Business Trust as a New Asset Class (I)

I have written a piece on Real Estate Investment Trust (REIT) – Financial Tip #24. Now there is a new asset class known as a Business Trust.

The idea for a Business Trust is to establish a portfolio of viable businesses to be managed by a Trustee-Manager who is experienced in managing these types of businesses. The Business Trust will start with initial established businesses brought into the Business Trust and this Business Trust will be floated in the Singapore Stock Exchange (SGX) and be traded like a normal stock or REIT by investors. Moving forward, the Business Trust will acquire potentially growth businesses to add to the portfolio. Each Business Trust may go on specific principal objective of investing in, for example, infrastructure assets.

The aim of the Business Trust is to provide long term capital growth potential in the value of the Business Trust, which Unitholders or investors can sell at SGX for capital gains. At the same time, the Business Trust will pay cash distribution based on the performance of the various combined businesses that make up the Business Trust. The cash distribution is tax-free for tax-residents. (Please review the prospectus of a Business Trust on the aspect of taxation.)

As in all investments, there are risks involved in investing in this new asset class. Investors must study the prospectus and the business model carefully.

Written on 2/4/2007 11:39 AM

Copyright © 2007, the author known as LKT in Singapore.

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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