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SECTION 5 FINANCIAL INFORMATION 5.1 INTRODUCTION This Section contains financial information prepared on three different bases.The basis of preparation and the rationale for each is: 5.1.1 AGAAP Financial Information The financial information prepared under AGAAP contained in Section 5.3 (AGAAP Financial Information) comprises: • AGAAP pro-forma historical statements of financial performance for the years ended 31 December 2001, 2002 and 2003 at average actual $:US$ exchange rates for the relevant periods and pro-forma Forecasts of financial performance for the years ending 31 December 2004 and 31 December 2005 at the forecast exchange rates outlined in Section 5.3.2.2 • Pro-forma statements of cash flows for the years ended 31 December 2002 and 2003 • A pro-forma statement of financial position as at 31 December 2003 Babcock & Brown will report its results for the period from the date of the listing to 31 December 2004 on the basis of AGAAP. 5.1.2 Australian IFRS Financial Information The financial information prepared under Australian IFRS contained in Section 5.4 (Australian IFRS Financial Information) comprises: • Pro-forma historical statement of financial performance for the year ended 31 December 2003 at average actual $:US$ exchange rates for the period and pro-forma Forecasts of financial performance for the years ending 31 December 2004 and 31 December 2005 at the forecast exchange rates outlined in Section 5.3.2.2 • Pro-forma statement of financial position as at 31 December 2003 A summary of the key differences between the financial information prepared under AGAAP and the financial information prepared under Australian IFRS is included in Section 5.4.4. Babcock & Brown will report its results for the year ending 31 December 2005 and subsequent periods on the basis of Australian IFRS. 5.1.3 Restated Financial Information The restated AGAAP financial information contained in Section 5.2 (Restated Financial Information) comprises: • AGAAP pro-forma historical statements of financial performance at a constant $:US$ exchange rate for the years ended 31 December 2001, 2002 and 2003 • AGAAP pro-forma Forecasts of financial performance for the years ending 31 December 2004 and 2005 using the forecast exchange rates for 2004 outlined in Section 5.3.2.2, including the constant $:US$ exchange rate used to restate the AGAAP pro-forma historical statements of financial performance referred to above • AGAAP pro-forma statement of financial position as at 31 December 2003. The Restated Financial Information has been prepared by Babcock & Brown based on the pro-forma AGAAP Financial Information referred to above.The Restated Financial Information has been provided to more meaningfully reflect the underlying economic performance of Babcock & Brown over the historic and forecast periods.The Business Overview in Section 3 is based on the Restated Financial Information.The management discussion and analysis contained in Section 5.2.5 has also been prepared using the Restated Financial Information. 104
BABCOCK & BROWN PROSPECTUS The AGAAP Financial Information and Australian IFRS Financial Information has been prepared on the basis that the Restructure of Babcock & Brown and the IPO and related transactions had taken place on 31 December 2003.The AGAAP and Australian IFRS pro-forma Forecasts of financial performance have been prepared on the basis that the $550 million capital raising as part of the IPO occurred on 30 September 2004. Details of the key assumptions on which the AGAAP and Australian IFRS pro-forma Forecasts of financial performance are based are contained in Sections 5.3.2.2 and 5.4.2, respectively. Quantification of the impact of varying certain of the key assumptions underlying the AGAAP pro-forma Forecasts of financial performance is contained in Section 5.3.2.3. The financial information contained in this Section is presented in an abbreviated form and does not contain all the disclosures that are usually provided in an annual report prepared in accordance with the Corporations Act 2001. Further detailed historical financial information is contained in the pro-forma financial statements of Babcock & Brown contained in Appendix A of this document.The pro-forma financial information prepared under AGAAP contained in this Section has been prepared in accordance with the accounting policies set out in note 1 of Appendix A. Detailed reconciliations between AGAAP and Australian IFRS are set out in notes 5 and 6 of Appendix A. As noted in Section 2.4, the pre-IPO US Executive Stakeholders will hold their interests in the restructured Group through BBIPL rather than in the listed vehicle. Despite the different legal interests, the economic interests of the pre-IPO US Executive Stakeholders and all other Shareholders following the IPO are economically materially equivalent.The Restated Financial Information is prepared for the entire Babcock & Brown Group. The AGAAP Financial Information and the Australian IFRS Financial Information are prepared on a comparable basis to the Restated Financial Information but also include a deduction for outside equity interests relating to the pre-IPO US Executive Stakeholders.This treatment is consistent with relevant accounting standards. As noted in Section 2.5, it is expected that new Shareholders who subscribe for Shares as part of the IPO, will have an Economic Interest in the Group of approximately 33.9% following the Restructure. However, because pre-IPO US Executive Stakeholders hold at the BBIPL level, the interest of new Shareholders in the listed vehicle will amount to approximately 48.4%. Ernst & Young has reviewed the pro-forma financial statements contained in Appendix A.The Independent Accountant’s Report on these pro-forma financial statements is set out in Section 6. Ernst & Young Transaction Advisory Services Limited has reviewed the pro-forma Forecast of financial performance prepared under AGAAP and Australian IFRS contained in Section 5.3.2 and Section 5.4.2, respectively.The Independent Accountant’s Report on these pro-forma Forecasts of financial performance is contained in Section 6.The Independent Accountants’ Reports relate solely to the information referred to above and do not relate to the Restated Financial Information contained in Section 5.2 and elsewhere in this Prospectus. The pro-forma financial statements and the pro-forma Forecasts of financial performance should be read in conjunction with the Independent Accountants’ Reports and investors should note the comments in relation to scope and limitations contained in those reports.The pro-forma Forecasts of financial performance should also be read together with the assumptions underlying their preparation, as set out in Sections 5.3.2.2 and 5.4.2, the risk factors set out in Section 7 and other information contained in this Prospectus. Undue reliance should not be placed on the pro-forma Forecasts of financial performance. Refer Section 5.3.2 for important commentary in this regard. 105
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BABCOCK & BROWN PROSPECTUS TABLE OF
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SECTION 3 BUSINESS OVERVIEW Babcock
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APPENDIX A PRO-FORMA CONSOLIDATED F
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