Lead Manager

SECTION 3
BUSINESS OVERVIEW
Accelerate the expansion in Europe and Japan
Babcock & Brown has observed similar types of market inefficiencies and value arbitrage opportunities in its
target sectors of the European and Japanese property markets to those that existed in Australia prior to the
mid-to-late 1990s.There is also significant potential to transfer a number of products, financing structures and
operating practices that have been successfully employed in Australia to these markets. In the past 18 months, the
Group has built a pipeline of European property transactions that is expected to require at least $50 million of
capital deployment during the Forecast Period, including the acquisition of further residential portfolios.
In Japan the business will seek to further build on its successful track record and market presence both as an
investor and asset manager, and to continue the growth in its assets under management, both through acquisitions
as a principal and on behalf of clients, including a large European real estate mutual fund manager. Given the size
and nature of the Japanese market, Babcock & Brown believes there is ample room for expansion both in
principal investment and asset management for some years to come. Babcock & Brown will also seek to broaden
the types of investment products it offers with respect to Japanese real estate and is currently reviewing the
potential launch of a diversified Japanese property investment product.
Increase capital deployed in investments
Babcock & Brown has traditionally syndicated most of its property investment positions. In retrospect, Babcock &
Brown would have received substantial financial benefits had it had sufficient capital to allow it to retain a greater
stake in many of those investments for a longer period of time.
With an expanded capital base, Babcock & Brown intends to hold more significant positions in its investments
where appropriate, while continuing to build its investment management business by syndicating the remainder of
the assets to private investors or to investment vehicles that it has established.
Expansion in selected niches in the US
Babcock & Brown has established a team to pursue opportunities in specialised sectors in the US real estate
market. A particular focus is the provision of structured finance solutions for US property transactions.
FINANCIAL SUMMARY 1
Year ended 31 December ($000) 2001A 2 2002A 2 2003A 2004F 2005F
Net Revenue
– Advisory 4,338 14,385 6,398
– Investment management 27,551 19,152 32,949
– Principal invested 32,309 49,990 78,451
Net Revenue 30,779 25,716 64,198 83,527 117,797
Operating costs 3 (16,587) (21,992) (24,394)
Operating profit before bonuses 47,611 61,535 93,403
NOTES
1.All amounts in foreign currencies for historical financial information in 2001-2003 and forecast financial information for 2004 and 2005 are translated at
constant exchange rates based on the rates assumed for the 2004 Forecasts. Prior to the Offer, the Group managed its activities with US dollars as its benchmark
currency. Historical financial information has been prepared from statements prepared in US dollars.The use of constant exchange rates, whilst not consistent
with Australian GAAP, has been adopted in the table above and in the Business Overviews in Section 3 of this Prospectus, as Babcock & Brown believes that
this basis provides a more meaningful insight into the activities and financial performance of Babcock & Brown given the prior practice of managing its
activities using the US dollar as its benchmark currency.
2. Babcock & Brown did not segment revenues or operating costs by Business Group prior to 2003.
3. Includes operating costs attributable to the segment and allocated corporate overhead costs.
50