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MARKETS & INVESTING | Staff Reporter, Singapore
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REITs and business trusts pump up disclosure practices

CapitaLand and Keppel DC REIT led the initiatives in transparency practices.

Residential investment trusts (REITs) and business trusts (BTs) stepped up their disclosure and governance practices to move up the rankings of the Government Index for Trusts (GIFT) 2018.

The study found improvements across all areas, except for internal and external audit which stagnated, and business risk which slightly dipped.

“For the sector to continue thriving, it must embrace even higher standards of transparency and communication including new initiatives such as sustainability reporting and in the conduct and reporting of valuations,” Singapore Exchange Regco CEO Tan Boon Gin said.

Produced by corporate governance advocate Mak Yuen Teen, GIFT recognises the unique features of REITs and BTs compared to listed companies. In collaboration with governanceforstakeholders.com, the NUS associate professor teamed up with investor Chew Yi Hong to produce GIFT which is supported by the SGX.

The assessment process in GIFT considers differences in business models of listed trusts, applicable regulatory requirements, the Code of Corporate Governance, and the MAS consultation paper on proposed enhancements to the regulatory regime governing REITs and REIT managers.

“We are strongly encouraged by the effort put in by many of the trusts in improving their disclosure and governance practices this year,” Mak commented. “The excellent response to our invitation for the trusts to submit a self-assessment demonstrates their commitment to engage and improve.”

For 2018, CapitaLand and Keppel DC REIT topped the index with a score of 79, followed by Mapletree Commercial Trust and Mapletree Greater China Commercial Trust having the same score of 78.5. Frasers Logistics and Industrial Trust came nex with an index score of 77.5.

On its second instalment, the index assessed 44 trusts including six stapled securities.

Some minor changes to the index’s assessment and approach were made for the 2018 rankings. Amongst them is replacing volatility of returns as a business risk factor with a criterion relating to foreign assets and foreign currency risks as well as providing a separate breakdown of the governance and business risk scores.

In addition, the assessment included inviting trusts to submit a self-assessment. More than half of the 43 trusts we were able to submit.

“Whilst we are delighted with the improvement in scores this year, we have highlighted some emerging issues that trusts and their investors should bear in mind,” Chew noted.

“These include the change in control of the manager/trustee-manager, the expansion of the trust’s geographical mandate and the over-active management of the trust’s DPU,” he explained.

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