monthly estimates.

Takeaway: S-REITs must adhere to a 45% aggregate leverage limit, which can only be increased to 50% if the Interest Coverage Ratio (ICR) is at least 2.5 times.

Correct: According to Appendix 6 (Property Funds Appendix) of the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore (MAS), a Singapore REIT must invest at least 75% of its deposited property in income-producing real estate. This requirement ensures the REIT remains focused on its core objective of providing regular income to unitholders through property rentals.

Incorrect: The strategy involving 40% in non-real estate assets is incorrect because Appendix 6 limits investments in non-real estate related assets to a maximum of 25% of the REIT’s Gross Asset Value. The acquisition of vacant land is generally prohibited unless the REIT intends to undertake development activities on that land. Investing heavily in unlisted property companies without management control or board representation is restricted to ensure the REIT manager can effectively oversee the underlying assets and protect unitholder interests.

Takeaway: A Singapore REIT must maintain a minimum of 75% of its deposited property in income-producing real estate to comply with the Property Funds Appendix of the CIS Code.

Correct: Under the tax transparency treatment granted by the Inland Revenue Authority of Singapore (IRAS), an S-REIT is not taxed on its taxable income provided it distributes at least 90 percent of that income to unitholders. Taxable income for an S-REIT typically refers to income from the letting of properties and related services, but it specifically excludes capital gains from the disposal of properties, which are generally not taxable in Singapore unless the REIT is deemed to be trading in properties.

Incorrect: The option regarding accounting profit is incorrect because tax transparency is based on taxable income, not accounting profit; accounting profit includes non-taxable items like unrealized revaluation gains. The option regarding gross rental income is incorrect because the 90 percent requirement applies to taxable income, which is calculated after deducting allowable expenses and capital allowances. The option regarding the 80 percent distribution is incorrect because the 90 percent threshold is a strict annual requirement for that specific assessment year; failing to meet it generally results in the REIT being taxed at the prevailing corporate tax rate on the undistributed income.

Takeaway: To qualify for tax transparency in Singapore, an S-REIT must distribute at least 90 percent of its taxable income (excluding capital gains) to its unitholders within the same financial year or a specified period thereafter.