Lead Manager

BABCOCK & BROWN PROSPECTUS
5.4.2 Pro-forma summary of forecast financial performance under Australian IFRS
Year to 31 December ($000) 2003A 2004F 2005F
$:US$ exchange rate 0.6529 0.7220 0.7000
Net Revenue by division
– Real Estate 73,723 88,582 119,462
– Infrastructure and Project Finance 93,283 104,111 158,956
– Operating Leasing 88,142 101,619 126,433
– Structured Finance 137,761 96,524 99,215
– Corporate Principal Investment and Funds Management 42,747 38,328 29,253
Net Revenue 1 2 435,656 429,164 533,319
Other revenue 1,188
Net corporate interest income/(expense) (1,328) 5,759 20,977
Operating costs
– Payroll and related (96,714) (90,272) (108,214)
– Facilities (29,300) (26,811) (24,879)
– Other (53,737) (42,762) (49,389)
Operating costs 3 (179,751) (159,845) (182,482)
Operating profit before bonuses, restructuring costs and
goodwill amortisation 4 255,765 275,078 371,814
Bonus expense (pro-forma) 5 6 (133,009) (180,500)
Operating profit before restructuring costs and goodwill
amortisation 142,069 191,314
Restructure costs – business closure 7 (8,300)
Restructure costs – IPO corporate structure 8 (1,500)
Operating profit before tax 10 132,269 191,314
Tax (55,481)
NPAT (before deduction for BBIPL outside equity interest 9 ) 135,833
Outside equity interest – 30% BBIPL 9 (40,750)
Profit after tax attributable to members 95,083
NOTES
1. Net Revenue represents gross revenue calculated in accordance with Australian IFRS less cost of sales and, directly attributable expenses plus net contribution
from equity accounted and consolidated non-strategic investments.
2. As noted in Section 5.4.4(a) below, accounting for the Restructure of the Babcock & Brown Group under Australian IFRS will not involve revaluing all assets
and liabilities to fair value on the date of the Restructure.The carrying amount/fair value difference (see footnote 2, Section 5.3.2.1) that arises in the AGAAP
statutory accounts will not therefore arise under Australian IFRS.
3. Operating costs comprise total expenses calculated in accordance with Australian IFRS but exclude cost of sales, expenses directly related to transactions,
expenses of consolidated but non-strategic investments, bonuses and restructuring costs.
4. As noted in Section 5.4.4(a) no significant new goodwill is expected to arise under Australian IFRS as a result of the Restructure. Should any goodwill arise
because of the Restructure, Australian IFRS does not require amortisation of that goodwill.
5. 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 Sections 4.7.2 and 4.7.4, will be paid in cash or cash equivalents.Therefore the full amount of the forecast bonus pool is expensed
during 2004. In 2005, the total bonus pool is forecast to be $178.4 million consistent with the stated remuneration policy. However, of this amount $24.5 million
is expected to treated as Bonus Deferral Rights (see Section 4.7.5). Under Australian IFRS the Bonus Deferral Rights are treated as equity transactions and the
related expense is recognised on a pro rata basis from the date the related service commences (1 January 2005) to the vesting date (approximately five years).The
expense will be recognised in equal instalments over the 2005-2009 financial years.The expense recognised in 2005 is $4.7 million. In addition,Australian IFRS
requires that an expense be recognised for the Shares and Options allocated to the Employee Trusts (see Section 4.7.7).The expense for the Shares and Options
allocated to the Employee Trusts is recognised on a pro rata basis from the grant date to the vesting date (approximately four years).The expense recognised in
2004 and 2005 in respect of the Shares and Options allocated to the Employee Trusts is $5.5 million and $21.9 million respectively.This expense will be subject to
revision at the IPO date.
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