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SINGAPORE : Singapore is starting to attract a greater number of shipping trusts.
According to accounting firm KPMG, at least one new trust will be launched here by the end of this year and more are expected to follow suit over the next two years.
KPMG says it is seeing an influx of enquiries from both foreign and local companies planning to set up shipping trusts.
Companies are drawn by government efforts to attract such trusts to Singapore.
These include the Maritime Finance Incentive Scheme, which provides tax exemptions and concessions.
Leonard Ong, Tax Executive Director, KPMG, says: "The Maritime Finance Incentive is in a way superior to those that you see elsewhere. For those in South Korea and Germany the fund manager is taxed at a normal rate. The investors are taxed although the fund isn't.
"These two are really the more major shipping markets around the world and traditionally a lot of shipping funds come from Germany and South Korea. Now we're seeing Singapore coming in too."
Currently, there are only three shipping trusts listed in Singapore. One is by a local company, the other two by companies based in Germany and the US.
Investors have been taking their time to warm up to the trusts, but analysts say interest now is strong.
Kenny Tan, Audit Partner, KPMG, says: "The investors are attracted to these stream of stable cash flows because the business trust is very attractive for businesses with high initial capital expenditures that are able to provide stable operating cashflows.
"In the case of a company, you give dividends out of accounting profits. But in the case of a business trust, it's based on cash distribution, which is based on operating cash flow."
Rodicks Wong, Financial Analyst, Marine Money Asia, says: "So far, the Singapore business trusts, Singapore shipping funds are doing very well. As we see over the past few months, they have been making pretty active acquisitions. They're doing great."
Analysts say shipping trusts typically carry a yield of around 8 to 9 per cent, higher than that of real estate investment trusts.
Beyond Singapore, another country with its eye on ship financing is China. Analysts expect it to come into its own within the next 5 years, turning into a major player. - CNA/ch
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