• 
  
  BBSFF has received at least its originally anticipated cash economic income from all assets and expects to receive its anticipated cash economic income fromall assets for 2H 2007 and 2008;

• 
  
  BBSFF does not believe that the long term value of any of its assets is impaired;

• 
  
  BBSFF does not have any short term finance in place which needs to be refinanced which requires additional collateral to be posted;

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  BBSFF?s has no investments in, or exposure to the US sub-prime market. It has never had any investment in that sector;

• 
  
  BBSFF?s portfolio of investments, including expressly its loan portfolio and securitisation asset ("LPSA") portfolio and the Paramount Mezzanine Loan have performed in accordance with BBSFF?s expectations, and based on the information available to it today, are expected to continue to perform in line with expectations; and
• 
  
  As a long term holder of assets which is not required to sell, but can do so opportunistically, the widening of credit spreads does not affect the expected overall returns to BBSFF from its investment portfolio.

DIVIDENDS

Other Highlights

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  exercise of the over-allotment option with the majority of the proceeds invested in the AGSO Loan Guarantee until 2 April 2007, at which time the funds were withdrawn to fund other investments;
• 
  
  increase of the Company?s corporate debt facility from US$96.6m to US$116.6m;
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  further syndication of the Company?s corporate debt facility;
• 
  
  confirmation of first half 2007 dividend projection; and
• 
  
  upgrade of second half 2007 dividend projection.

Investments/Divestments

Consolidated Income Statement

• 
  
  net foreign exchange gains which have been recorded through the Income Statement resulting from a further weakening of the US dollar against the Euro, the British Pound and the Australian dollar; and
• 
  
  increased interest income resulting from a higher outstanding balance for the Ancora ? Seiza Warehouse Note Investment as well as accrued interest income on additional accretive investments acquired during the year.

Performance Overview

• continued strong performance of investments acquired at Listing; and
• the new accretive investments acquired since Listing.

Performance Overview

RESPONSE TO QUERIES REGARDING BBSFF?S LOAN PORTFOLIO AND SECURITISATION ASSETS

In view of the recent media attention on the United States? sub-prime mortgage market, Babcock & Brown Structured Finance Fund Limited ("BBSFF" or "the Company") wishes to make a clarification in relation to the Company?s loan portfolio and securitisation assets.

BBSFF?s loan portfolio and securitisation assets currently have no exposure to the United States? sub-prime residential mortgage market nor to its collateralised loan obligations ("CLOs") market.

BBSFF?s securitisation assets are secured mainly against residential and commercial properties located in Australia and the United Kingdom. Two of its securitisation assets, Avoca VI and Avoca VII, are European CLOs which are backed by loans made to corporations.

Equally importantly, the Company is not exposed to margin calls on its debt facilities nor is its equity subject to investor redemptions.

The Company maintains its dividend guidance for the six months ending 31 December 2007 of at least 5.50 Singapore cents per share, as outlined in its SGX-ST announcement dated 15 May 2007.

BBSFF will release its first half 2007 financial results, along with a description of the performances of its loan portfolio and securitisation assets, on 14 August 2007.