The Trustee-Manager has developed a set of proprietary internal risk management protocols that it believes will enable it to identify and assess risk prior to a potential transaction, monitor risk following the execution of a transaction and hedge risks associated with a transaction. The Trustee-Manager believes that these internal risk management protocols help it to better manage its risk profile and maintain a stable cash flow stream.

Before a transaction is entered into, the Trustee-Manager will assess the risk profile using its proprietary risk evaluation process to assess credit risk, asset risk and concentration risk. This involves a thorough analysis of the credit strength of a potential lessee, asset quality, asset price, asset fungibility and residual value prospects as well as other transaction specific and risk relevant factors.

Following the completion of a transaction, the Trustee-Manager will continuously monitor the ongoing risks associated with the transaction through various means including conducting regular credit reviews on the lessee, facilitating the renewal of the lessees' vessel insurance policies and carrying out annual vessel inspections.

FSL Trust may be exposed to interest rate and foreign currency exchange risks arising from its operations and sources of financing for its transactions. To manage these risks, the Trustee-Manager may from time to time enter into derivative transactions, being principally interest rate swaps, foreign currency forward contracts and cross currency swaps.