Lead Manager

APPENDIX A PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax
The consolidated pro-forma statement of financial position reflects the deferred taxes of the consolidated entity
of Babcock & Brown subsequent to the proposed IPO.The deferred tax balances reflect any changes in the tax
status of the US entities resulting from the restructure noted above and any resulting associated additional tax
losses that are considered virtually certain at the transaction date.The formation of a tax consolidated group for
all Australian wholly owned subsidiaries has also been incorporated in the pro-forma deferred tax balances.
Special cash distribution
A special cash distribution of $128,550,000 will be made to the existing partners/unit holders of the group prior
to the proposed listing date to enable personal tax liabilities crystallised as part of the transaction to be met.
(b) Pro-forma Statements of Financial Performance and Pro-forma Statements of Cash Flows
Reporting format
The consolidated pro-forma statements of financial performance have been presented to the level of profit before
tax and bonus after recognition of outside equity interests. Reflecting the move from a private partnership to a
public company following the IPO, Babcock & Brown will be structured with a different tax profile and with a
different remuneration policy than prior to the IPO. Accordingly, Babcock & Brown does not believe that the
reporting of historical tax and bonus charges and related cash flows would be meaningful or appropriate.
Foreign currency translation
The consolidated pro-forma statements of financial performance and pro-forma statements of cash flows have
been translated from US dollars at the average rate for the relevant period, except for the revenues, expenses and
cash flows of Australian entities which are included at actual amounts for the relevant period.The rates used are
as follows:
• year ended 31 December 2003 – 0.6529
• year ended 31 December 2002 – 0.5440
• year ended 31 December 2001 – 0.5176
Hedging transactions
The consolidated pro-forma historical statements of financial performance exclude the gains and losses associated
with hedging transactions undertaken to hedge exchange gains and losses of Australian dollar exposures. As the
reporting and functional currency of Babcock & Brown is Australian dollars, these hedging transactions will not
be undertaken by Babcock & Brown subsequent to the proposed public listing.
As a result of the factors outlined above in (a) and (b), the financial information included in these pro-forma
financial statements may not reflect the financial position, operating results or cash flows of Babcock & Brown
Limited and its controlled entities had the group existed as a publicly listed company under its proposed
corporate structure for the periods presented.
184