MACQUARIE GROUP 2011 ANNUAL REPORT 1 MACQUARIE GROUP LIMITED ACN 122 169 279 This 2011 Macquarie Group Annual 2011 Annual General Meeting The Holey Dollar Report complies with reporting Macquarie Group’s 2011 Annual In 1813 Governor Lachlan Macquarie overcame requirements and contains statutory General Meeting will be held at an acute currency shortage by purchasing Spanish financial statements. It contains 10:30am on Thursday 28 July silver dollars (then worth five shillings), punching reports from the Chairman and 2011 at the Hilton Hotel (Grand the centres out and creating two new coins – the Managing Director on Macquarie’s Ballroom), 488 George Street, ‘Holey Dollar’ (valued at five shillings) and the ‘Dump’ business and operational highlights, Sydney NSW. (valued at one shilling and three pence). Macquarie’s Corporate Governance Details of the business of the This single move not only doubled the number of Statement, the Directors’ Report meeting will be contained in the coins in circulation but increased their worth by including the Remuneration Report Notice of Annual General Meeting, 25 per cent and prevented the coins leaving the and full financial statements. to be sent to shareholders colony. Governor Macquarie’s creation of the Holey The 2011 Shareholder Review separately. Dollar was an inspired solution to a difficult problem contains a report from the and for this reason it was chosen as the symbol for Chairman and Managing Director Macquarie Group. on Macquarie’s business and operational highlights. It is not a concise report prepared under section 314 (2) of the Corporations Act. Macquarie Group has not prepared a concise report for the 2011 financial year. If you would like a copy of the 2011 Shareholder Review please call us on +61 2 8232 5006 or visit macquarie.com.au/investorrelations. The Macquarie name and Holey Dollar device are registered trade 2 marks of Macquarie Group Limited. Macquarie Group Limited and its subsidiaries 2011 Annual Report macquarie.com.au Macquarie Group Limited 2011 Annual Report Vale: David Clarke 10 ! "# ! About Macquarie 16 — Macquarie Securities Group 18 — Macquarie Capital 20 — Macquarie Funds Group 22 — Fixed Income, Currencies and Commodities 24 — Corporate and Asset Finance Group 26 — Banking and Financial Services Group 28 — Real Estate Banking Division 30 — Central functions 31 $% & Corporate Governance Statement 37 # ' ( ) * +' '& — Remuneration Report 77 — Schedule 1 133 — Schedule 2 138 % !&) — Income statements 140 — Statements of comprehensive income 141 — Statements of changes in equity 144 , !- +. / +! !. +& /#4 + $/5#8 +- $ 9 1 Macquarie Group Limited and its subsidiaries 2011 Annual Report macquarie.com.au Year ended 31 March 2011 2010 % $Am $Am Change Net operating income '<9 6,638 15 =5 (6,373) (5,344) 19 B45 1,271 1,294 (2) /55 E-F (201) 40 B4#4 income tax )-) 1,093 (10) ,H (33) (43) (23) B45 )+9 1,050 (9) Reported net profit after tax attributable to Operating income ordinary equity holders $A million $A million 600 4,000 3,000 400 2,000 200 1,000 0 2H09 1H10 2H10 1H11 2H11 0 2H09 1H10 2H10 1H11 2H11 2 %#44 — Operating income of $A7.6 billion — International income 60 per cent of total — Earnings per share of $A2.83 — Total ordinary dividends of $A1.86 per share — Return on equity of 8.8 per cent per annum — Assets under management of $A310 billion (4 — Diverse and stable funding base — Solid and conservative balance sheet !"#&' — Total deposits of $A31.6 billion *+-"#& — $A3.0 billion of capital in excess of minimum regulatory capital requirement Basic earnings per share (EPS) Dividends per share (DPS) $A $A 2.00 1.00 1.50 0.75 1.00 0.50 0.50 0.25 0.00 2H09 1H10 2H10 1H11 2H11 0.00 2H09 1H10 2H10 1H11 2H11 3 Macquarie Group Limited and its subsidiaries 2011 Annual Report macquarie.com.au $44 &!.!!88 prior year. 44* 8<4( Group, Macquarie Capital and Fixed Income, E%/F\]8#< #4# 48 4#*<85 4($85 *\ =$4 548 4" %$8<%/ %$4 4488 \8 # 44\ =$ 4## *44 *H4\ 4 ##8 :*P/##?<<; Macquarie Group (Macquarie) reported a consolidated -#"#"?#< !/:##;< 31 March 2010. million, a decrease of nine per cent on the previous year’s Assets under management (AUM) decreased 5 per cent *<-*=&*>;? from $A326 billion at 31 March 2010 to $A310 billion at a decrease of 12 per cent from $A3.20 in the prior year. ;<*P#&:#" @H##*>?H" conversion of the Macquarie Cash Management Trust to the :*J"K":>*>?#<* Macquarie Cash Management Account and also the impact cent in the prior year. The overall result, as in recent years, of the appreciation of the Australian dollar against major #-::&/K"#: global currencies. balance sheet. [&/*-? N&:+*-? 19 per cent from $A5.3 billion in the previous year. The increase of 15 per cent from $A6.6 billion in the prior :#""!: year. Corporate and Asset Finance Group (CAF) achieved expanded global platform. Average headcount increased &&"#:? 17 per cent on the prior year. The expense to income -&&H*P" #>;*?#><* K"Q"#U"VQUW#: cent in the previous year. The effective tax rate for the "##"-&#"#H? year increased to 22.8 per cent from 16.1 per cent in the -"/"#&"&:" :?:#"H prior year. The result from Banking and Financial Services #!#* U"VXQW&:":*Q/#Y? Currencies and Commodities (FICC) reported a strong ^ "#:?-"# [&&H:#":"&- :#"#"':* '#"&:?":#"&* Subdued equity market conditions affected activity across \HK":' Macquarie Securities Group (MSG) and Macquarie Capital volumes in Australia, Asia, Europe and Canada, volumes U&&:" remained subdued overall. This impacted activity levels for prior year. the cash equities and derivatives businesses. Equity capital -/:*;-? market (ECM) volumes in Australia and Europe, Middle the prior year. Foreign exchange translation is estimated to =#V==W&: have had a negative impact on the result of approximately :?H? H#"&&"# US and Canada. Mergers and acquisitions (M&A) activity by an average of 10 per cent against major currencies over generally improved on the prior year. Conditions for retail the year. Total international income increased by 31 per -'&H##:?-" cent to $A4.4 billion, accounting for 60 per cent of total also relatively subdued. Australian Securities Exchange annual income and 64 per cent of income in the second V^W#&'H"# Assets under management $A billion 350 300 250 200 150 100 50 0 FY07 FY08 FY09 FY10 FY11 5 Macquarie Group Limited and its subsidiaries 2011 Annual Report macquarie.com.au continued :?#"#H#* Q&K""&"VQYUW Demand for deposit products remained strong. Q/!{ww\ Mutual funds in all regions experienced increases in overall 2009, Macquarie’s FIG advisory business has continued to _#:*\QU _ /#?#H&"-& #<?/#/: #"&:*YH':## <-#H largest-ever initial public offering (IPO), the $US22 billion #?&:-: dual listing of Agricultural Bank of China Limited on the the Australian dollar against major global currencies. Hong Kong and Shanghai stock exchanges. Macquarie acted as joint sponsor, joint bookrunner and joint lead QYww-#&#&"" commodities and the continued rally in US credit markets. manager on the Hong Kong listing. Macquarie Capital P-:&&#&:'? #H#^#&;- particularly in US gas prices, and subdued client activity in acquisition of its business by AXA SA and AMP, the largest global foreign exchange. Activity levels for FICC’s businesses H" overall improved during the second half of the year. :?#!#&YU" $US20 billion listing on the Stock Exchange of Hong Kong, For the CAF businesses, primary and secondary corporate the second largest-ever IPO. #&##K"#:"#-' into global credit markets. The US leasing environment PK"#_ H:'* Macquarie Capital’s advisory offering. The acquisition of Presidio Partners LLC, a specialist real estate private Y/#HH: &##H:-"?# H?K"-""#&&- NH-<<*P#-:" platforms and maintained strong market positions. K""#K"J=Uw#H? $8# w?-"K"H#&# K"""#&&H#"& advice in the gaming, lodging and leisure industries. the year. During the year, Macquarie further consolidated its asset MSG expanded its global equities platform through &-"K"wQ"# &&#K"#"&:*P becoming a division of MFG and renamed Macquarie European business expanded its research coverage from Y""#JVYJW*K" +<<<'#&:# ranks as Australia’s largest asset manager and in the top its Derivatives DeltaOne product platform to more than 40 globally. <?<<<##""&K" Over the period, MFG continued to execute a range -"UH-'*[ &H#H*YK"# jr. & Cie. KGaA (Sal Oppenheim), completed in April 2010. INNOVEST Kapitalanlage AG, a leading Austrian securities Macquarie ranks as the ninth largest equities research asset manager, enhancing Macquarie Investment "&-:*Y?<<'"# Management’s presence in Europe. MIRA continued to H&"/#-" build out its Asian unlisted funds platform, raising over !'_#="* $A1.5 billion in equity for funds focused on Korea, China, Operating income1 by region 2H09 1H10 2H10 1H11 2H11 $A million 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Australia Asia Americas Europe, Middle East 6 1. Operating income excludes earnings on capital and other corporate items and Africa and India. Macquarie Specialised Investment Solutions Funding "":/##-"?": K""###H#"#& in the US and Europe. sources. Total deposits increased by 61 per cent from FICC continued to develop its Asia regional hub in $A19.6 billion at 31 March 2010 to $A31.6 billion at &K":&# 31 March 2011, primarily as a result of the conversion of bank branch licence covering a range of activities. In the Macquarie Cash Management Trust to the Macquarie ##?'-"-# Cash Management Account. This deposit base represents in Singapore offering foreign exchange and corporate a diverse and stable source of funding. Short-term debt services to pension funds, hedge funds and banks "#H: &-:*K" {-'- H"#&H#-:"#& extended to include over-the-counter derivatives. and equity. In the US, FICC expanded its energy marketing and trading K"""#:&"" ##w&:!-#"# funding into income-generating assets and the continued marketing team and a Latin American oil liquids origination &U" &-* and marketing team based in Houston.