BABCOCK & BROWN

To the extent that a capital loss would also otherwise arise, the capital loss should be reduced by
this amount. Where the deductible amount exceeds the amount of the capital loss, the capital loss
should be reduced to zero.
1.3 Holding Ordinary Shares
Where the Issuer elects to exchange BBSN for Ordinary Shares, Holders will be entitled to receive
a variable number of Ordinary Shares.
The income tax consequences of holding Ordinary Shares are broadly set out below.
(a)
Dividends from Ordinary Shares
A Shareholder’s assessable income will generally include any dividends and the amount of any
franking credits attached to dividends paid by Babcock & Brown. Where franking credits are
included in a Shareholder’s assessable income, they will generally be entitled to a corresponding tax
offset.
To the extent that franking credits are attached to Babcock & Brown’s dividends, to be generally
eligible for the franking credit and tax offset, the Shareholder must have held the shares “at risk” for
at least 45 days (not including the date of acquisition or the date of disposal). This rule should not
apply to an Shareholder if they are an individual whose tax offset entitlement (on all shares and
interests in shares held) does not exceed $5,000 for the income year in which the franked dividend
is paid.
Where the Shareholder is an individual, a complying superannuation entity or a registered charity
(in certain circumstances), they will generally be entitled to a refund to the extent that the franking
credits attached to their dividends exceed their tax liability on all of their income for the income
year.
Where the Shareholder is a company, any franked dividends they receive will generally give rise to
a franking credit in the Shareholder’s franking account.
(b)
Disposal of Ordinary Shares
Upon a disposal of the Ordinary Shares, any resultant capital gain or loss should be calculated by
reference to the cost base of the Ordinary Shares (see 1.2(b) above).
If Ordinary Shares have been owned for at least 12 months prior to their sale, a Holder may be
entitled to receive discount capital gains tax treatment in respect of any capital gain arising on the
disposal of the Ordinary Shares. The discount percentage is 50% for Holders who are individuals or
individual beneficiaries of a trust (where the trustee is a Holder), and is 33 1/3% for Holders who
are complying superannuation entities. Companies do not qualify for discount capital gains tax
treatment.
Holders who dispose of their Ordinary Shares within 12 months of acquiring them will not receive
discount CGT treatment.
1.4 PAYG taxpayers
Holders will derive their return by the receipt of BBSN Interest Payments or a Repayment
Amount.
Under the Pay As You Go (PAYG) regime, the Issuer must, subject to certain limited exceptions,
withhold an amount from BBSN Interest Payments at the highest individual marginal rate plus the
Medicare Levy (currently an aggregate of 48.5%) unless a Holder provides their TFN, ABN or
relevant exemption notification. Holders will be entitled to claim a tax credit in their tax returns in
respect of any tax which is withheld.
Accordingly, it is recommended that Holders consider providing their TFN, ABN or exemption
notification to the Issuer or their securities dealer to avoid the application of the PAYG provisions.
9 November 2005
Liability limited by the Accountants’ Scheme, approved under the Professional Standards Act 1994 (NSW)
Greenwoods & Freehills Pty Limited ABN 60 003 146 852
BABCOCK & BROWN SUBORDINATED NOTES 63