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2014 Annual
Financial Report
macquarie.com.au Macquarie Group
Macquarie Group LiMited ACN 122 169 279
the Holey dollar Macquarie Group contact details
2014 annual Financial report
In 1813 Governor Lachlan Macquarie Macquarie Group Limited’s 2014 Annual Report consists of Macquarie Group Head Office
two documents – the 2014 Annual Review and the 2014 Annual No.1 Martin Place
overcame an acute currency shortage
Financial Report. Sydney NSW 2000
by purchasing Spanish silver dollars
This 2014 Macquarie Group Annual Financial Report complies Australia
(then worth five shillings), punching with reporting requirements and contains the statutory
Tel: [phone]
financial report. It includes Macquarie’s Corporate Governance
the centres out and creating two new
Statement, the Directors’ Report including the Remuneration Registered Office
coins – the ‘Holey Dollar’ (valued at Report and the full financial statements. Macquarie Group Limited
Level 7, No.1 Martin Place
five shillings) and the ‘Dump’ (valued The 2014 Annual Review contains a report from the Chairman
and Managing Director on Macquarie’s business and Sydney NSW 2000
at one shilling and three pence). operational highlights. It is not a concise report prepared under Australia
section 314 (2) of the Corporations Act. Macquarie Group has
This single move not only doubled not prepared a concise report for the 2014 financial year. Tel: [phone]
Fax: [phone]
the number of coins in circulation but If you would like a copy of the 2014 Annual Review
increased their worth by 25 per cent please call us on [phone] or visit
macquarie.com.au/investorrelations.
and prevented the coins leaving the
colony. Governor Macquarie’s creation
2014 annual General Meeting
of the Holey Dollar was an inspired
Macquarie Group’s 2014 Annual General Meeting will be held at
solution to a difficult problem and
10:30am on Thursday 24 July 2014 at the Sheraton on the Park
for this reason it was chosen as the (Grand Ballroom), 161 Elizabeth Street, Sydney, NSW 2000.
symbol for Macquarie Group. Details of the business of the meeting will be contained in the
Notice of Annual General Meeting, to be sent to shareholders
separately.
The Macquarie name and Holey Dollar device are registered
trade marks of Macquarie Group Limited.
Macquarie Group Limited and its subsidiaries 2014 Annual Financial Report macquarie.com.au

Macquarie Group Limited

2 014 Annual Financial Report

Corporate Governance Statement 3
Diversity Report 11
Environmental, Social and Governance Report 14
Risk Management Report 23
Directors’ Report 37
– Remuneration Report 45
– Schedule 1 88
– Schedule 2 93
Financial Report 94
– Income Statements 95
– Statements of comprehensive income 96
– Statements of financial position 97
– Statements of changes in equity 98
– Statements of cash flows 100
– Notes to the financial statements 102
– Directors’ declaration 212
– Independent auditor’s report 213
Ten year history 215
Additional investor information 216
Glossary 225

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Macquarie Group Limited and its subsidiaries 2014 Annual Financial Report macquarie.com.au

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Corporate Governance Statement

company has followed the governance recommendations of
Macquarie’s approach to Corporate
the ASX Corporate Governance Council (ASX
Governance
Recommendations) during the reporting period. Macquarie's
Macquarie’s approach to governance, which has remained corporate governance remains consistent with the ASX
largely consistent over time, is to: Recommendations. A summary of the ASX
– promote the long term profitability of Macquarie while Recommendations and reference to the applicable
prudently managing risk Macquarie governance practice is available on Macquarie’s
– drive superior and sustainable shareholder value over website at macquarie.com.au
the long term through the alignment of the interests of
Macquarie as a non-operating holding company of a
shareholders and staff
licensed Australian bank, Macquarie Bank Limited
– meet stakeholder expectations of sound corporate (Macquarie Bank), is regulated by the Australian Prudential
governance as part of Macquarie’s broader
Regulation Authority (APRA). APRA’s prudential standards
responsibility to clients, shareholders, investors and
include governance requirements. Macquarie also has
the communities in which it operates.
subsidiaries that are supervised by regulators in the overseas
Macquarie recognises that a key factor in delivering long jurisdictions in which they operate. The notes to Macquarie’s
term shareholder returns is providing superior services to financial statements include a list of material subsidiaries of
clients. Macquarie recruits high quality staff and expects the company.
staff to uphold the company’s Goals and Values. Macquarie's corporate governance framework continues to
evolve to respond to regulatory changes in the global
Macquarie Group Limited (Macquarie) is a global financial
markets in which it operates.
services provider and its shares are listed on the Australian
Securities Exchange (ASX). As an ASX-listed company,

Macquarie is required to report on the extent to which the
Corporate Governance framework

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M acquarie Group Limited and its subsidiaries 2014 Annual Financial Report macquarie.com.au
Corporate Governance Statement
continued

Board oversight Director Independence
The primary role of the Board is to promote the long-term Macquarie recognises that independent directors have an
health and prosperity of Macquarie. The Macquarie Board important role in assuring shareholders that the Board is
consists of eleven Voting Directors, ten of whom are able to act in the best interests of Macquarie and
independent. Kevin McCann, an Independent Director, is independently of Management.
Chairman. Nicholas Moore, Macquarie’s Managing Director The independence of directors is reviewed annually by the
and Chief Executive Officer (CEO), is the only executive Board Governance and Compliance Committee (BGCC).
Board member. Based on Macquarie’s criteria for assessing director
During the year, Gary Banks, Patricia Cross and Nicola independence, each independent director is asked to
Wakefield Evans were appointed to the Board, and confirm whether they have any material interests or
Catherine Livingstone and John Niland retired on 25 July relationships with Macquarie, other than as a director.
2013 and 31 December 2013, respectively. Schedule 1 of At its meeting in March 2014, the BGCC determined that
the Directors' Report includes when each Voting Director while some Directors noted commercial relationships
joined the Board. between Macquarie and other large companies of which
The table below sets out the current composition of the they are a director as well as professional service providers
Board and the membership of each Board Committee. of which, within the last three years, they were a partner,
Details of each Voting Director’s experience are summarised there were no interests or relationships that could interfere
in Schedule 1 of the Directors’ Report. with the Non-Executive Director's ability to act in the best
interests of Macquarie and independently of Management.
Macquarie’s Constitution sets out requirements concerning Each Director's experience and directorships are set out in
the setting of board size, meetings, election of directors Schedule 1 of the Directors' Report. The BGCC confirmed
and the powers and duties of directors. In accordance with that, excluding the CEO, all directors continued to be
the Constitution, the Board has resolved that the maximum independent.
number of Voting Directors is currently eleven.
The criteria used to assess independence, including
A copy of the Constitution is available on Macquarie’s guidance for determining materiality, are reviewed annually
website. and are available on Macquarie’s website.
Decision-making authority Directors are able to consult independent experts at
Macquarie’s expense, subject to the estimated costs
The Board has reserved certain matters for its approval
being approved by the Chairman in advance as being
and has delegated specific authorities to its various
reasonable, and also have unlimited access to senior
Board Committees. The Managing Director, who is also
management of Macquarie.
Macquarie’s CEO, has been granted general authority for
those matters not reserved for the Board or a Board Board Committees
Committee. Macquarie’s Executive and Operations Review
Committees, appointed by the Managing Director, operate Macquarie’s five standing Board Committees assist the
as management committees to assist in the exercise of the Board in its oversight role. Each Board Committee has an
Managing Director’s delegated authority. independent director as its Chairman. All Board members
are sent Board Committee meeting agendas and may attend
The CEO, the Chief Risk Officer and the Chief Financial any Board Committee meetings. Subsequent to each Board
Officer report to the Board at each monthly Board meeting. Committee meeting, the minutes are included in the Board
In addition to regular reporting from Management, the Board papers and presented to the Board by the respective Board
has unlimited access to senior management as well as Committee Chairmen.
external advisers.
The Audit, Governance and Compliance, Nominating and
The Board Charter, which is available on Macquarie’s Remuneration Committees comprise members who are
website, details the Board’s role and responsibilities and its independent directors. The Board Risk Committee includes
relationship with Management. all members of the Board and the Managing Director of
Macquarie Bank to focus appropriate attention on the
oversight of risk. Members’ attendance at Board and Board
Committee meetings during the past year is set out at the
beginning of the Directors’ Report.
The Board Committee Charters, detailing the responsibilities
of each Committee and how they exercise their authority,
are available on Macquarie’s website.

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Board and Board Committee membership
Governance
Macquarie and
Board Audit Compliance Nominating Remuneration Risk
Macquarie Independent Directors
Kevin McCann AM* Chairman Chairman Member Member
Gary Banks AO Member Member Member
Michael Coleman Member Chairman Member Member
Patricia Cross Member Member Member Chairman
Diane Grady AM Member Member Member Member
Michael Hawker AM Member Member Chairman Member Member
Peter Kirby Member Member Member Member
Helen Nugent AO Member Member Chairman Member
Nicola Wakefield Evans Member Member Member
Peter Warne Member Member Member Member
Macquarie Managing Director and Chief Executive Officer
Nicholas Moore Member Member
Macquarie Bank Managing Director and Chief Executive Officer
Greg Ward Member

* The Chairman attends meetings of Board Committees of which he is not a member.

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M acquarie Group Limited and its subsidiaries 2014 Annual Financial Report macquarie.com.au
C orporate Governance Statement
continued

determines that extending the term will be of significant
Allocation of responsibilities between
benefit to Macquarie. Previously independent directors were
Board Committees
appointed for a maximum term of 12 years or the end of their
Primary responsibility for ensuring an appropriate risk final three year term.
management framework, including the establishment of
policies for the control of risk, lies with the Board Risk Board performance
Committee. The Board Risk Committee receives information
Director induction and development
on the risk profile and policy framework of the Group and
external developments that may have an impact on the All new Directors undertake an induction program to
effectiveness of the risk management framework. It also familiarise themselves with Macquarie, its Board practices
approves significant changes to risk management policies and procedures and prudential requirements. In addition to
and the framework. briefings with members of senior management, Non-
Executive Directors (NEDs) identify business awareness
The Board Audit Committee (BAC) assists the Board with needs on an ongoing basis and regular board education
its oversight of the integrity of the financial statements
sessions are held during the year.
including compliance with the requirements of the
Corporations Act 2001 (Cth) (the Act) as well as other The Board and Directors
mandatory professional reporting requirements. In addition,
The Board reviews its performance and the performance of
it is responsible for reviewing the adequacy of the
each Director on an annual basis with emphasis on those
Group’s financial regulatory reporting control framework to
individual Directors who are required to stand for re-election
banking regulators and monitoring the internal control
at the next Annual General Meeting. The process for
environment. To assist with its role of monitoring the internal
conducting the review is agreed by the Board. Typically the
control environment, the BAC reviews reports from business
process includes individual interviews by the Chairman or an
operational risk managers, the external auditor and Internal
external facilitator with each Director, and the use of a
Audit referring matters relating to the duties and
questionnaire to cover matters such as:
responsibilities of the Board Risk Committee and Board
– the Board’s contribution to developing strategy
Governance and Compliance Committee to the appropriate
and policy
Committee.
– the Board’s performance relative to its objectives
The Board Remuneration Committee (BRC) makes – interaction between the Board and Management and
recommendations to the Board that promote appropriate between Board members
remuneration policies and practices for the Macquarie – the Board’s oversight of business performance and
Group consistent with Macquarie Group’s risk compliance, risk controls and management
management framework. The BRC is responsible for – Board composition, including consideration of relevant
liaising with the Board Risk Committee to ensure there skills and structure
is effective coordination between the two Committees to – the operation of the Board, including the conduct of
assist in producing a properly integrated approach to Board meetings and group behaviours.
remuneration that reflects prudent and appropriate risk. The
A nominated independent Director or an external facilitator
BRC is also responsible for liaising with the BAC in relation to
provides feedback to the Chairman on the Chairman’s
remuneration related disclosures in the remuneration report.
performance based on discussion with the other
The Board Governance and Compliance Committee independent Directors. A written report summarising the
(BGCC) has responsibility for recommending to the Board results, issues for discussion and recommendations is
the most appropriate corporate governance policies for the presented to the Board and discussed at a Board meeting.
Macquarie Group and for assisting the Board in fulfilling its
The Board’s review for 2014 is being conducted internally in
responsibility for oversight of the compliance practices of the
accordance with the process described above.
Group. In addition, it has oversight of Macquarie’s work
health and safety practices and environmental and social risk Board Committees
policies.
Each Board Committee undertakes a periodic review of its
The Board Nominating Committee is responsible for performance, at least biennially. The process for the review
assisting the Board in maintaining a diverse board that also includes use of a questionnaire and discussion of the
contributes to the successful oversight and stewardship of outcomes, including recommendations, which is led by the
Macquarie and has an appropriate mix of skills and Chairman of the Board Committee. During the year, four
experience to be an effective decision-making body. Board Committees undertook an evaluation of their
performance.
Macquarie’s Policy on Board Renewal and Appointment of
Directors sets out the fundamental factors relevant to the A summary of the processes adopted by Macquarie for
selection and appointment of new Directors and is available Board and Key Executive Performance Review is available on
on Macquarie’s website. Under the policy, which was Macquarie’s website.
amended during the year, new Non-Executive Directors are
appointed for three 3-year terms from first election by
shareholders. The Board has discretion to extend a Non-
Executive Director's term of appointment if the Board

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Performance of key executives Integrity office
Formal processes have been adopted by Macquarie to Macquarie staff are expected to uphold, and are supported
review the performance of Macquarie’s most senior in, maintaining the highest standards.
executives. The BGCC oversees the process for the CEO’s
Macquarie established the position of Integrity Officer in
annual performance review. Oversight of this process will
1998. The Integrity Officer acts as an independent point of
transfer to the BRC for Macquarie's 2015 financial year.
contact for staff on integrity issues and works to ensure,
As part of the annual review, the CEO prepares a formal through training and awareness, that all Macquarie business
report on his performance and presents to the NEDs. The is conducted in accordance with sound ethical practices and
NEDs review performance by considering a range of the Goals and Values of the organisation. Supporting the
indicators including financial performance measures, group-wide Integrity Officer are regional Integrity Officers
performance against peers, operational and strategic located in key areas around the globe.
initiatives, cost management initiatives, financial
The group-wide Integrity Officer reports directly to the CEO
management, prudential and compliance matters, risk
and provides an annual report on the activities and
management, human resources matters, upholding
developments of the Integrity Office to the BGCC.
Macquarie's Goals and Values, reputation management and
monitoring, and community and sustainability matters. A Further information about the role of the Integrity Officer
similar process is also followed to review the performance of and activities of the Integrity Office is provided in the
the CEO of Macquarie Bank. Sustainability section of the Annual Financial Report.
The CEO evaluates, at least annually, the performance of the Dealing with potential conflicts
Operating Group Heads, including the Chief Risk Officer
Failure to identify a conflict of interest before entering into
(CRO) and the Chief Financial Officer. Performance criteria
a transaction, undertaking any dealing (either directly with
vary according to the individual’s role. Factors relevant to
clients or otherwise), or undertaking any fiduciary role, can
assessing performance include (as appropriate) financial
give rise to considerable harm to Macquarie’s relationship
performance, risk management, business leadership and
with clients and its reputation.
people and organisational leadership. The CEO reports to
the BRC on the performance of these key executives and Macquarie has systems and protocols in place to identify a
recommends individual senior executive remuneration for conflict of interest and a framework for managing conflicts.
Board approval. It is the responsibility of each business head to ensure that
conflicts of interest are adequately managed and that their
The Board and Management seek to ensure that
business is conducted in accordance with applicable laws,
remuneration for the CRO is determined in a way that
regulations, rules and statements of regulatory policy.
preserves the independence of this function and maintains
Macquarie’s robust risk management framework. Macquarie has adopted a variety of measures to manage
conflicts of interest, including Macquarie-wide policies and
A performance evaluation for senior executives has taken
divisional policies, systems, lists, information protocols
place during the year in accordance with the process
and appropriate disclosures. The appropriate mechanism
described above. Further detail on the remuneration policy
to manage a conflict will depend on the circumstances and
and performance review for Executive Key Management
nature of the conflict. Conflict management arrangements
Personnel is found in the Remuneration Report in the
at Macquarie are subject to the oversight function of the
Directors’ Report.
Compliance division within the Risk Management Group.
Ethical and responsible decision making
The Board has guidelines for its members for declaring and
Code of Conduct dealing with potential conflicts of interest that include:
Macquarie has adopted a Code of Conduct that – Board members declaring their interests as required
under the Corporations Act, the ASX Listing Rules and
incorporates Macquarie’s Goals and Values. The Code of
general law requirements
Conduct is also reflected in, and supported by, a broad
range of Macquarie’s internal policies and practices. – Board members with a material personal interest in a
matter before the Board do not receive the relevant
The Code of Conduct, which is endorsed by the Board, is Board paper and are not present at a Board meeting
intended to provide staff with an understanding of their during the consideration of the matter and subsequent
responsibility to uphold the following goals and values to vote, unless the Board (excluding the relevant Board
which Macquarie aspires: Integrity, Client commitment, Strive member) resolves otherwise
for profitability, Fulfillment for our people, Teamwork and – Board members with a conflict not involving a material
Highest standards. It also details standards and expectations personal interest may be required to absent themselves
regarding conflicts of interest, disclosure and corruption, to from the relevant deliberations of the Board.
ensure that the highest standards are maintained and
Macquarie’s reputation is protected and enhanced.
A copy of the Code of Conduct is available on Macquarie’s
website.

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M acquarie Group Limited and its subsidiaries 2014 Annual Financial Report macquarie.com.au
C orporate Governance Statement
continued

Macquarie Bank is a subsidiary of Macquarie, and the Corporate governance in Macquarie-managed
Macquarie Bank Board is ultimately responsible for the funds
sound and prudent management of Macquarie Bank,
Macquarie’s expertise in managing fund assets and sourcing
with due consideration for the interests of deposit holders.
new value-adding opportunities is a key attraction for
Where potential conflicts arise, Management will ensure
investors in Macquarie-managed funds (Funds).
that Directors of the relevant Board have sufficient
information to manage conflicts appropriately. The Macquarie-managed funds’ governance standards
adopt an appropriate governance framework to ensure that
Staff and Director trading
key decisions are taken in the best interests of investors
Macquarie’s personal dealing policies apply to Directors consistent with the fund’s mandate and regulatory
and all Macquarie staff. They identify the principles by which requirements.
Macquarie balances personal investment interests against
The key elements of Macquarie’s corporate governance
the responsibility of Macquarie and its staff to ensure that all
framework for Funds are:
personal dealing and investment activities are conducted
appropriately. Key aspects of Macquarie’s personal dealing – appropriate management of conflicts of interest arising
policies include: between a Fund and its related parties. Related party
transactions should be identified clearly, conducted on
– pre-clear securities trading: Directors and staff must
arm’s length terms and tested by reference to whether
pre-clear their securities trading with Macquarie
they meet market standards. Decisions by listed Funds
– trading windows: Generally, Directors and staff may
about transactions with Macquarie or its affiliates should
only trade in Macquarie securities and related
be made by parties independent of Macquarie
derivatives during designated trading windows. These
are typically of three to five weeks duration and follow – appropriate resourcing of funds management
businesses. In particular:
Macquarie’s announcement of its interim and full year
results and after the Annual General Meeting (AGM) — staff involved in managing a Fund should be
dedicated to the relevant funds management
– excluded dealings: Certain types of transactions such
business, rather than to advisory or other activities
as acquisition of securities under an employee share
— all recommendations to Fund boards (and
plan or participation in the dividend reinvestment plan
supporting information) should be prepared or
may be effected outside a trading window without
reviewed by funds management staff
pre-clearance
— each listed Fund that invests in operating assets or
– trading prohibition while in possession of material businesses should have its own managing director
non-public price-sensitive information: In all cases or chief executive officer and a majority of
Macquarie prohibits Directors and staff from dealing independent directors on the Fund board
in any security, including a Macquarie security, if they — Chinese Walls operate to separate Macquarie’s
possess non-public price-sensitive information about corporate finance, advisory and equity capital
or affecting the relevant security markets businesses from its funds management
– deferred and unvested equity awards, retained shares businesses.
and minimum shareholding requirements cannot be
Sustainability, diversity and the community
hedged: Staff are not permitted to undertake any action
that is designed to limit their exposure to Macquarie Macquarie’s Board and Management view the commitment
shares that are subject to retention arrangements, or to sustainability and Environmental, Social and Governance
their deferred and unvested equity awards. NEDs may (ESG) performance as part of their broader responsibility to
not enter into a transaction that operates to limit the clients, shareholders and the communities in which
economic risk of their Macquarie shareholding below Macquarie operates.
their minimum shareholding requirement
Macquarie’s approach is detailed in the ESG Report in the
– net short positions not permitted: Directors and staff are
Annual Financial Report. Macquarie has continued efforts to:
not permitted to take net short positions in Macquarie
manage ESG risks in its business activities; advance
shares or any securities in Macquarie-managed funds.
environmental management; and pursue investments,
Macquarie's Trading Policy sets out the restrictions that markets and products with an ESG focus, including in
apply to dealing in Macquarie securities by Macquarie staff, renewable energy and energy efficiency. Macquarie values
including Key Management Personnel, and is available on its its people and continues to invest in the development and
website. well-being of its diverse talent base. A Global Reporting
Initiative (GRI) index is available on Macquarie's website. The
Each member of the Board is encouraged to consider
diversity of our people remains fundamental to Macquarie’s
positions in a Macquarie security as a long term investment
success. Macquarie’s Workforce Diversity Policy defines
and is not permitted to trade derivatives relating to a
Macquarie’s diversity commitment and the structures in
Macquarie security without the prior approval of the
place to facilitate its realisation. Our approach to diversity is
Chairman (or the CEO in the case of the Chairman). Board
detailed in the Diversity Report in the Annual Financial
members and Executive Committee members are also
Report.
required to annually disclose to Macquarie any financing
arrangements relating to their Macquarie securities and
manage their financing arrangements in accordance with
Macquarie’s policies.

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