Date: October 29, 2024
Some FHT Stapled Securityholders reached out to SIAS recently to seek help as they are concerned on the tax withholding status of the Australian trusts due to the share swap exercise between InterBev Investment Limited (“IBIL”) (a subsidiary of Thai Beverage Public Company Limited (“ThaiBev”)) and TCC Assets Limited (“TCCA”). Due to this transaction with the enlarged shareholdings, FHT would not meet a key criteria in maintaining its status as a Managed Investment Trust for its Australia Assets. The potential tax burden will increase from 15% to 37.5% for its Australia assets.
SIAS sent a list of questions to FHT and we have received their replies with an announcement made on SGX.
SIAS questions and FHT’s replies are as follows:
1. Is FHT aware that this tax issue would happen before the sponsor’s restructuring took place?
Our Sponsor, Frasers Property Limited (“FPL”), did not undertake any restructuring. The restructuring referred to is the share swap between InterBev Investment Limited (“IBIL”) (a subsidiary of Thai Beverage Public Company Limited (“ThaiBev”)) and TCC Assets Limited (“TCCA”), in which FPL shares were being swapped between IBIL and TCCA (amongst others). FPL was not a party to this share swap transaction.
Management became aware of the share swap when ThaiBev issued its announcement on 18 July 2024. As mentioned in FHT’s prospectus at IPO, there are no stipulated limits on how many Stapled Securities an investor may acquire. Hence, the risk of a potential loss of MIT status has always been present since FHT’s IPO in 2014. Consequently, any foreign (non-Australian) individual investor could potentially acquire more than 10% interests resulting in the loss of MIT status.
FHT has been monitoring the percentage of foreign individual shareholding for each income period and providing updates in our unaudited half-year financial results and full year financial results on the MIT status for the relevant income period.
2. Where and how did FHT disclose the impact of the increase in the tax withholding status of the Australian trusts due to the share swap exercise?
Although the share swap was announced on 18 July 2024, the completion was conditional upon: (i) the satisfaction of certain conditions precedents; and (ii) approval of ThaiBev’s minority shareholders at ThaiBev’s EGM i.e. outcome of ThaiBev’s EGM.
There was no certainty regarding the loss of MIT status until at least after the share swap was successfully completed on 20 September 2024.
We were not in a position to make an announcement until after we have quantified and assessed the financial impact for FY2024 due to the loss of MIT status i.e. only after the FY2024 Australia portfolio figures became available. With the relevant information available, we then made the Announcement on 9 October 2024, to provide an update to Stapled Securityholders on the loss of MIT status and estimated amount of the financial impact.
3. FHT unit holders feel that they should not bear such consequences and therefore, will FHT consider to waive/refund the tax amount from the manager fees and continue to do so as long as this situation persists?
The loss of MIT status was beyond the control of FH-REIT and the REIT Manager as it was a corporate action that was undertaken by entities above FH-REIT’s unitholder’s level.
We wish to highlight that any stapled securityholder being a foreign individual investor could potentially acquire more than 10% interest in FHT, thereby resulting in the loss of MIT status. The REIT Manager and its parent company, FPL, also hold Stapled Securities and are similarly impacted by the loss of MIT status. Consequently, it would not be reasonable for the REIT Manager to waive its fees.
4. Will FHT board carry out a strategic review given the change in ownership?
The Managers’ board regularly conducts reviews of its strategies to ensure that FHT is aligned with its long-term objectives and that the Managers act in the best interests of Stapled Securityholders.
In addition to the above responses from FHT, they are also open to having a dialogue session at a mutually suitable date and time with SIAS and we will continue to facilitate such engagements between FHT and the Stapled Securityholders.
David Gerald
Founder, President and CEO
SIAS
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