BABCOCK & BROWN

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CHAIrmAN’s Letter 9 November 2005 Dear investor On behalf of the Directors of Babcock & Brown Limited (Babcock & Brown) I am pleased to present to you the first public debt raising of Babcock & Brown — Babcock & Brown Subordinated Notes (BBSN). BBSN are unsecured, subordinated, cumulative, resettable notes issued by Babcock & Brown, and guaranteed on a subordinated basis by Babcock & Brown International Pty Limited. Babcock & Brown intends to issue up to $250 million of BBSN and may choose to issue a further $50 million of oversubscriptions (Offer). The success of Babcock & Brown since its initial public offer (IPO) in October 2004 has presented a growing number of business and investment opportunities to Babcock & Brown in all five of its business areas and across its global platform. The number of transactions and our rate of success have exceeded expectations. This has resulted in Babcock & Brown reporting significantly higher profits than were envisaged at the time of the IPO and fully employing the funds raised under the IPO. As indicated at the time of the IPO, it was Babcock & Brown’s intention to appropriately leverage its balance sheet to underpin growth in its businesses. To this end we are currently renegotiating our corporate facilities, and are arranging standby finance to fund specific asset acquisitions. Commensurate with our growth, the Babcock & Brown Board considers that it is now well positioned to also approach the capital markets for debt funding. Given the pipeline of opportunities which exist in the short to medium term, Babcock & Brown has decided to raise up to $300 million under the Offer. The Offer proceeds will be used to generally invest in the various business and investment transactions which are available to Babcock & Brown. A number of specifically identified projects exist, including the equity investment in an unlisted aircraft fund, the equity investment in US freight railcar syndications, investment in wind turbines, funds to develop wind farms in the US and Australia and funds for the development of thermal power stations. Under the Terms of BBSN, investors have the right to request an exchange of BBSN into ordinary shares in Babcock & Brown in a number of circumstances, including at the reset and maturity dates. On receipt of a request to exchange, Babcock & Brown may generally choose whether to exchange, repay or resell the relevant BBSN. Babcock & Brown’s decision on whether to exchange, repay or resell the relevant BBSN will depend on a range of factors including Babcock & Brown’s equity and debt position at the time, the opportunities for expansion of our business and alternative financial accommodation available to Babcock & Brown at that time. In the event of exchange, Babcock & Brown ordinary shares will be issued to investors at a discount of 2.5% to the average market price on the terms set out in this Prospectus. Full details of this investment opportunity are set out in this Prospectus, which I urge you to read carefully. To apply for BBSN you will need to complete the Application Form attached to this Prospectus. If you have any questions about how to apply, please contact the BBSN InfoLine on 100 1 562. The Offer is expected to open on 21 November 2005. It is possible that the Closing Dates for the Offer may be changed, and therefore if you wish to apply for BBSN you should lodge your Application Form as soon as possible. On behalf of the Directors of Babcock & Brown, I invite you to consider this investment opportunity. Yours faithfully Jim Babcock Executive Chairman Babcock & Brown Limited 6 BABCOCK & BROWN SUBORDINATED NOTES
HoW to APPLy for BBsN Read Consider and consult Complete Mail or deliver Read this Prospectus in full, paying particular attention to: • important information on the inside front cover; • answers to key questions about BBSN in Section 2; • investment risks that may be relevant to an investment in BBSN in Section 6; and • the Terms in Appendix B. Consider all risks and other information about BBSN in light of your particular investment objectives and circumstances. Consult with your stockbroker, accountant or other financial advisor if you are uncertain whether BBSN are a suitable investment for you. Complete the Application Form. Applications for BBSN may only be made on an Application Form attached to this Prospectus (including an electronic copy). If you are a Broker Firm Applicant, you should contact your Retail Broker for instructions on how to submit your Application Form and Application payment. If you are a General Applicant, your completed Application Form and Application payment must be received by the Registry no later than 5.00pm 14 December 2005. If you are a General Applicant, your completed Application Form and Application payment should be: mailed to: or hand delivered to: BBSN Offer BBSN Offer Link Market Services Limited Link Market Services Limited Locked Bay A14 Level 8, 580 George Street Sydney South NSW 1235 Sydney NSW 2000 If you are a Broker Firm Applicant, your completed Application Form and Application payment must be received by your Retail Broker in time for them to arrange settlement on your behalf by 10.00am on 19 December 2005. It is possible that the Offer will close early, so you should lodge your Application as soon as possible. For further details on how to apply for BBSN, see Section 3 and the guide to completing Application Forms in this Prospectus. If you have any further questions on how to apply for BBSN, call the BBSN InfoLine on 100 1 562. BABCOCK & BROWN SUBORDINATED NOTES 7
Page 1 and 2: BABCOCK & BROWN Sydney Melbourne Br
Page 3 and 4: Prospectus & supplementary prospect
Page 5 and 6: SUPPLEMENTARY PROSPECTUS Issuer Bab
Page 7 and 8: Key DAtes Key dates for the Offer D
Page 9: Guarantee: BBSN have the benefit of
Page 13 and 14: 1. Key terms of BBSN BABCOCK & BROW
Page 15 and 16: Interest Payments (continued) Defer
Page 17 and 18: Babcock & Brown’s transaction rig
Page 19 and 20: 2. answers to key questions BABCOCK
Page 21 and 22: Topic Summary More information BBSN
Page 23 and 24: Topic Summary More information Inte
Page 25 and 26: Topic Summary More information Exch
Page 27 and 28: Topic Summary More information Repa
Page 29 and 30: Topic Summary More information Guar
Page 31 and 32: 3. Details of the Offer BABCOCK & B
Page 33 and 34: 3.2.1 Source of Interest Payments B
Page 35 and 36: 3.8 How do you complete Application
Page 37 and 38: 4. information about babcock & brow
Page 39 and 40: 4.2.1 Real Estate The Real Estate g
Page 41 and 42: distribution, bulk terminal and pow
Page 43 and 44: an economist with the Australian Tr
Page 45 and 46: 5. summary financial information BA
Page 47 and 48: can be obtained free of charge by a
Page 49 and 50: Consolidated balance sheet (continu
Page 51 and 52: • performance fees earned from BJ
Page 53 and 54: 6. risk factors BABCOCK & BROWN SUB
Page 55 and 56: HISTORICAL BANK BILL SWAP RATE 8.0%
Page 57 and 58: Group. The interests of these Emplo
Page 59 and 60: terrorist attack, major plant break
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6.3 General economic factors that m
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7. Tax Letter BABCOCK & BROWN SUBOR
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9 November 2005 The Directors Babco
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To the extent that a capital loss w
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8. Additional information BABCOCK &
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• Subordination. A claim by the T
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may be invested or otherwise made u
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8.6.1 Classes of shares The A Class
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Agreement. Under the agreement, the
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This right is independent of Babcoc
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8.10 Summary of the Arrangement Dee
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Greenwoods & Freehills has acted as
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8.20 Foreign acquisitions and takeo
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APPENDIX A - Glossary BABCOCK & BRO
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BBEM BBGP BBI Babcock & Brown Elect
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Guarantee Guarantor the unsecured a
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Security Trust Deed means the deed
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APPENDIX B - Terms of Issue BABCOCK
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(c) For the purposes of clause 2.1(
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2.11 Method of payment Any amount w
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4.4 Exit Notices (a) Once given by
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(2) (in the case of an entitlement
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(b) it shall have been indemnified
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13 Amendments to these Terms of Iss
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Change in Control Event means each
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Issuer’s Group means the Issuer a
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APPENDIX C - arranger’s financial
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From time to time BBAH may act unde
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Pin cheque(s) here (do not staple)
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Pin cheque(s) here (do not staple)
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CORPORATE DIRECTORY Issuer Babcock
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BABCOCK & BROWN

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