Lead Manager

SECTION 5
FINANCIAL INFORMATION
6. The forecast bonus expense in 2004 and 2005 includes forecast amounts payable in connection with forecast ringfenced revenue as discussed in Section 4.7.3.
7. 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 the US tax laws and to provisions associated with assignment of the lease on the Group’s existing New York office
space and moving to smaller premises.
8. 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 Australian IFRS.The remainder, amounting to $1.5 million will be
expensed during 2004.
9. For statutory purposes Babcock & Brown will only own approximately 70% of BBIPL. In Babcock & Brown’s consolidated financial statements under
Australian IFRS the approximately 30% interest in BBIPL held by the pre-IPO US Executive Stakeholders will be treated as an outside equity interest.This
amount for 2005 is $40.8 million.The final interest may be subject to adjustment as referred to in Section 4.7.8.
10.At 31 December 2003 and at the date of this Prospectus, Babcock & Brown held an effective 19.9% interest in Primelife Corporation Ltd which is reflected in
the pro-forma statement of financial position at 31 December 2003 and in the forecasts as an equity accounted investment. In August 2004, Primelife
announced an expected loss for the year ended 30 June 2004 of $78 million.The equity accounted portion of this loss has been offset by a gain on the
settlement of a financing liability for this investment.
As noted in Section 5.4.1, the Australian IFRS pro-forma Forecast has been prepared before the accounting
implications of the Restructure. Having regard to the potential adjustments under Australian IFRS:
• No adjustment is required to restate the profit on investments sold (see footnote 2, Section 5.3.2.1) as in the
context of the Restructure, Australian IFRS does not require all assets and liabilities to be carried at fair
value (see (a) in Section 5.4.4)
• The foreign exchange adjustment relating to the closed hedges in relation to the Group’s Australian
operations and earnings and other foreign exchange differences (see footnote 11, Section 5.3.2.1),
amounting to approximately $3.8 million is required under Australian IFRS
• No goodwill is expected to arise on the Restructure and, in any event, Australian IFRS does not require
amortisation of goodwill
• Australian IFRS will also recognise an outside equity interest in respect of pre-IPO US Executive
Stakeholders’ holdings in BBIPL
Key Australian IFRS assumptions
Other than as noted below, the key assumptions set out in Section 5.3.2.2 in respect of the AGAAP pro-forma
summary of forecast financial performance apply equally to the Australian IFRS pro-forma forecast financial
performance set out above.
Net Revenue
Forecast Net Revenue under Australian IFRS for the year ending 31 December 2004 incorporates an estimated
$5 million value increment for investment properties.
Bonus expense
Under Australian IFRS, the value of the Bonus Deferral Rights to be issued at partial payment of the bonus pool
for the year ending 31 December 2005 are amortised over the period to the vesting date of the rights.This results
in an increase to the forecast bonus expense for the year ending 31 December 2005 of $4.7 million.
Under Australian IFRS, the value of Shares and Options allocated to the Employee Trusts immediately prior to the
Restructure (see Section 4.7.7) are recognised on a pro rata basis from the grant date to the vesting date
(approximately four years).The forecast bonus expense under Australian IFRS includes $5.5 million and $21.9 million
for the years ending 31 December 2004 and 31 December 2005 respectively relating to these Shares and Options.
This expense will be subject to revision at the IPO date.
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