CMFAS CM-EIP REITs & Business Trusts question: mandatory payout and gearing rules

CMFAS CM-EIPREITs & Business Trusts

Regarding mandatory payout and gearing rules, which statement about a business trust is TRUE?

A It must distribute a high proportion of its income and obey the same statutory gearing cap as any REIT
B It is banned from borrowing any money, so it has no gearing at all
C It must pay out exactly the same percentage of income every year by law
D It is generally not bound by REIT-style payout or gearing rules; its deed and governance set them

Show the answer and explanation

Answer: D. It is generally not bound by REIT-style payout or gearing rules; its deed and governance set them

Unlike a REIT, a business trust is generally not subject to a mandatory high-payout rule or a statutory gearing cap; its distribution and borrowing policies are set by its own trust deed and governance.

Common mistake

Assuming REIT-style payout and gearing rules automatically apply to business trusts.

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CMFAS CM-EIP REITs & Business Trusts question: mandatory payout and gearing rules

Answer: D. It is generally not bound by REIT-style payout or gearing rules; its deed and governance set them

Common mistake

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CMFAS CM-EIP REITs & Business Trusts question: mandatory payout and gearing rules

Answer: D. It is generally not bound by REIT-style payout or gearing rules; its deed and governance set them

Common mistake

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