Comparison for Trust and Funds

			BB Code		FYE	Price	DPS	DPS	Yield	Yield

							Current	Forward	Current	Forward

Business Trusts

Babcock & Brown SFF  BABB SP      	Dec 	0.87	10.2 	10.5 	11.7% 	12.1%

Cityspring 		CITY SP 	Mar 	0.99 	6.0 	6.8 * 	6.1% 	6.9%

MIIF 			MIIF SP 	Dec 	1.05 	8.4 	8.4 	8.0% 	8.0%

SP Ausnet 		SPN SP 		Mar 	1.66 	14.0^ 	14.2^ 	8.4% 	8.5%

Shipping Trusts

First Ship (US$) 	FSLT SP 	Dec 	0.86 	6.6 	8.5 	10.2% 	9.9%

Pacific Shipping Trust (US$) PST SP 	Dec 	0.42 	4.2 	4.2 	10.0% 	10.0%

Rickmers Maritime 	RMT SP 		Dec 	1.56 	8.6 	13.1 	8.3% 	8.4%

Average - Business Trust 						8.5% 	8.8%

Average - Shipping Trust 						9.5% 	9.4%

Average 8.9% 9.1%

Current yield for First Ship and Rickmers are annualised

DBS Vickers - High yield underpinned by firm guidance for FY07/FY08

DBS Vickers

Capital recycling. Management is looking to monetize its investment in JET-I equity and JET-I CDS which should result in capital gains given that aircraft prices have been rising and the portfolio was acquired at 87% of value. Other investments being considered are further investments in BBRNA, aircraft, and music assets.DPU for FY07 is confirmed to be at least 10.2Scts - 1H07 dividend declared was 5.23Scts; made up of 4.7Scts for 1H07 and 0.53Scts for date of listing to end Dec 06. 2H dividend of at least 5.5 cts is 100% hedged. 2H dividend is higher HoH by 5% as distributions from new investments made in 1H will start to contribute.As a percentage of the total portfolio, exposure to the Australian non-conforming mortgage market is 18% whilst exposure to UK is 4%. Our opinion is that the risk is low: (a) The portfolio's loan to value ratio stood at 76% for UK and 73.3% for Australia as at the end of 2006. For comparison, for the US sub-prime mortgage market, the loan to value ratio stood at 85% at the end of 2006 and the risk is heightened as 29% of loans had a loan to value ratio of close to 100%. (b) Over the last 12 months, property prices have risen in both UK (10%) and Australia (9.2%) while there was a decline of around 3% in the US. (c) There is an added cushion for BBSFF?s portfolio that is exposed to Australia as these mortgages originated before 2003 and home prices have risen substantially since then.

DBS Vickers

Babcock & Brown Structured Finance Fund: High yield underpinned by firm guidance for FY07/FY08

BUY S$0.87 BABB SP; Price Target : 12-Month S$ 1.20

Phillip Securities Research - BUY

TP - $1.40

Valuation. Share price of BBSFF has taken a hit recently reaching a low of $0.90. In a recent announcement, BBSFF had highlighted it has no exposure to the US subprime market and reiterated that point in the results brief. In addition, the Manager has released a FY08 dividend guidance and for greater transparency, disclosed the cash economic income of each investment. We feel that this is a good move to re-assure investors of the stable underlying income which is on course to achieve the projected values. We do not feel that the current economic conditions have any adverse impact on BBSFF and at this point in time, we maintain our initial earnings forecast and fair value at $1.40, which is priced at a slight premium to our DCF model of $1.36 to reflect an acquisition premium. At the current price of $0.96, BBSFF offers a very attractive yield of 10.6% and we recommend a BUY on the counter.BBSFF reported total revenue for the first half of 2007 at US$36.0 million. On a QoQ comparison with 1QFY07, second quarter revenue grew 47% and PAT grew 30% mainly due to contributions from the new investments since IPO. Among the new investments are music copyrights, additional investment in railcars as well as securitised assets. Excluding the effect of foreign exchange gain, revenue for the half year stands at US$28.8 million.