Direct Investment Fund - Alignment of Interests

Executive summary

DIF unit holder base

Product features

Asset realisations

Fund fees

Alignment of interests

Recent information releases

Directors and officers

Babcock & Brown Direct Investment Fund Limited (DIF), the Trustee, Responsible Entity and Adviser to three constituent trusts, has been established as a partnership between B&B and the DIF Management Team. This formula has been adopted to ensure the best merger of B&B’s deal origination skills, with the investment and credit analysis, asset management, and superannuation market experience of DIF's Management Team.

B&B will be highly motivated, as the sole shareholder in DIF and unitholder in DIF I to ensure the successful growth of the business. Specifically, B&B is bound to a number of initiatives that secure its on-going commitment to DIF:

B&B is a seed investor in DIF I with a commitment of A$30 million and in DIF III with a commitment of US$15 million.
B&B reserves the right to co-invest with DIF in future transactions.
B&B will provide DIF with preferred access to its global deal stream.
DIF will not be limited to doing business with B&B and may source appropriate transactions from across the banking and capital markets sector.

In addition, there are a set of arrangements designed to protect the Unit Holders and ensure the full alignment of interests between DIF and the Fund’s Unit Holders:

DIF out-sources unit registry, custody, trust administration and weekly unit pricing for DIF I and DIF II to JP MorganChase.
DIF out-sources asset valuations to a recognised independent third party valuer – currently KPMG Corporate Finance (Aust) Pty Limited.
DIF has appointed a Board with 50% independent directors, a fully independent Compliance Committee, and an Advisory Board nominated and elected by the Unit Holders.
DIF will ensure full fee transparency (especially on all fees paid to B&B).
DIF will maintain its own stand-alone business agenda, strategy, and financial targets.
Management Team performance rewards will be tied entirely to the activities of DIF and not to the performance of B&B.

Once DIF II Mezzanine Debt Trust achieves $350 million of assets under management Unit Holders may vote, by simple majority, to partion all assets held at that time into a separate and therefore closed-end vehicle.

Half of DIF's directors are independents
The main Board of DIF is comprised of six directors, three of whom are independent directors with longstanding experience in the investment management and superannuation industries: Lynn Ralph, Bob Officer, and David Balkin. There will be no executive directors, although the Executive Chairman, Phil Green, is also Chief Executive of B&B.
An Advisory Board has been nominated and elected by the Unit Holders
The first Advisory Board members are all representatives of the Fund's cornerstone investors. Every second year, nominations will be sought for election to Advisory Board membership from amongst the officers and trustees of all client super funds. The Advisory Board will focus on ensuring that DIF management is regularly appraised of Unit Holder priorities and concerns. In particular, the Advisory Board will apply regular review to: a) the redemptions process; b) related party transactions; and c) asset valuations.