Lead Manager

SECTION 5
FINANCIAL INFORMATION
Expenses
Babcock & Brown’s recurring operating expense base was reduced in the first-half of 2004 as the Finance Leasing
Business Unit was restructured to address the effective shut-down of the US cross-border leasing market and
slowdown in domestic US finance leasing market. Non-bonus compensation expenses had previously increased
(from 2001 to 2003) as the Group expanded its Structured Finance activities to meet record activity in the sector
(particularly in US cross-border leasing), and entered into new business areas with the hiring of experienced
professionals in Electronics and European Rail Operating Leasing and Asian Infrastructure and Project Finance.
5.2.5.2 Forecast Financial Information
The assumptions underlying the AGAAP pro-forma forecasts of financial performance are contained in
Section 5.3.2.2. A detailed discussion of the nature of and trends in underlying Forecast Net Revenue for each
Business Segment is contained in Section 3.
5.3 AGAAP FINANCIAL INFORMATION
5.3.1 Historical pro-forma financial information – introduction
The information in this Section reflects pro-forma historical financial information for Babcock & Brown prepared
under AGAAP.The information has been extracted from the audited consolidated financial statements of BBH for
the years ended 31 December 2001, 2002 and 2003 which were prepared under USGAAP.These USGAAP
financial statements have been restated to AGAAP and foreign currency denominated amounts have been translated
into Australian dollars at the average rate for the particular period. Further pro-forma adjustments have been made
to reflect the Restructure and IPO of the Babcock & Brown Group to arrive at the pro-forma historical financial
information.These adjustments are summarised below and detailed in notes 2, 3 and 4 of Appendix A.
5.3.1.1 Pro-forma summary of historical financial performance
The pro-forma results of operations have been presented to the level of operating profit before tax and bonus.
Due to the different tax profile and different remuneration policy of the Group following the IPO, historical
bonus and tax charges have not been reflected in the pro-forma summary of historical financial performance
under AGAAP or the pro-forma financial statements of the Babcock & Brown Group included in Appendix A.
The pro-forma summary of historical financial performance set out below has been derived from the audited
consolidated statements of financial performance of BBH for the years ended 31 December 2001, 2002 and 2003
adjusted to:
• Restate the historical results from USGAAP to AGAAP
• Exclude the results of entities historically controlled by BBH but which will not form part of the Babcock
& Brown Group following the IPO
• Include the results of entities historically excluded from the consolidated results of BBH which will form
part of the Babcock & Brown Group following the IPO
• Exclude the impact of gains and losses on hedges in relation to the Group’s Australian operations and
earnings, entered into during the historical period when the US dollar was the main operating currency of
the Group
• Exclude the impact of historic outside equity interests which are eliminated under the new structure and
recognise outside equity interests applicable to the pre-IPO US Executive Stakeholders interests in BBIPL
Further details of these pro-forma adjustments are provided in note 3 of Appendix A.
The detailed presentation of pro-forma historical financial performance is set out in Appendix A.The summary
presentation set out below is designed to show the reconciliation of key line items in the pro-forma historical
financial performance set out in Appendix A to line items included in the summary restated statement of financial
performance set out below and also to highlight the differences between these line items based on the average
$:US$ exchange rate used in the table below and the constant $:US$ exchange rate of $0.722 used for the
historical period in the summary restated statement of financial performance.
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