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RMR Funds’ Revised Merger Documents Filed With SEC

RMR Asia Pacific Real Estate Fund (NYSE Amex: RAP) today announced that it has filed a preliminary proxy statement/prospectus with the U.S. Securities and Exchange Commission, or the SEC, to effect its combination with RMR Real Estate Income Fund (NYSE Amex: RIF).

On June 6, 2011, RIF filed a preliminary joint proxy statement/prospectus to effect a merger of RAP into RIF. Among other matters, that merger was conditioned upon receipt of a ruling from the U.S. Internal Revenue Service, or the IRS, that the merger would be a tax free reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended. After further consultation with the IRS, the Boards of Trustees of RAP and RIF have determined to restructure the proposed combination so that RIF will now be merged into RAP, with the substantive results of the combination remaining unchanged, insofar as the surviving fund in the merger will be substantively identical to RIF. The following summarizes certain differences and similarities between the transaction proposed in the June 6 SEC filings, and the transaction proposed in the July 29 SEC filing:
  • The completion of the merger is no longer conditioned upon RIF and RAP receiving a ruling from the U.S. Internal Revenue Service that the merger will qualify as a "reorganization" within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"); nonetheless, the merger is still intended to qualify as a "reorganization" within the meaning of Section 368(a) of the Code.
  • The June 6 filing provided that newly issued common shares of RIF would be issued in exchange for common shares of RAP, with the number of shares to be issued based upon the relative net asset values (NAVs) of RAP's and RIF's common shares, respectively. The July 29 filing provides that newly issued common shares of RAP will be issued in exchange for common shares of RIF, with the number of shares to be issued based upon the relative NAVs of RAP's and RIF's common shares, respectively. Accordingly, although the direction of the merger has been reversed, the values upon which the exchange will be based remain identical.
  • The June 6 filing provided that RIF would continue to focus its investments on income producing U.S. real estate securities after the merger. The July 29 filing provides that RAP will change its investment focus to income producing U.S. real estate securities after the merger, and will also change all of its fundamental and non-fundamental investment objectives, policies and restrictions to match those of RIF. In both circumstances, the surviving entity will focus on income producing U.S. real estate securities and implement its investment program using RIF's fundamental and non-fundamental investment objectives, policies and restrictions. Also, after the reorganization, RAP will change its name to "RMR Real Estate Income Fund" and adopt the "RIF" trading symbol.
  • Prior to the closing of the merger, RAP will make a self tender offer for up to 20% of its outstanding common shares. The tender offer price will be RAP's NAV per common share at the time the purchase is completed. This provision has not changed, and RAP's tender offer remains conditioned on RAP's shareholders approving their merger related proposals.
  • The June 6 filing disclosed that the Board of RIF had conditionally approved raising RIF's quarterly common share dividend rate by $0.02/share ($0.08/share per year). The July 29 filing discloses that, after the merger, RAP expects to begin paying regular quarterly dividends at a rate that will be the substantive equivalent of the rate currently paid by RIF, increased by $0.02/share ($0.08/share per year). Accordingly, this aspect of the proposed combination of RIF and RAP has not changed, and remains conditioned upon RAP's shareholders approving their merger related proposals and the merger being completed.
  • The June 6 filing provided that the preferred shareholders of RIF would not be adversely affected by the proposed merger. The July 29 filing also provides that RIF preferred shareholders would not be adversely affected by the proposed merger, but additionally provides that RAP will exchange newly issued RAP preferred shares for the outstanding preferred shares of RIF, and that these new RAP preferred shares will have identical terms to the existing RIF preferred shares, including with respect to auction dates, rate periods and divided payment dates.
  • RAP, in connection with its transformation into a fund similar to RIF, will adopt a leveraged capital structure by issuing preferred shares, as described above, and assuming RIF's currently outstanding credit facility.
  • RAP will amend its investment management agreement with RMR Advisors, Inc. so that its terms are identical to those of RIF's management agreement with RMR Advisors, Inc.

The proposed merger will be submitted to a vote of RAP common shareholders at a special meeting of shareholders. The RIF and RAP boards have determined that the proposed merger is in the best interests of RIF, RAP and their respective shareholders and that RIF's preferred shareholders will not be adversely affected by the merger. No shareholders' vote by RIF will be required since RIF will be merging into a fund that is operated in the same manner. The June 6 filing previously scheduled a special shareholders' meeting on September 20, 2011 to consider the merger. RAP will make an announcement concerning the timing for its special shareholders' meeting and related matters at about the time the proxy statement/prospectus is declared effective by the SEC.

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