Business Trusts

1. What are business trusts?

Business trusts are business enterprises set up as trusts, instead of companies. They are hybrid structures with elements of both companies and trusts.

Like a company, a business trust operates and runs a business enterprise. But unlike a company, a business trust is not a separate legal entity on its own. It is created by a trust deed under which the Trustee-Manager has legal ownership of the trust assets and manages the assets for the benefit of the beneficiaries of the trust. In the case of FSLTrust, the Trustee-Manager is FSL Trust Management Pte Ltd.

Owners of units in a business trust, being beneficiaries of the trust, hold beneficial interest in assets and income of the business trust.

For more information on business trusts, please visit SGX website at www.sgx.com/psv/securities/BusinessTrusts.shtml

2. How are business trusts different from traditional listed companies?

Unlike companies which are restricted to paying dividends out of accounting profits, there are no such restrictions on trusts. Business trusts are therefore able to pay distributions out of surplus operating cash flows and in excess of accounting profits, subject to a solvency test prior to each distribution. As such, business trusts offer investors a new way to invest in assets with a stable operating income whereby in return, investors can benefit from a steady stream of predictable distributions.

This explains why the distribution per unit ("DPU") of a business trust can be more than the earnings per unit.

3. How are business trusts different from Real Estate Investment Trust (REITs)?

Both business trusts and REITs are investment vehicles meant to provide less volatile, steady returns to investors.

Business trusts allow investors to have direct exposure to cash flow-generating assets, such as utilities, vessels or aircraft. The structure unitises big ticket assets into liquid and affordable units which are traded on the stock exchange, giving investors a new alternative to existing yield plays.

The key differences are:

Source: http://www.sgx.com/wps/portal/marketplace/mp-en/products/securities_products/business_trusts

4. Why is FSL Trust an attractive investment choice?

FSL Trust's investment merits include:

• Exposure to shipping industry without excessive risks
• Average remaining 8.7 years^ of contracted lease revenues
• Attractive yield on a risk-adjusted basis
• Focus on growth through DPU-accretive acquisitions
• Diversified lease portfolio across shipping sectors and customers
• Strong management team, with extensive finance and industry experience
• Strong commitment of Sponsor
• Robust risk management practices
• No Singapore tax nor Singapore withholding tax on distribution to unitholders
• Well-positioned in a growing non-tax driven ship leasing market
• Competitive capital structure with substantial financial flexibility

^ as at 30 September 08 and assuming inclusion of YM Enhancer in FSL Trust portfolio.

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