Lead Manager

BABCOCK & BROWN PROSPECTUS
5.2.2 Summary restated statement of financial performance
Year ended 31 December ($000) 8 10 11 2001A 2002A 2003A 2004F 2005F
Net Revenue by division
– Real Estate 30,779 25,716 64,198 83,527 117,797
– Infrastructure and Project Finance 42,744 69,456 84,352 104,111 156,717
– Operating Leasing 82,036 83,226 79,704 101,619 122,604
– Structured Finance 171,784 156,998 124,573 96,524 97,127
– Corporate Principal Investment and
Funds Management (996) 12,439 38,655 38,328 29,120
Net Revenue 1 326,347 347,835 391,482 424,109 523,365
Other revenue (1,263) 600 1,073
Net corporate interest income/expense 2 (2,780) (1,564) (1,200) 5,759 20,977
Operating costs 3 (118,894) (148,361) (162,543) (159,845) (178,730)
Operating profit before bonuses,
restructuring costs and
goodwill amortisation 203,410 198,510 228,812 270,023 365,612
Bonus expense (pro-forma) 4 (127,509) (150,700)
Operating profit before restructuring
costs and goodwill amortisation 142,514 214,912
Restructure costs – business closure 5 (8,300)
Restructure costs – IPO corporate structure 6 (1,500)
Operating profit before tax and goodwill
amortisation 7 132,714 214,912
Tax 9 (62,324)
NPAT (before goodwill amortisation) 152,588
NOTES
1. Net Revenue represents gross revenue calculated in accordance with AGAAP less cost of sales and directly attributable expenses plus net contribution from
equity accounted and consolidated non-strategic investments.
2. Net corporate interest income includes interest income on cash and cash-equivalent balances held by the Group and interest expense on corporate debt
facilities.The Forecasts assume that net Offer Proceeds of $523 million are raised as at 30 September 2004 and used to extinguish corporate debt and other
liabilities and provide capital for certain transactions incorporated in the Forecasts, with the balance forecast to be held as cash on deposit.
3. Operating costs comprise total expenses calculated in accordance with AGAAP but exclude cost of sales, expenses directly related to transactions, expenses of
consolidated but non-strategic investments, bonuses and restructure costs.
4. Consistent with Babcock & Brown’s intentions, the forecast bonus for 2004 assumes that the full amount of the bonus pool, calculated in accordance with the
remuneration policy outlined in Section 4.7, will be paid in cash or cash equivalents.Therefore the full amount of the forecast bonus pool is expensed during
2004. In 2005 based on constant exchange rates, the total bonus pool is forecast to be $174.5 million consistent with the stated remuneration policy. However,
of this amount $23.8 million based on constant exchange rates is expected to treated as Bonus Deferral Rights (see Section 4.7.5). As the Bonus Deferral
Rights relate to equity transactions there is no requirement under AGAAP to recognise an expense for this amount.The forecast AGAAP 2005 bonus expense
based on constant exchange rates is therefore $150.7 million.Were Babcock & Brown to elect to recognise an expense, the value attributed to the rights would
be recognised as an expense over the period to the vesting date of the rights consistent with Australian IFRS (see footnote 5, Section 5.4.1.2). In addition,
consistent with current AGAAP, no amount has been forecast as an expense in the pro-forma Forecast in respect of Shares and Options allocated to the
Employee Trusts (see Section 4.7.7) in either 2004 or 2005.
5. Restructure costs – business closure relates to redundancy costs and related expenditure in connection with the effective closure in 2004 of the Group’s US
cross border leasing activities due to changes in US tax laws and to consequential provisions associated with assigning the lease on the Group’s existing New
York office space and moving to smaller premises.
6. Total transaction costs of the IPO and Restructure amount to $28.5 million as set out in Section 8.11. Of this amount, $27 million is directly attributable to
the capital raising and has been netted off against the Offer Proceeds consistent with AGAAP.The remainder, amounting to $1.5 million has been included as
an expense in the 2004 Forecast.
7. Details of the treatment of goodwill under AGAAP in the Forecast Period are set out in footnote 3, Section 5.3.2.1.
8. As noted above, to facilitate comparison the Restated Financial Information for 2001, 2002 and 2003 is prepared on the basis of a constant $:US$ exchange
rate of $0.7220, which represents the average $:US$ exchange rate assumed for the 2004 Forecasts.The 2005 forecast has been restated using various of the
exchange rates assumed in the 2004 Forecasts.
9. A forecast tax charge has only been included for 2005 as this is the first full year in which the new corporate and tax structure will apply.
10.As discussed in note 7 above, the Restated Financial Information excludes amortisation of goodwill resulting from the Restructure immediately prior to the
IPO.The Restated Financial Information also excludes other AGAAP accounting impacts relating to the Restructure.
11.A reconciliation of the restated statements of financial performance to the AGAAP pro-forma summary of financial performance set out in Section 5.2.2 has
not been provided as the only net difference relates to the restatement of the relevant income or expense amount from the historical and the forecast average
exchange rates to the constant exchange rates assumed.
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