MACQUARIE GROUP 2009 ANNUAL REPORT MACQUARIE GROUP LIMITED ACN 122 169 279 This 2009 Macquarie Group Annual 2009 Annual General Meeting Cover image: Constellation Energy Report complies with reporting Macquarie Group’s 2009 Annual Constellation Energy is one of the largest marketers of requirements and contains statutory General Meeting will be held at natural gas in North America, providing physical natural financial statements. It contains 10:30 am on Wednesday, 29 July gas to distribution companies, power generators, retail reports from the Chairman and 2009 at The Westin Sydney, in the aggregators and large end-users in the United States Managing Director on Macquarie’s Grand Ballroom, Lower Level, and Canada. business and operational highlights, No.1 Martin Place, Sydney NSW. The acquisition and integration of the Constellation Macquarie’s Corporate Governance Details of the business of the downstream gas trading portfolio makes Macquarie Statement, the Directors’ Report meeting will be contained in the Group’s North American gas trading business, including the Remuneration Report separate Notice of Annual General Macquarie Cook Energy, a leading participant in this and full financial statements. Meeting to be sent to shareholders. key wholesale gas market. The 2009 Shareholder Review Cover photograph Dan Tobin Smith/Gallery Stock contains reports from the Chairman and Managing Director on Macquarie’s business and operational highlights. This document is not a concise report prepared under section 314 (2) of the Corporations Act. Macquarie Group has not prepared a concise report for the 2009 financial year. If you would like a copy of the 2009 Shareholder Review please call us on +61 2 8232 5006 or visit macquarie.com.au/shareholdercentre. Corporate Governance Approach to Corporate Governance Developing a sound corporate governance Macquarie’s governance approach aims to achieve framework superior financial performance and long term Macquarie’s corporate governance arrangements have prosperity while meeting stakeholders’ expectations of been developed to achieve its aim as stated above. Six sound corporate governance practices by proactively of the Board’s nine members are Independent determining and adopting the most appropriate Directors, and all Board Committees are composed of corporate governance arrangements. a majority of Independent Directors. The Board, with Macquarie’s governance approach delivers these the assistance of the Corporate Governance, Audit and outcomes through: Compliance, Remuneration, and Risk Committees, determines the most appropriate corporate 1. reviewing developments in corporate governance; governance arrangements for Macquarie which allow 2. taking into account corporate governance our people the flexibility, within risk limits, to continue obligations; to adapt business to changing markets. 3. developing a sound corporate governance In addition to requiring all Macquarie’s business to be framework supported by related processes and conducted in accordance with applicable laws and corresponding practices; and operations in the jurisdictions in which Macquarie operates, and in a way that enhances its reputation in 4. monitoring the operation of the governance those markets, Macquarie’s Voting Directors and staff framework and processes. are required to maintain high ethical standards of Reviewing developments in corporate governance conduct, consistent with the following goals and values to which Macquarie aspires: Macquarie actively reviews Australian and international – Integrity developments in corporate governance and considers – Client commitment the views of shareholders, regulators and other stakeholders. The Macquarie Board (the Board) adopts – Strive for profitability those arrangements which it considers are in the best – Fulfilment for our people interests of Macquarie and its shareholders, consistent – Teamwork with Macquarie’s responsibilities to other stakeholders. – Highest standards Taking into account corporate governance Monitoring the operation of the governance obligations framework Macquarie Group Limited (Macquarie) is regulated by The Board Corporate Governance Committee assists the Australian Prudential regulator, APRA, as a non- the Board in monitoring the effectiveness of the operating holding company of a licensed Australian Corporate Governance Framework. Each of the Board Bank, Macquarie Bank Limited (Macquarie Bank). It is Committees assists the Board in monitoring the also supervised by the Australian corporate regulator, operation of key corporate governance processes. ASIC, and is listed on the Australian Securities The following description of the governance Exchange (ASX). A number of Macquarie’s key arrangements in place during the year to 31 March operating subsidiaries are supervised by regulators in 2009 is in the order of the Principles set out in the 2nd the overseas jurisdiction in which they operate. edition of the ASX Corporate Governance Principles Macquarie’s governance obligations include APRA’s and Recommendations (ASX Recommendations) and Governance Standard (Authorised Deposit-taking provides references to relevant information contained Institution Prudential Standard 510), the ASX in other sections of the Annual Report or available on Corporate Governance Council’s Principles and Macquarie’s website. Recommendations and related ASX Listing Rules and Australian corporate law requirements. Macquarie considers that its governance practices during the year have been consistent with all but one ASX Recommendation. Macquarie believes the exception is appropriate for the reasons set out under Principle 2 below in the description of the role of Chairman. A checklist summarising Macquarie’s compliance with the ASX Recommendations and copies of key corporate governance practices are available at www.macquarie.com.au/au/about_macquarie/ corporate_governance.htm. All references to Macquarie’s website in the following description of Macquarie’s corporate governance approach are to this link unless otherwise stated. 23 Macquarie Group Limited and its subsidiaries Corporate Governance continued Principle 1 – Lay Solid Foundations for Management Dealing with potential conflicts And Oversight The Board has guidelines for its members for declaring The Board Charter details the composition and role and dealing with potential conflicts of interest which and responsibilities of the Board and their relationship include: with management to accomplish the Board’s primary – Board members will declare their interests as required role of promoting the long term health and prosperity under the Corporations Act 2001 (Cth), ASX Listing of Macquarie. A copy of the Board Charter is available Rules and general law requirements on Macquarie’s website. – Board members with a material personal interest in a As set out in the Board Charter, the Board has matter will not receive the relevant Board paper and delegated specific authorities to the various Board will not be present at a Board meeting during the Committees and the Managing Director. Macquarie’s consideration of the matter and subsequent vote Executive Committee and Operations Review unless the Board (excluding the relevant Board Committee operate as management committees member) resolves otherwise appointed by the Managing Director pursuant to his – Board members with a conflict not involving a material delegated powers and, in exercising these powers, he personal interest, will generally not receive the relevant typically makes decisions regarding significant issues in Board papers, and may be required to absent consultation with one of these Committees. themselves from the relevant deliberations of the Board Macquarie has a number of Non-Voting Executive The Board has also established systems and protocols Directors. Pursuant to Macquarie’s constitution, they to identify a conflict of interest and a framework for have no right to attend or vote at any Board meeting. managing conflicts that include Divisional and However, they do have the power to exercise Macquarie-wide policies, Lists, Information Protocols management powers delegated by the Board including and appropriate disclosures. It is the responsibility of to sign and countersign Macquarie’s common seal. each of the businesses to ensure that conflicts of interest are adequately managed. Divisional and compliance staff ensure that the day to day legal and compliance obligations are discharged at the business level. The Risk Management Group (RMG) provides a risk oversight role in relation to these staff. Macquarie Bank is a wholly owned subsidiary of Macquarie, and the Macquarie Bank Board is ultimately responsible for the sound and prudent management of the Macquarie Bank Group, with due consideration for the interests of deposit holders. The Macquarie Bank Board has processes in place to ensure arm’s length decision-making by the board of Macquarie Bank. Where potential conflicts arise, management will ensure that Directors of the relevant Board have sufficient information to manage conflicts appropriately. Corporate Governance Framework Macquarie Board Board Audit Board Corporate Board Risk Board Board and Compliance Governance Committee Remuneration Nominating Committee Committee Committee Committee — Financial — Corporate — Risk — Remuneration — Board and reporting, Governance Management policies, Board Compliance Framework Framework and practices and Committee and Internal Risk Profile related membership Audit disclosures Macquarie Managing Director