Lead Manager

SECTION 7
RISK FACTORS
There are a number of risks, both specific to Babcock & Brown and general investment risks, which may
materially and adversely affect the future operating and financial performance and financial condition of Babcock
& Brown and the value of the Shares.This Section describes a number of risks associated with an investment in
Shares. Prospective investors should note that this list of risks is not exhaustive.
Many of these risks are outside the control of Babcock & Brown and its Directors.There can be no guarantee
that Babcock & Brown will achieve its stated objectives or that any forward-looking statements or forecasts will
eventuate, nor can Babcock & Brown give an assurance that past performance (such as historical IRRs) will be
repeated.
Prior to making an investment decision, prospective investors should read the entire Prospectus and carefully
consider the following risk factors. Investors should have regard to their own investment objectives and financial
circumstances, and should consider seeking professional guidance from their stockbroker, solicitor, accountant or
other independent professional advisor before deciding whether to invest.
Babcock & Brown has a number of general policies and processes in place which help to mitigate these risks.
These policies and processes are set out in Section 4.8.
7.1 SPECIFIC RISKS
7.1.1 Competition
The financial services industry is intensely competitive and expected to remain so. Babcock & Brown competes
on the basis of a number of factors, including the quality of advice and service, innovation, reputation and price.
Over time, Babcock & Brown relies on the creation of new products and business lines within that environment.
Many competitors are better capitalised, have a greater range of products and services, greater financial and
marketing resources and larger customer bases than Babcock & Brown.
7.1.2 Loss of key personnel
Babcock & Brown’s performance is largely dependent on the talents and efforts of highly skilled individuals.
Babcock & Brown’s continued ability to compete effectively depends on the ability to retain and motivate
existing employees as well as attracting new employees. Section 4.7 sets out the Executive retention initiatives that
Babcock & Brown has put in place.
7.1.3 Large holdings by existing Shareholders and Executive Stakeholders
When the Offer is completed the Executive Stakeholders and HVB will own or control approximately 54.2%
and 11.9%, respectively of the Shares. In particular, a number of the Executive Stakeholders are on the Board and
will have significant influence over the direction of the Group.The interests of these Executive Stakeholders may
be different to those of other Shareholders.The Shares may remain tightly held with limited liquidity on ASX.
The size of the Executive stakeholding significantly reduces the likelihood of a takeover of the Company. Certain
Executive Stakeholders have entered into voluntary escrow arrangements, and other arrangements which will
assist with the management of an orderly market should they wish to sell down post the escrow period.These are
detailed in Sections 4.7.8 and 4.8.4. However, if HVB, or Executive Stakeholders following release of the escrow,
did sell their shareholdings, it may adversely impact the market price of Shares.
7.1.4 Employee misconduct
Babcock & Brown runs the risk that employee misconduct may occur. Misconduct by employees could involve
the improper use or disclosure of confidential information resulting in regulatory sanctions and serious
reputational or financial harm.Whilst Babcock & Brown believes that its processes for preventing employee
misconduct are adequate, it is not always possible to avoid employee misconduct and the precautions taken to
detect and prevent this activity may not be effective in all cases.
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