Lead Manager

BABCOCK & BROWN PROSPECTUS
AGAAP requires that in any acquisition, all assets and liabilities be carried at fair value and the difference between the fair value of the assets and liabilities and the
consideration paid be treated as goodwill. Given the Restructure of the group outlined in Section 8.3 of the Prospectus, in the consolidated pro-forma statement
of financial position, the Executive Stakeholders are deemed to subscribe for shares in Babcock & Brown at the relevant subscription price (in most cases this is
the IPO Price) and goodwill is therefore calculated as the difference between the number of shares allocated to existing owners at the Subscription Price and the
fair value of the underlying assets and liabilities at 31 December 2003.The consolidated pro-forma statement of financial position has therefore been derived from
the statement of financial position of BBH at 31 December 2003 adjusted to reflect:
• The transactions required to give effect to the restructured Babcock & Brown including the recognition of:
– all assets and liabilities at fair value at 31 December 2003;
– deferred tax balances consistent with the new structure; and
– goodwill inherent in the group
• An accrual for dividends and distributions to the existing Executive Stakeholders
• The raising of $17.6 million from existing Executive Stakeholders immediately prior to the IPO
• The raising of $550 million of new capital as part of the IPO
• The repayment of debt amounting to $170.2 million
• Transaction costs of the IPO estimated at $27 million
• The reflection of an outside equity interest representing the interests of the existing US Executive Stakeholders held through BBIPL
Further details of the impact of these pro-forma adjustments on individual line items within the consolidated pro-forma statement of financial position are set out
below.
(a) Purchase by Company of HVB interest in German subsidiary (3,186)
Payments to current owners to provide cash to cover personal income taxes due upon restructure (128,550)
Net subscriptions and redemptions of Company equity effective 1 January 2004 53
Repayment by employees of financing used to purchase equity under the previous capital structure 30,711
Proceeds from Listing 550,000
Listing expenses (27,000)
Debt payments by Company (170,169)
251,859
(b) Equity raised from existing employees immediately prior to IPO (24,205)
Acquisition Fair value adjustments 5,356
(18,849)
(c) Acquisition Fair value adjustments 26,483
(d) Adjustment of deferred tax balance to reflect post-reorganisation tax paying status 15,000
Deferred tax assets related to deductions generated by Babcock & Brown reorganisation 50,000
65,000
(e) Goodwill recorded in connection with Babcock & Brown reorganisation and IPO 725,733
(f) Accrual of other liabilities in connection with reorganisation 4,249
Reclassification from Other Liabilities 7,333
Acquisition Fair value adjustments 18,605
30,187
(g) Repayment of Notes Payable from IPO proceeds (72,914)
(h) Repayment of Notes Payable from IPO proceeds (92,305)
Reclassification to Equity of Notes Payable related to Babcock & Brown Equity subscriptions (23,120)
Repayment of Note Payable to Employee related to Babcock & Brown Equity subscription (4,950)
(120,375)
(i) Reclassification to accounts payable and accrued liabilities (7,333)
Reclassification to equity of balance related to phantom stock plan (51,339)
(58,672)
(j) Purchase by Company of HVB interest in Company German subsidiary (3,186)
Payments to current owners to provide cash to cover personal income taxes due upon reorganisation in connection with IPO (128,550)
Net subscriptions and redemptions of equity effective 1 January, 2004 53
Equity raised from existing employees immediately prior to IPO (24,205)
Reclassification to Equity of Notes Payable related to equity subscriptions 23,120
Repayment by employees of financing used to purchase equity 30,711
Reversal of liabilities related to compensation charges on stock and phantom purchases 1,250
Proceeds from IPO 550,000
IPO expenses (27,000)
Adjustment of deferred tax assets to reflect post reorganisation tax paying status 15,000
Deferred tax assets related to deductions generated by reorganisation 50,000
Record Employee and HVB redemptions and subscriptions 270,639
Reclassification to equity of balance related to phantom stock plan 51,339
Reclassification to equity of HVB and BBA outside interest 116,786
Fair value adjustment 11,644
937,601
(k) Reclassification to equity of HVB and BBA outside interest (116,786)
Record employees redemption and BBIPL equity purchase 449,595
Fair value adjustments 1,590
334,399
187