letter to shareholders

Dear Shareholder
Macquarie Group recently provided an update on its outlook for the current year profit, balance sheet
funding and medium term business focus at its regular operational briefing to market analysts. This letter
provides you with a summary of the briefing.
At the briefing we reported that Macquarie currently anticipates profit for the year to 31 March 2009 will be
approximately $0.9 billion, compared to a record result of $1.8 billion in the previous year when market
conditions were strong. The anticipated result is after an estimated $2.0 billion of write-downs and
impairment charges for the full year reflecting the severe downturn in financial markets. Operating income
for the year is expected to be down 15% (before impairments) indicating that the underlying operating
performance of the business is sound. The 2009 full year result will be announced on 1 May 2009.
Extremely challenging market conditions have adversely impacted levels of business activity and profitability
for almost all Macquarie’s business groups. Notwithstanding these conditions, Macquarie continues to
operate profitably and our business groups are busy and continuing to pursue new opportunities arising
from market conditions. We should note that forecasting during current market conditions is extremely
difficult and the outlook remains subject to significant swing factors previously identified, including market
conditions, asset realisations, completion rate of transactions and asset prices.
Balance sheet strength is of critical importance for all financial institutions at this time. Since
30 September 2008, Macquarie has continued to strengthen its balance sheet funding. At February 2009,
Macquarie had substantial liquidity with cash and liquid assets exceeding $32.1 billion. This significantly
exceeds its short-term wholesale liabilities totalling $12.7 billion. Macquarie’s regulatory capital position
remains strong with a $2.9 billion buffer of capital in excess of its minimum capital requirements. In
summary, we remain very well funded and well capitalised. Macquarie Bank Limited has seen strong growth
in deposits and has launched a number of new deposit products which we believe are very attractive to
investors.
Over the past year, Macquarie has been successfully divesting or exiting lower return businesses, and has
undertaken operational management initiatives to ensure costs and staffing levels are in line with the level
of activity in each business. Each business is actively managing all its operating costs. Staffing levels have
fallen from 13,898 at 30 September 2008 to 12,851 at 31January 2009.
At the briefing, we reiterated that Macquarie’s model has always been focussed on the medium term and
based on the following principles:
- client driven business
- alignment of interests with shareholders, investors and staff
- conservative approach to risk management
- incremental growth and evolution
- diversified by business and geography
- an ability to adapt to change
Opportunities for organic growth and acquisitions in current market conditions are being identified across
the Group. Recently, our US-based gas trading business, Macquarie Cook Energy, announced the
acquisition of Constellation Energy’s natural gas trading operation, which is one of the largest marketers of
natural gas in North America, and will more than double the size of the existing business.
In summary, our fundamental business is sound and Macquarie continues to deliver high quality service to
clients and expects to attract new clients in these challenging markets. Despite a scarcity of capital in the
world, we continue to support our clients' capital needs and provide opportunities and products which are of
value to them. We have a strong balance sheet, strong team and strong core businesses. We continue to
maintain a cautious stance with a conservative approach to funding and capital.