Macquarie Group
Annual Report
Year ended 31 March 2021
Macquarie Group Limited ACN 122 169 279
Macquarie is a global
financial services group
operating in 32 markets in
asset management, retail
and business banking,
wealth management,
leasing and asset
financing, market access,
commodity trading,
renewables development,
specialist advice,
access to capital and
principal investment.
2021 Annual General Meeting
Macquarie Group Limited’s 2021 AGM will
be held at 10:30 am on Thursday, 29 July 2021.
Details of the meeting will be sent to
shareholders separately.
Cover image
Macquarie is one of Australia's largest agricultural
investment managers. Located
in Western Australia, the Tantanoola
property – operated by Macquarie‑managed
Viridis Ag – grows grains such as wheat, barley,
lupins and canola.
Contents
01
About
About Macquarie
Letter from the Chairman
Letter from the Managing
Director and CEO
Empowering people to innovate
and invest for a better future
Financial Highlights
8
10
12
14
18
Operating and Financial Review
20
02
Governance
Corporate Governance
Diversity and Inclusion
Environmental, Social
and Governance
Macquarie Group Foundation
Risk Management
36
46
52
72
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
03
04
05
Directors’ Report
Financial Report
Further information
Directors’ Report
87
Financial statements
Additional investor information 296
Directors’ experience and
special responsibilities
Remuneration Report
92
100
Income statements
Statements of comprehensive
income
149
150
Ten year history
Glossary
302
303
Statements of financial position
151
Statements of changes in equity 152
Statements of cash flows
154
Notes to the financial statements 155
Statutory statements
Directors’ declaration
286
Independent auditor’s report
287
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About
The Home of Good Borrowers
The Home of Good Borrowers campaign featured across
high impact outdoor spaces nationally, increasing our share
of voice and awareness and reinforcing the reasons why
Australians are choosing to say I Bank with Macquarie.
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01
About Macquarie
Macquarie (MGL and
its subsidiaries, the
Consolidated Entity) is a
global financial group with
offices in 32 markets.
Macquarie now employs over 16,000(1) people
globally across 32 markets.
EMEA ~15%
Americas ~16%
Asia ~25%
ANZ ~44%
(1) This figure includes staff employed in certain operationally segregated subsidiaries (OSS). Unless otherwise stated, further references to staff data and
policies do not include those in OSS.
8
Macquarie Group Limited and its subsidiaries 2021 Annual Report
About Macquarie
Macquarie Group Limited (MGL, the Company) is listed in Australia and is regulated by the
Australian Prudential Regulation Authority (APRA), the Australian banking regulator, as a
Non-Operating Holding Company (NOHC) of Macquarie Bank Limited (MBL), an authorised
deposit-taking institution (ADI). Macquarie’s activities are also subject to supervision by
various other regulatory agencies around the world.
Founded in 1969, Macquarie now employs over 16,000(1)
people globally, has total assets of $A245.7 billion and total
equity of $A22.4 billion as at 31 March 2021.
Macquarie’s breadth of expertise covers asset management,
retail and business banking, wealth management, leasing
and asset financing, market access, commodity trading,
renewables development, specialist advice, access to capital
and principal investment. The diversity of our operations,
combined with a strong capital position and robust risk
management framework, has contributed to Macquarie’s
52-year record of unbroken profitability.
Macquarie works with institutional, corporate, government
and retail clients and counterparties around the world,
providing a diversified range of products and services.
We have established leading market positions as a global
specialist in a wide range of sectors, including resources and
commodities, renewables, conventional energy, financial
institutions, infrastructure and real estate and have a deep
knowledge of Asia-Pacific financial markets.
Alignment of interests is a longstanding feature of
Macquarie’s client-focused business, demonstrated by our
willingness to both invest alongside clients and closely align
the interests of our shareholders and staff.
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$A3,015m
FY2021 profit
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9
Letter from the Chairman
Our performance
has been resilient,
and our operating
and support
groups have
remained busy
supporting our
clients, partners
and communities,
as well as our
own team.”
Letter from the
Chairman
When we last wrote to shareholders, the
world was in the early months of the
COVID-19 pandemic, the profound effects
of which continued to be felt throughout
Macquarie’s 2021 financial year (FY2021).
Macquarie has also experienced the economic impacts of
the pandemic but overall, our performance has been resilient
and our operating and support groups have remained busy
supporting our clients, partners and communities, as well
as our own team. Shemara provides more detail about
Macquarie’s performance in her letter to shareholders and
we outline some of our initiatives in this Annual Report.
Significant progress has since been made in managing the
public health crisis while the speed with which vaccines have
been developed is testament to the remarkable contributions
made by medical science. However, we recognise that some
countries are in a stronger position today than others and
consequently, we anticipate the overall public health and
economic effects of the pandemic will continue to be felt
for some time.
On behalf of the Board, I commend staff for their resilience
and continued focus; at the peak of global lockdowns more
than 98% of staff were working remotely. In accordance
with local public health orders, many staff have now
returned to the office, but have done so in the context of
more widespread adoption of hybrid working. This model of
working is supported by the Board and Management, with
significant investment in technology to ensure that staff
are able to perform their duties to high standards, meet
regulatory obligations and remain connected with their
colleagues and clients.
10
Professional conduct
One of the core responsibilities of the Board and Management
is ensuring the highest standards of professional conduct
across all our operations, a commitment that has been in
place since Macquarie’s inception some 52 years ago.
During FY2021, and after extensive consultation with staff
in all of our markets around the world, we re-articulated
Macquarie’s purpose as, ‘empowering people to innovate
and invest for a better future’. This statement of purpose
articulates why Macquarie exists and what we do. It supports
our longstanding operating principles of Opportunity,
Accountability and Integrity, which express how we do
business. Our purpose and principles are embedded
in Macquarie’s Code of Conduct, which sets out the
expectations of Management and staff in managing their
responsibilities and conducting themselves.
The standards expected of Board, Management and staff are
high, and there are consequences for anyone at Macquarie
who fails to meet those standards. We actively enhance our
risk culture and Conduct Risk Management Framework in
response to changes in our business operations, outcomes
of our oversight activities and the expectations of regulators
and communities. The Board and Management also regularly
review and enhance our reporting, training, monitoring and
surveillance activity, and there is an established Conduct Risk
Management Framework in place.
Everyone at Macquarie is accountable for their conduct,
and supervisors are accountable for outcomes in businesses
they supervise with independent oversight by the Risk
Management Group.
Environmental, social and governance
Sound environmental, social and governance (ESG) practices
remain an area of focus for the Board and Management.
Macquarie continued business activities that support
the transition to a lower-carbon economy, and we have
continued to embed ESG risk management across the
organisation. The ESG section of this Annual Report and the
Macquarie website provide further details on our approach.
During FY2021, the Board and Management considered
Macquarie’s position on a net zero carbon emissions
commitment. Macquarie has been carbon neutral in its
operations since 2010 and during FY2021, Macquarie Asset
Management made the commitment to manage its portfolio
in line with global net zero emissions by 2040. After carefully
reviewing the substantial activity across Macquarie’s
business and operations, Macquarie Group has confirmed
its commitment to reaching net zero operational emissions
by 2025 and aligning financing activity with the global goal of
net zero emissions by 2050. We provide more information on
these commitments in this Annual Report.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Board changes
During FY2021, we welcomed Rebecca McGrath and Mike
Roche to the Board. Rebecca and Mike bring considerable
energy sector and corporate finance expertise respectively
and they are already making a valued contribution.
Shareholders will be asked to formally elect Rebecca and
Mike at the 2021 Annual General Meeting.
These appointments follow the retirement of Michael Hawker
and Gary Banks AO in FY2021. Gordon Cairns, who had
previously advised of his intention to retire, steps down on
7 May 2021. Michael, Gary and Gordon have been outstanding
colleagues over many years and on behalf of the Board,
I thank them for their service to shareholders and wish
them well for the future.
Ensuring that the Board is an effective shareholder
steward for a business as diverse as Macquarie requires
balancing experience and longevity with fresh perspectives,
underpinned by diversity of expertise. I can say with
absolute confidence that shareholders are well served by
the Board, which is hard-working and diligent in fulfilling its
responsibilities.
With the business continuing to navigate the recovery
from a period of global uncertainty, and with a process of
Board renewal underway, my colleagues have asked me to
consider extending my tenure as Chair until Macquarie’s 2022
AGM. Subject to shareholders extending my tenure by one
additional year at the 2021 AGM, I have agreed to this request.
Over the course of FY2022, the Board will undertake
a process of nominating a new Chair and will advise
shareholders in due course. My time on the Macquarie Board
has been a professional highlight. It has been a privilege to
represent shareholders and to work with such an exceptional
team across the Board, Management and staff. I’m proud of
all that Macquarie has achieved and would be delighted to
provide an extended period of continuity while more recently
appointed colleagues become more familiar with Macquarie.
Dividends
The Board resolved to pay a final ordinary dividend of
$A3.35 per share (40% franked). This results in a total
ordinary dividend for the year ended 31 March 2021 of
$A4.70 per share, up from $A4.30 in the prior year.
On behalf of the Board, we would like to thank Macquarie’s
staff for their efforts, and our clients and shareholders for
their ongoing support.
Peter Warne
Independent Director and Chairman
Sydney
7 May 2021
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Letter from the Managing Director
and CEO
Macquarie’s
performance
reflects our
involvement in areas
of deep structural
need in the global
economy and the
commitment of our
staff to work with
clients to address
opportunities and
challenges in our
communities.”
Letter from the
Managing Director
and CEO
Despite the many unexpected challenges
of the last year, Macquarie staff remained
focused on delivering for our clients,
partners, shareholders, and the communities
in which we operate. The team adapted to
the changed operating environment, with
most working remotely for a period and
some now returned to spending time in
our offices, without interruption to their
activities or to client service.
Macquarie’s performance reflects our involvement in areas
of deep structural need in the global economy and the
commitment of our staff to work with clients to address
opportunities and challenges in our communities. The
following pages of this report include examples of projects
aligned to our purpose of empowering people to innovate
and invest for a better future.
Our annuity-style activities, Macquarie Asset Management
(MAM), Banking and Financial Services (BFS) and parts
of Commodities and Global Markets (CGM), had a steady
year, with a combined net profit contribution of
$A3,314 million, down 4% on the prior year.
Annuity-style activities represented 54% of net profit
contribution from operating groups.
Macquarie’s businesses continued to perform well despite
challenging market conditions, reflecting the diversity of our
activities and ongoing focus on prudent risk management.
For the year ended 31 March 2021, Macquarie delivered a
record profit of $A3,015 million, up 10% on the prior year.
Lower performance fees and Macquarie AirFinance income in
MAM were partially offset by gains on the sale of Macquarie
European Rail and the reversal of impairments. In BFS,
growth in deposits, the loan portfolio and funds on platform
as well as decreased credit impairment charges were partially
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offset by margin compression on deposits and a decrease in
the vehicle finance portfolio. CGM’s annuity-style activities
reflected higher revenue from the Specialised and Asset
Finance division but lower revenues and an increase in
provisions in Commodities Lending and Financing.
Our markets-facing activities in Macquarie Capital and
the remainder of CGM made a net profit contribution of
$A2,783 million, up 39% on the prior year. Markets-facing
activities represented 46% of net profit contribution from
operating groups.
Lower fee and commission income in Macquarie Capital
was partially offset by significantly higher equity capital
markets activity in ANZ. Lower investment-related income
due to fewer material asset realisations was partially offset
by improved performance of the assets in the portfolio. The
markets-facing activities within CGM generated increased
revenues across the commodities platform with strong
results in resources, gas and power, agriculture, and precious
metals, as well as foreign exchange, interest rates and credit
and equity derivatives and trading.
While our Australian franchise maintained its strong
position and benefited from the relatively rapid recovery of
the Australian economy, Macquarie’s offshore businesses
continued to perform well, with international income
accounting for 68% of total income for the year ended
31 March 2021. Total international income was $A8,468 million,
an increase of 5% from $A8,061 million in the prior year.
Macquarie is highly disciplined in maintaining sufficient
surplus capital to meet regulatory requirements and support
business growth opportunities. Macquarie’s APRA Basel III
capital was $A26.3 billion at 31 March 2021 and the surplus
above regulatory minimum requirements was $A8.8 billion.
In light of actions recently announced by APRA regarding
MBL’s risk management practices and ability to calculate and
report key prudential ratios, we acknowledge that continued
work is required on our risk governance and operating
platform and we have programs in place to strengthen
capital and liquidity reporting and the risk management
framework. We will work closely with APRA on these
programs through a period of intensified supervision. APRA
noted that the breaches are historical and do not impact the
current overall soundness of Macquarie Group’s capital and
liquidity positions.
Management update
During FY2021, Macquarie announced a small number of
senior management changes. After 16 years with Macquarie,
Martin Stanley stepped down as Group Head of MAM and
from the Executive Committee, effective 1 April 2021. From
that date, Macquarie’s Asia CEO Ben Way, who has been with
Macquarie for 14 years, became Group Head of MAM and
joined the Executive Committee.
From 1 July 2021, Mr Way, who will remain in Hong Kong, will
be succeeded as Asia CEO by Verena Lim, Senior Managing
Director in MAM in Singapore. Ms Lim will join Macquarie’s
Management Committee, as will Leigh Harrison, the
London-based global head of MAM’s infrastructure and
real assets business.
After 22 years with Macquarie, Mary Reemst decided to
retire from her role as Managing Director and Chief Executive
Officer of MBL, from the MBL Board, and from the MGL
Macquarie Group Limited and its subsidiaries 2021 Annual Report
and MBL Executive Committees, effective 1 July 2021. From
that date, and subject to regulatory approvals, Mary’s
successor will be Stuart Green, who has been with Macquarie
for 20 years in a range of roles including Head of Investor
Relations and most recently Group Treasurer. Mary Reemst
will continue in her role as Chair of the Macquarie Group
Foundation for the remainder of 2021, working on transition
alongside Macquarie’s CFO, Alex Harvey, who will succeed
her in 2022.
Following the successful integration of the Principal Finance
business into Macquarie Capital, Florian Herold has decided
to step down from the Executive Committee, effective 7
May 2021. The decision coincides with Mr Herold returning
to London, where he continues to lead the global Principal
Finance team and is focused on consolidating the recent
momentum in its investing activity. Macquarie Capital will
continue to be represented on the Executive Committee by
co-heads Michael Silverton and Daniel Wong.
In the community
FY2021 was another significant year for the Macquarie Group
Foundation. In response to the COVID-19 crisis, Macquarie
Group allocated an additional $A20 million to the Foundation
to contribute to organisations working to combat the
pandemic and provide relief from its impacts, conduct
research and stimulate economic recovery. To date, the
Foundation has allocated $A17.7 million to 36 organisations.
In early FY2022, $A1 million was committed to support
COVID-19 relief in India.
During the year, the Foundation continued to work with the
five winners of Macquarie’s 50th Anniversary Award, all of
which progressed their health, environmental and social
inclusion projects despite the challenges of COVID-19.
Inclusive of the COVID-19 allocation, funding to 50th
Anniversary Award recipients, grant-making, and matching
donations and fundraising efforts of our staff, together
the Foundation and staff contributed $A64 million to
more than 2,400 community organisations around the
world, representing a record year. Since inception, total
contributions stand at over $A475 million.
Outlook
We have provided the market with an outline of the factors
impacting the short-term outlook for FY2022 for each of
our operating groups. We maintain a cautious stance, with a
conservative approach to capital, funding and liquidity that
positions us well to respond to the current environment.
On behalf of Senior Management, we would like to thank
Macquarie’s staff for their efforts, and our clients and
shareholders for their ongoing support.
Shemara Wikramanayake
Managing Director and Chief Executive Officer
Sydney
7 May 2021
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Empowering people to innovate
and invest for a better future
Empowering people
to innovate and invest
for a better future
Communities around
the world have shown
remarkable resilience
through a year in which
the COVID‑19 pandemic
had an impact on every
aspect of life. While the
health and economic
challenges presented by
the pandemic remain
profound, there have
been many examples
of ingenuity and adaptability
as businesses pivoted,
governments collaborated,
and communities
rallied together.
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
Throughout this period, Macquarie remained focused on
empowering people to innovate and invest for a better
future. Our teams provided essential short-term support to
clients, communities and each other, while driving forward
activity to address some of the longer-term challenges
facing countries around the world.
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Helping clients navigate change
and realise opportunity
As part of the banking industry in
Australia, we quickly moved to offer
lending relief and enhanced support
for our personal bank customers and
small business clients. At its peak,
approximately 13% of customers
and clients accessed support but
most of our clients are now in a
position where they no longer need
enhanced assistance.
Across our corporate and institutional
clients, we worked closely with those in
the most challenged sectors on their
long-term resilience and response to
disruption, and by helping them raise
essential finance and capital. For some,
the pandemic has ultimately led to
growth opportunities, either through
the acceleration of disruption already
taking place or the creation of new lines
of business.
Our ability to respond rapidly through
a period of acute disruption is reflective
of our long history of partnering with
our clients to address challenges and
pursue growth.
Developing new social
infrastructure
Macquarie advises, sponsors and
invests in social infrastructure, assisting
public and private entities to deliver
essential services including hospitals,
schools, housing and justice facilities.
Social infrastructure provides access
to quality, affordable social services
and offers investors long-term,
impactful opportunities in regulated
non-profit sectors.
Over the last financial year, Macquarie
teams continued to build expertise
across both debt and equity
investment, advancing projects that
included affordable housing, free
renewable energy for social housing
tenants, new community medical
facilities and specialist disability
accommodation. Macquarie teams
also invested in digital platforms that
improved access to essential services
such as education and healthcare
during the pandemic.
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...we expect to
increase investment
in important emerging
transition opportunities
including zero emissions
transport, hydrogen,
carbon sequestration,
nature-based solutions,
and climate resilient
infrastructure.
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Strengthening the resilience
of essential infrastructure
As the world’s largest infrastructure
manager with assets serving over
100 million people daily, we recognise
that each portfolio company faces
specific resilience risks. As stewards
of these companies, on behalf of our
investors and the communities they
serve, we work to ensure that they are
long-lasting and resilient.
In relation to climate risks, we are
adapting assets to improve their
resilience to temperature extremes,
changing weather patterns and to
increased incidence of fires and floods.
In our agriculture business, we have
adopted precision farming technology
to produce higher yields, cut emissions
and reduce environmental damage.
Where Macquarie Capital is building
new infrastructure, we are designing-in
climate resilience from the outset.
One trend over the past year has been
the acceleration of digitalisation. The
move to large-scale remote working
and learning, and greater reliance
on e-commerce, has exponentially
increased demand for faster, more
reliable and more secure digital
infrastructure. Capacity upgrades to
our digital infrastructure assets have
left them able to handle significant and
structural activity increases.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Delivering solutions to
reduce emissions
We are building on our leading position
as a global developer, investor,
financer, and manager of renewable
energy projects. In addition to
established technologies like wind
and solar, we expect to increase
investment in important emerging
transition opportunities including
zero emissions transport, hydrogen,
carbon sequestration and offsetting,
nature-based solutions, and climate
resilient infrastructure.
As countries make the transition to
net zero, we recognise that much of
the world will depend on oil and gas
to power economies and that until
new, commercially viable technologies
become available, these fuels will have
a continued role in the provision of
essential energy. We will continue to
support clients in these sectors, and
we are engaging with them to design
both finance and technology solutions
that will help them deliver a managed
transition to decarbonise and reduce the
emissions intensity of their activities.
Beyond the energy transition,
Macquarie teams are investing to
reduce emissions through zero
emissions transport, industrial
processes, buildings and agriculture.
Extending our global
commitment to address
climate change
Decarbonisation and climate resilience
have been placed at the centre of
countries’ economic recovery plans.
Some have committed to net zero
carbon emissions by 2050. This
requires public and private sectors to
work together. Macquarie supports this
and is well-placed to participate in the
opportunities that arise.
Grounded in our longstanding
expertise in infrastructure and
energy, we have carefully assessed
how Macquarie might make a more
meaningful contribution to achieving a
decarbonised world. We are committed
to reaching net zero operational
emissions by 2025 and aligning our
financing activity with the global goal of
net zero emissions by 2050. We provide
more detail on these commitments in
the ESG section of this annual report.
In our asset management business,
we have started work with portfolio
companies to consistently measure
greenhouse gas emissions and identify
emission reduction opportunities.
Where we have sufficient influence,
we are working with these businesses
to develop plans that will put them on
a pathway to reduce emissions in line
with a net zero economy by 2040.
Organisation: Humana People to People India
Addressing areas of unmet
need through philanthropy
Over many decades, the majority of the
Macquarie Group Foundation’s activities
have been driven by our staff, who are
best placed to identify areas of unmet
need in their local communities and
motivated to support the causes they
feel most passionate about. In addition
to financial support, staff devote
their time and expertise to partnering
with community organisations. The
Foundation amplifies the endeavours
of our staff through matched financial
support and grantmaking and
partnering with non-profits to build
capacity and capability.
Recognising in the earliest days
of the pandemic the imperative
to step up philanthropic support
across a range of areas of need, an
additional $A20 million was allocated
to the Macquarie Group Foundation
specifically to combat COVID-19. To
date, $A17.7 million in funding has been
allocated to organisations around the
world, balancing the need for urgent
direct relief with longer-term research
and investment, and supporting
existing community partners that had
to quickly respond to change and the
increased demand on their services.
In early FY2022, $A1 million was
committed to support COVID-19
relief in India.
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Financial Highlights
FY2021 net profit
$A3,015m
10% on prior year
FY2021 net operating income
FY2021 operating expenses
$A12,774m
4% on prior year
$A8,867m
in line with prior year
FY2021 earnings per share
FY2021 return on equity
$A8.43
7% on prior year
14.3%
from 14.5% in prior year
FY2021 dividends per share
FY2021 effective tax rate
Assets under management
$A4.70
(
40% franked)
9% on prior year
23.0%
from 21.0%
in prior year
$A563.5b
from $A598.9b
as at 31 March 2020
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
FY2021 international income(1)
EMEA
23%
Americas
34%
Asia
11%
Australia(2)
32%
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FY2021 net profit contribution(3) by activity
Annuity‑style activities
Markets‑facing activities
$A3,314m
4% on prior year
$A2,783m
39% on prior year
~54%
~46%
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Assets under management
$A563.5b
from $A598.9b
as at 31 March 2020
Macquarie Asset
Management
Banking and
Financial Services
Commodities and Global Markets
~34%
~13%
~7% ~35%
International income is net operating income excluding earnings on capital and other corporate items.
(1)
(2) Includes New Zealand.
(3) Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax.
Macquarie Capital
~11%
19
Operating and Financial Review
Our businesses
Macquarie is a diversified
financial group providing clients
with asset management and
finance, banking, advisory and
risk and capital solutions across
debt, equity and commodities.
Asset
management
Banking
Advisory
Capital
solutions
Further information is also available at
macquarie.com/company
For more details on the operational performance
of the Operating Groups, see slides 15 to 18 of the
presentation to investors and analysts available at
macquarie.com/fy21‑investor‑presentation
20
Macquarie Group Limited and its subsidiaries 2021 Annual Report
For internal reporting and risk management purposes, Macquarie is divided into four
Operating Groups, which are supported by four Central Service Groups. The Operating
Groups are split between annuity-style businesses and markets-facing businesses.
Operating Groups update
Cash Equities was transferred from Commodities and Global
Markets to Macquarie Capital on 1 June 2020. Comparatives
have been reclassified to reflect this reorganisation.
Central Service Groups
The Central Service Groups provide a range of functions
supporting Macquarie’s Operating Groups, ensuring they
have the appropriate workplace support and systems to
operate effectively and the necessary resources to meet
their regulatory, compliance, financial reporting, legal and
risk management requirements.
Risk Management Group (RMG)
An independent and centralised function responsible
for objective review and challenge, oversight, monitoring
and reporting in relation to Macquarie’s material risks.
RMG designs and oversees the implementation
of the risk management framework. The Head of
Internal Audit reports functionally to the Board Audit
Committee and operationally to the Head of RMG for
day-to-day management.
Legal and Governance (LGL)
Provides a full range of legal and corporate governance
services, including strategic legal and governance advice
and risk assessment on corporate transactions, treasury
and funding, insurance, regulatory enquiries and litigation.
Financial Management Group (FMG)
Provides financial, tax, treasury, corporate affairs and
advisory services to all areas of Macquarie.
Corporate Operations Group (COG)
Provides specialist support services through technology,
operations, human resources, workplace, strategy,
operational risk management, data and transformation,
resilience, global security and the Macquarie
Group Foundation.
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Operating and Financial Review
Our businesses continued
Annuity‑style businesses
Macquarie Asset Management
Banking and Financial Services
$A2,074m
5% on prior year
$A771m
in line with prior year
MAM is a leading specialist global asset manager, offering a
diverse range of products through two business divisions:
BFS serves the Australian market, and is organised into the
following three business divisions:
Macquarie Infrastructure and Real Assets (MIRA):
a leader in alternative asset management worldwide,
specialising in infrastructure and renewables, agriculture,
real estate, transportation finance and private credit via
public and private funds, co-investments, partnerships and
separately managed accounts.
Macquarie Investment Management (MIM): offering
securities investment management capabilities across a
number of asset classes including equities, fixed income
and multi-asset solutions.
FY2021 highlights
MAM AUM decreased 6% to $A562.2 billion as at
31 March 2021, due to impacts from foreign exchange and a
reduction in contractual insurance assets. This was partially
offset by MIM market movements and investments by
MIRA-managed funds.
During the period, MIRA raised $A21.8 billion in new equity,
for a diverse range of funds, products and solutions across
the platform. In April 2020, MIRA closed the sale of the
Macquarie European Rail business.
MIM entered into an agreement to acquire Waddell & Reed
Financial, Inc., and also made strategic divestitures of MIM
Korea and its minority stake in Jackson Square Partners.
Medium‑term
MAM is a leading specialist global asset manager,
well-positioned to respond to current market conditions
and grow assets under management through its
diversified product offering, track record and experienced
investment teams.
Personal Banking: provides a diverse range of retail banking
products to clients with home loans, credit cards, transaction
and savings accounts and vehicle finance.
Wealth Management: provides clients with a wide range of
wrap platform and cash management services, investment
and superannuation products, financial advice, private banking
and stockbroking.
Business Banking: provides a full range of deposit, lending and
payment solutions, vehicle finance as well as tailored services
to business clients, ranging from sole practitioners to corporate
professional firms.
FY2021 highlights
For the full-year ended 31 March 2021, total BFS deposits
increased 26% to $A80.7 billion, the loan and lease portfolio
increased 18% to $A89.1 billion and funds on platform increased
28% to $A101.4 billion.
The home loan portfolio increased 29% to $A67.0 billion
driven by strong demand in lower loan-to-value ratio and
owner-occupier lending tiers, while the Business Banking loan
portfolio increased 13% to $A10.2 billion and Business Banking
deposit volumes increased 23%. During the year, BFS expanded
the Macquarie Wrap managed accounts offering with funds
under administration of $A5.4 billion, up from $A3.0 billion
in March 2020. BFS continued the implementation of a
cloud-based portfolio management platform as part of the
wealth platform transformation.
Medium‑term
BFS focused on growth opportunities through intermediary
and direct retail client distribution, platforms and client service;
opportunities to increase financial services engagement with
existing business banking clients and extend into adjacent
segments; and modernising technology to improve client
experience and support growth.
22
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Markets‑facing businesses
Commodities and Global Markets
Macquarie Capital
$A2,601m
50% on prior year
$A651m
15% on prior year
CGM provides clients with an integrated, end-to-end offering
across global markets including equities, fixed income, foreign
exchange, commodities and technology, media and telecoms.
The platform covers over 30 market segments with more than
200 products and has evolved over more than four decades
to provide clients with access to markets, financing, financial
hedging, physical execution, and research and market analysis.
CGM comprises seven divisions: Commodity Markets and
Finance, Credit Markets, Equity Derivatives and Trading, Fixed
Income and Currencies, Futures, Specialised and Asset Finance
and Central (CGM-wide services).
Macquarie Capital has global capability in advisory and
capital raising services, investing alongside partners and
clients across the capital structure, providing clients with
specialist expertise, advice and flexible capital solutions
across a range of sectors.
It also has global capability in development and investment
in infrastructure and energy projects and companies and, in
relation to renewable energy projects, the supply of green
energy solutions to corporate clients.
Macquarie Capital’s Equities brokerage business provides
clients with access to equity research, sales, execution
capabilities and corporate access.
FY2021 highlights
CGM’s net profit contribution was strong across the platform,
up 50% on the prior year. The result was reflective of increased
contribution from Resources, North American Gas and Power,
EMEA Gas and Power and Agriculture due to client hedging
activity driven by increased volatility and commodity price
movements. The FY2021 result saw increased opportunities in
inventory management and trading, primarily driven by market
dislocations and increased volatility in North American Gas and
Power, Oil and Precious Metals in addition to gains associated
with the timing of income recognition on Oil and Gas storage
contracts and transport agreements. The result also reflected
improved client and trading activity in foreign exchange, interest
rate and credit products; as well as increased net operating
lease income driven by higher secondary income from the
asset financing portfolio. The result was partially offset by
reduced fee and commission income due to decreased demand
for commodity risk premia products and a reduction in client
brokerage activity.
CGM continues to be recognised across the industries it
operates in, with a number of awards earned during the period
including Environmental Products Bank of the Year, Oil and
Products House of the Year and Derivatives House of the Year
in the 2020 Energy Risk Awards. CGM also maintained its ranking
by Platts as No. 2 physical gas marketer in North America.
Medium‑term
CGM remains focused on: opportunities to grow the
commodities business, both organically and through acquisition;
the development of institutional and corporate coverage
for specialised credit, rates and foreign exchange products;
providing tailored financing solutions globally across a variety of
industries and asset classes; continued investment in the asset
finance portfolio and growing the client base across all regions.
FY2021 highlights
Macquarie Capital was ranked No.1 Global Renewables
Financial Adviser in 2020 and No.1 in ANZ for both M&A
and IPOs for the past decade.
Macquarie Capital acted as exclusive financial adviser
to Strata Fund Solutions on its sale to Alter Domus
and Joint Bookrunner on the acquisition financing.
Principal Finance co-invested with FTV Capital in Strata
and subsequently realised its position in a successful
sale process.
Macquarie Capital continued to focus on green
energy with over 250 projects under development or
construction as at 31 March 2021. Green Investment
Group launched a new solar energy company, Cero
Generation, to take forward an 8 GW portfolio of over
150 projects across Europe as an OSS. In Australia,
Macquarie Capital acted as the sole financial adviser
to Snowy Hydro Limited on the over $A5 billion
Snowy 2.0 expansion and associated raising of
$A3.5 billion of corporate senior debt facilities.
Medium‑term
Macquarie Capital is positioned to benefit from further
recovery in transaction activity. It continues to tailor
the business offering to current opportunities and
market conditions including providing flexible capital
solutions across sectors and regions. It also continues
to pursue opportunities for project development and
balance sheet investment by the group and in support of
partners and clients subject to market conditions.
23
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Operating and Financial Review
Our strategy
Our business strategy
Consistent with the principles of What We Stand For, Macquarie’s
business strategy is focused on the medium‑term with the following
key aspects:
Risk management approach
Adopting a conservative approach to risk management underpinned by a sound
risk culture. Macquarie’s robust risk management framework and risk culture are
embedded across all Operating and Central Service Groups.
Strong balance sheet
Maintaining a strong and conservative balance sheet.
This is consistent with Macquarie’s longstanding policy of holding a level of capital
that supports its business and managing its capital base ahead of ordinary business
requirements. Macquarie remains well funded, with diversified funding sources,
including deposits.
We continue to pursue the strategy of diversifying funding sources by growing our
deposit base and accessing different funding markets.
Business mix
Conducting a mix of annuity-style and markets-facing businesses that deliver solid
returns in a range of market conditions.
Macquarie has progressively developed its annuity-style businesses, providing steady
returns to the business and our shareholders, and stability to clients.
Diversification
Operating a diversified set of businesses across different locations and service
offerings: asset management and finance, banking, advisory and risk and capital
solutions across debt, equity and commodities.
Macquarie offers a range of services to government, institutional, corporate and retail
clients. This diversity in services and clients mitigates concentration risk and provides
resilience to Macquarie.
Proven expertise
Utilising proven deep expertise has allowed Macquarie to establish leading market
positions as a global specialist in sectors including renewables, infrastructure,
resources and commodities, energy, financial institutions and real estate.
Adjacencies
Expanding progressively by pursuing adjacencies through organic opportunities and
selective acquisitions.
These include products and geographies adjacent to our established areas of
expertise, supporting sustainable evolutionary growth.
Pursuit of growth opportunities
Targeting continued evolution and growth through innovation. We start with
knowledge and skill, and we encourage ingenuity and entrepreneurial spirit coupled
with accountability.
Ideas for new businesses are typically generated in the Operating Groups. Additionally,
there are no specific businesses, markets or regions in which our strategy dictates
that we operate. This means we retain operational flexibility and can adapt the
portfolio mix to changing market conditions within the boundaries of the Risk
Appetite Statement (RAS) approved by the Board.
Our
purpose
Empowering
people to innovate
and invest for a
better future.
What we stand for
Opportunity
Accountability
Integrity
The way we fulfil our purpose is defined
by these three long-held principles that
determine how we conduct business
and guide what we do every day. Our
purpose and principles and what we
expect of our staff are set out in our
Code of Conduct.
The balance between opportunity
and accountability, while operating
with integrity within a strong risk
management framework, is a
feature of Macquarie’s success and
a key factor in our long record of
unbroken profitability.
The Code of Conduct is available at
macquarie.com/what‑we‑stand‑for
24
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Risk management
Macroeconomic factors
Macquarie recognises that a sound risk culture is
a fundamental requirement of an effective risk
management framework.
The key macroeconomic risks to Macquarie’s
short and medium term financial outlook noted
on page 32 are:
Risk culture
Market conditions
Macquarie’s risk culture is well established, grounded in the
long-held principles of What We Stand For: Opportunity,
Accountability and Integrity.
Macquarie’s approach to maintaining an appropriate risk
culture is based on the following three components:
• setting behavioural expectations: Senior Management,
with oversight from the Board, set behavioural
expectations. The way we fulfil Macquarie’s purpose
is defined by our principles of What We Stand For:
Opportunity, Accountability and Integrity. Staff are made
aware that these principles must form the basis of all
behaviours and actions. These behavioural expectations
are specified in the Board approved Code of Conduct,
which is actively promoted by Management and
cascaded through the organisation
• leading and executing: Management implements
behavioural expectations through leadership actions and
communication, organisational governance, incentives
and consequence management and organisational and
individual capability
• monitoring, measuring and reporting: Macquarie
monitors and measures its risk culture to gauge
effectiveness while promoting continuous improvement.
Risk management framework
Macquarie’s risk management framework is embedded
across all operations. The framework is the totality of
systems, structures, policies, processes and people
within Macquarie that identify, measure, monitor, report
and control or mitigate internal or external sources of
material risk.
Macquarie’s approach to risk management is based
on stable and robust core risk management principles.
These are:
• ownership of risk at the business level
• understanding worst‑case outcomes
• requirement for an independent sign‑off by RMG.
The general condition of markets, driven by both
macroeconomic and geopolitical factors may have a bearing
on Macquarie’s businesses. Changing market conditions
influence the volume and timing of client and principal
transactions across businesses and the value of various equity,
credit and market risk exposures held by Macquarie on its
balance sheet.
The value of the Australian dollar
A significant proportion of Macquarie’s net income is
denominated in foreign currency. Therefore, net income will
be lower in Australian dollar terms if the Australian dollar
appreciates against other foreign currencies, and net income
will be higher in Australia dollar terms if the Australian dollar
depreciates against other foreign currencies.
Potential regulatory changes
Macquarie is affected by changes in regulation. Regulatory
change continues to increase at both the global and Australian
levels and has the potential to affect the regulatory capital
and funding requirements and profitability of Macquarie’s
businesses.
Funding and liquidity
Macquarie uses deposits and debt markets, among other
funding sources, to fund its assets. Macquarie is therefore
exposed to the risk of an increase in the cost of funding, or of
reduced access to funding sources.
In addition, there are specific material risks that relate to the
nature of Macquarie’s operations. These include aggregate,
asset, conduct, credit, environmental and social (including
climate change), equity, financial crime, legal, liquidity, market,
operational (including cyber and information security), regulatory
and compliance, reputational, strategic, tax, and work health
and safety risks. These risks, including those mentioned above,
are monitored, mitigated and managed under Macquarie’s risk
management framework.
Refer to Risk Management in section 2 for details
on Macquarie’s risk management framework, risk
culture and conduct risk management
Further details on the management of these risks
are available at macquarie.com/risk‑management
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Review of group performance and financial position
Group performance
Overview
Profit attributable to
ordinary equity holders
of $A3,015 million for the
year ended 31 March 2021
increased 10% from
$A2,731 million in the
prior year.
Net operating income
Operating expenses
Income tax expense
Loss attributable to non-controlling interests
Profit attributable to ordinary equity holders
FULL YEAR TO
31 Mar 21
31 Mar 20 Movement
$Am
12,774
(8,867)
(899)
7
3,015
$Am
12,325
(8,871)
(728)
5
2,731
%
4
(<1)
23
40
10
For more details on the financial performance of the Operating Groups, see
section 3 Segment Analysis of the Management Discussion and Analysis available
at macquarie.com/fy21‑mda
26
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Annuity‑style businesses
Markets‑facing businesses
Macquarie Asset Management (MAM)
Macquarie Capital(1)
$A2,074m
5% on prior year
• Decreased net operating lease income driven by the sale of
the Macquarie AirFinance business to a joint venture in the
prior year and the sale of Macquarie European Rail in the
current year.
• Decreased share of net profits from associates and joint
ventures predominantly due to an equity accounted
loss from Macquarie AirFinance as well as lower net
profits from the sale of underlying assets within equity
accounted investments.
• Decreased performance fees following a strong prior year.
• Decreased other fee and commission income, largely due
to lower income from private capital markets, True Index
products and transaction fees.
Partially offset by:
• increased net income on equity and debt investments driven
by the sale of Macquarie European Rail and decreased credit
and other impairment charges, driven by a partial reversal of
the impairment previously recognised on MIRA’s investment
in Macquarie Infrastructure Corporation (MIC).
$A651m
15% on prior year
• Lower net income on equity, debt and other investments due
to fewer material asset realisations compared to prior year.
• Lower fee and commission income due to lower mergers and
acquisitions fee income and debt capital markets fee income
partially offset by higher equity capital markets fee income.
Partially offset by:
• lower share of net losses from associates and joint
ventures due to changes in the composition and improved
performance of investments in the portfolio
• higher net interest and trading income due to lower funding
costs, higher interest income resulting from the growth in
the debt portfolio and lower mark-to-market losses
compared to prior year
• lower operating expenses driven by the structural change
in the prior year to refocus the Equities division on the
Asia-Pacific region, active cost management throughout
FY2021 across Macquarie Capital resulting in lower headcount
and lower employment expenses, and lower travel and
entertainment expenses due to COVID-19.
Banking and Financial Services (BFS)
Commodities and Global Markets(2) (CGM)
$A771m
In line with prior year
• Higher net interest and trading income driven by volume
growth in BFS deposits and the loan portfolio, partially offset
by margin compression on deposits and lower vehicle finance
portfolio volumes.
• Decreased credit impairment charges driven by improvement
in current and expected macroeconomic conditions
compared to the prior year as a result of COVID-19.
Offset by:
• higher employment expenses including increased headcount
to support volume growth and clients impacted by COVID-19,
as well as increased costs associated with investment
in technology to support business growth and to meet
regulatory requirements.
$A2,601m
50% on prior year
• Strong results across the commodities risk management
platform including increased contribution from Resources,
North American Gas and Power, EMEA Gas and Power and
Agriculture due to client hedging activity driven by increased
volatility and commodity price movements.
• Increased opportunities in inventory management and
trading primarily driven by market dislocations and increased
volatility in North American Gas and Power, Oil and Precious
Metals in addition to gains associated with the timing of
income recognition on Oil and Gas storage contracts and
transport agreements.
• Improved client and trading activity in foreign exchange,
interest rate and credit products.
• Increased net operating lease income driven by higher
secondary income from the asset financing portfolio.
Partially offset by:
• reduced fee and commission income due to decreased
demand for commodity risk premia products and a reduction
in client brokerage activity following a strong prior year.
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(1) Certain activities of the Equities business are undertaken from within the Banking Group.
(2) The Non-Banking Group includes certain activities of CGM.
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Review of group performance and financial position continued
Net operating income
Net operating income of $A12,774 million for the year ended 31 March 2021 increased 4% from $A12,325 million in the prior year.
Higher Net interest and trading income and lower Credit and other impairment charges were partially offset by lower Fee and
commission income and Net operating lease income.
Net interest and trading income
Fee and commission income
FULL YEAR TO
31 Mar 21
$Am
5,677
31 Mar 20
$Am
4,720
20%
on prior year
FULL YEAR TO
31 Mar 21
$Am
5,176
31 Mar 20
$Am
5,837
11%
on prior year
• Lower performance fees on a strong prior year in MAM.
• Lower mergers and acquisitions fee income in Macquarie Capital.
• Reduced demand for commodity risk premia products and
reduced client brokerage activity in CGM.
• Base fees broadly in line in MAM.
• Increased opportunities in inventory management and trading
driven by market dislocations and increased volatility, as
well as timing of income recognition on Oil and Gas storage
contracts and transport agreements in CGM.
• Growth in average deposits and loan portfolio volumes in BFS.
• Lower interest expense in MAM driven by the sale of the
Macquarie AirFinance business to a joint venture in the prior
year and a decrease in receivables.
Partially offset by:
• margin compression on deposits and lower vehicle finance
portfolio volumes in BFS
• lower income in Corporate primarily due to greater accounting
volatility from changes in the fair value of economic hedges
in the prior year.
Net operating lease income
Share of net (losses)/profits from associates and joint ventures
FULL YEAR TO
31 Mar 21
$Am
466
31 Mar 20
$Am
745
37%
on prior year
FULL YEAR TO
31 Mar 21
$Am
(3)
31 Mar 20
$Am
95
significantly
on prior year
• Lower income in MAM driven by the sale of the Macquarie
AirFinance business to a joint venture in the prior year and the
sale of Macquarie European Rail in the current year.
• Losses from Macquarie AirFinance, driven by the impact
of COVID-19 on aircraft leasing income and related aircraft
impairments in MAM.
Partially offset by:
• higher secondary income from the asset financing
portfolio in CGM.
Partially offset by:
• lower share of net losses in Macquarie Capital due to changes in
the composition and improved performance of investments in
the portfolio.
Credit and other impairment charges
Other operating income and charges
FULL YEAR TO
31 Mar 21
$Am
(524)
31 Mar 20
$Am
(1,040)
50%
on prior year
FULL YEAR TO
31 Mar 21
$Am
1,982
31 Mar 20
$Am
1,968
1%
on prior year
• Lower credit and other impairment charges recognised across
the Consolidated Entity compared to the prior year reflecting
improvement in the current and expected macroeconomic
conditions.
• Gain on sale of Macquarie European Rail in MAM.
Partially offset by:
• fewer material asset realisations compared to the prior year and
increased activity in relation to the development of green energy
projects in Macquarie Capital.
28
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Operating expenses
Total operating expenses of $A8,867 million for the year ended 31 March 2021 was broadly in line with $A8,871 million in the prior
year with decreases across Brokerage, commission and trading-related fee expenses and Other operating expenses, largely
offset by increases in Employment expenses and Non-salary technology expenses.
Employment expenses
Brokerage, commission and trading‑related fee expenses
FULL YEAR TO
31 Mar 21
$Am
5,517
31 Mar 20
$Am
5,323
4%
on prior year
FULL YEAR TO
31 Mar 21
$Am
879
31 Mar 20
$Am
964
9%
on prior year
• Lower Wealth management expenses in BFS.
• Lower equities activity in EMEA and Asia in CGM.
• Increase in performance-related profit share expense
mainly as a result of the improved performance of the
Consolidated Entity.
• Higher leave provisions due to less holiday entitlements
being taken by staff across the Consolidated Entity driven
by COVID-19.
• Higher average headcount in Central Service Groups to
support business growth, technology projects and ongoing
regulatory compliance.
Partially offset by:
• favourable foreign exchange movements
• lower average headcount in Macquarie Capital including the
structural change in the prior year to refocus Equities on the
Asia-Pacific region.
Non‑salary technology expenses
Other operating expenses and Occupancy
FULL YEAR TO
31 Mar 21
$Am
781
31 Mar 20
$Am
749
4%
on prior year
FULL YEAR TO
31 Mar 21
$Am
1,690
31 Mar 20
$Am
1,835
8%
on prior year
• Higher cloud consumption, software license and maintenance
costs as well as IT application costs to support business activity.
Partially offset by:
• favourable foreign exchange movements.
• Reduced travel and entertainment expenses across the
Consolidated Entity driven by COVID-19.
• Favourable foreign exchange movements.
Partially offset by:
• the recognition of certain transaction and other charges
in Corporate.
Income tax expense
Income tax expense of $A899 million for the year ended 31 March 2021 increased 23% from $A728 million in the prior year.
The effective tax rate for the year ended 31 March 2021 was 23.0%, up from 21.0% in the prior year.
The higher effective tax rate was mainly driven by the geographic composition and nature of earnings.
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Operating and Financial Review
Review of group performance and financial position continued
Financial position
Balance sheet
The Consolidated Entity’s Statement of financial position was impacted during the year ended 31 March 2021 by changes
resulting from business activities, Group Treasury management initiatives, developments with respect to COVID-19 and
macroeconomic factors including the appreciation of the Australian dollar against major currencies.
Total assets
Total liabilities
AS AT
31 Mar 21
$Am
245,653
31 Mar 20
$Am
255,802
4%
on 31 March 20
AS AT
31 Mar 21
$Am
223,302
31 Mar 20
$Am
234,018
5%
on 31 March 20
In addition to the appreciation of the Australian dollar against
major currencies which contributed to the decrease in total
assets, the principal drivers for the decrease in the Consolidated
Entity’s total assets were as follows:
• derivative assets of $A20.6 billion as at 31 March 2021
decreased 55% from $A45.6 billion as at 31 March 2020
primarily due to a decrease in client trade volumes and
mark-to-market movements in energy markets, commodities,
interest rate and foreign exchange products in CGM
• interests in associates and joint ventures of $A4.2 billion
as at 31 March 2021 decreased 49% from $A8.3 billion as
at 31 March 2020 primarily due to the disposal of certain
associates during the year
• margin money and settlement assets of $A14.4 billion as
at 31 March 2021 decreased 12% from $A16.4 billion as at
31 March 2020 primarily due to lower trade volumes
resulting in a decrease in margin placed with financial
institutions by CGM
• held for sale assets of $A0.3 billion as at 31 March 2021
decreased 81% from $A1.6 billion as at 31 March 2020 primarily
due to the subsequent sale of certain assets during the
current year
• cash collateral on securities borrowed and reverse repurchase
agreements of $A36.7 billion as at 31 March 2021 decreased
3% from $A37.7 billion as at 31 March 2020 primarily due to
a decrease in reverse repurchase agreements in CGM
partially offset by an increase in Group Treasury reverse
repurchase agreements following lower Operating Group
funding requirements.
These decreases were partially offset by:
• loan assets of $A105.0 billion as at 31 March 2021 increased
12% from $A94.1 billion as at 31 March 2020 primarily due
to growth in the home loan portfolio partially offset by a
decrease in the vehicle finance portfolio in BFS and a decrease
in the corporate and commercial lending portfolio in CGM
• cash and bank balances of $A18.4 billion as at 31 March 2021
increased 90% from $A9.7 billion as at 31 March 2020 primarily
due to an increase in surplus cash placed on overnight deposit
with the Reserve Bank of Australia (RBA)
• trading assets of $A21.7 billion as at 31 March 2021 increased
28% from $A16.9 billion as at 31 March 2020 primarily due to
an increase in precious metal and oil inventories in CGM.
In addition to the appreciation of the Australian dollar against major
currencies which contributed to the decrease in total liabilities, the
principal drivers for the decrease in the Consolidated Entity’s total
liabilities were as follows:
• derivative liabilities of $A17.6 billion as at 31 March 2021 decreased
54% from $A38.4 billion as at 31 March 2020 primarily due to a
decrease in client trade volumes and mark-to-market movements
in energy markets, commodities, interest rate and foreign exchange
products in CGM
• borrowings of $A9.8 billion as at 31 March 2021 decreased 43%
from $A17.1 billion as at 31 March 2020 primarily due to the net
repayment of debt facilities and disposal of borrowings, together
with related assets, to an associate
• debt issued of $A61.0 billion as at 31 March 2021 decreased 6%
from $A64.6 billion as at 31 March 2020 primarily due to the
repayment of bondholder notes issued by securitisation vehicles
in BFS partially offset by the issuance of short-term debt in
Group Treasury.
These decreases were partially offset by:
• deposits of $A84.2 billion as at 31 March 2021 increased 25%
from $A67.3 billion as at 31 March 2020 primarily due to an
increase in retail and business banking deposits in BFS
• cash collateral on securities lent and repurchase agreements
of $A4.5 billion as at 31 March 2021 increased significantly from
$A2.3 billion as at 31 March 2020 primarily due to the draw down
of the Term Funding Facility from the RBA by Group Treasury and
increased stock lending transactions in CGM
• loan capital of $A9.4 billion as at 31 March 2021 increased 27% from
$A7.4 billion as at 31 March 2020 primarily due to the net issuance
of capital instruments and subordinated debt during the year.
Total equity
AS AT
31 Mar 21
$Am
22,351
31 Mar 20
$Am
21,784
3%
on 31 March 20
The increase in the Consolidated Entity’s equity was predominantly
attributable to the increase in retained earnings, net of the amortisation of
share-based payment arrangements during the year, of $A2.3 billion.
This was partially offset by a decrease in the foreign currency
translation and net investment hedge reserve of $A1.7 billion following
the appreciation of the Australian dollar against major currencies, and
redemption of the Macquarie Income Securities of $A0.4 billion.
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Funding
Macquarie’s liquidity risk management framework is designed to ensure that it is able to meet its funding
requirements as they fall due under a range of market conditions.
Macquarie has a funding base that is stable with minimal reliance on short-term wholesale funding
markets. As at 31 March 2021, Macquarie’s term assets were covered by term funding maturing beyond
one year, stable deposits, hybrids and equity.
The weighted average term to maturity of term funding maturing beyond one year(1) was 4.8 years as at
31 March 2021.
4.8
years
The weighted
average term to
maturity of term
funding maturing
beyond one year
at 31 March 2021
Term funding profile
Detail of drawn funding maturing beyond one year
Diversity of funding sources
Wholesale
issued paper
7%
Customer
deposits
48%
Other loans 1%
Structured notes 1%
Secured funding
2%
Total
$Ab
11.3
3.9
3.3
1.7
1.4
5.1
3.9
0.7
–
0.7
10.4
21.6
$A billion
40
35
30
25
20
15
10
5
0
Equity and hybrids
15%
Subordinated
debt
3%
Bonds
19%
Net trade
creditors
1%
1–2 yrs
2–3 yrs
3–4 yrs
4–5 yrs
5 yrs+
Debt
Subordinated debt
Equity and hybrids
Syndicated loan
facilities
3%
Macquarie has a liability driven approach to balance sheet management, where funding is raised prior
to assets being taken on to the balance sheet. Since 1 April 2020, Macquarie has continued to raise term
wholesale funding across various products and currencies.
Details of term funding raised between 1 April 2020 and 31 March 2021:
Bank Group
$Ab
Non-Bank Group
$Ab
Issued paper
– Senior and subordinated
Loan facilities
– MGL loan facilities
Secured funding
– Term securitisation and other secured finance
– RBA Term Funding Facility(2)
– Hybrid instruments
Hybrids
Total(3)
6.2
–
2.6
1.7
0.7
11.2
Macquarie has continued to develop its major funding markets and products during the year ended
31 March 2021.
Including drawn RBA Term Funding Facility (TFF), excluding equity which is a permanent source of funding, and securitisations.
(1)
(2) Initial Allowance drawn as at 31 March 2021. MBL has $A1.3 billion of undrawn TFF Supplementary Allowance and had access to $A4.6 billion of TFF
Additional Allowance as at 31 March 2021.
(3) Issuances cover a range of tenors, currencies and product types and are Australian dollar equivalent based on FX rates at the time of issuance and
include undrawn facilities (does not include undrawn accessible TFF Allowances).
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Operating and Financial Review
Review of group performance and financial position continued
$A8.8b
Group capital surplus
Capital
As an APRA authorised and regulated NOHC, Macquarie’s capital adequacy framework requires it to
maintain minimum regulatory capital requirements calculated as the sum of:
• the Bank Group’s minimum Tier 1 capital requirement, based on a percentage of risk-weighted assets
(RWAs) plus Tier 1 deductions using prevailing APRA ADI Prudential Standards; and
• the Non-Bank Group’s capital requirement, calculated using Macquarie’s Board-approved Economic
Capital Adequacy Model (ECAM).
Transactions internal to Macquarie are eliminated.
Macquarie remains well capitalised with APRA Basel III Group capital of $A26.3 billion at 31 March 2021,
with a Group surplus of $A8.8 billion ($A11.6 billion on a Harmonised(1) Basel III basis).
Under Basel III rules, APRA requires ADIs to have a minimum ratio of Tier 1 capital to RWAs of 8.5%
including the 2.5% capital conservation buffer (CCB), with at least 7% in the form of Common Equity Tier 1
capital, per APRA ADI Prudential Standard 110.(2)
In addition, APRA may impose ADI specific minimum capital ratios which may be higher than these levels.
The minimum Basel Committee on Banking Supervision (BCBS) Basel III leverage ratio requirement of 3%
was effective from 1 January 2018.(3)
On 1 April 2021, APRA announced actions required regarding MBL’s risk management practices and ability
to calculate and report key prudential ratios. APRA increased MBL’s operational risk capital requirement
and made adjustments to requirements for certain liquidity prudential ratios, effective from 1 April 2021.
The actions relate to specific intra-group funding arrangements as well as breaches of APRA’s reporting
standards on liquidity between 2018 and 2020. APRA noted that the breaches are historical and do not
impact the current overall soundness of Macquarie Group’s capital and liquidity positions.
While specific historical matters leading to these actions have been addressed, Macquarie acknowledges
that continued work is required on its risk governance and operating platform and has programs in place
to strengthen capital and liquidity reporting and its risk management framework. Macquarie will work
closely with APRA on these programs through a period of intensified supervision.
As at 31 March 2021, the Bank Group had the following capital adequacy ratios:
Bank Group Level 2 Basel III ratios as at 31 March 2021
Harmonised Basel III
APRA Basel III
Common Equity Tier 1 Capital Ratio
Tier 1 Capital Ratio
Leverage Ratio
16.2%
18.1%
6.3%
12.6%
14.3%
5.5%
For further information relating to the capital adequacy of Macquarie, refer to section 6.0 Capital
of the Management Discussion and Analysis at macquarie.com/fy21‑mda
Outlook
We continue to maintain a cautious stance, with a conservative approach to capital,
funding and liquidity that positions us well to respond to the current environment.
The range of factors that may influence our short-term outlook include:
• the duration of COVID-19, speed of the global economic recovery and extent of
government support for economies
• market conditions including significant volatility events and the impact of
geopolitical events
• potential tax or regulatory changes and tax uncertainties
• completion of period-end reviews and the completion rate of transactions
• the geographic composition of income and the impact of foreign exchange.
(1) Basel III applies only to the Bank Group and not the Non-Bank Group. ‘Harmonised’ Basel III estimates are calculated in accordance with the BCBS
Basel III framework.
(2) Based on materiality, the countercyclical capital buffer (CCyB) of ~1bps has not been included. The individual CCyB varies by jurisdiction and the Bank
Group’s CCyB is calculated as a weighted average based on exposures in different jurisdictions.
(3) APRA has released draft prudential standards on its implementation of a minimum requirement for the leverage ratio of 3.5% expected to be effective
from January 2023.
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Governance
Storegga, Shell St Fergus, United Kingdom
CGM has announced further investment in
Storegga, a United Kingdom carbon reduction
and removal company. The investment will
help fund Storegga’s Acorn Project and
plans for a Direct Air Capture facility.
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02
Corporate Governance
Macquarie’s key governance practices guide our decision-making to meet stakeholder
expectations of sound corporate governance, acknowledging Macquarie’s specific and
broader responsibilities to its shareholders, funders, clients, staff and the communities
in which it operates.
MGL’s corporate governance practices have been consistent with the 4th edition of the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations throughout the year.
Macquarie is a global financial services group operating in 32 markets in asset management, retail and business banking, wealth
management, leasing and asset financing, market access, commodity trading, renewables development, specialist advice,
access to capital and principal investment.
Macquarie’s revised purpose statement ‘Empowering people to innovate and invest for a better future’ explains why we exist
We believe that by empowering people we will achieve our shared potential.
The way we fulfil our purpose is defined by our principles of Opportunity, Accountability and Integrity. These principles guide
Board, management and staff conduct and it is expected that they all meet these standards and deal honestly and fairly with
our clients, counterparties and regulators. There are appropriate consequences for anyone who fails to meet our standards.
The balance between opportunity and accountability, while operating with integrity within a strong risk management
framework, is a feature of Macquarie’s success and a key factor in our long record of unbroken profitability. Our corporate
governance practices reflect this balance.
Identify and realise
opportunity for clients,
community, shareholders
and our people
Promote the long-term
profitability of Macquarie
while prudently
managing risk
Drive superior and
sustainable shareholder
value over the long term
Meet stakeholder
expectations of sound
corporate governance
What We Stand For: Opportunity, Accountability and Integrity
Prudently managing risk
Align staff and shareholders’ interests
Responsibility to clients, funders, communities
The full Corporate Governance Statement (Statement) has been lodged with ASX and is available on our website at
macquarie.com/corporate‑governance. This summary should be read with the Statement.
36
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Professional Conduct
Macquarie’s culture, as represented by our long-held
principles, may be summarised as follows:
Board oversight
The Board sets the ‘tone at the top’ in a highly visible manner.
Board members have extensive contact with staff at all levels
within the organisation and across regions.
There is a culture of open and frank discussion at the Board.
Actions taken by the Board seek to promote long-term
sustainability and prudent management of risk consistent
with What We Stand For.
In FY2021 there were 43 formal Board and Board Committee
meetings. At these meetings a total of approximately
620 items of business were presented by over 500 presenters
who were not members of the Board and Macquarie’s
Executive Committees. Between formal meetings
management provided the Board with material business and
other updates as well as information in response to requests
from Board members.
Workshops scheduled during FY2021 included presentations
on cultivating culture at Macquarie, human centred design
and Macquarie’s purpose, global regulatory reporting,
hydrogen as a source of renewable energy, recovery and
resolution planning, stress testing, market risk, regulatory
change, management of non-financial risk and cybersecurity.
Non-executive Board members also met regularly without
members of management and held private meetings with
each of the external auditor, Head of Internal Audit and Chief
Risk Officer (CRO) to assist with their oversight role.
Opportunity
Accountability
From March 2020, the Board transitioned to enabling
virtual attendance at all Board and Board Committee
meetings, workshops and meetings with management,
in response to COVID-19 restrictions.
Integrity
Board members believe that informal conversations with
staff are important in assessing the culture within Macquarie
and seeing Macquarie’s purpose at work. Board members
generally attend various staff functions in Australia and
conduct two overseas trips to Macquarie offices each year.
Due to international travel restrictions, the Board harnessed
the use of technology by holding virtual visits with the US,
EMEA and Asia offices. These visits helped to emulate the
in-person experience for the Board with presentations
from regional staff covering regional, group and strategy
updates, people and culture and Macquarie’s purpose in
practice, and presentations from external speakers. During
these virtual visits the Board engaged with approximately
120 staff presenters at all levels of seniority. Each visit
brought together staff from various locations within the
regions, increasing and enhancing the Board’s opportunity for
engagement with staff.
We are entrepreneurial. Our people
come from diverse backgrounds and are
empowered to work together to pursue
innovative ideas, to solve problems and
challenge conventional thinking. We work
hard and with enthusiasm and everyone
has the opportunity to achieve to their
full potential. We have a learning mindset,
and continually evolve our expertise and
recognise and reward performance.
We take pride and ownership of the
long‑term outcomes we deliver for
our clients and shareholders, our
communities and each other. We
manage risk to ensure these outcomes
are sustainable and invest our time and
capital to contribute to a better future.
We take ownership of the performance
of our endeavours and seek to quickly
identify and respond to emerging issues
and trends.
We operate with care and
professionalism. We work collaboratively
to amplify our impact and consider the
effect of our decisions on others. We
have the courage, and are encouraged,
to speak up with our ideas, when we
make a mistake or see something that
doesn’t seem right. We respect the law,
community expectations, our regulators,
shareholders, clients and customers and
each other.
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The Board oversees compliance with key policies that are
intended to instil a culture of acting lawfully, ethically and
responsibly. An overview of the key policies that apply to
our staff, such as the Whistleblower Policy and Anti-bribery
and Corruption Policy, is provided in Macquarie’s Code of
Conduct. Material incidents and breaches relating to those
policies and the Code of Conduct are reported to the Board
through the relevant Board Committee.
37
Corporate Governance
Continued
The following actions taken by the Board as part of its oversight role also support the Board in forming a view on culture
at Macquarie.
Board oversight
• Commitment to achieving the highest standards of professional conduct across all Macquarie operations.
• Regularly reinforce company-wide expectations and enhance Board reporting.
• Diligently take action as part of its responsibility to shareholders, funders, clients, staff, communities and the environment
in which Macquarie operates.
• Review and monitor operations and challenge management.
Conduct and Culture
• Set high behavioural standards and act in accordance with these standards.
• Take a dynamic approach to oversight of risk culture and conduct risk management in response to business outcomes
and expectations of communities and regulators.
• Monitor the actions management take to embed behavioural standards, including a sound risk culture, in operations:
– staff training
– direct communications to staff
– risk surveillance activity.
Business strategy
Financial and non‑financial
risk management
Pay for performance
Assess ability of strategy to adapt
to markets and deliver sound client
and community outcomes within
Board approved risk appetite and
related limits.
Approve Macquarie’s Risk Management
Strategy and Risk Appetite Statement,
monitor material risks faced by
Macquarie and review how they
are managed.
Approve remuneration policies
that align the interests of staff and
shareholders to deliver sustained
results for our customers, clients
and community.
Review budget and funding and capital
management strategy to deliver on
business strategy.
Monitor Macquarie’s risk
management framework, including
its compliance framework.
Remuneration outcomes reflect an
assessment of a range of factors
including risk management, compliance
and behavioural measures to promote
good conduct and commitment to
the Code of Conduct and What We
Stand For.
38
FY2021 Governance activities
During FY2021, the Board’s governance activities included:
• continuing Board renewal and succession planning,
including the appointment of two Non-Executive Directors
(NEDs), Rebecca McGrath and Mike Roche
• continuing oversight as management responded to
the impact of increased expectations and actions from
Macquarie’s regulators across the industry, including
on non-financial risk with particular attention to
matters relating to governance, culture, remuneration
and accountability
• engaging and meeting with key regulators
• meeting with shareholders and proxy advisors as part
of Macquarie’s ongoing engagement to discuss matters
relating to Macquarie’s business performance, governance
and remuneration
• continuing cross-committee information sharing through
Board and Board Committee Chair meetings and specific
reporting on non-financial risk matters considered by the
Board Governance and Compliance Committee (BGCC)
to the Board Risk Committee (BRiC)
• enhancing coordination of oversight of risk among the
Board Committees by extending a standing invitation
to the Chair of the BGCC and the Chair of the BRiC for
meetings with the Chair of the Board Audit Committee
(BAC) and the Head of Internal Audit to discuss Internal
Audit Report findings ahead of each scheduled
BAC meeting
• approving Macquarie’s revised purpose statement and
refreshed Code of Conduct
• a triennial independent review of the appropriateness,
effectiveness and adequacy of the risk management
framework for MGL and Macquarie Bank Limited (MBL),
a subsidiary of MGL
• continuing integration of the Banking Executive
Accountability Regime (BEAR) since its commencement
with respect to MBL, from 1 July 2019.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
The Board’s response to COVID‑19
At Macquarie we have been agile in adapting our approach
to a rapidly changing environment and our longstanding
approach to crisis planning has proven that our systems
and processes have been resilient, reflecting Macquarie’s
long-term investment in technology.
As a global organisation with offices across Australia(1), the
Americas, EMEA and Asia, the Board is accustomed to the
use of technology to connect with regional attendees at
Board and Board Committee meetings. While the COVID-19
restrictions had an impact on convening in-person Board and
Board Committee meetings, the Board leveraged existing
meeting technology to host virtual meetings.
The Board engaged in overseeing Macquarie’s response to
COVID-19 which included:
• monitoring the impact of COVID-19 on Macquarie’s
changing risk profile
• considering the impact of COVID-19 on Macquarie’s
financial performance and position, capital requirements
and payment of dividends to shareholders
• overseeing Macquarie’s response to the COVID-19
pandemic relating to:
– employees: staff safety and well-being, systems and
processes for ongoing remote working and long-term
investment in technology and flexible working culture,
and investment in leadership capability, technology and
the workplace to respond to the evolving culture of
work and promote greater flexibility
– clients: initiatives introduced and delivered to support
retail and SME banking clients, including working
closely with clients in the most challenged sectors on
long-term resilience and response to disruption, and
active support to clients in all regions in raising essential
finance and capital
– portfolio companies: ongoing work with MIRA and
Macquarie Capital portfolio companies, including
projects under construction to ensure business
continuity, financial resilience and employee well-being,
and maintaining essential community services and
connected best practice across assets, industries
and regions
– community: $A20 million allocation to the Macquarie
Group Foundation to support community organisations
helping to combat the effects of COVID-19.
A gradual return to office is underway in 90% of Macquarie’s
locations and in numbers that allow for social distancing.
The Board has begun convening in-person Board and
Board Committee meetings with social distancing
measures observed.
(1)
Includes New Zealand.
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Corporate Governance
Continued
Corporate Governance framework
Macquarie’s Code of Conduct
The Board approved Code of Conduct, which applies to Macquarie’s NEDs and staff:
• incorporates What We Stand For: Macquarie’s purpose and the principles of Opportunity, Accountability and Integrity that
guide the way staff conduct business
• provides clear guidance on good decision-making and escalation, encouraging staff to speak up and report genuine concerns
about improper conduct
• reinforces Macquarie’s key policies, including the Whistleblower Policy and the Anti-bribery and Corruption Policy.
To ensure that Macquarie’s culture of honesty and integrity remains strong throughout the organisation, all staff who join
Macquarie receive specific training on What We Stand For and the Code of Conduct. Existing staff also receive periodic training
and sign an annual certification that they understand the obligations imposed on them by the Code of Conduct as well as their
responsibility to adhere to the Code of Conduct.
What We Stand For and the Code of Conduct
are available at macquarie.com/what‑we‑stand‑for
Risk governance
Macquarie’s approach to risk management is based on stable and robust core risk management principles:
Ownership of risk
at the business level
Understanding
worst case outcomes
Independent
sign-off by Risk
Management Group
Principles stable for 30+ years
Supported by an appropriate risk culture
Details of Macquarie’s approach to risk management
is contained in the Risk Management section
The Board annually approves Macquarie’s Risk Management
Strategy and Risk Appetite Statement. The BRiC assists the
Board by providing oversight of Macquarie’s risk management
framework and advising the Board on Macquarie’s risk
appetite, risk culture and risk management strategy.
All Independent Directors of the Board are members of
the BRiC to support strong risk governance and oversight.
They constructively challenge management’s proposals
and decisions on risk management arising from business
activities. The Board is also assisted by the BAC, the Board
Remuneration Committee (BRC) and the BGCC in its
oversight of financial and non-financial risk.
40
During each year, including the most recent year, the Board
monitored the operation of Macquarie’s risk management
framework to satisfy itself that the framework continues to
be sound and that Macquarie is operating with due regard to
the risk appetite set by the Board. Key components of the
framework are reviewed by the relevant Risk Management
Group (RMG) divisions and the results are reported to the
Board. The Internal Audit Division reviews the compliance
with, and effectiveness of, Macquarie’s risk management
framework. The rolling three-year internal audit plan covers
all material elements of the framework on a rotational basis.
The risk management framework has been established on
the premise that a disciplined approach to risk management
is best maintained with a single risk management framework
located within Macquarie that applies to all Macquarie’s
Operating and Central Service Groups (including MBL and
its subsidiaries (Bank Group)). The Bank Group maintains its
own governance structure that is responsible for the sound
and prudent management of the Bank Group, with due
consideration to the interests of deposit holders.
Oversight of remuneration
Macquarie’s longstanding and consistent approach to
remuneration continues to support the overarching objective
of delivering strong company performance over the short
and long-term, while prudently managing risk and reinforcing
the Code of Conduct and What We Stand For.
The Board oversees Macquarie’s remuneration arrangements,
assisted by the BRC. The BRC annually reviews whether
Macquarie’s remuneration approach remains appropriate and
that it creates a strong alignment of staff and shareholders’
interests while prudently managing risk.
Macquarie’s remuneration framework and consequence
management processes are designed to promote
accountability, encourage innovation, reward appropriate
behaviours and discourage inappropriate behaviours.
The Remuneration Report contains further
information on:
• each NED’s current Macquarie shareholding, set out
in the Key Management Personnel (KMP) disclosure
• Macquarie’s approach and the amount of
remuneration paid to NEDs and Executive KMP.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
External auditor performance and
independence
At least annually, on behalf of the Boards of MGL and MBL,
the BAC reviews:
• the external auditor engagement: The BAC annually
reviews the terms of the engagement and assesses
the performance, quality and effectiveness of the
external auditor.
The BAC recommends to the Board the appointment of a
new, or removal of the existing, external auditor
• the external auditor’s independence: Before the
approval of the interim and year-end financial reports, the
BAC reviews the independence of the external auditor,
PricewaterhouseCoopers (PwC).
Auditor independence
Macquarie’s Auditor Independence Policy requires BAC
approval, or between meetings the approval of the BAC
Chair for subsequent ratification by the BAC, for non-audit
work performed by the external auditor if the proposed
service falls outside the scope of pre-approved services or
the proposed engagement fee exceeds the policy’s local
currency threshold.
The policy, which reflects Australian legal requirements, also
requires that Macquarie’s lead auditor and review auditor be
rotated every five years unless the Board grants approval to
extend the term for up to a further two years.
Ms Kristin Stubbins of PwC has been Macquarie’s lead auditor
since FY2020. She attended the Annual General Meeting
(AGM) held during the reporting period and was available to
answer questions about the conduct of the audit, and the
preparation and content of the auditor’s report.
Macquarie’s auditor provides a declaration to the BAC at the
time of Macquarie’s interim and year-end financial reports,
that no prohibited non-audit services have been provided.
The external auditor is also required to declare in their audit
report that they are independent of MGL and its subsidiaries
in accordance with the auditor independence requirements
of the Corporations Act 2001 (Cth) and the ethical
requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) that are
relevant to its audit of the financial report in Australia.
The BAC Charter and the External Auditor Policy
Statement describe key aspects of Macquarie’s
Auditor Independence Policy and external
auditor review process, and are available at
macquarie.com/corporate‑governance
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Corporate Governance
Continued
Review of the quality and effectiveness of the
external auditor’s performance
The BAC conducts an annual review of the quality and
effectiveness of the external auditor, including qualifications,
expertise, resources and performance of the external auditor,
PwC. The process involves assessing PwC’s performance
against ASIC’s audit quality guidance, obtaining feedback
from the Board and senior stakeholders across various
Macquarie finance and business teams, and obtaining and
reviewing feedback from PwC on the results of any internal
or other external audit quality reviews relating to the audit.
A written report summarising the results of the review
and feedback from the Board and senior stakeholders
across Macquarie finance and business teams is presented
to, and discussed at, a BAC meeting and separately
discussed with PwC.
Based on the results of this year’s annual performance and
independence reviews, in May 2021 the BAC recommended
to the Board that PwC continue in its role as Macquarie’s
external auditor.
Board evaluation and consideration
In FY2021, the Board exercised its continuing oversight of the
performance of the external auditor. The Board members
provided feedback forming part of the annual performance
review of the external auditor considered by the BAC to
assess their effectiveness and service quality. In addition,
the Board conducted a comprehensive global review of
the appointment processes for an external auditor to
determine whether any change to the appointment process
was required. As a result, the Board agreed to a number
of changes to the appointment processes for the external
auditor which will be conducted annually.
Based on that assessment, the results of the auditor
independence review, the appointment process review and
recommendation of the BAC, in May 2021 the Board agreed
that PwC should continue as Macquarie’s external auditor.
Board and management
MGL’s Constitution sets out requirements concerning board
size, meetings, election of directors and the powers and
duties of directors. In accordance with the Constitution, the
Board has resolved that the maximum number of Directors is
currently twelve.
The Board Charter details the Board’s role and responsibilities
and matters expressly reserved for the Board, which include
approving the annual strategy and business plan, adopting
an annual budget, approving Macquarie’s funding and
capital management strategy, approving Macquarie’s
Risk Management Strategy and Risk Appetite Statement,
monitoring material risks faced by Macquarie and how they
are managed, appointing MGL’s Managing Director and Chief
Executive Officer (CEO) and approving group policies relating
to remuneration, diversity and a code for ethical behaviour.
The role of the Board is to promote the long-term interests
of MGL, taking into account MGL’s specific and broader
responsibilities to its shareholders, funders, clients, staff and
the communities in which it operates.
The Board is assisted by its various Board Committees as
detailed in each Board Committee Charter.
MGL’s Constitution and Board Charter are available at
macquarie.com/corporate‑governance
The Board determines delegations to management and
approves applicable limits and policies.
The CEO has been granted authority for matters not
reserved for the Board or a Board Committee. Macquarie’s
Management Committees assist in the exercise of the
CEO’s delegated authority. The CEO, the CRO and the Chief
Financial Officer (CFO) report to the Board at each meeting.
In addition to regular reporting from management, the
Board has unrestricted access to senior management and
external advisers.
The Company Secretary is appointed by and accountable
to the Board, through the Chair, for matters relating to the
proper functioning of the Board.
42
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Board Committees
MGL’s five standing Board Committees assist the Board in its oversight role. Board members have access to all Board Committee
meeting papers and may attend any Board Committee meeting. Subsequent to each Board Committee meeting, the minutes
are included in the Board papers and presented to the Board by the respective Committee Chairs.
All NEDs, who are Independent Directors, are members of the BRiC to assist the Board in its oversight of Macquarie’s risk
management framework. The Chairs of the Board and each Board Committee meet to broadly consider the work plan,
responsibilities and the performance of each Committee and to focus on any areas of overlap or gaps in Committee reporting
and responsibilities, including coordination of non-financial risk reporting between Committees and the coverage of risk
reporting across Committees.
The Board Committee Charters detailing the responsibilities
of each Committee are available at macquarie.com/corporate‑governance
Allocation of responsibilities between Board Committees
The following table provides a summary of the allocation of responsibilities between Board Committees.
Committee
Role
Board Risk Committee
(BRiC)
Board Governance and Compliance
Committee (BGCC)
Board Remuneration
Committee (BRC)
Board Audit Committee
(BAC)
Board Nominating Committee
(BNC)
The BRiC assists the Board by providing oversight of Macquarie’s risk management
framework and advising the Board on Macquarie’s risk appetite, risk culture and risk
management strategy. The BRiC receives information on material risks and reviews
the impact of developments in markets in which Macquarie operates on its risk profile.
The BRiC reviews and monitors Macquarie’s approach to risk culture and conduct risk, and
forms a view on Macquarie’s risk culture and the extent to which it supports the ability of
Macquarie to operate consistently within its risk appetite. The CRO reports directly to the
CEO and has a secondary reporting line to the BRiC.
The BGCC assists the Board with adopting the most appropriate corporate governance
standards for Macquarie and assists the Board in monitoring the operation of the
regulatory, legal and compliance risk framework of Macquarie, including reviewing
and monitoring compliance with Macquarie’s Conduct Risk Management Framework.
In addition, the BGCC reviews and monitors Macquarie’s work health and safety,
environmental and social risk management policies and customer and client reporting.
The BRiC, BRC and BAC oversee aspects of the regulatory, legal and compliance risk
framework relating to their duties and responsibilities.
The BRC makes recommendations to the Board that promote appropriate remuneration
policies and practices for Macquarie that drive behaviours that support Macquarie’s risk
management framework, promote Macquarie’s Code of Conduct and accountability of
staff for the business and customer outcomes they deliver by encouraging a long-term
perspective. The BRC reviews Human Resources-related reports and is responsible
for liaising with the BRiC to ensure there is effective coordination between the two
Committees to assist in producing a properly integrated approach to remuneration that
reflects prudent and appropriate risk. The BRC is also responsible for remuneration related
disclosures in the Remuneration Report.
The BAC assists the Board with its oversight of the quality and integrity of the accounting,
auditing and financial reporting of Macquarie. The BAC also reviews the adequacy of
Macquarie’s control framework for financial regulatory reporting to banking regulators and
monitors the internal financial control environment. The BAC monitors the effectiveness,
objectivity and independence of the external auditor. The BAC reviews reports from
the external auditor and Internal Audit, referring matters relating to the duties and
responsibilities of the BRiC and BGCC to the appropriate Board Committee. The BAC also
monitors and reviews the performance of the Head of Internal Audit and the effectiveness
of the Internal Audit function.
The BNC assists the Board in satisfying itself that it has an appropriate mix of skills,
experience, tenure and diversity for the Board to be an effective decision-making body and
to provide successful oversight and stewardship of Macquarie.
Details of the Directors’ qualifications, experience, Committee membership
and meeting attendance at Board and Board Committee meetings is contained in the Directors’ Report
43
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Corporate Governance
Continued
Commitment to shareholders and
an informed market
Macquarie believes that shareholders, regulators, rating
agencies and the investment community should be informed
of all material business events and risks that influence
Macquarie in a factual, timely and widely available manner.
Macquarie has an investor relations program to facilitate
effective two-way communication with investors and
analysts and to provide a greater understanding of
Macquarie’s business, performance, governance and financial
prospects. Macquarie engages with institutional investors,
private investors, sell-side analysts and buy-side analysts
throughout the year via scheduled and ad hoc interactions.
Macquarie has a continuous disclosure policy that is
incorporated in its Continuous Disclosure & External
Communications Policy. This policy includes a Continuous
Disclosure Committee, which may be convened to consider
matters that may require disclosure to ASX in accordance
with Macquarie’s continuous disclosure obligations.
All external communications which include any price sensitive
material for public announcement, annual and interim result
announcements, release of financial reports, presentations
to investors and analysts and other prepared investor
presentations for Macquarie will, in accordance with the
Continuous Disclosure & External Communications Policy:
• be factual and subject to internal review and authorisation
before issue
• not omit material information
• be timely and expressed in a clear and objective manner.
Material announcements relating to matters that fall within
the reserved powers of the Board and not delegated to
management are referred to the Board for approval.
The Board receives copies of material market announcements
promptly after they have been released by ASX.
Macquarie’s Continuous Disclosure & External
Communications Policy is available at
macquarie.com/corporate‑governance
As part of Macquarie’s commitment to keep its investor
base informed, management presents at various investment
conferences and conducts investor visits and meetings
(including virtual) throughout the year. All material investor
or analyst presentations are lodged with ASX ahead of the
presentation and made available on Macquarie’s website.
Periodic corporate reports that are not audited or reviewed
by PwC are verified internally by management prior to release
to ASX. The verification process allocates material disclosures
within the relevant document to designated persons to
substantiate the disclosures by reference to company source
documents or, if no source documents are available, by
persons with the knowledge and expertise to confirm the
accuracy and completeness of the disclosures.
Macquarie’s website
Recent announcements, past and current reports to
shareholders, including summaries of key financial data,
operational briefing presentations, AGM webcasts and copies
of recent notices of meeting are available on the investor
centre page of our website. Investor Relations contacts are
also available on our website.
Shareholders can elect to receive communications
electronically by contacting MGL’s share registry.
Further information about Macquarie is available at
macquarie.com
44
Shareholder meetings
MGL encourages shareholders to participate in general
meetings and aims to choose a date, time and venue
convenient to its shareholders. For shareholders who are
unable to attend in person, MGL provides a webcast of
its AGM and any other general meetings. The results of all
resolutions are lodged with ASX as soon as they are available
after the meeting.
MGL typically holds its AGM in July each year.
Notices of meeting are accompanied by explanatory notes
on the items of business and together they seek to clearly
explain the nature of business of the meeting.
If shareholders are unable to attend the meeting, they are
encouraged to vote on the proposed motions by appointing
a proxy. The proxy form included with a notice of meeting
explains how to appoint a proxy. Online proxy voting is also
available to shareholders.
Unless specifically stated in a notice of meeting, all holders of
fully paid ordinary shares are eligible to vote on all resolutions.
MGL’s practice is that voting on each proposed resolution is
conducted by poll.
MGL seeks to conduct its shareholder meetings in a
courteous manner for those attending. In the interests of
attending shareholders, the chair of the meeting will exercise
their powers as the chair to ensure that the meeting is
conducted in an orderly and timely fashion.
Due to the COVID-19 pandemic, Macquarie decided in the
interests of the health and safety of shareholders, staff
and other stakeholders, to hold MGL’s 2020 AGM online.
Shareholders were provided with various alternatives to
participate in the AGM, including by watching the AGM
live through a facility that enabled shareholders to vote
and to ask questions or make comments online and a
dial-in teleconference to listen to the meeting live and to
ask questions on the telephone but not vote.
A shareholder calendar is available at
macquarie.com/investors
Macquarie Group Limited and its subsidiaries 2021 Annual Report
The Corporate Governance Statement is current as at
6 May 2021 and has been approved by the Board.
Our Corporate Governance Statement and Key to
Disclosures (Appendix 4G) have been lodged with
ASX and are available at
macquarie.com/corporate‑governance
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At Macquarie, the diversity of our people is one of our
greatest strengths. An inclusive workplace enables us
to embrace diversity to deliver more innovative and
sustainable solutions for our clients, shareholders,
communities and our people.
Diversity and Inclusion
This year Macquarie staff have taken part in programs, both virtually and face-to-face, that celebrate diversity, support inclusion and provide development opportunities to
under-represented people in our communities.
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Diversity and Inclusion
Our commitment
Macquarie’s growth has been driven by the entrepreneurialism
of our people and the unique ideas and perspectives applied
to finding opportunities. Diversity and Inclusion (D&I) is a
business priority and remains fundamental to Macquarie’s
success. It is also a shared responsibility with everyone from
our newest employees to our most senior leaders playing a
role in creating an inclusive workplace where our people are
safe to be themselves and reach their full potential.
In FY2021, we reaffirmed our commitment to building a
diverse workforce that reflects the communities in which we
operate. Our leadership teams in each Operating and Central
Service Group and region have developed D&I strategies to
realise tangible results aligned to our Workforce Diversity
Policy. Progress towards achieving Macquarie’s FY2021 D&I
objectives is disclosed in this report.
Macquarie is committed to:
• continue building a workforce that reflects all aspects
of diversity to bring a range of perspectives, ideas and
insights to everything we do
• fostering a workplace where our people feel respected
for their uniqueness, valued for their contribution and
empowered to reach their full potential
• providing and supporting additional commercial and
development opportunities for under-represented people
in our community.
Macquarie’s Workforce Diversity Policy is available
at macquarie.com/diversity‑and‑inclusion
Diversity and Inclusion objectives
Holding ourselves to account is critical to demonstrating our
commitment to D&I progress. During FY2021 responsibility
for reviewing and approving the Diversity and Inclusion
Report was re-allocated from the Board Governance
and Compliance Committee to the Board Remuneration
Committee (BRC) to align with the BRC’s oversight of our
key people-related strategies. The Workforce Diversity
Policy provides that each year the BRC will set measurable
objectives for increasing the diversity of Macquarie’s
workforce and maintaining a culture of respect and inclusion.
Our D&I objectives reflect the commitment to action
across our organisation. Each employee is responsible for
creating a respectful and inclusive culture and valuing the
diverse ideas and perspectives of others. Management
Committees globally, in each Operating and Central Service
Group and region, are accountable for achieving Macquarie’s
D&I objectives. The Board and BRC receive regular updates
on progress against Macquarie’s D&I commitments and
challenge our leaders to do better.
Macquarie’s BRC has endorsed the FY2021 D&I objectives
as set out below.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Our diverse people
Macquarie is committed to building a workforce that reflects
all aspects of diversity and intersectionality to bring a range
of perspectives, ideas and insights to everything we do. Our
focus continues to be on developing the internal and external
pipeline of women and people from under-represented
groups at all levels and enhancing our recruitment and talent
practices to facilitate this. Macquarie’s objectives are:
Workforce composition:
• increase representation of under-represented groups
across our workforce
• maintain gender balance on Intern and Graduate programs
• increase representation of under-represented groups
at the senior leadership levels of Executive Committee,
Division Head and Senior Executive
• increase diversity of our Board of Directors, including
always having at least 30% gender diversity.
Diversity practices:
• expand the collection of demographic data to build
additional metrics and better understand the diversity of
our workforce
• evolve practices to attract candidates with broad inherent
and acquired diversity
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• require diverse representation on all recruitment shortlists
and interview panels and ask ‘if not, why not?’
• hire experienced candidates from groups that are
under-represented in Macquarie
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• maintain high return-to-work and retention rates for
employees following parental leave
• maximise retention of people from under-represented groups.
Progress FY2021
Our ongoing commitment to achieving gender balance
is demonstrated by the year-on-year increase in female
representation across Macquarie’s total workforce. In FY2021,
Macquarie’s Senior Executives comprise a greater proportion
of females than in preceding years. 46% of Macquarie’s Board
of Directors are female. A reduction in female representation
at Division Head level in FY2021 was due to changes in
organisational structure with a slightly greater proportion
of senior women than men changing reporting lines which
had an impact on the categorisation of their role. Whilst
Division Head representation is dependent on reporting
line structure, the year-on-year increase in female Senior
Executives, which includes Division Directors and Executive
Directors, demonstrates the growing pipeline of senior
women in Macquarie.
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Diversity and Inclusion
Continued
The table below outlines the proportion of women employed
globally at Macquarie over the last five years.
2017
2018
2019
2020
2021
As at 31 March
Board of Directors
Executive Committee
Division Head(1)
Senior Executive(2)
%
33.3
25.0
21.6
15.6
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30.0
25.0
23.5
17.2
Macquarie Workforce
39.2
39.8
%
36.4
25.0
23.9
19.1
40.1
%
36.4
27.3
24.6
19.9
41.0
%
45.5
27.3
23.0
20.5
42.0
The majority of all roles filled globally during FY2021 had at
least one female candidate on the shortlist and one or more
female Macquarie staff on the interview panel. Women
continue to be hired in greater proportion than the underlying
female application rate. Macquarie maintained gender
balanced Intern and Graduate programs in FY2021.
Macquarie’s Returner Programs continue to support
candidates in key global locations to reintegrate into the
workforce following extended professional career breaks.
Female and male turnover have remained comparable.
Macquarie continues to provide support to working parents
and those with carer’s responsibilities through initiatives such
as childcare centres, backup child/adult/eldercare, nursing
mothers’ facilities and return-to-work coaching for parents.
The vast majority of part-time and full-time employees
are able to access some form of company paid parental
leave provisions.
Macquarie’s global return to work rate was 97% in FY2021 and
high retention rates continue to be achieved for staff who
have taken parental leave.
Macquarie encourages staff to share their cultural background
so we may better understand the diversity of our workforce.
We continue to focus on attracting candidates with broad
inherent and acquired diversity, and we continue to invest
in new recruitment channels to expand our reach beyond
traditional financial services sectors. As examples, to better
connect and engage with talent from under-represented
ethnic groups, Macquarie partnered with Jopwell, Seizing
Every Opportunity, and BLK Capital Management in the
US, and continued participation in the CareerTrackers and
CareerSeekers internship programs in Australia, placing
39 students during FY2021. In the UK and Australia,
Macquarie’s Graduate recruitment team ran a Female
Business Series with a goal of encouraging female university
students to explore a career in finance. In India, Macquarie
continued its partnership with Asha to provide internship
opportunities to university students from economically
disadvantaged backgrounds.
Our inclusive culture
Creating a workplace where our people feel respected for their
uniqueness, valued for their contribution and empowered to
reach their full potential is essential for diversity of thought
to flourish. We are embedding inclusion and psychological
safety in our culture though day-to-day practices (behavioural
inclusion) and programs and policies (structural inclusion).
Macquarie’s objectives are:
Behavioural inclusion:
• continue developing inclusive leadership capabilities of
our managers and leaders
• further promote psychological safety, and respectful
and inclusive behaviour through awareness and
education activities
• encourage flexible working in all its forms
• foster a culture of natural sponsorship of people from
under-represented groups to create pathways to
senior management.
Division Head refers to critical roles across Macquarie. It typically includes executives two layers down from the CEO.
(1)
(2) Senior Executive refers to Macquarie’s combined Division Director and Executive Director population.
48
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Structural inclusion:
• continue to equip senior managers with data to
understand the diversity of their teams and assess the
inclusiveness of their practices
• monitor the equity of people decisions, holding senior
managers accountable for inclusive practices
• further embed the principles of D&I in all people related
policies, processes and programs to ensure the highest
and fairest standards:
– maintain pay equity for like roles and performance
– provide equal access to opportunities and future skilling
– maintain equity for people of all gender and cultural
backgrounds in promotion opportunities
– provide staff with access to flexible working.
Progress FY2021
With the majority of staff working remotely in FY2021,
Macquarie moved quickly to transition our development
programs to a virtual setting. Macquarie expanded on its
inclusive leadership training with an additional focus on
equipping managers with knowledge and skills to maintain
inclusive environments whilst leading teams remotely. The
shift to virtual training has allowed us to connect more
regularly with employees in all of our offices around the
globe. In our 2020 staff survey, 92% of employees stated that
they felt just as or more included in their teams than they did
before working remotely as a result of COVID-19.
Whilst hybrid working has long been part of Macquarie’s
working practice, the COVID-19 environment has enhanced
the diverse ways in which we connect with each other.
Resources and workshops were provided to staff throughout
FY2021 to facilitate best practices for remote working,
particularly for those working from home whilst managing
caring responsibilities. In our 2020 staff survey, 92% of
employees stated that they felt just as or more productive
at work than they did before COVID-19.
Macquarie has adopted hybrid working as part of the evolving
culture of work, and subject to local regulations, the majority
of Macquarie’s employees seek to work more flexibly than
they did before COVID-19. Macquarie recognises that working
flexibly means different things to different people and exists
in many forms. Macquarie empowers staff to manage their
work and time to suit their own roles, the needs of their
teams, and achieve their career and personal goals.
Cultural diversity has been a priority for our leaders and
Employee Network Groups (ENGs) around the world for
several years. Following the heightened attention on racial
injustices across the world that commenced in the US,
before leading to similar movements around the globe,
Macquarie accelerated initiatives to ensure we are building
an organisation that takes real steps towards racial equity
and full inclusion for all colleagues. New initiatives were
put in place to enhance our focus on equitable career
progression and development opportunities for all staff.
In many markets, small group forums on racial equity and
social justice were held to facilitate conversations on current
and historical issues impacting Black communities and the
corporate work environment. Staff were encouraged to share
personal stories or observed experiences in these forums,
as well as through open dialogue with leaders. Resources
were provided to enable leaders to facilitate conversations
about race. Managers at all levels are also being provided
with greater access to training to help our leaders to be
better advocates and foster a culture of belonging. Our
multicultural ENGs, made up of members and allies, played an
active role in supporting and advocating for our colleagues from
under-represented groups. In the Americas, the very nuanced
impacts affecting our Black employees and the community
led to the launch of the Black Employees at Macquarie
(BE@M) ENG, in addition to the existing multicultural
ENG (Unity).
This year Macquarie staff have taken part in programs, both virtually and face-to-face, that celebrate diversity, support inclusion and provide development opportunities to
under-represented people in our communities.
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Diversity and Inclusion
Continued
Across our regions and groups, we have programs
and initiatives to develop a culture of sponsorship to
support our talent from under-represented groups into
leadership roles.
Macquarie’s ENGs span culture and heritage, families, First
Nations, gender, LGBTQ, race and ethnicity, veterans and
wellness, and provide staff with opportunities to exchange
ideas, build relationships and support Macquarie’s D&I
strategy. The ENGs led staff in their regions in recognising
days of significance throughout the year.
The principles of equity and inclusion are embedded
in Macquarie’s people related practices and processes,
including core talent programs, recruitment processes,
remuneration and promotion criteria. We continue to focus
on creating opportunities for all staff to demonstrate skills
and capability and their promotion readiness; and ensuring
we support staff from under-represented groups through the
critical midcareer levels and into senior roles.
Workforce data is regularly analysed and provided to senior
managers so they may assess the equity of people decisions,
the inclusiveness of practices in their teams and to identify
where additional action is needed. Senior managers are also
held accountable for achieving inclusion objectives. In FY2021:
• remuneration outcomes were reviewed to ensure pay
equity for like roles and performance across all Operating
and Central Service Groups and regions. No significant
differences in remuneration outcomes were found to exist
between males and females for like roles and performance
• a higher proportion of women completed the Macquarie
Masterclasses, Macquarie’s new leadership development
series, compared to the proportion of women at Executive
Director-level
• promotion decisions and outcomes were reviewed and
analysed to identify any gender discrepancies. Promotion
rates of males and females to Director levels have
remained comparable.
Our clients and community
Macquarie is committed to providing and supporting
commercial and development opportunities for
under-represented people in our community. We have
long-term funding partnerships with non-profit organisations
around the globe and our staff participate in a variety of
activities including literacy and employability coaching,
and mentoring. We are proud of the awards we have
received this year and are committed to doing more to
provide opportunities to under-represented people in our
communities. Macquarie’s objectives are to:
• continue to tailor the delivery of our services to meet the
needs of our diverse client base
• increase opportunities in our supply chain for businesses
that have been historically under-represented in our
communities or those driven by a social purpose
• further support the progress of under-represented groups
through partnerships and sponsorships with organisations
in the diversity sector
• increase promotion of finance careers to secondary
school and university students from under-represented
groups to increase the diversity of the finance industry
• participate in additional D&I benchmarking indexes to
identify opportunities for improvement.
Progress FY2021
Macquarie is committed to fostering a diverse and
inclusive workplace for its own staff and seeks to instil this
commitment within its assets under management when
possible. For example, in the MAM business, MIRA is focused
on progressing D&I initiatives at the asset level and equipping
its portfolio board directors and portfolio company
leaders with resources and training to foster an inclusive
environment and set measurable diversity objectives.
As part of our procurement strategy, Macquarie includes
sustainability and supplier diversity requirements within
tender documents. In FY2021, Macquarie spent over
$A12 million with minority-owned businesses in our tier
one and tier two supply chain.(3)
(3) Includes qualified businesses from traditionally under-represented groups such as companies owned and operated by minorities, women, Indigenous Australians and small businesses.
Tier one is defined as spend incurred via diverse suppliers directly contracted by Macquarie. Tier two is defined as spend incurred via fourth parties meeting the diverse supplier
definition, indirectly supporting goods and services delivered to Macquarie.
50
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Macquarie is proud to be a partner and sponsor of organisations across the diversity sector, including those that support
students from under-represented groups. In Australia, staff completed secondments with Indigenous organisations through
our partnership with Jawun. Through our First Nations ENG, Macquarie supports the Girls Academy at the Clontarf Aboriginal
College, Melbourne Indigenous Transition School and Gawura School in Sydney. In Asia, Macquarie has continued its partnership
with The Women’s Foundation and Girls Go Tech Program to encourage girls to pursue STEM (Science, Technology, Engineering
and Mathematics) subjects. In the US, Macquarie established a Racial Equity Fund which, over a three-year period, will donate
$US1 million to support community groups working to promote racial equity in the US. In the UK, Macquarie’s Graduate team
partnered with the Bright Network to develop a coaching program for Black, Asian and Minority ethnic students, aimed at
increasing the number of students applying to internships.
In FY2021 Macquarie was recognised for its commitment and progress in creating an inclusive workplace for its diverse staff
across the globe. In the UK, Macquarie is currently one of the few financial services firms to feature as a Top 75 employer in the
Social Mobility Foundation’s Social Mobility Index, a national benchmark on diversity and inclusion, and Macquarie maintained
its ranking of 33rd in the UK Stonewall Workplace Equality Index, a national benchmark on LGBTQ workplace inclusion. In
the US, Macquarie received a score of 100% on the Human Rights Campaign Foundation 2021 Corporate Equality Index for
LGBTQ inclusion. In Asia, Macquarie was named a Silver Employer in India’s Workplace Equality Index and in Japan’s PRIDE Index
for its efforts in creating an inclusive environment for LGBTQ staff. Macquarie ranked in the top 100 Best Companies for Women
in India (BCWI). Macquarie joined The Valuable 500, a global collective focused on disability inclusion. In Australia, Macquarie was
accredited as a Carer Friendly Organisation with Carers + Employers, and we continued our partnership with Heads Over Heels
to help provide female entrepreneurs with access to strategic networks.
Further information on D&I is available at
macquarie.com/diversity‑and‑inclusion
Diversity and Inclusion awards and partnerships
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Environmental, Social and Governance
Macquarie’s Board and Management recognise the importance of sound Environmental,
Social and Governance (ESG) practices as part of their responsibility to our clients,
shareholders, communities, people and the environment in which Macquarie operates.
ESG approach
Macquarie’s ESG approach is structured around eight focus
areas considered to be material to our business.
Clear dialogue with stakeholders is important to building
strong relationships, understanding external dynamics,
earning and maintaining trust, enhancing business
performance and evolving our ESG approach. We regularly
engage with a broad range of stakeholders including clients,
shareholders, investors, analysts, governments, regulators,
staff, suppliers and the wider community.
ESG governance
The Board is responsible for approving Macquarie’s ESG
framework including major ESG policies. In accordance
with its Charter, the Board Governance and Compliance
Committee (BGCC) assists the Board in adopting appropriate
governance standards and reviewing the operation of
environmental and social risk management policies.
Responsibility for implementation of the ESG framework and
related board approved policies resides with Management.
ESG governance:
What We Stand For (principles of Opportunity, Accountability and
Integrity) and Code of Conduct, Board oversight, ESG risk management
External stakeholder interests
Risks and opportunities identified by the business
Environmental and social
risk management
Climate
change
Environmental and
social financing
Sustainability in
direct operations
Client
experience
People and
workplace
Business conduct
and ethics
Community
s
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G
S
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612
transactions
assessed under our
Environmental and Social
Risk (ESR) Policy
Alignment to net
zero by 2050
$A6.64
invested in renewable energy
for every $A1 invested in
conventional energy(1)
30 GW
of green energy assets
in development as at
31 March 2021(2)
14 GW
of green energy assets
in operation or under
management as at
31 March 2021(2)
100%
renewable electricity by 2025
Emissions per capita
reduced by
84%
from FY2010 baseline
(71% reduction from FY2020)
Carbon neutral since 2010(3)
(1)
Includes (i) banking book equity investments fair valued through profit or loss; and (ii) investments in which Macquarie has significant influence or joint control (investments in
associates and joint ventures). Excludes investments held through consolidated subsidiaries and off balance sheet equity commitments.
(2) GW of green energy assets reflect 100% generating capacity of each asset, not the proportion owned/managed by Macquarie.
(3) Covers scope 1 and scope 2 emissions, and business travel.
52
Partnerships Gold Award
2020 for Financial Advisor
of the Year and Sponsor/
Developer of the Year
2020 MFAA Excellence
Awards for Major Lender
of the Year
Mozo Experts Choice
Awards 2021 for Everyday
and Savings Bank of the
Year, Kick Start Savings, No
Strings Savings, Excellent
Banking App, Internet
Banking and Exceptional
Everyday Account
2020 Energy Risk Asia Awards
for Environmental Products
House of the Year, Asia
2,428
learning events(4)
Tailored training, workshops
and leadership sessions
provided to over
9,000
staff(5)
>98%
of our people working
remotely during
COVID-19 (at peak)
Over
$A64m
donated by Macquarie staff
and the Foundation in FY2021
($A475 million since
inception in 1985)(6)
$A20m
allocated to Foundation
to combat the effects
of COVID-19
Further information can be
found on pages 72 to 75 of
this Annual Report
Macquarie Group Limited and its subsidiaries 2021 Annual Report
About these disclosures
Macquarie’s FY2021 ESG disclosures have been prepared in
accordance with the GRI Standards: Core option. The ESG
disclosures comprise relevant sections of Macquarie’s 2021
Annual Report and Macquarie’s website.
The content of the disclosures is presented to align with
Macquarie’s ESG focus areas, which are reviewed annually
and selected as most relevant to Macquarie based on
business insights, secondary research, market benchmarking,
and stakeholder analysis.
Full details of the focus areas and a GRI Index table
are available at macquarie.com/esg
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ESG governance:
What We Stand For (principles of Opportunity, Accountability and
Integrity) and Code of Conduct, Board oversight, ESG risk management
External stakeholder interests
Risks and opportunities identified by the business
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transactions
assessed under our
Environmental and Social
Alignment to net
zero by 2050
$A6.64
for every $A1 invested in
conventional energy(1)
Risk (ESR) Policy
invested in renewable energy
30 GW
of green energy assets
in development as at
31 March 2021(2)
14 GW
of green energy assets
in operation or under
management as at
31 March 2021(2)
100%
renewable electricity by 2025
Emissions per capita
reduced by
84%
from FY2010 baseline
(71% reduction from FY2020)
Carbon neutral since 2010(3)
Environmental and social
risk management
Climate
change
Environmental and
social financing
Sustainability in
direct operations
Client
experience
People and
workplace
Business conduct
and ethics
Community
Partnerships Gold Award
2020 for Financial Advisor
of the Year and Sponsor/
Developer of the Year
2020 MFAA Excellence
Awards for Major Lender
of the Year
Mozo Experts Choice
Awards 2021 for Everyday
and Savings Bank of the
Year, Kick Start Savings, No
Strings Savings, Excellent
Banking App, Internet
Banking and Exceptional
Everyday Account
2020 Energy Risk Asia Awards
for Environmental Products
House of the Year, Asia
2,428
learning events(4)
Tailored training, workshops
and leadership sessions
provided to over
>98%
of our people working
remotely during
COVID-19 (at peak)
9,000
staff(5)
Over
$A64m
donated by Macquarie staff
and the Foundation in FY2021
($A475 million since
inception in 1985)(6)
$A20m
allocated to Foundation
to combat the effects
of COVID-19
Further information can be
found on pages 72 to 75 of
this Annual Report
Including virtual and face-to-face forums.
(4)
(5) Tailored content focused on conduct, supervision in a hybrid working environment, integrity, speaking up and psychological safety. Macquarie also requires all staff globally to
undertake mandatory online Code of Conduct training.
(6) Comprises Macquarie employees’ donations and fundraising; Foundation matching support for employees’ donations and fundraising; Foundation donations to commemorate
employees attaining 10 year and 25 year anniversaries at Macquarie; Foundation grants to non profit organisations to recognise 12 months of board service by a Macquarie employee;
and Macquarie and Foundation grants to community organisations (including Year 2 donations for the 50th Anniversary Award and COVID-19 donation fund) in the 12 months to
31 March 2021.
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Client on-boarding
216
Environmental and social risk management
Macquarie recognises that failure to manage
ESG risks could affect communities, the
environment and other external parties
and expose the organisation to commercial,
reputational and regulatory impacts.
Assessing and managing Macquarie wide
ESG risks is a key business priority and an
important component of our broader risk
management framework, detailed in the Risk
Management section of this Annual Report.
Under the Code of Conduct all staff share responsibility
for identifying and managing environmental and social issues
as part of normal business practice. Staff are supported by
the ESR team.
Advisory
mandates
79
612
ESR reviews
(606 in FY20)
Transactions
317
Americas
32%
EMEA
29%
Australia
27%
Asia 12%
Transactions assessed under the ESR Policy by sector
The ESR team coordinates a diverse range of ESG activities
across business groups and regions, including developing and
implementing Macquarie wide and business-specific policies,
conducting transaction reviews, providing advice on ESG
risks and opportunities and facilitating training. The ESR team
sits within the Risk Management Group and regularly reports
to the Chief Risk Officer (CRO) and to the BGCC on ESG
related matters.
ESR in transactions
Environmental and social risks are managed through
the implementation of the ESR and Work Health and
Safety (WHS) policies, which are based on international
standards.(7) These are updated periodically to address
opportunities for improvement and emerging issues.
Consumer finance products 4
Waste management 6
Nuclear 8
Transport 9
Manufacturing 9
Chemicals &
Pharmaceutical 11
Technology 11
Macquarie’s ESR Policy describes our approach to ESR
management in client onboarding and across a broad range
of transactions including equity investments, financing,
leasing and advisory mandates. The ESR Policy provides
a robust process to assess, manage, mitigate, monitor
and report environmental and social risks and takes a
precautionary approach to ESR issues including labour
and employment practices, climate change, human rights,
resource efficiency, pollution prevention, biodiversity
and cultural heritage. Based on international guidelines,
including the International Finance Corporation Performance
Standards, the ESR Policy provides escalated decision-making
and approval processes, alongside the credit approval
process, for material environmental and social risks.
Transactions with material environmental and social risks are
referred to the CRO and may be escalated to the Executive
Committee or Macquarie Board.
Other 12
Agriculture
16
Gaming &
Entertainment
21
Real estate
22
Defence
23
317
transactions
(391 in FY20)
Mining
67
Infrastructure
49
Energy
26
Renewables
23
(7)
‘Occupational health and safety management systems – Requirements with guidance for use’ ISO 45001:2018 and ‘Environmental management systems – Requirements with
guidance for use’ ISO 14001:2016.
54
Environmental, Social and GovernanceContinued The ESR team oversees the operation of the ESR Policy,
reviewing transactions and providing specialist advice
and targeted training.
144 1,499
staff received ESR and
WHS training in FY2021(8)
staff received specialist
Human Rights
training in FY2021
Human rights
Macquarie recognises the duty of States to protect human
rights and the responsibility of businesses to respect human
rights. Macquarie supports fundamental human rights as set
out in the Universal Declaration of Human Rights and core
ILO Conventions.
Macquarie has a framework of polices and processes in place
to identify and mitigate potential and actual human rights,
including modern slavery, impacts resulting from our business
activities and the relationships connected to those activities.
This year, we produced our fifth modern slavery and human
trafficking statement, and first joint statement under the UK
Modern Slavery Act 2015 and the Australian Modern Slavery
Act 2018 (Cth).
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Work health and safety in investments
Macquarie acknowledges that WHS risks are inherent in
our investments and recognises, supports, and promotes
the right of every worker to return home safely from their
workplace. We have zero tolerance for loss of life or serious
injuries or illnesses sustained in, or resulting from, the work
environment, as set out in our WHS Policy.
In line with our updated Macquarie-wide WHS vision, we
continued to facilitate WHS improvements for operating
assets in which Macquarie has an equity interest or manages
on behalf of a fund. Our comprehensive safety framework
is built around culture and leadership, governance and
assurance. It involves:
• promoting clear WHS expectations with our
business partners
• identifying key WHS risks and conducting due diligence
prior to investment
• training our people to support the governance
of WHS risks
• monitoring and reviewing WHS performance regularly
• investigating incidents that did or had the potential to
result in serious injuries
• sharing lessons learnt and best practices across our
business groups and regions
• ongoing reviews and audits.
COVID-19 has had a significant impact on the health and
safety risk in our investments and on the way Macquarie
engages with their management. Examples of how we have
responded to these challenges include:
• investment of significant resources in the immediate
response and on an ongoing basis to support the
implementation of additional precautions required to
protect the workforce and public (e.g. social distancing and
hygiene factors)
• maintaining awareness of COVID-19 restrictions and their
impact on front-line delivery by sharing best practices and
lessons learned across regions and business groups
• introduction of virtual site visits to show support and
engage with the workforce in the absence of face-to-face
meetings and ability to travel to site.
Macquarie will continue to regularly discuss best practices
and lessons learnt in the ongoing response to COVID-19.
More detailed information is available at macquarie.com/esg
Macquarie’s Modern Slavery Transparency Statement can be
downloaded from macquarie.com/esg
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(8)
Includes risk managers and those in specific business groups with greatest potential exposure to environmental, social and WHS risks.
55
Climate change
Climate change is one of the most complex and critical challenges facing the world, and
the finance sector has a vital role to play in efforts to limit global warming. For almost two
decades, Macquarie has worked with governments and clients to drive the energy transition
and advance solutions to climate challenges.
Supporting the transition to a net zero economy
We are committed to reaching net zero operational
emissions by 2025 and aligning our financing activity with the
global goal of net zero emissions by 2050.(9) This is consistent
with our purpose of ‘Empowering people to innovate and
invest for a better future’.
We have built expertise in investing directly in climate
mitigation and adaptation and in supporting our clients
and portfolio companies to decarbonise their activities.
Our activity spans the supply and financing of renewable
energy, including green Power Purchase Agreements (PPAs),
storage, firming, transmission and distribution solutions;
risk and capital solutions in transition, green and lower
carbon fuels and metals; asset finance for zero emission
transportation, smart meters, energy efficiency and onsite
generation; precision agriculture; and carbon offsetting. Our
leading advisory business supports clients to raise capital,
invest and align their portfolios with the transition to a net
zero economy.
In the past year, we have made further progress in
partnership with our clients. Our asset management business
announced plans to manage its portfolio in line with global
net zero emissions by 2040. Our principal investment
business is developing over 30 GW of new renewable energy
projects across four continents. And our commodities and
global markets business has created new products to offset
the carbon impact of commodities like oil and gas.
As global commitments to tackling climate change
accelerate, and in keeping with our culture of innovation and
evolution, we are strengthening our own commitment on
climate in four key areas.
First, we are strengthening our support for clients and
portfolio companies to manage the transition to net zero and
achieve their decarbonisation ambitions.
In our asset management business, we have started
work with portfolio companies to consistently measure
greenhouse gas emissions and identify emission reduction
opportunities. Where we have sufficient influence, we will
work with these businesses to develop plans that will put
them on a pathway to reduce emissions in line with a net zero
economy by 2040.
More broadly, we are working with our clients to achieve a
managed transition to net zero. We recognise that much of
the world will depend on oil and gas to power economies
and that until new, commercially viable technologies become
available, these fuels will have a continued role in the
provision of essential energy. We will continue to support
clients in these sectors, and we are engaging with them to
design both finance and technology solutions that will
help them deliver a managed transition to decarbonise and
reduce the emissions intensity of their activities.
Second, we are increasing our investment in climate
mitigation and adaptation solutions.
This builds on our leading position as a global developer,
investor, financer, and manager of renewable energy projects.
In addition to our leading role in established technologies
like wind and solar, we expect to increase investment in
important emerging transition opportunities including
zero emissions transport, hydrogen, carbon sequestration,
nature-based solutions, and climate resilient infrastructure.
Third, we will align the emissions of our financing activities
with the objective of enabling and accelerating the world’s
pathway to net zero by 2050. As part of this commitment,
we will measure and set interim and long-term science-based
emissions targets for our financing activities, prioritising
our efforts on clients and partners in high emission sectors
and the role that Macquarie will play in accelerating their
pathways to net zero.
We recognise that the financial sector does not currently
have fully established methodologies and tools to measure
and manage emissions across all types of financing activities
and sectors. We will work to expand our approach as industry
practice develops and continue to collaborate with our peers
to evolve and shape measurement standards.
As previously indicated, we have reduced our limited
remaining equity and lending exposures to the coal sector,
which are expected to run off by 2024.
Finally, we will continue to reduce the emissions of our own
business operations. We have maintained carbon neutrality
across our offices, data centres and business travel since
2010 and, consistent with our 2025 Sustainability Plan, we
are committed to reaching net zero operational emissions by
2025, including targets to reduce energy use and meet all of
our operational needs from renewable sources.
We will outline more detail in each of these four areas by
publishing a Macquarie Net Zero Plan by the end of 2022, and
annual progress reports thereafter.
Advocacy and engagement
Macquarie continues to support global efforts to better
understand the impact of climate change on society, our
clients and our business. This involves a diverse range of
activity including engaging clients and assets; research
projects into areas such as reducing agricultural emissions
with CSIRO; active engagement in initiatives like the Task
Force on Climate-related Financial Disclosures (TCFD); and
collaborating with other financial institutions through the
Climate Finance Leadership Initiative (CFLI), Sustainable
(9) Operational emissions include scope 1 and scope 2 emissions, and emissions from business travel.
56
Environmental, Social and GovernanceContinued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Markets Initiative (SMI) and broader multi-stakeholder
initiatives like the Global Commission on Adaptation (GCA).
Throughout FY2021 Macquarie took part in a range of global
and national initiatives including: the Global Adaptation
Summit, the Australian Government’s Technology Investment
Roadmap, and the launch of the UK Government’s ten-point
plan to tackle climate change and deliver the UK’s ambitious
net zero commitments.
Through these and other engagements, Macquarie is
working to pursue opportunities to advance mitigation and
adaptation solutions and improve our understanding of the
risks associated with climate change.
More broadly, our industry experts continue to work with
governments, non-government organisations and industry
groups to build international capacity in the green finance
sector and promote confidence among investors to finance
green assets. Globally, last year, we took an active role in
over 120 industry initiatives and conferences, and advisory
groups establishing common international standards for
Sustainable Finance.
Task Force on Climate‑related Financial
Disclosures (TCFD)
Alongside the action being taken by our businesses,
Macquarie continues to support the important work of the
TCFD and is actively implementing its recommendations.
In July 2020, we published a detailed report outlining our
progress towards TCFD implementation. The report provides
details of the transition and physical risk heat mapping and
scenario analysis that was completed in 2020.
Scenario analysis
We continue to build on the physical and transition risk heat
mapping undertaken in FY2020 for our lending and equity
portfolios under 1.5°C and 3–4°C scenarios. Our approach for
FY2021 focuses on better understanding the physical climate
risk impacts (chronic and acute) to our infrastructure equity
investments in the utilities, oil and gas sectors. We continue
to evolve our approach to scenario analysis to support
integration into our existing stress testing activities.
We have also commenced an assessment of the operational
resilience of our business operations to physical climate risks.
This analysis of our strategic locations will support long-term
business continuity and resilience planning.
This section includes a summary of our climate-related
disclosures. A more detailed report will be published as
analysis progresses during the FY2022 year.
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FY2021 energy sector exposures
$A6.64 invested in renewable energy for every $A1
invested in conventional energy as at 31 March 2021.(10)
In supporting clients and economies through a managed
transition, we also note that global projections of
power generation indicate an ongoing role for gas to
complement renewable energy. Macquarie has played a
leading role in increased deployment of renewables and
the wider decarbonisation of the global economy.
Particular focus was placed on trying to address the
various challenges that remain to full transition including
energy storage, land use, the need for a greater number
of investible projects and greater levels of investment in
adaptation and resilience projects. In FY2021 these efforts
continued globally, see pages 60–63 of this Annual Report.
The table below provides Macquarie’s equity and loan
portfolio exposures to the coal, oil, gas and renewables
sectors as at 31 March 2021.
Equity and loan portfolio exposures to the oil, gas,
coal and renewables sectors:
FY20
FY21
Loan
assets(11)
$Ab
Equity
investments(10)
$Ab
Loan
assets(11)
$Ab
Equity
investments(10)
$Ab
Oil
Gas
Coal
Renewable
energy
0.5
0.4
0.2
–
0.1
–
–
1.0
0.3
0.2
0.1
–
0.1
–
–
0.6
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More detailed information is available in our TCFD report
which can be downloaded from macquarie.com/esg
More detailed information on our approach to
Climate Change is available at macquarie.com/esg
(10) Includes (i) banking book equity investments fair valued through profit or loss; and (ii) investments in which Macquarie has significant influence or joint control (investments in
(11)
associates and joint ventures). Excludes investments held through consolidated subsidiaries and off balance sheet equity commitments.
Includes drawn loan assets held at amortised cost adjusted to exclude certain items such as assets that are funded by third parties with no recourse to Macquarie, operating leases,
asset finance and short-term financing such as inventory financing.
57
TCFD Implementation Summary
Climate change governance
Strategy
Risk management
Metrics
• Board responsibility for approving ESG
framework and key ESG policies.
• BGCC oversight and monitoring of
effectiveness of ESG framework,
including approach to climate change
risk management.
• Internal Global Green Committee,
established in 2017 and led by
Senior Management, promotes and
coordinates climate change mitigation
and adaptation opportunities.
• Climate Risk Steering Committee
reporting to CRO, oversees approach
to climate scenario analysis.
• Evolved governance structures to
support relevant regulatory guidelines
on climate-related risks.
• Enhancing and embedding climate
considerations within existing risk
management framework.
• Continue to enhance and embed climate
considerations within existing risk
management framework.
• Continue to enrich Board and
executive insight into and visibility of
climate-related risks and opportunities.
0
2
0
2
Y
F
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s
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F
• Engaged in activities related to climate change and the low
carbon transition for over a decade (refer pages 60–63 for
key milestones).
• Pursued a sustainability strategy in direct operations, including
a commitment to operate on a carbon neutral basis since 2010
and a commitment to source 100% renewable energy for our
offices by 2025.
• Supported a range of global and national strategies on climate, led
by third parties, including the Climate Finance Leadership Initiative
and the Global Commission on Adaptation.
• Made a series of new investments in climate mitigation and
adaptation spanning established and new technologies including:
onshore and offshore wind, solar, waste-to-energy, battery
storage, hydrogen, carbon capture and storage, combined heat
and power, smart meters and ultra-low emission transport.
• Macquarie Asset Management (MAM) announced a plan to
manage its portfolio in line with net zero emissions by 2040.
• Green Investment Group (GIG) published its third Progress Report
announcing that it had arranged or invested over £6.9 billion in
green projects since the business was acquired by Macquarie in
2017 and is developing a 30 GW portfolio of new projects.
• Commodity and Global Markets (CGM) further extended its
leadership in environmental markets with the world’s first
shipment of carbon-neutral oil.
• Hosted annual Green Energy Conference attended by 1,000
stakeholders and clients.
• Align our business operations and financing activities with the
global goal of net zero emissions by 2050.
• Deploy balance sheet and funds under management to develop
and invest in projects that support the energy transition.
• Provide a range of products and services to support our clients
to make progress towards their decarbonisation goals.
• Support our clients and portfolio companies to strengthen the
climate resilience of infrastructure assets.
• Engage in a range of cross industry initiatives leading up to the
UN COP26 summit.
• Continue to build internal expertise and capacity to support
the global energy transition into new markets and across
new technologies.
• Evolve approaches for integration into business strategy planning.
• Source 100% renewable energy for Macquarie premises by 2025
in line with our RE100 commitment.
• Establish a new Climate Intelligence Unit to support and inform
Macquarie’s engagement and growth in issues related to climate
change and the energy transition.
• Incorporated climate-related risks into environmental and social
risk and credit analysis for carbon intensive sectors.
• Consistently invested and arranged capital into
renewable energy and energy efficiency: $A9.0b
• Established approaches to transition risk analysis in the oil,
gas, coal and power generation sectors of our lending and
in FY2020, $A7.9b in FY2019, $9.5b in FY2018.
• Carbon neutral since 2010(12).
equity portfolios.
• Included climate change risk within Macquarie’s Risk Appetite
Statement and Risk Management Strategy.
• Generated physical and transition climate risk vulnerability
heat maps for lending and equity portfolios across sectors
and geographies.
• Conducted scenario risk analysis of lending and equity portfolios
for the oil, gas, coal and power generation sectors, representing
transition pathways to 1.5°C, 2°C and 4°C warming by 2100.
• Analysed physical risk of Macquarie’s mortgage portfolio,
representing pathways to 1.5°C and 4°C warming by 2100.
• Analysing physical risk of Macquarie’s equity portfolio for the
utilities, oil and gas sectors, representing pathways to 1.5°C and
• $A3.1 billion invested or arranged in green
energy projects in FY2021(13).
4°C warming by 2100, in progress.
• Assessing vulnerability and resilience of our business premises
at 31 March 2021(14).
to physical climate risks, in progress.
• 30 GW of green energy assets in development as
• 14 GW of green energy assets in operation or under
management as at 31 March 2021(14).
• FY2021 emissions per capita reduced by 84% from
FY2010 baseline (71% reduction from FY2020).
• FY2021 absolute emissions reduced by 82% from
FY2010 baseline (69% reduction from FY2020).
• Continue integration of climate-related risks through our risk
• A further 20% reduction in electricity use by 2023
management framework.
• Refine climate scenario analysis and evolve approaches to
integrate into broader stress testing.
• Evolve strategic response to vulnerability and resilience
of our business premises to physical climate risks.
(from 2014 baseline).
• Source 100% renewable energy for Macquarie
premises by 2025 in line with our RE100
commitment.
• 80% of employees in sustainably rated
premises by 2025(15).
• Ongoing enhancement of TCFD disclosures
to be consistent with all relevant Task Force
recommendations.
(12) Covers scope 1 and scope 2 emissions, and business travel.
(13) The reduction in investment in FY21 is a reflection of fewer large projects reaching final investment decision (FID) during the year. This is in part a timing issue and also reflects GIG’s
growing focus on earlier stage investment during the development phase.
(14) GW of green energy assets reflect 100% generating capacity of each asset, not the proportion owned/managed by Macquarie.
(15) LEED Gold, BREEAM Good, 5 Star Green Star or equivalent.
58
Environmental, Social and GovernanceContinued
TCFD Implementation Summary
Climate change governance
Strategy
Risk management
Metrics
Macquarie Group Limited and its subsidiaries 2021 Annual Report
• Incorporated climate-related risks into environmental and social
risk and credit analysis for carbon intensive sectors.
• Established approaches to transition risk analysis in the oil,
gas, coal and power generation sectors of our lending and
equity portfolios.
• Included climate change risk within Macquarie’s Risk Appetite
Statement and Risk Management Strategy.
• Generated physical and transition climate risk vulnerability
heat maps for lending and equity portfolios across sectors
and geographies.
• Conducted scenario risk analysis of lending and equity portfolios
for the oil, gas, coal and power generation sectors, representing
transition pathways to 1.5°C, 2°C and 4°C warming by 2100.
• Analysed physical risk of Macquarie’s mortgage portfolio,
representing pathways to 1.5°C and 4°C warming by 2100.
• Analysing physical risk of Macquarie’s equity portfolio for the
utilities, oil and gas sectors, representing pathways to 1.5°C and
4°C warming by 2100, in progress.
• Assessing vulnerability and resilience of our business premises
to physical climate risks, in progress.
• Consistently invested and arranged capital into
renewable energy and energy efficiency: $A9.0b
in FY2020, $A7.9b in FY2019, $9.5b in FY2018.
• Carbon neutral since 2010(12).
• $A3.1 billion invested or arranged in green
energy projects in FY2021(13).
• 30 GW of green energy assets in development as
at 31 March 2021(14).
• 14 GW of green energy assets in operation or under
management as at 31 March 2021(14).
• FY2021 emissions per capita reduced by 84% from
FY2010 baseline (71% reduction from FY2020).
• FY2021 absolute emissions reduced by 82% from
FY2010 baseline (69% reduction from FY2020).
• Continue to enhance and embed climate
• Align our business operations and financing activities with the
considerations within existing risk
global goal of net zero emissions by 2050.
• Continue integration of climate-related risks through our risk
management framework.
• A further 20% reduction in electricity use by 2023
(from 2014 baseline).
• Refine climate scenario analysis and evolve approaches to
integrate into broader stress testing.
• Evolve strategic response to vulnerability and resilience
of our business premises to physical climate risks.
• Source 100% renewable energy for Macquarie
premises by 2025 in line with our RE100
commitment.
• 80% of employees in sustainably rated
premises by 2025(15).
• Ongoing enhancement of TCFD disclosures
to be consistent with all relevant Task Force
recommendations.
(12) Covers scope 1 and scope 2 emissions, and business travel.
(13) The reduction in investment in FY21 is a reflection of fewer large projects reaching final investment decision (FID) during the year. This is in part a timing issue and also reflects GIG’s
growing focus on earlier stage investment during the development phase.
(14) GW of green energy assets reflect 100% generating capacity of each asset, not the proportion owned/managed by Macquarie.
(15) LEED Gold, BREEAM Good, 5 Star Green Star or equivalent.
59
• Board responsibility for approving ESG
framework and key ESG policies.
• Engaged in activities related to climate change and the low
carbon transition for over a decade (refer pages 60–63 for
key milestones).
• Pursued a sustainability strategy in direct operations, including
a commitment to operate on a carbon neutral basis since 2010
and a commitment to source 100% renewable energy for our
offices by 2025.
• Supported a range of global and national strategies on climate, led
by third parties, including the Climate Finance Leadership Initiative
coordinates climate change mitigation
and the Global Commission on Adaptation.
• Evolved governance structures to
support relevant regulatory guidelines
• Made a series of new investments in climate mitigation and
adaptation spanning established and new technologies including:
• BGCC oversight and monitoring of
effectiveness of ESG framework,
including approach to climate change
risk management.
• Internal Global Green Committee,
established in 2017 and led by
Senior Management, promotes and
and adaptation opportunities.
• Climate Risk Steering Committee
reporting to CRO, oversees approach
to climate scenario analysis.
on climate-related risks.
• Enhancing and embedding climate
considerations within existing risk
management framework.
management framework.
• Continue to enrich Board and
executive insight into and visibility of
climate-related risks and opportunities.
0
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onshore and offshore wind, solar, waste-to-energy, battery
storage, hydrogen, carbon capture and storage, combined heat
and power, smart meters and ultra-low emission transport.
• Macquarie Asset Management (MAM) announced a plan to
manage its portfolio in line with net zero emissions by 2040.
• Green Investment Group (GIG) published its third Progress Report
announcing that it had arranged or invested over £6.9 billion in
green projects since the business was acquired by Macquarie in
2017 and is developing a 30 GW portfolio of new projects.
• Commodity and Global Markets (CGM) further extended its
leadership in environmental markets with the world’s first
shipment of carbon-neutral oil.
• Hosted annual Green Energy Conference attended by 1,000
stakeholders and clients.
• Deploy balance sheet and funds under management to develop
and invest in projects that support the energy transition.
• Provide a range of products and services to support our clients
to make progress towards their decarbonisation goals.
• Support our clients and portfolio companies to strengthen the
climate resilience of infrastructure assets.
• Engage in a range of cross industry initiatives leading up to the
UN COP26 summit.
• Continue to build internal expertise and capacity to support
the global energy transition into new markets and across
new technologies.
• Evolve approaches for integration into business strategy planning.
• Source 100% renewable energy for Macquarie premises by 2025
in line with our RE100 commitment.
• Establish a new Climate Intelligence Unit to support and inform
Macquarie’s engagement and growth in issues related to climate
change and the energy transition.
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Environmental and social financing
We have seen further growth in demand for environmental and social finance, often
associated with infrastructure and energy. This is driven largely by the global energy
transition and areas like transport and mobility, digital infrastructure, housing and healthcare
where social needs are seeing client demands for capital, innovative financing solutions and
support for new technologies.
Macquarie continues to support our clients seeking to
manage and respond to sustainability challenges and
capitalise on emerging opportunities. Drawing on our global
network, sector expertise and strong record, Macquarie
provides a diverse range of products and services with an
ESG focus to corporate, government and institutional clients.
Our activities span the investment cycle from research
on alternative energy to tailored capital solutions for the
development and construction of renewable assets and
social infrastructure.
Our capabilities
Finance and develop
• Investment in development projects,
platforms and businesses.
• Debt and equity investment.
• Asset financing, including demand side
management, energy efficient assets,
distributed generation and battery storage
and electric vehicles.
Advise
• Financial advisory.
• Debt and equity arrangement.
• Green impact assessment, reporting
and ratings.
Manage
• Real asset management, including green and
social infrastructure, equity and debt, asset
finance and real estate.
• Securities investment management and
structured access to funds.
• Equity based products and alternative assets.
Research
• Specialist ESG and clean energy research.
• Corporate and investor ESG
engagement programs.
Trade
• Emission allowances, compliance and
voluntary carbon offsets and renewable
energy certificates.
• Equity and debt financing of carbon offset
generating projects with Sustainable
Development Goal co-benefits.
• Inventory financing for
environmental markets.
• Derivative financing for renewable
energy projects.
• Environmental risk management solutions.
60
Finance, develop and advise
Macquarie has a substantial and longstanding commitment
to the renewable energy sector, offering a full range of
financial services and products across the organisation that
target investments in projects to support the transition to
a low carbon economy. We service clients across various
technologies including solar, wind, waste-to-energy, bioenergy
and energy efficiency.
When Macquarie acquired the Green Investment Bank in
2017, forming the Green Investment Group (GIG), we made
a commitment to invest £3 billion in green energy projects
by 31 December 2020. Since the acquisition, the GIG has
remained true to its original mission, with £4.7 billion invested
or arranged in green energy projects in the UK and Europe
and £6.9 billion invested globally by the target date.
Through the GIG, a signatory to the UN Principles for
Responsible Investment (PRI) and Equator Principles,
Macquarie is dedicating a growing proportion of our
resources to early-stage project development to help bridge
the gap of development stage funding and accelerate the
global energy transition. Currently, GIG is progressing 30 GW
of development projects and is focused on delivering that
pipeline into construction and expanding on it.
We are a leader in green impact reporting for public
disclosure and our Carbon Score methodology has been
combined with BloombergNEF’s (BNEF) renewable energy
project data to assess the positive carbon impact of wind
and solar assets on the BNEF platform.
Macquarie also advises, sponsors and invests in social
infrastructure, assisting public and private entities to deliver
essential services including hospitals, schools, social housing
and justice facilities.
Manage
Macquarie’s asset management businesses are committed
to evaluating ESG factors in investment decision-making and
engaging with investors on ESG issues. MAM is a signatory
to the UN PRI. Divisions within MAM have established
specific ESG policies and approaches that reflect the ESG
considerations associated with their business.
This year, MAM has announced its commitment to invest and
manage its portfolio in line with global net zero emissions by
2040, ten years ahead of the deadline to achieve the goals
of the Paris Agreement. This announcement included a
range of commitments that will reduce emissions across the
MAM portfolio and build sustainable long-term value for the
benefit of portfolio companies, clients and the communities
in which it operates.
Environmental, Social and GovernanceContinued Macquarie Group Limited and its subsidiaries 2021 Annual Report
To support this, Macquarie Infrastructure and Real Assets
(MIRA) implemented initiatives including training and actions
to improve carbon and energy reporting from its fund
portfolio companies.
In Europe, Macquarie has a strategic partnership with Kepler
Cheuvreux, a UN PRI signatory. The partnership provides
our clients with access to a larger pool of alternative
energy research.
Macquarie Investment Management (MIM)’s Equity and Fixed
Income Investment teams have access to ESG analytical
tools that provide insight into companies’ and portfolios’
carbon footprint, allow them to identify companies making
contributions to the UN Sustainable Development Goals, and
offer guidance regarding material ESG factors that affect a
given industry. MIM’s Fixed Income research team assigns
their own proprietary ESG risk ratings to new issues that they
analyse, and its Emerging Markets Debt team has established
a differentiated approach towards assessing Emerging Market
countries on ESG.
In Asia, we are responding to increased client demand for ESG
research with an expanded ESG team that works alongside
our existing equity and macro research teams. In 2020, we
expanded our proprietary corporate governance screens
across our entire Asian coverage, and we are currently in the
process of rolling out our sector based sustainability scores
across Asia.
Across our equity research, our ESG initiatives leverage
strongly off Macquarie’s deep sector expertise in areas such
as renewable energy, agriculture and technology.
$A23.2b
renewable energy assets
under management as
at 31 March 2021(16)
$A3.1b
assets managed under
MIM’s targeted Responsible
Investment strategies
$A6.0b
funds managed in line with MIM’s
clients’ specific ESG goals and
screening preferences
Research
It is important to us to keep our clients informed about
emerging ESG trends. Macquarie has made ESG a standard
component of all Australian stocks initiations and issued
specialist ESG reports this year covering topics such as
human capital management, company ESG ratings, corporate
governance, reporting season and climate change.
We also hosted virtual investor calls focused on climate
change, forced labour, divestment, hydrogen, cybersecurity,
circular economy as well as other sustainability
themed events.
Top three rating for Australian ESG
research by institutional investors
in 2020 Peter Lee survey
Trade
The trading business within CGM provides wholesale energy
market access and hedging for a wide range of renewable
energy suppliers, retailers and producers, such as waste
to energy and biomass power plants. CGM enables clients
to hedge their increasing exposure to global carbon
emissions products. It actively implements sustainability and
decarbonisation solutions for clients and assets.
In late 2020, CGM arranged and executed on behalf of Oxy
Low Carbon Ventures, LLC the world’s first major petroleum
shipment for which greenhouse gas emissions associated
with the entire crude lifecycle were offset.
The business has made several investments in renewable
projects, such as Xpansiv CBL Holding Group, the first
significant data and commodities platform that generates
data on several factors including human and natural
capital, enabling greater transparency to support trading in
sustainable commodities.
More detailed information is available at
macquarie.com/esg and mirafunds.com/sustainability
(16) Includes equity and debt investments.
61
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Our work in action
To help finance its growing role in renewables financing,
Macquarie issued its first £500 million Green Loan facility in 2018.
This year, in response to the growing interest in green investment across Japan, we issued a
$US300 million Samurai loan facility, including a $US150 million green tranche. Proceeds from the
green tranche will support eligible green projects globally that provide clear green benefits under
Macquarie’s Green Finance Framework. The green tranche will adopt the four pillars identified in
the Green Loan Principles published by the Asia Pacific Loan Market Association (APLMA).
More detailed information
is available in the latest
Green Finance Impact
Report which can be
downloaded from
macquarie.com/esg
Developing and managing renewable energy projects
Macquarie had 13,800 MW of green energy assets in operation
or under management at 31 March 2021, spanning established
technologies like wind, solar and energy-from-waste.(17) New
projects are also integrating emerging technologies like utility
scale storage, floating offshore wind and hydrogen.
Building on this, the next stage, known as the Acorn Hydrogen
project, will include the infrastructure to remove the carbon
from natural gas supplied from the North Sea and introduce
hydrogen to the UK gas supply, cutting carbon emissions from
homes, transportation, and industry.
For example, GIG recently launched a new European solar energy
company, Cero Generation, which will develop and construct
utility-scale and on-site generation projects, as well as integrated
energy storage solutions, across Europe.(18) Its current 8 GW
portfolio containing over 150 projects makes it one of the largest
solar development portfolios in the region.
In Korea, GIG has partnered with Total to develop a portfolio of
floating offshore wind projects totalling an initial 2.3 GW. The
portfolio will support the delivery of the Korean Government’s
New Deal plan and target to deliver 12 GW of offshore wind by
2030 and represents GIG’s first major investment in floating
offshore wind technology.
In February 2021, another partnership with Total successfully
secured the seabed lease rights to develop a 1.5 GW offshore
wind project located off the UK’s east coast. This represents
a significant early-stage investment which will enable GIG’s
considerable expertise and technical capability to support the
project’s full development lifecycle.
CGM has taken a minority equity stake in Storegga
Geotechnologies Limited (Storegga), which has been established
to deliver carbon capture and storage (CCS), hydrogen and
other energy transition projects. With deep sector expertise,
CGM provides strategic support to Storegga’s ongoing projects,
including one of the UK’s first CCS projects known as Acorn CCS.
This project will repurpose existing oil and gas infrastructure and a
depleted gas reservoir to store carbon dioxide from the St Fergus
Gas Terminal in Northern Scotland and other emitter customers.
Financing affordable housing in the UK
An undersupply of housing, coupled with high property prices
relative to wages, continues to drive the need for affordable
and social housing in the UK. MAM has been financing the
UK’s affordable housing sector and local authorities, with
approximately £700 million invested in these sectors on behalf
of our clients over the past five years.
MAM recently completed a transaction that delivers
50 affordable homes for rent in south-east London.
In early 2021, CGM executed a market first power derivative by
entering into a virtual storage contract with Hydro Tasmania, one
of the largest owners and operators of hydro generation in the
east coast Australian power market. The transaction involved the
execution of a derivative designed to hedge hydro generation by
guaranteeing a minimum spread between the high and the low
spot prices on any given day in Victoria, Australia. Providing price
spread certainty for assets which can both discharge and recharge
in the market at their discretion, the transaction paves the way
for standardised instruments designed to hedge a broader class
of storage assets, be it pumped hydro or utility scale batteries,
unlocking further wind and solar development within the grid.
GIG is actively driving solutions for decarbonisation by
aggregating demand and capital to develop projects involving
hydrogen and other clean fuel technologies. For example, GIG,
together with gas network company SGN, have commissioned
an engineering consultancy to prepare a feasibility study for a
hydrogen super-hub in the Port of Southampton, UK.
MIRA raised more than €1.6 billion for investment in renewable
energy with the final close of Macquarie GIG Renewable Energy
Fund 2 (MGREF2), exceeding its target of €1 billion. MGREF2 will
invest in a diversified portfolio of assets including platforms and
construction and operational stage wind and solar projects in
Western Europe and other core markets. The fund’s contribution
to the low carbon transition was a key driver of investor interest
in the strategy, with many seeking exposure to assets that drive
positive environmental change.
The properties, which Beehive Affordable Homes acquired
with financing provided by MAM, are a mixture of sizes and
are located across the London Borough of Bromley and the
surrounding areas. The London Borough of Bromley has agreed
to rent the properties from Beehive Affordable Homes on a
long-term basis to help meet local affordable housing needs with
an option to acquire them for £1 at the end of the agreement.
Beehive Affordable Homes and MAM are exploring opportunities
to replicate the model across the country, working closely with
local authorities to help meet their affordable housing needs.
(17) MW of green energy assets in operation or under management reflect 100% generating capacity of each asset, not the proportion owned/managed by Macquarie.
(18) Cero is a GIG portfolio company, operating on a stand-alone basis.
62
Environmental, Social and GovernanceContinued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Adapting infrastructure for climate resilience
As a global leader in infrastructure and energy, supporting the
long-term climate resilience of our projects and businesses is
central to our approach to investment and asset management.
In January, Macquarie co-hosted a session on infrastructure
at the Climate Adaptation Summit organised by the Global
Commission on Adaptation, of which Macquarie CEO, Shemara
Wikramanayake, is a founding Commissioner.
Additionally, Macquarie is designing climate resilience into new
infrastructure and investing in operating procedure changes,
physical enhancements, and specialised resiliency features
to manage climate-related risks at our assets and those of
our clients.
Following a successful pilot, Macquarie’s UK Climate Investments
(UKCI) and its co-shareholders approved a £1.2 million investment
to install robotic waterless cleaning technology at the vehicle’s
Bhadla Solar park in Rajasthan. The technology will adapt
the plant, which is located in a water-stressed region, for
the expected future impacts of climate change. By reducing
the plant’s reliance on already scarce water, this innovative
technology will ensure that the solar farm continues to operate
efficiently whilst increasing the availability of water for use by
local communities and farmers.
In Australia, bushfires have long been a natural hazard and
can pose a significant danger to the environment, property
and people. MIRA is supporting Endeavour Energy in utilising
geospatial analysis from light detection and ranging (LiDAR) data,
to assess and quantify the risk of bushfires from vegetation
near its network. This enables a more targeted and efficient
vegetation maintenance program and as a result a more
proactive management of bushfire risk.
In Europe, Macquarie is supporting the resilience of major
infrastructure. MIRA is supporting Finland’s second largest
electricity network operator, Elenia, to bury 25,000km of its
power line network to protect it from more severe and frequent
weather events, while Macquarie Capital acted as sole financial
advisor and debt arranger to the Blankenburg Connection. The
project involves construction of a 950m-long immersed tunnel
below the Scheur River, which crosses the area’s main flood
protection dam. The team assists its construction partners
to meet strict legal requirements, reinforce existing flood
prevention infrastructure and ensure that the project will be able
to resist future water level rises.
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Helping our clients on their decarbonisation pathways
Macquarie provides sustainability and decarbonisation solutions
for clients and assets. As part of MAM’s commitment to invest
and manage its portfolio in line with global net zero emissions
by 2040, a decarbonisation project was launched for Australian
portfolio companies which saw several of them establish their
baseline greenhouse gas emissions footprint and identify
initiatives to achieve sustained emissions reductions over time.
Endeavour Energy, for example, has identified an initiative with
the potential to reduce a significant portion of its scope 2
emissions which are largely due to line losses. The initiative would
involve the installation of Ecojoule Energy’s EcoVAR units that
would help regulate voltage swings on the network, thereby
lowering line losses and its carbon emissions footprint.
In late 2020, Macquarie arranged and executed the world’s first
major petroleum shipment for which greenhouse gas emissions
associated with the entire crude lifecycle were offset. The
delivery of two million barrels of carbon-neutral oil was arranged
for Oxy Low Carbon Ventures, LLC, a US-based international
energy company focused on advancing low-carbon technologies.
The bundling of high-quality carbon offsets with crude oil is
an immediately executable solution that Macquarie hopes
will catalyse a market for climate-differentiated commodities
and drive investments in longer-term, industrial-scale
decarbonisation strategies.
GIG has partnered with Siemens to launch Calibrant Energy,
a joint venture that offers comprehensive onsite Energy as a
Service (EaaS) solutions at no up-front cost for its customers.
Calibrant Energy offers a unique combination of technical,
operating, and risk management expertise that enables
customers to access the benefits of on-site energy systems with
a new level of simplicity. Calibrant’s on-site energy solutions seek
to deliver immediate cost savings, cost certainty, resilience and
low-cost energy grid augmentation. Calibrant’s technologies will
include solar, integrated solar-battery solutions, hybrid systems,
standalone batteries, microgrids, combined heat and power and
centralised heating and cooling infrastructure upgrades.
The Energy, Renewables and Sustainability (MERS) division within
CGM’s Specialised and Asset Finance business has deep expertise
across metering, distributed energy, zero emission mobility
and sustainable waste solutions. Supporting a major Australian
real estate trust, MERS developed a Solar Power Purchase
Agreement to design, install, and manage solar systems for a
number of retail shopping centres across Australia. Installations
commenced in December 2019 with the last site in the initial
tranche due to come online in mid-2021. The installed capacity
will total 2.8 MW in size, generating 4 GWh of zero-carbon,
renewable electricity and reducing the client’s carbon emissions
by approximately 2,800 tonnes per year. In addition to achieving
emission reduction targets, the solution is also significantly
reducing electricity costs compared to sourcing from traditional
energy retailers.
MERS has also delivered more than five million and funded over
ten million smart and advanced meters to date in the UK. The
roll-out of smart meters in the UK is a key enabler to a more
efficient energy system, allowing customers to reduce their
energy costs and emissions by managing their own energy
consumption. By working with partners, Macquarie provides an
end-to-end service solution for the provision, installation and
funding of smart gas and electricity meters – enabling smaller
suppliers to roll out this energy saving technology.
63
Sustainability in direct operations
Macquarie’s direct environmental and social impacts predominantly relate to the resources
we consume in our offices, data centres, business travel, and our procurement activity.
We seek to manage these impacts by monitoring and reducing resource use, maintaining
innovative and sustainable workplaces, maintaining carbon neutrality, and improving the
sustainability of our supply chain.
Macquarie’s 2025 Sustainability Plan articulates our corporate
sustainability commitments with specific and measurable
targets across environmental and social pillars.
virtual conferencing and collaboration tools and will
continue to encourage their use to help reduce the need
for business travel.
Emissions from energy use and business travel
This year, Macquarie’s absolute emissions decreased by 69%
from FY2020 attributed to a reduction in Scope 2 and 3
emissions. This is largely due to the impact of the COVID-19
pandemic on our global office occupancy levels as well as
our business travel. Scope 1 emissions are not considered
to be material, comprising less than 2% of Macquarie’s total
operational emissions.(19)
FY2021 Scope 2 emissions reduced 26% from FY2020. While
this can be largely attributed to reduced occupancy levels
due to COVID-19, we have also continued our focus on energy
use in all Macquarie premises globally. This included retrofit
and new full fitout projects that have delivered more energy
efficient premises and our IT cloud transformation strategy
that enables rationalisation of servers.
Macquarie’s RE100 commitment is to source 100% of global
electricity from renewable power by FY2025. In FY2021, we
reached 34% of global electricity from renewable power, up
from 18% in FY2020. We expect to see a more significant
increase in FY2022 and FY2023.
Macquarie’s FY2021 Scope 3 emissions decreased by 99%
compared with FY2020 due to travel restrictions in place
since March 2020. In FY21, we adopted more sophisticated
Carbon and energy data for FY2021(21)
Carbon emissions in tCO2-e
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
Sustainable buildings
Macquarie’s corporate offices are fitted with water and
energy efficient fittings and fixtures and are continually
monitored for energy performance, environmental quality
and staff comfort. In FY2021, Macquarie’s Seoul office
achieved a LEED Gold rating for its fitout. Macquarie’s new
global headquarters, currently being developed in Sydney,
achieved a 6-Star Green Star Design rating. At the end of
FY2021, 69% of Macquarie staff occupied a sustainability
rated office.(20)
Carbon neutrality
Since 2010, Macquarie has maintained our carbon neutral
commitment by working to reduce and offset emissions.
In FY2021, to meet this commitment, Macquarie purchased
and retired a portfolio of Australian Carbon Credit Units
(ACCUs) and other voluntary carbon offsets that meet the
Verified Carbon Standard and Climate, Community and
Biodiversity Standard. The projects were selected based on
quality and verifiable emissions reductions. Supported by the
sale of carbon credits on international markets, they provide
solutions to reduce carbon emissions in each of the regions
in which Macquarie operates.
Energy use in TJ
250
200
150
100
50
0
Baseline(21)
FY19
FY20
FY21
Scope 1 (tCO2-e)
Scope 2 (tCO2-e)
Scope 3 (tCO2-e)
Energy (TJ)
(19) PwC has provided limited assurance over selected information for the FY2021 reporting period as detailed in its independent assurance report available on Macquarie’s website.
The assurance report includes a table outlining Macquarie’s carbon and energy data for FY2010 to FY2021 as well as a definition of the different scopes.
(20) Minimum 5 Star Green Star, LEED GOLD or BREEAM GOOD rating.
(21) Note that the baseline for Scope 2 electricity emissions is FY2009 while, due to data availability, the baseline for Scope 3 business travel emissions is FY2010.
64
Environmental, Social and GovernanceContinued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Further information is available at macquarie.com/esg
The Principles for Suppliers are available at
macquarie.com/suppliers
Macquarie’s Modern Slavery Transparency Statement can be
downloaded from macquarie.com/esg
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Resource efficiency
We continue to raise staff awareness and improve recycling
rates across our regional headquarters. In all major Sydney
offices and our London headquarters, we reached an average
recycling rate of 35%. Office closures and reduced occupancy
during FY2021 have impacted our waste data collection and
verification. This is scheduled to resume as our people return
to office.
In FY2021, paper use decreased by 82% compared to
FY2020 due to an increase in remote working. Paper use
data is collected across the majority of Macquarie’s offices,
representing approximately 90% of Macquarie staff. Managed
print has been implemented in 100% of Macquarie’s offices.
In FY2021, electronic signatures were enabled for our supplier
contracts. The environmental impacts of paper use are also
being addressed through an ongoing commitment to use
certified sustainable or recycled paper stock.
In FY2021, we initiated a review of global electronic waste
providers and introduced requirements for certifications to
ensure electronic waste is managed in a responsible manner.
Sustainable procurement
In FY2021, Macquarie continued to implement a risk-based
approach to environmental and social due diligence in
our supply chain. We refreshed Macquarie’s Principles for
Suppliers and published them in seven languages to better
enable Macquarie to engage across our supply chain. In
addition, Macquarie includes environmental and social risk
requirements within commercial agreements and
tender documents.
Over the last three years, over 1,300 strategic suppliers
responded to Macquarie’s ESG questionnaire developed to
assess their ESG credentials. We continued to communicate
our Principles for Suppliers and implemented an independent
risk-based assurance programme which involved an in-depth
assessment and onsite meetings with suppliers exposed to
high human rights risks based on country of operation and
service category.
Macquarie is committed to maintaining collaborative supplier
relationships. In FY2021, this included engaging with key
suppliers on the impacts of COVID-19 on their operations
and where possible, seeking mutually beneficial outcomes for
both parties. This involved, but was not limited to, extending
contracts, supporting suppliers during lockdowns and
ensuring COVID-19 impacts to workers were considered in the
independent assurance programme.
Macquarie’s approach towards identifying and mitigating the
risk of modern slavery within our supply chain and business
operations is set out in our Modern Slavery Transparency
Statement as described on page 55.
In FY2021, Macquarie spent over $A12 million with
minority-owned businesses in our tier one and two
supply chain.(22)
(22) Includes qualified businesses from traditionally under-represented groups such as companies owned and operated by minorities, women, Indigenous Australians and small business.
Tier 1 is defined as spend incurred via diverse suppliers directly contracted by Macquarie. Tier 2 is spend incurred via fourth parties meeting the diverse supplier definition, indirectly
supporting goods and services delivered to Macquarie.
65
Client experience
Clients are at the core of our business. They put their trust in Macquarie by choosing to
work with us, and we seek to maintain this trust by focussing on delivering exceptional client
experiences and outcomes.
Supporting clients in times of need
To build staff capability in responding to clients who may
be experiencing personal challenges, BFS has delivered
workshop training on dealing with difficult situations to all our
client facing people in the past year. We have also partnered
with an external outreach service provider offering holistic
support to referred clients.
Our response to COVID‑19
From the outset of the COVID-19 outbreak, Macquarie
responded quickly to implement a series of comprehensive
measures to support clients, partners and communities
impacted by the pandemic.
BFS delivered relief to impacted clients by implementing
a lending product payment pause, temporarily ceasing
collections activity, reducing rates on business loans and
participating in Early Release of Super and SME Guarantee
Scheme support initiatives by the Australian Government.
This was enabled by broad communication with our clients
and a focus on reducing manual processes though digitising
forms, removing manual signatures and improving secure
online self-service options for clients. BFS’ Agile practices
allowed our people to transition to remote working without
disruption to client service. Following these enhanced
support measures, most clients have now resumed
regular payments.
MAM continues to adapt its client engagement strategy
in response to the pandemic to ensure its clients remain
informed about the performance of their investments and
the broader investment landscape. Regular reporting for
the majority of MAM’s infrastructure and real asset funds
continued to be supplemented with additional briefing calls,
fund updates, direct engagement, thought leadership, and a
new regular webinar series. Key client engagement activities,
such as the Annual General Meetings for MAM’s flagship
strategies, were also held in a virtual format.
CGM’s businesses adapted to the changing environment by
supporting clients and looking for enhanced ways to help
clients restructure their businesses and rebalance their
portfolios. CGM worked closely with clients in the most
challenged sectors on their long-term resilience and response
to disruption. The Specialised and Asset Finance business
provided access to lending relief to over 30,000 SME clients
globally to help support business cash flows and sourced
computer equipment for North American educators.
Macquarie relies on building and maintaining enduring
relationships with our co-investors, corporate, institutional,
government and retail clients across all our businesses.
Client engagement
Our specialist teams engage with our clients through a
variety of channels including one-to-one contact, video and
online, knowledge-based conferences and events, and other
insight-based communications.
Macquarie Capital’s diverse mix of advisory, capital markets
and principal investing capabilities results in a broad array of
client and stakeholder interactions, ranging from close and
collaborative relationships with partners and co-investors
to more intermittent and transaction-focused contact. The
team regularly collates formal and informal feedback to
help us evaluate the strength of our client relationships and
identify opportunities for improvement and innovation.
CGM is a client focused business, concentrating on deepening
relationships through a continued understanding of our
clients’ changing needs. We regularly engage clients to seek
feedback and gain insights with the intention of adapting our
offering where required. An example of this is the outreach
program initiated in May 2020, when CGM undertook a series
of conversations with clients to understand their experiences
during COVID-19, bringing the voice of the clients to CGM’s
strategy development.
To deliver an enhanced client experience and drive further
collaboration, MAM reorganised its business into four global
divisions and announced its intention to transition to a single
MAM brand. These changes will enable MAM’s integrated
client solutions team to further simplify how its suite of
alternatives, equities, and fixed income capabilities are
presented to clients. MAM’s operations, technology, and data
teams were also brought together, with the new function
providing greater global coordination to ongoing investments
designed to enhance the client experience.
Macquarie’s Banking and Financial Services (BFS) business
uses client insights to prioritise new initiatives and shape
how we deliver products and services. For example, BFS has
embedded Human Centred Design (HCD) and proactively
measures customer advocacy at specific interaction points
to understand the experience clients have with Macquarie.
Combined with other insights, BFS then makes data based
decisions to ensure we are building the right experiences
for clients.
This year we have rolled out online cultural competency
training for some client-facing people in BFS across
Australia. The program, which was developed by an
Australian Indigenous business specialising in cultural
competency training, is designed to introduce participants
to Indigenous people, culture and history while providing
practical knowledge and skills to work more effectively with
Indigenous people.
66
Environmental, Social and GovernanceContinued Macquarie Capital has also been providing expertise, advice
and capital solutions to help our clients and partners to
navigate COVID-19 and the related market disruption – from
strategic advisory and capital raising to supporting our
clients’ continued growth and transformation in key sectors
reshaped by COVID-19, such as healthcare and education. In
addition to adapting to the pandemic, some of our portfolio
companies are also directly contributing to the fight against
COVID-19, from vessels delivering essential supplies and
supporting hospital ships to our online education companies
providing free access to millions of children during the
height of the pandemic. In the US, Macquarie Capital’s
portfolio company Dovel Technologies directly participated
in government research initiatives to fight COVID-19 through
its support of the National Institutes of Health (NIH). It also
ran one of the US government’s grants programs which
helped to deliver billions of emergency dollars to citizens and
organisations in need.
Fair and efficient resolution of issues
Reflecting our commitment to our clients, Macquarie Bank
Limited subscribes to the Australian Banking Association 2019
Banking Code of Practice.
Macquarie has a robust complaint management framework
across our retail banking business to ensure client complaints
are resolved quickly and fairly. BFS teams analyse complaint
data to understand the root causes of complaints so they
can be addressed at their source, with oversight from
senior management. In FY2021, 97% of BFS complaints
were resolved within five business days, up from 91% in the
previous year.
Macquarie’s Customer Advocate is independent of the
operating, risk and support groups including our internal
dispute resolution teams and reports directly to the CEO.
The Customer Advocate’s role is to:
• promote fair and reasonable customer
complaint outcomes
• minimise the risk of future problems by reviewing key
customer themes and new product approvals to identify
opportunities to enhance products, services, systems
and processes
• provide a customer-centric voice when making
recommendations to improve customer experience.
Further information is available at macquarie.com/bank
Further information on the Customer Advocate office is
available at macquarie.com/customer‑advocate
The Banking Code of Practice can be downloaded at
macquarie.com/banking‑code
Macquarie Group Limited and its subsidiaries 2021 Annual Report
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67
People and workplace
Macquarie recognises that our most important assets are our people. We recruit talented
individuals and encourage them to realise their potential in an environment that values
excellence, innovation and creativity. By supporting their development and wellbeing, we
ensure Macquarie continues to meet the highest standards and serves the evolving needs
of our stakeholders.
Leadership, talent and culture
In FY2021, an initiative to review and reconsider Macquarie’s
purpose statement was undertaken. Over an 11-week
period, 800+ staff shared perspectives to inform this
refreshed purpose. Following this extensive consultation,
Macquarie’s revised purpose statement was articulated,
endorsed by the CEO, the Executive Committee and Board,
and launched during the 2020 Annual Staff Meetings. The
new purpose, ‘Empowering people to innovate and invest
for a better future’, has now been embedded throughout
the organisation, and feedback from staff has shown that it
resonates with and inspires our people.
Macquarie is continuously building a culture of high
performing talent by developing our people. We focus on
our leaders and their leadership impact as they are our
culture carriers. They set the tone for our people and directly
influence the way people think and act. We seek to attract
the right talent and develop our people to reach their full
potential in order to deliver measurable business outcomes
that benefit our clients, our shareholders and our people.
86%
of Macquarie’s 325 Executive Directors are
currently completing or have completed the
Macquarie Executive Director Leadership
Program (EDLP)
The EDLP builds the capability of leaders to better
understand their impact and to inspire and develop others.
It also equips them to address the pace and complexity of
change and to cultivate and support a culture of innovation.
While the ongoing delivery of EDLP was paused for the
majority of 2020 due to the impact of the pandemic, delivery
has continued in a virtual format in 2021.
To meet the evolving needs of our leaders, a new series
of virtual Masterclasses was launched in FY2021. The
Masterclasses focus on equipping our Executive Directors with
the skills and tools needed to navigate the opportunities and
challenges associated with leading through COVID-19. A series
of complementary virtual Masterclasses was subsequently
launched for our Division and Associate Directors.
244 attendees across the six Masterclasses offered
to Executive Directors in FY2021, and
1,725
attendees across the four Masterclasses
offered to Associate and Division
Directors in FY2021
Following a FY2020 project analysing the attributes and
experiences required by our future leaders, the new
Macquarie Leadership Standards were launched in FY2021.
These Standards were developed based on extensive
research and incorporated feedback from our people, our
Executive Directors, Macquarie’s Board and our Executive
Committee. These Standards provide greater consistency
and transparency in our expectations of Executive Directors
and have been adopted as the new criteria for Executive
Director promotions.
For the broader organisation, Macquarie supports the career
development of its people through a number of manager and
strategic leadership programs and investment in executive
coaching and mentoring initiatives.
Learning opportunities are provided to all staff, to meet the
needs of Macquarie’s diverse talent base and to provide the
workforce with the skills to realise future opportunities in
a rapidly changing environment. Development areas range
across both professional and personal skillsets including
self-awareness and leadership impact, wellbeing, cultivating
environments of inclusion, innovation, technical mastery and
effective collaboration to identify opportunities and support
each other.
The global pandemic and the rapid move to remote working
has accelerated the use of technology to deliver virtual
classroom learning. Our Learning and Development teams
were able to offer over 119 courses in a new virtual format in
FY2021. This was achieved through the onboarding of new
suppliers and the conversion of existing course content to
virtual formats, which provided a more accessible learning
and development experience for our staff.
2,428 learning events in FY2021(23), with
89% delivered virtually
During the employee onboarding and orientation process,
Macquarie offers a series of learning and development
activities (including events hosted by the CEO) designed
to communicate and embed the Macquarie culture and
reinforce the ongoing importance of meeting behavioural
expectations and effective risk management across all our
businesses and regions. Globally, over 2,000 staff completed
Success at Macquarie virtually as part of Macquarie
Orientation in FY2021.
(23) Including virtual and face-to-face forums.
68
Environmental, Social and GovernanceContinued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Goal setting, providing ongoing feedback, and having regular
performance and career development discussions are a key
part of performance measurement and talent management
at Macquarie. In addition to providing regular feedback
throughout the year, Macquarie requires all staff to have at
least one formal Year in Review, or appraisal session, with
their manager.
Workplace health, safety and wellbeing
Macquarie recognises the value of effective WHS
performance as an integral part of how we successfully
manage our business. We seek to operate zero harm
environments through maintaining high WHS standards and
performance across all our activities globally. We promote
an integrated approach to safety and wellbeing matters and
encourage our staff to speak up on any actual or potential
health and safety issues, including matters relating to
inappropriate behaviour such as sexual harassment or other
form of harassment, discrimination, bullying or victimisation.
Our recently updated WHS vision seeks to build and promote
safe workplaces which enable and empower people to
do their best work. This commitment is underpinned by
a comprehensive safety framework built around culture
and leadership, governance, and assurance. Staff are
provided with training and resources to promote positive
safety practices. Staff consultation forums inform the
implementation and effectiveness of these policies, systems,
and risk controls.
0.2 Lost Time Injury Frequency Rate (LTIFR)
in the year ended 31 March 2021(24)
The safety and wellbeing of our people remains at the
centre of our response to COVID-19. Through our security
operations we continuously monitor and assess changes
in government regulations to inform decision-making. Our
Crisis Management Teams evaluates local health information
and legal and regulatory obligations to ensure our policies
and practices remain compliant. Our people are informed
of our safety requirements through staff briefings and
office-specific communications.
In response to the external changing environment, we offer
financial support to all staff for ergonomic office chairs and
technology peripherals to enhance their remote working
environment. We provide resources to assist people leaders
to manage remote working teams. Additional online training
provides staff with education on “Work Health and Safety
While Working from Home”, including strategies to support
both physical and mental wellbeing.
Macquarie’s holistic wellbeing program, Macquarie Plus,
provides a comprehensive range of initiatives and benefits
designed to equip our people with the tools and resources
to own their wellbeing. The delivery of wellbeing initiatives
pivoted to provide equitable opportunity to staff, with
the program maintaining its focus through digitalised and
in person content allowing for flexible engagement. With
a strong focus on encouraging our people to balance
all aspects of their lives. Macquarie Plus comprises
four key elements:
• People: providing our people with access to a range of
benefits and initiatives designed to support their physical,
psychological and financial wellbeing through educational
seminars, health screening, fitness classes and access
to psychological support services
• Lifestyle: encouraging our people to make the most of the
rewarding and inclusive culture at Macquarie, and helping
them to integrate life and work, through initiatives from
community groups through to networking events and
school holiday programs
• Tools: promoting technology platforms to enable our
people to tap into wellbeing information regardless of
location or time of day
• Space: designing places that are not only flexible and
sustainable, but that also encourage collaboration and
connection and offer our people choice in how they work.
7.5% global voluntary turnover rate(25)
The retention of our employees is a key indicator of our
inclusive culture where people feel engaged and enabled.
Diversity & Inclusion
Macquarie’s ongoing commitment to workforce Diversity
& Inclusion ensures that our business remains innovative
and sustainable and continues to meet the evolving needs
of our clients.
Macquarie’s broad range of experiences, skills and views are
key strengths and critical to the wide range of services we
deliver across a global operating environment.
Information on our approach to diversity & inclusion
is provided in the Diversity & Inclusion section of this
Annual Report
Further information is available at
macquarie.com/esg and macquarie.com/careers
(24) Lost time Injury (LTI) is an incident that results in time lost from work equal to or greater than a full day/shift. The LTI Frequency Rate (LTIFR) is the number of Lost Time Injuries
resulting in a compensable claim per million workhours.
(25) Rolling 12-month voluntary turnover with leavers for the 12 month period divided by average headcount for the same period.
69
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Business conduct and ethics
Macquarie’s organisational culture drives the way we do business and our expectations
of our staff are outlined in the Code of Conduct. Our approach is based on three long-held
principles: Opportunity, Accountability and Integrity.
Political engagement and public policy
Macquarie believes we need to be engaged and understand
the evolving policy, political and regulatory environments in
Australia and other jurisdictions in which we operate, as these
factors impact our business as well as our clients’ businesses.
As a listed financial institution operating in highly regulated
sectors, we have a responsibility to our shareholders, clients,
counterparties and employees to understand and contribute
to public policy and to ensure that our organisation and
operating environments are well understood by
parliamentarians and policy makers. Additionally, our clients,
many of whom also operate in regulated sectors, expect us
to have detailed current knowledge of public policy issues and
drivers when we provide advice and services to them.
Macquarie contributes to public policy in the markets in
which we operate in the following ways:
• making submissions to industry consultation processes
and inquiries, where appropriate. These may be processes
established by parliaments, government departments or
government agencies such as regulators. Submissions may
be made by Macquarie directly or as part of a broader
industry group
• participating in government and other policy advisory
panels when invited to do so, and where we can make a
differentiated contribution based on our expertise
• engaging with parliamentarians and policy-makers
through avenues such as formal meetings, attending
events, speaking in public forums and appearing before
parliamentary inquiries where appropriate
• contributing to the advocacy work done by industry
groups in key markets around the world. Given the
diversity of Macquarie’s business activities, we are
members of industry groups representing sectors such as
financial services and markets, infrastructure, energy as
well as general business peak bodies.
In Australia, political parties are funded by a mix of public and
private monies. As part of its engagement with the Australian
political process, Macquarie provides financial support to the
major political parties, primarily through paid attendance
at events.
Macquarie has a full disclosure policy and declares all
monies paid to political parties to the Australian Electoral
Commission (AEC) regardless of any thresholds or other
provisions that may otherwise limit the need to disclose.
This disclosure is made by way of an annual AEC return on
a 1 July to 30 June basis and is published by the AEC in the
February following the end of the disclosure year.
Macquarie’s revised purpose ‘Empowering people to innovate
and invest for a better future’ represents why we exist
and what we do. We believe that by empowering people
– our colleagues, clients, communities, shareholders and
partners – we will achieve our shared potential.
Macquarie’s Risk Culture and Conduct team is responsible
for developing and maintaining frameworks for risk culture
and conduct risk, and monitoring and reporting on the
implementation of those frameworks across Macquarie.
As part of their role, the team:
• assesses the risk culture across the group and provides
oversight of its alignment to Board expectations
• challenges and advises Macquarie teams on how to
enhance risk culture maturity
• assesses, challenges and advises on the effective
identification, evaluation, and management of
conduct risk.
Macquarie’s Integrity Office provides an internally
independent and confidential point of contact for Macquarie
staff and external parties to safely raise concerns about
improper conduct. It is responsible for implementing the
Whistleblower Policy and for managing the investigation
of concerns raised under this policy, including any raised
through the Macquarie Staff Hotline. The Integrity Office
reports to the Macquarie CEO and provides regular reports
to the BGCC.
The Integrity Office also promotes high ethical standards
and good decision-making through communications and
engagement with staff.
Information on our risk culture and approach to
conduct risk is provided in the Risk Management
section of this Annual Report
Tax transparency
Macquarie acknowledges stakeholder expectations for
increased transparency on tax-related matters. Macquarie
is a signatory to the Australian Board of Taxation’s voluntary
Tax Transparency Code.
More detailed information on Macquarie’s
approach to tax transparency is available at
macquarie.com/fy21‑tax‑transparency
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Environmental, Social and GovernanceContinued In the year ended 30 June 2020, Macquarie’s political
contributions in Australia totalled $A251,230 comprising:
$A127,680 to the Liberal Party of Australia; $A112,550 to the
Australian Labor Party; and $A11,000 to the National Party.
Contributions were to meet the costs of memberships of
political party business forums, attendance at events and
party conference corporate days, and sponsorship of events.
Macquarie did not make any direct donations.
It is not Macquarie’s practice to contribute monies to political
parties in other jurisdictions.
Data privacy and security
Whenever we handle personal information, we take steps
to ensure appropriate standards of privacy practice and
security are applied.
Further information is available at
macquarie.com/corporate‑governance
Our policies are available at macquarie.com/esg
Macquarie Group Limited and its subsidiaries 2021 Annual Report
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Macquarie Group Foundation
The Macquarie Group Foundation (the Foundation) is the philanthropic arm of Macquarie.
The Foundation encourages Macquarie employees to give back to the communities in
which they live and work by contributing service, financial support and leadership to the
community organisations they feel passionately about.
$A475m(1)
contributed since inception
2,400+(2)
non-profit organisations
supported
$A20m
allocated to responding
to the COVID-19 crisis
During an unprecedented year, Macquarie employees and
the Foundation responded with empathy and generosity.
In FY2021 $A64 million(3) was contributed to over 2,400
non-profit organisations around the world by Macquarie
employees and the Foundation, making this a record year.
Through donations and fundraising efforts by employees and
matching by the Foundation, together with the Foundation’s
annual grant-making program, over $A475 million(1) has been
contributed to thousands of community organisations
around the world since inception.
The Foundation’s focus on the communities where Macquarie
employees live and work enables a better understanding of
local needs, and helps to leverage employees time, expertise
and networks for greater social impact. In FY2021 employees
continued to volunteer their time in a variety of ways,
including pro bono work and board positions.
Many employees provide their time and skills to non-profit
organisations aligned to the Foundation’s global grant-making
focus area of supporting social and economic opportunities
for young people.
By pivoting towards virtual volunteering throughout
FY2021, Macquarie employees continue to be highly
engaged in global initiatives such as Foundation Week, as
well as regional initiatives including Mentoring Week in the
Americas, Community Day in Asia, Australian Business and
Community Network (ABCN) programs in ANZ and Social Mobility
Week in EMEA.
During the sixth annual Foundation Week – a campaign
where non-profits receive bonus matching of amounts raised
up to $A5,000 by Macquarie teams – more than $A5.4 million
was distributed to over 208 non-profit organisations around
the world. Employees organised more than 230 events
across 41 Macquarie offices, many of which supported
Foundation grant partners. By hosting 85% of events virtually,
Macquarie employees ensured the non-profit organisations
they’re passionate about still received the support they needed.
For more information on the Foundation’s response
to COVID-19, visit macquarie.com/community
Responding to crisis
In response to the COVID-19 crisis, Macquarie Group
announced an allocation of $A20 million to the Foundation
to make donations to a number of organisations working to
combat the disease and provide relief from its impacts. The
Foundation has focused on recipients addressing areas of
immediate and medium-term need.
To date $A17.7 million in total has been allocated to
36 organisations. $A2 million has been allocated to two
Australian research projects, $A7.2 million has been allocated
across 24 non-profits internationally that focused on direct
relief efforts and most recently $A8.5 million has been
allocated to 10 organisations that are supporting workers
and businesses in restarting economic activity.
For example, through funding received from the COVID-19
donation fund, edX created the ‘Macquarie Scholarship
Program’ for economic recovery by supporting online learning
courses and programs for low-income and under-represented
groups of learners. Economic recovery grants have also been
allocated to organisations including Local Initiatives Support
Corporation (LISC) in the Americas, Regional Opportunities
Australia in ANZ, Investing in Women in Asia and the London
Community Response Fund in EMEA.
Alongside the COVID-19 pandemic, 2020 also saw a
heightened focus on societal inequalities, with particular
action demanded on longstanding racial injustice in the
United States and around the world. As part of Macquarie’s
response, the Macquarie Americas Management Committee
partnered with the Foundation to create the Racial Equity
Fund. The Fund supports community groups working on
solutions towards racial equity, with a working group of
Macquarie employees engaged in nominating potential
recipients as well as educating and engaging employees on
the issue.
One organisation supported through the Racial Equity Fund
is the Robin Hood Foundation. Macquarie’s funding supports
Robin Hood’s Power Fund, an initiative to fund and elevate
non-profit leaders of colour working to increase economic
mobility for New Yorkers living in poverty.
(1) Since inception in 1985.
(2) In the 12 months to 31 March 2021.
(3) Contribution figures comprise Macquarie employees’ donations and fundraising; Foundation matching support for employees’ donations and fundraising; Foundation donations
to commemorate employees attaining 10-year and 25-year anniversaries at Macquarie; Foundation grants to non-profit organisations to recognise 12 months of board service by a
Macquarie employee; and Macquarie and Foundation grants to community organisations (including COVID-19 donation fund and Year 2 donations for the 50th Anniversary Award) in
the 12 months to 31 March 2021.
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
Macquarie Sports
In FY2021, Macquarie Sports clinics were heavily impacted
by the pandemic, and responded with two key initiatives.
Macquarie Sports extended 2020 funding to 31 March 2021
to allow an extra three months for sporting partners to get
through the COVID-19 restrictions, restart their programs and
utilise the funding provided to them.
Macquarie Sports also redeployed funding to selected
sporting partners to enable them to enhance an existing
program or commence a new program.
Macquarie employees selected Wheelchair Sports NSW/
ACT to receive a $A25,000 grant to deliver a second
annual residential Junior Wheelies Camp. The Macquarie
Sports Advisory Committee also selected a further two
organisations to receive $A25,000 each: Sportwell’s
Hydrothon All-Female Surf Sports Clinics (focused on
bushfire-affected surf clubs on the far south coast of NSW)
and Water Polo NSW’s Girls Making Waves program (focused
on regional communities).
In early 2021 many Macquarie Sport clinics have resumed
with appropriate COVID-19 safe protocols in place.
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Macquarie Group Collection
For the first time the Macquarie Group Collection’s (the
Collection’s) ninth annual 2020 Macquarie Group Emerging
Artist Prize and Exhibition was held virtually. In order to
support more emerging artists during these challenging
times, eight artists were selected as winners. This year saw
a record number of submissions, attendance at the launch
event and social media activity.
The Collection also supported the Indigenous Art Code’s ‘Our
Art Is Our Lifeline’ national media campaign, which aimed to
support the Indigenous art industry through the global crisis
and promote fair and ethical trading.
The Collection has been supporting emerging Australian
artists for over 30 years by acquiring and displaying their
works in Macquarie offices around the world. The Collection
features art in all media, around the theme The Land and its
Psyche, reflecting the diversity of the Australian landscape
as seen through the eyes of its artists. Now comprising
more than 850 works selected by a volunteer committee of
Macquarie employees and a curatorial expert, the Collection
is on display in around 40 Macquarie offices worldwide.
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Grant‑making focus for social impact
The Foundation’s global grant-making focus area of supporting
social and economic opportunities for young people in the
communities where employees live and work now represents
the majority of the global granting budget. With this focus,
the Foundation aims to maximise its social impact, using not
only its financial resources but also the skills and networks
of Macquarie employees.
Many of the grant partner organisations engage Macquarie
employees through mentoring, career development and
employability programs. These organisations include the
Double Discovery Center at Columbia University in the
Americas, Raise Mentoring in ANZ, Asha India Foundation in
Asia and Dallaglio RugbyWorks in EMEA.
Throughout FY2021, the Foundation provided flexible funding
arrangements and access to additional funding to enable
grant partners respond to the challenges of the pandemic.
Macquarie 50th Anniversary Award
In August 2019, Macquarie announced the five winners of
the Macquarie 50th Anniversary Award to each receive
$A10 million over a five year period to drive social change
through bold projects: Last Mile Health, Monash University’s
World Mosquito Program, Murdoch Children’s Research
Institute World Scabies Program, Social Finance and The
Ocean Cleanup.
Throughout FY2021, the five winners adapted to these
challenging times and continued to progress their projects.
For example, Last Mile Health, a national health assistance
program in Liberia, was able to deploy over 3,800 frontline
health workers and served more than 770,000 people since
2019 whilst also assisting with the local COVID-19 response in
Malawi and Ethiopia. The Ocean Cleanup, working to rid the
world’s oceans of plastic, successfully launched a new River
Interceptor in the Dominican Republic stemming the flow of
plastic before it gets out to sea.
Over 70 Macquarie employees from around the world
volunteered to join the Macquarie 50th Anniversary Award
Ambassador Network this year, putting their hand up to work
alongside these organisations and drive key initiatives.
For more information on the Macquarie 50th
Anniversary Award winners, visit macquarie.com/50award
FY2021 contribution amount
Total Macquarie spend
(including matching of staff contributions)
Staff contribution
(estimation based on Foundation match funding)
$A51,770,000
$A11,845,000
Further information regarding Macquarie employees community initiatives and organisations supported by the
Foundation is available at macquarie.com/community
73
Direct relief
$A7.25m
has been allocated across
24 non-profits internationally
that are focused on direct
relief efforts including:
Macquarie’s funding helped address critical
food security needs across The Global
FoodBanking’s network of more than 900
foodbanks in 40 countries, including meals
for children as many schools around the
world remain closed.
Funding supported the International Rescue
Committee’s (IRC) COVID-19 preparedness
and response programs in over 40
countries. From sharing crucial information
in Italy to training health care workers in
Syria to continuing vital work with refugees
in the US, the IRC teams are on the ground
responding to the outbreak every day.
Macquarie Group Foundation
$A20 million
COVID-19
donation
fund
To date, we have allocated
$A17.7m in total to
36 organisations
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
Global coverage
Direct relief
• Australia
• Austria
• France
• Germany
• Hong Kong
• India
• Luxembourg
• Philippines
• Singapore
• South Africa
• South America
• Switzerland
• United Kingdom
• United States
of America
Scientific
research
• Australia
Economic
recovery
• Australia
• Hong Kong
• India
• Philippines
• United Kingdom
• United States
of America
Scientific research
Economic recovery
$A2m
donated to two
renowned Australian
research institutes:
$A8.5m
to ten organisations that
are supporting workers
and businesses in restarting
economic activity including:
Funding contributed to the large-scale
Optimise Study on isolation/quarantine
and physical distancing, providing
evidence to government, community
organisations and key health service
groups to assist in restoring economic
and recreational activities whilst
keeping new infections at a low level.
An initiative of the Australian
Government, funding established
the ‘Macquarie Investing in Women
RISE Fund’, enabling impact
investors to unlock private sector
and other investments for women’s
SMEs, stimulating job creation and
providing access to critical services in
hard-hit markets in Philippines.
Funding contributed to the
international Australasian COVID-19
Trial (ASCOT), which aims to identify
the best treatments for COVID-19 that
will reduce mortality or the need for
mechanical ventilation in hospitalised,
but not yet critically ill patients.
Funding is providing Local Initiatives
Support Corporation (LISC) with
grants directed to small business
owners for their most urgent relief
and rebuilding needs. Funding will be
directed to minority-owned small
businesses, located in underserved
communities in New York, Houston and
Philadelphia, which are experiencing
economic hardship, and have traditionally
been left out of business relief programs.
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Main image: LISC COVID-19 direct relief
Top: Asylum Seekers Centre COVID-19 staff and volunteers
at the temporary foodbank
Bottom: Goonj COVID-19 staff making family relief kits
75
Risk Management
Risk governance at Macquarie
Risk management framework
Role of the Board
The role of the Board is to promote the long-term interests
of Macquarie, taking into account Macquarie’s specific and
broader responsibilities to its shareholders, funders, clients,
staff and the communities in which it operates. The Board
is committed to oversight of Macquarie’s performance, risk
management, engagement with regulators and culture and
to promoting the creation of enduring value by realising
opportunities for the benefit of our clients, community,
shareholders and our people. Macquarie’s robust risk
management framework supports the Board in its role.
The Board is ultimately responsible for the framework,
including oversight of its operation by Management.
Role of Management
The Group Heads of the Operating and Central Service
Groups are responsible for the implementation of the risk
management framework in their groups. They are required
semi-annually to attest that key risks have been identified
and are adequately controlled in their groups. These
management representations support the sign-off of the
half-year and the full-year financial statements.
Three lines of defence
Macquarie’s approach to risk management adopts the
‘three lines of defence’ model in which risk ownership
responsibilities are functionally independent from oversight
and assurance:
• primary responsibility for risk management lies with
the business. The risk owner is the first line of defence.
An important part of the role of all staff throughout
Macquarie is to ensure they manage risks appropriately
• the Risk Management Group (RMG) forms the second line
of defence and provides independent and objective review
and challenge, oversight, monitoring and reporting in
relation to Macquarie’s material risks
• Internal Audit, as the third line, provides independent
and objective risk-based assurance on the compliance
with, and effectiveness of, Macquarie’s financial and risk
management framework.
Overview
Macquarie’s risk management framework is the totality of
systems, structures, policies, processes and people within
Macquarie that identify, measure, monitor, report and
control or mitigate internal and external sources of material
risk. Material risks are those that could have a material
impact, financial or non-financial on Macquarie. Macquarie’s
material risks include aggregate, asset, conduct, credit,
environmental and social (including climate change), equity,
financial crime, legal, liquidity, market, operational (including
cyber and information security), regulatory and compliance,
reputational, strategic, tax, and work health and safety risks.
The risk management framework applies to all Operating and
Central Service Groups.
Details about the risks we manage are available at
macquarie.com/risk‑management
Key components
Core risk management principles
Macquarie’s approach to risk management is based on stable
and robust core risk management principles. These are:
• ownership of risk at the business level: Group Heads
are responsible for ownership of all material risks that
arise in, or because of, the business’ operations, including
identification, measurement, control and mitigation of
these risks. Before taking decisions, clear analysis of the
risks is sought to ensure those taken are consistent with
the risk appetite and strategy of Macquarie
• understanding worst‑case outcomes: Macquarie’s
risk management approach is based on examining the
consequences of worst-case outcomes and determining
whether these are acceptable and within Macquarie’s risk
appetite. This approach is adopted for all material risk
types and is often achieved by stress testing. Macquarie
operates a number of sophisticated quantitative
risk management processes, but the foundation of
the approach is the informed consideration of both
quantitative and qualitative inputs by highly
experienced professionals
• requirement for an independent sign‑off by RMG:
Macquarie places significant importance on having a
strong, independent risk management function charged
with signing off all material risk acceptance decisions. It is
essential that RMG has the capability to do this effectively.
RMG has invested in recruiting skilled professionals from
a range of disciplines, including those with trading or
advisory and capital markets experience. For all material
proposals, RMG’s opinion must be sought at an early
stage in the decision-making process. The approval
document submitted to Senior Management must include
independent input from RMG on risk and return.
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Risk Management Group
RMG, which forms the second line of defence, is an
independent and centralised function responsible for
independent and objective review and challenge, oversight,
monitoring and reporting in relation to Macquarie’s material
risks. RMG designs and oversees the implementation of
the risk management framework. RMG is structured into
specialist functional divisions, depicted below, and employs
an integrated approach to risk analysis and management
across risk classes. RMG’s assessment and monitoring of risks
involves a collaborative effort across the divisions to ensure
a detailed analysis takes place both at the individual and
aggregate risk level.
RMG’s oversight of risk is based on the following
five principles:
• Independence: RMG is independent of Macquarie’s
Operating and Central Service Groups. The Head of RMG,
as Macquarie’s CRO, reports directly to the CEO with
a secondary reporting line to the BRiC. RMG approval
is required for all material risk acceptance decisions
• Centralised risk management: RMG’s responsibility
covers the whole of Macquarie. It assesses risks from
a Macquarie-wide perspective and provides a consistent
approach across Macquarie
• Approval of all new business activities: The Operating
and Central Service Groups cannot undertake new
businesses or activities, offer new products, enter new
markets, or undertake significant projects without first
consulting RMG. RMG reviews and assesses risk and sets
limits. Where appropriate, these limits are approved by the
Executive Committees and the Board
• Continuous assessment: RMG continually reviews risks
to account for changes in market circumstances and
developments within Macquarie’s business
• Frequent monitoring and reporting: The risk profile of
Macquarie with respect to all material risks is monitored
by RMG on an ongoing basis. Centralised systems exist to
allow RMG to monitor financial risks daily. Reporting on
all material risks is provided to Senior Management and
the Board.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Internal audit
The Internal Audit Division, as the third line, provides
independent and objective risk-based assurance to the
Board Audit Committee (BAC), other Board Committees
and Senior Management on the compliance with, and
effectiveness of, Macquarie’s financial and risk management
framework, including its governance, systems, structures,
policies, processes and people for managing material
risks. Internal Audit assesses whether material risks have
been properly identified by management and key internal
controls have been properly designed and are operating
effectively and sustainably to mitigate those material risks.
The BAC has primary power of direction over the Internal
Audit Division and is accountable for reviewing the
effectiveness of the Internal Audit function. The Head
of Internal Audit reports functionally to the BAC and is
primarily accountable to them. The Head of Internal Audit
has unrestricted access to the Committee and its Chair and
meets privately with the BAC members regularly during the
year. The BAC monitors and reviews the performance, degree
of independence and remuneration of the Head of Internal
Audit. The BAC also approves any appointment and removal
of the Head of Internal Audit. The Head of Internal Audit
reports operationally to the CRO for day-to-day management.
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Macquarie Board
Board Risk Committee(1)
Macquarie Managing Director and CEO
Board Audit Committee
Head of RMG
Chief Risk Officer
Credit Risk
Market Risk
Regulatory
Affairs &
Aggregate Risk
Operational
Risk &
Governance
Compliance
Financial
Crime Risk
Behavioural
Risk
Enterprise
Support
Internal Audit
Management reporting line
Operational reporting line
Secondary reporting line
(1) The Board Risk Committee assists the Board by providing oversight of Macquarie’s risk management framework and advising the Board on Macquarie’s risk appetite, risk culture and
risk management strategy. In addition, the Board Governance and Compliance Committee assists the Board in fulfilling its responsibility for monitoring the regulatory and compliance
risk framework of Macquarie, including the conduct risk management framework, and reviews and monitors Macquarie’s work health and safety, environmental and social risk
management policies and customer and client reporting.
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Risk Management
Continued
Risk appetite management
Macquarie’s risk appetite, being the nature and amount of risk
that Macquarie is willing to accept in pursuit of an appropriate
and resilient long-term return on its capital is detailed in the
Board-approved Risk Appetite Statement (RAS). The RAS
states transactions must generate returns proportionate to
the risks. Accordingly, a risk and return analysis is required for
all significant new deals, products and businesses.
The RAS is accessible to all staff and is referred to in the
Code of Conduct. The principles of the RAS are implemented
primarily through the following mechanisms:
Risk tolerances
Risk tolerances have been established to ensure that we only
accept risks that are consistent with our risk appetite.
Financial risks
Limits translate risk appetite principles into hard constraints,
being the Global Risk Limit that constrains Macquarie’s
aggregate level of risk as well as granular limits for specific
financial risks.
Macquarie sets the Global Risk Limit with reference not only
to capital but also to earnings so that in a prolonged, severe
downturn, earnings and surplus capital are sufficient to cover
losses and maintain market confidence in Macquarie. The
potential financial impact of a non-financial risk event is also
included in the Global Risk Limit.
Macquarie operates under a strict principle of ‘no limits, no
dealing’. Compliance with specific limits is monitored by the
business and RMG. These granular limits are set to allow the
Businesses to achieve their near-term plans while promoting
a reassessment of the opportunity and associated risks as
the limit is approached.
Non‑financial risks
We seek the highest standards in addressing non-financial
risks. Macquarie monitors and reports on a range of metrics
for non-financial risks that provide a measure of our risk
profile for these risks.
These metrics provide a basis for analysis and
communication of risk, for forcing explicit consideration of
the risk profile, raising awareness of risks and facilitating
debate and actions in relation to potential future risks.
Further explanation on Environmental, Social and
Governance (ESG) and Work Health and Safety
risks in particular is set out in the ESG section of
this report.
Policies
Policies are key tools for ensuring that risks taken are
consistent with Macquarie’s risk appetite. They are designed
to influence and determine all major decisions and actions,
and all activities must take place within the boundaries
set by them.
New product and business approval process
All new businesses and significant changes to existing
products, processes or systems are subject to a rigorous,
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interactive approval process that adheres to the principles
stated in the RAS. This results in constructive dialogue on
risk matters between RMG and the relevant business.
This formal process is designed so that the proposed
transaction or operation can be managed. All relevant risks
are reviewed to ensure they are identified and addressed
prior to implementation. These risks are also monitored on an
ongoing basis. The approvals of RMG, Financial Management
Group, Legal and Governance and other relevant
stakeholders within Macquarie are obtained. RMG also checks
that all necessary internal approvals are obtained prior to
commencement.
Stress testing
Stress testing is an integral component of Macquarie’s risk
management framework and a key input to the capital
adequacy assessment process. Stress testing incorporates
enterprise-wide scenario analyses in which losses and capital
are driven by the chosen economic parameters of a scenario.
The scenarios as well as their economic parameters are
tailored to Macquarie’s portfolio.
Stress testing is used to validate that Macquarie’s capital
targets and associated triggers remain appropriate given the
risk profile of the portfolio. It is also used to identify areas of
potential concentration in Macquarie’s portfolio as well as
being a key measure of aggregate risk appetite, calibrated to
Macquarie’s ability to withstand severe stress.
Risk culture
A sound risk culture has been integral to Macquarie’s
risk management framework since inception. Primary
responsibility for risk management in Macquarie, including
risk culture, is at the business level. The Board, assisted by the
BRiC, is responsible for:
• reviewing, endorsing and monitoring Macquarie’s approach
to risk culture and conduct
• forming a view on Macquarie’s risk culture and the extent
to which it supports the ability of Macquarie to operate
consistently within its risk appetite.
Macquarie’s approach to maintaining an appropriate risk
culture is based on three components:
Setting behavioural expectations
Senior Management, with oversight from the Board, set
behavioural expectations. The way we fulfil Macquarie’s
purpose is defined by our principles of What We Stand
For: Opportunity, Accountability and Integrity. Staff are
made aware that these principles must form the basis of all
behaviours and actions. These behavioural expectations are
specified in the Board approved Code of Conduct, which is
actively promoted by Management and cascaded through
the organisation.
Leading and executing
Management implements behavioural expectations through:
• leadership actions and communication
• organisational governance
• incentives and consequence management
• organisational and individual capability.
Monitoring, measuring and reporting
Macquarie monitors and measures its risk culture to gauge
effectiveness while promoting continuous improvement.
Mechanisms include:
• reports incorporating behavioural elements (such as
policy and limit breaches) are prepared by all Operating
and Central Service Groups, including reports prepared by
RMG, HR and Macquarie’s Integrity Office and escalated,
where relevant, according to our governance framework.
These include regular reports relating to risk culture that
are provided to Senior Management and the Board
• the Risk Culture team in RMG Behavioural Risk uses a
well-developed assessment process, governed by the Risk
Culture Framework. The team undertakes independent
risk culture reviews across the Operating and Central
Service Groups to assess the relative strengths and areas
for development within a business or function.
These mechanisms facilitate a feedback loop of sharing good
practice and lessons learned to enable cultural alignment.
Remuneration and consequence management
Macquarie’s remuneration framework and consequence
management process are designed to promote
accountability, encourage innovation, reward appropriate
behaviours and discourage inappropriate behaviours.
Effective consequence management is a key component
of Macquarie’s risk culture. Macquarie aims to apply
consequences for non-compliance in a timely manner, and as
fairly and consistently as possible.
See the Remuneration Report for more details
on Macquarie’s remuneration framework and
consequence management process
Conduct risk
Macquarie defines conduct risk as the risk of behaviour,
action or omission by individuals employed by, or on
behalf of, Macquarie or taken collectively in representing
Macquarie that may have a negative outcome for our clients,
counterparties, the communities and markets in which we
operate, our staff, or Macquarie.
Such behaviour, actions or omissions may include:
• breaches of laws or regulations
• disregard for Macquarie’s principles of What We Stand For
or the Code of Conduct
• negligence and/or a lack of reasonable care and diligence
• failure to escalate improper conduct.
Conduct risk can arise inadvertently or deliberately in any
of Macquarie’s Operating and Central Service Groups.
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
Macquarie’s approach to conduct risk management is
integrated in our risk management framework and is
consistent with our three lines of defence model. Risk-taking
must be consistent with Macquarie’s principles of What We
Stand For: Opportunity, Accountability and Integrity which
must form the basis of all behaviours and actions. These
behavioural expectations are outlined in the Board approved
Code of Conduct.
Macquarie has a range of controls and processes in place
to identify and manage conduct risk, including:
• new and emerging conduct risks are identified through
the annual strategy and business planning process
• conduct risks that may arise when Macquarie establishes
a new business or product, or makes a significant change
to an existing business, product, process or system are
identified and assessed through the new business and
product approval process
• independent monitoring and surveillance conducted
by RMG, in addition to front line supervisory activities
performed by the business
• the Risk and Control Self-assessment incorporates
a conduct risk lens, requiring businesses to identify
and assess their key conduct risks
• where incidents occur, we investigate the underlying
contributing behaviours and record where they are the
root cause of the incident
• performance-based remuneration reflects an
individual’s performance, which includes assessment
of a range of factors including risk management and
behavioural measures
• an Integrity Office that is an independent point of contact
for staff to safely raise concerns about misconduct,
unethical behaviour or breaches of the Code of Conduct
• a global Staff Hotline for staff who wish to speak
up anonymously.
79
Risk Management
Continued
Market and credit risk
Year end performance indicators
Macquarie monitors and measures a range of risks as outlined above in the risk management framework overview. The
following graphs provide historical and current year information on key market and credit risks.
Trading revenue
The effectiveness of Macquarie’s risk management framework can be partially measured by Macquarie’s daily trading results.
These are daily profit and loss results that are directly attributable to market-based activity from Macquarie’s trading desks.
Macquarie’s market risk activities continue to be based on earning income from client-facing businesses. The majority of trading
income is derived from client activities rather than outright proprietary trading activity.
Macquarie’s trading results over time have shown consistent profits and low volatility. This is evident in the graph below and
reflects the client-based nature of trading activities. In FY2021 Macquarie made a net trading profit on 240 out of 261 trading
days (2020 results: 208 out of 262 trading days) and trading loss profiles were consistent with previous years.
Daily trading profit and loss
<-35
<-30
<-25
<-20
<-15
<-10
<-5
<0
>0
>5
>10
>15
>20
>25
>30
>35
FY 2020
FY 2021
$Am
Days
70
60
50
40
30
20
10
0
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
Value at Risk (VaR)
VaR provides a statistically based summary of overall market risk in Macquarie. The magnitude of VaR reflects changes in
positions as well as changes in market volatility, correlations and enhancements to the model. The integrity of the VaR model is
regularly tested against daily profit and loss.
Macquarie’s market risk remained in line with the previous year, driven by higher market volatility along with commodity
exposure driven by oil and gas activity. VaR reached a maximum towards the end of the year as a result of the extreme cold
weather in the US. VaR remains modest in comparison to capital and earnings, representing less than 0.2% of total equity.
Aggregate VaR
Value at Risk ($Am)
Average Value at Risk to Total Equity %
50
40
30
20
10
0
1.0
0.8
0.6
0.4
0.2
0.0
Mar 19
Jun 19
Sep 19
Dec 19
Mar 20
Jun 20
Sep 20
Dec 20
Mar 21
Value at Risk (1-day 99% confidence interval)
Average Value at Risk to Total Equity
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Risk Management
Continued
Loan impairment review
Macquarie prospectively adopted AASB 9 Financial Instruments (AASB 9) effective 1 April 2018. As permitted by AASB 9,
prior year comparative information was not restated. AASB 9 contains requirements for the classification and measurement
of certain financial instruments, hedge accounting requirements and, from a credit provisioning perspective, introduced an
expected credit loss methodology, which differed to the incurred loss methodology applied prior to FY2019.
For AASB 9 disclosures refer to Note 36.1 Credit risk to the financial statements including disclosure of loan asset exposures
by stage of credit performance. Note 13 Expected credit losses to the financial statements discloses expected credit losses
on loan assets by stage of credit performance. The 2021 numbers presented below are calculated with reference to this
information. Loan assets categorised as Stage III in terms of AASB 9 are defined as ‘credit impaired’. As noted, AASB 9 did not
require the restatement of comparative information, and for that reason the comparative numbers in the graph below have
not been restated.
Underlying credit quality in FY2021, as indicated by Stage I & II provisions and credit losses, has remained broadly consistent
compared to FY2020. The level of Stage I & II provisions to loan assets and net credit losses to loans assets is primarily caused
by the deterioration of market conditions and market uncertainty, as a result of COVID-19 (as disclosed in the Notes to the
financial statements).
Ratio of Provisions and Credit Impaired Loan Assets to Loans Assets
%
5
4
3
2
1
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
(2)
AASB 139
AASB 9
Stage I & II Provisions to Loan Assets (Prior year comparatives to FY18: Collective provision to loans, advances and leases) - Balance sheet
Net Stage III Loan Assets to Loan Assets (Prior year comparatives to FY18: Impaired assets to loans, advances and leases) - Balance sheet
Net Credit Losses to Loan Assets (Prior year comparatives to FY18: Net Credit losses to loans, advances and leases) - Income statement
Notes to prior year comparatives(3)
• Loans, advances and leases excluded securitised mortgages, securitised Macquarie Capital loans/leases, segregated futures
funds and receivables in the form of fees.
• The collective provision is intended to cover losses inherent in the existing overall credit portfolio which are not yet
specifically identifiable.
• Net impaired assets and net losses excluded investment securities.
• Net credit losses represented the total P&L impact in the stated period due to additional individual provisions, direct
write-offs (net of any write-backs) and change in Stage I & II provisions.
(2) The decrease in the ratio of Net Stage III Loan Assets to Loan Assets during FY2021 is attributable to the growth in the mortgage portfolio and the carrying value of loans within
Stage III remaining relatively comparable to the prior year.
(3) The information for the financial years ended 31 March 2009–2021 is based on results using the Australian Accounting Standards that were effective and adopted by the Consolidated
Entity at the reporting dates. Reporting periods have been restated only to the extent as required by the accounting standards. The financial reporting periods may hence not be fully
comparable with one another as a result of changes in accounting standards’ requirements.
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Directors’
Report
FreeWire Boost Charger, United States
Part of the Macquarie Capital Venture Studio
portfolio, FreeWire Technologies is a leading
manufacturer of next-generation electric
vehicle (EV) charging and battery-integrated
power solutions for grid edge applications.
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86
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Directors’ Report
For the financial year ended 31 March 2021
The Directors of MGL submit their report with the financial report of the
Consolidated Entity and of the Company for the year ended 31 March 2021.
Directors
At the date of this report, the Directors of MGL are:
Independent Directors
P.H. Warne, Chairman
J.R. Broadbent AC
G.M. Cairns
P.M. Coffey
M.J. Coleman
D.J. Grady AO
R.J. McGrath
M. Roche
G.R. Stevens AC
N.M. Wakefield Evans
Executive Voting Director
S.R. Wikramanayake, Managing Director and Chief
Executive Officer
Other than Ms McGrath and Mr Roche, the Directors listed
above each held office as a Director of MGL throughout
the financial year ended 31 March 2021. Ms McGrath and
Mr Roche joined the Board of Directors as Independent
Directors effective from 20 January 2021.
Mr G.R. Banks retired as an Independent Director on
30 July 2020 and Mr M.J. Hawker retired as an Independent
Director on 30 September 2020. Mr G.M. Cairns retires as an
Independent Director on 7 May 2021.
Those Directors listed as Independent Directors have been
independent throughout the period of their appointment.
Details of the qualifications, experience and special
responsibilities of the Directors and qualifications and
experience of the Company Secretaries at the date of
this report are set out on pages 92 to 98 of this report
Principal activities
The principal activity of MGL during the financial year
ended 31 March 2021 was to act as a Non-Operating Holding
Company (NOHC) for the Consolidated Entity. The activities
of the Consolidated Entity were those of a global financial
group providing banking, financial, advisory, investment and
funds management services. In the opinion of the Directors,
there were no significant changes to the principal activities of
the Consolidated Entity during the financial year under review
that are not otherwise disclosed in this report.
Result
The financial report for the financial years ended
31 March 2021 and 31 March 2020, and the results
have been prepared in accordance with Australian
Accounting Standards.
The consolidated profit after income tax attributable
to ordinary equity holders for the financial year ended
31 March 2021 was $A3,015 million (2020: $A2,731 million).
Dividends and distributions
Subsequent to the year ended 31 March 2021, the
Directors have resolved to pay a final ordinary dividend of
$A3.35 per share, 40% franked based on tax paid at 30%
($A1,211 million in aggregate). The final ordinary dividend is
payable on 2 July 2021.
On 22 December 2020, the Company paid an interim ordinary
dividend of $A1.35 per share, 40% franked ($A486 million in
aggregate) for the financial year ended 31 March 2021.
On 3 July 2020, the Company paid a final ordinary dividend of
$A1.80 per share, 40% franked ($A637 million in aggregate) for
the financial year ended 31 March 2020.
No other ordinary share dividend or distributions were
declared or paid during the financial year by the Company.
State of affairs
There were no other significant changes in the state of
affairs of the Consolidated Entity that occurred during the
financial year under review that are not otherwise disclosed
in this report.
Operating and financial review
Please refer to section 1 of this Annual Report for the
following in respect of the Consolidated Entity:
• a review of operations during the year and the results
of those operations
• likely developments in the operations in future financial
years and the expected results of those operations
• comments on the financial position
• comments on business strategies and prospects for future
financial years.
In respect of likely developments, business strategies and
prospects for future financial years, material which if included
would be likely to result in unreasonable prejudice to the
Consolidated Entity, has been omitted.
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Directors’ Report
For the financial year ended 31 March 2021 continued
Directors’ equity participation and other relevant interests
As at the date of this report, the Directors have relevant interests in MGL ordinary shares, MGL securities, or managed
investment schemes made available by related companies of MGL and other relevant disclosable interests, as notified by the
Directors to ASX in accordance with the Corporations Act 2001 (Cth) (the Act), in the following:
Name and position
Executive Voting Director
EQUITY PARTICIPATION
OTHER RELEVANT INTERESTS
MGL
ordinary shares
RSUs held
in MEREP(1)
PSUs held
in MEREP(1)
Direct and
Indirect Interests
Number held
S.R. Wikramanayake
945,793
350,417
107,110 MAFCA Investments
2,000,000
Independent Directors
J.R. Broadbent
G.M. Cairns
P.M. Coffey
M.J. Coleman
D.J. Grady
R.J. McGrath
M. Roche
G.R. Stevens
N.M. Wakefield Evans
P.H. Warne
16,250
12,734
8,739
7,324
9,895
349
2,000
4,809
7,111
14,933
–
–
–
–
–
–
–
–
–
–
Pty Ltd ordinary shares
– Macquarie Group Capital
7,177
Notes 3 (MCN3)
Macquarie Group Capital
Notes 4 (MCN4)
Macquarie Bank Capital
Notes 2 (BCN2)
–
–
– Walter Scott Global
Equity Fund units
4,000
1,500
–
408,699.89
– Macquarie Group Capital
2,000
Notes 5 (MCN5)
– MCN3
MCN4
MCN5
BCN2
– –
–
–
–
–
–
–
–
–
390
500
100
366
–
–
–
–
–
During the financial year, Directors received dividends relating to their holdings of MGL ordinary shares at the same rate
as other shareholders.
(1) These RSUs and PSUs were issued pursuant to the Macquarie Group Employee Retained Equity Plan (MEREP) and are subject to the vesting, forfeiture and other conditions applied to
grants of awards to Executive Directors, as described in Note 32 Employee equity participation disclosure to the financial statements in the Financial Report.
88
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Board and Board Committee meetings and attendance
The number of meetings of the Board of Directors (the Board) and of the Committees of the Board and the individual
attendance by Directors at those meetings which they were eligible to attend, during the financial year, is summarised
in the table below:
Number of meetings
P.H. Warne
S.R. Wikramanayake
G.R. Banks(3)
J.R. Broadbent
G.M. Cairns
P.M. Coffey
M.J. Coleman
D.J. Grady
M.J. Hawker(4)
R.J. McGrath(5)
M. Roche(6)
G.R. Stevens
N.M. Wakefield Evans
Regular Board
meetings(2)
11
BAC
meetings(2)
7
BGCC
meetings(2)
5
BNC
meetings(2)
5
BRC
meetings(2)
6
BRiC
meetings(2)
5
Special Board
Meetings(2)
4
11/11
11/11
4/4
11/11
11/11
11/11
11/11
11/11
4/5
3/3
3/3
11/11
11/11
–
–
–
–
–
7/7
7/7
–
2/2
–
–
7/7
7/7
–
–
1/1
–
–
–
5/5
5/5
–
2/2
–
–
5/5
5/5
–
1/1
5/5
5/5
5/5
5/5
5/5
1/1
2/2
2/2
5/5
5/5
6/6
–
3/3
6/6
6/6
6/6
–
6/6
3/3
–
1/1
–
–
5/5
–
1/1
5/5
5/5
5/5
5/5
5/5
1/1
2/2
2/2
5/5
5/5
4/4
4/4
1/1
4/4
4/4
4/4
4/4
4/4
1/2
–
–
4/4
4/4
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There was one Board sub-committee convened during the period, with two meetings held. All eligible sub-committee members,
being Mr Warne, Ms Wikramanayake, Mr Coleman and the Chief Financial Officer (CFO), Mr Harvey, attended both meetings.
All Board members are sent Board Committee meeting agendas and may attend any meeting.
The Chairman of the Board and the CEO attend Board Committee meetings by invitation as a matter of course.
(2) Number of meetings attended by the member/total number of meetings eligible to attend as a member. Some of the Special Board Meetings were called at short notice and not all
Board members were able to attend.
(3) Mr Banks retired from the Board as an Independent Voting Director on 30 July 2020.
(4) Mr Hawker retired from the Board as an Independent Voting Director on 30 September 2020.
(5) Ms McGrath was appointed to the Board as an Independent Voting Director, and as a member of the Board Risk Committee and Board Nominating Committee, effective from
20 January 2021. She was appointed as a member of the Board Governance and Compliance Committee effective from 1 February 2021.
(6) Mr Roche was appointed to the Board as an Independent Voting Director, and as a member of the Board Risk Committee and Board Nominating Committee, effective from
20 January 2021. He was appointed as a member of the Board Remuneration Committee effective from 1 February 2021.
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Directors’ Report
For the financial year ended 31 March 2021 continued
Directors’ and officers’
indemnification and insurance
Under MGL’s Constitution, MGL indemnifies all past
and present directors and secretaries of MGL and its
wholly-owned subsidiaries (including at this time the
Directors named in this report and the Secretaries),
against certain liabilities and costs incurred by them in
their respective capacities. The indemnity covers the
following liabilities and legal costs (subject to the
exclusions described as follows):
• every liability incurred by the person in their
respective capacity
• all legal costs incurred in defending or resisting
(or otherwise in connection with) proceedings in
which the person becomes involved because of their
respective capacity
The indemnities and insurance arrangements provided for
under the MGL Constitution, the Deed and the Deed Poll,
are broadly consistent with the corresponding indemnities
and insurance arrangements provided under the MBL
Constitution and deeds entered into by MBL.
Macquarie maintains a Directors’ and Officers’ insurance
policy that provides cover for each person in favour of whom
such insurance is required to be taken out under the Deed
and the Deed Poll and for MGL in indemnifying such persons
pursuant to the Deed and the Deed Poll. Relevant individuals
pay the premium attributable to the direct coverage under
the policy and MGL pays the premium attributable to the
company reimbursement coverage under the policy. The
Directors’ and Officers’ insurance policy prohibits disclosure
of the premium payable under the policy and the nature of
the liabilities insured.
• legal costs incurred by the person in good faith
in obtaining legal advice on issues relevant to the
performance and discharge of their duties as an officer
of MGL and its wholly-owned subsidiaries, if that has been
approved in accordance with MGL policy.
To the extent permitted by law, MGL has agreed to reimburse
its auditor, PricewaterhouseCoopers (PwC), for any liability
(including reasonable legal costs) PwC incurs in connection
with any claim by a third party arising from MGL’s breach of
the letter of engagement dated 23 June 2020.
This indemnity does not apply to the extent that:
• MGL is forbidden by law to indemnify the person against
the liability or legal costs, or
• an indemnity by MGL of the person against the liability
or legal costs, if given, would be made void by law.
MGL has also entered into a Deed of Access, Indemnity,
Insurance and Disclosure (as amended from time to time)
(Deed) with each of the Directors. Under the Deed, MGL,
inter alia agrees to:
• indemnify the Director upon terms broadly consistent
with the indemnity contained in MGL’s Constitution
• take out and maintain an insurance policy against liabilities
incurred by the Director acting as an officer of MGL or its
wholly-owned subsidiaries. The insurance policy must be
for an amount and on terms and conditions appropriate
for a reasonably prudent company in MGL’s position.
Insurance must be maintained for seven years after the
Director ceases to be a Director or until any proceedings
commenced during that period have been finally resolved
(including any appeal proceedings)
• grant access to the Director to all relevant company
papers (including Board papers and other documents) for
seven years after the Director ceases to be a Director or
until any proceedings commenced during that period have
been finally resolved (including any appeal proceedings).
In addition, MGL made an Indemnity and Insurance Deed
Poll on 12 September 2007 (Deed Poll). The benefit of the
undertakings made by MGL under the Deed Poll have been
given to each of the directors, secretaries, persons involved
in the management and certain other persons, of MGL and
its wholly-owned subsidiaries and other companies where
the person is acting as such at the specific request of MGL
and its wholly-owned subsidiaries. The Deed Poll provides for
broadly the same indemnity and insurance arrangements
for those persons with the benefit of the Deed Poll as for
the Deed described above. However, the Deed Poll does not
provide for access to company documents.
Environmental regulations
The Consolidated Entity has policies and procedures in
place that are designed to ensure that, where operations
are subject to any particular and significant environmental
regulation under a law of the Commonwealth or of a State
or Territory, those obligations are identified, appropriately
addressed and material breaches notified.
The Directors have determined that there has not been any
material breach of those obligations during the financial year.
Non‑audit services
Fees paid or payable to PwC, being the auditor of the
Consolidated Entity, for non-audit services during the year
ended 31 March 2021 total $A11.9 million (2020: $A9.0 million).
Further details of amounts paid or payable to PwC and its
related practices are disclosed in Note 41 Audit and other
services provided by PwC in the Financial Report.
The Voting Directors are satisfied that the provision
of non-audit services did not compromise the auditor
independence requirements of the Act for the
following reasons:
• the operation of the Consolidated Entity’s Auditor
Independence Policy, restricts the external auditor from
providing non-audit services under which the auditor
assumes the role of management, becomes an advocate
for the Consolidated Entity, audits its own professional
expertise, or creates a mutual or conflicting interest
between the auditor and the Consolidated Entity. The
policy also provides that significant permissible non-audit
assignments awarded to the external auditor must be
approved in advance by the Board Audit Committee (BAC)
or the BAC Chairman, as appropriate
• the BAC has reviewed a summary of non-audit services
provided by PwC, including details of the amounts paid
or payable, and has provided written advice to the Board
of Directors.
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Consistent with the advice of the BAC, the Voting Directors
are satisfied that the provision of non-audit services during
the year by the auditor and its related practices is compatible
with the general standard of independence for auditors
imposed by the Act.
Rounding of amounts
In accordance with ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191, amounts
in the Directors’ Report and Financial Report have been
rounded off to the nearest million Australian dollars unless
otherwise indicated.
This report is made in accordance with a resolution of
the Directors.
Events subsequent to balance date
At the date of this report the Directors are not aware of any
matter or circumstance, other than transactions disclosed in
the financial statements, that has arisen and has significantly
affected or may significantly affect the operations of the
Consolidated Entity, the results of those operations or the
state of affairs of the Consolidated Entity in the financial
years subsequent to 31 March 2021.
Peter Warne
Independent Director and Chairman
Shemara Wikramanayake
Managing Director and Chief Executive Officer
Sydney
7 May 2021
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Auditor’s independence declaration
As lead auditor for the audit of Macquarie Group Limited
for the year ended 31 March 2021, I declare that to the best
of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence
requirements of the Corporations Act 2001 (Cth) in
relation to the audit, and
(b) no contraventions of any applicable code of professional
conduct in relation to the audit.
This declaration is in respect of Macquarie Group Limited
and the entities it controlled during the financial year.
Kristin Stubbins
Partner
PricewaterhouseCoopers
Sydney
7 May 2021
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay,
Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional
Standards Legislation.
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Directors’ experience and special responsibilities
Peter H
Warne
BA (Macquarie), FAICD
Age: 65
Resides: New South Wales
Independent Chairman
of MGL and MBL since
April 2016
Independent Voting
Director of MGL since
August 2007
Independent Voting
Director of MBL
since July 2007
Mr Warne is Chairman of
the BNC and a member
of the BRC and BRiC
Shemara R
Wikramanayake
BCom LLB (UNSW)
Age: 59
Resides: New South Wales
Managing Director
and Chief Executive
Officer of MGL since
December 2018
Executive Voting Director
of MGL and MBL
since August 2018
Experience
Peter Warne has extensive knowledge of, and
experience in, financial services and investment
banking, through a number of senior roles at Bankers
Trust Australia Limited, including as Head of its global
Financial Markets Group from 1988 to 1999. Mr Warne
was a Director of the Sydney Futures Exchange (SFE)
from 1990 to 1999, then from 2000 to 2006.
He served as Deputy Chairman of the SFE from 1995
to 1999. When the SFE merged with the Australian
Securities Exchange (ASX Limited) in July 2006, he
became a Director of ASX Limited, a position he held
to 2020. Mr Warne has previously served as Chairman
of ALE Property Group from 2003 to 2017 and OzForex
Group Limited (now trading as OFX Limited) from
2013 to 2016. He was a Director of New South Wales
Treasury Corporation from 2012 to 2020, where he
served as Chairman from 2019 to 2020.
Listed company directorships (last three years)
• Director, ASX Limited (July 2006–September 2020)
Other current directorships/appointments
• Board member, Allens
• Member, ASIC Corporate Governance
Consultative Panel
Experience
In her time at Macquarie, Shemara Wikramanayake
has worked in nine cities in six countries and across
several business lines, establishing and leading
Macquarie’s corporate advisory offices in New Zealand,
Hong Kong and Malaysia, and the infrastructure
funds management business in the US and Canada.
She joined Macquarie in 1987 and was instrumental
in establishing Macquarie Capital which at the time
included: advisory; infrastructure funds; corporate
leasing and lending; and cash equities.
Ms Wikramanayake was most recently the Head
of Macquarie Asset Management, a role she held
from 2008 to 2018. Macquarie Asset Management
offers a diverse range of services including
infrastructure and real asset management; securities
investment management; and fund and equity based
investment solutions.
Before joining Macquarie, she worked as a corporate
lawyer at Blake Dawson Waldron in Sydney.
Other current directorships/appointments
• Board member, Institute of International Finance
• Founding Commissioner, Global Commission
on Adaptation
• Founding Member, Climate Finance
Leadership Initiative
• Member, University Research
Commercialisation Scheme
• Member, Technology Investment Advisory Council
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
Gender diversity
Jillian R
Broadbent AC
BA (Maths &
Economics) (Sydney)
Age: 73
Resides: New South Wales
Independent Voting
Director of MGL and MBL
since November 2018
Ms Broadbent is Chair of
the BRC and a member of
the BNC and BRiC
Experience
Jillian Broadbent has extensive investment banking
industry knowledge and markets expertise, including
a deep knowledge of risk management and regulation
in these areas. She also has considerable executive
management and listed company board experience.
Ms Broadbent spent 22 years at Bankers Trust Australia
until 1998, initially as an economic strategist and then
as executive director responsible for risk management
and derivatives in foreign exchange, interest rates
and commodities.
Ms Broadbent was also a Member of the Reserve
Bank of Australia Board between 1998 and 2013 and
has previously served as Chair of the Board of Clean
Energy Finance Corporation, and as a director of ASX
Limited, SBS, Coca Cola Amatil Limited, Woodside
Petroleum Limited, Qantas Airways Limited, Westfield
Management Limited and Woolworths Group Limited.
Listed company directorships (last three years)
• Director, Woolworths Group Limited
(January 2011–November 2020)
Other current directorships/appointments
• Director, National Portrait Gallery of Australia
• Director, Sydney Dance Company
Male: 6
Female: 5
Board tenure
5
0–3 years
1
3
2
Directors
3–6 years
6–9 years
9+ years
Board independence
91%
of Board members
are independent
directors
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Directors’ experience and special responsibilities
Continued
Gordon M
Cairns
MA (Hons) (Edin)
Age: 70
Resides: New South Wales
Independent Voting
Director of MGL and MBL
since November 2014
Mr Cairns is a member of
the BNC, BRC and BRiC
Philip M
Coffey
BEc (Hons) (Adelaide),
GAICD, SF Finsia
Age: 63
Resides: New South Wales
Independent Voting
Director of MGL and MBL
since August 2018
Mr Coffey is a member
of the BAC, BNC,
BRC and BRiC
Experience
Gordon Cairns has held a range of management
and executive roles throughout his career with
Nestle, Cadbury Ltd and Pepsico culminating as Chief
Executive Officer of Lion Nathan Limited from 1997
to 2004. He has extensive experience as a company
director, including nine years as a Non-Executive
Director of Westpac Banking Corporation, where
he served on the Board Risk Management and
Remuneration Committees.
Mr Cairns has served as a director on the boards of Lion
Nathan Australia Limited and Seven Network Australia
Limited, and as Chairman of David Jones Limited, Rebel
Group Pty Limited and Origin Energy Limited.
Listed company directorships (last three years)
• Chairman, Woolworths Group Limited
(since September 2015)
• Chairman, Origin Energy Limited
(October 2013–October 2020);
(Director June 2007–October 2020)
Other current directorships/appointments
• Director, World Education Australia
Experience
Phil Coffey served as the Deputy Chief Executive
Officer (CEO) of Westpac Banking Corporation, from
April 2014 until his retirement in May 2017. As the
Deputy CEO, Mr Coffey had the responsibility of
overseeing and supporting relationships with key
stakeholders of Westpac including industry groups,
regulators, customers and government. He was also
responsible for the Group’s Mergers & Acquisitions
function. Prior to this role, Mr Coffey held a number
of executive positions at Westpac including Chief
Financial Officer and Group Executive, Westpac
Institutional Bank.
He has successfully led operations based in Australia,
New Zealand, the United States, the United Kingdom
and Asia, and has extensive experience in financial
markets, funds management, balance sheet
management and risk management. He began
his career at the Reserve Bank of Australia and
has also held executive positions at AIDC Limited
and Citigroup.
Listed company directorships (last three years)
• Director, Lendlease Corporation Limited
(since January 2017)
Other current directorships/appointments
• Director, Clean Energy Finance Corporation
94
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Michael J
Coleman
MCom (UNSW), FCA,
FCPA, FAICD
Age: 70
Resides: New South Wales
Independent Voting
Director of MGL and MBL
since November 2012
Mr Coleman is Chairman
of the BAC and a
member of the BGCC,
BNC and BRiC
Diane J
Grady AO
BA (Mills), MA (Hawaii),
MBA (Harv), FAICD
Age: 72
Resides: New South Wales
Independent Voting
Director of MGL and MBL
since May 2011
Ms Grady is a member
of the BGCC, BNC,
BRC and BRiC
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Experience
After a career as a senior audit partner with KPMG
for 30 years, Mr Coleman has been a professional
Non Executive Director since 2011. He has significant
experience in risk management, financial and regulatory
reporting and corporate governance.
Mr Coleman has been the Chairman of ING Management
Limited, a member of the Audit Committee of the
Reserve Bank of Australia and a member of the
Financial Reporting Council, including terms as
Chairman and Deputy Chairman. During his time with
KPMG, Mr Coleman was a financial services specialist,
providing audit and advisory services to large banks,
investment banks and fund managers. He was KPMG’s
inaugural National Managing Partner Assurance and
Advisory from 1998 to 2002, National Managing Partner
for Risk and Regulation from 2002 to 2010, and Regional
Leader for Asia Pacific Quality and Risk Management
from 2002 to 2011.
Listed company directorships (last three years)
• Chairman, Bingo Industries Limited (since March 2017)
Other current directorships/appointments
• Chairman, Planet Ark Environmental Foundation
• Chairman, Reporting Committee,
Australian Institute of Company Directors
• Member, National Board and NSW Council,
Australian Institute of Company Directors
• Board member, Legal Aid NSW
• Adjunct Professor, Australian School of
Business, UNSW
• Governor, Centenary Institute of
Cancer Medicine & Cell Biology
Experience
Diane Grady has extensive international experience
in a variety of industries having spent 25 years as a
full-time independent director of public companies
and not-for-profit boards and as a partner with
McKinsey & Co where for 15 years she consulted
with clients in financial services, insurance, retailing,
telecommunications, consumer goods and
manufacturing industries.
Ms Grady’s previous boards include Woolworths,
BlueScope, Lendlease, MLC, Goodman Group and the
Sydney Opera House. She has also served as President
of Chief Executive Women and Chair of Ascham
School. At McKinsey Ms Grady was a firm-wide leader
of the Organisation, Culture and Change Management
Practice and in Australia she focused on assisting
clients to grow through service improvement,
innovation, and marketing strategies. She has a
Masters of Chinese Studies and worked for three
years as a journalist in Asia.
Other current directorships/appointments
• Chair, The Hunger Project Australia
• Director, Grant Thornton Australia Board
• Director, Tennis Australia
• Member, Heads Over Heels Advisory Board
• Member, NFP Chairs Forum
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Directors’ experience and special responsibilities
Continued
Rebecca J
McGrath
BTP (Hons) (UNSW),
MAppSc (ProjMgt)
(RMIT), FAICD
Age: 56
Resides: Victoria
Independent Voting
Director of MGL and MBL
since January 2021
Ms McGrath is a
member of the BGCC,
BNC and BRiC
Mike
Roche
BSc (UQ), GAICD,
FIA (London), FIAA
Age: 68
Resides: New South Wales
Independent Voting
Director of MGL and MBL
since January 2021
Mr Roche is a member of
the BNC, BRC and BRiC
Experience
Mike Roche has over 40 years’ experience in the
finance sector as a highly skilled and experienced
provider of strategic, financial, mergers and
acquisitions, and capital advice to major corporate,
private equity and government clients. He held senior
positions with AXA Australia as a qualified actuary and
Capel Court/ANZ Capel Court.
Mr Roche spent more than 20 years at Deutsche Bank
and was Head of Mergers and Acquisitions (Australia
and New Zealand) for 10 years where he advised on
major takeovers, acquisitions, privatisations, and
divestments. He stepped down as Deutsche Bank’s
Chairman of Mergers and Acquisitions (Australia
and New Zealand) in 2016. He was a member of the
Takeovers Panel for two terms from 2008 to 2014.
Listed company directorships (last three years)
• Director, Wesfarmers Limited (since February 2019)
Other current directorships/appointments
• Director, MaxCap Group Pty Ltd
• Director, Six Park Asset Management Pty Ltd
• Director, Te Pahau Management Ltd
• Trustee Director, Energy Industries Superannuation
Scheme Pty Ltd
• Managing Director, M R Advisory Pty Ltd
• Member, ADARA Partners Corporate Advisory
Wise Counsel Panel
• Co-founder and Director, Sally Foundation
Experience
Rebecca McGrath is an experienced professional
company director and Chairman, with substantial
international business experience. She spent 25 years
at BP plc. where she held various executive positions,
including Chief Financial Officer Australasia and served
as a member of BP’s Executive Management Board for
Australia and New Zealand.
Ms McGrath has served as a director of CSR Limited,
Big Sky Credit Union and Incitec Pivot Ltd, and as
Chairman of Kilfinan Australia. She is a former member
of the JP Morgan Advisory Council. She has attended
executive management programmes at Harvard
Business School, Cambridge University and
MIT in Boston.
Listed company directorships (last three years)
• Chairman, OZ Minerals Limited (since May 2017);
Director (since November 2010)
• Director, Goodman Group (since April 2012)
• Director, Incitec Pivot Limited
(September 2011–December 2020)
Other current directorships/appointments
• Chairman, Scania Australia Pty Limited
• Director, Investa Wholesale Funds
Management Limited
• Director, Kilfinan Australia
• President, Victorian Council,
Australian Institute of Company Directors
• Member, National Board,
Australian Institute of Company Directors
• Member, ASIC Corporate Governance
Consultative Panel
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Glenn R
Stevens AC
BEc (Hons) (Sydney),
MA (Econ) (UWO)
Age: 63
Resides: New South Wales
Independent Voting
Director of MGL and MBL
since November 2017
Mr Stevens is Chairman of
the BRiC and a member
of the BAC and BNC
Experience
Glenn Stevens worked at the highest levels of the
Reserve Bank of Australia (RBA) for 20 years and,
as well as developing Australia’s successful inflation
targeting framework for monetary policy, played a
significant role in central banking internationally.
Most recently, he was Governor of the Reserve Bank
of Australia between 2006 and 2016.
Mr Stevens has also made key contributions to a
number of Australian and international boards and
committees, including as chair of the Australian Council
of Financial Regulators between 2006 and 2016, as a
member of the Financial Stability Board and on a range
of G20 committees.
Other current directorships/appointments
• Board member, NSW Treasury Corporation
• Director, Anika Foundation
• Director, Lowy Institute
• Member, Investment Committee,
NWQ Capital Management
• Deputy Chair, Temora Aviation Museum
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Nicola M
Wakefield Evans
BJuris/BLaw
(UNSW), FAICD
Age: 60
Resides: New South Wales
Independent Voting
Director of MGL and MBL
since February 2014
Ms Wakefield Evans is
Chair of the BGCC and
a member of the BAC,
BNC and BRiC
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Experience
Nicola Wakefield Evans is an experienced
Non-Executive Director and corporate finance lawyer.
As a lawyer, Ms Wakefield Evans has significant
Asia-Pacific experience and was a partner at King
& Wood Mallesons (and its predecessor, Mallesons
Stephen Jacques) for more than 20 years. Ms Wakefield
Evans has particular expertise in the financial services,
resources and energy, and infrastructure sectors.
She held several key management positions at
King & Wood Mallesons including Managing Partner
International in Hong Kong and Managing Partner,
Practice in Sydney.
Listed company directorships (last three years)
• Director, Lendlease Corporation Limited
(since September 2013)
Other current directorships/appointments
• Director, MetLife Insurance Limited
• Director, MetLife General Insurance Limited
• Director, Clean Energy Finance Corporation
• Chair, 30% Club Australia
• Member, Takeovers Panel
• Member, National Board, Australian Institute
of Company Directors
• Director, UNSW Foundation Limited
• Director, GO Foundation
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Continued
Company secretaries’ qualifications and experience
Dennis Leong
BSc BE (Hons) (Syd), MCom (UNSW), FGIA
Company Secretary since October 2006
Experience
Dennis Leong is an Executive Director of Macquarie
and has had responsibility for Macquarie’s company
secretarial requirements, general and professional risks
insurances and aspects of its employee equity plans.
He has over 27 years company secretarial experience
and 12 years experience in corporate finance at
Macquarie and Hill Samuel Australia Limited.
Simone Kovacic
BBus LLB (Hons) (UTS), LLM (Sydney)
Assistant Company Secretary since June 2020
Experience
Simone Kovacic is a Division Director of Macquarie,
having joined in 2009. Simone has company secretarial
responsibilities and provides governance and corporate
advice. She has over 20 years of experience as a
corporate lawyer at Macquarie and in private practice
at Freehills, now Herbert Smith Freehills, and Skadden,
Arps, Slate, Meagher & Flom LLP in the US.
Ida Lawrance ceased to be an Assistant Company
Secretary of MGL on 29 May 2020.
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Remuneration Report
We appreciate
the exceptional
effort made by our
staff during a very
difficult year. Their
response embodies
Macquarie’s
purpose and
core principles.”
Letter from the
Chair of the Board
Remuneration Committee
On behalf of the Board, I am pleased to
present the 2021 Remuneration Report and
my first as Chair of the Board Remuneration
Committee (BRC).
The financial year 2021 (FY2021) has seen challenging market
conditions associated with the ongoing impact of the
COVID-19 pandemic. Our customers, clients and the broader
community have all been affected on various levels. Our
focus has been on ensuring the health and well-being of our
staff and their families, and supporting our clients and the
broader community.
During this time and amid physical changes to the working
environment, Macquarie’s culture and long-term focus on
building leadership capability and resilience in technology
have provided a platform from which our staff have
continued to respond to client needs. We appreciate the
exceptional effort made by our staff during a very difficult
year. Their response embodies Macquarie’s purpose and
core principles.
100
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Macquarie has demonstrated great resilience against this
challenging backdrop, and our purpose and culture have
guided staff through these times. Our strong financial results
and returns to shareholders in FY2021 reflect the diversity
of our businesses and our ability to support our clients and
adapt to a rapidly changing external environment.
• Net profit after tax (NPAT) is up 10% compared to FY2020.
• Return on Equity (ROE) of 14.3% is stable compared to
FY2020’s 14.5%.
• Earnings per share (EPS) of 842.9 cents per share is up 7%
compared to the prior year.
Shareholders were impacted in FY2020 with a reduced
dividend in line with regulatory expectations. The FY2021
full-year dividend is up 9% compared to the prior year.
Pay for performance
Our longstanding and consistent approach to remuneration
has served us well and has been a key driver of our sustained
success as an international organisation. Staff are rewarded
based on their performance against a wide range of
financial and non-financial considerations. This approach
aligns the interests of staff and shareholders and allows
us to deliver positive outcomes over the long-term for our
customers, clients and the broader community. The Board
believes that it is critical that Macquarie maintains its strong
entrepreneurial culture that incentivises innovation and
drives sustained success.
The Board is always mindful of the external focus on overall
remuneration levels and spends considerable time each
year determining remuneration outcomes for the CEO and
Executive Key Management Personnel (KMP). We recognise
the range of expectations and have made decisions that
we believe take into consideration the perspectives of all
stakeholders. This report has been prepared to provide
transparency around the considerations informing
our decisions.
On 1 April 2021, APRA announced actions required regarding
MBL’s risk management practices and ability to calculate
and report key prudential ratios. APRA increased MBL’s
operational risk capital requirement and made adjustments
to requirements for certain liquidity prudential ratios,
effective from 1 April 2021. The actions relate to specific
intra-group funding arrangements as well as breaches of
APRA’s reporting standards on liquidity between 2018 and
2020. APRA noted that the breaches are historical and do not
impact the current overall soundness of Macquarie Group’s
capital and liquidity positions.
The Board acknowledges the seriousness of the APRA
findings and has reflected this in its determination of
remuneration outcomes. This has been through a reduction
in the PSU allocations for Executive KMP and the imposition
of additional qualifying conditions on the release of a portion
of their retained profit share. The qualifying conditions
relate to the timely and satisfactory remediation of the
APRA findings.
Remuneration outcomes
FY2021 remuneration outcomes reflect:
• this year's achievements against a range of financial and
non-financial factors, some of which are discussed below
• the importance of our people and retaining key talent to
encourage innovation and pursue growth opportunities
• an alignment to the outcomes delivered to shareholders
• risk management, compliance and conduct outcomes.
We have firstly considered the financial results of Macquarie
overall as well as each Operating Group. Against a challenging
backdrop, all Operating Groups have been profitable this year.
These results reinforce the value of the diversification which
we have built into each of our businesses.
In determining the CEO’s remuneration, we have considered
her strong leadership through the challenges of COVID-19.
She has also advanced a process of reorganising Macquarie’s
Operating Groups and renewing the Executive Committee,
positioning the business for future opportunities.
We have also considered a number of factors, which the
Board views as critical to Macquarie’s ongoing success.
These include cross-group collaboration, the continued focus
on people and culture, the ongoing investment in technology,
progress against Diversity and Inclusion (D&I) initiatives, risk
management and Macquarie’s response to COVID-19. Further
details are set out on page 118 of this Report.
The BRC receives extensive reporting on remuneration
outcomes across Macquarie and, in addition to the CEO
and Executive KMP, individually reviews and approves the
remuneration of Banking Executive Accountability Regime
(BEAR) Accountable Persons, staff who hold regulated roles,
Designated Executive Directors(1) and other senior staff
(generally direct reports of Executive KMP), and has reviewed
overall total remuneration levels across each business to
ensure appropriate distribution of remuneration across the
organisation. The BRC has also considered the compensation
expense to income ratio as a guide as to whether the share of
profits distributed to staff and shareholders is reasonable.
After careful consideration of these factors, we believe the
following outcomes for the year are appropriate:
• CEO awarded profit share has increased 14% on the prior
year to $A19.85 million
• total Executive KMP awarded profit share is up 8% to
$A106.9 million
• reflecting the APRA findings, PSU allocations for Executive
KMP have been reduced and additional qualifying
conditions have been imposed on the release of a portion
of their retained profit share
• in FY2020, in light of the economic uncertainty due to
COVID-19, retention rates for the CEO and Executive KMP
were increased to 100%. This year, they have been reset to
levels more in line with 2019.
(1) Executive Directors who have a significant management or risk responsibility in the organisation.
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Regulatory environment
During the year, APRA released the revised draft of the
Prudential Standard CPS 511 Remuneration, which requires
an increased focus on non-financial risks. We engaged
with APRA during the year with regard to the proposed
requirements and continue to participate in the consultation
process, including on the recently released draft Prudential
Practice Guide CPG 511 Remuneration. We support APRA’s
policy position and recognise that this is an evolving area
as regulators and organisations seek to define and assess
best practice.
I look forward to receiving your views and support at the 2021
Annual General Meeting.
Jillian Broadbent
Chair
Board Remuneration Committee
Sydney
7 May 2021
Remuneration Report
Continued
Culture, accountability and remuneration
Macquarie’s evolution is driven by our people who are guided
by our core principles of Opportunity, Accountability and
Integrity. These principles remain pivotal to our culture
and effectively guide our staff in balancing risk and reward
and making decisions that realise opportunities for the
benefit of our clients, our shareholders, our people and the
communities in which we operate.
The BRC and the Board are able to assess Macquarie’s
culture in many ways, including through staff survey results,
human capital reporting, risk culture reporting and strategy
presentations, as well as through personal observation of
management and staff behaviours and actions. The BRC
coordinates with the Board Risk Committee (BRiC) and
Board Governance and Compliance Committee (BGCC) to
achieve an integrated approach to remuneration that reflects
prudent and appropriate risk considerations.
The remuneration framework supports our principles
by motivating staff to be innovative, to build businesses
and to be accountable for their decisions, behaviours
and their associated risk management, customer and
reputational consequences.
Strong risk management is a fundamental part of everyone’s
role at Macquarie. Staff understand that they are rewarded
for their performance, including their identification and
management of risk. They also understand that there
are consequences for non-compliance with Macquarie’s
behavioural expectations. Staff training and communications
emphasise the link between risk, conduct, policy breaches
and consequence management outcomes, including,
where appropriate, adjustments to performance-based
remuneration.
In FY2021, there were 97 (FY2020: 164) matters involving
conduct or policy breaches (for example, Code of Conduct,
appropriate workplace behaviour, risk management and
technology breaches) that resulted in formal consequences
including termination of employment or a downward
adjustment to their profit share. The remote working
environment was a key factor in the decline in the number of
matters this year. For example, fewer in-person interactions
contributed to a reduction in instances of conduct failing to
meet appropriate workplace behaviour standards. Consistent
with prior years, we have disclosed further details regarding
these matters (refer to page 111).
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
Remuneration framework
This section explains the link between Macquarie’s purpose and its remuneration objectives and principles, and how these
are reflected in the remuneration framework.
Macquarie’s longstanding and consistent approach to remuneration continues to support our remuneration objectives,
including delivering strong company performance over the short and long-term, while prudently managing risk and reinforcing
the Code of Conduct and What We Stand For. The Board recognises that to achieve these objectives, we must attract,
motivate and retain exceptional people with deep industry expertise while aligning their interests with shareholders to meet the
needs of clients and customers while ensuring that regulatory requirements are upheld. This broad approach has been in place
since Macquarie’s inception, evolving over time to ensure the framework continues to meet our remuneration objectives.
Macquarie’s remuneration approach has been a key driver of our sustained success as an international organisation. Staff are
motivated to grow businesses over the medium to long-term, taking accountability for all decisions and their accompanying risk
management, customer, economic and reputational consequences.
This approach has been fundamental in ensuring we can continue to attract, motivate and retain exceptional, entrepreneurial
and ethical people across the global markets in which we operate. We hire world-class people in 32 highly competitive markets.
These people come from, and compete in, various industry sectors (including hedge funds, private equity firms, global
investment banks, fund managers, advisory boutiques, commodity houses and other banks, as well as industries that are not
specific to banking or financial services, for example, technology, accounting and engineering) across many jurisdictions.
The table below shows the link between Macquarie’s purpose and the remuneration objectives and principles.
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Macquarie’s purpose:
Empowering people to innovate
and invest for a better future
Opportunity
Accountability
Integrity
Remuneration objectives
Remuneration principles
Macquarie’s remuneration framework aims to:
• deliver strong company performance over
the short and long-term whilst prudently
managing risk
• attract, motivate and retain exceptional
people with deep industry expertise
• align the interests of staff and shareholders
to deliver sustained results for our customers,
clients and community
• promote innovation and the building
of sustainable businesses
• drive behaviours that reflect Macquarie’s
culture and the principles of What We Stand For
• foster a diverse and inclusive work environment.
These objectives are achieved by:
• emphasising performance-based remuneration
• determining an individual’s variable remuneration
based on a range of financial and
non-financial factors
• retaining a significant proportion of
performance-based remuneration to enable risk
outcomes to be considered over a long period
• delivering retained profit share in equity to ensure
the interests of staff and shareholders are aligned
over the long-term
• remunerating high-performing staff appropriately,
relative to global peers
• providing consistent arrangements over time to
give staff the confidence to pursue multi-year
initiatives.
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Continued
Remuneration framework continued
Macquarie’s remuneration framework works as an integrated whole. As summarised below, an individual’s remuneration
comprises fixed remuneration, profit share and, for Executive Committee members (our Executive KMP), Performance Share
Units (PSUs).
Remuneration framework
Fixed Remuneration
• primarily comprises base salary, as well as superannuation contributions and standard country-specific benefits in line
with local market practice
• for Executive KMP, is set at a comparatively low level, relative to the industry, and a low proportion of total remuneration
but sufficient to avoid inappropriate risk-taking
• is reviewed annually and reflects technical and functional expertise, role scope, market practice and regulatory
requirements
• for risk and financial control staff, is generally a higher proportion of total remuneration than for front office staff.
Performance‑based Remuneration
Criteria
Eligibility
Profit Share
• all permanent employees
Determination
Structure
• allocations reflect an individual’s
performance, which is assessed against
a range of financial and non-financial
factors including:
– contribution to financial results
– approach to risk management
and compliance
– business leadership including outcomes
for customers and the community
– people leadership and professional
conduct including the role-modelling of
Macquarie’s culture and purpose
• significant proportion is retained (80%
for the CEO and up to 70% for other
Executive KMP)
• long deferral periods (up to seven years for
the CEO and other Executive KMP)
• retained profit share is delivered in a
combination of Macquarie equity and
Macquarie-managed fund equity
Performance Share Units
• Executive Committee members
• PSU pool is determined with reference
to profits over recent years, subject to
Board discretion
• individual allocations reflect their role as
members of the Executive Committee and
their contribution to driving the collective
performance of Macquarie
• for FY2021, allocations are based on the
face value of shares on the grant date
• PSUs vest after four years, subject to
the achievement of two forward-looking
performance hurdles (no retesting
of hurdles)
• PSUs are structured as DSUs(2) with no
exercise price
• no right to dividend equivalent payments
Malus
• applies for senior employees
• applies to all awards
Forfeiture
• retained profit share is subject to
forfeiture upon leaving Macquarie
except in certain circumstances
• unvested PSUs are subject to forfeiture
upon leaving Macquarie except in
certain circumstances
The Board has discretion to change remuneration arrangements on an annual basis to meet changing market conditions as well
as to comply with regulatory and corporate governance developments.
(2) A DSU is a Deferred Share Unit and is an award type under the MEREP. For further details, refer to Note 32 to the financial statements in the Financial Report.
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Profit share
This section describes the way in which profit share is determined, structured and delivered.
Annual process to determine profit share outcomes
Remuneration outcomes are based on realised outcomes and are determined through a principles-based approach, taking
into consideration all aspects of an individual’s performance. Significant judgement is applied in determining remuneration
outcomes to ensure that all factors that may potentially impact the quantum of profit share allocations are considered. The
table below describes how profit share allocations are determined at an individual, business group and company-wide level.
Outcomes may be adjusted downwards at any level as a result of any risk management, compliance and conduct issues that
have come to light during the year.
Individual profit
share allocations
Business group
profit share pools
Company‑wide
profit share pool
Individual profit share allocations reflect an employee’s performance. Employees are assessed against the
following areas:
Financial results
• business profits and individual contribution to profits for front office staff
• primarily based on contribution to high quality control functions for risk and financial control roles
• for other support staff, based on their contribution to delivering high quality services to support
the businesses
Risk management and compliance
• the active management and consideration of a wide range of financial and non-financial risks
• motivates a culture of disciplined risk management, and regulatory, policy and business compliance
Business leadership (including customer and community outcomes)
• business growth and innovation
• delivering solutions for our customers and the communities in which we operate
People leadership and professional conduct
• alignment to Macquarie’s purpose and culture
• conduct and behaviour consistent with the Code of Conduct and What We Stand For
• fostering a diverse and inclusive work environment
• talent development.
Individual profit share allocations also consider relativities in the market in which each business competes
for talent.
• For Operating Groups, reflects consideration of:
– each business’ contribution to company-wide profits
– each business’ capital, funding and liquidity requirements and usage
– other factors such as the quality of the income, whether the business is highly regulated or not,
the maturity of the business, and the reliance on intellectual capital versus financial capital.
• For Central Service Groups, based on the quality and integrity of control functions and support
services; not primarily determined with reference to profitability.
• Considers the risk profile of each business including consideration of any significant reputational,
cultural or compliance matters.
• Also considers overall remuneration levels in the market in which each business operates.
• Is an aggregate of the bottom-up assessment conducted at both the business and individual level.
• Is assessed for overall reasonableness, including consideration of:
– an internal reference based on Macquarie’s after-tax profits and its earnings over and above the
estimated cost of capital
– the resultant compensation expense to income ratio and how it compares to that of peers.
• The Board retains discretion to amend the final pool determined in accordance with the bottom-up
assessment to ensure that all relevant factors, including risk and conduct matters, have been
appropriately taken into consideration. For the seventh year in a row, the company-wide pool is
substantially below the internal reference described above.
• The Chief Financial Officer (CFO) confirms that the profit share pool can be supported by Macquarie’s
capital position and does not limit Macquarie’s ability to further strengthen its capital base in
the future.
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Retained profit share: retention and vesting
Macquarie retains a percentage of each individuals’ annual profit share allocation (retained profit share) above certain thresholds,
which is invested in a combination of Macquarie ordinary shares under the Macquarie Group Employee Retained Equity Plan
(MEREP) and Macquarie-managed fund equity notionally invested under the Directors’ Profit Share (DPS) Plan.(3) Whilst they are
employed, an individual’s retained profit share vests and is released over a period that reflects the scope and nature of their role
and responsibilities.(4) These arrangements ensure that Macquarie continues to retain high-performing staff, provide significant
long-term alignment to shareholders and customers, as well as enabling risk outcomes to be considered over long periods.
Retention and vesting arrangements are determined by the BRC according to prevailing market conditions, remuneration trends, and
compliance with regulatory requirements (including under the BEAR). For each year’s allocation, once the vesting period has been
determined it remains fixed for that allocation.
As noted in last year’s Remuneration Report, in light of the economic uncertainty due to COVID-19, retention rates in FY2020
were increased to 100% for the CEO and all Executive Committee members (no cash component). For FY2021, as a result of
improved economic conditions, the Board has determined that retention rates be reset to levels more in line with 2019. The
following table summarises the standard retention and vesting arrangements applicable for FY2021.
FY2021 standard profit share retention and vesting arrangements
Role
CEO
CEO MBL
Executive Committee members
Designated Executive Directors
Executive Directors
Staff other than Executive Directors
Profit share retention (%)
Vesting and release of profit share(5)
80
60
60–70
50–70
40–70
25–70(6)
One-fifth in each of years 3–7
One-third in each of years 3–5
One-third in each of years 2–4
The Board’s discretion to change remuneration arrangements, as noted above, includes changes to profit share retention levels
provided that the retention percentage is at least 30% for all Executive Directors.
Investment of retained profit share
An individual’s retained profit share is invested in a combination of Macquarie ordinary shares under the MEREP and
Macquarie-managed fund equity notionally invested under the DPS Plan. The allocation reflects the nature of their role as set
out in the following table.
FY2021 standard investment of retained profit share
Role
CEOs of MGL and MBL
Executive Committee members
Executive Committee members with Funds responsibilities
Executive Directors
Executive Directors with Funds responsibilities
Staff other than Executive Directors
Retained profit share investment
MEREP
(MGL ordinary shares) %
DPS Plan
(Macquarie‑managed
fund equity) %
90
80–90
50
80–100(7)
25–50(7)
100(8)
10
10–20
50
0–20
50–75
0(8)
(3) Both the MEREP and DPS Plan are fundamental tools in Macquarie’s retention, alignment and risk management strategies, encompassing both long-term retention arrangements and
equity holding requirements. The MEREP has a flexible plan structure that offers different types of equity grants depending on the jurisdiction in which the participating employees
are based. In most cases, the equity grants are in the form of units comprising a beneficial interest in Macquarie ordinary shares held in a trust for the staff member (Restricted Share
Units or RSUs). For further details on the MEREP, refer to Note 32 Employee equity participation to the financial statements in the Financial Report. The DPS Plan comprises exposure
to a notional portfolio of Macquarie-managed funds. Retained amounts are notionally invested over the retention period. This investment is described as ‘notional’ because Executive
Directors do not directly hold securities in relation to this investment.
(4) Profit share that is not retained (“available profit share”) is delivered in cash except for staff (including one Executive Committee member) subject to the UK Remuneration Code
implementing CRD IV, where 50% of available profit share is delivered in Macquarie equity and is subject to a 12-month hold period.
(5) For staff (including one Executive Committee member) subject to the UK Remuneration Code implementing CRD IV, retained profit share invested in Macquarie equity is subject to
a further 12-month hold post the vesting period.
(6) Above certain monetary thresholds.
(7) For Executive Directors subject to the UK Remuneration Code implementing CRD IV, retained profit share is invested 60% in Macquarie equity and 40% in the DPS Plan.
(8) For staff other than Executive Directors, retained profit share is generally 100% invested in Macquarie equity with the exception of those staff with funds responsibilities where
retained profit share is invested in a combination of Macquarie equity and Macquarie-managed fund equity.
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In addition to the arrangements set out in the tables above, different arrangements may apply in certain circumstances:
• retention rates and vesting and release schedules may vary for certain groups of staff who have become employees
as a result of an acquisition, or for staff in certain jurisdictions, for example in the UK or European Union (EU), to ensure
compliance with local regulatory requirements
• in limited circumstances, retained profit share may be allocated under arrangements other than the DPS Plan or the MEREP.
For example, this may include investment in funds or products of a specific business group where there is a need to directly
align the interests of staff with those of their clients.
Forfeiture of retained profit share – Malus and Clawback
The Board or its delegate has the ability to reduce or eliminate unvested profit share for certain senior employees in certain
circumstances (Malus), as set out on page 110. For certain employees identified in the UK or EU, the Board also has the ability to
recover (in whole or in part) vested profit share (Clawback).
Early vesting and release of retained profit share
The standard policy is that staff who cease employment with Macquarie will forfeit their unvested retained profit share.
The Board may exercise discretion to accelerate the vesting of a departing employee’s retained profit share and reduce the
retention period including where, for example, their employment ends in the case of retirement from Macquarie, redundancy,
death, serious incapacitation, disability, or serious ill-health. The Board’s discretion to accelerate the vesting of retained profit
share under these circumstances is subject to the conditions of early release as set out below for Executive Directors.
Discretion may be exercised in certain other limited exceptional circumstances on the grounds of business efficacy, in relation
to strategic business objectives, including in connection with the divestment or internalisation of Macquarie businesses,
or when an employee resigns to fulfil a public service role in a governmental organisation or agency. Where such discretion
is exercised, the Board may impose such other conditions as it considers appropriate. This year, such discretion has been
exercised and retained profit share was approved to be released on original vesting schedules for two executives due to the
transfer of their employment to an operationally segregated subsidiary or joint venture entity.
Conditions of early release to departing Executive Directors – Post Employment Events
Where discretion has been exercised to accelerate the vesting of retained profit share, the Board may reduce or eliminate their
retained profit share, if it is determined that the Executive Director has at any time during their employment or the relevant
release periods after their employment committed a Malus Event (as set out on page 110) or:
(a) taken staff to a competitor of Macquarie or been instrumental in causing staff to go to a competitor, or
(b) joined a competitor of Macquarie or otherwise participated in a business that competes with Macquarie.
Each of the above is a Post Employment Event.
In the case of death or serious incapacitation, the Board will typically accelerate the vesting of retained profit share and
immediately release it. In other circumstances, the release will occur over the period from six months to two years after the
Executive Director leaves, in accordance with the following table:
First Period
Second Period
Third Period
Time post‑departure
Six months
Six months to one year
One year to two years
Unvested retained
profit share released
From all but the last two
years of employment
From the second year prior to
the end of employment
From the year prior to the end of
employment
Subject to
No Malus Event or Post
Employment Event as set
out previously
No Malus Event or Post
Employment Event during the
First Period, and
No Malus Event or Post Employment
Event during the First Period, and
Where the release
is by reason of
retirement from
Macquarie
As above
No Malus Event or Post
Employment Event (a) above
during Second Period
No Malus Event or Post Employment
Event (a) during the Second Period, and
No Malus Event during the Third Period
As above and in addition, the
release is subject to no Post
Employment Event (b) during
the Second Period
As above and in addition, the release is
subject to no Post Employment Event (b)
during the Second or Third Period
In addition to the above, for Accountable Persons, the exercise of discretion for any early release of retained profit share will be
subject to Macquarie meeting the minimum deferral periods required under the BEAR.
Where an Executive Director has a tax liability on termination of employment in respect of any unvested retained profit share,
the Board has discretion to release unvested retained profit share up to an amount equal to the Executive Director’s tax liability
at an earlier time than noted above.
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Performance Share Units
This section describes the way in which Performance Share Units (PSUs) are determined, structured and delivered.
Allocation and structure
Executive Committee members are the only group of staff eligible to receive PSUs, which are subject to forward-looking
performance hurdles and determined with reference to Macquarie’s performance as a whole. As such, they provide an
additional incentive to Executive Committee members to drive company-wide performance over the long-term and beyond
their business group responsibilities. PSU awards are a meaningful incentive but are generally not the major element of an
Executive Committee member’s total remuneration.
While the PSU pool is determined with reference to profits over recent years, the Board retains discretion to determine the final
PSU pool taking into consideration both financial and non-financial factors, including the risk profile of Macquarie.
Individual allocations are based on their role as members of the Executive Committee and their contribution to driving the
collective performance of Macquarie, including their collaboration across businesses.
PSUs are granted in August each year. The number of PSUs that will be allocated will be calculated by dividing the face value of
the award by the price of Macquarie ordinary shares on or around the date of grant.
Since their introduction, PSUs have been structured as DSUs with performance hurdles. Holders have no right to dividend
equivalent payments. There is no exercise price for PSUs.
Performance hurdles
The following summarises the key terms of PSUs and the performance hurdles:
Application
EPS CAGR hurdle
50% of PSU award
Performance measure Compound annual growth rate (CAGR) in EPS over the
vesting period (four years)(9)
Sliding scale applies:
• 50% becoming exercisable at EPS CAGR of 7.5%
• 100% at EPS CAGR of 12%
For example, if EPS CAGR was 9.75%, 75% of the
relevant awards would become exercisable
Hurdle
Forfeiture
ROE hurdle
50% of PSU award
Average annual ROE over the vesting period
(four years)(9) relative to a reference group of
global financial institutions(10)
Sliding scale applies:
• 50% becoming exercisable above the
50th percentile
• 100% at the 75th percentile
For example, if ROE achievement was at the
60th percentile, 70% of the relevant awards
would become exercisable
• Malus provisions apply
• the standard policy is that unvested PSUs will be forfeited upon termination
• in the case of retirement from Macquarie, redundancy, death, serious incapacitation, disability,
serious ill-health or other limited exceptional circumstances, the Board or the BRC has the
authority to either accelerate the vesting of PSUs or to permit the PSUs to continue to vest in
accordance with the original award schedule and remain subject to the same performance hurdles
• should a change of control occur(11) the Board or the BRC has discretion to determine how
unvested PSUs should be treated, having regard to factors such as the length of time elapsed in
the performance period, the level of performance to date and the circumstances of the change
in control.
(9) PSUs awarded prior to FY2020 vested in two equal tranches after three and four years.
(10) The reference group for awards is Bank of America Corporation, Barclays PLC, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., JP Morgan Chase & Co., Lazard
Ltd, Morgan Stanley and UBS AG. Comparator company information is presented in the same order throughout the Remuneration Report.
(11) Under the MEREP Plan Rules, a change in control occurs where a person acquires or ceases to hold a relevant interest in more than 30% of Macquarie shares or where the Board
resolves that a person is in a position to remove one-half or more of the Non-Executive Directors.
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Rationale for hurdles
The PSU hurdles are regularly reviewed by the BRC to ensure they continue to align the interests of staff and shareholders and
provide a challenging but meaningful incentive to Executive Committee members. The BRC considers historical and forecast
market data, the views of corporate governance bodies, shareholders and regulators, as well as market practice. Both the
relative ROE and absolute EPS hurdles were reviewed by the BRC during the year and were considered to still be appropriate.
No change has been made to the hurdles for FY2021 for the following reasons:
• ROE and EPS growth drive long-term shareholder value and are appropriate as the Executive Committee can affect
outcomes on both measures. In contrast, Total Shareholder Return (TSR) is influenced by many external factors over which
executives have limited control
• the approach is consistent with that advocated by APRA in not using TSR as a measure
• ROE and EPS can be substantiated using information that is disclosed in Macquarie's annual reports
• a sliding scale diversifies the risk of not achieving the hurdles and provides rewards proportionate to performance for
shareholders and is preferable to an all-or-nothing test, which some have argued could promote excessive risk-taking
• the hurdles are designed to reward sustained strong performance and are relatively well-insulated from short-term
fluctuations. The time frame used for PSUs should also be considered in light of the three- to seven-year deferral of profit
share for members of the Executive Committee
• the EPS targets are confirmed as rigorous when market performance is considered, with the EPS threshold hurdle exceeding
the performance of most of the ASX 20, global reference group and relevant indices over time
• for the EPS element to fully vest, Macquarie needs to achieve at least 12% CAGR over the vesting period. Supporting the
rigour of the hurdle, cumulative EPS growth of 57% over four years is required to achieve full vesting
• the ROE vesting thresholds and sliding scale are in line with the domestic market and are particularly challenging when
compared to international practice.
The charts below display Macquarie’s historical EPS and ROE PSU outcomes, highlighting that since their introduction in 2009,
50% of the EPS tranches and 55% of the ROE tranches have resulted in either no vesting or partial vesting.
Historical EPS tranche outcomes
Historical ROE tranche outcomes
Below vesting
threshold
45%
Full
vesting
50%
Below vesting
threshold
20%
Full
vesting
45%
Partial
vesting
5%
Partial
vesting
35%
Use of an international reference group
An international reference group(12) recognises the extent of Macquarie’s diversification and internationalisation. As at
31 March 2021, total international income represented approximately 68% of Macquarie’s total income, with approximately
56% of Macquarie’s staff located outside Australia. The BRC considers an international reference group to be appropriate
on the basis that:
• the international reference group is currently most representative of Macquarie’s business operations and talent pool.
These firms broadly operate in the same markets and in similar business segments, and compete for the same
people as Macquarie
• Macquarie has no comparable Australian-listed peers.
In addition, the BRC considers it important to not intervene reactively to remove under-performers or over-performers in any
given period. An organisation’s period of under-performance is generally followed by a period of over-performance.
(12) The reference group is Bank of America Corporation, Barclays PLC, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., JP Morgan Chase & Co., Lazard Ltd, Morgan
Stanley and UBS AG. Comparator company information is presented in the same order throughout the Remuneration Report.
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Culture, accountability and remuneration
This section describes how risk and conduct are considered throughout Macquarie’s remuneration approach.
Risk culture
Macquarie’s What We Stand For principles of Opportunity, Accountability and Integrity remain pivotal to our culture and
effectively guide our staff in balancing risk and reward and making decisions that realise opportunity for the benefit of our clients,
our shareholders, our people and the communities in which we operate. Staff are continually made aware that these principles
must form the basis of all behaviours and actions. These behavioural expectations are outlined in the Board approved Code of
Conduct, which is actively promoted by Management and cascaded through the organisation through multiple mechanisms.
Macquarie invests significant time and effort into communicating and reinforcing Macquarie’s culture through communications
from senior management, policy reminders, training, and learning and development activities. The Board is able to assess
Macquarie’s culture in a number of ways including through staff survey results, human capital reporting, risk culture reports,
consequence management reports, strategy presentations as well as through personal observation of management, and staff
behaviour and actions.
Strong risk management is a fundamental part of everyone’s role at Macquarie. Staff understand that they are rewarded not
just for their contribution to financial results, but also for how those results are achieved. This includes an assessment of an
individual’s approach to managing risk, and their alignment to the What We Stand For principles. They understand there are
potential consequences for non-compliance with the risk management framework and Macquarie’s behavioural expectations.
Staff training and communications emphasise the link between risk, conduct, policy breaches and consequence management
outcomes, including, where appropriate, adjustments to performance-based remuneration.
Alignment of remuneration with risk outcomes
The Board considers that the effective alignment of remuneration with prudent risk-taking is fundamental to its remuneration
approach. The consideration of risk is embedded throughout the entire remuneration process including through the
determination of individual profit share allocations, business and company-wide profit share pools as well as through the way in
which remuneration is structured and delivered.
The Board is aware of the increasing focus of regulators and shareholders on ensuring that risk-related matters that come to
light subsequent to remuneration being awarded are appropriately factored into remuneration decisions. Macquarie’s high
retention rates and long deferral periods provide a mechanism for the Board to consider risk outcomes over a long period.
Furthermore, where an investigation has commenced into a risk or conduct-related matter that may result in forfeiture or, for
senior employees, the application of Malus, Macquarie may further defer the payment, vesting and/or release of profit share to
allow for the investigation to be completed.(13)
The following mechanisms exist to risk adjust remuneration outcomes:
In‑year profit share adjustments
• determined as part of assessing an individual’s performance each year
• the annual assessment includes consideration of compliance with the risk management framework and with the
Applies to all staff
behavioural expectations outlined in the Code of Conduct. In addition, any outcomes from the consequence management
process or the independent reporting from the Chief Risk Officer (CRO) and General Counsel are also considered.
Forfeiture
• where an individual’s employment is terminated due to a compliance or conduct concern (or they resign), unvested
Applies to all staff with retained profit share
remuneration is forfeited, as per Macquarie’s standard policy.
Malus Events
Applies to senior employees
Macquarie’s Malus provisions provide the Board or its delegate with the ability to reduce or eliminate in full, the retained profit
share for senior employees and, for Executive Committee members, unvested PSUs where it is determined that the individual
has at any time:
• acted dishonestly (including, but not limited to, misappropriating funds or deliberately concealing a transaction)
• acted or failed to act in a way that contributed to:
– a breach of a significant legal or significant regulatory requirement relevant to Macquarie
– MGL or MBL making a material financial restatement
– MGL, MBL or any Operating Group within Macquarie incurring:
– significant reputational harm
– a significant unexpected financial loss, impairment charge, cost or provision.
(13) Malus also applies to any unvested profit share retained by Executive Directors on termination, in addition to the Post Employment Events set out on page 107.
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Additional provisions may apply to staff in certain jurisdictions to ensure compliance with local regulations. This includes,
for example:
• if an Accountable Person fails to comply with their accountability obligations under the BEAR, this may result in
consequences being applied in accordance with Macquarie’s policies, including the application of Malus
• staff in the UK and EU, including one Executive Committee member, who are subject to additional Malus and Clawback
provisions under local regulatory requirements.
The BRC considers whether, and the extent to which, to apply Malus, taking into account local employment laws, the nature and
circumstances of the event and any other redress that has been or may be applied.
Macquarie has always had and continues to have, the ability to terminate staff where a Malus Event has occurred, at which time
any unvested profit share would be forfeited in full.
Risk adjustment processes
There are robust processes in place to ensure that all risk, reputation, and conduct-related matters are specifically considered
when determining remuneration outcomes. These processes may result in a downward adjustment to group and/or individual
profit share allocations where appropriate. A wide range of risks that could have a financial or non-financial impact on
Macquarie are considered, including if there has been a detriment to customers.
The diagram below provides an overview of these processes.
Independent control function input when determining remuneration outcomes
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Risk Management Group
Human Resources
Legal
The CRO provides the BRC with an
independent report detailing significant
regulatory and legal matters, significant
compliance and operational incidents,
internal audit issues and other financial
and non-financial risk matters.
The Global Head of HR discusses RMG’s
report with the Group Heads to ensure
any matters listed in the report are
appropriately reflected in remuneration
outcomes for relevant staff and
provides a report to the BRC on how
this has been achieved.
The General Counsel provides a further
source of independent input and, in
conjunction with HR, considers whether
there are any incidents (including any
breach of the BEAR obligations) that
should be brought to the attention
of the BRC which might lead to a
Malus determination.
Consequence management process
Incidents, breaches of policy and misconduct issues are regularly reported to senior management. The Global Head of HR
annually reports to the BRC on the outcomes from the consequence management process and confirms that these matters
have been considered in determining remuneration and promotion outcomes where appropriate.
Consequence management outcomes
Macquarie’s Consequence Management Guideline applies wherever a breach of internal policy or regulatory requirement
is identified. Consequences may include further training, removal of delegated authorities or permissions, adjustments to
performance-based remuneration, impact on promotion, formal warnings or termination.
Where an employee has received a formal warning, their performance-based remuneration will likely be impacted and in
some cases, it will be reduced to zero. Promotion decisions may also be impacted. Consequences may also be applied where a
formal warning has not been issued. In each case, judgement is exercised as to the appropriate consequence(s) based on all the
relevant circumstances.
In FY2021, there were 97 (FY2020: 164) matters involving conduct or policy breaches (for example, Code of Conduct, appropriate
workplace behaviour, risk management and technology breaches) that resulted in formal consequences. Of those:
• for 16 matters, termination of employment was the outcome (FY2020: 32)
• for 81 matters, a formal warning was issued (FY2020: 132). Additional consequences were applied as appropriate including
additional training, removal of delegated authorities or permissions, adjustments to profit share and/or impact to
promotion. Of the 81 matters, 15 have resulted in individuals subsequently leaving Macquarie before year-end outcomes were
determined and 64 individuals had their profit share reduced by an average of 48%.
The remote working environment was a key factor in the decline in the number of matters this year. For example, fewer
in-person interactions contributed to a reduction in instances of conduct failing to meet appropriate workplace behaviour
standards (50 matters in FY2020 decreasing to 20 matters in FY2021).
The 97 matters were considered isolated incidents and there was no evidence of broader systemic conduct issues.
111
Remuneration Report
Continued
Further details on remuneration framework
This section describes other key features of Macquarie’s remuneration framework and of the employment contracts for
Executive Committee members.
Other features of Macquarie’s remuneration framework
The following table summarises key features of Macquarie’s remuneration framework:
Role‑based
allowances
Minimum
shareholding
requirement
Promotion
Awards
Performance
fees
Hedging
• Role-based allowances are a component of fixed remuneration that may be awarded to certain
employees, including those identified as Material Risk Takers (MRTs) under UK or EU regulatory
requirements. These allowances are determined based on the role and organisational responsibility
of the individuals.
• Executive Directors are required to hold a relevant interest in Macquarie ordinary shares that have a value
equal to 5% of an Executive Director’s aggregate profit share allocation for each of the past five years (10
years for Executive Committee members), which can be satisfied by the requirements of the profit share
retention policy.
• For Executive Committee members, compliance with this policy equates to a minimum shareholding
requirement of between 195% to 835% of fixed remuneration, excluding the role-based allowance in
place for one Executive Committee member.
• Staff who are promoted to Associate Director, Division Director or Executive Director receive an
allocation of MEREP awards based on Director-level set with reference to an Australian dollar value.
Currently these awards range from $A25,000 to $A175,000 depending on the promotion level.
• A small number of individuals with funds responsibilities may receive a portion of their
performance-based remuneration as a share of performance fees paid by Macquarie-managed funds.
• The profit share pool is adjusted downwards to reflect these deferred remuneration arrangements, which
are also taken into account in determining the individual’s profit share allocation.
• Consistent with market practice, these individuals are allocated an entitlement to a share of performance
fees paid by a particular fund. This allocation is based on performance, seniority and the extent of the
individual’s involvement with the particular fund.
• An individual will not receive their entitlement until Macquarie has received performance fees towards
the end of the fund’s life, which is typically upwards of 10 years. The entitlement will be forfeited if their
employment ceases before five years from the date of allocation. Entitlements are subject to similar
forfeiture conditions as profit share.
• Prior to joining the Executive Committee, both Mr Stanley (ceased to be a member of the Executive
Committee effective 1 April 2021) and Mr Way (joined the Executive Committee on 1 April 2021) participated
in these arrangements for certain funds in their former roles. Upon joining the Executive Committee, they
maintained their participation in these existing funds, but they have not been allocated any additional
entitlements. No other Executive Committee members currently participate in these arrangements.
• Macquarie prohibits staff from hedging (i) shares held to meet the minimum shareholding requirement
and (ii) unvested equity held in the MEREP.
Employment contracts
The following table summarises key features of the employment contracts for Executive Committee members including the CEO:
Length of contract
Permanent open-ended.
Remuneration
review period
Profit share
participation
1 April to 31 March annually.
Executive Committee members are eligible to be considered for a profit share allocation that ensures a large
part of their remuneration is ‘at risk’. Refer to pages 104 to 107 for details.
PSU participation
Executive Committee members are eligible to receive PSUs. Refer to pages 108 to 109 for details.
Termination of
employment
Requires no more than four weeks’ notice by Macquarie or the Executive Committee member
(Post-employment restrictions apply).(14)
Post‑employment
restrictions
Restrictions include non-solicitation provisions applicable for six months, and paid non-competition
provisions applicable, at Macquarie’s election, for up to three months post-termination.
(14) Subject to compliance with local regulatory and legal requirements. In Australia, Executive Directors given notice by Macquarie may receive an additional week’s notice if they are
over 45 years of age and have more than two years’ continuous service at the time of the termination of their employment. In the UK, the statutory minimum notice period increases
from 4 weeks to a maximum 12 weeks based on years of service.
112
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Pay for performance
This section details Macquarie’s results and demonstrates the link between pay and performance.
Macquarie’s results
Macquarie delivered strong financial results for shareholders in FY2021. NPAT has increased by 10% compared to the prior
year and EPS has increased by 7%. In addition, returns to shareholders have been strong with an increase in ordinary dividends
of 9% compared to the prior year, noting that shareholders were impacted in FY2020 with a reduced dividend in line with
regulatory expectations.
Total compensation and total Executive KMP awarded profit share has not increased to the same extent as NPAT and the
compensation expense to income ratio is consistent with FY2020. CEO awarded profit share has increased by 14%. This increase
has been explained in both the Chair letter and the CEO’s awarded pay table on page 120.
Comparison of performance measures and executive remuneration measures: FY2020–2021
Expressed as
FY2021
FY2020
Increase/
(Decrease) %
Performance measures
NPAT
Basic EPS
Ordinary Dividends
Return on equity
Executive remuneration measures
Total compensation expense
Compensation expense to income ratio
Average staff headcount(15)
Actual staff headcount(15)
CEO awarded profit share
Current Executive KMP awarded profit share(16)
CEO Statutory Remuneration
Total Executive KMP Statutory Remuneration
$Am
Cents per share
Cents per share
Percent
$Am
Percent
$Am
$Am
$Am
$Am
Performance over past 10 years: FY2012–2021
3,015
842.9
470.0
14.3
5,190
40.6
16,385
16,459
19.85
106.9
16.0
122.4
2,731
791.0
430.0
14.5
5,001
40.6
15,762
15,849
17.35
99.4
14.9
105.8
10
7
9
4
4
4
14
8
7
16
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Year ended 31 March
Income Statement
NPAT ($Am)
Basic EPS (cents per share)
Shareholder returns
Return on equity (%)
Ordinary Dividends (cents per share)
Special Dividends (cents per share)(17)
Share price as at 31 March ($A)
Annual TSR (%) to 31 March(18),(19)
730
210.1
6.8
140
–
29.08
(16.0)
10 year TSR (%) to 31 March(18),(19)
56.3
170.4
189.6
851
1,265
1,604
2,063
2,217
2,557
2,982
251.2
383.6
502.3
619.2
657.6
758.2
883.3
2,731
791.0
3,015
842.9
7.8
200
–
37.15
34.5
11.1
260
116
14.0
330
–
14.7
400
–
15.2
470
–
16.8
525
–
18.0
575
–
14.5
430
–
14.3
470
57.93
76.67
66.09
90.20
102.90
129.42
85.75
152.83
67.2
40.0
187.7
(9.2)
83.5
46.0
99.0
21.3
32.8
(29.9)
83.9
257.7
723.6
220.7
628.6
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(15) Headcount for both FY2021 and FY2020 includes staff employed in operationally segregated subsidiaries (OSS).
(16) Represents the full year profit share awarded to the current Executive KMP population in both FY2021 and FY2020.
(17) The special dividend for the year ended 31 March 2014 represented the special dividend component of the SYD Distribution in January 2014. The total distribution including return on
capital was 373 cents per share.
(18) TSR data reflects the reinvestment of gross dividends.
(19) Source: Bloomberg.
113
Remuneration Report
Continued
Total shareholder return
Macquarie’s TSR over the long-term has been strong and continues to outperform both the MSCI World Capital Markets Index
(MSCI Index) since the inception of this index and the All Ordinaries Accumulation Index (All Ords Index) since listing.
The TSR charts below are displayed on a base-10 logarithmic scale, which displays relative percentage movements over an
extended historical time frame as similar in size, without visually skewing the performance in more recent years.
Macquarie TSR versus the MSCI Index(20): 30 April 2003, being the date the index was first calculated, to 31 March 2021
10,000
1,000
100
10
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Source: Bloomberg.
Macquarie TSR since listing versus the All Ords Index(21): 29 July 1996 to 31 March 2021
MQG
MSCI World Capital Markets Index
10,000
1,000
100
10
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Source: Bloomberg.
MQG
All Ordinaries Index
(20) Indexed to 100 on 30 April 2003, being the date the index was first calculated. The MSCI World Capital Markets Index comprises a basket of companies that provide capital markets
activities (defined by MSCI as asset management, investment banking and brokerage, and diversified capital markets activities). Macquarie TSR calculations assume continuous
listing. Therefore, they are based on Macquarie Bank Limited (ASX Code: MBL) data up to and including 2 November 2007 (the last day of trading of MBL shares), and MGL
(ASX Code: MQG) data from the commencement of trading of MGL ordinary shares on 5 November 2007 onwards.
(21) Indexed to 100 on 29 July 1996, being when MBL shares were first quoted on ASX. The All Ordinaries Accumulation Index (All Ords Index) comprises the 500 largest ASX listed
companies by market capitalisation. As per the footnote for the MSCI World Capital Markets Index, Macquarie TSR calculations assume continuous listing.
114
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Macquarie’s ROE performance compared with an international reference group
Macquarie’s ROE for FY2021 is 14.3%, broadly in line with FY2020, and remains higher than the majority of the international
reference group. In addition, Macquarie’s three, five and ten-year average annual ROE exceeds the majority of the
reference group.
Reference group ROE over ten years FY2012–2021
1 year average
% p.a.
3 year average
% p.a.
5 year average
% p.a.
10 year average
% p.a.
Macquarie
Average of reference group
Company
Company
Company
Company
Company
Company
Company
Company
Company
14.3
12.8
6.7
2.8
6.2
0.3
10.9
11.3
52.9
12.7
11.5
15.6
12.1
9.5
3.5
6.2
(3.1)
11.4
13.2
46.7
12.0
9.4
15.8
9.7
8.4
2.0
2.0
(2.8)
9.7
11.9
38.3
10.5
7.2
13.3
9.4
5.6
1.4
2.0
(1.2)
9.2
10.9
42.3
7.4
6.5
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Source: Bloomberg (reference group) and Macquarie as reported.
Compensation expense to income ratio
In determining the reasonableness of the company-wide profit share pool, the Board considers Macquarie’s compensation
expense to income ratio (compensation ratio) compared to that of an international reference group as a broad guide to assess
whether the share of profits distributed to staff and shareholders is reasonable. The compensation ratio effectively adjusts for
differences in size between organisations; however, some companies are or have become part of larger organisations, often
with large retail operations that can distort comparisons.
In the following chart, Macquarie’s compensation ratio is compared with that of the international reference group.(22)
Macquarie’s FY2021 compensation ratio of 40.6% is well below the average of our international peer group.
Compensation expense to income ratio: FY2019–2021 (%)
65
60
55
50
45
40
35
30
25
20
15
10
5
0
Macquarie
Reference group based on most recent statutory accounts/filings
2018/2019
2019/2020
2020/2021
Average 2020/2021 comp ratio of reference group
Source: Data has been calculated by Macquarie. The information is based on publicly available information for the reference group. In order to show more comparable compensation
ratios, impairments have been consistently netted against net revenue in the revised calculations for some organisations.
(22) The reference group comprises Bank of America Corporation, Barclays PLC, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., JP Morgan Chase & Co., Lazard Ltd,
Morgan Stanley and UBS AG.
115
Remuneration Report
Continued
Tenure of Executive KMP(23)
One of the primary goals of Macquarie’s remuneration
framework is to attract, motivate and retain high-performing
staff. The Board’s view is that Macquarie continues to achieve
this goal as demonstrated by the following:
• Macquarie’s Executive KMP had an average tenure of
24 years with Macquarie as at 31 March 2021. Their strong
leadership and deep expertise have been integral to driving
company and business performance in FY2021
• as at 31 March 2021, 49% of Director-level staff had
more than ten years’ experience with Macquarie, while a
further 22% had between five and ten years’ experience
with Macquarie
• the 4.4% Director-level voluntary turnover rate in FY2021
is considerably lower compared with the prior year
and remains below the voluntary turnover rate across
Macquarie overall.
S Wikramanayake
M Reemst
N O'Kane
G Ward
N Sorbara
M Silverton
P Upfold
A Harvey
D Wong
M Stanley
F Herold
0
5
10
15
20
25
30
35
Number of years at Macquarie
(23) This includes accumulated service at acquired companies, for example, Bankers Trust Investment Bank Australia.
116
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Executive KMP remuneration outcomes for FY2021
This section details Executive KMP remuneration outcomes for FY2021 and demonstrates the link between pay
and performance.
Executive KMP fixed remuneration outcomes
In line with our pay for performance approach to
remuneration, fixed remuneration for our Executive KMP
in FY2021 comprised approximately 10% of total awarded
remuneration, with the balance at risk and explicitly linked
to performance.
In addition to a base salary and as part of fixed remuneration,
one Executive KMP, Mr Wong, receives a role-based
allowance as described on page 112.
Process to determine Executive KMP profit
share outcomes
There is a consistent and comprehensive process for the
Board and the BRC to assess the performance of the CEO
and each Executive KMP during the year to enable them
to determine remuneration outcomes at the end of the
year. The Board is always mindful of the external focus on
overall remuneration levels and has spent considerable time
determining remuneration outcomes for the CEO and each
Executive KMP. The BRC recognises the range of expectations
and have made decisions which take into consideration the
perspectives of all stakeholders. Significant judgement is
applied in order to ensure that remuneration outcomes are
aligned both with individual and company-wide performance
and with outcomes delivered to our shareholders, our clients
and the communities in which we operate.
As part of the Board’s annual review of Macquarie’s CEO’s
performance, the CEO meets with the Non-Executive
Directors (NEDs) of the Board towards the end of each
financial year to consider formal documentation that outlines
her views of Macquarie’s performance. The presentation
includes a broad range of Macquarie’s activities covering the
following main areas:
• financial performance
• risk management and compliance
• business leadership including customer and
community outcomes
• people leadership and professional conduct consistent
with the Code of Conduct and What We Stand For.
Over the course of the year the Board receives regular
reports and updates on many of these areas. These are
summarised in the CEO’s presentation, together with
additional information on any particular matters of interest
the Board has identified for further discussion as a part
of the review process. This year, the NEDs requested that
the CEO focus on how Macquarie demonstrates its culture
of putting customers first, promotes the expansion of
businesses with new and existing customers as well an
ongoing focus on regulatory issues, including compliance and
reporting. The Board then considers the CEO’s performance
and progress against all of these topics in determining the
CEO’s remuneration for the year. A similar process is followed
for the CEO of Macquarie Bank.
The Board and the BRC consider formal documentation for
each Executive KMP, which includes consideration of the
same factors as the CEO as set out above.
The BRC also consider risk-related matters raised in the
independent reports from the CRO and the General Counsel.
To ensure that all matters are appropriately brought to
the BRC’s attention and to achieve an integrated approach
to remuneration that reflects prudent and appropriate
risk, there is a joint meeting of the BRC, BRiC and the
BGCC. Finally, the BRC considers remuneration levels for
organisations that broadly operate in the same markets and
compete for the same people as Macquarie.
FY2021 remuneration impacts –
APRA enforcement action
On 1 April 2021, APRA announced actions required regarding
MBL’s risk management practices and ability to calculate
and report key prudential ratios. APRA increased MBL’s
operational risk capital requirement and made adjustments
to requirements for certain liquidity prudential ratios,
effective from 1 April 2021. The actions relate to specific
intra-group funding arrangements as well as breaches of
APRA’s reporting standards on liquidity between 2018 and
2020. APRA noted that the breaches are historical and do not
impact the current overall soundness of Macquarie Group’s
capital and liquidity positions.
The Board acknowledges the seriousness of the APRA
findings and has reflected this in its determination of
remuneration outcomes. This has been through a reduction
in the PSU allocations for Executive KMP and the imposition
of additional qualifying conditions on the release of a portion
of their retained profit share. The qualifying conditions
relate to the timely and satisfactory remediation of the
APRA findings.
FY2021 Executive KMP profit share outcomes
FY2021 remuneration outcomes reflect:
• this year's achievements against a range of financial and
non-financial factors, some of which are discussed below
• the recognition that our people are our greatest asset,
and the importance of retaining key people to encourage
innovation and pursue growth opportunities
• an alignment to the outcomes delivered to shareholders
• risk management, compliance and conduct outcomes.
We have firstly considered the financial results of Macquarie
overall, as well as each Operating Group. Against a challenging
backdrop, all Operating Groups have been profitable this year.
These results reinforce the value of the diversification which
we have built into each of our businesses.
117
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• Macquarie’s response to COVID‑19: There has been
a heightened awareness of the issues impacting our
customers, clients, portfolio companies, and the broader
community as a result of the pandemic, as well as the
global political and social challenges. Some of the ways
Macquarie has addressed the impact of COVID-19 include:
– payment pause and lending relief continues
although the vast majority of clients have resumed
normal payments
– within our portfolio companies, there has been ongoing
work to ensure business continuity, financial resilience
and employee well-being
– the Macquarie Group Foundation (the Foundation)
has increased financial support for urgent direct relief
needs, research, and to support workers and businesses
in restarting economic activity through the COVID-19
donation fund.
Executive KMP remuneration outcomes have been
considered in the context of the wider workforce. The BRC
receives extensive reporting on remuneration outcomes
and individually reviews and approves the remuneration
of BEAR Accountable Persons, staff who hold regulated
roles, Designated Executive Directors and other senior staff
(generally direct reports of Executive KMP) and has reviewed
overall total remuneration levels across each business to
ensure appropriate distribution of remuneration across the
organisation. The BRC has also considered the compensation
expense to income ratio as a guide as to whether the share of
profits distributed to staff and shareholders is reasonable.
Finally, the BRC also considers remuneration levels for
organisations in an international reference group that broadly
operate in the same markets and compete for the same
people as Macquarie.
After careful consideration of all these factors, we believe the
following outcomes for the year are appropriate:
• CEO awarded profit share has increased 14% on the prior
year to $A19.85 million
• total Executive KMP awarded profit share is up 8% to
$A106.9 million
• reflecting the APRA findings, PSU allocations for Executive
KMP have been reduced and additional qualifying
conditions have been imposed on the release of a portion
of their retained profit share
• in FY2020, in light of the economic uncertainty due to
COVID-19, retention rates for the CEO and Executive KMP
were increased to 100%. This year, they have been reset to
levels more in line with 2019.
Remuneration Report
Continued
In determining the CEO’s remuneration, we have considered
her strong leadership through the challenges of COVID-19.
She has also advanced a process of reorganising Macquarie’s
Operating Groups and renewing the Executive Committee,
positioning the business for future opportunities.
We have also considered the following contributing
factors which the Board views as critical to Macquarie’s
ongoing success:
• Cross‑group collaboration: There has been an increasing
focus over the last year as businesses work together
to leverage expertise and find holistic solutions for
customers and unlock new opportunities. Our culture of
putting customers first and delivering on customer and
community expectations permeates through Macquarie.
This has helped to drive growth, secure repeat business
and support our whole portfolio during COVID-19
challenged market conditions.
• The continued focus on people and culture: The
well-being and empowerment of staff is instrumental
to Macquarie’s resilience and performance. As part of
this ongoing focus, Macquarie’s rearticulated purpose
was launched this year following extensive consultation
with over 800 staff. Each group has implemented new
and reviewed existing strategies to embed our purpose:
to empower people to innovate and invest in a better
future. In addition, longstanding investment in leadership
capability and flexible working has been accelerated as
a result of the pandemic. The Macquarie Voice survey
conducted in November 2020 saw increased employee
engagement, further evidencing the focus being given to
staff well-being.
• Ongoing investment in technology: Macquarie continues
to invest in technology, systems and processes to
reduce risk, enhance the customer experience and drive
efficiencies. These investments have also underpinned
business resilience, with as many as 98% of staff across
Macquarie working remotely during the year with
minimal disruption.
• Progress against D&I initiatives: D&I continues to be
a business priority that is fundamental to Macquarie’s
ongoing success. We acknowledge the heightened political
and social focus on addressing inequality. During the year
we reaffirmed our commitment to building a diverse
workforce with the development of D&I initiatives focused
on building inclusive leadership capabilities and enhancing
the transparency of demographic data to better
understand the diversity of the workforce and where
further action is required.
• Risk management: A disciplined approach to risk
management is critical to Macquarie’s success.
Notwithstanding the APRA findings noted earlier, there
have been a number of enhancements made to ensure
that non-financial risks are identified and managed,
including:
– significant investment in Work, Health, Safety
and Environment systems, procedures, training
and oversight
– heightened focus on financial crime risk
– a comprehensive review of the ESR policy to ensure
stakeholder expectations are met
– a refresh of the Conduct Risk framework.
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
To demonstrate the alignment between pay and performance, the following graphs show the multi-year alignment between
CEO and total Executive KMP awarded profit share and Macquarie NPAT over a ten-year period.
CEO awarded profit share(24)
Total Executive KMP awarded profit share
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(24) For 2019, the graph reflects awarded profit share for the CEO role for FY2019. This equates to the sum of awarded profit share for Mr Moore for the period 1 April 2018 to
30 November 2018 and awarded profit share for Ms Wikramanayake for the period 1 December 2018 to 31 March 2019.
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Remuneration Report
Continued
Executive KMP awarded pay
To clearly demonstrate the link between pay and performance, we have included awarded remuneration disclosures for fixed
remuneration and profit share as well as highlights of each Executive KMP’s performance for the year. Details of PSUs awarded
and vested in the year are set out in the following sections.
The tables on the following pages are additional disclosures that are prepared on a different basis to those included in the
statutory disclosures in Appendix 2 and are not additive. Remuneration relating to the portion of the relevant periods that each
person was an Executive KMP is disclosed.
As noted in last year’s report, in light of the economic uncertainty due to COVID-19, retention rates for FY2020 were increased
to 100% for the CEO and all Executive Committee members and there was no available profit share component. For FY2021, as
a result of improved economic conditions, retention rates have been reset to levels more in line with 2019.
Macquarie Group
S.R. Wikramanayake – Macquarie CEO
Awarded remuneration ($A)
FY2021
FY2020
Fixed remuneration
820,244
795,740
Available profit share
3,970,000
–
Retained profit share
15,880,000
17,352,388
Total
20,670,244
18,148,128
Ms Wikramanayake’s fixed remuneration increased effective 1 July 2019,
to reflect her role as CEO.
Financial results
• Successfully steered the organisation through the challenges of
COVID-19, achieving strong financial outcomes, including Macquarie’s
highest profit on record: NPAT of $A3,015 million, up 10% compared
to FY2020, ROE of 14.3% and EPS of 842.9 cents per share, despite
the challenges of COVID-19.
• Maintained a strong and conservative balance sheet.
Risk management and compliance
• Ongoing investment into risk management capabilities to support
business growth and address increasing regulatory focus, as well
as meeting community expectations (including around ESR) in a
scalable and controlled manner.
Business leadership (including customer and community outcomes)
• Promoted cross-group collaboration throughout Macquarie
including the acceleration of Macquarie’s role in energy transition.
• Comprehensive response to COVID-19 focusing on employees,
clients, portfolio companies and the community: supported
Macquarie’s ongoing focus on a culture of putting customers first,
including payment pauses and assistance for affected customers
during COVID-19 and delivering on customer and community
expectations.
People leadership and professional conduct
• Advanced the process of reorganising Macquarie’s Operating Groups
and renewing the Executive Committee, positioning the business for
future opportunities.
• Strong people leadership during the year reflected in high employee
engagement and a high CEO approval rating evidenced through the
Macquarie Voice survey.
• Embedded Macquarie’s purpose to empower people to innovate
and invest in a better future through the launch of a staff-led
Purpose statement.
• Ongoing focus of building inclusive leadership capabilities.
• Ongoing contribution to policy formation through formal
consultations and appointments to a number of advisory panels
on key Environmental, Social and Governance (ESG) initiatives.
These leadership roles add to existing contributions including the
Global Commission on Adaptation and the UN Climate Finance
Leadership Initiative.
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Macquarie Bank
M.J. Reemst – Macquarie Bank CEO
Awarded remuneration ($A)
FY2021
FY2020
Fixed remuneration
771,319
770,885
Available profit share
1,508,000
–
Retained profit share
2,262,000
3,982,515
Total
4,541,319
4,753,400
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Financial results
• Strong management of MBL’s balance sheet in FY2021 ensuring
a strong financial position and operating ratios well in excess of
regulatory minimums.
• Despite challenging market conditions, successfully increased
Bank funding with $A11.2 billion term funding raised to support
business growth.
• Maintained Macquarie’s upgraded S&P rating of A+.
Risk management and compliance
• BEAR is embedded and operational in MBL and there is ongoing
engagement with the government, regulators and industry
associations on the proposed Financial Accountability Regime (FAR).
• Managed a significant increase in the frequency of requests for
regulatory reports during COVID-19.
• Continued to invest to manage high regulatory reporting risk
acknowledging the heightened focus by regulators and the
significant increase in the frequency of requests for regulatory
reports during COVID-19.
Business leadership (including customer and community outcomes)
• Established, capitalised and operationalised Macquarie Bank Europe
and smaller licenced entities to facilitate Macquarie continuing
regulated activity in European markets post-Brexit.
• Successful transfer of Macquarie Group Services Australia Pty Ltd
(MGSA) from the group to the bank as part of Resolution.
People leadership and professional conduct
• Served as Chair of the Macquarie Group Foundation. During an
unprecedented year, staff and the Foundation responded with
empathy and generosity. Support for communities included the
global $A20 million COVID-19 donation fund and the creation
of the Racial Equity Fund in the Americas. In FY2021, through
donations and fundraising effort by employees and matching by
the Foundation, together with the Foundation’s annual grant-making
program, $A64 million was contributed to over 2,400 non-profit
organisations around the world.
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Macquarie Asset
Management (MAM)
M.S.W. Stanley – Group Head
Awarded remuneration ($A)
FY2021
Fixed remuneration
710,608
Available profit share
7,548,692
FY2020
727,571
–
Retained profit share
11,323,038
18,125,946
Total
19,582,338
18,853,517
Financial results
• Delivered a net profit contribution of $A2,074 million, down 5% on
FY2020's record result, reflecting significant headwinds impacting
the Transportation Finance business and considerable volatility in
public markets.
• Base fees and performance fees were down 2% and 21%
respectively on record FY2020 levels.
Risk management and compliance
• MAM’s risk governance was strengthened during the year
including an enhanced Work Health and Safety (WHS) framework.
Notwithstanding this improvement, WHS remained a key priority
during FY2021.
• MAM continued to strengthen its ESG credentials with the
launch of the annual MIRA Sustainability Report as well as the
announcement of MAM’s commitment to investing and managing
its portfolio in line with global net zero emissions by 2040.
Business leadership (including customer and community outcomes)
• Entered into an agreement to acquire Waddell & Reed Financial
Inc. and made strategic divestitures of MIM Korea and the minority
stake in Jackson Square Partners.
• MIRA raised $A21.8 billion in new equity for a diverse range of funds,
products and solutions across the platform.
• In April 2020, MIRA closed the sale of the Macquarie European
Rail business.
People leadership and professional conduct
• Established a MAM Awards program to reward and recognise staff
who role model key behaviours.
• Sponsored diverse talent through various training and programs, as
well as through the implementation of MAM’s D&I strategy.
• Successfully managed an orderly transition to the new MAM Group
Head, Ben Way.
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Banking and Financial
Services (BFS)
G.C. Ward – Deputy Managing Director
and Group Head
Awarded remuneration ($A)
FY2021
FY2020
Fixed remuneration
771,319
770,885
Available profit share
3,220,000
–
Retained profit share
4,830,000
8,059,013
Total
8,821,319
8,829,898
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Financial results
• Delivered a net profit contribution of $A771 million, in line with the
prior year.
• Total BFS deposits increased 26% to $A80.7 billion, the loan and
lease portfolio increased 18% to $A89.1 billion and funds on platform
increased 28% to $A101.4 billion.
• The home loan portfolio increased 29% to $A67.0 billion driven by
strong demand in lower loan-to-value ratio and owner-occupier
lending tiers, while the Business Banking loan portfolio increased
13% to $A10.2 billion and Business Banking deposit volumes
increased 23%.
Risk management and compliance
• Established the BFS Regulatory Risk team and expanded regulatory
assurance functions within non-financial risk.
• Key risk metrics throughout FY2021 compared to pre-COVID-19
demonstrate the ongoing robustness of the BFS control framework
over this challenging period.
Business leadership (including customer and community outcomes)
• Provided an industry-leading, rapid response to COVID-19, including
being first in market to support clients on payment pause with an
online request form, a pause on collections activity, and redeploying
approximately 400 staff to support a period of increased client and
operational needs.
• During the first half of the year, BFS expanded the Macquarie Wrap
managed accounts offering with assets under management of
$A5.4 billion, up from $A3.0 billion in March 2020.
• BFS continued the implementation of a cloud-based portfolio
management platform as part of the wealth platform
transformation.
• Received a number of awards, including: Mortgage Choice winner
(Lender of the Year); Money Magazine’s Consumer Finance Awards
winner (Home Lender of the Year); Mozo Experts Choice Awards
winner (Internet Banking, Exceptional Everyday Account and
Excellent Banking App).
People leadership and professional conduct
• Sustained commitment to gender balance has led BFS to a gender
balanced workforce, including increased female representation at
the Director level.
• Ongoing investment and focus on creating a high-performing,
diverse and inclusive culture is evidenced in BFS’ Level 1
accreditation as a Carer Friendly Employer (one of only six
organisations to receive this recognition), BFS’ qualification as an
Australian Workplace Equality Index Platinum Employer and BFS'
record-high levels of staff engagement.
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Commodities and
Global Markets (CGM)
N. O’Kane – Group Head
Awarded remuneration ($A)
FY2021
FY2020
Fixed remuneration
816,732
928,940
Available profit share
10,198,800
–
Retained profit share
15,298,201
18,546,763
Financial results
• Delivered a record net profit contribution of $A2,601 million for
FY2021, up 50% on the prior year.
• The result was reflective of increased contribution from
Resources North American Gas and Power, EMEA Gas and
Power and Agriculture due to client hedging activity driven by
increased volatility and commodity price movements. This was
underpinned by:
– client focused businesses with deep longstanding
client relationships
– platform diversity that drives earnings stability and de-risks
Total
26,313,733
19,475,703
the portfolio
The movement in Mr O’Kane’s fixed remuneration reflects an adjustment
to his salary on relocation to Australia in line with other Executive KMP
based in Australia.
– dedicated specialist staff with deep sector knowledge and
market insights
– a focus on risk management that remains core to every
business activity.
Risk management and compliance
• Focused on embedding the operational risk management
framework including increased investment in the non-financial
risk teams.
• Several initiatives have been implemented across CGM to further
embed a robust risk culture including recognising and rewarding
behaviour that role models and promotes strong risk culture.
Business leadership (including customer and community outcomes)
• Adapted to changing market conditions by supporting clients;
responding to increased trading opportunities; and repositioning
businesses where necessary including via pursuit of opportunities in
adjacencies by entering new markets and introducing new products.
• Delivered positive outcomes for the community including the
funding of 10 million+ smart meters in the UK to enable end
consumers to reduce their energy costs and emissions; servicing the
energy needs of North America, with ~11 billion cubic feet of natural
gas volume traded per day.
• Maintained ranking as No. 1 futures broker on the ASX,(25) No. 2
physical gas marketer in North America(26) and received a number
of awards for CGM’s expertise, including Derivatives House of the
Year,(27) Oil and Products House of the Year(27) and Environmental
Products Bank of the Year.(27)
People leadership and professional conduct
• Significant investment in CGM’s people and culture.
• D&I remained a strategic priority with significant focus and
investment across CGM.
(25) Based on overall market share on ASX24 Futures volumes as at 31 December 2020.
(26) Platts Q3 2020.
(27) 2020 Energy Risk Awards.
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Macquarie Capital
M.J. Silverton – Group Co‑Head
Awarded remuneration ($A)
FY2021
FY2020
Fixed remuneration
724,676
631,620
Available profit share
1,650,000
–
Retained profit share
3,850,000
3,791,603
Total
6,224,676
4,423,223
D. Wong – Group Co‑Head
Awarded remuneration ($A)
FY2021
FY2020
Fixed remuneration
4,675,126
4,015,344
Available profit share
942,951
–
Retained profit share
2,200,218
2,480,770
Total
7,818,295
6,496,114
Mr Silverton and Mr Wong were appointed to the Executive Committee
effective 1 June 2019. FY2020 awarded remuneration disclosed reflects
their time as Executive KMP from the period 1 June 2019 to 31 March 2020.
Mr Wong’s fixed remuneration includes a role-based allowance described
on page 112.
F. Herold – Head of Macquarie Capital
Principal Finance
Awarded remuneration ($A)
FY2021
FY2020
Fixed remuneration
723,138
722,704
Available profit share
1,176,000
–
Retained profit share
2,744,000
6,406,635
Total
4,643,138
7,129,339
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Financial results
• Delivered a net profit contribution of $A651 million, down 15% on
the prior year due primarily to fewer material asset realisations
and lower fee and commission income, partially offset by lower
operating expenses.
• 1H21 net profit contribution significantly impacted by COVID-19.
2H21 net profit contribution significantly higher than prior period
and prior corresponding period.
Risk management and compliance
• Further invested in additional specialist risk experts across several
risk areas including Operational Risk, Work, Health and Safety, and
Anti-Bribery, Corruption and Sanctions.
• Established a Non-Financial Risk function, bringing various specialist
risk managers together to drive best practice risk management, set
frameworks, and provide training and assurance.
Business leadership (including customer and community outcomes)
Advisory and Capital Solutions (ACS):
• Macquarie Capital was ranked No.1 in ANZ for both M&A and IPOs
for the past decade
• global collaboration between teams continues to create successful
outcomes, particularly with financial sponsors
• acted as exclusive financial adviser to Strata Fund Solutions on
its sale to Alter Domus and Joint Bookrunner on the acquisition
financing. Principal Finance co-invested with FTV Capital in Strata
and subsequently realised its position in a successful sale process
• focused alignment around areas of opportunity such as
technology-enabled innovation in all sectors.
Infrastructure and Energy Group (IEG):
• Macquarie Capital was ranked No.1 Global Renewables Financial
Adviser in 2020
• continued focus on green energy with over 250 projects under
development or construction, with a pipeline of more than 30GW
• Green Investment Group launched a new solar energy company,
Cero Generation, to take forward an 8 GW portfolio of over
150 projects across Europe as an OSS
• expanded into new markets including Israel, Latin America, Poland,
and new asset classes including Digital Infrastructure, floating
offshore wind and battery storage.
Equities:
• repositioning as an Asia-Pacific focused full service broker with
specialist US services and Global Portfolio Trading offering continues
to resonate with our clients
• equities has been named number one in seven of the eight Chief
Investment Officer Magazine Transitions Management survey
categories, as well as receiving a further top ranking in the
over-riding client satisfaction score.
People leadership and professional conduct
• Continued focus on D&I initiatives, with a focus on recruitment,
communications, leader-led inclusion training and ethnicity and
racial equality awareness training.
• Ongoing investment in people leadership skills.
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Corporate Operations
Group (COG)
N. Sorbara – COO and Group Head
Awarded remuneration ($A)
FY2021
FY2020
Fixed remuneration
771,319
770,885
Available profit share
2,440,000
–
Retained profit share
3,660,000
5,689,307
Total
6,871,319
6,460,192
Financial results
• Responsible for Technology, Operations, Human Resources, Business
Services, Business Improvement and Strategy, Digital Transformation
and Data, and the Macquarie Group Foundation.
• Delivered $A45 million efficiency savings to fund ongoing investment
in COG services. In addition, delivered $A93 million savings direct to
Operating Groups.
Risk management and compliance
• Effectively managed a number of risk frameworks including
cyber security, global security and fraud, enterprise information
management, business resilience, supplier governance and
remuneration.
• Continued to engage with Treasury and regulators on
remuneration regulation.
Business leadership (including customer and community outcomes)
• Led Macquarie’s successful response to COVID-19. Our long-term
focus on investing in people and technology enabled 98% of staff
to work remotely ensuring business resilience and operations
were maintained.
• Led the ongoing development of the Sydney Martin Place Metro
Project, including partnership with Macquarie Capital on the sale
of the South Tower which will complete in 2024.
• Led multiple transformation programs across COG, including the
delivery of a digital HR and procurement platform.
• Delivered support for the community including achieving a record
year of giving through the Foundation and implementing the COVID-19
donation fund, a $A20 million fund donation to support non-profit
organisations working to combat the effects of COVID-19.
People leadership and professional conduct
• Strong people leadership evidenced by high staff engagement scores.
• Continued to embed inclusive leadership capabilities and supported
an innovative culture throughout Macquarie through group-wide
training and tools.
• Maintained strong inclusion & diversity outcomes, including 50%
female representation on leadership team and gender pay parity
for like roles.
• Co-sponsorship of the rearticulation of Macquarie’s purpose.
126
Financial Management
Group (FMG)
A.H. Harvey – CFO and Group Head
Awarded remuneration ($A)
FY2021
FY2020
Fixed remuneration
771,319
770,885
Available profit share
2,440,000
–
Retained profit share
3,660,000
5,689,307
Total
6,871,319
6,460,192
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Financial results
• Responsible for financial, tax and treasury services to all areas of
Macquarie and for Macquarie’s corporate affairs team including
corporate communications and investor relations.
Risk management and compliance
• Managed the capital and funding, liquidity and interest rate risk
management of Macquarie’s balance sheet and delivered year end and
half year reporting without interruption while teams worked remotely.
• Completed phase 1 of the General Ledger project with the release
of Accounts Payable, Fixed Assets and Accounts Receivable, which
will drive efficiencies, reduce risk and enable better informed
decision making.
• Continued investment and focus on regulatory and tax reporting
governance and key controls with dedicated resourcing and
project support.
Business leadership (including customer and community outcomes)
• Further developed relationships with investors, banks and rating
agencies despite restrictions on travel.
• Raised over $A22 billion of term funding across multiple products.
• Continued to evolve the depth of Macquarie’s disclosure, notably in
relation to climate.
• Created business unit aligned finance teams, aligning legal entity
control and financial control with specific Operating Groups, improving
transparency while reducing risk.
• Continued to transform platforms and processes by leveraging better
technology across FMG to enable the delivery of activities in a more
cost-efficient manner.
People leadership and professional conduct
• Co-sponsored the rearticulation of Macquarie’s purpose.
• Launched the refreshed FY2021 D&I strategy and appointed an
Executive Sponsor to help drive accountability against D&I objectives.
• Supported the growth and development of our people and
continued to focus on skills development, talent management and
succession planning.
• Sponsored a heightened focus on well-being and manager capabilities
as staff continued to work remotely for an extended period of time.
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Risk Management
Group (RMG)
P.C. Upfold – CRO and Group Head
Awarded remuneration ($A)
FY2021
FY2020
Financial results
• Responsible for identifying, assessing and monitoring risks across
Macquarie.
Risk management and compliance
• Enhanced key elements of Macquarie’s Non-Financial Risk Management
framework, including the:
– conduct risk framework by implementing the Conduct Issue
Fixed remuneration
771,319
770,885
Rating Standard
Available profit share
2,440,000
–
Retained profit share
3,660,000
5,689,307
Total
6,871,319
6,460,192
– Work, Health and Safety policy and framework
– Group-wide Climate Risk and Modern Slavery Program
– investment in leading risk technology and data
management capabilities.
• Executed an extensive stress testing program to provide management
risk insights during COVID-19.
• Managed Macquarie’s COVID-19 related exposures.
• Managed Macquarie’s regulatory obligations in a remote
working environment.
Business leadership (including customer and community outcomes)
• Invested in non-financial risk teams, including Compliance, Risk
Surveillance, Financial Crime and Operational Risk.
• Flexibly supported our business group plans in response to market
developments (for example, Brexit) and opportunities (for example,
the purchase of Waddell & Reed Financial Inc.).
People leadership and professional conduct
• Continued enhancements to the leadership team, including hiring
of a Global Head of Financial Crime Risk.
• Piloted manager capability modules to support managers to improve
their engagement and people management skills.
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
Executive KMP – Allocation of PSUs for FY2021
As set out on page 108, individual PSU allocations were determined based on their role as members of the Executive
Committee and their contribution to driving the collective performance of Macquarie. This year, PSU allocations have been
reduced to reflect the APRA findings.
In a change from last year, the number of PSUs to be allocated will be calculated by dividing the face value of the PSU award
by the price of Macquarie ordinary shares on or around the date of grant. This change from a fair value methodology is not
expected to have an impact on the resulting number of PSUs to be allocated for FY2021. In the table below, we have disclosed
PSU allocations for all Executive KMP at face and fair value.
Approval will be sought at Macquarie’s 2021 Annual General Meeting to allocate PSU awards to the Macquarie CEO, who is also
an Executive Voting Director.
Executive KMP
S.R. Wikramanayake
A.H. Harvey
F. Herold
N. O’Kane
M.J. Reemst
M.J. Silverton
N. Sorbara
M.S.W. Stanley
P.C. Upfold
G.C. Ward
D. Wong
Face Value of the PSU award ($A)
Fair Value of the PSU award ($A)
3,200,000
2,240,000
2,240,000
2,240,000
–
2,240,000
2,240,000
–
2,240,000
2,240,000
2,240,000
2,117,000
1,482,000
1,482,000
1,482,000
–
1,482,000
1,482,000
–
1,482,000
1,482,000
1,482,000
The fair value is estimated assuming a fair value of $A101.10 per PSU based on the share price of $A152.83, being the closing price of Macquarie ordinary shares on 31 March 2021. The
fair value takes into account trading restrictions, the fact that PSUs do not attract dividends and the vesting performance hurdles and time frames. As a result, the fair value of a PSU is
lower than the face value of a PSU. The following assumptions were used in estimating the fair value: a risk-free interest rate of 0.44% per annum, share volatility of 31.31% and a forecast
dividend yield of 3.96% per annum (paid in two instalments each year).
Pages 108 to 109 set out details of the performance hurdles and vesting period applicable to these awards.
Executive KMP – PSUs vesting during FY2021
The PSUs that completed their performance period on 30 June 2020 comprised the second tranche of those awards granted
in 2016 and the first tranche of those granted in 2017. The performance hurdle tests were performed using data sourced from
Bloomberg for all peers (as well as Macquarie) and the calculations were reviewed independently. The results showed that the
performance hurdles:
• based on Macquarie’s relative average annual ROE compared to the peer group have been fully met for both tranches; and
• based on the EPS CAGR in Macquarie’s reported financial year have not been met for either the 2016 or the 2017 PSU grants.
As a result, 50% of the awards became exercisable on 1 July 2020, as shown below:
PSU tranche
Macquarie result
(for vesting period)
Hurdle
Outcome
Macquarie result
(for vesting period)
Hurdle
Outcome
EPS CAGR Hurdle
ROE Hurdle
2016
Tranche 2
2017
Tranche 1
6.31%
6.35%
50% at 7.5% CAGR
100% at 12% CAGR
0%
exercisable
14.86%
(88th percentile)
50% at 7.5% CAGR
100% at 12% CAGR
0%
exercisable
15.23%
(88th percentile)
50% above the
50th percentile(28)
100% at the 75th
percentile(28)
50% above the
50th percentile(29)
100% at the 75th
percentile(29)
100%
exercisable
100%
exercisable
(28) Peer group ROE at 50th percentile 8.83% and peer group ROE at 75th percentile 9.41%.
(29) Peer group ROE at 50th percentile 9.92% and peer group ROE at 75th percentile 10.53%.
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Remuneration Report
Continued
Remuneration governance
Effective governance is central to Macquarie’s remuneration strategy and approach. The key elements of Macquarie’s
remuneration governance framework are described below.
MGL AND MBL BOARDS
Board Remuneration Committee
Oversees Macquarie’s remuneration policies and practices,
and makes recommendations to the Boards
Strong Board oversight
The Board oversees Macquarie’s remuneration framework.
The Board has a BRC whose objective is to assist the Board
and the Board of Macquarie Bank, a key operating subsidiary,
with Macquarie’s remuneration policies and practices. The
BRC currently comprises six independent Non-Executive
Directors (NEDs):
Board Remuneration Committee
Chair
J.R. Broadbent
Members
G.M. Cairns
P.M. Coffey
D.J. Grady
M. Roche
P.H. Warne
The BRC members have the required experience and
expertise in human resources, remuneration and risk to
enable them to achieve effective governance of Macquarie’s
remuneration framework. The BRC has a regular meeting
cycle and met six times during FY2021. Attendance at
meetings by the BRC members is set out in the Directors’
Report. Strict processes are in place to ensure conflicts of
interest are appropriately managed.
BRC responsibilities
The BRC pays close attention to the design and operation
of remuneration practices for all of Macquarie, not just for
the most senior executives. The responsibilities of the BRC
are outlined in its Charter, which is reviewed and approved
annually by the Board.
The Charter is available at
macquarie.com/corporate‑governance
Board Risk Committee &
Board Governance and Compliance Committee
Discuss any relevant matters which may impact
remuneration in a joint meeting with the Board
Remuneration Committee
Some of the responsibilities include:
• overseeing the process for the annual review by the Board
of the CEOs’ and other Executive KMPs’ performance
• recommending to the Board the remuneration outcomes
for all Executive KMP, Designated Executive Directors and
other senior executives
• assessing the effectiveness of the Remuneration Policy to
ensure compliance with legal and regulatory requirements,
as well as to support the alignment of remuneration
with prudent risk-taking and professional conduct across
the organisation
• recommending the Remuneration Policy to the Board
for approval.
Alignment to risk
The BRC liaises with the BRiC and BGCC to ensure there is
effective co-ordination between the Committees to assist
in producing an integrated approach to remuneration that
reflects prudent and appropriate risk.
As set out on page 111, the CRO provides the BRC with an
independent report detailing significant regulatory and legal
matters, significant compliance and operational incidents,
internal audit issues and other non-financial risk matters.
A joint meeting of the BRC, BRiC and BGCC is held to discuss
these matters, with the CRO in attendance. The General
Counsel attends as required to provide a further source of
independent input, including on matters which might lead to
a Malus determination. The CFO annually confirms to the BRC
that the profit share pool can be supported by Macquarie’s
current and forecast capital position and does not limit
Macquarie’s ability to further strengthen its capital base in
the future if required.
Engagement with external stakeholders
The Chairman of the Board, the previous BRC Chair and
the current BRC Chair undertook a series of meetings with
investors and proxy advisors during the year to communicate
our remuneration approach and to hear any concerns raised
by the investor community.
They also engaged with APRA during the year during the
consultation process for CPS 511.
130
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Pay Governance’s findings included that:
• the objectives of Macquarie’s remuneration framework
are similar to those cited by other leading global
investment banks
• Macquarie’s remuneration components support its
remuneration objectives and principles and are largely
consistent with practices at other leading global
investment banks, including that performance-based
remuneration takes risk management into account.
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Independent remuneration review
The BRC has retained Pay Governance as its independent
remuneration consultant, for the use of the Board to
obtain advice on the appropriateness of Macquarie’s
remuneration framework.
The only service that Pay Governance provides to
Macquarie is executive compensation consulting to the
BRC. Pay Governance has not made any remuneration
recommendations, as defined by the Corporations Act 2001
(Cth) (the Act). The BRC is responsible for making decisions
within the terms of its Charter. Pay Governance’s terms of
engagement set out their independence from members of
Macquarie’s management. This year, Pay Governance:
• provided information on global remuneration and
regulatory trends
• considered alignment with shareholder interests
• compared individual remuneration for Executive KMP
where relevant comparator company information
was available
• considered Macquarie’s overall remuneration approach
compared to comparator company organisations.
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Remuneration Report
Continued
Non‑Executive Director remuneration
The Macquarie Board seeks to attract and appoint high-calibre NEDs. Reflecting the Board’s role, the remuneration
arrangements applicable to NEDs, as outlined in this section, differ significantly from the arrangements applicable
to Executives.
Non‑Executive Director remuneration
Non-Executive Director fees are set acknowledging the level
required to appropriately remunerate highly qualified NEDs
who have the relevant skills and experience to govern as a
member of the Board.
Macquarie’s NED remuneration framework seeks to
remunerate high-calibre directors by:
• setting an overall fee that reflects the scale and
complexity of Macquarie, including risk management and
regulatory responsibilities and the global financial nature
of Macquarie’s activities
• setting Board and Committee fees to reflect the time
commitment required to meet the responsibilities involved
in the annual scheduled calendar, taking into account
market rates for relevant organisations and market trends
• paying separate fees for additional responsibilities that
may arise on an ad hoc basis
• delivering these fees in a form that is not contingent
on Macquarie’s performance
• setting a minimum shareholding requirement to align
the interest of NEDs with shareholders.
All NEDs of MGL are also NEDs of MBL. The framework
governs the remuneration of NEDs of MGL and MBL. The
CEO is not remunerated separately for acting as an Executive
Voting Director.
Unlike Macquarie executives, NEDs are not granted equity,
nor are they eligible to receive profit share payments. There
are no termination payments to NEDs on their retirement
from office other than payments relating to their accrued
superannuation contributions comprising part of their
remuneration.
NEDs may elect to receive their remuneration, in part,
in the form of superannuation contributions over and
above the minimum level of contribution required under
applicable legislation.
Macquarie’s NEDs are remunerated for their services from
the maximum aggregate amount approved by shareholders
for this purpose. Macquarie shareholders approved the
current limit ($A5.0 million per annum) at MGL’s 2019 AGM.
The Board ensures that NED remuneration for MGL and MBL
taken together does not exceed this shareholder approved
maximum amount.
Board and Committee fees are reviewed annually.(30)
An internal review of NED fees was completed during the
year. The Boards determined, following this review, that Board
and Committee fees should remain unchanged.
Minimum shareholding requirement for
Non‑Executive Directors
To align the interests of the Board with shareholders, the
Board has a minimum shareholding requirement for NEDs,
who are required to have a meaningful direct shareholding
in Macquarie.
The Board minimum shareholding requirements:
• for NEDs other than the Chair, an investment equivalent
to one times the average annual NED fee for the financial
year ending prior to their appointment
• for the Chair, an investment equivalent to one times the
annual Chair fee.
with the minimum number of shares to be determined using
the share price as at the date of a NED’s/Chair’s appointment.
The above requirements apply to NEDs and are to be met
within three years from appointment with one third of the
requirement to be held after one year, two thirds after two
years and in full after three years.
Under Macquarie’s Trading Policy, NEDs may only trade
Macquarie securities during designated trading windows
and are prohibited from hedging shares held to meet this
minimum Macquarie shareholding requirement. Each NED’s
current holding of Macquarie ordinary shares is included on
page 88 of the Directors’ Report.
MGL and MBL Annual Director Fees (from 1 July 2018)
Board
Board Risk Committee (BRiC)
Board Audit Committee (BAC)
Board Remuneration Committee (BRC)
Board Governance and Compliance Committee (BGCC)
Board Nominating Committee (BNC)
MGL FEES
MBL FEES
TOTAL FEES
Chairman(31)
$A
Member
$A
Chairman
$A
Member
$A
Chairman
$A
Member
$A
623,000
182,000
267,000
78,000
890,000
260,000
75,000
75,000
75,000
75,000
n/a
35,000
35,000
35,000
35,000
8,000
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
75,000
75,000
75,000
75,000
n/a
35,000
35,000
35,000
35,000
8,000
(30) Macquarie has five standing Board Committees. The BAC and BRiC are joint committees of Macquarie and Macquarie Bank. The BGCC and BRC assist both Boards. The BNC assists
the Macquarie Board.
(31) The Chairman of the Board does not receive Board Committee membership fees.
132
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Appendix 1: Key Management Personnel (KMP) for FY2021
All the individuals listed below have been determined to be KMP for FY2021 for the purposes of the Act and as defined by
AASB 124 Related Party Disclosures. KMP include Executive Voting Directors and Executives with authority and responsibility
for planning, directing and controlling the activities of MGL and its controlled entities (together making Executive KMP) and
NEDs. MGL’s NEDs are required by the Act to be included as KMP for the purposes of disclosures in the Remuneration Report.
However, the NEDs do not consider themselves part of Management.
Name
Position
Term as KMP for FY2021
Full year
Ceased to be a member of the Board on
30 July 2020
Full year
Full year(32)
Full year
Full year
Full year
Ceased to be a member of the Board on
30 September 2020
Appointed to the Board effective from
20 January 2021
Appointed to the Board effective from
20 January 2021
Full year
Full year
Full year
Full year
Executive Voting Director
S.R. Wikramanayake
CEO
Non‑Executive Directors
G.R. Banks AO
Independent Director
J.R. Broadbent AC
Independent Director
G.M. Cairns
P.M. Coffey
M.J. Coleman
D.J. Grady AO
Independent Director
Independent Director
Independent Director
Independent Director
M.J. Hawker AM
Independent Director
R.J. McGrath
Independent Director
M. Roche
Independent Director
G.R. Stevens AC
Independent Director
N.M. Wakefield Evans
Independent Director
Head of Macquarie Capital Principal Finance
Full year(34)
P.H. Warne
Executives(33)
A.H. Harvey
F. Herold
N. O’Kane
M.J. Reemst
M.J. Silverton
N. Sorbara
Independent Chairman
CFO, Head of FMG
Head of CGM
Macquarie Bank CEO
Co-Head of Macquarie Capital
COO, Head of COG
M.S.W. Stanley
Head of MAM
P.C. Upfold
G.C. Ward
D. Wong
CRO, Head of RMG
Deputy Managing Director and Head of BFS
Co-Head of Macquarie Capital
Full year
Full year(35)
Full year
Full year
Full year(36)
Full year
Full year
Full year
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(32) Will cease to be a member of the MGL and MBL Boards effective 7 May 2021.
(33) Except where otherwise indicated, all of the Executives as well as the CEO were members of the Executive Committee as at 7 May 2021.
(34) Will cease to be a member of the Executive Committee effective 7 May 2021.
(35) Will cease to be a member of the Executive Committee effective 1 July 2021.
(36) Ceased to be a member of the Executive Committee effective 1 April 2021.
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Remuneration Report
Continued
Appendix 2: Executive KMP remuneration disclosure
(in accordance with Australian Accounting Standards)
SHORT-TERM EMPLOYEE BENEFITS
LONG-TERM EMPLOYEE BENEFITS
SHARE BASED PAYMENTS
Name
Position
Executive Voting Director
S.R. Wikramanayake(37) Macquarie Group
CEO
Other Executives
A.H. Harvey
CFO, Head of FMG
F. Herold
Head of Macquarie Capital
Principal Finance
N. O’Kane(38)
Head of CGM
M.J. Reemst(39)
Macquarie Bank CEO
N. Sorbara
COO, Head of COG
M.S.W. Stanley(40)
Head of MAM
P.C. Upfold
CRO, Head of RMG
G.C. Ward
Deputy Managing Director,
Head of BFS
Total Remuneration – Comparable Executive KMP(41)
New and former Executives
T.C. Bishop(42)
Former Head of
Macquarie Capital
G.A. Farrell(43)
Former Co-Head of CAF
M.J. Silverton(44)
Co-Head of Macquarie Capital
D. Wong(44)
Co-Head of Macquarie Capital
Total Remuneration – Executive KMP
(including new and former executives)
Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Salary
(including
superannuation)
Performance
related
remuneration
$A
$A
820,244
795,740
771,319
770,885
723,138
722,704
816,732
928,940
771,319
770,885
771,319
770,885
710,608
727,571
771,319
770,885
771,319
770,885
6,927,317
7,029,380
120,451
301,127
724,676
631,620
4,675,126
4,015,344
12,327,119
12,097,922
3,970,000
–
2,440,000
–
1,176,000
–
10,198,800
–
1,508,000
–
2,440,000
–
7,548,692
–
2,440,000
–
3,220,000
–
34,941,492
–
–
–
1,650,000
–
471,476
–
37,062,968
–
Total
short-term
employee
benefits
$A
4,790,244
795,740
3,211,319
770,885
1,899,138
722,704
11,015,532
928,940
2,279,319
770,885
3,211,319
770,885
8,259,300
727,571
3,211,319
770,885
3,991,319
770,885
41,868,809
7,029,380
120,451
301,127
2,374,676
631,620
5,146,602
4,015,344
49,390,087
12,097,922
(37) Ms Wikramanayake’s fixed remuneration increased effective 1 July 2019, to reflect her role as CEO.
(38) The movement in Mr O’Kane’s fixed remuneration reflects an adjustment to his salary on relocation to Australia in line with other Executive KMP based in Australia.
(39) Ms Reemst will retire as a member of the Executive Committee effective 1 July 2021. Her FY2021 statutory remuneration of $A7.9 million includes $A5.5 million related to the
amortisation of her equity awards. $A3.1 million of this amount represents accelerated amortisation of equity awards. As a result of her intention to retire, the amortisation of her
equity awards is being recognised over an accelerated vesting period resulting in further accounting amortisation.
(40) Mr Stanley ceased to be a member of the Executive Committee on 31 March 2021 but remains currently employed with Macquarie. Outstanding amortisation related to his equity
awards, totalling $A12.4 million, will continue to be recognised over the vesting period of the awards.
134
Restricted
profit share
Earnings on
prior years
restricted
profit share
Total long-term
employee
benefits
Equity awards
Total
share-based
payments
Total
Remuneration
Percentage of
remuneration
that consists
of PSUs
$A
$A
$A
$A
$A
$A
PSUs
$A
1,588,000
(714,053)
873,947
9,465,702
837,375
10,303,077
15,967,268
1,733,611
3,137,174
4,870,785
6,914,590
2,324,622
9,239,212
14,905,737
366,000
568,397
274,400
640,063
1,529,820
1,854,676
226,200
397,878
366,000
568,397
366,000
568,397
966,000
1,610,459
–
–
385,000
379,160
220,022
248,077
(20,627)
197,664
(49,417)
367,374
(34,776)
563,959
(15,730)
143,063
(21,996)
200,360
(26,558)
218,930
(53,515)
542,368
110,440
(30,291)
184,925
(123,691)
466,908
345,373
766,061
224,983
1,007,437
210,470
540,941
3,427,751
2,993,294
2,970,895
3,204,969
1,011,290
1,038,757
4,439,041
4,032,051
7,995,733
5,568,997
1,350,459
4,321,354
6,445,475
944,580
4,149,549
5,879,690
1,495,044
11,044,704
1,281,745
12,326,449
24,837,025
2,418,635
9,083,550
1,472,193
10,555,743
13,903,318
4,874,638
584,132
5,458,770
7,948,559
2,151,589
1,362,480
3,514,069
4,825,895
344,004
3,404,577
297,673
3,702,250
768,757
2,930,069
1,362,480
4,292,549
7,257,573
5,832,191
5,661,519
(1,136,619)
4,524,900
4,668,814
9,062,973
4,689,260
13,752,233
3,773,978
339,442
787,327
3,573,595
3,191,917
1,362,480
912,485
4,309,959
2,152,827
3,826,136
11,343,939
(2,073,291)
9,270,648
47,740,635
6,951,505
54,692,140
105,831,597
17,004,851
10,060,152
27,065,003
38,070,092
12,727,888
50,797,980
84,892,363
987,166
944,580
297,673
303,992
1,915,716
1,327,779
840,647
368,209
840,647
371,998
5,655,980
18,440,180
4,718,558
19,198,362
3,871,268
4,554,397
4,613,951
5,741,852
7,422,029
6,112,609
9,517,755
8,665,564
4,541,461
3,204,814
4,011,903
2,937,990
7,270,846
4,400,519
9,254,836
7,668,319
43,654
43,654
2,381,319
418,209
2,799,528
2,963,633
110,440
4,085,998
5,413,777
5,825,344
354,709
564,085
96,331
714,985
3,700,814
2,836,605
3,171,256
2,565,992
11,948,961
(2,227,273)
9,721,688
54,612,705
8,632,799
63,245,504
122,357,279
17,632,088
10,866,079
28,498,167
49,940,006
15,214,083
65,154,089
105,750,178
%
5%
16%
13%
19%
21%
16%
5%
11%
7%
28%
4%
23%
5%
5%
4%
22%
3%
22%
14%
23%
12%
8%
9%
5%
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Appendix 2: Executive KMP remuneration disclosure
(in accordance with Australian Accounting Standards)
Name
Position
Executive Voting Director
S.R. Wikramanayake(37) Macquarie Group
CEO
Other Executives
A.H. Harvey
CFO, Head of FMG
F. Herold
Head of Macquarie Capital
Principal Finance
N. O’Kane(38)
Head of CGM
M.J. Reemst(39)
Macquarie Bank CEO
N. Sorbara
COO, Head of COG
M.S.W. Stanley(40)
Head of MAM
P.C. Upfold
CRO, Head of RMG
G.C. Ward
Deputy Managing Director,
Head of BFS
Total Remuneration – Comparable Executive KMP(41)
New and former Executives
T.C. Bishop(42)
Former Head of
Macquarie Capital
G.A. Farrell(43)
Former Co-Head of CAF
M.J. Silverton(44)
Co-Head of Macquarie Capital
D. Wong(44)
Co-Head of Macquarie Capital
Total Remuneration – Executive KMP
(including new and former executives)
Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
820,244
795,740
771,319
770,885
723,138
722,704
816,732
928,940
771,319
770,885
771,319
770,885
710,608
727,571
771,319
770,885
771,319
770,885
6,927,317
7,029,380
120,451
301,127
724,676
631,620
4,675,126
4,015,344
12,327,119
12,097,922
3,970,000
2,440,000
1,176,000
10,198,800
1,508,000
2,440,000
7,548,692
2,440,000
3,220,000
34,941,492
1,650,000
471,476
37,062,968
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
short-term
employee
benefits
$A
4,790,244
795,740
3,211,319
770,885
1,899,138
722,704
11,015,532
928,940
2,279,319
770,885
3,211,319
770,885
8,259,300
727,571
3,211,319
770,885
3,991,319
770,885
41,868,809
7,029,380
120,451
301,127
2,374,676
631,620
5,146,602
4,015,344
49,390,087
12,097,922
SHORT-TERM EMPLOYEE BENEFITS
LONG-TERM EMPLOYEE BENEFITS
SHARE BASED PAYMENTS
Salary
(including
superannuation)
Performance
related
remuneration
$A
$A
Restricted
profit share
Earnings on
prior years
restricted
profit share
Total long-term
employee
benefits
Equity awards
$A
$A
$A
$A
Total
share-based
payments
Total
Remuneration
$A
$A
PSUs
$A
1,588,000
(714,053)
873,947
9,465,702
837,375
10,303,077
15,967,268
1,733,611
3,137,174
4,870,785
6,914,590
2,324,622
9,239,212
14,905,737
366,000
568,397
274,400
640,063
1,529,820
1,854,676
226,200
397,878
366,000
568,397
(20,627)
197,664
(49,417)
367,374
(34,776)
563,959
(15,730)
143,063
(21,996)
200,360
345,373
766,061
224,983
1,007,437
3,427,751
2,993,294
2,970,895
3,204,969
1,011,290
1,038,757
4,439,041
4,032,051
7,995,733
5,568,997
1,350,459
4,321,354
6,445,475
944,580
4,149,549
5,879,690
1,495,044
11,044,704
1,281,745
12,326,449
24,837,025
2,418,635
9,083,550
1,472,193
10,555,743
13,903,318
210,470
540,941
4,874,638
584,132
5,458,770
7,948,559
2,151,589
1,362,480
3,514,069
4,825,895
344,004
3,404,577
297,673
3,702,250
768,757
2,930,069
1,362,480
4,292,549
7,257,573
5,832,191
5,661,519
(1,136,619)
4,524,900
4,668,814
9,062,973
4,689,260
13,752,233
3,773,978
366,000
568,397
966,000
1,610,459
(26,558)
218,930
(53,515)
542,368
339,442
787,327
3,573,595
3,191,917
1,362,480
912,485
4,309,959
2,152,827
3,826,136
303,992
1,915,716
987,166
944,580
297,673
5,655,980
18,440,180
4,718,558
19,198,362
3,871,268
4,554,397
4,613,951
5,741,852
7,422,029
6,112,609
9,517,755
8,665,564
11,343,939
(2,073,291)
9,270,648
47,740,635
6,951,505
54,692,140
105,831,597
17,004,851
10,060,152
27,065,003
38,070,092
12,727,888
50,797,980
84,892,363
–
–
385,000
379,160
220,022
248,077
43,654
110,440
(30,291)
184,925
(123,691)
466,908
43,654
2,381,319
418,209
2,799,528
2,963,633
110,440
4,085,998
354,709
564,085
96,331
714,985
3,700,814
2,836,605
3,171,256
2,565,992
1,327,779
840,647
368,209
840,647
371,998
5,413,777
5,825,344
4,541,461
3,204,814
4,011,903
2,937,990
7,270,846
4,400,519
9,254,836
7,668,319
11,948,961
(2,227,273)
9,721,688
54,612,705
8,632,799
63,245,504
122,357,279
17,632,088
10,866,079
28,498,167
49,940,006
15,214,083
65,154,089
105,750,178
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Percentage of
remuneration
that consists
of PSUs
%
5%
16%
13%
19%
21%
16%
5%
11%
7%
28%
4%
23%
5%
5%
4%
22%
3%
22%
14%
23%
12%
8%
9%
5%
(37) Ms Wikramanayake’s fixed remuneration increased effective 1 July 2019, to reflect her role as CEO.
(38) The movement in Mr O’Kane’s fixed remuneration reflects an adjustment to his salary on relocation to Australia in line with other Executive KMP based in Australia.
(39) Ms Reemst will retire as a member of the Executive Committee effective 1 July 2021. Her FY2021 statutory remuneration of $A7.9 million includes $A5.5 million related to the
amortisation of her equity awards. $A3.1 million of this amount represents accelerated amortisation of equity awards. As a result of her intention to retire, the amortisation of her
equity awards is being recognised over an accelerated vesting period resulting in further accounting amortisation.
(40) Mr Stanley ceased to be a member of the Executive Committee on 31 March 2021 but remains currently employed with Macquarie. Outstanding amortisation related to his equity
awards, totalling $A12.4 million, will continue to be recognised over the vesting period of the awards.
(41) Comparable KMP are Executive KMP who are members of the Executive Committee for the full year in both FY2021 and FY2020.
(42) Mr Bishop ceased to be a member of the Executive Committee on 31 May 2019 and retired on 15 July 2019.
(43) Mr Farrell ceased to be a member of the Executive Committee and retired on 1 September 2019.
(44) Mr Silverton and Mr Wong were appointed to the Executive Committee effective from 1 June 2019. Mr Wong’s fixed remuneration includes a role-based allowance which is a
component of fixed remuneration which may be awarded to certain employees, including those identified as Material Risk Takers (MRTs) under UK or EU regulatory requirements.
These allowances are determined based on the role and organisational responsibility of the individuals.
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Continued
Additional information regarding the statutory remuneration disclosures set out in this Appendix
The remuneration disclosures set out in this Appendix have been prepared in accordance with Australian Accounting Standards
and differ to the additional disclosures set out on pages 120 to 128.
Under the requirements of AASB 124 Related Party Disclosures, the remuneration disclosures for the years ended 31 March 2021
and 31 March 2020 only include remuneration relating to the portion of the relevant periods that each person was an
Executive KMP.
The following information provides more detail regarding some of the column headings in this Appendix:
(1) Short-term employee benefits:
(a) Salary: includes salary, superannuation, any accrual for long service leave and other benefits
(b) Performance-related remuneration: this represents the cash portion of each person’s profit share allocation for the
reporting period as an Executive KMP.
(2) Long-term employee benefits:
(a) Restricted profit share: this represents the amount of retained profit share awarded for the current period that is
deferred to future periods and held as a notional investment in Macquarie-managed fund equity (DPS Plan)
(b) Earnings on prior years restricted profit share: Profit share amounts retained under the DPS Plan are notionally invested
in Macquarie-managed funds, providing Executive Directors with an economic exposure to the underlying investments.
Executive Directors are each entitled to amounts equivalent to the investment earnings (dividends/distributions and
security price appreciation) on the underlying securities. The notional returns are calculated based on Total Shareholder
Return. Where these amounts are positive, they may be paid to Executive Directors and are included in these
remuneration disclosures as part of ‘Earnings on prior years restricted profit share’. If there is a notional loss, this loss will
be offset against any future notional income until the loss is completely offset and is reported as a negative amount in the
same column. These earnings reflect the investment performance of the assets in which prior years retained amounts
have been notionally invested. Their inclusion in the individual remuneration disclosures on the previous pages may,
therefore, cause distortions when year-on-year remuneration trends are examined. They do not reflect remuneration
review decisions made about the individual’s current year performance.
(3) Share-based payments:
(a) Equity awards including shares: This represents the current year expense for retained profit share that is invested in
Macquarie ordinary shares under the MEREP as described on pages 106 to 107. This is recognised as an expense over the
respective vesting periods, or service period if shorter, as described on pages 106 to 107 and includes amounts relating
to prior years equity awards that have been previously disclosed. Equity awards in respect of FY2021 performance will be
granted during FY2022; however, Macquarie begins recognising an expense for these awards (based on an initial estimate)
from 1 April 2020. The expense is estimated using the price of MGL ordinary shares as at 31 March 2021 and the number of
equity awards expected to vest. In the following financial year, Macquarie will adjust the accumulated expense recognised
for the final determination of the accounting fair value for each equity award when granted and will use this validation for
recognising the expense over the remaining vesting period
(b) PSUs: This represents the current year expense for PSUs that is recognised over the vesting period as described on pages
108 to 109. This includes amounts relating to prior years PSU awards. PSU awards in respect of FY2021 will be granted
during FY2022; however, Macquarie begins recognising an expense for these awards (based on an initial estimate) from
1 April 2020. The expense is estimated using the price of MGL ordinary shares as at 31 March 2021 and the number of
PSUs expected to vest. The estimate also incorporates an interest rate to maturity of 0.44% per annum, expected vesting
date of 1 July 2025, and a dividend yield of 3.96% per annum. In the following financial year, Macquarie will adjust the
accumulated expense recognised for the final determination of the accounting fair value for each PSU when granted and
will use this validation for recognising the expense over the remaining vesting period. Performance hurdles attached to
the PSUs allow for PSUs to become exercisable upon vesting only when the relevant performance hurdles are met. The
current year expense is reduced for previously recognised remuneration expense where performance hurdles have not
been met, have been partially met or are not expected to be met.
136
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Appendix 3: Non‑Executive Director remuneration
The remuneration arrangements for all the persons listed below as NEDs are described on page 132 of the Remuneration
Report. The fees shown include fees paid as members of both the MGL and MBL Boards.
G.R. Banks(46)
J.R. Broadbent(47)
G.M. Cairns
P.M. Coffey(48)
M.J. Coleman
D.J. Grady
M.J. Hawker(49)
R.J. McGrath(50)
M. Roche(51)
G.R. Stevens(52)
N.M. Wakefield Evans
P.H. Warne
Total Remuneration – Non‑Executive KMP
Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Fees
$A
Other benefits(45)
$A
Total Compensation
$A
124,333
373,000
361,333
317,583
338,000
338,000
373,000
332,167
413,000
413,000
373,000
373,000
203,167
436,333
66,108
–
66,108
–
378,000
341,667
413,000
413,000
890,000
890,000
–
–
–
–
10,000
12,000
–
–
–
–
–
–
–
124,333
373,000
361,333
317,583
338,000
338,000
373,000
332,167
423,000
425,000
373,000
373,000
203,167
436,333
66,108
–
66,108
–
378,000
341,667
413,000
413,000
890,000
890,000
3,999,049
4,227,750
10,000
12,000
4,009,049
4,239,750
(45) Other benefits for NEDs include due diligence fees paid to Mr Coleman of $A10,000 in FY2021 (FY2020: $A12,000).
(46) Mr Banks ceased to be a member of the MGL and MBL Boards on 30 July 2020.
(47) Ms Broadbent became a member of the Board Remuneration Committee, effective from 1 November 2019 and was appointed as Chair of the Board Remuneration Committee,
effective from 1 September 2020.
(48) Mr Coffey became a member of the Board Remuneration Committee and a member of the Board Audit Committee, effective from 1 November 2019.
(49) Mr Hawker was Chairman of the Board Risk Committee until 1 November 2019 and served as a member of the Board Risk Committee until 30 September 2020. He was Chairman of
the Board Remuneration Committee until 1 September 2020 and served as a member of the Board Remuneration Committee until 30 September 2020. Mr Hawker ceased to be a
member of the MGL and MBL Boards on 30 September 2020.
(50) Ms McGrath was appointed to the MGL and MBL Boards as an Independent Voting Director, effective from 20 January 2021. She became a member of the Board Risk Committee and
a member of the Board Nominating Committee effective from 20 January 2021. Ms McGrath became a member of the Board Governance and Compliance Committee effective from
1 February 2021.
(51) Mr Roche was appointed to the MGL and MBL Boards as an Independent Voting Director, effective from 20 January 2021. He became a member of the Board Risk Committee and a
member of the Board Nominating Committee effective from 20 January 2021. He became a member of the Board Remuneration Committee effective from 1 February 2021.
(52) The Board approved a leave of absence, due to illness, for Mr Stevens for the period 1 February 2019 to 31 May 2019. Mr Stevens was appointed as Chairman of the Board Risk
Committee, effective from 1 November 2019.
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Continued
Appendix 4: Share disclosures
Shareholdings of KMP and their related parties
The following table sets out details of MGL ordinary shares held during the financial year by KMP including their related parties.
Name and position
Executive Directors
S.R. Wikramanayake
Non‑Executive Directors
G.R. Banks
J.R. Broadbent
G.M. Cairns
P.M. Coffey
M.J. Coleman(58)
D.J. Grady
M.J. Hawker
R.J. McGrath
M. Roche
G.R. Stevens
N.M. Wakefield Evans
P.H. Warne
Executives
A.H. Harvey
F. Herold
N. O’Kane
M.J. Reemst
M.J. Silverton
N. Sorbara
M.S.W. Stanley
P.C. Upfold
G.C. Ward
D. Wong
Number of shares
held at 1 April 2020(53)
Shares received on
withdrawal from
the MEREP(54)
Other
changes(55)
Number of shares held
as at 31 March 2021(56),(57)
883,625
62,168
6,541
6,250
12,734
8,739
8,861
9,768
7,469
349
2,000
3,900
6,929
14,933
44,834
–
4,840
68,828
19,802
9,384
45,361
75,151
–
168
–
–
–
–
323
–
–
–
–
–
–
–
24,787
30,018
72,683
29,513
31,459
32,113
20,052
40,229
48,160
–
–
–
10,000
–
–
–
252
(9)
–
–
909
182
–
(44,934)
(30,018)
(72,683)
(17,010)
(31,459)
(32,113)
(9,632)
(40,229)
(48,160)
(168)
945,793
6,541
16,250
12,734
8,739
9,184
10,020
7,460
349
2,000
4,809
7,111
14,933
24,687
4,840
81,331
19,802
9,384
55,781
75,151
(53) Or date of appointment if later.
(54) For RSUs, this represents RSUs vesting during the current financial year. For DSUs, this represents vested DSUs exercised during the current financial year.
(55) Includes on market acquisitions and disposals.
(56) Or date of ceasing to be a KMP if earlier.
(57) In addition to the MGL ordinary shares set out in this table, Executive KMP also hold an interest in MGL ordinary shares through the MEREP, as set out in the table in page 143.
(58) A related party of Mr Coleman holds RSU awards, some of which vested during the year. Mr Coleman does not influence any investment decisions over, nor does he benefit from,
this holding.
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
RSU and DSU awards to KMP
The following table sets out details of the RSU and DSU awards associated with Macquarie equity granted to Executive KMP.
Grants made to Executive KMP prior to their joining the Executive Committee are not disclosed. PSUs are disclosed in a
separate table.
A significant portion of an Executive KMP’s retained profit share is invested in Macquarie equity, delivered as RSUs or DSUs.
RSUs are units comprising a beneficial interest in Macquarie ordinary shares held in a trust for the staff member. DSUs
are structured to provide the holder with the same benefits and risks of RSU holders. For further details, refer to Note 32
Employee equity participation to the financial statements in the Financial Report. There have been no alterations to the terms
or conditions of the grants set out below since the grant date. RSU and DSU awards are subject to forfeiture as set out on
page 110. The value of the grants at vesting could vary significantly as they are dependent on the MGL ordinary share price at
the time of vesting. Retention rates, the vesting profiles and service and performance criteria for the current year are set out
on pages 106 to 107. RSUs and DSUs are granted in the financial year following the year of Macquarie’s performance to which
the grant relates. For example, RSUs and DSUs granted to KMP in June 2020 relate to their performance in FY2020. All awards
that were eligible to vest, vested during the year. No awards were forfeited during the year.
Name and position
Executive Director
S.R. Wikramanayake
Executives
A.H. Harvey
F. Herold(62)
N. O’Kane
M.J. Reemst
M.J. Silverton
RSU/DSU awards
granted to date(59),(60)
139,266
65,003
49,162
49,025
54,473
42,608
47,019
35,957
45,661
25,945
27,009
51,418
33,150
148,994
91,106
61,902
31,962
18,831
18,906
21,229
18,787
14,810
37,375
37,138
Grant date
04 Aug 20
15 Aug 19
21 Jun 18
22 Jun 17
17 Jun 16
06 Jul 15
25 Jun 14
25 Jun 13
09 Jun 20
24 Jun 19
21 Jun 18
09 Jun 20
24 Jun 19
09 Jun 20
24 Jun 19
21 Jun 18
09 Jun 20
24 Jun 19
21 Jun 18
22 Jun 17
17 Jun 16
06 Jul 15
09 Jun 20
24 Jun 19
Number vested/exercised
during the year(61)
–
–
–
9,805
10,894
8,521
8,034
7,193
–
–
–
–
6,443
–
–
–
–
–
–
4,245
3,757
2,962
–
–
(59) Or during the period that the Executive was a KMP.
(60) On 23 December 2013, Macquarie consolidated its shares through the conversion of one ordinary share into 0.9438 ordinary shares, including for shares held in the MEREP. For the
RSUs in the above table granted prior to that date, the number of RSUs has been adjusted for the impact of the consolidation.
(61) For RSUs, this represents RSUs vesting during the current financial year in respect of grants made while a KMP. For DSUs, this represents vested DSUs exercised during the current
financial year in respect of grants made while a KMP. Grants made prior to Executives becoming a KMP are not disclosed.
(62) On 24 June 2019, Mr Herold was granted 6,443 Material Risk Taker Available awards which vested on the acquisition date of the awards and were subject to a 12-month non-disposal
period. These awards represented 50% of FY2019 available profit share, as discussed on page 106, footnote 4, and are a requirement under the UK regulations (the UK Remuneration
Code implementing CRD IV). During the current year, Mr Herold exercised these awards.
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Continued
Name and position
N. Sorbara
M.S.W. Stanley
P.C. Upfold
G.C. Ward
D. Wong(66)
RSU/DSU awards
granted to date(63),(64)
45,661
25,945
27,009
26,967
25,049
18,512
17,105
12,327
78,735
41,140
45,661
25,945
27,009
32,131
33,399
26,446
57,499
31,618
33,211
40,801
32,445
26,446
31,696
31,229
51,976
42,258
Grant date
09 Jun 20
24 Jun 19
21 Jun 18
22 Jun 17
17 Jun 16
06 Jul 15
25 Jun 14
25 Jun 13
09 Jun 20
24 Jun 19
09 Jun 20
24 Jun 19
21 Jun 18
22 Jun 17
17 Jun 16
06 Jul 15
09 Jun 20
24 Jun 19
21 Jun 18
22 Jun 17
17 Jun 16
06 Jul 15
25 Jun 14
25 Jun 13
09 Jun 20
24 Jun 19
Number vested/exercised
during the year(65)
–
–
–
5,393
5,009
3,702
3,039
2,467
–
–
–
–
–
6,426
6,679
5,289
–
–
–
8,160
6,489
5,289
4,847
6,245
–
–
(63) Or during the period that the Executive was a KMP.
(64) On 23 December 2013, Macquarie consolidated its shares through the conversion of one ordinary share into 0.9438 ordinary shares, including for shares held in the MEREP. For the
RSUs in the above table granted prior to that date, the number of RSUs has been adjusted for the impact of the consolidation.
(65) For RSUs, this represents RSUs vesting during the current financial year in respect of grants made while a KMP. For DSUs, this represents vested DSUs exercised during the current
financial year in respect of grants made while a KMP. Grants made prior to Executives becoming a KMP are not disclosed.
(66) On 24 June 2019, Mr Wong was granted 13,247 Material Risk Taker Available awards which vested on the acquisition date of the awards and were subject to a 12 month non disposal
period. These awards represented 50% of FY2019 available profit share, as discussed on page 106, footnote 4, and are a requirement under the UK regulations (the UK Remuneration
Code implementing CRD IV). These awards have not been exercised.
140
Macquarie Group Limited and its subsidiaries 2021 Annual Report
PSU awards to KMP
The following table sets out details of PSU awards granted to Executive KMP.
GRANTED TO DATE
FORFEITED/LAPSED DURING
THE FINANCIAL YEAR(67)
EXERCISED DURING THE
FINANCIAL YEAR(67)
Name and position
Number Date
Executive Directors
Accounting
Fair Value
$A(68)
Face Value
$A(69)
Number
S.R. Wikramanayake
32,575 04 Aug 20
3,423,307
4,079,693
Executives
A.H. Harvey
34,198 15 Aug 19
3,385,267
4,035,364
23,561
15 Aug 18
2,466,207
2,956,906
33,552 15 Aug 17
2,449,276
2,944,524
37,332 15 Aug 16
2,462,541
2,917,122
16,223 04 Aug 20
1,704,875
2,031,769
17,032 15 Aug 19
1,686,001
2,009,776
16,624 15 Aug 18
1,740,089
2,086,312
F. Herold
22,994 04 Aug 20
2,416,439
2,879,769
N. O’Kane
22,994 04 Aug 20
2,416,439
2,879,769
24,139 15 Aug 19
2,389,524
2,848,402
24,139 15 Aug 19
2,389,524
2,848,402
23,561
15 Aug 18
2,466,207
2,956,906
M.J. Reemst
16,223 04 Aug 20
1,704,875
2,031,769
17,032
15 Aug 19
1,686,001
2,009,776
16,624
15 Aug 18
1,740,089
2,086,312
23,673
15 Aug 17
1,728,115
2,077,542
26,339
15 Aug 16
1,737,407
2,058,129
M.J. Silverton
N. Sorbara
22,994 04 Aug 20
2,416,439
2,879,769
16,223 04 Aug 20
1,704,875
2,031,769
17,032
15 Aug 19
1,686,001
2,009,776
16,624
15 Aug 18
1,740,089
2,086,312
23,673
15 Aug 17
1,728,115
2,077,542
26,339
15 Aug 16
1,737,407
2,058,129
–
–
8,388
9,333
–
–
–
–
–
–
5,918
6,585
–
–
5,918
6,585
Value
$A(70)
Number
exercised
Value
$A(71)
–
–
–
–
–
–
994,817
8,388
1,046,948
1,106,894
9,333
1,164,618
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
701,875
780,981
5,918
738,507
6,585
822,335
–
–
–
–
–
–
701,875
780,981
5,918
733,891
6,585
816,606
%
–
–
25
25
–
–
–
–
–
–
25
25
–
–
25
25
(67) Or during the period for which the Executive was a KMP if shorter.
(68) Based on the accounting fair value on the date of grant.
(69) Face value is calculated by multiplying the number of PSUs granted by the closing market price of Macquarie ordinary shares on the date of grant.
(70) Based on closing share price at 30 June 2020, being the day the PSUs were forfeited.
(71) Based on the share price at the time of exercise.
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Remuneration Report
Continued
GRANTED TO DATE
FORFEITED/LAPSED DURING
THE FINANCIAL YEAR(72)
EXERCISED DURING THE
FINANCIAL YEAR(72)
Name
and position
Number Date
Accounting
Fair Value
$A(73)
Face Value
$A(74)
Number
M.S.W. Stanley
22,994 04 Aug 20
2,416,439
2,879,769
24,139
15 Aug 19
2,389,524
2,848,402
P.C. Upfold
16,223 04 Aug 20
1,704,875
2,031,769
17,032
15 Aug 19
1,686,001
2,009,776
16,624
15 Aug 18
1,740,089
2,086,312
23,673
15 Aug 17
1,728,115
2,077,542
26,339
15 Aug 16
1,737,407
2,058,129
G.C. Ward
22,994 04 Aug 20
2,416,439
2,879,769
24,139
15 Aug 19
2,389,524
2,848,402
23,561
15 Aug 18
2,466,207
2,956,906
32,434
15 Aug 17
2,367,663
2,846,408
36,087
15 Aug 16
2,380,417
2,819,838
D. Wong
22,994 04 Aug 20
2,416,439
2,879,769
–
–
–
5,918
6,585
–
–
8,109
9,022
–
%
–
–
–
25
25
–
–
25
25
–
Value
$A(75)
Number
exercised
Value
$A(76)
–
–
–
–
–
–
–
–
–
701,875
5,918
739,001
780,981
6,585
822,268
–
–
–
–
–
–
961,727
8,108
1,004,668
1,070,009
9,022
1,118,505
–
–
–
As required under the Act, Macquarie has adopted the fair value measurement provisions of AASB 2 Share-Based Payment
for all PSUs granted to KMP. The accounting fair value of such grants is being amortised and disclosed as part of each KMP’s
remuneration on a straight-line basis over the vesting period. The 2020 PSU allocation has been determined based on a
fair valuation of a PSU as at 4 August 2020. The accounting fair value of $A105.09 at this date has been estimated using a
discounted cash flow method.
The following key assumptions were adopted in determining the value of the PSUs granted:
Interest rate to maturity
Expected vesting dates
Dividend yield
0.2023% per annum
1 July 2024
4.33% per annum
PSUs have a nil exercise price. PSUs awarded prior to FY2020 vest on a pro-rata basis as set out on page 108, footnote 9. For
the 2020 grant, it will vest on 1 July 2024. The PSUs expire on 4 August 2029.
(72) Or during the period for which the Executive was a KMP if shorter.
(73) Based on the accounting fair value on the date of grant.
(74) Face value is calculated by multiplying the number of PSUs granted by the closing market price of Macquarie ordinary shares on the date of grant.
(75) Based on closing share price at 30 June 2020, being the day the PSUs were forfeited.
(76) Based on the share price at the time of exercise.
142
Macquarie Group Limited and its subsidiaries 2021 Annual Report
MEREP awards of KMP and their related parties
The following table sets out details of the MEREP RSU, DSU and PSU awards held during the year for the KMP including their
related parties.
Further details in relation to the MEREP RSU, DSU and PSU awards are disclosed in Note 32 Employee equity
participation to the financial statements in the Financial Report
Name and position
Executive Director
S.R. Wikramanayake
Executives
A.H. Harvey
F. Herold(83)
N. O’Kane
M.J. Reemst
M.J. Silverton
N. Sorbara
M.S.W. Stanley(83)
P.C. Upfold
G.C. Ward
D. Wong(83)
Type of
Award
Number of
Awards held at
1 April 2020(7 7)
Awards granted
during the
financial year(78)
Awards vested/
exercised during the
financial year(79),(80)
Awards forfeited
or not able to be
exercised during the
financial year(81)
Number of
Awards held as at
31 March 2021(82)
RSU
PSU
RSU
PSU
DSU
RSU
PSU
RSU
PSU
RSU
PSU
RSU
PSU
RSU
PSU
DSU
PSU
RSU
PSU
RSU
PSU
DSU
PSU
255,598
109,977
128,750
33,656
96,834
11,512
24,139
368,819
47,700
91,832
70,499
133,819
–
119,617
70,499
177,780
24,139
141,721
70,499
163,396
98,178
172,865
–
139,266
32,575
45,661
16,223
–
51,418
22,994
148,994
22,994
31,962
16,223
37,375
22,994
45,661
16,223
78,735
22,994
45,661
16,223
57,499
22,994
51,976
22,994
(44,447)
(17,721)
(24,787)
–
(30,018)
–
–
(72,683)
–
(17,010)
(12,503)
(31,459)
–
(19,610)
(12,503)
(20,052)
–
(27,726)
(12,503)
(31,030)
(17,130)
–
–
–
(17,721)
–
–
–
–
–
–
–
–
(12,503)
–
–
–
(12,503)
–
–
–
(12,503)
–
(17,131)
–
–
350,417
107,110
149,624
49,879
66,816
62,930
47,133
445,130
70,694
106,784
61,716
139,735
22,994
145,668
61,716
236,463
47,133
159,656
61,716
189,865
86,911
224,841
22,994
(77) Or date of appointment if later.
(78) RSU and DSU awards are granted in the financial year following the year of the Company’s performance to which the grant relates. RSUs and DSUs disclosed as granted above relate
to FY2020. PSUs are granted annually in August. RSU and PSU awards granted to the CEO, who is an Executive Voting Director, were approved by shareholders at the 2020 AGM as
required under ASX Listing Rule 10.14.
(79) For RSUs, this represents vested RSUs transferred to the KMP’s shareholding and includes RSUs vesting during the current year in respect of all grants, including those made prior to Executives
becoming a KMP. For DSUs, this represents vested DSUs exercised during the current period in respect of all grants, including those made prior to Executives becoming a KMP.
(80) There were no PSUs that vested during the year that were not exercised.
(81) Or during the period for which the Executive was a KMP if shorter.
(82) Or date of ceasing to be a KMP if earlier.
(83) DSUs are granted in jurisdictions where legal or tax rules make the grant of RSUs impractical. DSUs are structured to provide the holder with the same benefits and risks of RSU holders.
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Remuneration Report
Continued
Appendix 5: Loan disclosures
Loans to Key Management Personnel and their related parties
Details of loans provided by Macquarie to KMP and their related parties are disclosed in the following table.
Balance as at
1 April 2020(84)
$A’000
Interest
charged
$A’000
Write downs
$A’000
Balance as at
31 March 2021(85)
$A’000
Highest balance
during the year
$A’000
Name and Position
Non‑Executive Directors
D.J. Grady (related party)
M.J. Hawker (related party)
N.M. Wakefield Evans (related party)
P.H. Warne (related party)
Executives
A.H. Harvey
M.J. Silverton
M.S.W. Stanley(86)
479
560
4,960
470
5,000
224
118
18
12
77
10
15
7
1
0
0
0
0
0
0
0
0
468
504
4,800
456
5,000
209
0
479
659
4,960
470
5,000
224
110
11,437
11,952
Aggregate of KMP and related
party loans(87)
11,811
144
This Remuneration Report has been prepared in accordance with the Act. The Remuneration Report contains disclosures
as required by AASB 124 Related Party Disclosures as permitted by Corporations Regulation 2M.3.03 Prescribed details.
Throughout this Remuneration Report financial information for Macquarie relating to the years ended 31 March 2012 through to
31 March 2021 has been presented in accordance with Australian Accounting Standards. Compliance with Australian Accounting
Standards ensures compliance with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IABS).
(84) Or date of appointment if later.
(85) Or date of ceasing to be a KMP if earlier.
(86) Mr Stanley’s loan is denominated in EUR. The opening balance of €66,000 has been converted to AUD at the spot rate on 1 April 2020. The highest balance of €67,000 has been
converted at the spot rate on 25 August 2020. There has been an exchange rate movement of approximately $A8,000 during the year.
(87) In addition to the loans disclosed above, a related party of a KMP had a car loan provided by Macquarie for a period of the year which is included in relevant totals. All loans provided
by Macquarie to KMP are made in the ordinary course of business on an arm's length basis and are entered into under normal terms and conditions consistent with other customers
and employees. There have been no write-downs or allowances for doubtful debts.
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Report
Gwynt y Môr Offshore Wind Farm, United Kingdom
Macquarie-managed funds have been invested
in Gwynt y Môr Offshore Wind Farm since 2017.
The 576 MW project, located off the coast of
North Wales in the United Kingdom, has capacity
to power the equivalent of 430,000 homes each year.
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04
Contents
For the financial year ended 31 March 2021
Income tax expense
Financial statements
Income statements
Statements of comprehensive income
Statements of financial position
Statements of changes in equity
Statements of cash flows
Notes to the financial statements
1. Basis of preparation
2. Operating profit before income tax
3. Segment reporting
4.
5. Dividends
6. Earnings per share
7. Trading assets
8. Margin money and settlement assets
9. Derivative assets
10. Financial investments
11. Held for sale and other assets
12. Loan assets
13. Expected credit losses
14. Interests in associates and joint ventures
15. Property, plant and equipment and right-of-use assets
16. Intangible assets
17. Investments in subsidiaries
18. Deferred tax assets/(liabilities)
19. Trading liabilities
20. Margin money and settlement liabilities
21. Derivative liabilities
22. Deposits
23. Held for sale and other liabilities
24. Debt issued
25. Capital management strategy
26. Loan capital
27. Contributed equity
28. Reserves, retained earnings and non-controlling interests
29. Notes to the statements of cash flows
30. Related party information
31. Key management personnel disclosure
32. Employee equity participation
33. Contingent liabilities and commitments
34. Structured entities
35. Hedge accounting
36. Financial risk management
37. Measurement categories of financial instruments
38. Fair value of financial assets and financial liabilities
39. Offsetting financial assets and financial liabilities
40. Pledged assets and transfers of financial assets
41. Audit and other services provided by PricewaterhouseCoopers
42. Acquisitions and disposals of subsidiaries and businesses
43. Events after the reporting date
44. Significant accounting policies
Statutory statements
Directors’ declaration
Independent auditor’s report
149
149
150
151
152
154
155
155
158
161
168
169
170
171
171
171
172
172
173
174
180
182
185
186
188
189
189
189
189
189
190
191
192
195
197
199
201
203
207
212
213
215
222
245
249
258
261
264
265
267
267
286
286
287
The Financial Report was authorised for issue by the Board of Directors on 7 May 2021.
The Board of Directors has the power to amend and reissue the Financial Report.
148
Income statements
For the financial year ended 31 March 2021
Interest and similar income
Effective interest rate method
Other
Interest and similar expense
Net interest income/(expense)
Fee and commission income
Net trading income/(loss)
Net operating lease income
Share of net (losses)/profit from associates and joint ventures
Net credit impairment (charges)/reversal
Other impairment charges
Other operating income and charges
Net operating income
Employment expenses
Brokerage, commission and trading-related fee expenses
Occupancy expenses
Non-salary technology expenses
Other operating expenses
Total operating expenses
Operating profit before income tax
Income tax expense
Profit after income tax
Loss/(profit) attributable to non‑controlling interests:
Macquarie Income Securities
Other non-controlling interests
Total loss attributable to non-controlling interest
Profit attributable to the ordinary equity holders of
Macquarie Group Limited
Basic earnings per share
Diluted earnings per share
Macquarie Group Limited and its subsidiaries 2021 Annual Report
CONSOLIDATED
COMPANY
Notes
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
4
28
2021
$m
3,632
333
2020
$m
4,411
745
(1,770)
(3,297)
2,195
5,176
3,482
466
(3)
(434)
(90)
1,982
12,774
(5,517)
(879)
(382)
(781)
(1,308)
(8,867)
3,907
(899)
3,008
7
7
1,859
5,837
2,861
745
95
(805)
(235)
1,968
12,325
(5,323)
(964)
(400)
(749)
(1,435)
(8,871)
3,454
(728)
2,726
(12)
17
5
2021
$m
554
(602)
(48)
14
(3)
18
761
742
(4)
–
(4)
(8)
734
21
755
2020
$m
828
–
(893)
(65)
14
296
–
–
(2)
–
859
1,102
(5)
–
–
–
(5)
(10)
1,092
(104)
988
–
–
–
3,015
2,731
755
988
Cents per
share
Cents per
share
6
6
842.9
824.6
791.0
764.5
The above income statements should be read in conjunction with the accompanying notes.
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Statements of comprehensive income
For the financial year ended 31 March 2021
Profit after income tax
Other comprehensive (loss)/income(1)
Movements in items that may be subsequently reclassified to
the income statement:
Fair value through other comprehensive income (FVOCI) reserve:
Revaluation movement
Changes in allowance for expected credit losses
Cash flow hedges:
Revaluation movement
Transferred to income statement
Transferred to share of reserves in associates and
joint ventures
Share of other comprehensive losses of associates and
joint ventures
Foreign exchange movements on translation and hedge
accounting of foreign operations
Movements in item that will not be subsequently reclassified
to the income statement:
Fair value (loss)/gain attributable to own credit risk on debt that
is designated at fair value through profit or loss (DFVTPL)
Total other comprehensive (loss)/income
Total comprehensive income
Total comprehensive loss/(income) attributable
to non-controlling interests:
Macquarie Income Securities
Other non-controlling interests
Total comprehensive loss/(income) attributable
to non-controlling interests
Total comprehensive income attributable to the
ordinary equity holders of Macquarie Group Limited
Notes
CONSOLIDATED
COMPANY
2021
$m
3,008
2020
$m
2,726
2021
$m
755
2020
$m
988
28
28
28
28
28
28
28
233
(127)
(13)
8
(108)
27
(29)
42
(6)
(22)
(101)
(1,761)
1,230
(107)
(1,789)
1,219
58
58
61
1,116
3,842
(12)
(21)
(33)
(28)
(28)
727
–
–
–
–
–
–
–
11
11
999
–
–
–
1,277
3,809
727
999
The above statements of comprehensive income should be read in conjunction with the accompanying notes.
(1) All items are net of tax, where applicable.
150
Statements of financial position
As at 31 March 2021
Macquarie Group Limited and its subsidiaries 2021 Annual Report
CONSOLIDATED
COMPANY
Notes
2021
$m
2020
$m
2021
$m
2020
$m
Assets
Cash and bank balances
Cash collateral on securities borrowed and reverse
repurchase agreements
Trading assets
Margin money and settlement assets
Derivative assets
Financial investments
Held for sale assets
Other assets
Loan assets
Due from subsidiaries
Interests in associates and joint ventures
Property, plant and equipment and right-of-use assets
Intangible assets
Investments in subsidiaries
Deferred tax assets
Total assets
Liabilities
Cash collateral on securities lent and repurchase agreements
Trading liabilities
Margin money and settlement liabilities
Derivative liabilities
Deposits
Held for sale liabilities
Other liabilities
Borrowings
Due to subsidiaries
Debt issued
Deferred tax liabilities
Total liabilities excluding loan capital
Loan capital
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total capital and reserves attributable to
ordinary equity holders of Macquarie Group Limited
Non-controlling interests
Total equity
7
8
9
10
11
11
12
30
14
15
16
17
18
19
20
21
22
23
23
30
24
18
26
27
28
28
28
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18,425
9,717
2
54
–
–
–
–
–
–
–
18
–
37,710
16,855
16,393
45,607
8,930
1,634
6,868
94,117
–
22,227
32,334
8,319
5,044
3,268
–
1,340
–
–
31,429
31,816
–
245,653
255,802
53,712
64,168
36,681
21,746
14,397
20,642
9,566
279
6,006
105,026
4,194
4,676
2,543
1,472
4,542
6,205
22,124
17,579
84,199
18
8,211
9,817
2,334
5,544
22,815
38,399
67,342
260
8,027
17,093
–
60,980
64,556
204
234
213,879
226,604
9,423
223,302
22,351
7,414
234,018
21,784
8,531
1,286
12,231
22,048
303
22,351
7,851
2,773
10,439
21,063
721
21,784
1
46
423
5,821
2,204
13,232
4
21,731
2,606
24,337
29,375
11,063
1,158
17,154
–
–
–
2
51
–
460
10,114
8,901
13,253
–
32,781
2,416
35,197
28,971
10,380
1,056
17,535
29,375
28,971
–
29,375
28,971
151
The above Statements of financial position should be read in conjunction with the accompanying notes.
Statements of changes in equity
For the financial year ended 31 March 2021
Contributed
equity
$m
Notes
Reserves
$m
Retained
earnings
$m
Total
$m
Non-controlling
interests
$m
Total
equity
$m
CONSOLIDATED
Balance as at 1 Apr 2019
Profit after income tax
Other comprehensive income, net of tax
Total comprehensive income
Transactions with equity holders in their capacity as
ordinary equity holders:
Issue of shares
Dividends paid
Purchase of shares by Macquarie Group
Employee Retained Equity Plan (MEREP) Trust
Non-controlling interests:
Change in non-controlling ownership interests
Dividends and distributions paid or provided for
Other equity movements:
MEREP share-based payment arrangements
Deferred tax benefit on MEREP share-based
payment arrangements
Transfer from share-based payments reserve
on vesting of MEREP awards
6,181
–
–
–
27
5, 28
1,670
–
27
(607)
–
–
–
–
28
28
1,773
–
1,017
1,017
–
–
–
–
–
586
4
27, 28
557
(557)
Transfer of deferred tax benefit on MEREP from
share-based payments reserve on vesting of
MEREP awards
27, 28
Transfer from share-based payments capital
reduction reserve on vested and forfeited awards 27, 28
Balance as at 31 Mar 2020
Profit after income tax
Other comprehensive loss, net of tax
Total comprehensive (loss)/income
Transactions with equity holders in their capacity as
ordinary equity holders:
Issue of shares
Dividends paid
Non-controlling interests:
Change in non-controlling ownership interests
Redemption of Macquarie Income Securities
Other equity movements:
MEREP share-based payment arrangements
Deferred tax benefit on MEREP share-based
payment arrangements
Transfer from share based payment reserve for
awards for which the performance condition was
not met following the vesting period
Transfer from share-based payments reserve
on vesting of MEREP awards
27
5, 28
28
28
28
52
(2)
1,670
7,851
262
(9)
27, 28
419
(419)
Transfer of deferred tax benefit on MEREP from
share-based payments reserve on vesting of
MEREP awards
27, 28
Balance as at 31 Mar 2021
152
8
680
8,531
(52)
2
(17)
529
50
(8)
(8)
144
9,758
2,731
61
17,712
2,731
1,078
2,792
3,809
–
1,670
(2,108)
(2,108)
–
(607)
(3)
–
–
–
–
–
–
(3)
–
586
4
–
–
–
(2,111)
(458)
262
(1,123)
(1,123)
(1)
8
(1)
(9)
529
50
2,773
10,439
21,063
(1,631)
(1,631)
3,015
(107)
2,908
3,015
(1,738)
1,277
603
(5)
38
33
–
–
–
98
(13)
–
–
–
–
–
85
721
(7)
(51)
(58)
31
18,315
2,726
1,116
3,842
1,670
(2,108)
(607)
95
(13)
586
4
–
–
–
(373)
21,784
3,008
(1,789)
1,219
262
(1,123)
30
(391)
(400)
529
50
(1,116)
(292)
(360)
(652)
1,286
12,231
22,048
303
22,351
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Contributed
equity
$m
Notes
Reserves
$m
Retained
earnings
$m
8,767
1,026
18,629
Total equity
$m
COMPANY
28,422
–
–
–
1,661
–
(607)
–
–
557
4
(2)
1,613
10,380
262
27
5, 28
27
28
28
27, 28
27, 28
27, 28
27
5, 28
28
28
28
–
–
–
–
–
–
586
3
(557)
(4)
2
30
1,056
529
2
(8)
27, 28
419
(419)
27, 28
2
683
11,063
(2)
102
1,158
988
11
999
–
(2,093)
–
–
–
–
–
–
(2,093)
17,535
755
(28)
727
(1,116)
8
988
11
999
1,661
(2,093)
(607)
586
3
–
–
–
(450)
28,971
755
(28)
727
262
(1,116)
529
2
(1,108)
17,154
(323)
29,375
Balance as at 1 Apr 2019
Profit after income tax
Other comprehensive income, net of tax
Total comprehensive income
Transactions with equity holders in their
capacity as ordinary equity holders:
Issue of shares
Dividends paid
Purchase of shares by MEREP Trust
Other equity movements:
MEREP share-based payment
arrangements
Deferred tax benefit on MEREP
share-based payment arrangements
Transfer from share-based payments
reserve on vesting of MEREP awards
Transfer of deferred tax benefit on
MEREP from share-based payments
reserve on vesting of MEREP awards
Transfer from share-based payments
capital reduction reserve on vested and
forfeited awards
Balance as at 31 Mar 2020
Profit after income tax
Other comprehensive loss, net of tax
Total comprehensive income
Transactions with equity holders in their
capacity as ordinary equity holders:
Issue of shares
Dividends paid
Other equity movements:
MEREP share-based payment
arrangements
Deferred tax benefit on MEREP
share-based payment arrangements
Transfer from share‐based payments
reserve on unexercised awards
Transfer from share-based payments
reserve on vesting of MEREP awards
Transfer of deferred tax benefit on
MEREP from share-based payments
reserve on vesting of MEREP awards
Balance as at 31 Mar 2021
The above statements of changes in equity should be read in conjunction with the accompanying notes.
153
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Statements of cash flows
For the financial year ended 31 March 2021
Cash flows generated from operating activities
Interest income and expense:
Received
Paid
Fee, commissions and other income and charges:
Received
Paid
Operating lease income received
Dividends and distributions received
Operating expenses paid:
Employment expenses
Other operating expenses including occupancy, non-salary technology
and brokerage, commission and trading-related fee expenses
Income tax paid
Changes in operating assets:
Loan assets and due to/due from subsidiaries
Assets under operating lease
Other assets
Trading assets, derivatives, cash collateral and repurchase transactions,
margin money and settlement balances (net of related liabilities),
segregated funds and trading income
Changes in operating liabilities:
Deposits
Borrowings
Debt issued
Other liabilities
Life business:
Life investment linked contract premiums received, disposal
of investment assets and other unitholder contributions
Life investment linked contract payments, acquisition of investment
assets and other unitholder redemptions
Net cash flows generated from operating activities
Cash flows generated from/(utilised in) investing activities
Net proceeds from/(payments for) financial investments
Associates, joint ventures, subsidiaries and businesses:
Proceeds from disposal or capital return, net of cash deconsolidated
Payments for the acquisition or additional capital contribution, net of
cash acquired
Property, plant and equipment, right-of-use assets, investment property
and intangible assets:
Proceeds from disposals
Payments for acquisitions
Net cash flows generated from/(utilised in) investing activities
Cash flows generated from/(utilised in) financing activities
Proceeds from the issue of ordinary shares
Loan capital:
Issuance
Redemption
Dividends and distributions paid
Payments for the acquisition of treasury shares
Non-Controlling interests:
Redemption of Macquarie Income Securities
Receipts from non-controlling interests
Net cash flows generated from/(utilised in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effect of exchange rate movements on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
CONSOLIDATED
COMPANY
Notes
2021
$m
2020
$m
2021
$m
2020
$m
3,992
(1,919)
6,246
(1,983)
1,026
148
5,114
(3,375)
7,609
(1,792)
1,728
383
(4,647)
(4,841)
(1,872)
(790)
(14,056)
(388)
100
(2,958)
(1,043)
(15,487)
(487)
(666)
554
(628)
829
(906)
14
(8)
601
(4)
(1)
(345)
520
(38)
20
–
–
848
(2)
(6)
(390)
3,024
–
48
(1,495)
3,232
–
17,179
(2,798)
4,138
(57)
10,920
5,973
7,736
69
(5)
(2,821)
2,288
30
426
29
(28)
2,826
(422)
12,119
149
(1,156)
127
–
1,653
(1,230)
–
–
–
3,888
–
4,248
4,156
534
6,298
(1,092)
(4,661)
(9,146)
359
(761)
2,903
81
(1,165)
(2,745)
534
–
–
(2,848)
1,670
1,660
4,419
(1,271)
(861)
(400)
25
1,912
7,641
28,960
(3,108)
33,493
–
(429)
(2,122)
(607)
–
413
(1,075)
8,299
18,867
1,794
28,960
27
29
29
725
(531)
(855)
(661)
–
–
(2,093)
(607)
–
–
(1,040)
–
–
–
–
The above statements of cash flows should be read in conjunction with the accompanying notes.
154
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Notes to the financial statements
For the financial year ended 31 March 2021
Note 1
Basis of preparation
This Financial Report is a General Purpose Financial Report
which has been prepared in accordance with Australian
Accounting Standards and the Corporations Act 2001 (Cth).
Macquarie Group Limited is a for-profit Company for the
purposes of preparing this Financial Report.
The principal accounting policies adopted in the preparation
of this Financial Report are set out below. These policies
have been consistently applied to all the financial years
presented and are applicable to both the Consolidated
Entity (Macquarie Group Limited and its subsidiaries) as
well as to the Company (Macquarie Group Limited), unless
otherwise stated.
(i) Compliance with IFRS as issued by the IASB
Compliance with Australian Accounting Standards ensures
that this Financial Report complies with International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
Consequently, this Financial Report is compliant with IFRS.
(ii) Basis of measurement
This Financial Report has been prepared under the historical
cost convention except for the following items, as disclosed
in the respective accounting policy:
• financial instruments (including derivatives) required to
be measured at fair value through profit or loss (FVTPL),
financial assets classified as fair value through other
comprehensive income (FVOCI) and financial instruments
that have been designated as FVTPL (DFVTPL)
• financial assets and liabilities that are otherwise measured
on an amortised cost basis but adjusted for changes in fair
value attributable to the risk being hedged in qualifying fair
value hedge relationships
• non-current assets and disposal groups that have been
classified as held for sale and where a disposal group has
been impaired to its fair value less costs to sell
• commodity inventories that are measured at fair
value less costs to sell in accordance with the
broker-trader exemption
• certain other non-financial assets and liabilities that are
measured at fair value, such as investment property.
(iii) Critical accounting estimates and significant judgements
The preparation of this Financial Report in compliance with
Australian Accounting Standards requires the use of certain
critical accounting estimates. It also requires management to
exercise judgement in the process of applying the accounting
policies. The notes to the financial statements set out areas
involving a higher degree of judgement or complexity, or
areas where assumptions are significant to the Consolidated
Entity and the consolidated Financial Report such as:
• determining the appropriate business model for a group
of financial assets which includes determining the level at
which the business model condition is applied and whether
past or expected sales activity is consistent with a held to
collect business model (Note 44(vii))
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• assessing whether the cash flows generated by a financial
asset constitute solely payments of principal and
interest (SPPI) may require the application of judgement,
particularly for certain subordinated or non-recourse
positions, and in the determination of whether
compensation for early termination of a contract is
reasonable (Note 44(vii))
• the choice of inputs, estimates and assumptions used in
the measurement of Expected Credit Loss, including the
determination of significant increase in credit risk (SICR),
forecasts of economic conditions and the weightings
assigned thereto (Note 44(xxii) and Note 13)
• timing and amount of impairment of interests in
associates and joint ventures and investment in
subsidiaries, including the reversal thereof (Note 44(i),
Note 44(xxii), Note 14 and Note 17)
• the timing and amount of impairment of goodwill and
other identifiable intangible assets and, where applicable,
the reversal thereof (Note 44(xxii) and Note 16)
• fair value of assets and liabilities including the
determination of non-recurring fair values and accounting
for day 1 profits or losses for financial instruments
(Note 44(vii), Note 44(x) and Note 38)
• distinguishing between whether assets or a business is
acquired under a business combination, particularly the
determination of whether a substantive process exists
that, together with an integrated set of activities and
assets, significantly contributes to the ability to create an
output (Note 44(ii))
• determination of significant influence over associates, joint
control over arrangements and control over subsidiaries,
including the assessment of whether certain rights are
protective or substantive in nature, whether these rights are
held in the capacity as agent or principal, and whether the level
of involvement in an investee’s relevant activities is sufficient
to significantly affect the returns generated (Note 44(i))
• recoverability of tax receivables, deferred tax assets
and measurement of current and deferred tax liabilities
can require significant judgement, particularly where the
recoverability of such tax balances relies on the estimation
of future taxable profits and management’s determination
of the likelihood that uncertain tax positions will be
accepted by the relevant taxation authority (Note 44(vi),
Note 4 and Note 18)
• recognition and measurement of certain revenue streams
including performance fees from Macquarie-managed
funds and other capital market investments and
transactions (Note 44(iv))
• recognition and measurement of provisions related to actual
and potential claims, determination of contingent liabilities,
and supplemental rent, maintenance liabilities and end of
lease compensation (Note 44(iv), Note 44(xvii) and Note 33)
• the application of hedge accounting principles, including
the assessment that a forecast transaction is highly
probable (Note 44(x) and Note 35)
• the timing of derecognition of assets and liabilities
following the disposal of an investment, including the
measurement of the associated gain or loss (Note 44(i)).
Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including
reasonable expectations of future events.
155
The AASB Framework includes amendments to the definition
and recognition criteria for assets, liabilities, income and
expenses, guidance on measurement and derecognition, and
other relevant financial reporting concepts. The application
of the revised AASB Framework did not have a material
impact on the Consolidated Entity’s financial statements.
(ii) AASB 2020‑8 Interest Rate Benchmark Reform ‑ Phase 2
IBOR reform: Transition from inter‑bank offered rates (IBOR)
to alternative reference rates (ARRs)
IBOR are interest rate benchmarks that are used in a wide
variety of financial instruments such as derivatives and
lending arrangements. Examples of IBOR include ‘LIBOR’
(the London Inter-bank Offered Rate), ‘EURIBOR’ (the Euro
Inter-bank Offered Rate) and ‘BBSW’ (the Australian Bank Bill
Swap Rate). Historically, each IBOR has been calculated and
published daily based on submissions by a panel of banks.
Over time, changes in inter-bank funding markets have meant
that IBOR panel bank submissions have become based less
on observable transactions and more on expert judgement.
Financial markets’ authorities reviewed what these changes
meant for financial stability, culminating in recommendations
to reform major interest rate benchmarks. As a result of
these recommendations, many IBOR around the world are
undergoing reforms.
The nature of the reforms varies across different jurisdictions.
For example, in Australia the existing IBOR benchmark
(BBSW) has undergone reform and is expected to continue
for the foreseeable future alongside the nominated ARR
for AUD which is AONIA (AUD Overnight Index Average).
By contrast, due to a lack of observable transactions to
support robust LIBOR reference rates, LIBOR publication is
expected to cease. A transition away from LIBOR is therefore
necessary. The cessation date for all tenors of GBP, CHF,
EUR, JPY LIBOR and the one week and two-month tenors for
USD LIBOR is 31 December 2021. The cessation date for the
remaining USD LIBOR tenors is 30 June 2023.
Industry working groups have worked with authorities and
consulted with market participants to develop market
practices that may be used to transition existing LIBOR-linked
contracts for derivatives, loans, bonds and other financial
instruments that mature beyond their respective LIBOR
cessation dates, to ARRs. Amongst the issues considered
were the key differences between LIBOR and ARRs. LIBOR are
term rates which are quoted at the beginning of that period
(for example, one-, three-, six-or twelve-month periods)
and include a component of bank credit risk. ARRs on the
other hand are overnight rates with little or no credit risk. To
facilitate the transition of contracts from LIBOR to ARRs on
an economically equivalent basis, adjustments for term and
credit differences will need to be applied.
As a diversified financial services group with a variety of
global products and services, IBOR reforms, including the
transition from LIBOR to ARRs, are important changes for the
Consolidated Entity.
Note 1
Basis of preparation continued
(iii) Critical accounting estimates and
significant judgements continued
Management believes that the estimates used in preparing
this Financial Report are reasonable. Actual results in the
future may differ from those reported and it is therefore
reasonably possible, on the basis of existing knowledge, that
outcomes within the next financial year that are different
from management’s assumptions and estimates could
require an adjustment to the carrying amounts of the
reported assets and liabilities in future reporting periods.
(iv) Coronavirus (COVID‑19) impact
The Novel Coronavirus (COVID-19) has had significant impacts
on global economies and equity, debt and commodity
markets, led to several changes in the economy and resulted
in several support actions by financial markets, governments,
and regulators. The impact of COVID-19 continues to
evolve and, where applicable, has been incorporated into
the determination of the Consolidated Entity’s results of
operations and measurement of its assets and liabilities at
the reporting date.
The Consolidated Entity’s processes to determine the impact
of COVID-19 for these financial statements is consistent with
the processes disclosed and applied in its 31 March 2020 and
30 September 2020 financial statements. Those processes
identified that expected credit losses (Note 13) and the
assessment of the impairment of non-financial assets
(Note 15 and Note 16) required continued judgement as a
result of the impact of COVID-19.
As there is a higher than usual degree of uncertainty
associated with these assumptions and estimates, actual
outcomes may differ to those forecasted which may
impact the accounting estimates included in these financial
statements. Other than adjusting events that provide
evidence of conditions that existed at the end of the
reporting period, the impact of events that arise after the
reporting period will be accounted for in future reporting
periods. The impact of COVID-19 has been discussed further
in each of the related notes.
(v) New Australian Accounting Standards and
amendments to Australian Accounting Standards that
are either effective in the current financial year or have
been early adopted
(i) AASB Revised Conceptual Framework for
Financial Reporting
The revised AASB Framework was effective for the
Consolidated Entity’s annual financial reporting period
beginning on 1 April 2020.
The AASB Framework provides the AASB with a base of
consistent concepts upon which future accounting standards
will be developed. The AASB Framework will also assist
financial report preparers to develop consistent accounting
policies when there is no specific or similar standard that
addresses an issue.
156
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Note 1
Basis of preparation continued
(v) New Australian Accounting Standards and
amendments to Australian Accounting Standards that
are either effective in the current financial year or have
been early adopted continued
Impacts on financial reporting
AASB 2019-3 Amendments to Australian Accounting
Standards – Interest Rate Benchmark Reform, issued in
October 2019, amended AASB 7 Financial Instruments:
Disclosures (AASB 7) and AASB 9 Financial Instruments
(AASB 9) to provide certain relief from applying specific
accounting requirements to hedge accounting relationships
directly affected by IBOR reform. The relief enables the
continuation of hedge accounting for impacted hedge
relationships during the period of uncertainty prior to IBOR
transition. The Consolidated Entity early adopted these
amendments for the year ended 31 March 2020.
In August 2020, AASB 2020-8 Amendments to Australian
Accounting Standards – Interest Rate Benchmark Reform
- Phase 2 amended standards including AASB 7, AASB 9
and AASB 16 Leases (AASB 16) to address accounting issues
following the transition to ARR. The amendments provide
certain relief from applying specific requirements related to
hedge accounting and the modification of financial assets
and financial liabilities if certain criteria are met.
Where modifications to a contract, or changes in the basis
for determining the contractual cash flows under a contract,
are necessitated as a direct consequence of IBOR reform
and the new basis for determining the contractual cash flows
is economically equivalent to the previous basis, the relief
allows an entity to reset the yield applied to such an exposure
on a prospective basis. Thus, at the time of modification,
where the relief applies, there is no impact to the income
statement. The relief requires continuation of hedge
accounting in circumstances when changes to hedged items
and hedging instruments arise as a result of changes required
by the IBOR reform.
The amendments, which are mandatorily effective for annual
reporting periods beginning on or after 1 January 2021, also
require additional quantitative and qualitative disclosures.
The Consolidated Entity has early adopted the amendments
for its annual financial statements for the year ended
31 March 2021.
(iii) Other amendments made to existing standards
Other amendments made to existing standards that were
mandatorily effective for the annual reporting period
beginning on 1 April 2020 did not result in a material impact
to the Consolidated Entity’s financial statements.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
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157
Note 2
Operating profit before income tax
Net interest income/(expense)
Interest and similar income
Effective interest rate method(1)
Other
Interest and similar expense(2)
Net interest income/(expense)
Fee and commission income
Base and other asset management fees(3)
Mergers and acquisitions, advisory and underwriting fees
Brokerage and other trading-related fee income
Performance fees
Other fee and commission income
Total fee and commission income
Net trading income(4)
Commodities(5),(6)
Equities
Credit, interest rate, foreign exchange and other products
Net trading income
Net operating lease income
Rental income
Depreciation and other operating lease-related charges
Net operating lease income
Share of net (losses)/profits from associates and joint ventures(7)
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
3,632
333
(1,770)
2,195
2,305
858
816
660
537
5,176
2,750
399
333
3,482
949
(483)
466
(3)
4,411
745
(3,297)
1,859
2,356
1,060
870
821
730
5,837
1,793
647
421
2,861
1,748
(1,003)
745
95
554
(602)
(48)
14
14
(3)
(3)
828
–
(893)
(65)
–
–
–
–
14
14
–
–
296
296
–
–
–
–
(1)
Includes interest income of $3,500 million (2020: $4,228 million) in the Consolidated Entity and $554 million (2020: $828 million) in the Company on financial assets measured at
amortised cost and $132 million (2020: $183 million) in the Consolidated Entity on financial assets measured at FVOCI. As part of business model assessment, certain loan assets in
Company’s books have been reclassified as held to collect and measured at amortised cost (previously classified as held to collect and sell and measured at FVOCI). Refer to Note 37
Measurement categories of financial instruments.
(2) Includes interest expense on financial liabilities measured at amortised cost calculated using effective interest method of $1,734 million (2020: $3,196 million) in the Consolidated
Entity and $602 million (2020: $893 million) in the Company.
(3) Includes $2,011 million (2020: $2,053 million) of base fee income.
(4) Includes fair value movements on trading assets and liabilities, ineffective portion of designated hedge relationships; fair value changes on derivatives used to economically hedge
the Consolidated Entity’s interest rate risk and foreign currency gains and losses on foreign currency-denominated monetary assets and liabilities. Refer to Note 44(x) Derivative
instruments and hedging activities.
(5) Includes $679 million (2020: $701 million) of transportation, storage and certain other trading-related costs.
(6) Includes $47 million (2020: $41 million) depreciation on right-of-use (ROU) assets held for trading-related business.
(7) Includes the Consolidated Entity’s equity-accounted share of impairments on aircraft in Macquarie AirFinance. Refer to Note 14 Interests in associates and joint ventures.
158
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
Note 2
Operating profit before income tax continued
Credit and other impairment (charges)/reversal
Credit impairment (charges)/reversal
Loan assets
Other assets
Margin money and settlement assets
Loans to associates and joint ventures
Undrawn credit commitments and financial guarantees
Financial investments
Gross credit impairment (charges)/reversal
Recovery of loans previously written off
Net credit impairment (charges)/reversal
Other impairment (charges)/reversal
Interests in associates and joint ventures
Intangible and other non-financial assets
Total other impairment charges
Total credit and other impairment (charges)/reversal
Other operating income and charges
Investment income
Net gain/(loss) on:
Interests in associates and joint ventures
Equity investments
Debt investments
Non-financial assets
Disposal of businesses and subsidiaries(1),(2)
Change of control, joint control and/or significant influence
Dividends from subsidiaries
Total investment income
Subsidiaries held for investment purposes(3)
Net operating revenue(4)
Expenses(5)
Net loss incurred by subsidiaries held for investment purposes
Other income and charges
Total other operating income and charges
Net operating income
(323)
(50)
(42)
(17)
(9)
5
(436)
2
(434)
65
(155)
(90)
(524)
1,063
215
5
492
239
9
2,023
354
(504)
(150)
109
1,982
12,774
(618)
(81)
(71)
(13)
(24)
(12)
(819)
14
(805)
(119)
(116)
(235)
(1,040)
1,235
76
(38)
35
291
113
–
1,712
467
(573)
(106)
362
1,968
12,325
12
6
18
18
18
167
601
768
(7)
761
742
(1) Company includes gain on sale of Macquarie’s service entities to MBL.
(2) Includes gains on disposal of businesses of $120 million (2020: $261 million) and gain on disposal of subsidiaries of $119 million (2020: $30 million).
(3) Subsidiaries held for investment purposes are consolidated entities that are held with the ultimate intention to sell as part of Macquarie’s investment activities.
(4) Includes revenue of $968 million (2020: $858 million) after deduction of $614 million (2020: $391 million) related to cost of goods sold.
(5) Includes employment expenses, depreciation and amortisation expenses and other operating expenses.
–
1
–
–
(3)
–
(2)
–
(2)
–
–
–
(2)
–
–
–
–
–
–
848
848
–
–
–
11
859
1,102
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CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
Note 2
Operating profit before income tax continued
Employment expenses
Salary and related costs including commissions, superannuation
and performance-related profit share
Share-based payments(1)
Provision for long service leave and annual leave
Total compensation expenses
Other employment expenses including on-costs, staff procurement
and staff training
Total employment expenses
Brokerage, commission and trading‑related fee expenses
Brokerage and other trading-related fee expenses
Other fee and commission expenses
Total brokerage, commission and trading-related fee expenses
Occupancy expenses
Lease expenses(2)
Depreciation on own use assets: buildings, furniture, fittings
and leasehold improvements (Note 15)
Other occupancy expenses
Total occupancy expenses
Non‑salary technology expenses
Information services
Depreciation on own use assets: equipment (Note 15)
Service provider and other non-salary technology expenses(3)
Total non-salary technology expenses
Other operating expenses
Professional fees
Indirect and other taxes
Advertising and promotional expenses
Amortisation of intangible assets
Audit fees
Communication expenses
Travel and entertainment expenses
Depreciation on own use assets: infrastructure assets (Note 15)
Other expenses
Total other operating expenses
Total operating expenses
Operating profit before income tax
(4,522)
(582)
(86)
(5,190)
(327)
(5,517)
(643)
(236)
(879)
(172)
(67)
(143)
(382)
(216)
(27)
(538)
(781)
(495)
(154)
(100)
(63)
(55)
(30)
(17)
(9)
(385)
(1,308)
(8,867)
3,907
(4,395)
(586)
(20)
(5,001)
(322)
(5,323)
(722)
(242)
(964)
(200)
(72)
(128)
(400)
(218)
(26)
(505)
(749)
(505)
(138)
(110)
(70)
(40)
(29)
(183)
(27)
(333)
(1,435)
(8,871)
3,454
(4)
(4)
(4)
(4)
(4)
(8)
734
(5)
–
–
(5)
–
(5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5)
(5)
(10)
1,092
Includes share-based payment related expenses of $50 million (2020: $3 million gain) for cash settled awards.
(1)
(2) Includes $159 million (2020: $167 million) of depreciation on ROU assets relating to property leases.
(3) Includes $9 million (2020: $12 million) of depreciation on ROU assets relating to technology leases.
160
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Note 3
Segment reporting
(i) Operating segments
AASB 8 Operating Segments requires the ‘management
approach’ to disclosing information about the Consolidated
Entity’s reportable segments. The financial information is
reported on the same basis as used internally by Senior
Management for evaluating Operating Segment performance
and for deciding how to allocate resources to Operating
Segments. Such information may be produced using
different measures to that used in preparing the statutory
income statement.
For internal reporting, performance measurement and
risk management purposes, the Consolidated Entity is
divided into Operating Groups and a Corporate segment
(Reportable segments).
During the current year, Cash Equities was transferred
from CGM to Macquarie Capital. Comparatives have been
reclassified to reflect this reorganisation between the
Operating Groups.
The financial information disclosed relates to the
Consolidated Entity’s ordinary activities.
These segments have been set up based on the different
core products and services offered. The Operating
Groups comprise:
• MAM provides investment solutions to clients across
a range of capabilities, including infrastructure and
renewables, real estate, agriculture, transportation
finance, private credit, equities, fixed income and
multi-asset solutions
• BFS provides a diverse range of personal banking, wealth
management, business banking and vehicle finance(1)
products and services to retail clients, advisers, brokers
and business clients
• CGM provides an integrated, end-to-end offering across
global markets including equities, fixed income, foreign
exchange, commodities and technology, media and
telecoms, as well as providing clients with risk and capital
solutions across physical and financial markets. CGM
also delivers a range of tailored specialised asset finance
solutions across a variety of industries and asset classes
• Macquarie Capital has global capability in advisory and
capital raising services, investing alongside partners
and clients across the capital structure, and providing
clients with specialist expertise, advice and flexible
capital solutions across a range of sectors. It also has
global capability in the development and investment in
infrastructure and energy projects and companies, and
in relation to renewable energy projects, the supply of
green energy solutions to corporate clients. Additionally,
Macquarie Capital’s equities brokerage business provides
clients with access to equity research, sales, execution
capabilities and corporate access.
(1)
Includes general plant and equipment.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
The Corporate segment, which is not considered an
Operating Group, comprises head office and Central
Service Groups, including Group Treasury. As applicable,
the Corporate segment holds certain legacy and strategic
investments, assets and businesses that are not allocated to
any of the Operating Groups.
Items of income and expense within the Corporate segment
include the net result of managing Macquarie’s liquidity and
funding requirements, earnings on capital and the residual
accounting volatility relating to economically hedged
positions where hedge accounting is applied, as well as
accounting volatility for other economically hedged positions
where hedge accounting is not applicable.
Other items of income and expenses within the Corporate
segment include earnings from investments, changes in
central overlays to impairments or valuation of assets,
unallocated head office costs and costs of Central Service
Groups, the Consolidated Entity’s performance-related
profit share and share-based payments expense, income
tax expense and certain distributions attributable to certain
non-controlling interests.
Below is a selection of key policies applied in determining the
Operating Segment results.
Internal funding arrangements
Group Treasury has the responsibility for managing funding
for the Consolidated Entity, and Operating Groups obtain
their funding from Group Treasury. The interest rates charged
by Group Treasury are determined by the currency and term
of the funding. Break costs may be charged to Operating
Groups for the early repayment of term funding.
Generally, Operating Groups may only source funding directly
from external sources where the funding is secured by the
Operating Group’s assets. In such cases the Operating Group
bears the funding costs directly and Group Treasury may levy
additional charges where appropriate.
Deposits are a funding source for the Bank Group. The value
of deposits that the Bank Group generates is recognised
within Net interest and trading income for segment
reporting purposes.
161
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Income tax
Income tax expense and benefits are recognised in the
Corporate segment and not allocated to the Operating
Groups. However, to recognise an Operating Group’s
contribution to permanent income tax differences, the
internal management revenue/charge category is used.
This internal management revenue/charge category, which
is primarily used for permanent income tax differences
generated by the Operating Groups, are offset by an equal
and opposite amount recognised in the Corporate segment
such that they are eliminated on consolidation.
Reportable segment assets
Segment assets are the external operating assets that are
employed by a segment in its operating activities.
Note 3
Segment reporting continued
(i) Operating segments continued
Transactions between Operating Segments
Operating Segments that enter into arrangements with other
Operating Segments must do so on commercial terms or as
agreed by the Consolidated Entity’s Chief Executive Officer or
Chief Financial Officer.
Internal transactions are recognised in each of the relevant
categories of income and expense and eliminated on
consolidation as appropriate.
Accounting for derivatives that hedge interest rate risk
With respect to businesses that predominantly earn income
from lending activities, derivatives that hedge interest
rate risk are measured at fair value through profit or loss
(FVTPL). Changes in fair value are presented in net trading
income and gives rise to income statement volatility unless
designated in a hedge accounting relationship, in which
case the carrying value of the hedged item is adjusted for
changes in fair value attributable to the hedged risk to reduce
volatility in the income statement. If designated in a cash
flow hedge accounting relationship, the effective portion of
the derivative’s fair value gains or losses is deferred in the
cash flow hedge reserve as part of Other comprehensive
income (OCI), and subsequently recognised in the income
statement at the time at which the hedged item affects
the income statement for the hedged risk. For segment
reporting, derivatives are accounted for on an accrual basis
in the results of the Operating Groups to the extent that the
Corporate segment manages the derivative volatility, either
through the application of hedge accounting or where the
derivative volatility may offset the volatility of other positions
managed within the Corporate segment.
Central Service Groups
The Central Service Groups provide a range of functions
supporting Macquarie’s Operating Groups, ensuring they
have the appropriate workplace support and systems to
operate effectively and the necessary resources to meet
their regulatory, compliance, financial reporting, legal and risk
management requirements.
Central Service Groups recover their costs from Operating
Groups generally on either a time and effort allocation basis
or a fee for service basis. Central Service Groups include the
Corporate Operations Group (COG), Financial Management
Group (FMG), Risk Management Group (RMG), Legal and
Governance and Central Executive.
Performance‑related profit share and share‑based
payments expense
Performance-related profit share and share-based payments
expense relating to the Macquarie Group Employee Retained
Equity Plan (MEREP) are recognised in the Corporate segment
and not allocated to Operating Groups.
162
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
This page has been left intentionally blank.
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Note 3
Segment reporting continued
(i) Operating segments continued
The following is an analysis of the Consolidated Entity’s revenue and results by reportable segment:
Macquarie Asset
Management
$m
Banking and
Financial Services
$m
Commodities and
Global Markets
$m
Macquarie Capital
$m
Corporate
$m
Total
$m
(249)
2,921
79
(12)
85
699
31
3,554
(1,474)
2,080
(6)
2,074
5,927
(402)
3,207
380
224
(231)
465
89
3,732
(1,554)
2,178
–
(1)
2,177
8,434
1,746
419
(3)
(115)
30
1
2,078
(1,307)
771
771
90,226
1,728
445
–
2
(148)
8
2
2,037
(1,267)
770
–
–
770
76,776
3,856
485
383
43
(237)
153
(5)
4,678
(2,077)
2,601
2,601
94,972
2,957
630
360
24
(243)
97
15
3,840
(2,102)
1,738
–
–
1,738
126,612
69
1,387
(35)
(229)
1,025
31
2,248
(1,614)
634
17
651
19,342
(59)
1,592
–
(198)
(282)
1,397
61
2,511
(1,765)
746
–
17
763
23,778
255
(36)
4
4
(28)
75
(58)
216
(2,395)
(2,179)
(899)
(4)
(3,082)
35,186
496
(37)
5
43
(136)
1
(167)
205
(2,183)
(1,978)
(728)
(11)
(2,717)
20,202
CONSOLIDATED 2021
CONSOLIDATED 2020
5,677
5,176
466
(3)
(524)
1,982
12,774
(8,867)
3,907
(899)
7
3,015
245,653
4,720
5,837
745
95
(1,040)
1,968
–
12,325
(8,871)
3,454
(728)
5
2,731
255,802
Net interest and trading (expense)/income
Fee and commission income/(expense)
Net operating lease income
Share of net (losses)/profits of associates and joint ventures
Credit and other impairment reversal/(charges)
Other operating income and charges
Internal management revenue/(charge)
Net operating income
Total operating expenses
Operating profit/(loss) before income tax
Income tax expense
(Profit)/loss attributable to non-controlling interests
Net profit/(loss) attributable to the ordinary equity holders of
Macquarie Group Limited
Reportable segment assets
Net interest and trading (expense)/income
Fee and commission income/(expense)
Net operating lease income
Share of net profits/(losses) of associates and joint ventures
Credit and other impairment charges
Other operating income and charges
Internal management revenue/(charge)
Net operating income
Total operating expenses
Operating profit/(loss) before income tax
Income tax expense
(Profit)/loss attributable to non-controlling interests
Net profit/(loss) attributable to the ordinary equity holders of
Macquarie Group Limited
Reportable segment assets
164
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Macquarie Asset
Management
$m
Banking and
Financial Services
$m
Commodities and
Global Markets
$m
Macquarie Capital
$m
Corporate
$m
Total
$m
Note 3
Segment reporting continued
(i) Operating segments continued
The following is an analysis of the Consolidated Entity’s revenue and results by reportable segment:
Net interest and trading (expense)/income
Fee and commission income/(expense)
Net operating lease income
Share of net (losses)/profits of associates and joint ventures
Credit and other impairment reversal/(charges)
Other operating income and charges
Internal management revenue/(charge)
Net operating income
Total operating expenses
Operating profit/(loss) before income tax
Income tax expense
(Profit)/loss attributable to non-controlling interests
Net profit/(loss) attributable to the ordinary equity holders of
Macquarie Group Limited
Reportable segment assets
Share of net profits/(losses) of associates and joint ventures
Net interest and trading (expense)/income
Fee and commission income/(expense)
Net operating lease income
Credit and other impairment charges
Other operating income and charges
Internal management revenue/(charge)
Net operating income
Total operating expenses
Operating profit/(loss) before income tax
Income tax expense
(Profit)/loss attributable to non-controlling interests
Net profit/(loss) attributable to the ordinary equity holders of
Macquarie Group Limited
Reportable segment assets
(249)
2,921
79
(12)
85
699
31
3,554
(1,474)
2,080
(6)
2,074
5,927
(402)
3,207
380
224
(231)
465
89
3,732
(1,554)
2,178
–
(1)
2,177
8,434
1,746
419
(3)
(115)
30
1
2,078
(1,307)
771
–
2
8
2
–
–
771
90,226
1,728
445
(148)
2,037
(1,267)
770
770
76,776
3,856
485
383
43
(237)
153
(5)
4,678
(2,077)
2,601
2,601
94,972
2,957
630
360
24
(243)
97
15
3,840
(2,102)
1,738
–
–
1,738
126,612
69
1,387
(35)
(229)
1,025
31
2,248
(1,614)
634
17
651
19,342
(59)
1,592
–
(198)
(282)
1,397
61
2,511
(1,765)
746
–
17
763
23,778
255
(36)
4
4
(28)
75
(58)
216
(2,395)
(2,179)
(899)
(4)
(3,082)
35,186
496
(37)
5
43
(136)
1
(167)
205
(2,183)
(1,978)
(728)
(11)
(2,717)
20,202
CONSOLIDATED 2021
5,677
5,176
466
(3)
(524)
1,982
12,774
(8,867)
3,907
(899)
7
3,015
245,653
CONSOLIDATED 2020
4,720
5,837
745
95
(1,040)
1,968
–
12,325
(8,871)
3,454
(728)
5
2,731
255,802
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Note 3
Segment reporting continued
(ii) Fee and commission income/(expense) relating to contracts with customers
The following is an analysis of the Consolidated Entity’s fee and commission income/(expense) by reportable segment:
Macquarie
Asset
Management
$m
Banking and
Financial
Services
$m
Commodities
and Global
Markets
$m
Macquarie
Capital
$m
Fee and commission income/(expense)
Base and other asset management fees
2,090
Mergers and acquisitions, advisory
and underwriting fees
Brokerage and other trading-related
fee income
Performance fees
Other fee and commission income/
(expense)
Total fee and commission income/
(expense)
18
36
653
124
2,921
Fee and commission income/(expense)
Base and other asset management fees
2,132
Mergers and acquisitions, advisory
and underwriting fees
Brokerage and other trading-related
fee income
Performance fees
Other fee and commission income/
(expense)
Total fee and commission income/
(expense)
53
10
821
191
3,207
212
47
160
419
219
–
50
–
176
445
3
12
209
261
485
5
18
251
–
356
630
839
524
7
17
1,387
–
1,000
559
–
33
1,592
Corporate
$m
Total
$m
CONSOLIDATED 2021
(11)
(25)
(36)
2,305
858
816
660
537
5,176
CONSOLIDATED 2020
–
(11)
–
–
(26)
(37)
2,356
1,060
870
821
730
5,837
166
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 3
Segment reporting continued
(iii) Products and services
Segment reporting based on products and services is based on the following activities of the Consolidated Entity:
• Financial markets: trading in fixed income, equities, foreign exchange and commodities and broking services
• Lending: corporate and structured finance, banking activities, home loans, asset financing and leasing
• Capital markets: capital raising and advisory services, underwriting, facilitation and principal lending and investments
• Asset and wealth management: distribution and management of funds and wealth management products.
Revenue from external customers
Financial markets
Lending
Capital markets
Asset and wealth management
Total revenue from external customers(1)
CONSOLIDATED
2021
$m
6,023
4,350
3,814
3,208
17,395
2020
$m
6,039
5,472
4,116
3,585
19,212
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(iv) Geographical areas
Geographical segments have been determined based on the tax location of the entity where the transactions have been
recorded. The operations of the Consolidated Entity are headquartered in Australia.
Americas(3)
Australia
Europe, Middle East and Africa(4)
Asia Pacific
Total
CONSOLIDATED 2021
CONSOLIDATED 2020
Revenue from
external customers Non‑current assets(2)
$m
$m
Revenue from
external customers
$m
Non-current assets(2)
$m
6,370
5,425
4,041
1,559
17,395
3,146
2,183
5,790
557
11,676
5,457
7,049
5,408
1,298
19,212
4,359
2,663
9,268
581
16,871
(v) Major customers
The Consolidated Entity does not rely on any major customers.
(1) Revenue from external customers includes fee and commission income relating to contracts with customers, interest and similar income, net trading income, operating lease income,
operating income from subsidiaries held for investment purposes, share of net profits/(losses) of associates and joint ventures, income associated with investing activities and other
operating income.
(2) Non-current assets consist of intangible assets, interests in associates and joint ventures, property, plant and equipment and right-of-use assets and investment properties.
(3) Includes external revenue generated in the United States of America of $5,979 million (2020: $5,053 million).
(4) Includes external revenue generated in the United Kingdom of $2,943 million (2020: $4,266 million).
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Note 4
Income tax expense
(i) Income tax (expense)/benefit
Current tax expense
Deferred tax benefit/(expense)
Total income tax (expense)/benefit
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
(1,021)
122
(899)
(1,027)
299
(728)
37
(16)
21
(95)
(9)
(104)
(ii) Reconciliation of income tax expense to prima facie
tax expense
Prima facie income tax expense on operating profit(1)
(1,172)
(1,036)
(220)
(327)
Tax effect of amounts which are non-assessable/(non-deductible)
in calculating taxable income:
Rate differential on offshore income
Intra-group dividend
Other items
Total income tax (expense)/benefit
(iii) Tax (expense)/benefit relating to items of OCI
FVOCI reserve
Own credit risk
Cash flow hedges and cost of hedging
Share of other comprehensive expense/(income) of associates
and joint ventures
Total tax (expense)/benefit relating to items of OCI
(iv) Deferred tax benefit/(expense) represents movements
in deferred tax assets and liabilities
Property, plant and equipment
Intangible assets
Financial investments and interests in associates and joint ventures
Tax losses
Operating and finance lease assets
Loan assets and derivatives
Other assets and liabilities
Total deferred tax benefit/(expense) represents movements
in deferred tax assets/(liabilities)
302
(29)
(899)
(25)
46
15
14
50
(5)
67
(62)
(69)
55
(21)
157
122
375
–
(67)
(728)
22
(26)
(22)
6
(20)
(1)
(36)
87
(22)
98
28
145
299
62
180
(1)
21
12
12
7
(23)
(16)
15
254
(46)
(104)
–
–
–
–
–
–
–
–
–
–
–
(9)
(9)
Revenue authorities undertake risk reviews and audits as part of their normal activities. The Consolidated Entity has assessed
these and other taxation claims and litigation, including seeking external advice where appropriate, and considers that it holds
appropriate provisions.
(1) Prima facie income tax expense on operating profit is calculated at the Australian statutory corporate tax rate of 30% (2020: 30%).
168
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 5
Dividends
(i) Dividends paid
Ordinary share capital and exchangeable shares
Final dividend paid (2020: $1.80 (2019: $3.60) per share)
Interim dividend paid (2021: $1.35 (2020: $2.50) per share)
Total dividends paid (Note 28)(1)
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
637
486
1,123
1,224
884
2,108
633
483
1,116
1,215
878
2,093
The 2021 interim and 2020 final dividends paid during the year were franked at 40%, based on tax paid at 30% (2020 interim
dividend franked at 40% based on tax paid at 30%; 2019 final dividend franked at 45% based on tax paid at 30%). The dividends
paid to the holders of the exchangeable shares were not franked (refer to Note 27 Contributed equity for information on
exchangeable shares).
The Company’s Dividend Reinvestment Plan (DRP) remains active. The DRP is optional and offers ordinary shareholders in
Australia and New Zealand the opportunity to acquire fully paid ordinary shares without transaction costs. A shareholder can
elect to participate in or terminate their involvement in the DRP at any time. Equity Shares issued by the Consolidated Entity in
the current year (equity shares purchased from the market and reissued in earlier periods) were allocated as fully paid ordinary
shares pursuant to the DRP, details of which are included in Note 27 Contributed equity and Note 29 Notes to the statements
of cash flows.
(ii) Dividends not recognised at the end of the financial year
Since the end of the financial year, the Directors have resolved to pay a final dividend of $3.35 per fully paid ordinary share, 40%
franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 2 July 2021 from
retained profits, but not recognised as a liability at the end of the year is $1,211 million(2). This amount has been estimated based
on the number of shares and MEREP awards eligible to participate as at 31 March 2021.
Cash dividend per ordinary share (distribution of current year
profits) ($ per share)
Franking credits available for the subsequent financial year at a
corporate tax rate of 30% (2020: 30%) ($m)(3)
CONSOLIDATED
COMPANY
2021
4.70
426
2020
4.30
264
2021
4.70
426
2020
4.30
264
Includes $7 million (2020: $15 million) of dividend equivalent amount paid to Deferred Share Unit (DSU) holders as described in Note 32 Employee equity participation.
(1)
(2) This liability will be reduced to the extent that the Company issues shares to meet DRP elections.
(3) Amounts represent balances for franking accounts adjusted for franking credits/debits that will arise from the payment/receipt of income tax payables/receivables as at the end of
the financial year respectively.
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Note 6
Earnings per share
Basic earnings per share is calculated by dividing the Consolidated Entity’s profit attributable to ordinary equity holders by the
weighted average number of ordinary shares outstanding during the financial year.
Diluted earnings per share is calculated by dividing the Consolidated Entity’s profit attributable to ordinary equity holders
(adjusted by profit attributable to the dilutive potential ordinary shares) by the weighted average number of ordinary
shares and potential ordinary shares that would be issued on the exchange of all the dilutive potential ordinary shares into
ordinary shares.
Basic earnings per share
Diluted earnings per share
Reconciliation of earnings used in the calculation of basic and diluted earnings per share
Profit after income tax
(Profit)/loss attributable to non-controlling interests:
Macquarie Income Securities
Other non-controlling interests
Total profit attributable to the ordinary equity holders of MGL
Less: profit attributable to participating unvested MEREP awards(1)
Total earnings used in the calculation of basic earnings per share
Add back:
Profit attributable to dilutive participating unvested MEREP awards
Distributions to subordinated debt holders
Total earnings used in the calculation of diluted earnings per share
CONSOLIDATED
2021
2020
CENTS PER SHARE
842.9
824.6
$m
3,008
7
3,015
(99)
2,916
57
123
3,096
791.0
764.5
$m
2,726
(12)
17
2,731
(95)
2,636
58
139
2,833
Total weighted average number of equity shares (net of treasury shares) adjusted for
participating unvested MEREP awards used in the calculation of basic earnings per share(2)
345,940,759
333,234,377
Reconciliation of weighted average number of equity shares used in the calculation of basic
and diluted earnings per share
Weighted average number of equity shares used in the calculation of basic earnings per share
345,940,759
333,234,377
Weighted average number of potential dilutive equity shares:
Unvested MEREP awards
Convertible subordinated debt (loan capital)(3)
Total weighted average number of equity shares (net of treasury shares) and potential
equity shares used in the calculation of diluted earnings per share
9,394,636
10,146,584
20,113,100
27,178,986
375,448,495
370,559,947
NUMBER OF SHARES
(1) For details of MEREP awards, refer to Note 32 Employee equity participation.
(2) Includes weighted average number of additional equity shares issued during the current year under MEREP and DRP participation and the Macquarie Group Employee Share Plan (ESP)
(2020: includes weighted average number of equity shares issued under the Institutional Private Placement and Share Purchase Plan).
(3) For details of loan capital included in potential dilutive equity shares, refer to Note 26 Loan capital.
170
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
Note 7
Trading assets
Commodities
Equity securities
Listed
Unlisted
Debt securities
Commonwealth and foreign government securities
Corporate loans and securities
Treasury notes
Other debt securities
Commodity contracts
Total trading assets
6,988
3,785
6,756
1
4,385
269
2
3,345
21,746
4,437
2
6,763
605
318
2
943
16,855
The majority of the above amounts are expected to be materially recovered within 12 months of the balance date by the
Consolidated Entity.
Note 8
Margin money and settlement assets
Security settlements
Margin money
Commodity settlements
Total margin money and settlement assets
7,253
4,852
2,292
14,397
6,698
7,238
2,457
16,393
The above amounts are expected to be materially recovered within 12 months of the balance date by the Consolidated Entity.
Note 9
Derivative assets
Held for trading
Designated in hedge relationships(1)
Total derivative assets
19,478
1,164
20,642
42,572
3,035
45,607
2
2
The above amounts under held for trading category are expected to be materially recovered within 12 months of the balance
date by the Consolidated Entity.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1) For details of net derivative assets and liabilities designated in hedge relationships refer to Note 35 Hedge Accounting.
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Note 10
Financial investments
Equity securities
Listed
Unlisted
Debt securities
Bonds and Negotiable Certificate of Deposits (NCDs)
Other
Total financial investments
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
181
1,260
7,676
449
9,566
255
1,046
7,232
397
8,930
–
–
–
–
–
Of the above amounts, $2,309 million (2020: $3,446 million) is expected to be recovered within 12 months of the balance date
by the Consolidated Entity.
Note 11
Held for sale and other assets
Held for sale assets
Assets of disposal groups and interests in associates and
joint ventures classified as held for sale(1)
279
1,634
Other assets
Debtors and prepayments(2)
Commodity-related receivables
Property and other inventory(3)
Income tax receivables
Life investment linked contracts and other unitholder assets
Other
Total other assets
2,948
1,661
681
675
10
31
3,405
1,525
785
807
307
39
6,006
6,868
2
52
54
–
–
–
–
16
–
2
18
Of the above amounts, $4,801 million (2020: $7,564 million) is expected to be recovered within 12 months of the balance date by
the Consolidated Entity and $53 million (2020: $18 million) by the Company.
(1) Subsequent to 31 March 2021, the Consolidated Entity disposed of certain assets that had been classified as held for sale for a pre-tax gain of approximately $450 million. The gain on
disposal will be recognised by the Consolidated Entity in the half-year ending 30 September 2021.
(2) Includes $778 million (2020: $891 million) of fee and commission receivables and $331 million (2020: $270 million) of fee-related contract assets.
(3) Includes $356 million (2020: $240 million) of investment properties measured at fair value. The valuation is classified as Level 3 in the fair value hierarchy as shown in Note 38 Fair
values of financial assets and financial liabilities.
172
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
CONSOLIDATED 2021
CONSOLIDATED 2020
Gross
$m
ECL
allowance(1)
$m
Net
$m
Gross
$m
ECL
allowance(1)
$m
Note 12
Loan assets
Home loans(2)
Corporate, commercial and other lending
Asset financing(2)
Investment lending
Total loan assets
72,068
18,117
13,697
2,275
106,157
(67)
(721)
(342)
(1)
72,001
17,396
13,355
2,274
(1,131)
105,026
56,653
18,960
16,866
2,562
95,041
(62)
(557)
(302)
(3)
(924)
Net
$m
56,591
18,403
16,564
2,559
94,117
Of the above amounts, $27,422 million (2020: $27,811 million) is expected to be recovered within 12 months of the balance date
by the Consolidated Entity.
Loan assets continue to represent the Consolidated Entity’s most significant component of credit exposures on which
expected credit losses (ECL) allowances are carried. The credit quality of the Consolidated Entity’s loan assets, which are
monitored through its credit policies, is reported under Note 36.1 Credit risk.
The carrying value of the exposure in the corporate, commercial and other lending segments reduced in the current year as a
result of repayments and the impact of the stronger Australian dollar, partially offset by new originations. Repayments, lower
drawdowns and the impact of the stronger Australian dollar contributed to the reduction in the asset financing segment during
the current year.
Repossessed collateral
In the event of a customer default, the Consolidated Entity may either take possession of the underlying collateral held as
security and/or exercise its right to dispose of the customer’s asset. At the reporting date the Consolidated Entity did not have
any material amounts of such collateral recognised in its Statement of financial position.
Finance lease receivables
Finance lease receivables are included within loan assets. The Consolidated Entity provides finance leases to a broad range of
clients to support financing needs in acquiring movable assets such as motor vehicles, small plant and equipment, electronic
and IT equipment. Finance lease receivables do not include retail products such as hire purchase, mortgages related to movable
property and consumer loans. The following table represents the maturity profile of the contractual undiscounted cashflows of
the Consolidated Entity:
CONSOLIDATED 2021
CONSOLIDATED 2020
Gross
investment in
finance lease
receivables
$m
Present value
of minimum
lease payments
receivable
$m
Gross
investment in
finance lease
receivables
$m
Unearned
income
$m
Unearned
income
$m
Present value
of minimum
lease payments
receivable
$m
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Later than five years
Total
1,532
1,142
751
396
130
43
3,994
(123)
(87)
(56)
(30)
(9)
(1)
(306)
1,409
1,055
695
366
121
42
3,688
2,169
1,599
1,112
641
282
68
5,871
(209)
(144)
(100)
(59)
(26)
(3)
(541)
1,960
1,455
1,012
582
256
65
5,330
(1) The ECL allowance carried against loan assets measured at FVOCI is not represented in the table as the allowance is included in reserves. Refer to Note 13 Expected credit losses.
(2) Includes $11,344 million (2020: $16,402 million) held by consolidated Structured Entities (SEs), which are available as security to note holders and debt providers.
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stage II exposures will suggest an increase in credit risk, it
should not necessarily be inferred that the assets are of a
lower credit quality.
Retail exposures
Exposures are assigned a behavioural score which considers
the exposures’ lifetime PD on initial recognition. This
behavioural score is periodically assessed and updated to
reflect changes in the underlying exposures’ credit behaviour.
SICR movement thresholds between origination and
reporting date for behavioural score movements have been
established that, where exceeded, result in the exposure
being categorised as stage II.
Wholesale exposures
The Consolidated Entity assigns an internal credit rating to
each exposure at origination based on information available
at that date. These internal ratings are broadly aligned to
external credit rating agencies such as Standard & Poor’s
and Moody’s.
Where an exposures’ assigned credit rating deteriorates
beyond pre-defined thresholds, the exposure is categorised
as stage II. The methodology has been calibrated so that a
larger change in rating is required for higher quality credit
rated exposures than for lower quality credit rated exposures
to be classified as stage II.
For both retail and wholesale portfolios:
• the AASB 9 ‘low credit risk’ exemption is not applied by the
Consolidated Entity to material portfolios
• for material retail portfolios, the credit risk for an exposure
or portfolio is generally deemed to have increased
significantly if the exposure is more than 30 days past
due, unless there are product specific characteristics that
indicate that this threshold should be rebutted.
Definition of default
The Consolidated Entity’s definition of default determines
the reference point for the calculation of the ECL
components, and in particular the PD. Default is generally
defined as the point when the borrower is unlikely to
pay its credit obligations in full, without recourse by the
Consolidated Entity to the realisation of collateral; or the
borrower is 90 days or more past due.
The Consolidated Entity periodically monitors its exposures
for potential indicators of default such as significant
financial difficulty of the borrower including breaches of
lending covenants; it is probable that the borrower will
enter bankruptcy or other financial reorganisation; the
disappearance of an active market for that financial asset
because of financial difficulties; or the purchase or origination
of a financial asset at a deep discount that reflects the
incurred credit losses.
Note 13
Expected credit losses
The Consolidated Entity models the ECL for on-balance sheet
financial assets measured at amortised cost or FVOCI such
as loans, debt securities and lease receivables, as well as
off-balance sheet items such as undrawn loan commitments,
certain financial guarantee contracts and letters of credit.
Model inputs
The Consolidated Entity segments its credit portfolio
between retail and wholesale exposures, and further splits
these portfolios into representative groupings which are
typically based on shared risk characteristics.
The Consolidated Entity has developed several models to
predict the ECL. These models incorporate a range of inputs
notably that of Exposure at Default (EAD), Probability of
Default (PD) and Loss Given Default (LGD) (‘credit inputs’) as
well as Forward-Looking Information (FLI).
For retail portfolios, behavioural variables are also considered
in the determination of inputs for ECL modelling.
The key model inputs used in measuring the ECL include:
• exposure at default (EAD): The EAD represents the
estimated exposure in the event of a default
• probability of default (PD): The calculation of PDs for
retail and wholesale exposures is generally performed
at a facility level. Retail exposures are segmented based
on product type and shared characteristics that are
highly correlated to credit risk such as region, product,
counterparty groupings, loan-to-value ratio (LVR) and
other similar criteria. Wholesale portfolio PDs are a
function of industry type, internal credit ratings and
transition matrices used to determine a point in time
PD estimate. PD estimates for both retail and wholesale
portfolios are also adjusted for FLI
• loss given default (LGD): The LGD associated with the PD
used is the magnitude of the ECL in a default event. The
LGD is estimated using historical loss rates considering
relevant factors for individual exposures or portfolios.
Method of determining significant increase in
credit risk (SICR)
The Consolidated Entity periodically assesses exposures
to determine whether there has been a SICR, which may
be evidenced by either qualitative or quantitative factors.
Qualitative factors include, but are not limited to, whether an
exposure has been identified and placed on CreditWatch, an
internal credit monitoring mechanism supervised by the credit
watch management committee to closely monitor exposures
showing signs of stress. All exposures on CreditWatch are
classified as stage II or, if defaulted, as stage III.
SICR thresholds, which require judgement, are used to
determine whether an exposure’s credit risk has increased
significantly. The SICR methodology is based on a relative
credit risk approach which considers changes in an underlying
exposures’ credit risk since origination. This may result in
exposures being classified in stage II that are of a higher
credit quality than other similar exposures that are classified
as stage I. Accordingly, while increases in the quantum of
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Notes to the financial statementsFor the financial year ended 31 March 2021 continued Note 13
Expected credit losses continued
Forward‑looking information (FLI)
The inclusion of FLI in calculating ECL allowances adjusts
the PD, the determination of SICR as well as the LGD (that
is relevant to the determination of the recovery rates on
collateral). The predicted relationships between these key
indicators and the key model inputs in measuring the ECL
have been developed by analysing historical data as part of
the development of internal models, and the calibration and
validation process.
The Consolidated Entity applies its professional judgement
in determining whether there are any inherent risks in the
models’ predictive outcomes. These overlays consider the
risk that losses predicted to occur at points of particular
economic stress, which have since been passed, are yet to
occur and that uncertainty exists as to whether enhanced
levels of government and other-related support measures
may cause the loss emergence profile to differ to that for
which the models have been calibrated. These overlays also
account for the risk that underlying credit risk events have
occurred but observable modelled inputs are yet to reflect
those events, as well as risks that are specific to regional,
counterparties or industries which are difficult to account for
within the modelled outcomes. Overtime the credit models
are recalibrated to enhance the predictive capability. At the
reporting date this overlay was approximately $450 million.
These judgements are reviewed by FMG and RMG at each
reporting date.
RMG is responsible for the FLI including the development of
scenarios and the weighting applied to those scenarios. For
this purpose, three possible economic scenarios have been
developed, being an upside, downside and base case scenario.
In calculating the ECL, each of the scenarios is probability
weighted and then applied to the exposures’ PDs and LGDs.
The scenarios have been developed using a combination
of publicly available data, internal forecasts and
third-party information to form the initial baseline. Internal
specialists within the Consolidated Entity are consulted
to assist in refining and challenging the baseline and the
alternate scenarios. For the current reporting period the
Consolidated Entity has continued to anchor the upside and
downside scenarios with COVID-19 as the key driver of the
macroeconomic outlook.
The general shape of the economic recovery varies within
each scenario and is outlined in further detail in the
following section.
Refinement of the scenarios includes benchmarking to
external data from reputable sources, which includes
forecasts published from a range of market economists and
official data sources, including major central banks,
when available.
Where limited official data sources against which to
benchmark key economic indicators on a forward-looking
basis is available, management exercises judgement when
determining the duration, severity and impact of the
macroeconomic scenarios used by the Consolidated Entity.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Assigning probabilities to these scenarios requires
professional judgement which draws on internal risk and
economics specialist input and comparison to general market
outlooks and publicly available market commentary.
The scenarios and the associated probabilities are ultimately
approved by senior risk and finance executives.
The scenarios for each of the key regions where Macquarie’s
ECL is derived have been set out below. Noting the wide
range of possible scenarios and macroeconomic outcomes,
and the continuing uncertainty of how COVID-19 and
its social and economic consequences will flow, these
scenarios represent plausible forward-looking views as at the
reporting date.
These scenarios impact the modelled ECL provisioning
levels through determination of probabilities of default and
determination of losses that may be incurred should a default
occur. The ability of borrowers to service their obligations
through personal or business income is generally estimated
using unemployment rates, GDP, commodity prices and
interest rates. The losses that the Consolidated Entity may
incur should a default occur and the collateral utilised is
generally estimated through property price and share price
index outlooks.
The modelled ECL for each scenario is sensitive to the speed
and resilience of post-COVID-19 economic normalisation, and
the longevity of monetary and fiscal intervention, as these
influence both the probability of default, and the value of
collateral that may be utilised.
Future economic conditions may differ to the scenarios
outlined, the impact of which will be accounted for in future
reporting periods.
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Note 13
Expected credit losses continued
Forward Looking Information (FLI) continued
Scenario
Baseline
A 100% weighting to this
scenario would result
in a total expected
credit loss provision
on balance sheet at
the reporting date of
~$1,450 million (2020:
$1,400 million)(1)
Weighting
Expectation
Probable
Global: The baseline assumes the global economic recovery continues through the first
half of 2021, helped by the continuation of localised health policies and enduring fiscal
and monetary stimulus across most economies. Job retention schemes and other policy
measures are expected to ease gradually through 2021 as recoveries take hold, ensuring that
official unemployment rates remain stable as economic activity returns gradually towards
normalised levels. In developed markets outside Europe, GDP is expected to return to
pre-COVID-19 levels by mid-2021.
Australia: The Australian economy is expected to recover ahead of other economies having
experienced a relatively small contraction in 2020. Equity markets are expected to continue
to stabilise and return to modest growth reaching pre-COVID-19 peaks at the end of 2021.
With localised restrictions generally eased, unemployment rates continue to fall from a peak
of 7.1% in mid-2020 declining to ~5% by the end of 2022. House prices increase by 8% in 2021,
supported by low rates as the RBA maintains the cash rate at historic lows until 2023.
United States: The unemployment rate continues to fall from its high of ~13% in the first
half of 2020, albeit at a slowing pace remaining above pre-COVID-19 levels, reaching ~5% in
early 2022. US GDP contracted by ~10% in the first half of 2020 but is expected to return
to pre-COVID-19 levels in the second quarter of 2021 fuelled by robust stimulus measures.
10-year government bond yields are expected to remain at historical lows while equities
trend higher.
Europe: European GDP is not expected to recover to pre-COVID-19 levels until the second
half of 2022. The unemployment rate is expected to peak at ~9% in mid-2021 and return
slowly to pre-COVID-19 levels of ~7% by 2025. The European Central Bank (ECB) is expected to
maintain its policy rate in slightly negative territory.
(1) This number provides comparative ECL provision information as at the reporting date assuming the scenarios outlined, but do not reflect changes in the credit rating of the
counterparty that may occur if these scenarios were to occur. Changes in credit ratings may have a material impact on these ECL provisions.
176
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 13
Expected credit losses continued
Weighting
Expectation
Possible
Scenario
Downside
A 100% weighting to this
scenario would result
in a of total expected
credit loss provision
on balance sheet at
the reporting date of
~$2,200 million (2020:
$1,900 million)(1)
Upside
Unlikely
A 100% weighting to this
scenario would result in
the recognition of total
expected credit loss
provision on balance
sheet at the reporting
date of ~$1,300 million
(2020: $1,200 million)(1)
Global: The downside assumes the COVID-19 recovery is more protracted as fresh outbreaks
trigger renewed lockdown measures, while delayed or ineffectual vaccination programmes
fail are unable to facilitate a return to pre-COVID economic environments. The impact
to global economic output is significantly less than the initial wave in early 2020, but the
recovery trajectory is slow as low interest rates and limited fiscal capacity constrain the
scope for further stimulus. Employment rates in this scenario stagnate at elevated levels
across developed markets throughout 2021. With equity markets reversing much of their
gains in 2021 as it becomes clear that recovery will be more prolonged.
Australia: Returning to recession in 2021, the downward trend in unemployment rates ends
and remains above 6% (~1% above pre-COVID-19 levels) until mid-2023. Australian GDP in this
scenario would return to pre-COVID-19 levels in mid-2022 and growth rates would remain
modest thereafter. House prices may continue to rise by 3% in 2021 before correcting sharply
in 2022, falling by 8% and not recovering to pre-pandemic levels until late 2024. The RBA
would maintain the cash rate at historic lows until the end of 2024.
United States: GDP growth briefly tips into negative territory in the second half of 2021 but
avoids the severe shocks of 2020, ultimately restoring pre-pandemic output by early 2022.
The declining unemployment rate reverses only modestly but remains at ~6% and above into
late 2022 at ~2.5% above the pre-COVID-19 levels. 10-year government bond yields remain
below 1% for the forecast period and central bank rates are kept at all-time lows until 2025.
Europe: Hardest-hit of developed markets, European GDP stagnates through 2021, with GDP
remaining ~5% below pre-COVID-19 levels at the end of 2021, only returning to pre-pandemic
highs in 2025. Increases in the unemployment rate are contained by fiscal measures though
the rate remains slightly above pre-COVID-19 levels at 8-9% through to 2025. The ECB
maintains interest rates in negative territory for the forecast period.
Global: The scenario assumes swift results through medical developments allows for a
faster removal of restrictions without triggering subsequent outbreaks of COVID-19, enabling
normalisation and the release of pent-up demand. Governments and central banks would
gradually ease accommodative monetary and fiscal policies without economic harm in
this scenario.
The growth trajectory is steeper and maintained, allowing for the removal of active stimulus
by governments and central banks without prompting reversals. Global GDP surpasses
pre-COVID-19 levels by mid-2021 facilitating higher employment and stimulating commodity
prices. Equity markets also rally, driven by the positive economic and health developments,
and continued support from monetary policy.
Australia: GDP surpasses pre-COVID-19 levels by mid-2021 and continues to grow at upwards
of 3% annually through to 2024. The uptick in economic activity segues with the withdrawal
of job retention schemes, while unemployment rates fall to 5% by the end of 2021 and
continue to fall as low as 4.5%. House prices respond to this improved outlook and increase
sharply by ~9% in 2021 and 6% in 2022.
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(1) This number provides comparative ECL provision information as at the reporting date assuming the scenarios outlined, but do not reflect changes in the credit rating of the
counterparty that may occur if these scenarios were to occur. Changes in credit ratings may have a material impact on these ECL provisions.
177
Note 13
Expected credit losses continued
The table below presents the gross exposure and related ECL allowance for assets measured at amortised cost or FVOCI and
off balance sheet exposures subject to the impairment requirements of AASB 9.(1)
GROSS EXPOSURE FOR
FINANCIAL ASSETS
CARRIED AT(1)
ECL ALLOWANCE ON
FINANCIAL ASSETS
CARRIED AT
Amortised
cost
$m
FVOCI
$m
Other(2)
$m
Total
exposure
$m
Amortised
cost
$m
FVOCI
$m
Other
$m
Total ECL
allowance
$m
AS AT 31 MARCH 2021
Cash and bank balances
18,425
Cash collateral on securities borrowed
and reverse repurchase agreements
9,284
19,488
Margin money and settlement assets
14,136
Financial investments
18
7,632
Held for sale and other assets
Loan assets
Loans to associates and joint ventures
Undrawn credit commitments, letters
of credit and financial guarantees(3)
2,455
105,404
635
6
317
90
331
18,425
28,772
14,136
7,650
2,792
105,721
725
Total
150,357
27,533
9,026
186,916
1,459
8,695
8,695
Cash and bank balances
9,717
–
Cash collateral on securities borrowed
and reverse repurchase agreements
6,689
23,064
Margin money and settlement assets
15,909
–
Financial investments
–
7,345
–
–
–
–
Held for sale and other assets
Loan assets
Loans to associates and joint ventures
Undrawn credit commitments, letters
of credit and financial guarantees(3)
Total
3,879
92,342
799
–
270
1,592
117
–
–
–
–
129,335
32,118
6,792
7,062
6,792
168,515
9,717
29,753
15,909
7,345
4,149
93,934
916
71
158
1,131
99
–
–
71
–
143
924
88
–
1,226
6
50
31
87
–
–
–
15
–
182
62
–
259
57
57
71
6
158
1,181
130
57
1,603
AS AT 31 MARCH 2020
–
–
–
–
–
–
–
56
56
–
–
71
15
143
1,106
150
56
1,541
(1)
The gross exposure of financial assets measured at amortised cost represents the amortised cost before the ECL allowance and the gross exposure of financial assets measured at FVOCI
represents amortised cost before fair value adjustments and ECL allowance. Accordingly, these exposures will not equal the amount as presented in the Statement of financial position.
(2) Other exposures included in other assets represents fee-related contract assets.
(3) Gross exposure for undrawn credit commitments letters of credit and financial guarantees (not measured at FVTPL) represents the notional values of these contracts.
178
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 13
Expected credit losses continued
The Company’s ECL provision primarily relates to a $19 million (March 2020: $37 million) provision on related party receivables of
$19,260 million (March 2020: $29,466 million) that are presented as Due from Subsidiaries in the Statement of financial position
and certain off balance sheet exposures of $4,402 million (March 2020: $5,877 million). Change in the ECL allowance is primarily
due to the decrease in underlying exposures during the year as well as decrease in PD due to improved ratings.
The table provides a reconciliation between the opening and closing balance of the ECL allowances:
Margin
money and
settlement
assets
$m
Financial
investments
$m
Held for
sale and
other
assets
$m
Loan
assets
$m
Loans to
associates
and joint
ventures
$m
Undrawn
credit
commitments
and financial
guarantees
$m
Balance as at 1 Apr 2019
Credit impairment charge (Note 2)
Amount written off, previously provided for
Foreign exchange, reclassifications and
other movements
Balance as at 31 Mar 2020
Credit impairment charge/(reversal) (Note 2)
Amount written off, previously provided for
Foreign exchange, reclassifications and
other movements
Balance as at 31 Mar 2021
–
71
–
–
71
42
(33)
(9)
71
91
12
–
(88)
15
(5)
(2)
(2)
6
102
81
(19)
(21)
143
50
(12)
(23)
158
618
618
(156)
26
1,106
323
(159)
(89)
1,181
119
13
–
18
150
17
(21)
(16)
130
29
24
–
3
56
9
(8)
57
Total
$m
959
819
(175)
(62)
1,541
436
(227)
(147)
1,603
The $62 million increase in ECL allowance during the year reflects the net impact of impairment charges partially offset by
amounts written off, and foreign exchange movements with the appreciation of the Australian dollar during the year.
ECL on loan assets
The table below provides a reconciliation of the ECL allowance on loan assets to which the impairment requirements under
AASB 9 are applied.
LIFETIME ECL
Stage I
12 month ECL
$m
Stage II
Not credit impaired
$m
Stage III
Credit impaired
$m
Total ECL Allowance
$m
Balance as at 1 Apr 2019
Transfers during the year
Credit impairment charge (Note 2)
Amount written off, previously provided for
Foreign exchange, reclassifications and
other movements
Balance as at 31 Mar 2020
Transfers during the year
Credit impairment charge /(reversal) (Note 2)
Amount written off, previously provided for
Foreign exchange, reclassifications and
other movements
Balance as at 31 Mar 2021
158
27
97
–
3
285
17
143
(24)
421
199
(13)
170
–
2
358
(24)
(44)
(10)
280
261
(14)
351
(156)
21
463
7
224
(159)
(55)
480
618
–
618
(156)
26
1,106
323
(159)
(89)
1,181
179
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Note 14
Interests in associates and joint ventures
Equity investments with no provisions for impairment
Equity investments with provisions for impairment
Gross carrying value
Less: provisions for impairment
Equity investments with provisions for impairment
Total equity investments in associates and joint ventures(1)
Loans to associates and joint ventures
Less: credit impairment charges(2)
Total loans to associates and joint ventures
Total interests in associates and joint ventures(3),(4)
CONSOLIDATED
2021
$m
2,652
1,415
(505)
910
3,562
731
(99)
632
4,194
2020
$m
6,415
1,600
(648)
952
7,367
1,040
(88)
952
8,319
The above amounts are expected to be recovered after 12 months of the balance date by the Consolidated Entity.
Disclosure of principal associates
The Consolidated Entity’s principal associates at the balance date are:
Associates(5)
Macquarie Infrastructure
Corporation (MIC)
Macquarie AirFinance Limited
Carrying value 2021
($m)
Carrying value 2020
($m)
Ownership interest Nature of activities
517
569
763
789
16.11% Infrastructure
business
50.00% Aircraft leasing
31 March
Financial
reporting date
31 December
Macquarie Infrastructure Corporation
The Consolidated Entity holds a 16.11% interest in Macquarie Infrastructure Corporation (MIC) under the MAM Operating Group
and accounts for it as an interest in associate on the basis of exercising significant influence through its advisory contract,
Board representation and secondment of key management. MIC owns, operates and invests in a portfolio of infrastructure
businesses and is listed on the New York Stock Exchange.
During the financial year, indicators of impairment reversal have been identified which resulted in the Consolidated Entity
calculating the investment’s recoverable amount. The recoverable amount has been determined using management’s estimate
of the future risk-adjusted cash flows with significant inputs including net proceeds on realisation of the remaining portfolio
businesses. Both the investment’s fair value less costs of disposal (FVLCD) and value-in-use (VIU) resulted in a $125 million
impairment reversal, which was recognised in the income statement as part of net Other impairment charges.
(1)
Includes investments in Macquarie-managed funds of $1,076 million (2020: $1,185 million). The Consolidated Entity classifies its investments in these funds as equity-accounted
associates where it has a less than 20% ownership interest on the basis of its ability to participate in the financial and operating policy decisions through its role as manager.
(2) Excludes credit losses of $31 million (2020: $62 million) which have been recognised on loans to associates classified as FVOCI. The loans are measured at fair value through OCI hence
these expected credit losses have also been recognised in reserves.
(3) Comprises $3,039 million (2020: $6,959 million) relating to interests in associates and $1,155 million (2020: $1,360 million) relating to interests in joint ventures.
(4) Financial statements of associates and joint ventures have various reporting dates which have been adjusted to align with the Consolidated Entity’s reporting date.
(5) The comparative disclosures have been presented to align with Macquarie’s principal associates at the reporting date.
180
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 14
Interests in associates and joint ventures continued
Macquarie AirFinance Limited
During the prior year, the Consolidated Entity disposed of its Macquarie AirFinance Limited (MAF) under the MAM Operating
Group to a newly formed joint venture of which the Consolidated Entity held a 75% interest (Refer to Note 42 Acquisitions and
disposals of subsidiaries and businesses). Subsequently, the Consolidated Entity disposed of a 25% interest in the joint venture
and the remaining 50% retained interest was classified as an equity-accounted associate due to retaining significant influence.
MAF continues to be impacted by a global reduction in airline movements due to COVID-19 resulting in a drop in cash
collections following deferrals and non-payments. As a result, an impairment analysis on an aircraft-by-aircraft basis was
undertaken by MAF. Each aircraft’s recoverable value, being the higher of its VIU and its fair value less costs of disposal, was
determined and compared to its book value. The cash flows included in the VIU assessment considered the circumstances
of each lessee and its impact on contracted lease revenue, unleased aircraft, the probability of leases being extended, the
time that an aircraft is off-lease, future lease rates and disposal proceeds. The fair value less costs of disposal was determined
with reference to independent appraisal values for each aircraft. MAF recognised an impairment for each aircraft where the
recoverable value was less than carrying value.
The recoverable value of the Consolidated Entity’s investment in MAF, after accounting for the above-mentioned
equity-accounted loss, was also considered. The investment’s VIU was determined using the income approach where significant
inputs included forecasts over the timing and amount of distributions, and the terminal value of the investment beyond the
forecast period. The investment’s fair value less costs of disposal was determined with reference to the current market value of
the net assets of MAF.
Changes in the carrying value of the investment during the year as a result of the appreciation of the Australian dollar against
the United States dollar are accounted for in the Consolidated Entity’s foreign currency translation and net investment hedge
reserve, together with applicable hedges.
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181
Note 15
Property, plant and equipment and right‑of‑use assets
CONSOLIDATED 2021
CONSOLIDATED 2020
Accumulated
depreciation
Cost
$m
and impairment Carrying value
$m
$m
Accumulated
depreciation
and impairment
$m
Cost
$m
Carrying value
$m
Assets for own use
Furniture, fittings and leasehold
improvements
Land and buildings
Infrastructure assets
Equipment
Total assets for own use
Assets under operating lease
Meters
Aviation
Telecommunications
Other
Total assets under operating lease
Right‑of‑use assets
Property
Commodity storage
Other
Total right‑of‑use assets
Total property, plant and equipment
and right‑of‑use assets
1,020
531
489
129
2,169
2,184
967
734
526
4,411
825
129
59
1,013
(633)
(43)
(134)
(90)
(900)
(814)
(124)
(602)
(85)
387
488
355
39
1,049
381
273
175
1,269
1,878
1,370
2,454
843
132
441
1,193
1,139
315
5,101
875
129
51
1,055
(1,625)
2,786
(295)
(78)
(19)
(392)
530
51
40
621
(676)
(26)
(129)
(123)
(954)
(910)
(79)
(715)
(98)
(1,802)
(173)
(45)
(16)
(234)
373
355
144
52
924
1,544
1,114
424
217
3,299
702
84
35
821
7,593
(2,917)
4,676
8,034
(2,990)
5,044
The majority of the above amounts have expected useful lives longer than 12 months after the balance date.
182
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 15
Property, plant and equipment and right‑of‑use assets continued
The movement in the carrying value of the Consolidated Entity’s property, plant and equipment and ROU assets was as follows:
Assets for own use
Balance as at 1 Apr 2019
Acquisitions and additions
Disposals
Reclassifications and other adjustments
Impairments
Foreign exchange movements
Depreciation expense(1)
Balance as at 31 Mar 2020
Acquisitions and additions
Disposals
Reclassifications and other adjustments
Impairments
Foreign exchange movements
Depreciation expense(1)
Balance as at 31 Mar 2021
Assets under operating lease
Balance as at 1 Apr 2019
Acquisitions and additions
Disposals
Reclassifications and other adjustments(2)
Impairments
Foreign exchange movements
Depreciation expense
Balance as at 31 Mar 2020
Acquisitions and additions
Disposals
Reclassifications and other adjustments
Impairments
Foreign exchange movements
Depreciation expense
Balance as at 31 Mar 2021
Furniture,
fittings and
leasehold
improvements
$m
Land and
buildings
$m
Infrastructure
assets
$m
Equipment
$m
155
277
(10)
(3)
–
22
(68)
373
184
(13)
(52)
(37)
(68)
387
305
80
(29)
1
–
3
(5)
355
151
(11)
2
(4)
(5)
488
165
129
(102)
(7)
(39)
29
(31)
144
186
(5)
84
(8)
(36)
(10)
355
39
40
(1)
(4)
–
5
(27)
52
24
(1)
1
(8)
(29)
39
Aviation
$m
Meters
$m
Tele‑
communications
$m
Rail cars
$m
Other
$m
1,027
27
(47)
(9)
(3)
153
(34)
1,114
3
(10)
(13)
(3)
(211)
(37)
843
1,248
420
–
(51)
–
142
(215)
1,544
304
(98)
(163)
(217)
1,370
966
347
(330)
–
(11)
1
(549)
424
(1)
(92)
(3)
(14)
(1)
(181)
132
612
–
–
(589)
(40)
44
(27)
–
184
105
(26)
(19)
–
22
(49)
217
296
(18)
32
(0)
(33)
(53)
441
Total
$m
664
526
(142)
(13)
(39)
59
(131)
924
545
(30)
35
(8)
(85)
(112)
1,269
Total
$m
4,037
899
(403)
(668)
(54)
362
(874)
3,299
602
(120)
(82)
(17)
(408)
(488)
2,786
(1)
Includes depreciation expense of $1 million (2020: $4 million) on infrastructure assets, $2 million (2020: $1 million) on equipment and $6 million (2020: $1 million) on buildings,
furniture, fittings and leasehold improvements relating to subsidiaries held for investment purposes and presented under other operating income and charges in Note 2 Operating
profit before income tax.
(2) $589 million of Rail assets were reclassified to held for sale in March 2020 and were subsequently disposed of.
183
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Note 15
Property, plant and equipment and right‑of‑use assets continued
Right‑of‑use assets
Balance as at 1 Apr 2019
Additions
Disposals
Depreciation
Foreign exchange movements
Other adjustments
Balance as at 31 Mar 2020
Additions
Disposals
Depreciation
Impairment
Foreign exchange movements
Other adjustments
Balance as at 31 Mar 2021
Property
$m
Commodity
storage
$m
Other
$m
616
226
(15)
(165)
53
(13)
702
102
(23)
(161)
(11)
(79)
530
92
26
–
(41)
12
(5)
84
31
(3)
(47)
(15)
1
51
29
51
(7)
(17)
2
(23)
35
29
(5)
(13)
(3)
(3)
40
The future minimum lease payments expected to be received under non-cancellable operating leases are as follows:
Assets under operating lease
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Later than five years
Total future minimum lease payments receivable
CONSOLIDATED
2021
$m
269
230
181
116
38
326
1,160
Total
$m
737
303
(22)
(223)
67
(41)
821
162
(31)
(221)
(11)
(97)
(2)
621
2020
$m
422
149
95
36
12
11
725
184
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 16
Intangible assets
CONSOLIDATED 2021
CONSOLIDATED 2020
Accumulated
amortisation
Cost
$m
and impairment Carrying value
$m
$m
Goodwill
Management rights and licenses
Customer and servicing contracts
Intangible assets with indefinite lives
Other identifiable intangible assets
Total intangible assets
1,354
486
557
272
464
3,133
(33)
(133)
(216)
(208)
(590)
1,321
353
341
272
256
2,543
Accumulated
amortisation
and impairment
$m
Carrying value
$m
(258)
(126)
(219)
–
(248)
(851)
1,717
425
400
337
389
3,268
Cost
$m
1,975
551
619
337
637
4,119
The above amounts are expected to be recovered after 12 months of the balance date by the Consolidated Entity.
Goodwill and intangible assets with indefinite lives comprises of $926 million (2020: $1,239 million) related to the Consolidated
Entity’s integrated consolidated businesses and $667 million (2020: $815 million) related to the Consolidated Entity’s subsidiaries
held for investment purposes.(1)
The recoverable amount was determined on the basis of the asset or cash generating unit’s fair value less costs to sell. This
measurement basis for goodwill and intangible assets with indefinite lives was determined with reference to external valuations
or using Discounted Cashflow methodologies, in which case the key assumptions included discount rates ranging from 8%-13%,
forecasted cashflows and long term growth rate information specific to the underlying asset or cash generating unit.
Further, there were no significant impairment indicators for Customer and servicing contracts, Management rights and licenses
and Other identifiable intangible assets at the balance sheet date.
The movement in the carrying value of the Consolidated Entity’s intangible assets is as follows:
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Goodwill
Management
rights and
license
Customer
and servicing
contracts
Intangible
assets with
indefinite lives
Other
identifiable
intangible
assets
Balance as at 1 Apr 2019
Acquisitions(2)
Disposals, reclassifications and
other adjustments
Impairment
Amortisation(3)
Foreign exchange movements
Balance as at 31 Mar 2020
Acquisitions(2)
Disposals, reclassifications and
other adjustments(4)
Impairment
Amortisation(3)
Foreign exchange movements
Balance as at 31 Mar 2021
$m
1,032
722
(237)
(1)
–
201
1,717
2
(46)
(106)
(246)
1,321
$m
222
221
–
1
(27)
8
425
13
(1)
(11)
(36)
(37)
353
$m
25
366
–
(2)
(25)
36
400
52
(1)
(37)
(73)
341
$m
291
–
–
–
–
46
337
(65)
272
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Total
$m
2,031
1,567
(563)
(22)
(100)
355
3,268
401
$m
461
258
(326)
(20)
(48)
64
389
334
(360)
(408)
(9)
(41)
(57)
256
(126)
(114)
(478)
2,543
(1) Subsidiaries held for investment purposes are consolidated entities that are held with the ultimate intention to sell as part of Macquarie’s investment activities.
(2) Includes asset acquisitions. Refer to Note 42 Acquisitions and disposals of subsidiaries and businesses for intangible assets acquired as part of business combinations.
(3) Includes amortisation of $51 million (2020: $30 million) presented under Net trading income and other income and $63 million (2020: $70 million) under Other operating expenses in
the Income statement.
(4) Includes purchase price adjustments and reclassifications as held for sale.
185
Note 17
Investments in subsidiaries
Investments at cost with no provisions for impairment
Investment at cost with provisions for impairment
Less: provisions for impairment(1)
Investment with provisions for impairment
Total investments in subsidiaries
COMPANY
2021
$m
19,076
14,249
(1,896)
12,353
31,429
2020
$m
19,463
14,249
(1,896)
12,353
31,816
The above amounts are expected to be recovered after 12 months of the balance date by the Company.
The following are the Consolidated Entity’s significant subsidiaries:
BANK GROUP
NON-BANK GROUP
Macquarie Financial Holdings Pty Limited
(MFHPL)(2)
Macquarie Asset Management Holdings Pty Ltd
(MAMH)(3)
Australia
• Macquarie B.H. Pty Ltd
• Macquarie Bank Limited
• Macquarie Equities Limited
• Macquarie Finance Pty Limited
• Macquarie Group Services
Australia Pty Ltd
• Macquarie Group Treasury Funding
Pty Limited
• Macquarie International
Finance Limited
• Macquarie Investment
Management Ltd
• Macquarie Leasing Pty. Limited
• Macquarie Life Limited
Asia Pacific
• Macquarie Commodities Trading
(Shanghai) Co, Ltd (China) (Reporting
date 31 December)
• Macquarie Emerging Markets Asian
Trading Pte. Limited (Singapore)
• Macquarie Futures (Singapore) Pte.
Limited (Singapore)
• Macquarie Financial Holdings
Pty Limited
• Macquarie Corporate Holdings
Pty Limited
• Macquarie Capital (Australia) Limited
• Macquarie Principal Finance
Pty Limited
• Macquarie Securities
(Australia) Limited
• Macquarie Asset Management Holdings
Pty Limited
• Macquarie Financial Products
Management Limited
• Macquarie Investment Management
Australia Limited
• Macquarie Investment Management
Global Limited
• Macquarie Specialised Asset
Management Ltd
• Macquarie Capital (Singapore) Pte.
Limited (Singapore)
• Macquarie Capital Limited (Hong Kong)
• Macquarie Capital Securities (India)
Private Limited (India)
• Macquarie Capital Securities
(Philippines) Inc. (Philippines)
• Macquarie Capital Securities
(Singapore) Pte. Limited (Singapore)
• Macquarie Securities (NZ) Limited
(New Zealand)
• Macquarie Securities (Thailand)
Limited (Thailand)
• Macquarie Securities Korea
Limited (Korea)
(1)
In accordance with its accounting policies, the Company reviewed its investments in subsidiaries for indicators of impairment and, where applicable, reversal of impairment. Where
its investments had indicators of impairment, the investments’ carrying value was compared to its recoverable value which was determined as the higher of VIU and fair value less
cost to sell (valuation). The valuations, which are classified as Level 3 in the fair value hierarchy (as defined in Note 38 Fair value of financial assets and financial liabilities), have been
calculated using a valuation technique with significant inputs including the subsidiary’s maintainable earnings, growth rates and relevant earnings’ multiples. Taking into account the
valuations and broader macroeconomic risks, no impairment loss or reversal of previously recognised impairment losses was recognised by the Company during the year.
(2) Within the Non-Bank Group, MFHPL is the holding company for Macquarie Capital and Macquarie Transportation business of MAM.
(3) Within the Non-Bank Group, MAMH is the holding company for MAM business (except for Macquarie Transportation business and certain other excluded assets).
186
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 17
Investments in subsidiaries continued
BANK GROUP
NON-BANK GROUP
Macquarie Financial Holdings Pty Limited
(MFHPL)(1)
Macquarie Asset Management Holdings Pty Ltd
(MAMH)(2)
Europe, Middle East and Africa
• Macquarie Bank Europe Designated
Activity Company (Ireland)
• Macquarie Bank International Limited
(United Kingdom)
• Macquarie Commodities (UK) Limited
(United Kingdom)
• Macquarie Corporate and Asset
Finance 1 Limited (United Kingdom)
• Macquarie Corporate and Asset
Finance 2 Limited (United Kingdom)
• Macquarie Equipment Finance
Designated Activity Company (Ireland)
• Macquarie Equipment Funding
Limited (Ireland)
• Macquarie Investments (UK) Limited
(United Kingdom)
• Macquarie Leasing Limited
(United Kingdom)
• Macquarie Meters 3 (UK) Limited
(United Kingdom)
Americas
• Macquarie Energy Canada
Ltd. (Canada)
• Macquarie Energy LLC (United States)
• Macquarie Financial Holdings (USA)
LLC (United States)
• Macquarie Futures USA LLC
(United States)
• Macquarie Inc. (United States)
• Macquarie Physical Metals (USA) Inc.
(United States)
• Green Investment Group Management
Limited (United Kingdom)
• Macquarie Infrastructure And
Real Assets (Europe) Limited
(United Kingdom)
• Macquarie Private Debt Europe Limited
(Ireland)
• Bilbao Offshore Topco Limited
(United Kingdom)
• Macquarie (UK) Group Services Limited
(United Kingdom)
• Macquarie Asset Management Europe
S.À R.L. (Luxembourg)
• Macquarie Capital (Europe) Limited
(United Kingdom)
• Macquarie Capital (Ireland) Designated
Activity Company (Ireland)
• Macquarie Capital France Société
Anonyme (France) (Reporting date
31 December)
• Macquarie Commodities Trading Sa
(Switzerland)
• Macquarie Euro Limited
(United Kingdom)
• Macquarie Insurance Facility
Luxembourg S.À R.L. (Luxembourg)
• Macquarie Internationale Investments
Limited (United Kingdom)
• Macquarie Investment Management
Europe Limited (United Kingdom)
• Macquarie Transportation Finance
Limited (United Kingdom)
• Macquarie Capital (USA) Inc.
(United States)
• Macquarie Capital Markets Canada
Ltd./Marchés Financiers Macquarie
Canada Ltée. (Canada)
• Macquarie Holdings (U.S.A.) Inc.
(United States)
• Macquarie Infrastructure Partners II
GP LLC (United States)
• Macquarie US Gas Supply LLC
(United States)
• Delaware Investments Management
Company, LLC (United States)
• Macquarie Investment Management
Advisers (United States)
• Macquarie Management Holdings, Inc.
(United States)
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The list of significant subsidiaries has been categorised based on the geographic region of their incorporation. The country of
incorporation has been stated in brackets. For entities in the Australian region, the country of incorporation is Australia.
Overseas subsidiaries conduct business predominantly in their place of incorporation.
Beneficial interest in the subsidiaries listed above is 100%.
The subsidiaries listed above have a 31 March reporting date, except for specific cases covered above.
(1) Within the Non-Bank Group, MFHPL is the holding company for Macquarie Capital and MAM’s transportation business.
(2) Within the Non-Bank Group, MAMH is the holding company for MAM’s transportation business (except for MAM’s transportation business and certain excluded assets).
187
Note 18
Deferred tax assets/(liabilities)
The balance comprises temporary differences attributable to:
Other assets and liabilities
Tax losses
Financial investments and interests in associates and joint ventures
Property, plant and equipment
Operating and finance leases
Loan assets and derivatives
Intangible assets
Set-off of deferred tax liabilities
Net deferred tax assets
Other assets and liabilities
Financial investments and interests in associates and joint ventures
Property, plant and equipment
Operating and finance lease assets
Loan assets and derivatives
Intangible assets
Set-off of deferred tax assets
Net deferred tax liabilities
CONSOLIDATED
COMPANY
2021
$m
1,237
185
149
81
17
60
135
(392)
1,472
(64)
(37)
(3)
(302)
(54)
(136)
392
(204)
2020
$m
1,112
254
170
85
73
45
103
(502)
1,340
(83)
(9)
(2)
(420)
(54)
(168)
502
(234)
2021
$m
2020
$m
7
(7)
(11)
7
(4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The above amounts are expected to be recovered after 12 months of the balance date by the Consolidated Entity and
the Company.
Potential tax assets of approximately $389 million (2020: $436 million) attributable to tax losses carried forward by subsidiaries
and other timing differences have not been brought to account in the Consolidated Entity as the Directors do not believe that
the realisation of the tax assets is probable. Included in this amount are gross losses of $34 million (2020: $71 million) that will
expire within two years, $80 million (2020: $64 million) that will expire in 2–5 years, $109 million (2020: $96 million) that will expire
in 5–10 years and $261 million (2020: $331 million) that will expire in 10–20 years. $1,060 million (2020: $1,555 million) do not expire
and can be carried forward indefinitely.
188
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
6,205
6,205
12,368
7,490
2,266
22,124
16,804
775
17,579
63,951
9,289
10,959
84,199
18
4,002
1,475
1,075
784
604
12
259
8,211
5,534
10
5,544
13,894
6,607
2,314
22,815
37,953
446
38,399
48,244
12,385
6,713
67,342
260
3,803
1,402
984
1,038
314
307
179
8,027
1
1
42
4
46
90
19
312
2
423
–
–
–
–
–
–
–
2
–
2
–
48
3
51
–
47
53
357
–
–
–
3
460
Note 19
Trading liabilities
Equity securities
Listed
Commodities and debt securities
Total trading liabilities
Note 20
Margin money and settlement liabilities
Margin money
Security settlements
Commodity settlements
Total margin money and settlement liabilities
Note 21
Derivative liabilities
Held for trading
Designated in hedge relationships(1)
Total derivative liabilities
Note 22
Deposits
Interest bearing deposits
Call
Term
Non-interest bearing deposits
Total deposits
Note 23
Held for sale and other liabilities
Held for sale liabilities
Liabilities of disposal groups classified as held for sale
Other liabilities
Accrued charges, employment-related liabilities and provisions(2)
Creditors
Income tax payable
Lease liabilities
Commodity-related payables
Life investment linked contracts and other unitholder liabilities(3)
Other
Total other liabilities
(1) For details of net derivative assets and liabilities designated in hedge relationships refer to Note 35 Hedge accounting.
(2) Includes provisions recognised for actual and potential claims and proceedings that arise in the ordinary course of business. The range of likely outcomes and change in provisions
during the current year in these matters did not have and is not currently expected to have a material impact on the Consolidated Entity.
(3) Certain liabilities were transferred to an investment platform which is managed by the Consolidated Entity as an asset manager.
189
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Note 24
Debt issued
Bonds, NCDs and commercial paper(1)
Structured notes(2)
Total debt issued(3),(4)
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
58,258
2,722
60,980
61,611
2,945
64,556
12,625
607
13,232
13,145
108
13,253
The Consolidated Entity and the Company have not had any defaults of principal, interest or other breaches with respect to its
debt during the financial years reported.
Reconciliation of debt issued by major currency
(In Australian dollar equivalent)
United States dollar
Australian dollar
Euro
Swiss franc
Japanese yen
Pound sterling
Chinese renminbi
Norwegian krone
Korean won
Hong Kong dollar
South African rand
Other
Total debt issued
33,903
18,166
5,788
1,031
587
580
491
157
107
83
87
33,102
21,046
6,627
1,260
840
1,028
120
165
123
103
7
135
8,715
966
2,589
418
424
34
86
9,835
969
1,665
–
621
–
–
–
–
42
–
121
60,980
64,556
13,232
13,253
(1) The Consolidated Entity includes $9,994 million (2020: $13,665 million) payable to note holders and debt holders for which loan assets are held by consolidated SEs and are available
as security.
(2) Includes debt instruments on which the return is linked to commodities, equities, currencies, interest rates, other assets or credit risk of a counterparty.
(3) The amount that would be contractually required to be paid at maturity to the holders of debt issued measured at DFVTPL for the Consolidated Entity is $3,350 million (2020:
$3,615 million) and for the Company is $606 million (2020: $129 million). This amount is based on the final notional amount rather than the fair value. Refer to Note 37 Measurement
categories of financial instruments for the carrying value of debt issued measured at DFVTPL.
(4) The Consolidated Entity includes cumulative fair value loss of $34 million (2020: $119 million gain) due to changes in own credit risk on DFVTPL debt securities recognised in
directly OCI.
190
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 25
Capital management strategy
The Consolidated Entity’s and the Company’s capital
management strategy is to maximise shareholder value
through optimising the level and use of capital resources,
whilst also providing the flexibility to take advantage of
opportunities as they may arise.
The Consolidated Entity’s capital management
objectives are to:
• continue to support the Consolidated Entity’s credit rating
• ensure sufficient capital resources to support the
Consolidated Entity’s business and operational
requirements
• maintain sufficient capital to exceed externally imposed
capital requirements
• safeguard the Consolidated Entity’s ability to continue as a
going concern.
The Consolidated Entity’s capital management strategy uses
both internal and external measures of capital. Internally,
the Consolidated Entity has developed an Economic Capital
Adequacy Model (ECAM) that is used to quantify the
Consolidated Entity’s aggregate level of risk. The economic
capital framework complements the management of specific
risk types such as equity, credit, market and operational risk
by providing an aggregate view of the Consolidated Entity’s
risk profile. The economic capital model is used to support
business decision-making and has three main applications:
• capital adequacy assessment
• risk appetite setting
• risk-adjusted performance measurement.
The Consolidated Entity is subject to minimum capital
requirements externally imposed by Australian Prudential
Regulation Authority (APRA).
A wholly owned subsidiary of the Company, MBL, is
accredited by APRA to apply the Basel III Foundation
Internal Ratings Based Approach (FIRB) for credit risk, the
Advanced Measurement Approach (AMA) for operational
risk, the internal model approach for market risk and the
internal model approach for interest rate risk in the banking
book (IRRBB).
Regulatory capital requirements are measured at three
levels of consolidation within the Consolidated Entity. MBL
and certain subsidiaries which meet the APRA definition of
Extended Licensed Entities are reported as Level 1. Level 2
consists of MBL, its subsidiaries and its immediate parent
less certain subsidiaries of MBL which are deconsolidated
for APRA reporting purposes. These include entities
conducting insurance, funds management and non-financial
operations. Level 3 consists of the Level 2 group, other bank
entities excluded from Level 2 plus the Non-Bank Group. In
determining the capital requirements, transactions internal
to the Consolidated Entity are eliminated.
As an APRA authorised and regulated Non-Operating Holding
Company (NOHC), the Company is required to maintain
minimum regulatory capital calculated as the sum of:
• MBL’s minimum Tier 1 capital requirement, based on a
percentage of RWA plus Tier 1 deductions using prevailing
APRA ADI Prudential Standards
• the Non-Bank Group capital requirement, using the
Consolidated Entity’s ECAM.
The Consolidated Entity’s Level 3 eligible capital consists of
ordinary equity, certain reserves and hybrid instruments.
The overall Level 3 capital position is reported as an
excess over the regulatory imposed minimum capital
adequacy requirement.
The Consolidated Entity has satisfied all internally and
externally imposed capital requirements at Level 1, Level 2
and Level 3 throughout the financial year.
191
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Note 26
Loan capital
Subordinated debt
Subordinated debt comprises of agreements between the Consolidated Entity and its lenders that provide that, in the event of
liquidation, entitlement of such lenders to repayment of the principal sum and interest thereon is and shall at all times be and
remain subordinated to the rights of all other present and future creditors of the Consolidated Entity.
The table below highlights key capital instruments with conditional payment obligations issued by the Consolidated Entity and
the Company:
Contract feature
Code
Issuer
Par value
Currency
Carrying value at the reporting date
Accounting measurement basis
Macquarie Group Capital Notes
MCN2
Macquarie Group Limited
$100
AUD
$Nil
Financial liability at amortised cost
Macquarie Group Capital Notes
MCN3
Macquarie Group Limited
$100
AUD
$1,000 million
Financial liability at amortised cost
Issue date
Interest rate
18 December 2015
180-day BBSW plus a fixed margin of 5.15%
per annum, adjusted for franking credits
7 June 2018
90-day BBSW plus a fixed margin of 4.00%
per annum, adjusted for franking credits
Interest payment frequency
Interest payment
Dividend stopper
Outstanding notes at reporting date
Maturity
Semi-annually in arrears
Discretionary, non-cumulative
Yes
Nil(1)
Perpetual unless redeemed, resold,
converted, exchanged or written-off
earlier in accordance with the terms of
the instrument
Quarterly in arrears
Discretionary, non-cumulative
Yes
10 million
Perpetual unless redeemed, resold,
converted, exchanged or written-off
earlier in accordance with the terms of
the instrument
Convertible into ordinary shares
Convertible in issuer shares
Mandatory conversion date
Maximum number of shares on conversion 32,644,295
Optional exchange dates
Yes
MGL
18 March 2024
• 17 March 2021
• 17 September 2021
• 17 March 2022
• earlier in specified circumstances
at the discretion of MGL subject to
APRA approval
Yes
MGL
15 December 2027
43,798,178
• 16 December 2024
• 16 June 2025
• 15 December 2025
• earlier in specified circumstances
at the discretion of MGL subject to
APRA approval
Other exchange events
• acquisition date (where a party
acquires control of MGL)
• acquisition date (where a party
acquires control of MGL)
• where APRA determines MGL would
be non-viable without an exchange or
a public sector injection of capital (or
equivalent support)
• where APRA determines MGL would
be non-viable without an exchange or
a public sector injection of capital (or
equivalent support)
Capital treatment
Eligible hybrid capital
Eligible hybrid capital
Eligible hybrid capital
Eligible hybrid capital
Additional Tier 1 capital
Additional Tier 1 capital
(1) On 17 March 2021, MBL redeemed the MCN2. Nil MCN2 were exchanged during the period before their redemption.
192
$US750 million/($A1,055 million) $641 million
Macquarie Group Capital Notes
Macquarie Group Capital Notes
Securities
Macquarie Bank Capital Notes
Macquarie Additional Capital
Macquarie Group Limited
Macquarie Group Limited
Macquarie Bank Limited
Macquarie Bank Limited
MCN4
$100
AUD
MCN5
$100
AUD
MACS
n/a
USD
$905 million
Financial liability at
amortised cost
27 March 2019
$725 million
Financial liability at
amortised cost
17 March 2021
Financial liability at
amortised cost
8 March 2017
90-day BBSW plus a fixed margin
90-day BBSW plus a fixed margin
6.125% per annum
of 4.15% per annum, adjusted for
of 2.90% per annum, adjusted
franking credits
Quarterly in arrears
for franking credits
Quarterly in arrears
BCN2
$100
AUD
Financial liability at
amortised cost
2 June 2020
180-day BBSW plus a fixed
margin of 4.70% per annum,
adjusted for franking credits
Semi-annually in arrears
Quarterly in arrears
Discretionary, non-cumulative
Discretionary, non-cumulative
Discretionary, non-cumulative
Discretionary, non-cumulative
Yes
9.05 million
Yes
7.25 million
MBL only
-(2)
MBL only
6.41 million
Perpetual unless redeemed,
Perpetual unless redeemed,
Perpetual, redeemed subject to
Perpetual unless redeemed,
resold, converted, exchanged
resold, converted, exchanged
APRA’s written approval, and at
resold, converted, exchanged
or written-off earlier in
or written-off earlier in
the discretion of MBL in limited
or written-off earlier in
accordance with the terms of
accordance with the terms of
circumstances
accordance with the terms of
Yes
MGL
n/a
n/a
56,947,286
the instrument
the instrument
Yes
MGL
Yes
MGL
10 September 2029
18 September 2030
35,439,961
• 10 September 2026
• 10 March 2027
• 10 September 2027
• earlier in specified
24,641,431
• 18 September 2027
• 18 March 2028
• 18 September 2028
• earlier in specified
circumstances at the
circumstances at the
discretion of MGL subject to
discretion of MGL subject to
APRA approval
APRA approval
• acquisition date (where
• acquisition date (where
a party acquires
control of MGL)
a party acquires
control of MGL)
the instrument
Yes
MGL
21 December 2028
30,530,834
• 21 December 2025
• 21 June 2026
• 21 December 2026
• earlier in specified
circumstances at the
discretion of MGL subject to
APRA approval
• acquisition date (where a
party acquires control of
• acquisition date (where a
party acquires control of
MBL or MGL)
MBL or MGL)
• where APRA determines MGL
• where APRA determines MGL
• where APRA determines MBL
• where APRA determines MBL
would be non-viable without
would be non-viable without
would be non-viable without
would be non-viable without
an exchange or a public
an exchange or a public
an exchange or a public
an exchange or a public
sector injection of capital (or
sector injection of capital (or
sector injection of capital (or
sector injection of capital (or
equivalent support)
equivalent support)
equivalent support)
equivalent support)
• where MBL’s common equity
• where MBL’s common equity
Tier 1 capital ratio falls
Tier 1 Capital ratio falls
below 5.125%
below 5.125%
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Macquarie Group Capital Notes
MCN4
Macquarie Group Limited
$100
AUD
$905 million
Financial liability at
amortised cost
27 March 2019
90-day BBSW plus a fixed margin
of 4.15% per annum, adjusted for
franking credits
Quarterly in arrears
Discretionary, non-cumulative
Yes
9.05 million
Perpetual unless redeemed,
resold, converted, exchanged
or written-off earlier in
accordance with the terms of
the instrument
Yes
MGL
10 September 2029
35,439,961
• 10 September 2026
• 10 March 2027
• 10 September 2027
• earlier in specified
circumstances at the
discretion of MGL subject to
APRA approval
Macquarie Group Capital Notes
MCN5
Macquarie Group Limited
$100
AUD
$725 million
Financial liability at
amortised cost
17 March 2021
90-day BBSW plus a fixed margin
of 2.90% per annum, adjusted
for franking credits
Quarterly in arrears
Discretionary, non-cumulative
Yes
7.25 million
Perpetual unless redeemed,
resold, converted, exchanged
or written-off earlier in
accordance with the terms of
the instrument
Yes
MGL
18 September 2030
24,641,431
• 18 September 2027
• 18 March 2028
• 18 September 2028
• earlier in specified
circumstances at the
discretion of MGL subject to
APRA approval
Macquarie Bank Capital Notes
BCN2
Macquarie Bank Limited
$100
AUD
Macquarie Additional Capital
Securities
MACS
Macquarie Bank Limited
n/a
USD
$US750 million/($A1,055 million) $641 million
Financial liability at
amortised cost
8 March 2017
6.125% per annum
Semi-annually in arrears
Discretionary, non-cumulative
MBL only
-(2)
Perpetual, redeemed subject to
APRA’s written approval, and at
the discretion of MBL in limited
circumstances
Yes
MGL
n/a
56,947,286
n/a
Financial liability at
amortised cost
2 June 2020
180-day BBSW plus a fixed
margin of 4.70% per annum,
adjusted for franking credits
Quarterly in arrears
Discretionary, non-cumulative
MBL only
6.41 million
Perpetual unless redeemed,
resold, converted, exchanged
or written-off earlier in
accordance with the terms of
the instrument
Yes
MGL
21 December 2028
30,530,834
• 21 December 2025
• 21 June 2026
• 21 December 2026
• earlier in specified
circumstances at the
discretion of MGL subject to
APRA approval
A
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Capital treatment
Eligible hybrid capital
Eligible hybrid capital
Eligible hybrid capital
Eligible hybrid capital
Additional Tier 1 capital
Additional Tier 1 capital
• acquisition date (where
a party acquires
control of MGL)
• acquisition date (where
a party acquires
control of MGL)
• acquisition date (where a
party acquires control of
MBL or MGL)
• acquisition date (where a
party acquires control of
MBL or MGL)
• where APRA determines MGL
would be non-viable without
an exchange or a public
sector injection of capital (or
equivalent support)
• where APRA determines MGL
would be non-viable without
an exchange or a public
sector injection of capital (or
equivalent support)
• where APRA determines MBL
would be non-viable without
an exchange or a public
sector injection of capital (or
equivalent support)
• where APRA determines MBL
would be non-viable without
an exchange or a public
sector injection of capital (or
equivalent support)
• where MBL’s common equity
Tier 1 capital ratio falls
below 5.125%
• where MBL’s common equity
Tier 1 Capital ratio falls
below 5.125%
(2) The MACS are held by a custodian on behalf of the security holders.
193
Contract feature
Macquarie Group Capital Notes
Macquarie Group Capital Notes
Macquarie Group Limited
Macquarie Group Limited
MCN3
$100
AUD
$1,000 million
Yes
10 million
Code
Issuer
Par value
Currency
Issue date
Interest rate
MCN2
$100
AUD
$Nil
Carrying value at the reporting date
Accounting measurement basis
Financial liability at amortised cost
Financial liability at amortised cost
18 December 2015
7 June 2018
180-day BBSW plus a fixed margin of 5.15%
90-day BBSW plus a fixed margin of 4.00%
per annum, adjusted for franking credits
per annum, adjusted for franking credits
Interest payment frequency
Semi-annually in arrears
Quarterly in arrears
Discretionary, non-cumulative
Discretionary, non-cumulative
Interest payment
Dividend stopper
Maturity
Outstanding notes at reporting date
Yes
Nil(1)
Perpetual unless redeemed, resold,
Perpetual unless redeemed, resold,
converted, exchanged or written-off
converted, exchanged or written-off
earlier in accordance with the terms of
earlier in accordance with the terms of
the instrument
the instrument
Convertible into ordinary shares
Convertible in issuer shares
Mandatory conversion date
Yes
MGL
18 March 2024
Maximum number of shares on conversion 32,644,295
Optional exchange dates
• 17 March 2021
• 17 September 2021
• 17 March 2022
Yes
MGL
15 December 2027
43,798,178
• 16 December 2024
• 16 June 2025
• 15 December 2025
Other exchange events
• earlier in specified circumstances
at the discretion of MGL subject to
• earlier in specified circumstances
at the discretion of MGL subject to
APRA approval
APRA approval
• acquisition date (where a party
acquires control of MGL)
• acquisition date (where a party
acquires control of MGL)
• where APRA determines MGL would
be non-viable without an exchange or
• where APRA determines MGL would
be non-viable without an exchange or
a public sector injection of capital (or
a public sector injection of capital (or
equivalent support)
equivalent support)
Note 26
Loan capital continued
The Consolidated Entity has also issued subordinated debt denominated in Euros, United States dollars and Australian dollars
which are eligible Tier 2 capital under APRA’s capital standards (including transitional Basel III rules).
The table below discloses the carrying value of loan capital at 31 March. Where these instruments are designated in fair value
hedge accounting relationships, the carrying value includes the fair value hedge adjustment, refer to Note 35 Hedge accounting.
The contractual undiscounted cash flows are disclosed in Note 36 Financial risk management.
Original contractual maturity of loan capital:
Accrued Interest payable as per terms of instruments:
Less than 12 months
Subordinated debt instruments with fixed repayment obligations:
21 September 2020
7 April 2021
10 June 2025
3 June 2030
28 May 2030
3 March 2036
Instruments with conditional repayment obligations:
MCN2
MCN3
MCN4
MCN5
BCN2
MACS
Less: directly attributable issue costs
Total loan capital
Reconciliation of loan capital by major currency:
(In Australian dollar equivalent)
United States dollar
Australian dollar
Euro
Pound sterling
Less: directly attributable issue costs
Total loan capital
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
81
1,086
1,049
903
750
1,280
1,000
905
725
641
1,055
9,475
(52)
9,423
5,439
4,029
7
9,475
(52)
9,423
97
826
1,386
1,333
–
–
–
531
1,000
905
–
–
1,370
7,448
(34)
7,414
4,158
2,438
852
–
7,448
(34)
7,414
5
1000
905
725
2,635
(29)
2,606
2,635
2,635
(29)
2,606
5
–
–
–
–
–
–
531
1,000
905
–
–
–
2,441
(25)
2,416
–
2,441
–
–
2,441
(25)
2,416
The Consolidated Entity and the Company have not had any defaults of principal, interest or other breaches with respect to
their loan capital during the financial years reported.
194
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
2021
Number of
shares
2020
Number of
shares
Notes
2021
Total
$m
2020
Total
$m
CONSOLIDATED
Note 27
Contributed equity
Ordinary share capital
Treasury shares
Other equity
Total contributed equity
(i) Ordinary share capital(1)
Balance at the beginning of the financial year
Issue of shares on retraction of exchangeable shares
Issue of shares pursuant to the Institutional Private Placement(2)
Issue of shares pursuant to the Share Purchase Plan (SPP)(3)
Issue of shares pursuant to the MEREP(4)
Issue of shares pursuant to the Dividend Reinvestment Plan(5)
Issue of shares pursuant to the ESP scheme(6)
For employee MEREP awards:
Transfer from share-based payments reserve on vesting of
MEREP awards
Transfer of deferred tax benefit on MEREP from share-based
payments reserve on vesting of MEREP awards
Transfer from treasury shares for MEREP awards exercised
Transfer from share-based payments capital reduction reserve
on vested and forfeited awards
28
28
28
Others(7)
Balance at the end of the financial year
(ii) Treasury shares(8)
Balance at the beginning of the financial year
Acquisition of shares for employee MEREP awards(4)
Transfer to ordinary share capital for MEREP awards exercised
Purchase of shares for allocation under DRP scheme
Allocation of shares under DRP scheme
Purchase of shares for allocation under ESP scheme
Allocation of shares under ESP scheme
Balance at the end of the financial year
(iii) Other equity
(a) Exchangeable shares(9)
Balance at the beginning of the financial year
Retraction of exchangeable shares
Balance at the end of the financial year
(b) Other
Balance at the beginning of the financial year
Transaction cost relating to Macquarie Income Securities (MIS)(10)
Closing balance of exchangeable shares
354,381,396 340,382,738
5,175
8,333,333
5,660,150
–
–
–
1,730
5,163,874
2,261,063
13,314
–
–
–
361,821,377
–
–
354,381,396
(14,391,059)
(5,163,874)
4,419,011
(15,135,922)
(16,433,421)
(4,960,137)
7,002,499
(1,123,770)
1,123,770
(10,717)
10,717
(14,391,059)
100,501
(1,832)
98,669
105,984
(5,483)
100,501
–
–
–
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a
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10,166
(1,633)
(2)
8,531
9,290
579
258
2
419
8
(392)
2
10,166
(1,446)
(579)
392
(1,633)
7
7
(9)
(9)
9,290
(1,446)
7
7,851
7,546
–
1,000
679
–
–
–
557
52
(533)
(2)
(9)
9,290
(1,372)
(607)
533
(142)
142
(1)
1
(1,446)
7
–
7
–
–
–
(1) Ordinary shares have no par value.
(2) On 3 September 2019, MGL issued 8,333,333 fully paid ordinary shares at a price of $120 per share.
(3) On 30 September 2019, MGL issued 5,660,150 fully paid ordinary shares under the Share Purchase Plan offered to eligible existing shareholders with a registered address in Australia or
New Zealand.
(4) On 9 June 2020 and 4 August 2020 MGL issued 5,024,608 and 139,266 fully paid ordinary shares respectively, at a price of $112.15 per share that were allocated under the MEREP plan
that were accounted for as treasury shares.
(5) On 3 July 2020 and 22 December 2020, MGL issued 1,958,357 and 302,706 fully paid ordinary shares respectively at a price of $110.47 and $139.08 per share to the DRP
participative shareholders.
(6) On 9 December 2020, MGL issued 13,314 fully paid ordinary shares at a price of $139.70 per share to the ESP holders.
(7) Includes transaction costs and related tax, where applicable.
(8) Under MEREP, a portion of staff retained profit share is held in MGL ordinary shares by the MEREP Trust and is presented as Treasury shares. The Consolidated Entity has resolved to
issue additional Treasury shares to satisfy MEREP requirements of approximately $619 million, expected to occur on or around 9 June 2021. Ordinary shares will be purchased if issuing
becomes impractical or inadvisable. For further information regarding the terms and conditions of MEREP refer to Note 32 Employee equity participation.
(9) The exchangeable shares were issued by subsidiaries as consideration for the acquisitions of Tristone Capital Global Inc. and Orion Financial Inc. and are classified as equity.
(10) Balance represents transaction costs relating to the original issuance of MIS which was transferred to Contributed equity on redemption of the MIS during the current year. The MIS
were redeemed on 16 April 2020, for which the redemption cash was paid to holders on 15 April 2020.
195
2021
Number of
shares
2020
Number of
shares
Notes
2021
Total
$m
2020
Total
$m
Note 27
Contributed equity continued
Ordinary share capital
Treasury shares
Total contributed equity
(i) Ordinary share capital(1)
12,696
(1,633)
11,063
Opening balance of fully paid ordinary shares
354,381,396 340,382,738
11,826
Issue of shares pursuant to the Institutional Private Placement(2)
Issue of shares pursuant to the Share Purchase Plan (SPP)(3)
Issue of shares on retraction of exchangeable shares
Issue of shares pursuant to the MEREP(4)
Issue of shares pursuant to the Dividend Reinvestment Plan(5)
Issue of shares pursuant to the ESP Scheme(6)
For employee MEREP awards:
Transfer of MEREP expense from share-based payments
reserve on vesting of MEREP awards
Transfer of additional deferred tax benefit on MEREP from
share-based payments reserve on vesting of MEREP awards
Transfer from treasury shares for awards
withdrawn/exercised
Transfer from share-based payments capital reduction
reserve on vested and forfeited awards
Others(7)
8,333,333
5,660,150
1,730
5,175
5,163,874
2,261,063
13,314
28
28
28
–
–
–
–
–
–
–
–
COMPANY
11,826
(1,446)
10,380
10,139
1,000
679
1
–
–
–
557
4
579
258
2
419
2
(392)
(533)
2
(2)
(19)
Closing balance of fully paid ordinary shares
361,821,377 354,381,396
12,696
11,826
(ii) Treasury shares(8)
Opening balance
Acquisition of shares for employee MEREP awards
Transfer to ordinary share capital for awards
withdrawn/exercised
Closing balance of treasury shares
(14,391,059)
(16,433,421)
(5,163,874)
(4,960,137)
4,419,011
7,002,499
(15,135,922)
(14,391,059)
(1,446)
(579)
392
(1,633)
(1,372)
(607)
533
(1,446)
(1) Ordinary shares have no par value.
(2) On 3 September 2019, MGL issued 8,333,333 fully paid ordinary shares at a price of $120 per share.
(3) On 30 September 2019, MGL issued 5,660,150 fully paid ordinary shares under the Share Purchase Plan offered to eligible existing shareholders with a registered address in Australia or
New Zealand.
(4) On 9 June 2020 and 4 August 2020 , MGL issued 5,024,608 and 139,266 fully paid ordinary shares respectively, at a price of $112.15 per share that were allocated under the MEREP plan
that were accounted for as treasury shares.
(5) On 3 July 2020 and 22 December 2020, MGL issued 1,958,357 and 302,706 fully paid ordinary shares respectively at a price of $110.47 and $139.08 per share to the DRP
participative shareholders.
(6) On 9 December 2020, MGL issued 13,314 fully paid ordinary shares at a price of $139.70 per share to the ESP holders.
(7) Includes transaction costs and related tax, where applicable.
(8) Under MEREP, a portion of staff retained profit share is held in MGL ordinary shares by the MEREP Trust and is presented as Treasury shares. The Consolidated Entity has resolved to
issue additional Treasury shares to satisfy MEREP requirements of approximately $619 million, expected to occur on or around 9 June 2021. Ordinary shares will be purchased if issuing
becomes impractical or inadvisable. For further information regarding terms and conditions of MEREP refer to Note 32 Employee equity participation.
196
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
Note 28
Reserves, retained earnings and non‑controlling interests
(i) Reserves
Foreign currency translation and net investment hedge reserve
Balance at the beginning of the financial year
Foreign exchange movement on translation and hedge accounting
of foreign operations, net of tax(1)
Balance at the end of the financial year
FVOCI reserve
Balance at the beginning of the financial year
Revaluation movement for the year, net of tax
Changes in allowance for ECL, net of tax
Balance at the end of the financial year
Share‑based payments reserve
Balance at the beginning of the financial year
MEREP share-based payment arrangements for the financial year
Deferred tax benefit on MEREP share-based payment arrangements
MEREP issued to employees of subsidiaries (Note 30)
Transfer to ordinary share capital on vesting of MEREP awards
Transfer of deferred tax benefit to ordinary share capital
on vesting of MEREP awards
Transfer from share based payment reserve for awards provided for which
the performance condition was not met following the vesting period(2)
Balance at the end of the financial year
Share‑based payments capital reduction reserve(3)
Balance at the beginning of the financial year
Transfer to ordinary share capital on vested awards
Balance at the end of the financial year
Cash flow hedge reserve
Balance at the beginning of the financial year
Revaluation movement for the financial year, net of tax
Transferred to income statement on realisation, net of tax(4)
Transferred to share of reserves in associates and joint ventures
Balance at the end of the financial year
Cost of hedging reserve(5)
Balance at the beginning of the financial year
Revaluation movement for the financial year, net of tax
Transferred to income statement on realisation, net of tax
Balance at the end of the financial year
Share of reserves in associates and joint ventures
Balance at the beginning of the financial year
Share of other comprehensive losses of associates and joint ventures
during the year, net of tax
Transferred from cash flow hedge reserve
Balance at the end of the financial year
Total reserves at the end of the financial year
2,016
(1,710)
306
(72)
233
(127)
34
1,067
529
50
(419)
(8)
(8)
1,211
(7)
(7)
(90)
(13)
6
(97)
(10)
2
(8)
(131)
(22)
(153)
1,286
824
1,192
2,016
9
(108)
27
(72)
1,086
586
4
–
(557)
(52)
–
1,067
(9)
2
(7)
(102)
(24)
42
(6)
(90)
(5)
(5)
–
(10)
(30)
(107)
6
(131)
2,773
1,063
2
529
(419)
(2)
(8)
1,165
(7)
(7)
–
–
–
–
–
–
–
1,035
–
3
586
(557)
(4)
–
1,063
(9)
2
(7)
–
–
–
–
–
–
–
–
–
–
–
–
–
1,158
1,056
(1) The current year movement represents the revaluation of the Group’s unhedged investments in foreign operations primarily driven by the appreciation of the Australian dollar against
the United States dollar. It excludes foreign exchange movements of $51 million attributable to non-controlling interest. Refer to Note 36.3 Market Risk for the Consolidated Entity’s
foreign exchange risk management policy in relation to the alignment of capital supply to capital requirements.
(2) This relates to awards which were vested but not exercised as they have not met the performance hurdles criteria, and where the holder was not an employee of the Consolidated
Entity at the vesting date. For details, refer to Note 32 Employee equity participation.
(3) The share based payment capital reduction reserve represents the capital distribution attributable to all the unvested MEREP awards on the disposal of the Sydney Airport.
The reserve was created at the time of distribution, and will be transferred to ordinary share capital on vesting of the MEREP awards.
(4) Includes a $1 million loss (2020: $12 million loss) related to a previously designated hedge relationship for which the hedged future cash flows are no longer expected to occur.
(5) Relates to foreign currency basis spreads of financial instruments which have been excluded from the hedge designation.
197
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Note 28
Reserves, retained earnings and non‑controlling interests continued
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
(ii) Retained earnings
Balance at the beginning of the financial year
Profit attributable to ordinary equity holders of MGL
Dividends paid on ordinary share capital and exchangeable
shares (Note 5)
Loss on change in non-controlling ownership interest
Transferred from share-based payment reserve for
unexercised awards(1)
Fair value changes attributable to own credit risk on debt
classified at DFVTPL, net of tax
Balance at the end of the financial year
(iii) Non‑controlling interests
Macquarie Income Securities(2)
4,000,000 MIS of $100 each
Less: transaction costs for original placement
Total Macquarie Income Securities
Other non‑controlling interests(3)
Share capital and partnership interests
Reserves(4)
Accumulated losses
Total other non-controlling interests
Total non‑controlling interests
10,439
3,015
9,758
2,731
17,535
755
18,629
988
(1,123)
(2,108)
(1,116)
(2,093)
(1)
8
(107)
12,231
486
(59)
(124)
303
303
(3)
–
61
10,439
400
(9)
391
437
(14)
(93)
330
721
8
(28)
17,154
–
–
11
17,535
–
–
–
–
–
–
–
–
Distributions on MIS
The Macquarie Income Securities (MIS), which were stapled arrangements, which include perpetual preference shares issued by
the Company, $12 million of distributions were paid and provided for in the previous year. The MIS were redeemed during the
year on 16 April 2020, for which the redemption cash was paid to holders on 15 April 2020.
(1) This relates to awards which were vested but not exercised as they have not met the performance hurdles criteria. For details, refer to Note 32 Employee equity participation.
(2) The MIS were redeemed for cash of $400 million during April 2020. Following the redemption, original issuance cost of $9 million was re-attributed to contributed equity.
(3) Other non-controlling interests represents equity in subsidiaries that is not attributable, directly or indirectly, to the parent company. As such, it is ineligible to absorb losses arising
elsewhere within the Consolidated Entity.
(4) Includes non-controlling interest in the foreign currency translation reserve.
198
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 29
Notes to the statements of cash flows
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
(i) Reconciliation of cash and cash equivalents
Cash and cash equivalents at the end of the financial year are reflected in the related items in the Statement of financial position
as follows:
Cash and bank balances(1),(2)
Cash collateral on securities borrowed and reverse
repurchase agreements
Financial investments
Held for sale assets
15,452
6,838
17,606
21,469
430
5
616
37
Cash and cash equivalents at the end of the financial year
33,493
28,960
–
–
–
–
–
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n
(1) Amounts excluded from cash and cash equivalents but presented in the Statement of financial position as cash and bank balances primarily relate to $2,451 million
(2020: $2,360 million) of funds received from clients which are segregated from the Consolidated Entity’s own funds and thus not available to meet the Consolidated Entity’s
short-term cash commitments.
(2) Cash and bank balances includes $1,506 million (2020: $947 million) of balances held by consolidated SEs that are restricted from use by the Consolidated Entity, balances required to
be maintained with central banks and other regulatory authorities and balances held in countries where remittance of cash outside the country is subject to certain restrictions.
199
Note 29
Notes to the statements of cash flows continued
CONSOLIDATED
COMPANY
(ii) Reconciliation of profit after income tax to net cash flows generated from operating activities
Profit after income tax
Adjustments to profit after income tax:
3,008
2,726
2021
$m
2020
$m
Depreciation and amortisation
Expected credit losses and other impairment charges
Investment income and gain on sale of operating lease assets
and other non-financial assets
Share-based payments expense
Share of net losses/ (profits) of associates and joint ventures
Changes in assets and liabilities:
Carrying values of associates due to dividends received
Interest, fee and commission receivable and payable
Tax balances
Debtors, prepayments, accrued charges and creditors
Trading assets and liabilities, derivatives, cash collateral and
repurchase transactions, margin money and settlement balances
(net of related liabilities)(1)
Other assets and liabilities
Loan assets and related entities
Operating lease assets
Deposits
Borrowings
Debt issued
Net cash flows generated from operating activities
925
524
(1,968)
529
3
118
(253)
112
780
(5,070)
43
(14,056)
(388)
17,179
(2,798)
4,138
2,826
1,453
1,040
(1,673)
586
(95)
356
513
(317)
(837)
309
(597)
(15,487)
(487)
10,920
5,973
7,736
12,119
2021
$m
755
(18)
(167)
(27)
(366)
3
(38)
523
(5)
(2,821)
2,288
127
2020
$m
987
–
2
–
–
–
–
(8)
(286)
(6)
–
48
2,728
–
–
1,653
(1,230)
3,888
(iii) Non‑cash financing activities
Non-cash transactions include the issue of ordinary shares of $579 million relating to the issue of shares to the MEREP
trust under the MEREP plan, $260 million relating to issue of shares to shareholders under the DRP for settlement of the
dividend liability and $2 million relating to issue of shares under the ESP during the year ended 31 March 2021. Refer to Note 27
Contributed equity for details.
(iv) Reconciliation of loan capital
Balance at the beginning of the financial year
Cash flows:(2),(3)
Issuance
Redemption
Non-cash changes:
Foreign currency translation and other movements
Balance at the end of the financial year
7,414
6,963
4,419
(1,271)
(1,139)
9,423
–
(429)
880
7,414
2,416
725
(531)
(4)
2,606
2,411
–
–
5
2,416
Includes unrealised foreign exchange movements relating to derivatives which largely offsets the unrealised foreign exchange movements on financial assets and liabilities.
(1)
(2) During the year ended 31 March 2021, the Consolidated Entity issued BCN2 ($641 million) and MCN5 ($725 million) and redeemed MCN2 ($531 million). These are perpetual securities
which are eligible for conversion into a variable number of Consolidated Entity’s ordinary shares on the scheduled mandatory exchange date, provided the exchange conditions are
satisfied, unless redeemed, resold or written off earlier. Refer to Note 26 Loan capital for details.
(3) During the year ended 31 March 2021, the Consolidated Entity raised $3,053 million through the issue of tier 2 loan capital and redeemed $740 million of loan capital.
200
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 30
Related party information
Subsidiaries
Transactions between the Company and its subsidiaries principally arise from the granting of funding, deposit of funds,
derivative transactions for managing and hedging market risks, the provision of management and administration services and
the provision of guarantees.
The Master Loan Agreement (the MLA) governs the funding arrangements between various subsidiaries and related body
corporate entities which are under the common control of MGL and have acceded to the MLA. During the current financial
year the Tripartite Outsourcing Major Services Agreement (TOMSA) became effective governing the provision of intra-group
services between subsidiaries and related body corporate entities other than certain excluded entities.
A list of significant subsidiaries is set out in Note 17 Investments in subsidiaries.
The Company, as the ultimate parent entity of the Consolidated Entity, is the head entity of the Australian tax consolidated
group and has entered into a tax funding agreement with its eligible Australian resident subsidiaries. The terms and conditions
of this agreement are set out in Note 44(vi) Taxation. Due from subsidiaries in the Company’s separate Statement of financial
position includes the amount of current tax asset assumed by the Company as the head entity and amount receivable by the
Company under the tax funding agreement of the tax consolidated group.
The following represents transaction balances with subsidiaries during the financial year:
Interest income
Interest expense
Fee and commission income
Other operating expense
Gain on disposal of subsidiaries (Note 2)(1)
Dividends and distributions (Note 2)
Share based payments (Note 28)(2)
The following represents outstanding balances with subsidiaries as at financial year end:
On Balance Sheet:
Due from subsidiaries(3)
Due to subsidiaries(4)
Off Balance Sheet:
Guarantees(5)
COMPANY
2021
$’000
552,497
(2,882)
27,877
(110,617)
167,370
601,080
529,122
2020
$’000
826,715
(12,838)
13,580
(54,391)
–
847,628
586,482
22,227,171
(2,204,221)
32,334,286
(8,901,171)
(4,401,614)
(5,877,316)
Performance related guarantee of $591,019 thousand (2020: $763,382 thousand) was provided to the Company by its subsidiary
(MBL) for which collateral of a similar amount has been received from another subsidiary (MFHPL).
(1) Represents the gain on sale of Macquarie’s service entities to MBL.
(2) Represents an increase in the share based payment reserve – refer to accounting policy (xxiii) Performance based remuneration.
(3) Due from subsidiaries primarily represents loans and receivables as per the terms of the funding arrangements under MLA, loans and receivables under bespoke funding agreements
and trading-related balances including derivatives designated in hedge accounting relationships.
(4) Due to subsidiaries primarily represents the amounts in respect of MEREP awards offered to its subsidiaries’ employees, loans and payables as per the terms of the funding
arrangements under the MLA and trading-related balances including derivatives designated in hedge accounting relationships.
(5) Includes guarantees to counterparties with respect to their exposures to certain subsidiaries. These guarantees have a maximum value of $6,270 million (2020: $7,898 million) with
the amount disclosed in the table above being the component of that guarantee value equivalent to the fair value of the underlying risk position at the reporting date.
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Note 30
Related party information continued
Associates and joint ventures
Transactions between the Consolidated Entity and its associates and joint ventures principally arise from the provision of
corporate advisory services, the granting of loans, derivative transactions for managing and hedging market risks and the
provision of management services.
Balances may arise from lending and borrowing activities between the Consolidated Entity and its associates and joint ventures
which are generally extended on a term basis and where appropriate may be either subordinated or collateralised.
During the financial year, the following amounts of income/(expense) resulted from transactions with the Consolidated Entity’s
associates and joint ventures:
Interest income
Fee and commission income(1)
Brokerage, commission and trading-related expenses
Other income/(expenses)
CONSOLIDATED
2021
$’000
73,334
1,589,838
(14,984)
85,353
2020
$’000
122,436
1,524,311
(15,575)
(2,075)
Dividends and distributions of $118,230 thousand (2020: $356,000 thousand) received from associates were recorded as a
reduction from the carrying amount of the investment.
The following balances with associates and joint ventures were outstanding as at financial year end (these exclude amounts
which in substance form part of the Consolidated Entity’s net investment in associates and joint ventures, disclosed in Note 14
Interests in associates and joint ventures):
On Balance Sheet:
Amounts receivable(2)
Amounts payable
Off Balance Sheet:
Undrawn Commitments(3)
413,022
(101,917)
360,258
(91,817)
(1,866,230)
(1,699,116)
Includes $611,751 thousand (2020: $598,707 thousand) of performance fees.
(1)
(2) Includes $299,692 thousand (2020: $230,252 thousand) of fee and commission receivable and fee-related contract assets from Macquarie-managed funds.
(3) Includes $598,371 thousand (2020: $432,836 thousand) of debt and equity commitments to Macquarie-managed funds.
202
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 31
Key management personnel disclosure
Key management personnel (KMP)
The following persons were Directors of the Company during the financial years ended 31 March 2021 and 31 March 2020, unless
indicated otherwise.
Executive Voting Directors
S.R. Wikramanayake CEO
Non‑Executive Directors
P.H. Warne
Chairman
J.R. Broadbent AC
G.M. Cairns(1)
P.M. Coffey
M.J. Coleman
D.J. Grady AO
R.J. McGrath
(appointed effective from 20 January 2021)
M. Roche
(appointed effective from 20 January 2021)
G.R. Stevens AC(2)
N.M. Wakefield Evans
Former Non‑Executive Directors
G.R. Banks AO
(retired effective 30 July 2020)
M.J. Hawker AM
(retired effective 30 September 2020)
In addition to the Executive Voting Directors listed above, the following persons also had authority and responsibility for
planning, directing and controlling the activities of MGL during the financial years ended 31 March 2021 and 31 March 2020,
unless indicated otherwise.
Current Executives(3)
A.H. Harvey
CFO, Head of FMG
F. Herold(4)
N. O’Kane
Head of Macquarie Capital Principal Finance
Head of CGM
M.J. Reemst(5)
Macquarie Bank CEO
M.J. Silverton
Co-Head of Macquarie Capital (appointed to the Executive Committee effective from 1 June 2019)
N. Sorbara
P.C. Upfold
G.C. Ward
D. Wong
COO, Head of COG
CRO, Head of RMG
Deputy Managing Director and Head of BFS
Co-Head of Macquarie Capital (appointed to the Executive Committee effective from 1 June 2019)
M.S.W. Stanley
Head of MAM (ceased to be a member of the Executive Committee effective from 1 April 2021)
Former Executives
T.C. Bishop
G.A. Farrell
Former Head of Macquarie Capital (ceased to be a member of the Executive Committee on 31 May 2019)
Former Co-Head of CAF (ceased to be a member of the Executive Committee on 1 September 2019)
The remuneration arrangements for all the persons listed above are described on pages 100 to 145 of the Remuneration Report,
contained in the Directors’ Report.
(1) Mr Cairns will cease to be a member of the MGL and MBL Boards effective 7 May 2021.
(2) The Board approved a leave of absence, due to illness, for Mr Stevens for the period 1 February 2019 to 31 May 2019.
(3) Except where indicated otherwise, all of the Executives as well as the CEO were members of the Executive Committee as at 7 May 2021.
(4) Mr Herold was Co-Head of Corporate and Asset Finance until 31 August 2019. Effective 1 September 2019, Mr Herold became Head of Macquarie Capital Principal Finance following the
transfer of CAF Principal Finance to Macquarie Capital. Will cease to be a member of the Executive Committee effective 7 May 2021.
(5) Ms Mary Reemst will retire as Managing Director and Chief Executive Officer (CEO) of Macquarie Bank (MBL) at close of business on 1 July 2021 and, subject to regulatory approvals,
Stuart Green will then become Managing Director and CEO of MBL and join the Executive Committee on 1 July 2021.
203
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Note 31
Key Management Personnel disclosure continued
Key Management Personnel remuneration
The following tables detail the aggregate remuneration for KMP:
SHORT-TERM EMPLOYEE BENEFITS
Salary and
fees (including
superannuation)
$
Performance‑
related
remuneration(1)
$
Other
benefits
$
Total
short‑term
employee
benefits
$
Executive Remuneration
LONG-TERM
EMPLOYEE
BENEFITS
Restricted
profit share
including
earnings on
restricted
profit share(2)
$
SHARE-BASED PAYMENTS
Equity
awards(3)
$
PSUs(4)
$
Total
remuneration
$
2021
2020
12,327,119
37,062,968
12,097,922
Non‑Executive Remuneration
2021
2020
3,999,048
4,227,750
–
–
49,390,087
9,721,688
54,612,705
8,632,799
122,357,279
12,097,922
28,498,167
49,940,006
15,214,083
105,750,178
10,000
12,000
4,009,048
4,239,750
–
–
–
–
–
–
4,009,048
4,239,750
–
–
–
Equity holdings of KMP and their related parties
The following tables set out details of MGL ordinary shares held during the financial year by KMP including their related parties,
on a Consolidated Entity basis.
Number of shares
held by current KMP
at 1 Apr
Number of shares
held by new KMP at
appointment date
(after 1 Apr)
2021
2020
1,275,470
1,128,331
2,349
19,970
Shares received
on withdrawal
from MEREP
391,505
713,583
Other changes(5)
(315,072)
(404,977)
Number of shares
held by KMP at date
of resignation/
retirement
(prior to 31 Mar)
Number of shares
held as at 31 Mar
(51,354)
(181,437)
1,302,898
1,275,470
MEREP RSU Awards of KMP and their related parties
The following tables set out details of the MEREP RSU awards held during the financial year for the KMP including their related
parties, on a Consolidated Entity basis. Further details of the particulars of the grants can be found in Appendix 4 of the
Remuneration Report, contained in the Directors’ Report from pages 138 to 143. Further details in relation to the MEREP RSU
awards are disclosed in Note 32 Employee equity participation.
Number of RSU
awards held by
current KMP at
1 Apr
1,415,064
1,991,081
Number of RSU
awards held
by new KMP at
appointment date
(after 1 Apr)
RSU awards
granted during the
financial year(6)
Vested RSU awards
transferred to the
KMP’s shareholding
during the
financial year
96,681
603,497
362,754
(268,752)
(468,558)
2021
2020
Number of RSU
awards held by
KMP at the date
of resignation/
retirement
(prior to 31 Mar)
(566,894)
Number of RSU
awards held as at
31 Mar
1,749,809
1,415,064
(1) The cash portion of each KMP’s profit share allocation for the reporting period when they were a KMP.
(2) The amount of retained profit share held via the DPS plan including earnings on notional investments from retained profit share in prior financial years.
(3) The current year amortisation for equity awards calculated as described in Note 44(xxiii) Performance based remuneration.
(4) The current year amortisation for PSUs calculated as described in Note 44(xxiii) Performance based remuneration. The current year expense is reduced for previously recognised
remuneration expense where performance hurdles have not been met, have been partially met or are not expected to be met.
(5) Includes on-market acquisitions and disposals.
(6) RSUs are granted in the financial year following the year of the Company’s performance to which the grant relates. RSUs disclosed as granted above for 2021 relate to the Consolidated
Entity’s performance in 2020.
204
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 31
Key Management Personnel disclosure continued
MEREP DSU Awards of KMP and their related parties
The following tables set out details of the MEREP DSU awards held during the financial year for the KMP including their related
parties, on a Consolidated Entity basis. Further details of the particulars of the grants can be found in Appendix 4 of the
Remuneration Report, contained in the Directors’ Report from pages 138 to 143. Further details in relation to the MEREP DSU
awards are disclosed in Note 32 Employee equity participation.
Number of DSU
awards held
by current KMP
at 1 Apr
Number of DSU
awards held
by new KMP at
appointment date
DSU awards
granted during the
financial year(1)
447,479
251,081
146,212
130,711
105,036
2021
2020
Vested DSU
awards
transferred
to the KMP’s
shareholding
during the
financial year
(50,070)
(54,850)
Number of DSU
awards held by
KMP at the date
of resignation/
retirement
–
Number of DSU
awards held as
at 31 Mar
528,120
447,479
MEREP PSU Awards of KMP and their related parties
The following tables set out details of MEREP PSU awards held during the financial year for the KMP including their related
parties, on a Consolidated Entity basis. Further details of the particulars of the grants can be found in the Directors’ Report on
page 138 to 143. Further details in relation to the MEREP PSU awards are disclosed in Note 32 Employee equity participation.
Number of
PSU awards
held by
current
KMPs at
1 Apr
Number of
PSU awards
held by
new KMP at
appointment
date
PSU awards
granted
during the
financial
year(2)
Vested PSU
awards
transferred
to KMP
shareholding
during the
financial year
PSU awards
for which
performance
hurdles were
not met
PSU awards
cancelled on
termination
Number of
PSU awards
held by KMP
at date of
resignation/
retirement
2021
2020
549,286
828,388
–
235,431
223,021
(72,360)
(189,875)
(72,361)
–
(14,081)
(298,167)
Number of
PSU awards
held as
at 31 Mar(3)
639,996
549,286
(1) DSUs are granted in the financial year following the year of the Consolidated Entity’s performance to which the grant relates.
(2) PSUs are granted in the financial year following the year of the Consolidated Entity’s performance to which the grant relates. PSUs disclosed as granted above for 2021 relate to the
Consolidated Entity’s performance in 2020.
(3) PSU awards vested and not exercised as at 31 March 2021: Nil (2020: Nil).
205
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Note 31
Key Management Personnel disclosure continued
Details of share-based payment grant dates whose vesting periods affected compensation for the financial years ended
31 March 2021 and 31 March 2020.
Financial year grant relates to
Type of grant
Managing Director
2012
2013
2014
2015
2016
2017
2018
2019
2020
Retained DPS
Retained DPS
Retained DPS
Retained DPS
PSUs
Retained DPS
PSUs
Retained DPS
PSUs
Retained DPS
PSUs
Retained DPS
PSUs
Retained DPS
PSUs
15 August 2012
15 August 2013
15 August 2014
17 August 2015
17 August 2015
15 August 2016
15 August 2016
15 August 2017
15 August 2017
15 August 2018
15 August 2018
15 August 2019
15 August 2019
4 August 2020
4 August 2020
GRANT DATE
All other KMP
7 June 2012
25 June 2013
25 June 2014
6 July 2015
17 August 2015
17 June 2016
15 August 2016
22 June 2017
15 August 2017
21 June 2018
15 August 2018
24 June 2019
15 August 2019
9 June 2020
4 August 2020
Loans to Key Management Personnel and their related parties
Details of loans provided by the Consolidated Entity to KMP and their related parties are disclosed in aggregate in the
following tables:
Total for Key
Management Personnel
and their related parties
Opening balance
as at 1 Apr
$’000
Additions
during the year
$’000
Interest
charged
$’000
Repayments
during the year
$’000
Write‑downs
$’000
Closing balance
as at 31 Mar
$’000(1)
2021
2020
11,811
1,516
180
10,365
144
120
(698)
(190)
–
11,437
11,811
(1) Number of persons included in the aggregate as at 31 March 2021: 7 (2020: 7).
206
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 32
Employee equity participation
MEREP
The Consolidated Entity continues to operate the MEREP in conjunction with other remuneration arrangements.
Award Types under the MEREP
Restricted Share Units (RSUs)
An RSU is a beneficial interest in an MGL ordinary share held on behalf of a MEREP participant by the plan trustee (Trustee).
The participant is entitled to receive dividends on the share and direct the Trustee how to exercise voting rights of the share.
The participant also has the right to request the release of the share from the MEREP Trust, subject to the vesting and
forfeiture provisions of the MEREP.
RSUs on issue at the beginning of the financial year
Granted during the financial year
Vested RSUs withdrawn or sold from the MEREP during the financial year
Forfeited during the financial year
RSUs on issue at the end of the financial year
RSUs vested and not withdrawn from the MEREP at the end of the financial year
NUMBER OF RSU AWARDS
2021
11,374,065
4,218,981
(3,599,807)
(341,367)
11,651,872
72
2020
13,478,950
4,125,167
(5,938,611)
(291,441)
11,374,065
3,225
The weighted average fair value of the RSU awards granted during the financial year was $124.30 (2020: $126.73).
Deferred Share Units (DSUs)
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A DSU represents the right to receive on exercise of the DSU either a share held in the Trust or a newly issued share (as
determined by the Company in its absolute discretion) for no cash payment, subject to the vesting and forfeiture provisions of
the MEREP. A MEREP participant holding a DSU has no right or interest in any share until the DSU is exercised. The Company
may issue shares to the Trustee or direct the Trustee to acquire shares on-market, or via a share acquisition arrangement for
potential future allocations to holders of DSUs.
Generally, where permitted by law, DSUs will provide for cash payments in lieu of dividends paid on MGL ordinary shares before
the DSU is exercised. Further, the number of shares underlying a DSU will be adjusted upon any bonus issue or other capital
reconstruction of the Company in accordance with the ASX Listing Rules, so that the holder of a DSU does not receive a benefit
that holders of the Company’s shares do not generally receive. These provisions are intended to provide the holders of DSUs,
as far as possible, with the same benefits and risks as holders of RSUs. However, holders of DSUs will have no voting rights with
respect to any underlying MGL ordinary shares.
DSUs will only be offered in jurisdictions where legal or tax rules make the grant of RSUs impractical, or where PSUs are
structured as DSUs (see PSUs). DSUs have been granted with an expiry period of up to nine years.
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DSUs on issue at the beginning of the financial year
Granted during the financial year
Exercised during the financial year
Forfeited during the financial year
DSUs on issue at the end of the financial year
DSUs exercisable at the end of the financial year
NUMBER OF DSU AWARDS
2021
3,177,680
1,082,878
(687,073)
(61,114)
3,512,371
1,057,957
2020
3,075,825
1,011,298
(817,692)
(91,751)
3,177,680
913,107
The weighted average fair value of the DSU awards granted during the financial year was $117.53 (2020: $118.44).
207
Note 32
Employee equity participation continued
Award types under the MEREP continued
Performance Share Units (PSUs)
All PSUs currently on issue are structured as DSUs with performance hurdles that must be met before the underlying share or
cash equivalent (as the case may be) will be delivered. PSU holders have no right to dividend equivalent payments before the
PSUs vest.
PSUs on issue at the beginning of the financial year
Granted during the financial year
Exercised during the financial year
Expired during the year
Forfeited during the financial year
PSUs on issue at the end of the financial year
PSUs exercisable at the end of the financial year
NUMBER OF PSU AWARDS
2021
1,017,433
235,431
(190,293)
(190,295)
872,276
2020
1,229,353
223,021
(412,516)
–
(22,425)
1,017,433
–
The weighted average fair value of the PSU awards granted during the financial year was $105.09 (2020: $98.99).
Restricted Shares
A Restricted Share is an MGL ordinary share transferred from the MEREP Trust and held by a MEREP participant subject to
restrictions on disposal, vesting and forfeiture rules. The participant is entitled to receive dividends on, and to exercise the
voting rights of, the Restricted Shares. Restricted Shares are only offered in jurisdictions where legal or tax rules make RSU/DSU
awards impractical.
Restricted shares on issue at the beginning of the financial year
Transfer from MEREP Trust during the financial year
Forfeited during the financial year
Released during the financial year
Restricted shares on issue at the end of the financial year
NUMBER OF
RESTRICTED SHARE AWARDS
2021
547,874
113,222
(49,430)
(251,479)
360,187
2020
13,782
551,687
(1,766)
(15,829)
547,874
The weighted average fair value of the Restricted Shares granted during the financial year was $Nil (2020: $Nil).
Participation in the MEREP is currently provided to the following Eligible Employees:
• Executive Directors with retained Directors’ Profit Share (DPS) from 2009 onwards, a proportion of which is allocated in the
form of MEREP awards (Retained DPS Awards)
• staff other than Executive Directors with retained profit share above a threshold amount (Retained Profit Share Awards) and
staff who were promoted to Associate Director, Division Director or Executive Director, who received a fixed Australian dollar
value allocation of MEREP awards (Promotion Awards)
• Macquarie staff with retained commission (Commission Awards)
• new Macquarie staff who commence at Associate Director, Division Director or Executive Director level and are awarded a
fixed Australian dollar value (New Hire Awards)
• members of the MGL and MBL Executive Committees who are eligible for PSUs (PSU awards)
• in limited circumstances, Macquarie staff may receive an equity grant instead of a remuneration or consideration payment in
cash. Current examples include individuals who become employees of the Consolidated Entity upon the acquisition of their
employer by a Macquarie entity or who receive an additional award at the time of joining Macquarie (also referred to above
as New Hire Awards).
208
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 32
Employee equity participation continued
Award types under the MEREP continued
Vesting periods are as follows:
Award type
Level
Vesting
Retained Profit Share Awards
and Promotion Awards
Retained DPS Awards
Below Executive Director
1/3rd in the 2nd, 3rd and 4th year following the year of grant(1)
Executive Committee members
and Designated Executive
Directors
1/5th in the 3rd, 4th, 5th, 6th and 7th year following the year of grant(2)
Retained DPS Awards
All other Executive Directors
1/3rd in the 3rd, 4th and 5th year following the year of grant(2)
PSU Awards granted in relation
to years 2012 to 2019
PSU Awards granted in relation
to 2020 and following years
Executive Committee members 50% in the 3rd and 4th years following the year of grant(3)
Executive Committee members
100% in the 4th year following the year of grant(3)
Commission Awards
Below Executive Director
1/3rd in the 2nd, 3rd and 4th year following the year of grant(1)
New Hire Awards
All Director-level staff
1/3rd on each first day of a staff trading window on or after the
2nd, 3rd and 4th anniversaries of the date of allocation
In limited cases, the application form for awards may set out a different vesting period, in which case that period will be the
vesting period for the award. For example, staff in jurisdictions outside Australia may have a different vesting period due to local
regulatory requirements.
For Retained Profit Share awards representing 2020 retention, the allocation price was the weighted average price of the
shares issued for the 2020 issue period, which was 25 May 2020 to 5 June 2020. That price was calculated to be $112.15
(2019 retention: $122.37).
(1) Vesting will occur during an eligible staff trading window.
(2) Vesting will occur during an eligible staff trading window. If an Executive Director has been on leave without pay (excluding leave to which the Executive Director may be eligible under
local laws) for 12 months or more, the vesting period may be extended accordingly.
(3) Subject to achieving certain performance hurdles.
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Note 32
Employee equity participation continued
Performance Share Units (PSUs)
PSUs will only be released or become exercisable upon the achievement of certain performance hurdles. Only members of the
MGL and MBL Executive Committees are eligible to receive PSUs. For the PSUs allocated to Executive Committee Members,
two performance hurdles have been determined and each will apply individually to 50% of the total number of PSUs awarded.
Hurdles are periodically reviewed by the Board Remuneration Committee (BRC) to ensure they continue to align the interests
of staff and shareholders and provide a challenging but meaningful incentive to Executive Committee members. The BRC
considers historical and forecast market data, the views of corporate governance bodies, shareholders and regulators as well as
market practice. No change has been made to the hurdles for this financial year.
The hurdles are outlined below.
Performance hurdle 1
Hurdle
50% of the PSUs based solely on the relative average annual return
on ordinary equity (ROE) over the vesting period compared to a
reference group of global financial institutions.
A sliding scale applies with 50% becoming exercisable above
the 50th percentile and 100% vesting at the 75th percentile.
Performance hurdle 2
Hurdle
50% of the PSUs based solely on the compound annual growth rate
(CAGR) in earnings per share (EPS) over the vesting period.
REFERENCE GROUP
The current reference group comprises Bank of America
Corporation, Barclays PLC, Credit Suisse Group AG, Deutsche
Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co.,
Lazard Limited, Morgan Stanley and UBS AG.
REQUIRED RESULT
A sliding scale applies with 50% becoming exercisable at EPS
CAGR of 7.5% and 100% at EPS CAGR of 12%. For example,
if EPS CAGR were 9.75%, 75% of the relevant awards would
become exercisable.
Under both performance hurdles, the objective is examined once only. Testing occurs annually on 30 June immediately before
vesting on 1 July, based on the most recent financial year-end results available. To the extent that a condition is not met when
examined, the PSUs due to vest will not be exercisable upon vesting, resulting in no benefit to Executive Committee members.
RSUs and DSUs are measured at their grant dates based on their fair value (1) and for each PSU, the awards expected to vest
are measured on the basis of the assumptions below. This amount is recognised as an expense evenly over the respective
vesting periods.
RSUs, DSUs and PSUs relating to the MEREP plan for Executive Committee members have been granted in the current financial
year in respect of the 2020 performance. The accounting fair value of each of these grants is estimated using the Company’s share
price on the date of grant and for each PSU also incorporates a discounted cash flow method using the following key assumptions:
• interest rate to maturity: 0.2023% per annum
• expected vesting dates of PSUs: 1 July 2024
• dividend yield: 4.33% per annum.
While RSUs DSUs, and PSUs (for Executive Committee members) for FY2021 will be granted during the FY2022, the Company
begins recognising an expense for these awards (based on an initial estimate) from 1 April 2020 related to these future grants.
The expense is estimated using the estimated MEREP retention for FY2021 and applying the amortisation profile to the
retained amount.
For PSUs, the estimate also incorporates an interest rate to maturity of 0.44% per annum, expected vesting dates of PSUs
of 1 July 2025, and a dividend yield of 3.96% per annum. In the following financial year, the Consolidated Entity will adjust the
accumulated expense recognised for the final determination of fair value for each RSU, DSU and PSU when granted and will use
this valuation for recognising the expense over the remaining vesting period.
The Consolidated Entity annually reviews its estimates of the number of awards (including those delivered through MEREP) that
are expected to vest. It recognises the impact of the revision to original estimates, if any, in the employment expenses in the
income statement, with a corresponding adjustment to equity (for equity settled awards), or a corresponding adjustment to
liabilities (for cash settled awards).
(1) For employees categorised as Material Risk Takers who are required to comply with the European Banking Authority Guidelines on the CRD IV remuneration requirements, the fair
value of the awards granted for performance periods after 1 April 2019 has been adjusted to take into account the prohibition of dividends on unvested awards.
210
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Note 32
Employee equity participation continued
Performance Share Units (PSUs) continued
For the financial year ended 31 March 2021, compensation
expense relating to the MEREP totalled $579,198 thousand
(2020: $583,161 thousand).
For the equity settled awards, the estimated future
withholding tax outflow is $391,480 thousand (2020:
$197,947 thousand).
Employee Share Plan
The Consolidated Entity continues to operate the Macquarie
Group Employee Share Plan (ESP) whereby each financial
year eligible employees are offered up to $1,000 worth of
fully paid MGL ordinary shares for no cash consideration.
Shares allocated under the ESP cannot be sold until the
earlier of three years after allocation or the time when the
participant is no longer employed by the Consolidated Entity.
In all other respects, shares allocated rank equally with all
other fully paid ordinary shares then on issue.
The latest offer under the ESP was made during November
2020. A total of 1,902 (2020: 1,531) staff participated in
this offer.
On 9 December 2020, the participants were each allocated
7 (2020: 7) fully paid ordinary shares based on the offer
amount of $1,000 and the average market share price of
$139.70 (2020: $136.37); resulting in a total of 13,314 (2020:
10,717) shares being allocated. The shares were allocated
to staff for no cash consideration. The aggregate value of
the shares allocated was deducted from staff profit share
and commissions.
For the financial year ended 31 March 2021, compensation
expense relating to the ESP totalled $1,860 thousand (2020:
$1,446 thousand).
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Historical Share and Option Plans
Shares are no longer being issued under the Staff Share
Acquisition Plan or the Non-Executive Director Share
Acquisition plan. However, employees and Non-Executive
Directors still hold shares issued in previous years.
Options over fully paid unissued ordinary shares are no
longer granted under the Macquarie Group Employee Share
Option Plan and no options are outstanding.
Other plans
The Consolidated Entity operates other local share-based
compensation plans, none of which, individually or in
aggregate are material.
Shares issued/purchased on‑market for the purpose of an
employee incentive scheme
During the financial year ended 31 March 2021, the
Consolidated Entity issued 5,163,874 shares (2020: purchased
2,246,584 shares on-market and 2,713,553 shares via
off-market transfer from its employees during the Staff
Trading window) for MEREP. A further 13,314 shares were
issued for the ESP (2020: 10,717 shares were purchased
on-market). The average price of all share issued during
the financial year was $112.22 (2020: $122.40 for shares
purchased) and the average price of the purchases made
on-market was $Nil (2020: $125.02).
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Note 33
Contingent liabilities and commitments
Contingent liabilities exist in respect of:
Letters of credit
Guarantees(1)
Indemnities
Performance-related contingencies
Total contingent liabilities(2)
Commitments exist in respect of:
CONSOLIDATED
COMPANY
2021
$m
2020
$m
2021
$m
2020
$m
1,085
651
391
297
2,424
1,030
623
417
313
2,383
4,402
–
5,877
–
–
4,402
5,877
Undrawn credit facilities and securities commitments(3),(4),(5),(6)
14,041
11,948
Property, plant and equipment and right-of-use and other asset
developments(7),(8)
Total commitments
Total contingent liabilities and commitments
2,246
16,287
18,711
4,155
16,103
18,486
1,613
1,613
6,015
–
1,833
1,833
7,710
The Consolidated Entity and the Company operates in a number of regulated markets and is subject to regular regulatory
reviews and inquiries. From time to time these may result in litigation, fines or other regulatory enforcement actions. At the
reporting date there are no matters of this nature which are expected to result in a material economic outflow of resources
that has not been provided for. The Consolidated Entity and the Company considers the probability of there being a material
adverse effect in respect of litigation or claims that have not been provided for to be remote.
(1) The Company includes guarantees to counterparties with respect to their exposures to certain subsidiaries. These guarantees have a maximum value of $6,270 million (2020: $7,898 million)
with the amount disclosed in the table above being the component of that guarantee value equivalent to the fair value of the underlying risk position at the reporting date.
(2) It is not practicable to ascertain the timing of any outflow and the possibility of any reimbursement related to these contingent liabilities.
(3) Undrawn credit facilities are irrevocably extended to clients. These amounts include fully or partially undrawn commitments that are legally binding and cannot be unconditionally
cancelled by the Consolidated Entity. Securities underwriting represents firm commitments to underwrite debt and equity securities issuances and private equity commitments.
(4) Includes $854 million (2020: $648 million) in undrawn facilities where the loan and further commitment will be assigned to a third-party post drawdown.
(5) Includes $1,750 million (2020: $1,645 million) of equity commitment and $116 million (2020: $54 million) of debt commitment to associates and joint ventures of the Consolidated
Entity. Also, includes $598 million (2020: $432 million) of debt and equity commitment to Macquarie-managed funds.
(6) Includes $2,175 million equity commitment relating to the acquisition of Waddell & Reed Financial Inc., a publicly traded US asset manager providing wealth and asset management
services. For further details refer to Note 43 Events after the reporting date.
(7) The Consolidated Entity includes asset development commitments to third parties of $515 million (2020: $2,161 million) which certain subsidiaries of the Consolidated Entity fund
with borrowings of $365 million (2020: $1,874 million).
(8) The Consolidated Entity and Company includes asset development commitments to third parties of $1,613 million (2020: $1,833 million). During the financial year, the Consolidated
Entity entered into a sale agreement to divest of several assets which is contingent upon completion of their development.
212
Notes to the financial statementsFor the financial year ended 31 March 2021 continued
Note 34
Structured entities
The Consolidated Entity engages with structured entities
(SEs) for securitisation, asset backed financing and other
businesses in order to diversify its sources of funding for
asset origination and capital efficiency purposes. SEs are
designed so that voting or similar rights are not the dominant
factor in deciding who controls the entity, such as when
any voting rights relate to administrative tasks only and
the relevant activities are directed by means of contractual
arrangements. Generally, SEs do not have a range of
operating and financing activities for which substantive
decision making is required continuously.
Securitisations
Securitisations involve transferring assets into a vehicle that
sells beneficial interests to investors through the issue of
debt and equity notes with varying levels of subordination.
The notes are collateralised by the assets transferred to
these vehicles and pay a return based on the returns of those
assets, with residual returns paid to the most subordinated
investor. These vehicles are created for securitising assets,
including mortgages and finance leases of the Consolidated
Entity or of its clients.
The Consolidated Entity may serve as a sponsor, servicer,
underwriter, liquidity provider, derivative counterparty,
purchaser of notes and/or purchaser of residual income units.
The Consolidated Entity may also provide redraw facilities or
loan commitments to securitisation vehicles.
Asset‑backed financing
Asset-backed vehicles are used to provide tailored lending
for the purchase or lease of assets transferred by the
Consolidated Entity or its clients. The assets are normally
pledged as collateral to the lenders. The Consolidated
Entity engages in raising finance for assets such as vessels,
electronic and IT equipment.
Other
Other includes structured entities established to raise
financing and fulfil obligations for prepaid commodity
delivery contracts. The Consolidated Entity has contractually
guaranteed the performance obligation under these
arrangements. Certain Macquarie-managed funds also
represent Structured entities.
Consolidated Structured Entities
The Consolidated Entity may act as a lender, manager,
derivative counterparty, purchaser of notes and/or purchaser
of residual income units or guarantor.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Interests held in unconsolidated structured entities
Interests in unconsolidated SEs include, but are not limited
to, debt and equity investments, guarantees, liquidity
agreements, commitments, fees from investment structures,
and fees from derivative instruments that expose the
Consolidated Entity to the risks of the unconsolidated SE.
Interests do not include plain vanilla derivatives (for example
interest rate swaps and currency swaps) and positions where
the Consolidated Entity:
• creates rather than absorbs variability of the
unconsolidated SE (for example purchase of credit
protection under a credit default swap)
• acts as underwriter or placement agent, or provides
administrative, trustee or other services to third party
managed SEs
• transfers assets and does not have any other interest
deemed to be significant in the SE.
Income received by the Consolidated Entity during the
financial year from interests held at the reporting date relates
to interest, management fees, servicing fees, dividends and
gains or losses from revaluing financial instruments.
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Note 34
Structured entities continued
The following table presents the carrying value and maximum exposure to loss (before the benefit of collateral and credit
enhancements) of the Consolidated Entity’s interests in unconsolidated SEs (excluding interests in Macquarie-managed funds
that are disclosed below the following table):
Carrying value of assets
Trading assets
Derivative assets
Financial investments
Loan assets
Total carrying value of assets(1)
Maximum exposure to loss(2)
Debt, equity and derivatives held
Undrawn commitments(3)
Total maximum exposure to loss
CONSOLIDATED 2021
CONSOLIDATED 2020
Securitisations
$m
Asset‑backed
financing
$m
Other(3)
$m
Securitisations
$m
Asset-backed
financing
$m
Other(3)
$m
122
414
2,089
698
3,323
3,323
180
3,503
33
2,034
2,067
2,067
2,067
57
57
23
551
2,580
513
3,667
3,667
–
3,667
–
–
61
2,796
2,857
2,857
–
2,857
–
–
–
–
–
–
71
71
The Consolidated Entity’s interests in Macquarie-managed funds, include investments, receivables, contract assets, and
undrawn commitments, which represents the Consolidated Entity’s maximum exposure to loss. The Assets under Management
(AUM) of $562 billion (2020: $598 billion) represents the indicative size of these funds and is measured as the proportional
ownership interest in the underlying assets of funds and mandated assets that Macquarie actively manages or advises on.
In certain cases the Consolidated Entity invests alongside its own managed funds to demonstrate further alignment with
investors. The funds invest in assets that include: infrastructure and renewables, real estate, agriculture, transportation finance,
equities, fixed income, private credit and multi-asset solutions. The carrying value of the Consolidated Entity’s investments in
managed funds is disclosed in Note 14 Interest in associates and joint ventures. Other interests in these managed funds, which
include receivables, contract assets, and undrawn commitments are disclosed in Note 30 Related party information. Where the
Consolidated Entity does not invest in managed funds, the interests are largely in the nature of receivables and contract assets
in relation to asset management services which are generally paid quarterly.
The Consolidated Entity’s exposure to securitisation entities in the nature of trading assets, derivatives and debt financial
investment positions are acquired for the purpose of trading and liquidity management and are typically managed under
market risk described in Note 36.3 Market risk. For these reasons, information on the size and structure for these SEs is not
considered meaningful for understanding the related risks, and so have not been presented.
In respect of the Consolidated Entity’s loan assets’ exposure in securitisation and asset backed financing entities, the total size
of the unconsolidated SEs is $32,075 million (2020: $6,853 million). Size represents either the total assets of the SE (measured
either at amortised cost excluding impairments or fair values if readily available); outstanding notional of issued notes or the
principal amount of liabilities if there is nominal equity. Size is based on the most current publicly available information to the
Consolidated Entity.
(1)
Includes non-investment grade interests of $89 million (2020: $182 million) in securitisation activities and $1,211 million (2020: $1,521 million) in asset-backed financing activities. Of
these non-investment grade interests in asset backed financing activities, the potential loss borne by holders of notes whose interests rank lower is $Nil (2020: $164 million).
(2) Maximum exposure to loss is the carrying value of debt, equity and derivatives held and the undrawn amount for commitments.
(3) Excludes $2,905 million (2020: $3,640 million) of guarantees provided by the Company in respect of a subsidiary to fulfil its obligations for certain prepaid commodity contracts
towards unconsolidated structured entities. On consolidation these guarantees are accounted for as part of borrowings that represent the subsidiary’s obligations in terms of these
commodity contracts.
214
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
IBOR reform
The Consolidated Entity designates hedging relationships
where the hedged item and/or hedging instrument reference
IBOR. These rates are being transitioned to alternative
reference rates (ARRs) as described in Note 1 Basis of
preparation and Note 36 Financial risk management. IBOR
reform primarily impacts the Consolidated Entity’s hedge
relationships referencing USD LIBOR and GBP LIBOR. The
hedge relationships disclosed as impacted by IBOR reform
includes all those referencing transitioning LIBOR rates at the
reporting date and includes relationships that are expected
to expire before mandatory transition to ARRs. The majority
of these derivatives are subject to the ISDA Fallbacks
Protocol for converting LIBORs to ARRs plus a spread when
an index cessation event occurs.
The UK Financial Conduct Authority’s (FCA) announcement
on the future cessation and loss of representativeness of
LIBOR benchmarks on 5 March 2021 constituted such an
index cessation event which fixed the spread adjustment
to be applied to such derivative contracts upon fallback.
Despite the announcement uncertainty remains with respect
to the timing of transition of the IBOR-based cash flows of
these hedging instruments. As markets continue to develop,
regulators continue to monitor the progress of transition
and have encouraged the proactive transition of positions
from IBORs to ARRs rather than reliance on fallback clauses.
As a result, the relief afforded to the Consolidated Entity
under AASB 2019-3 Amendments to Australian Accounting
Standards – Interest Rate Benchmark Reform (Phase 1
relief), which was early adopted during the 31 March 2020
financial year, continues to apply. Certain hedge accounting
relationships have transitioned to ARRs during the current
period and consequently the Consolidated Entity has made
use of the relief provided by AASB 2020-8 Amendments to
Australian Accounting Standards – Interest Rate Benchmark
Reform (Phase 2 relief) to amend the formal designation of
these hedging relationships.
Note 35
Hedge accounting
Hedging strategy
The use of derivative and non-derivative instruments to
economically hedge non-traded positions potentially gives
rise to income statement volatility as a result of mismatches
in the accounting treatment between the derivative and
non-derivative instruments and the related exposure.
The Consolidated Entity’s objective is to reduce the risk
of volatility in earnings. This volatility may be managed
by allowing hedges to naturally offset one another or, where
the earnings volatility exceeds pre-defined thresholds, hedge
accounting is considered.
Hedging instruments
Detail on hedging instruments, the nature of hedged risks,
as well as the notional and the carrying amount of derivative
financial instruments and, in the case of net investment
hedges, the notional of foreign currency denominated debt
issued, for each type of hedge relationship, is shown in the
respective sections. The maturity profile for the hedging
instruments’ notional amounts are reported based on their
contractual maturity. Where a cross currency swap has
been dual designated in both a cash flow and a fair value
hedge, the notional is shown more than once. Increases in
notional profiles of hedging instruments are presented as
negative figures, with decreases and maturities presented as
positive figures.
Hedging ineffectiveness
In the case of a fair value hedge, hedge ineffectiveness is
the extent to which the changes in the fair value of the
hedging instrument differ to that of the hedged item. In
the case of a cash flow hedge, hedge ineffectiveness is the
extent to which the change in the fair value of the hedging
instrument exceeds, in absolute terms, that of the hedged
item. In the case of net investment hedge relationships,
hedge ineffectiveness is the extent to which the change in
the carrying amount of foreign currency denominated debt
and foreign exchange contracts attributable to the change
in exchange rates exceeds, in absolute terms, that of the
hedged item. Sources of hedge ineffectiveness primarily arise
from basis and timing differences between the hedged items
and hedging instruments, and designating existing derivatives
with a non-zero fair value as hedging instruments. Hedge
ineffectiveness is reported in net trading income in the
income statement.
215
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Note 35
Hedge accounting continued
The absolute notional amounts of hedging instruments designated in hedge accounting relationships represents the extent of
the risk exposure managed by the Consolidated Entity that are impacted by IBOR reform per the following table:
NOTIONAL VALUE IN AUD EQUIVALENT IMPACTED BY IBOR REFORM
USD
$m
3,004(4)
18,479
4,001(4)
20,240
GBP
$m
Other(1)
$m
2,051(5)
3,056
–
731
1,247
1,225
1,883
Total
$m
5,786
19,726
8,282
22,123
Other not
affected
by reform(2)
$m
Total notional(3)
$m
CONSOLIDATED 2021
4,584
13,712
10,370
33,438
CONSOLIDATED 2020
6,799
13,626
15,081
35,749
Cash flow hedges
Fair value hedges
Cash flow hedges
Fair value hedges
(1) Other includes balances impacted by the IBOR reform of JPY LIBOR and CHF LIBOR.
(2) The Consolidated Entity has exposure to rates such as BBSW and EURIBOR that are not subject to mandatory replacement and therefore do not make use of the relief (as described in
Note 1 Basis of preparation).
(3) Where a cross currency swap in a cash flow hedge designation references more than one interest rate, the risk exposure has been shown twice to reflect the absolute risk exposure to
different reference rates. For all other hedge accounting disclosures, the notional has been shown once. To reconcile this notional to other hedge accounting disclosures an amount of
$3,047 million (2020: $5,049 million) would need to be deducted in this regard. The notional of commodity swaps and futures and foreign exchange contracts shown in the hedging
instrument maturity tables on pages 217 and 220 are not included in the notionals disclosed above.
(4) The hedged exposure differs by AUD equivalent of $1,918 million (2020: $2,800 million) as it references another correlated US market rate.
(5) Excludes hedge relationships of $303 million notional which have been synthetically transitioned to SONIA during the current year (making use of the Phase 2 relief) and thus meet
the requirement for end of Phase 1 relief.
216
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 35
Hedge accounting continued
Cash flow hedges
The cash flow hedge reserve, representing the effective portion of the movements in the hedging instrument, is disclosed in
Note 28(i) Reserves. Changes in this reserve are reported in the Consolidated Entity’s statements of comprehensive income.
The cumulative gains and losses remaining in the cash flow hedge reserve for hedging relationships that have ceased, but for
which the hedged cash flows are still expected to occur is $1 million (2020: $3 million). This amount will be transferred to the
income statement as a loss when the hedged item affects the income statement.
Hedging instruments
Instrument type
Risk category
Derivative assets
Cross currency swaps
Foreign exchange contracts
Foreign exchange
Foreign exchange
Interest rate swaps and options
Interest rate
Commodity swaps and futures
Commodity price
Derivative liabilities
Cross currency swaps
Foreign exchange contracts
Foreign exchange
Foreign exchange
Interest rate swaps and options
Interest rate
Commodity swaps and futures
Commodity price
Derivative assets
Cross currency swaps
Foreign exchange
Interest rate swaps and options
Interest rate
Commodity swaps and futures
Commodity price
Derivative liabilities
Cross currency swaps
Foreign exchange
Interest rate swaps and options
Interest rate
Instrument type
Cross currency swaps
Risk category
Foreign exchange
Interest rate swaps and options
Interest rate
Commodity swaps and futures
Commodity price
MATURITY ANALYSIS PER NOTIONAL
Less than
3 months
$m
3 to 12
months
$m
1 to 5
years
$m
Over 5
years
$m
Total
$m
(20)
3
76
3
2
(94)
7
18
105
12
–
(44)
(48)
369
1,038
(102)
22
955
455
22
–
75
CONSOLIDATED 2021
1,079
1,488
48
938
38
3
1,975
3
1,922
2
1,938
99
CONSOLIDATED 2020
1,353
98
–
–
4,542
2,873
34
537
1,308
2,080
477
1,482
884
1,196
32
2,216
2,215
–
537
741
CONSOLIDATED CARRYING AMOUNT
2021
2020
Asset
$m
Liability
$m
Asset
$m
Liability
$m
105
68
82
111
8
697
126
19
38
175
–
217
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Note 35
Hedge accounting continued
Hedge ineffectiveness
In the case of cash flow hedge relationships, hedge ineffectiveness is the extent to which the change in the fair value of the
hedging instrument exceeds, in absolute terms, that of the hedged item.
Hedging instrument
Risk category
Cross currency swaps
Foreign exchange
Interest rate swaps and options
Interest rate
Commodity swaps and futures
Commodity price
Total
Hedge accounting executed rates
CONSOLIDATED
(Loss)/gain on
hedged item
Gain/(loss) on
hedged item
Hedge ineffectiveness
gain/(loss)
2021
$m
(27)
15
(26)
(38)
2020
$m
18
(81)
33
(30)
2021
$m
28
(24)
26
30
2020
$m
(19)
78
(33)
26
2021
$m
1
(9)
(8)
2020
$m
(1)
(3)
–
(4)
The following table shows the executed rates for the most significant hedging instruments designated in cash flow hedges:
Hedging instruments
Currency/currency pair
Cross currency swaps
Interest rate swaps and options
AUD/EUR
USD/GBP
AUD/CHF
GBP/CHF
USD/CHF
GBP
USD
CONSOLIDATED
2021
0.62–0.68
0.66
0.72
1.46
0.93
1.01–2.49%
0.29–3.01%
2020
0.62–0.68
0.66
0.72
1.46
0.93
0.40–2.49%
1.00–3.01%
218
Notes to the financial statementsFor the financial year ended 31 March 2021 continued
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 35
Hedge accounting continued
Net investment in foreign operation hedges
The Consolidated Entity’s net investment in foreign operations (NIFO) changes as a result of earnings, dividends, other
capital-related events and changes in the Consolidated Entity’s group structure as a result of internal restructures. The
risk of changes in the NIFO for movements in foreign exchange rates is hedged by the Consolidated Entity through the use
of a combination of derivatives and foreign currency denominated issued debt. Refer to Note 36.3 Market risk for further
information on the Consolidated Entity’s risk management strategy.
In order to reflect the Consolidated Entity’s risk management strategy, hedge accounting is applied resulting in foreign exchange
gains or losses on the hedging instruments being recognised in the Consolidated Entity’s other comprehensive income,
within the foreign currency translation reserve. The cumulative gains or losses in the foreign currency translation reserve are
reclassified to the income statement at the time at which there is a disposal or partial disposal of the hedged foreign operation
(refer to Note 44 Significant accounting policies). Hedge ineffectiveness is recognised in net trading income in the income
statement. Given that the Consolidated Entity’s NIFO frequently changes, the hedge designations are reviewed on a monthly
basis or more frequently where required, which includes updating the NIFO exposure and rebalancing the associated
hedge designations.
Hedging instrument
Risk category
Foreign exchange contracts
Foreign exchange
Foreign currency denominated issued debt
Foreign exchange
Hedging instrument
Risk category
Foreign exchange contracts(1)
Foreign exchange
Foreign currency denominated issued debt
Foreign exchange
CONSOLIDATED CARRYING AMOUNT
ASSET
LIABILITY
2021
$m
51
2020
$m
266
–
2021
$m
223
2020
$m
13
16,322
17,845
CONSOLIDATED NOTIONAL
ASSET
LIABILITY
2021
$m
2,211
2020
$m
4,131
–
2021
$m
4,877
16,244
2020
$m
1,083
17,732
In order to hedge the currency exposure of certain net investments in foreign operations, the Consolidated Entity jointly
designates both foreign exchange contracts (from the currency of the underlying foreign operation to USD) and foreign
denominated issued debt (from USD to AUD). As a result, the notional value of hedging instruments presented in the table
above of $23,332 million (2020: $22,946 million) represents the notional of both the derivative hedging instruments and the
foreign denominated issued debt and hence exceeds the $16,683 million (2020: $17,631 million) notional of the underlying hedged
component of the Consolidated Entity’s net investment in foreign operations.
Hedge ineffectiveness is the extent to which the absolute change in either the fair value of the derivative or the carrying
amount of foreign currency denominated debt issued attributable to the change in exchange rates exceeds that of the
hedged item. There was no ineffectiveness recognised in the income statement by the Consolidated Entity in the current year
(2020: $Nil).
(1) Where the fair value of the derivative is positive/(negative), the notional of the derivative has been similarly included in the table as an asset/(liability).
219
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a
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i
a
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m
a
t
i
o
n
Note 35
Hedge accounting continued
Fair value hedges
The fair value attributable to the hedged risk is recognised as a fair value adjustment to the hedged item on the balance sheet.
In an effective fair value hedge relationship, movements in this fair value adjustment are largely offset by movements in the fair
value of the hedging instrument. Any residual is recognised as ineffectiveness in net trading income in the income statement.
Executed rates for fair value hedges of interest rate risk and commodity price risk have not been shown as these would
represent the market reference rates at the time of designation.
Hedging instruments
Instrument type
Risk category
Derivative assets
Cross currency swaps
Interest rate swaps
Interest rate
Interest rate
Commodity forward contracts
Commodity price
Derivative liabilities
MATURITY ANALYSIS PER NOTIONAL
Less than
3 months
$m
3 to 12
months
$m
1 to 5
years
$m
Over 5
years
$m
Total
$m
CONSOLIDATED 2021
1,204
1
1,401
2
884
11,751
435
4,852
1,319
19,208
3
Interest rate swaps
Interest rate
791
2,220
6,231
3,669
12,911
CONSOLIDATED 2020
Derivative assets
Cross currency swaps
Interest rate swaps
Interest rate
Interest rate
Commodity forward contracts
Commodity price
Derivative liabilities
34
–
4
997
4,561
15
1,382
11,298
4
Interest rate swaps
Interest rate
525
2,724
4,408
605
9,215
–
–
Instrument type
Cross currency swaps
Interest rate swaps
Risk category
Interest rate
Interest rate
Commodity forward contracts
Commodity price
CONSOLIDATED CARRYING AMOUNT
2021
2020
Asset
$m
56
883
Liability
$m
351
Asset
$m
106
1,806
7
3,018
25,074
23
7,657
Liability
$m
–
212
–
220
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 35
Hedge accounting continued
Hedged item
As the hedged item is adjusted only for the hedged risk, the hedged item’s carrying value disclosed in the following table will not
be equivalent to its fair value as disclosed in other notes to these financial statements. The accumulated amount of the fair
value hedge adjustments remaining in the Statements of financial positions for hedged items that have ceased to be adjusted
for hedging gains and losses is $3 million gain (2020: $19 million loss) for the Consolidated Entity and have been included in the
fair value hedge adjustment in the table below. These amounts will be amortised to the income statement on an effective
interest rate basis.
CONSOLIDATED 2021
CONSOLIDATED 2020
Carrying amount(1)
$m
Fair value
hedge adjustment
$m
Carrying amount(1)
$m
Fair value
hedge adjustment
$m
400
7,940
19,874
5,372
50
(628)
(10)
104
7,200
2
24,870
4,920
4
128
2
(1,380)
(318)
Assets
Financial investments(2)
Loan assets
Commodity transportation contracts
Liabilities
Debt issued
Loan capital
Hedge ineffectiveness
In the case of a fair value hedge, hedge ineffectiveness is the extent to which the changes in the fair value of the hedging
instrument differ to that of the hedged item.
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i
F
n
a
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c
i
a
l
Hedging instrument
Cross currency swaps
Interest rate swaps
Risk Category
Interest rate
Interest rate
Commodity forward contracts(3) Commodity price
Total
CONSOLIDATED
Gain/(loss) on hedging
instrument
Gain/(loss) on
hedged item
Hedge
ineffectiveness
gain/(loss)
2021
$m
(49)
(890)
(7)
(946)
2020
$m
43
1,329
64
1,436
2021
$m
48
936
(2)
982
2020
$m
(45)
(1,317)
(53)
(1,415)
2021
$m
(1)
46
(9)
36
2020
$m
(2)
12
11
21
R
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p
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h
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I
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f
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a
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i
o
n
(1) The carrying amounts in the table above exclude accrued interest and include fair value hedge adjustments.
(2) The carrying amount includes debt instruments classified at fair value through other comprehensive income. Where this applies the fair value hedge adjustment for interest rate risk
is recognised in the income statement together with changes in the fair value of the hedging instrument.
(3) These hedges remain highly effective despite temporary dislocations in the market during the current period.
221
Note 36
Financial risk management
Risk Management and Risk Management Group (RMG)
Risk is an integral part of the Consolidated Entity’s
businesses. The material risks faced by the Consolidated
Entity include aggregate, asset, conduct, credit,
environmental and social (including climate change), equity,
financial crime, legal, liquidity, market, operational (including
cyber and information security), regulatory and compliance,
reputational, strategic, tax, and work health and safety risks.
The primary responsibility for risk management lies with the
business. An important part of the role of all staff throughout
Macquarie is to ensure they manage risks appropriately.
RMG is independent of other areas of the Consolidated
Entity. RMG approval is required for all material risk
acceptance decisions. RMG reviews and assesses risks and
sets limits. Where appropriate, these limits are approved
by the Executive Committee and the Board. The Head of
RMG, as Macquarie’s CRO, is a member of the Executive
Committee of MGL and MBL and reports directly to the CEO
with a secondary reporting line to the Board Risk Committee.
Further details on the Risk Management Framework in the
Consolidated Entity can be found in the Risk Management
Report of this Annual Report.
On 1 April 2021, APRA announced actions required regarding
Macquarie Bank Limited’s (MBL) risk management practices
and ability to calculate and report key prudential ratios.
APRA increased MBL’s operational risk capital requirement
and made adjustments to requirements for certain liquidity
prudential ratios, effective from 1 April 2021. The actions
relate to specific intra-group funding arrangements as
well as breaches of APRA’s reporting standards on liquidity
between 2018 and 2020. APRA noted that the breaches are
historical and do not impact the current overall soundness of
Macquarie Group’s capital and liquidity positions.
While specific historical matters leading to these actions have
been addressed, Macquarie acknowledges that continued
work is required on its risk governance and operating
platform and has programs in place to strengthen capital
and liquidity reporting and its risk management framework.
Macquarie will work closely with APRA on these programs
through a period of intensified supervision.
Note 36.1 Credit risk
Credit risk is the risk that a counterparty will fail to
complete its contractual obligations when they fall due.
The consequential loss is either the amount of the loan or
financial obligation not paid back, or the loss incurred in
replicating a trading contract with a new counterparty.
Credit risk assessment and approval
Exercise of credit authority within Macquarie is undertaken
under authority delegated by the MGL and MBL Boards
directly. Credit risk assessment includes a comprehensive
review of the creditworthiness of the counterparty and
related entities, key risk and mitigants, and that the downside
risk is properly understood and acceptable.
222
After this analysis is undertaken, limits are set for an
acceptable level of potential exposure. All wholesale limits and
ratings are reviewed at least once a year or more frequently if
required. Retail credit exposures are monitored by the business
units and overseen by RMG Credit on a portfolio basis.
All credit exposures are monitored regularly against limits.
Credit exposures for loan assets are reported at amortised
cost. Derivative exposures are measured using high
confidence potential future underlying asset prices.
To mitigate credit risk, where appropriate, the Consolidated
Entity makes use of margining and other forms of collateral
or credit enhancement techniques (including guarantees,
letters of credit and the purchase of credit default swaps).
Ratings and reviews
Refer to Note 13 Expected credit losses for details regarding
the manner in which the Consolidated Entity has adopted and
applied AASB 9’s expected credit loss impairment requirements.
Wholesale rating:
Macquarie wholesale ratings broadly correspond to Standard
& Poor’s credit ratings as follows:
Credit Profile
Internal Rating
Standard & Poor’s
Equivalent
Investment grade
MQ1 to MQ8
AAA to BBB-
Non-investment grade MQ9 to MQ16
BB+ to C
Default
MQ99
Default
Retail rating
Retail pools are mapped to the credit quality grades based
on their PDs.
Mapping retail portfolios to the credit grades has been
done for comparability of the overall portfolio presentation
and does not reflect the way that the retail portfolio is
segmented for management purposes. Management reviews
a range of information, including past due status for the
portfolio, to assess the credit quality of these assets.
Due from subsidiaries
Balances with subsidiaries are mapped to the rating grades
assigned internally to these counterparties for the pricing of
internal funding arrangements on an arm’s length basis.
Portfolio and country risk
A review of the credit portfolio analysing credit
concentrations by counterparty, geography, risk type,
industry and credit quality is carried out quarterly and
reported to the Board semi-annually. Policies are in place to
regulate large exposures to single counterparties or groups of
counterparties.
The Consolidated Entity has a country risk management
framework which covers the assessment of country risk and
the approval of country risk limits. Where appropriate the
country risk is mitigated by political risk insurance.
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 36
Financial risk management continued
Note 36.1 Credit risk continued
Credit quality of financial assets
The table below discloses, by credit rating grades and ECL impairment stage, the gross carrying amount(1) of assets measured at
amortised cost or FVOCI and off balance sheet exposures of the Consolidated Entity subject to the impairment requirements
of AASB 9. The credit quality is based on the counterparty’s credit rating using the Consolidated Entity’s credit rating system
and excludes the benefit of collateral and credit enhancements.
Stage I(2)
Stage II(2)
Stage III(2)
Investment grade
Cash and bank balances
Cash collateral on securities borrowed and reverse
repurchase agreements
Margin money and settlement assets
Financial investments
Held for sale and other assets
Loan assets
Undrawn credit commitments, letters of credit and financial
guarantee contracts
Total investment grade
Non‑investment grade
Cash and bank balances
Cash collateral on securities borrowed and reverse
repurchase agreements
Margin money and settlement assets
Financial investments
Held for sale and other assets
Loan assets
Loans to associates and joint ventures
Undrawn credit commitments, letters of credit and financial
guarantee contracts
Total non‑investment grade
Default
Margin money and settlement assets
Held for sale and other assets
Loan assets
Loans to associates and joint ventures
Undrawn credit commitments, letters of credit and financial
guarantee contracts
Total default
Total
$m
18,232
23,033
11,850
7,579
1,391
47,222
3,153
112,460
193
5,739
1,985
71
1,184
44,354
264
4,593
58,383
‑
‑
‑
‑
‑
‑
170,843
$m
‑
‑
‑
‑
‑
1,272
‑
1,272
‑
‑
5
‑
61
10,849
318
728
11,961
‑
‑
‑
‑
‑
‑
13,233
Total
$m
$m
CONSOLIDATED 2021
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
296
156
2,024
143
221
2,840
2,840
18,232
23,033
11,850
7,579
1,391
48,494
3,153
113,732
193
5,739
1,990
71
1,245
55,203
582
5,321
70,344
296
156
2,024
143
221
2,840
186,916
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o
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t
i
F
n
a
n
c
i
a
l
R
e
p
o
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t
F
u
r
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
(1) For the purposes of this disclosure gross carrying amount of financial assets measured at amortised cost represents the amortised cost before ECL allowance and gross carrying
amount of financial assets measured at FVOCI represents amortised cost before fair value adjustments and ECL allowance.
(2) For definitions of stage I, II and III, refer to Note 13 Expected credit losses. Whilst exposures may have migrated to stage II it should not be inferred that such exposures are of a lower
credit quality. The ECL for the stage III assets includes the benefit of collateral and other credit enhancements.
223
Note 36
Financial risk management continued
Note 36.1 Credit risk continued
Financial assets by ECL stage
Cash and bank balances
Cash collateral on securities borrowed and reverse
repurchase agreements
Margin money and settlement assets
Financial investments
Held for sale and other assets
Loan assets
Loans to associates and joint ventures
Undrawn credit commitments, letters of credit and financial
guarantee contracts
Total financial assets ECL by stage
Stage I(1)
$m
Stage II(1)
$m
Stage III(1)
$m
Total
$m
CONSOLIDATED 2021
18,425
28,772
13,835
7,650
2,575
91,576
264
7,746
170,843
5
61
12,121
318
728
13,233
296
156
2,024
143
221
2,840
18,425
28,772
14,136
7,650
2,792
105,721
725
8,695
186,916
Further analysis of credit risk for loan assets, being the Consolidated Entity’s most material credit exposure, is presented below:
OF WHICH PAST DUE
Investment
grade
$m
Non‑investment
grade
$m
Total other than
default
$m
Up to 30
days
$m
31 to <90
days
$m
Home loans(2)
38,372
32,906
71,278
Asset
financing
Corporate,
commercial
and other
lending
Investment
lending
Total(3)
3,756
9,546
13,302
4,319
12,523
16,842
2,047
48,494
228
55,203
2,275
103,697
447
304
56
807
166
60
109
335
Total past
due but
not default
$m
613
364
Default
$m
Total
$m
CONSOLIDATED 2021
790
72,068
395
13,697
165
839
17,681
2,275
1,142
2,024
105,721
(1) For definitions of stage I, II and III, refer to Note 13 Expected credit losses. Whilst exposures may have migrated to stage II it should not be inferred that such exposures are of a lower
credit quality. The ECL for the stage III assets includes the benefit of collateral and other credit enhancements.
(2) Includes $12,190 million home loans for which insurance has been obtained from investment grade Lenders Mortgage Insurance (LMI) counterparties and another $39,909 million
home loans where the Consolidated Entity has bought risk protection from a global panel of investment grade reinsurers via an excess of loss and quota share structure. Refer to
Note 36.1 Credit risk section Collateral and credit enhancements for further details.
(3) The credit quality is based on the counterparties’ credit rating as determined by the Consolidated Entity’s credit rating system and excludes the benefit of collateral and
credit enhancements.
224
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 36
Financial risk management continued
Note 36.1 Credit risk continued
Credit quality of financial assets
The table below discloses, by credit rating grades and ECL impairment stage, the gross carrying amount(1) of assets measured at
amortised cost or FVOCI and off balance sheet exposures of the Consolidated Entity subject to the impairment requirements
of AASB 9. The credit quality is based on the counterparty’s credit rating using the Consolidated Entity’s credit rating system
and excludes the benefit of collateral and credit enhancements.
Stage I(2)
Stage II(2)
Stage III(2)
Investment grade
Cash and bank balances
Cash collateral on securities borrowed and reverse
repurchase agreements
Margin money and settlement assets
Financial investments
Held for sale and other assets
Loan assets
Loans to associates and joint ventures
Undrawn credit commitments, letters of credit and
financial guarantees
Total investment grade
Non‑investment grade
Cash and bank balances
Cash collateral on securities borrowed and reverse
repurchase agreements
Margin money and settlement assets
Financial investments
Held for sale and other assets
Loan assets
Loans to associates and joint ventures
Undrawn credit commitments, letters of credit and
financial guarantees
Total non‑investment grade
Default
Margin money and settlement assets
Financial investments
Held for sale and other assets
Loan assets
Loans to associates and joint ventures
$m
9,603
23,432
12,571
7,196
1,599
47,468
52
2,236
104,157
114
6,321
3,147
147
2,210
29,737
666
4,305
46,647
–
–
–
–
–
$m
–
–
–
–
–
418
–
–
418
–
–
104
–
40
14,320
–
198
14,662
–
–
–
–
–
Undrawn credit commitments, letters of credit and
financial guarantees
Total default
Total
–
–
150,804
–
–
15,080
A
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a
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o
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t
i
F
n
a
n
c
i
a
l
R
e
p
o
r
t
F
u
r
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Total
$m
$m
CONSOLIDATED 2020
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
87
2
300
1,991
198
53
2,631
2,631
9,603
23,432
12,571
7,196
1,599
47,886
52
2,236
104,575
114
6,321
3,251
147
2,250
44,057
666
4,503
61,309
87
2
300
1,991
198
53
2,631
168,515
(1) For the purposes of this disclosure gross carrying amount of financial assets measured at amortised cost represents the amortised cost before ECL allowance and gross carrying
amount of financial assets measured at FVOCI represents amortised cost before fair value adjustments and ECL allowance.
(2) For definitions of stage I, II and III, refer to Note 13 Expected credit losses. Whilst exposures may have migrated to stage II it should not be inferred that such exposures are of a lower
credit quality. The ECL for the stage III assets includes the benefit of collateral and other credit enhancements.
225
Note 36
Financial risk management continued
Note 36.1 Credit risk continued
Financial assets by ECL stage
Cash and bank balances
Cash collateral on securities borrowed
and reverse repurchase agreements
Margin money and settlement assets
Financial investments
Held for sale and other assets
Loan assets
Loans to associates and joint ventures
Undrawn credit commitments, letters
of credit and financial guarantees
Total financial assets by ECL stage
Stage I(1)
$m
9,717
29,753
15,718
7,343
3,809
77,205
718
6,541
150,804
Stage II(1)
$m
Stage III(1)
$m
Total
$m
CONSOLIDATED 2020
–
–
104
–
40
14,738
–
198
15,080
–
–
87
2
300
1,991
198
53
2,631
9,717
29,753
15,909
7,345
4,149
93,934
916
6,792
168,515
Further analysis of credit risk for loan assets being the Consolidated Entity’s most material credit exposure is presented below:
OF WHICH PAST DUE
Investment
grade
$m
Non-investment
grade
$m
Total other than
default
$m
Up to 30
days
$m
31 to <90
days
$m
Home loans(3)
Asset financing
Corporate,
commercial and
other lending
Investment
lending
Total(4)
40,010
1,927
15,966
14,379
55,976
16,306
3,526
13,573
17,099
2,423
47,886
139
44,057
2,562
91,943
337
807
60
–
1,204
274
124
75
–
473
Total past
due but not
default(2)
$m
611
931
Default
$m
Total
$m
CONSOLIDATED 2020
677
560
56,653
16,866
135
754
17,853
–
1,677
–
1,991
2,562
93,934
(1) For definitions of stage I, II and III, refer to Note 13 Expected credit losses. Whilst exposures may have migrated to stage II it should not be inferred that such exposures are of a lower
credit quality. The ECL for the stage III assets includes the benefit of collateral and other credit enhancements.
(2) Loan assets of $177 million for which borrowers have been meeting their repayment obligations until recently and have applied for payment deferrals as a result of COVID-19 are not
considered past due by the Consolidated Entity.
(3) Includes $14,263 million home loans for which insurance has been obtained from investment grade Lenders Mortgage Insurance (LMI) counterparties and another $35,837 million
home loans where the Consolidated Entity has bought risk protection from a panel of investment grade companies via an excess of loss structure. Refer to Note 36.1 Credit risk
section Collateral and credit enhancements for further details.
(4) The credit quality is based on the counterparties’ credit rating as determined by the Consolidated Entity’s credit rating system and excludes the benefit of collateral and credit enhancements.
226
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 36
Financial risk management continued
Note 36.1 Credit risk continued
The following table below discloses, by credit rating grades, the gross carrying amount of assets measured at amortised cost or
FVOCI and off balance sheet exposures of the Company subject to the impairment requirements of AASB 9.
Investment grade
Due from subsidiaries
Undrawn commitments, letters of credit and financial guarantees(1)
Total investment grade
Non‑investment grade
Due from subsidiaries
Total non‑investment grade
Financial assets by ECL stage
Due from subsidiaries
Undrawn commitments, letters of credit and financial guarantees(1)
Financial assets by ECL stage
COMPANY 2021
COMPANY 2020
Stage I
$m
19,260
4,402
23,662
19,260
4,402
23,662
Total
$m
19,260
4,402
23,662
19,260
4,402
23,662
Stage I
$m
29,438
5,877
35,315
28
28
29,466
5,877
35,343
Total
$m
29,438
5,877
35,315
28
28
29,466
5,877
35,343
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(1) The Company includes guarantees to counterparties with respect to their exposures to certain subsidiaries. These guarantees have a maximum value of $6,270 million (2020: $7,898 million)
with the amount disclosed in the table above being the component of that guarantee value equivalent to the fair value of the underlying risk position at the reporting date.
227
Note 36
Financial risk management continued
Note 36.1 Credit risk continued
Credit risk concentration
The table below details the concentration of credit risk by significant geographical location and counterparty type of the
Consolidated Entity’s assets measured at amortised cost or FVOCI and off balance sheet exposures subject to the impairment
requirements of AASB 9. The geographical location is determined by the country of risk or country of domicile. Counterparty
type is based on APRA classification.
Cash
collateral on
securities
borrowed
and reverse
repurchase
agreements
$m
Cash
and bank
balances
$m
Margin
money and
settlement
assets
$m
Financial
investments
$m
Held for
sale and
other
assets
$m
Loan
assets(1)
$m
Loans to
associates
and joint
ventures
$m
Undrawn credit
commitments
and financial
guarantees
$m
Total
$m
CONSOLIDATED 2021
13
16
15
45
11,593
11,593
2,157
2,157
2,372
2,372
1,941
1,088
3,042
136
1,771
1,771
1,011
1,591
2,738
5,114
583
5,713
571
‑
571
161
327
503
24
284
308
2,818
91,467
94,330
311
311
22
88
4
1,463
15,404
1,982
2,519
900
426
675
759
3,980
4
4
14
14
319
156
11
100
549
24,548
4,469
97,938
5,029 122,586
5
5
5
15
141
5,539
2,205
7,885
1
115
84
21,337
344
7,674
1,463
15,404
4,523
900
1,189
4,743
475
429
29,126
3,212
3,212
23
92
110
9,225
9,225
1,959
1,851
3,833
448
18
466
158
542
792
2,472
3,755
6,337
18,425
28,772
14,136
7,650
2,792
105,721
232
232
725
3
228
215
17,689
3,004
9,402
3,222
27,319
8,695
186,916
Australia
Governments
Financial
institutions
Other
Total Australia
Asia Pacific
Governments
Financial
institutions
Other
Total Asia Pacific
Europe, Middle
East and Africa
Governments
Financial
institutions
Other
Total Europe,
Middle East and
Africa
Americas
Governments
Financial
institutions
Other
Total Americas
Total gross
credit risk(2)
(1) Loan assets in the Australia region includes Home loans of $71,751 million, Asset financing of $12,433 million, Corporate, commercial and other lending of $9,461 million and
Investment lending of $685 million.
(2) For the purposes of this disclosure gross carrying amount of financial assets measured at amortised cost represents the amortised cost before ECL allowance and gross carrying
amount of financial assets measured at FVOCI represents amortised cost before fair value adjustments and ECL allowance.
228
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 36
Financial risk management continued
Note 36.1 Credit risk continued
Cash collateral
on securities
borrowed
and reverse
repurchase
agreements
$m
Cash
and bank
balances
$m
Margin
money and
settlement
assets
$m
Financial
investments
$m
Held for
sale and
other
assets
$m
Loan
assets(1)
$m
Loans to
associates
and joint
ventures
$m
Undrawn
credit
commitments
and financial
guarantees
$m
Total
$m
CONSOLIDATED 2020
–
2,121
–
2,121
–
1,637
–
1,637
668
1,314
–
–
–
188
17
112
2,148
–
2,148
1,978
1,119
3,097
4,006
990
5,184
142
353
512
2,646
76,449
79,207
–
344
–
–
3,231
–
3,231
1,003
1,103
2,450
558
–
558
32
505
537
–
–
523
523
–
–
–
152
10
13,855
–
2,363
2,937
1,266
–
357
1,486
494
4,014
–
47
–
47
–
–
37
37
–
373
188
–
317
269
13,357
3,378
3,647
82,289
95,963
6
–
152
158
350
6,461
2,320
9,131
58
888
30
463
20,052
9,088
1,982
13,855
5,300
1,266
1,995
4,518
561
551
30,028
–
3,977
–
3,977
–
23
–
92
125
10,519
–
10,519
3,148
1,891
5,062
337
–
337
537
476
4,510
5,051
1,105
9,686
9,717
29,753
15,909
7,345
4,149
93,934
–
–
271
271
916
4
244
197
23,225
2,235
2,436
9,924
33,393
6,792
168,515
Australia
Governments
Financial
institutions
Other
Total Australia
Asia Pacific
Governments
Financial
institutions
Other
Total Asia Pacific
Europe, Middle
East and Africa
Governments
Financial
institutions
Other
Total Europe,
Middle East and
Africa
Americas
Governments
Financial
institutions
Other
Total Americas
Total gross
credit risk(2)
(1) Loan assets in the Australia region includes Home loans of $56,270 million, Asset financing of $14,745 million, Corporate, commercial and other lending of $8,020 million and
Investment lending of $172 million.
(2) For the purposes of this disclosure gross carrying amount of financial assets measured at amortised cost represents the amortised cost before ECL allowance and gross carrying
amount of financial assets measured at FVOCI represents amortised cost before fair value adjustments and ECL allowance.
229
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t
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a
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c
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a
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Note 36
Financial risk management continued
Note 36.1 Credit risk continued
Australia
Financial institutions
Other
Total Australia
Asia Pacific
Financial institutions
Other
Total Asia Pacific
Europe, Middle East and Africa
Financial institutions
Other
Total Europe, Middle East and Africa
Americas
Financial institutions
Other
Total Americas
Total gross credit risk
Australia
Financial institutions
Other
Total Australia
Asia Pacific
Financial institutions
Other
Total Asia Pacific
Europe, Middle East and Africa
Financial institutions
Other
Total Europe, Middle East and Africa
Americas
Financial institutions
Other
Total Americas
Total gross credit risk
Due from
subsidiaries(1)
$m
Undrawn
commitments
and financial
guarantees(2)
$m
Total
$m
COMPANY 2021
18,074
1,173
19,247
2
1
3
2
‑
2
6
2
8
19,260
29,407
9
29,416
2
3
5
11
–
11
33
1
34
29,466
‑
232
232
‑
344
344
‑
168
168
488
3,170
3,658
4,402
–
292
292
–
543
543
–
448
448
619
3,975
4,594
5,877
18,074
1,405
19,479
2
345
347
2
168
170
494
3,172
3,666
23,662
COMPANY 2020
29,407
301
29,708
2
546
548
11
448
459
652
3,976
4,628
35,343
(1) Due from subsidiaries have been presented as Financial institutions and Other based on APRA’s Standard Institutional Sector Classifications of Australia (SISCA) classification.
(2) The Company includes guarantees to counterparties with respect to their exposures to certain subsidiaries. These guarantees have a maximum value of $6,270 million (2020: $7,898 million)
with the amount disclosed in the table above being the component of that guarantee value equivalent to the fair value of the underlying risk position at the reporting date.
230
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 36
Financial risk management continued
Note 36.1 Credit risk continued
The table below details the concentration by significant geographical locations and counterparty type of the Consolidated
Entity’s financial assets which are not subject to impairment requirements of AASB 9 since they are measured at fair
value through profit and loss. Financial assets that are subject to risks other than credit risk, such as equity investments,
commodities, bank notes and coins are excluded from the table below.
Cash collateral
on securities
borrowed
and reverse
repurchase
agreements
$m
Margin
money and
settlement
assets
$m
Trading
assets
$m
Derivative
assets
$m
Financial
investments
$m
Held for
sale and
other
assets
$m
Loans to
associates
and joint
ventures
$m
Loan
assets
$m
Total
$m
CONSOLIDATED 2021
Australia
Governments
Financial
institutions
Other
Total Australia
Asia Pacific
Governments
Financial
institutions
Other
Total Asia Pacific
Europe, Middle
East and Africa
Governments
Financial
institutions
Other
Total Europe,
Middle East and
Africa
Americas
Governments
Financial
institutions
Other
Total Americas
Total gross
credit risk
‑
‑
‑
‑
‑
264
‑
264
3,842
1,235
5
5,082
125
18
937
1,080
‑
‑
2,203
‑
15
969
2,203
984
‑
403
5,438
4
5,442
25
427
855
‑
‑
‑
‑
6
6
‑
‑
‑
‑
‑
‑
326
326
10
1,581
1,473
3,064
41
582
703
1,326
18
4,514
5,360
‑
‑
‑
‑
‑
104
3
107
‑
52
6
‑
‑
29
29
‑
‑
335
335
‑
‑
‑
60
69
129
‑
‑
6
6
38
‑
‑
9
7
16
‑
‑
‑
‑
‑
‑
417
208
20
3,852
2,885
1,583
8,320
166
968
1,990
3,124
56
6,784
6,980
9,892
58
417
246
20
13,820
15
4,051
2,294
6,360
‑
200
67
267
‑
‑
532
532
‑
1
102
103
‑
‑
‑
‑
418
9,715
3,752
13,885
7,909
8,001
332
20,642
432
1,313
484
36
39,149
231
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Note 36
Financial risk management continued
Note 36.1 Credit risk continued
The table below details the concentration by significant geographical locations and counterparty type of the Consolidated
Entity’s financial assets which are not subject to impairment requirements of AASB 9 since they are measured at fair
value through profit and loss. Financial assets that are subject to risks other than credit risk, such as equity investments,
commodities, bank notes and coins are excluded from the table below.
Cash collateral
on securities
borrowed
and reverse
repurchase
agreements
$m
Margin
money and
settlement
assets
$m
Trading
assets
$m
Derivative
assets
$m
Financial
investments
$m
Held for
sale and
other
assets
$m
Loan
assets
$m
Loans to
associates and
joint ventures
$m
Total
$m
CONSOLIDATED 2020
Australia
Governments
Financial
institutions
Other
Total Australia
Asia Pacific
Governments
Financial
institutions
Other
Total Asia Pacific
Europe, Middle
East and Africa
Governments
Financial
institutions
Other
Total Europe,
Middle East and
Africa
Americas
Governments
Financial
institutions
Other
–
–
–
–
–
822
–
822
–
1,782
–
4,613
60
–
4,673
441
106
91
638
–
48
527
1,782
575
–
2,015
5,353
–
35
695
Total Americas
5,353
2,745
–
–
3
3
–
–
223
223
–
–
–
–
3
12
314
329
165
6,894
1,989
9,048
28
587
1,647
2,262
13
13,149
11,618
–
–
–
–
–
55
7
62
–
136
8
–
–
25
25
–
–
278
278
–
–
528
–
52
–
52
–
–
–
–
16
–
192
–
8
1
9
–
–
–
–
–
–
4,778
7,014
2,018
13,810
469
1,570
2,246
4,285
29
15,115
77
12,950
24,780
144
528
208
77
28,094
57
6,683
2,777
9,517
–
102
15
117
–
–
176
176
–
76
1,004
1,080
–
–
99
99
2,075
12,261
5,080
19,416
Total gross
credit risk
7,957
8,631
555
45,607
323
1,007
1,340
185
65,605
232
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 36
Financial risk management continued
Note 36.1 Credit risk continued
Australia
Financial institutions
Other
Total Australia
Total gross credit risk
COMPANY 2021
COMPANY 2020
Due from
subsidiaries(1)
$m
Due from
subsidiaries(1)
$m
2,424
500
2,924
2,924
2,580
300
2,880
2,880
Maximum exposure to credit risk
For on-balance sheet instruments, the maximum exposure to credit risk is the carrying amount reported on the balance sheet
(refer to Note 37 Measurement categories of financial instruments). For off balance sheet instruments, the maximum exposure
to credit risk is a function of the contractual notional amount except for certain usage-based guarantees in which case the
maximum exposure is determined with respect to the fair value of the underlying exposure and is disclosed in Note 13 Expected
credit losses.
Collateral and credit enhancements held
Cash collateral on securities borrowed and reverse repurchase agreements
The Consolidated Entity enters into stock borrowing and reverse repurchase transactions with counterparties which require
lodgement of collateral.
Securities borrowed require the deposit of cash collateral with counterparties at amounts equal to or greater than the market
value of the securities borrowed. Reverse repurchase agreements are collateralised financing arrangements with the market
value of the securities that have been received as collateral generally in excess of the principal amount.
The fair value of non-cash collateral held not recognised in the Statements of financial position as at 31 March 2021 is
$37,149 million (2020: $38,072 million). The Consolidated Entity is permitted to sell or re-pledge the entire value of securities
received, of which the fair value of collateral sold or re-pledged is $8,796 million (2020: $7,852 million). The value attributed to
collateral held is judgemental and is generally subject to valuation movements. Macquarie may also incur additional selling
costs when a defaulted position is closed out.
(1) Due from subsidiaries have been presented as Financial Institution and Others based on APRA’s Standard Institutional Sector Classifications of Australia (SISCA) classification.
233
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Note 36
Financial risk management continued
Note 36.1 Credit risk continued
Loan assets
Home loans
Macquarie purchases risk protection for its Home Loans portfolio. Prior to 2017 this was in the form of Lenders Mortgage
Insurance from a well rated Australian LMI provider. Since then Macquarie has diversified its risk protection coverage to a global
panel of reinsurers (panel) via an excess of loss structure for all loans whereby Macquarie is exposed to a defined first loss on
a pooled basis for each year of home loan origination after which loss protection is in place to certain pre-defined levels and is
thereafter exposed to any excess loss. From 1 April 2020 Macquarie began purchasing quota share protection for greater than
80% LVR loans from the panel as well as excess of loss for greater than 70% LVR loans. The panel has diverse lines of business
coverage and ratings ranging from AA to A- from external rating agencies. The length of cover is up to 10 years.
The following table provides information on the loan to collateral value ratio as determined using loan carrying values and the
most recent valuation of the home loan collateral. Expected credit loss provisions disclosed in Note 13 Expected credit losses
include forward-looking assumptions for the value of the collateral in determining the ECL at the reporting date.
<=25%
>25% to 50%
>50% to 70%
>70% to 80%
>80% to 90%
>90% to 100%
Partly collateralised
Total home loans
Australia
$m
2021
EMEA
$m
Total
$m
Australia
$m
2,182
13,360
29,576
22,199
3,656
676
30
5
56
176
65
14
5
1
2,187
13,416
29,752
22,264
3,670
681
31
1,699
10,104
22,415
17,992
3,436
525
36
2020
EMEA
$m
Total
$m
CONSOLIDATED
5
67
205
72
27
5
3
1,704
10,171
22,620
18,064
3,463
530
39
71,679
322
72,001
56,207
384
56,591
234
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 36
Financial risk management continued
Note 36.1 Credit risk continued
Asset financing
The Consolidated Entity leases assets and provides
asset-related financing, predominantly motor vehicles, to
corporate and retail clients. Titles to the underlying assets
are held by the Consolidated Entity as collateral. Of the asset
finance portfolio of $13,354 million (2020: $16,564 million), the
credit exposure after considering the depreciated value of
collateral is $5,921 million (2020: $7,514 million).
The collateralised value is based on standard recovery rates
for the underlying assets of corporate and retail clients.
Corporate, commercial and other lending
Collateral held against corporate, commercial and other
lending consists of secured positions over assets of the
counterparty, often in the form of corporate assets. Of the
term lending of $17,396 million (2020: $18,403 million), the
credit exposure after considering the estimated value of
collateral and credit enhancements is $3,108 million (2020:
$2,853 million).
Investment lending
The Consolidated Entity lends to clients for investment
lending, where it holds the underlying investment and/or
alternative acceptable assets as collateral or holds security
by way of a registered pledge over the underlying investment.
Investment lending portfolio of $2,274 million (2020: $2,559
million) is fully collateralised.
Derivative instruments
Derivatives may be traded on an exchange (exchange traded)
or they may be privately negotiated contracts, which are
referred to as Over the Counter (OTC) derivatives. The
Consolidated Entity’s OTC derivatives are cleared and settled
either through central clearing counterparties (OTC-cleared),
or bilateral contracts between two counterparties.
Exchange traded derivative contracts have reduced credit
risk as the Consolidated Entity’s counterparty is a clearing
house except for the cases where it is trading through
another clearing house member. The clearing house is
responsible for managing the risk associated with the
process on behalf of their members and providing a high
level of confidence that adequate resources exist to fulfil its
obligations when they become due. Members are required to
provide initial margins in accordance with the exchange rules
in the form of cash or securities and provide daily variation
margins in cash to cover changes in market values of the
underlying derivatives. Further, all members are generally
required to contribute to (and guarantee) the compensation
or reserve fund which may be used in the event of default
and shortfall of a member. The Consolidated Entity held
exchange traded derivatives with positive replacement values
as at 31 March 2021 of $1,379 million (2020: $5,662 million).
For OTC derivative contracts, the Consolidated Entity
often has master netting agreements (usually ISDA Master
Agreements) with certain counterparties to manage
the credit risk. The credit risk associated with positive
replacement value contracts is reduced by master netting
arrangements which, in the event of default, require balances
with a particular counterparty covered by the agreement
(for example derivatives and cash margins) to be terminated
and settled on a net basis. The Consolidated Entity also often
executes a Credit Support Annexure in conjunction with a
master netting agreement. This facilitates the transfer of
margin between parties during the term of arrangements
and mitigates counterparty risk arising from changes in
market values of the derivatives.
As at 31 March 2021, the Consolidated Entity held OTC
contracts with a positive replacement value of $19,263 million
(2020: $39,945 million). The credit risk of these contracts
has been reduced due to master netting agreements
covering negative OTC contracts of $11,048 million (2020:
$24,154 million) and margins and financial collateral held
(excluding the impact of over-collateralisation) of
$3,054 million (2020: $5,882 million).
Financial investments
This classification mainly includes debt securities held by
the Consolidated Entity primarily in the nature of bonds,
negotiable certificates of deposits (NCD), floating rate
notes (FRN), commercial paper and other debt securities
for liquidity management purposes and other securities for
short-term gains.
The Consolidated Entity utilises Credit Default Swaps (CDS),
guarantees, other forms of credit enhancements or collateral
in order to minimise the exposure to this credit risk.
Margin money and settlement assets
Security and commodity settlements of $7,253 million
(2020: $6,698 million) and $2,292 million (2020: $2,457 million)
respectively included in margin money and settlement assets,
represent amounts owed by an exchange (or a client) for
equities, commodities and other securities sold. These assets
are collateralised with the underlying securities, commodities
or cash held by the Consolidated Entity until the date of
settlement. The period between trade and settlement date
varies as per regional regulatory and business norms.
Credit commitments
Undrawn facilities and lending securities commitments of
$7,210 million (2020: $4,844 million) are secured through
collateral and credit enhancement out of the total
undrawn facilities and lending securities commitments of
$14,041 million (2020: $11,948 million).
235
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Financial risk management continued
Note 36.1 Credit risk continued
Additional collateral
Apart from collateral details disclosed above, the
Consolidated Entity also holds other types of collateral, such
as unsupported guarantees. While such mitigants have value
as a credit risk mitigant often providing rights in insolvency,
their assignable values are uncertain and therefore are
assigned no value for disclosure purposes.
The home loan and asset finance balance includes
$11,344 million (2020: $16,402 million) of loans which has
been securitised by consolidated SEs.
For all collaterals, in the event of default realised collateral
values may be lower than the value of collateral as at the
reporting date.
Note 36.2 Liquidity risk
Governance and oversight
Macquarie’s liquidity risk management framework is designed
to ensure that it is able to meet its funding requirements as
they fall due under a range of market conditions.
Liquidity management is performed centrally by Group
Treasury, with oversight from the Asset and Liability
Committee (ALCO) and RMG. Macquarie’s liquidity policy is
approved by the MGL and MBL Boards after endorsement
by the ALCO and liquidity reporting is provided to the Boards
on a regular basis. The ALCO includes the MGL CEO, MBL
CEO, CFO, CRO, Co-Heads of Group Treasury and Operating
Group Heads.
RMG provides independent oversight of liquidity risk
management, including ownership of liquidity policies and key
limits and approval of material liquidity scenario assumptions.
Liquidity policy and risk appetite
The MGL and MBL liquidity policies are designed so that
each of Macquarie, the Bank Group and the Non-Bank
Group maintains sufficient liquidity to meet its obligations
as they fall due. The MBL Liquidity Policy outlines the
standalone framework for the Bank Group and its principles
are consistent with the MGL Liquidity Policy. MGL provides
funding predominantly to the Non-Bank Group. Macquarie’s
liquidity risk appetite is intended to ensure that Macquarie
is able to meet all of its liquidity obligations during a period
of liquidity stress: a twelve month period with constrained
access to funding markets for MBL, no access to funding
markets for MGL and with only a limited reduction in
Macquarie’s franchise businesses.
Reflecting the longer-term nature of the Non-Bank Group
asset profile, MGL is funded predominantly with a mixture
of capital and long-term wholesale funding. MBL is an
authorised deposit-taking institution and is funded mainly
with capital, long-term liabilities and deposits.
Liquidity contingency plan
Group Treasury maintains a Liquidity Contingency Plan, which
outlines how a liquidity crisis would be managed. The plan
defines roles and responsibilities and actions to be taken
in a liquidity event, including identifying key information
requirements and appropriate communication plans with
both internal and external parties.
Specifically, the plan details:
• factors that may constitute a crisis
• the officers responsible for enacting the plan
• a committee of senior executives responsible for
managing a crisis
• the information required to effectively manage a crisis
• a communications strategy
• a high level checklist of possible actions to conserve or
raise additional liquidity
• contact lists to facilitate prompt communication with all
key internal and external stakeholders.
In addition, Macquarie monitors a range of early warning
indicators on a daily basis that might assist in identifying
emerging risks in Macquarie’s liquidity position. These
indicators are reviewed by Senior Management and are used
to inform any decisions regarding invoking the plan.
The Liquidity Contingency Plan is subject to regular review by
both Group Treasury and RMG. It is submitted annually to the
ALCO and the MGL and MBL Boards for approval.
Macquarie is a global financial institution, with branches and
subsidiaries in a variety of countries. Regulations in certain
countries may require some branches or subsidiaries to have
specific local contingency plans. Where that is the case, the
Liquidity Contingency Plan contains either a supplement or
a reference to a separate document providing the specific
information required for those branches or subsidiaries.
Funding strategy
Macquarie prepares a Funding Strategy for both MGL and
MBL on an annual basis and monitors progress against the
strategy throughout the year.
The Funding Strategy aims to maintain Macquarie’s diversity
of current and projected funding sources for MGL and
MBL, ensure ongoing compliance with all liquidity policy
requirements and facilitate forecast asset growth.
The Funding Strategy is reviewed by the ALCO and approved
by the respective Boards.
Scenario analysis
Scenario analysis is central to Macquarie’s liquidity risk
management framework. In addition to regulatory defined
scenarios, Group Treasury models additional liquidity
scenarios covering both market-wide and Macquarie
name-specific crises.
These scenarios use a range of assumptions, which
Macquarie intends to be conservative, regarding the level
of access to capital markets, deposit outflows, contingent
funding requirements and asset sales.
236
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Note 36
Financial risk management continued
Note 36.2 Liquidity risk continued
As an example, one internal scenario projects the expected
cash and liquid asset position during a combined market-wide
and Macquarie name-specific crisis over a twelve month
time frame. This scenario assumes no access to wholesale
funding markets, a significant loss of customer deposits
and contingent funding outflows resulting from undrawn
commitments, market moves impacting derivatives and
other margined positions combined with a multiple notch
credit rating downgrade. Macquarie’s cash and liquid
asset portfolio must exceed the minimum requirement as
calculated in this scenario at all times.
Liquid asset holdings
Group Treasury centrally maintains a portfolio of highly
liquid unencumbered assets which are intended to ensure
adequate liquidity is available under a range of market
conditions. The minimum level of cash and liquid assets is
calculated with reference to internal scenario projections and
regulatory requirements.
The cash and liquid asset portfolio contains only
unencumbered assets that can be relied on to maintain their
liquidity in a crisis scenario. Specifically, cash and liquid assets
held to meet minimum internal and regulatory requirements
must be held in cash (including central bank reserves and
overnight lending to financial institutions), qualifying High
Quality Liquid Assets (HQLA) or be eligible as collateral in
the Reserve Bank of Australia’s (RBA) facilities such as the
Committed Liquidity Facility (CLF) – so called ‘Alternative
Liquid Assets’ (ALA). Composition constraints are also applied
to ensure appropriate diversity and quality of the assets
in the portfolio. The cash and liquid asset portfolio is held
in a range of currencies consistent with the distribution of
liquidity needs by currency, allowing for an acceptable level of
currency mismatches.
Funds transfer pricing
An internal funds transfer pricing framework is in place that
has been designed to produce appropriate incentives for
business decision-making by reflecting the true funding costs
arising from business actions and the separate funding tasks
and liquidity requirements of the Bank and Non-Bank Groups.
Under this framework, each business is allocated the full cost
of the funding required to support its products and business
lines, recognising the actual and contingent funding-related
exposures their activities create. Businesses that raise
funding are compensated at a level that is appropriate for the
liquidity benefit provided by the funding.
Undrawn credit lines and facilities
The Consolidated Entity has $2,279 million (March 2020:
$2,775 million) of available undrawn credit lines and facilities
at 31 March 2021. On 19 March 2020, the RBA announced
that it was establishing a Term Funding Facility (TFF) that
would offer authorised deposit-taking institutions three
year funding at a rate of 0.25% per annum in response
to COVID-19. Subsequent to the Initial and Additional
Allowances, the RBA expanded the facility by introducing
Macquarie Group Limited and its subsidiaries 2021 Annual Report
a Supplementary Allowance and also reduced the rate
on subsequent drawdowns to 0.10% (for Additional and
Supplementary Allowances). As at March 2021, MBL has been
granted a Funding Allowance of $7,625 million (March 2020:
$1,911 million) and has drawn $1,723 million (March 2020: $Nil)
of this Funding Allowance. MBL has not included the TFF in
the available undrawn credit lines and facilities balance.
Contractual undiscounted cash flows
The following tables summarise the maturity profile of
the Consolidated Entity’s financial liabilities as at 31 March
based on a contractual undiscounted repayment basis and
hence would vary from the carrying value as reported on
the Statements of financial position at the balance date.
Repayments subject to notice are treated as if notice were
given immediately. This does not reflect the behaviour of the
expected cash flows as indicated by the Consolidated Entity’s
deposit retention history since the Consolidated Entity
expects that many customers will not request repayment
on the earliest date the Consolidated Entity could be
required to pay.
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Note 36
Financial risk management continued
Note 36.2 Liquidity risk continued
Contractual undiscounted cash flows
Statement
of financial
position
carrying value
$m
4,542
6,205
22,124
16,804
775
Cash collateral on securities lent
and repurchase agreements(1)
Trading liabilities(2)
Margin money and
settlement liabilities
Derivative liabilities (trading)(2)
Derivative liabilities (hedge
accounting relationships)(3)
Contractual amount payable
Contractual amount receivable
Held for sale and other liabilities(4)
Borrowings
Debt issued(5)
Loan capital(6)
Total
Contingent liabilities
Commitments
Total undiscounted contingent
liabilities and commitments(7)
Deposits
84,199
74,903
On demand
$m
0 to 3
months
$m
3 to 12
months
$m
1 to 5
years
$m
More than 5
years
$m
Total
$m
CONSOLIDATED 2021
487
13,029
2,183
6,205
8,464
16,804
1,071
(999)
6,070
1,027
1,281
9,528
1,150
2,641
9,817
60,980
9,423
516
410
121
217,510
89,466
52,784
5,307
2,424
837
147
631
2,872
(2,630)
3,002
499
599
10,213
254
15,587
1,736
2,256
(1,951)
230
566
7,651
24,671
4,542
39,701
4,469
3,568
171
9
108
451
22,073
5,393
4,553
6,205
22,124
16,804
6,370
(5,580)
84,214
2,716
10,392
66,606
11,339
28,205
225,743
2,106
2,424
16,287
5,307
3,261
4,469
3,568
2,106
18,711
Includes the Term Funding Facility (TFF) provided by the RBA.
(1)
(2) Derivative liabilities trading and trading liabilities are included in the ‘0 to 3 months’ column at their fair value. Liquidity risk on these items is not managed on the basis of contractual
maturity, as they are frequently settled in the short-term at fair value.
(3) Where multiple derivatives are combined in order to form a single hedge instrument designated in a hedge accounting relationship, each derivative is considered independently for
the purposes of assessing liquidity risk and for the disclosure’s requirement.
(4) Excludes non-contractual accruals and provisions.
(5) Includes $9,994 million payables to SE note holders disclosed on a contractual maturity basis. The expected maturity of the notes is dependent on the repayment of the underlying
loans included in loan assets.
(6) Includes securities with conditional repayment obligations. The cash outflow on the principal component on these securities is disclosed using the earliest optional exchange dates
and the cash outflow of the interest component is disclosed using repricing dates instead of the contractual maturity. For contractual maturity of these securities refer to Note 26
Loan capital. Further, as explained in Note 26 Loan capital, these instruments may be converted into ordinary shares on the occurrence of an Other exchange event, and this may
impact their maturity profile.
(7) Cash flows on contingent liabilities and commitments are dependent on the occurrence of various future events and conditions, and may or may not result in an outflow of resources.
These are reported in the ‘0 to 3 months’ column unless they are payable on demand or the contractual terms specify a longer dated cash flow.
238
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
On demand
$m
0 to 3
months
$m
3 to 12
months
$m
1 to 5
years
$m
More than
5 years
$m
Total
$m
CONSOLIDATED 2020
1,033
–
13,895
–
–
–
1,082
5,544
8,920
37,953
462
(414)
8,867
586
1,451
5,515
68
221
–
–
–
555
(390)
3,442
929
900
11,737
1,627
19,021
–
958
958
–
–
–
–
787
(600)
216
755
11,031
29,078
3,175
44,442
–
4,715
4,715
–
–
–
–
56
–
11
271
4,847
28,920
3,566
37,671
–
1,761
2,336
5,544
22,815
37,953
1,860
(1,404)
67,398
3,007
18,425
75,250
8,436
241,620
2,383
16,103
1,761
18,486
Note 36
Financial risk management continued
Note 36.2 Liquidity risk continued
Statement
of financial
position
carrying
value
$m
2,334
5,544
22,815
37,953
446
Cash collateral on securities lent
and repurchase agreements
Trading liabilities(1)
Margin money and
settlement liabilities
Derivative liabilities (trading)(1)
Derivative liabilities (hedge
accounting relationships)(2)
Contractual amount payable
Contractual amount receivable
Deposits
67,342
54,862
Held for sale and other liabilities(3)
Borrowings
Debt issued(4)
Loan capital(5)
Total
Contingent liabilities
Commitments
Total undiscounted contingent
liabilities and commitments(6)
2,919
17,093
64,556
7,414
466
196
–
–
228,416
70,452
70,034
–
4,908
2,383
3,761
4,908
6,144
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(1) Derivative liabilities (trading) and trading liabilities are included in the ‘0 to 3 months’ column at their fair value. Liquidity risk on these items is not managed on the basis of
contractual maturity, since they are not held for settlement according to such maturity and will frequently be settled in the short-term at fair value.
(2) Where multiple derivatives are combined in order to form a single hedge instrument designated in a hedge accounting relationship, each derivative is considered independently for
the purposes of assessing liquidity risk and for the disclosures requirement.
(3) Excludes non-contractual accruals and provisions.
(4) Includes $18,237 million payables to SE note holders disclosed on a contractual maturity basis. The expected maturity of the notes is dependent on the repayment of the underlying
loans included in loan assets.
(5) Includes securities with conditional repayment obligations. The cash outflow on the principal component on these securities is disclosed using the earliest optional exchange dates
and the cash outflow of the interest component is disclosed using repricing dates instead of the contractual maturity. For contractual maturity of these securities refer to Note 26
Loan capital. Further, as explained in Note 26 Loan capital, these instruments may be converted into ordinary shares on the occurrence of an Other exchange event, and this may
impact their maturity profile.
(6) Cash flows on contingent liabilities and commitments are dependent on the occurrence of various future events and conditions and may or may not result in an outflow of resources.
These are reported in the ‘0 to 3 months’ unless they are payable on demand or the contractual terms specify a longer dated cash flow.
239
Note 36
Financial risk management continued
Note 36.2 Liquidity risk continued
Statement
of financial
position
carrying value On demand
$m
$m
0 to 3
months
$m
3 to 12
months
$m
1 to 5
years
$m
More than
5 years
$m
Total
$m
COMPANY 2021
1
46
19
5,821
1,695
13,232
2,606
23,420
2
51
15
10,114
8,474
13,253
2,416
34,325
–
–
–
16
1,095
1
1,112
–
–
14
–
530
–
–
544
–
284
284
1
6
3
21
589
197
22
839
4,402
230
4,632
2
–
1
46
936
114
19
1,118
5,877
25
5,902
6
56
488
63
613
69
69
–
3
–
126
19
1,636
614
2,398
–
102
102
36
6,083
6
6,343
1,297
13,765
1,314
1,314
–
54
–
7,365
7,088
8,041
1,293
23,841
–
1,420
1,420
5
7,909
1,675
9,589
1
48
19
6,160
1,695
14,938
3,057
25,918
4,402
1,613
6,015
COMPANY 2020
–
–
–
3,205
–
5,836
960
10,001
–
2
2
2
57
15
10,742
8,573
15,627
2,886
37,902
5,877
1,833
7,710
Derivative liabilities (trading)(1)
Deposits
Other liabilities(2)
Borrowings
Due to subsidiaries
Debt issued
Loan capital(3)
Total
Contingent liabilities
Commitments
Total undiscounted contingent
liabilities and commitments(4)
Derivative liabilities (trading)(1)
Deposits
Other liabilities(2)
Borrowings
Due to subsidiaries
Debt issued
Loan capital(3)
Total
Contingent liabilities
Commitments
Total undiscounted contingent
liabilities and commitments(4)
(1) Derivative liabilities are included in the ‘0 to 3 months’ column at their fair value. Liquidity risk on these items is not managed on the basis of contractual maturity, since they are not
held for settlement according to such maturity and will frequently be settled in the short-term at fair value.
(2) Excludes items that are non-contractual accruals and provisions.
(3) Includes securities with conditional repayment obligations. The cash outflow on the principal component on these securities is disclosed using the earliest optional exchange dates
and the cash outflow of the interest component is disclosed using repricing dates instead of the contractual maturity. For contractual maturity of these securities refer to Note 26
Loan capital. Further, as explained in Note 26 Loan capital, these instruments may be converted into ordinary shares on the occurrence of an Other exchange event, and this may
impact their maturity profile.
(4) Cash flows on contingent liabilities and commitments are dependent on the occurrence of various future events and conditions and may or may not result in an outflow of resources.
These are reported in the ‘0 to 3 months’ unless they are payable on demand or the contractual terms specify a longer dated cash flow.
240
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Note 36
Financial risk management continued
Note 36.3 Market risk
Traded market risk
Market risk is the risk of adverse changes in the value of the
Consolidated Entity’s trading positions as a result of changes
in market conditions. The Consolidated Entity is exposed to
the following risks:
• price: The risk of loss due to changes in price of a risk
factor (interest rates, foreign exchange, commodities etc.)
• volatility: The risk of loss due to changes in the volatility of
a risk factor
• basis: Risk of imperfect correlation between offsetting
investments in a hedging strategy
• correlation: Risk that the actual correlation between
two assets or variables is different from the assumed
correlation
• illiquid market: Risk of inability to sell assets or close out
positions in the thinly-traded markets at close to the last
market prices
• concentration: Risk of over concentration of trading
exposures in certain markets and products
• valuation adjustments (XVA): Risk of actual valuation
adjustments to derivative positions; specifically Credit
Valuation Adjustment (CVA), Debit Valuation Adjustment
(DVA) and Funding Valuation Adjustment (FVA).
Macquarie Group Limited and its subsidiaries 2021 Annual Report
It is recognised that all trading activities contain calculated
elements of risk taking. The Consolidated Entity is prepared
to accept such risks provided they are within agreed limits,
independently and correctly identified, calculated and
monitored by RMG, and reported to Senior Management
on a regular basis. RMG monitors positions within the
Consolidated Entity according to a limit structure which sets
limits for all exposures in all markets.
Limits are for both individual trading desks and divisions as
well as in aggregate.
RMG sets three complementary limit structures:
• contingent loss limits: worst case scenarios that shock
prices and volatilities by more than that which has
occurred historically. Multiple scenarios are set for each
market to capture the non-linearity and complexity
of exposures arising from derivatives. A wide range of
assumptions about the correlations between markets
is applied
• position limits: volume, maturity and open position limits
are set on a large number of market instruments and
securities in order to constrain concentration risk and to
avoid the accumulation of risky, illiquid positions
• Value‑at‑Risk (VaR) limits: a statistical measure based
on a 10-day holding period and a 99% confidence level,
as stipulated by the APRA capital adequacy standard.
The model is validated daily by back testing a one-day VaR
against hypothetical and actual daily trading profit or loss.
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Note 36
Financial risk management continued
Note 36.3 Market risk continued
Value‑at‑Risk figures (1‑day, 99% confidence level)
The table below shows the average, maximum and minimum VaR over the financial year for the major markets in which the
Consolidated Entity operates. The VaR shown in the table is based on a one-day holding period being the mark-to-market that
could be incurred over that period. The aggregated VaR is on a correlated basis.
Average
$m
4.19
4.91
2.28
22.21
24.45
2021
Maximum
$m
15.62
8.07
4.00
45.20
46.72
Minimum
$m
Average
$m
2.66
3.25
1.21
12.03
12.72
7.57
2.52
1.59
23.36
24.53
2020
Maximum
$m
10.93
3.24
3.92
42.59
44.16
Minimum
$m
3.38
1.76
0.79
13.34
13.14
Equities
Interest rates
Foreign exchange and bullion
Commodities(1)
Aggregate
Value‑at‑Risk
The VaR model uses a Monte Carlo simulation to generate
normally distributed price and volatility paths, based on three
years of historical data. The following factors can limit the
effectiveness of VaR in predicting future price moves:
• the use of historical data means that the current model
parameters may not reflect future market conditions
especially when entering a period of heightened volatility.
The model utilises exponential weighting to place
emphasis on the most recent market movements to more
accurately reflect current conditions
• VaR focuses on unexceptional price moves so that it does
not account for losses that could occur beyond the 99%
level of confidence.
For capital adequacy purposes, debt-specific risk is measured
using APRA’s standard method, whilst all other exposures
are captured by the VaR model. This combined approach has
been approved by APRA and is subject to periodic review.
Non‑traded market risk
The Consolidated Entity has exposure to non-traded market
risks arising from transactions entered into during its normal
course of business and as a result of its investments in
foreign operations. These risks include:
• Interest rate: changes in the level, shape and volatility of
yield curves, and/or client behaviour given these changes
• Foreign exchange: changes in the spot exchange rates.
The Consolidated Entity has limited appetite for non-traded
market risks. Where commercially feasible, these risks
are transferred into the trading books of CGM and Group
(1)
Includes commodity contracts.
242
Treasury and governed within the traded market risk
framework described above. Responsibility for managing
exposures rests with individual businesses, with additional
central monitoring from FMG for foreign exchange risks. Any
residual non-traded market risks are subject to independent
limits approved by RMG and reported regularly to
Senior Management.
Where foreign exchange exposures arise as a result of
investments in foreign operations, a key objective of the
Consolidated Entity’s Non-traded market risk policy is to
reduce the sensitivity of regulatory capital ratios to foreign
currency movements. This is achieved by leaving specific
investments in core foreign operations exposed to foreign
currency translation movements and captured in the foreign
currency translation reserve, a component of regulatory
capital. This aligns the currency of capital supply with
capital requirements.
As a result of this policy, the Consolidated Entity is therefore
partially exposed to currency risk in relation to the translation
of its net investment in foreign operations to Australian
dollars. Apart from this there is no material non-trading
foreign exchange risk.
Accounting considerations arising from hedging activities
The use of derivative and other financial instruments to
hedge non-traded positions potentially gives rise to income
statement volatility due to accounting treatments. The
Consolidated Entity manages this through hedge accounting
as set out in Note 44(x) Derivative instruments and hedging
activities and Note 35 Hedge accounting.
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 36
Financial risk management continued
Note 36.3 Market risk continued
Interest rate risk‑ Interest Rate Benchmark Reform
(IBOR)
During 2018, the Consolidated Entity initiated a project,
which is sponsored by its Chief Financial Officer (CFO), to
manage the impacts of IBOR reform, including overseeing
the transition from LIBOR to ARRs. A group-wide steering
committee was established with its key responsibility
being the governance of the project. This committee
includes senior executives from the Consolidated Entity’s
Operating Groups, Financial Management Group (FMG), Risk
Management Group (RMG), Corporate Operations Group
(COG) and Legal and Governance.
In addition to the project’s scoping and assessments outlined
in the Consolidated Entity’s annual financial report for
the year ended 31 March 2020, and the progress reported
in 30 September 2020 interim financial statements, the
project achieved several important milestones in line with
recommendations from industry working groups that
included:
• the Consolidated Entity’s successful transition of its
internal funding from GBP LIBOR to SONIA
• an increasing range of ARR products becoming available
to offer clients, supported by changes to key systems
and processes
• several Group entities have adhered to the ISDA Fallbacks
Protocol which introduce robust fallbacks for legacy
derivatives, and work has progressed on the development
of a transition framework for managing client transitions.
Macquarie has identified the following four inherent risks
arising from IBOR transitions:
• Financial Risk: This includes (i) value transfers during
transition to ARRs, or triggering of fallback terms and
default interest payment terms, (ii) basis risk from
products and currencies moving at different times, (iii)
change in accounting treatment impacts including hedge
accounting, capital, tax and reported earnings, and (iv)
loss in revenue / market share from not being ready to
participate in ARR markets
• Conduct Risk: This includes (i) real or perceived benefit
of information asymmetry between financial institutions
and clients during transition, (ii) clients being sold LIBOR
contracts today who are unaware of the impending
transition or inappropriate advice given to clients, (iii) real
or perceived unfair treatment of clients during transition,
and (iv) market participants attempt to influence ARRs
during transition or misconduct in markets where there is
insufficient liquidity
• Legal Risk: This includes (i) client disputes over
amendment terms, (ii) litigation from clients and
counterparties (including potential class actions) due to
inappropriate / unenforceable contractual terms or losses
from transition
• Operational Risk: This includes (i) infrastructure and
processes not ready to support ARR products, (ii)
infrastructure and processes that result in errors upon
transition, and (iii) reduced model accuracy due to lack of
historical data.
Whilst IBOR reforms, including the transition from LIBOR to
ARRs, are important changes for the Consolidated Entity,
they have not resulted in changes to the Consolidated
Entity’s risk management strategy and these risks are
managed within the existing risk management framework.
Exposure yet to be transited to ARRs: Notional value
information relating to the Consolidated Entity’s financial
instruments which have yet to transition to ARRs as at the
reporting date includes(1):
• Derivatives: Primarily includes USD LIBOR ($51,057 million),
GBP LIBOR ($25,857 million), JPY LIBOR ($728 million) and
other currencies ($129 million)
• Non‑Derivative financial assets: Primarily includes USD
LIBOR ($5,234 million), GBP LIBOR ($904 million) and other
currencies ($48 million)
• Non‑Derivative financial liabilities: Primarily includes USD
LIBOR ($13,839 million) and GBP LIBOR ($1,882 million).
The scope of the above mentioned exposures has been
determined as follows:
• the benchmark will be replaced, and the replacement
date is known. Only exposures with contractual
maturities extending beyond the replacement date have
been included
• the gross notional values of both on-balance sheet and
off-balance sheet exposures have been included
• for contracts that reference more than one benchmark,
such as a cross currency swap, the exposure includes both
benchmarks to reflect the absolute exposure to different
reference rates
• exposures where a benchmark rate is not subject to
mandatory replacement (e.g. BBSW exposures), will be
considered in scope only if the Consolidated Entity makes
a determination to transition to an ARR
• derivative contracts of $261 million designated in
hedge accounting relationships and have synthetically
transitioned from GBP LIBOR to SONIA have
been excluded.
(1) The notional amounts of hedged items and/or hedging instruments designated in hedge relationship are covered in Note 35 Hedge accounting.
243
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Note 36
Financial risk management continued
Note 36.3 Market risk continued
Foreign currency risk
The Consolidated Entity is active in various currencies globally. The net investment in foreign operations generates capital
requirements in foreign currencies and results in sensitivity of the capital ratio to movements in the Australian dollar rate
against various foreign currencies. The Consolidated Entity hedges this exposure by leaving specific investments in foreign
operations exposed to foreign currency translation movements, which aligns the currency of capital supply with capital
requirements. Refer to Note 44(x) Derivative instruments and hedging activities and Note 34 Hedge accounting for details
regarding the application of hedge accounting to the Consolidated Entity’s net investment in foreign operations.
The sensitivity of the Consolidated Entity net investment in foreign operations to the most material currencies after
considering related hedges is presented in the table below.
United States dollar
Pound sterling
Euro
Canadian dollar
Total
United States dollar
Pound sterling
Euro
Canadian dollar
Total
2021
2020
Movement in
exchange rates
%
Sensitivity of other
comprehensive
income after tax
$m
Movement in
exchange rates
%
Sensitivity of other
comprehensive
income after tax
$m
CONSOLIDATED
+10
+10
+10
+10
‑10
‑10
‑10
‑10
(633)
(91)
(49)
(18)
(791)
773
112
60
22
967
+10
+10
+10
+10
-10
-10
-10
-10
(678)
(102)
(57)
(20)
(857)
828
125
70
24
1,047
Equity price risk
The table below indicates the equity markets to which the Consolidated Entity had significant exposure as at 31 March on its
non-trading investment portfolio. This excludes interests in associates and joint ventures. The effect on the income statement
due to a reasonably possible change in equity prices, with all other variables held constant, is as follows:
2021
2020
Movement in
equity price
%
Sensitivity of
profit after tax
$m
Movement in
equity price
%
Sensitivity of profit
after tax
$m
+10
+10
+10
+10
+10
‑10
‑10
‑10
‑10
‑10
3
10
1
1
84
99
(3)
(10)
(1)
(1)
(84)
(99)
+10
+10
+10
+10
+10
-10
-10
-10
-10
-10
4
12
3
–
71
90
(4)
(12)
(3)
–
(71)
(90)
Geographic region
Listed
Australia
Americas
Europe, Middle East and Africa
Asia Pacific
Unlisted
Total
Listed
Australia
Americas
Europe, Middle East and Africa
Asia Pacific
Unlisted
Total
244
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 37
Measurement categories of financial instruments
The following table contains information relating to the measurement categories (i.e. HFT, FVTPL, DFVTPL, FVOCI or Amortised
cost) of financial instruments, including commodities, of the Consolidated Entity. The descriptions of measurement categories
are included in Note 44(vii) Financial instruments.
The methods and significant assumptions that have been applied in determining the fair values of financial instruments are
disclosed in Note 38 Fair value of financial assets and financial liabilities.
FINANCIAL INSTRUMENTS CARRIED AT
FAIR VALUE
HFT DFVTPL
FVTPL
FVOCI
Amortised
cost
Non‑financial
instruments
Statement
of financial
position total
FAIR VALUE OF FINANCIAL
INSTRUMENTS CARRIED AT
Amortised cost
Fair value
$m
$m
$m
$m
$m
$m
$m
$m
$m
CONSOLIDATED 2021
18,425
18,425
Assets
Cash and bank balances
Cash collateral on
securities borrowed
and reverse repurchase
agreements
Trading assets(1)
Margin money and
settlement assets
Derivative assets(2)
Financial investments
Equity
Debt
Held for sale assets(3)
Other assets(3)
Loan assets(4)
Property, plant and
equipment and
right-of-use assets
Interests in associates
and joint ventures
Equity interests
Loans to associates
and joint ventures(4)
Intangible assets
Deferred tax assets
Total assets
Liabilities
Cash collateral on
securities lent and
repurchase agreements
Trading liabilities
Margin money and
settlement liabilities
Derivative liabilities(2)
Deposits
Held for sale liabilities(5)
Other liabilities(5)
Borrowings
Debt issued(4)
Deferred tax liabilities
Loan capital(4)
Total liabilities
21,746
19,479
1,266
64
18,425
7,909 19,488
332
1,163
1,442
432
27
30
420
36
7,674
6
269
60
9,284
14,065
18
29
2,268
104,273
536
41,225
1,330 11,791
27,497
148,898
6,205
16,804
23,009
345
605
2,722
3,672
775
775
4,197
22,124
84,199
17
2,019
9,817
58,258
9,423
190,054
217
2,442
3,562
2,543
1,472
14,912
1
5,587
204
5,792
4,676
4,676
36,681
21,746
14,397
20,642
1,442
8,124
279
6,006
105,026
3,562
632
2,543
27,397
21,746
332
20,642
1,442
8,106
33
1,296
753
96
1,472
245,653
81,843
4,542
6,205
22,124
17,579
84,199
18
8,211
9,817
60,980
204
9,423
223,302
345
6,205
17,579
605
2,722
27,456
9,284
14,065
18
29
2,268
105,024
538
149,651
4,197
22,124
84,217
17
1,213
9,867
59,526
9,829
190,990
Includes commodities carried at fair value which are held for trading purposes.
(1)
(2) Derivatives designated in effective hedge accounting relationships are presented as FVTPL. Further detail regarding the carrying amount of hedging instruments is included in Note 35 Hedge accounting.
(3) Non-financial assets primarily represents non-financial assets of disposal groups and equity interests in associates and joint ventures that have been classified as held for sale and
other assets that include fee related contract assets, prepayments, tax receivables, inventory held for sale and investment properties.
(4) Items measured at amortised cost includes, where applicable, fair value hedge accounting adjustments for the designated hedged risks.
(5) Non-financial liabilities primarily represent non-financial liabilities of disposal groups classified as held for sale and other liabilities that include accrued charges, employee related
provisions, retained director profit share, tax payables and income received in advance. The fair value of other liabilities excludes lease liabilities.
245
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Note 37
Measurement categories of financial instruments continued
FINANCIAL INSTRUMENTS CARRIED AT
FAIR VALUE
HFT DFVTPL
FVTPL
FVOCI
Amortised
cost
Non-financial
instruments
Statement
of financial
position
total
FAIR VALUE OF FINANCIAL
INSTRUMENTS CARRIED
AT
Fair value
Amortised
cost
$m
$m
$m
$m
$m
$m
$m
$m
$m
Assets
Cash and bank balances
Cash collateral on
securities borrowed
and reverse repurchase
agreements
Trading assets(1)
Margin money and
settlement assets
Derivative assets(2)
Financial investments
Equity
Debt
Held for sale assets(3)
Other assets(3)
Loan assets(4)
Property, plant and
equipment and
right-of-use assets
Interests in associates
and joint ventures
Equity interests
Loans to associates
and joint ventures(4)
Intangible assets
Deferred tax assets
Total assets
Liabilities
Cash collateral on
securities lent and
repurchase agreements
Trading liabilities
Margin money and
settlement liabilities
Derivative liabilities(2)
Deposits
Held for sale liabilities(5)
Other liabilities(5)
Borrowings
Debt issued(4)
Deferred tax liabilities
Loan capital(4)
Total liabilities
–
–
16,855
–
42,572
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
947
83
–
–
–
–
9,717
7,957
–
23,064
–
555
3,035
1,301
323
52
315
1,257
–
–
–
–
–
7,306
–
–
1,359
–
–
6,689
–
15,838
–
–
–
609
3,127
91,418
–
–
–
–
–
59,427
–
–
–
1,030
185
–
–
14,980
56
–
–
31,785
711
–
–
128,109
–
5,544
–
37,953
–
–
–
–
–
–
–
43,497
1,292
–
–
–
–
–
622
–
2,929
–
–
4,843
–
–
–
446
–
–
–
–
–
–
–
446
–
–
–
–
–
–
–
–
–
–
–
–
1,042
–
22,815
–
67,342
123
2,174
17,093
61,627
–
7,414
179,630
CONSOLIDATED 2020
9,717
–
9,717
–
–
–
–
–
–
–
973
2,479
–
37,710
16,855
16,393
45,607
1,301
7,629
1,634
6,868
94,117
5,044
5,044
7,367
7,367
–
3,268
1,340
20,471
952
3,268
1,340
255,802
–
–
–
–
–
137
5,231
–
–
234
–
5,602
2,334
5,544
22,815
38,399
67,342
260
8,027
17,093
64,556
234
7,414
234,018
31,021
16,855
555
45,607
1,301
7,629
52
1,262
2,699
–
–
6,689
–
15,838
–
–
–
609
3,127
91,445
–
–
241
–
–
107,222
756
–
–
128,181
1,292
5,544
–
38,399
–
–
622
–
2,929
–
–
48,786
1,042
–
22,815
–
67,413
123
1,130
17,031
60,961
–
7,013
177,528
Includes commodities carried at fair value which are held for trading purposes.
(1)
(2) Derivatives designated in effective hedges are included as FVTPL. Further detail regarding the carrying amount of hedging instruments is included in Note 35 Hedge accounting.
(3) Non-financial assets primarily represents non-financial assets of disposal groups and equity interests in associates and joint ventures that have been classified as held for sale and
other assets that include fee related contract assets, prepayments, tax receivables, inventory held for sale and investment properties.
(4) Items measured at amortised cost includes, where applicable, fair value hedge accounting adjustments for the designated hedged risks.
(5) Non-financial liabilities primarily represents non-financial liabilities of disposal groups classified as held for sale and other liabilities that include accrued charges, employee related
provisions, retained director profit share, tax payables and income received in advance and maintenance liability. The fair value of other liabilities excludes lease liabilities.
246
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 37
Measurement categories of financial instruments continued
The following table contains information relating to the measurement categories of financial instruments of the Company.
The descriptions of measurement categories are included in Note 44(vii) Financial instruments. The methods and significant
assumptions that have been applied in determining the fair values of financial instruments are disclosed in Note 38 Fair value of
financial assets and financial liabilities.
FINANCIAL INSTRUMENTS CARRIED AT
FAIR VALUE
HFT DFVTPL
$m
$m
FVTPL
$m
FVOCI
$m
Amortised
cost
$m
Non‑financial
instruments
$m
Assets
Derivative assets
Other assets(1)
Due from subsidiaries(2)
Investments in
subsidiaries
Total assets
Liabilities
Derivative liabilities
Deposits
Other liabilities(3)
Borrowings
Due to subsidiaries(4)
Debt issued
Deferred tax liabilities
Loan capital
Total liabilities
2
293
295
1
79
607
80
607
2,631
2,631
19,242
19,242
46
19
5,821
1,616
12,625
2,606
22,733
54
61
31,429
31,544
404
509
4
917
FAIR VALUE OF FINANCIAL
INSTRUMENTS CARRIED AT
Statement
of financial
position
total
$m
Fair value
$m
Amortised
cost
$m
COMPANY 2021
2
54
2
22,227
2,924
19,242
31,429
53,712
1
46
423
5,821
2,204
13,232
4
2,606
24,337
2,926
19,242
1
79
607
687
46
19
5,821
1,616
12,625
2,606
22,733
(1) Non-financial assets primarily represents tax receivables.
(2) Due from subsidiaries includes derivatives and trading positions classified as HFT and subordinated loan to subsidiaries classified as FVTPL. All other intercompany receivables are
carried at amortised cost. Non-financial receivables primarily represents internal tax balances.
(3) Non-financial liabilities primarily represents provisions for tax payable and employee stock-option related obligations.
(4) Due to subsidiaries includes derivatives and trading positions classified as HFT and employee stock-option related obligations and tax payables that are non-financial liabilities. All
other intercompany payables are carried at amortised cost.
247
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Note 37
Measurement categories of financial instruments continued
FINANCIAL INSTRUMENTS CARRIED AT
FAIR VALUE
HFT DFVTPL
$m
$m
FVTPL
$m
FVOCI
$m
Amortised
cost
$m
Non-
financial
instruments
$m
Statement
of financial
position total
$m
FAIR VALUE OF FINANCIAL
INSTRUMENTS CARRIED AT
Fair value
$m
Amortised
cost
$m
COMPANY 2020
Assets
Other assets(1)
Due from subsidiaries(2)
Investments in
subsidiaries
Total assets
Liabilities
Derivative liabilities
Deposits
Other liabilities(3)
Borrowings
–
480
–
480
2
–
–
–
Due to subsidiaries(4)
378
–
–
–
–
–
–
–
–
–
Debt issued
Loan capital
Total liabilities
–
–
380
108
–
108
–
2,400
–
2,400
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
29,436
–
29,436
–
51
15
10,114
8,096
13,145
2,416
33,837
18
18
31,816
31,852
–
–
445
–
427
–
–
872
18
–
–
32,334
2,880
29,436
31,816
64,168
2
51
460
10,114
8,901
13,253
2,416
35,197
–
–
2,880
29,436
2
–
–
–
378
108
–
488
–
51
15
10,114
8,096
13,145
2,416
33,837
(1) Non-financial assets primarily represents tax receivables.
(2) Due from subsidiaries includes derivatives and trading positions classified as HFT and subordinated loan to subsidiaries classified as FVTPL. All other intercompany receivables are
carried at amortised cost.
(3) Non-financial liabilities primarily represents provisions for tax payable and employee stock-option related obligations.
(4) Due to subsidiaries includes derivatives and trading positions classified as HFT and employee stock-option related obligations and tax payables that are non-financial liabilities. All
other intercompany payables are carried at amortised cost.
248
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 38
Fair value of financial assets and
financial liabilities
Fair value reflects the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
Quoted prices or rates are used to determine fair value
where an active market exists. If the market for a financial
instrument is not active, fair values are estimated using
present value or other valuation techniques, using
inputs based on market conditions prevailing at the
measurement date.
The values derived from applying these techniques are
affected by the choice of valuation model used and the
underlying assumptions made regarding inputs such as the
timing and amounts of future cash flows, discount rates,
credit risk, volatility and correlation.
Financial instruments measured at fair value are categorised
in their entirety, in accordance with the levels of the fair value
hierarchy as outlined below:
Level 1
Level 2
unadjusted quoted prices in active markets for
identical assets or liabilities
inputs other than quoted prices included within
Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived
from prices)
Level 3
inputs for the asset or liability that are not based on
observable market data (unobservable inputs)
The appropriate fair value hierarchy level for an instrument
is determined on the basis of the lowest level input that
is significant to the fair value measurement. AASB 13 Fair
Value Measurement requires the use of the price within the
bid-offer spread that is most representative of fair value.
Valuation systems will typically generate mid-market prices.
The bid-offer adjustment reflects the extent to which
bid-offer costs would be incurred if substantially all of the
residual net exposure to market risks were closed, on a
portfolio basis, using available hedging instruments.
The fair values calculated for financial instruments which are
carried in the Statements of financial position at amortised
cost (as disclosed in Note 37 Measurement categories of
financial instruments) are for disclosure purposes only. The
following methods and assumptions applied to derive these
fair values can require significant judgement by management
and therefore may not necessarily be comparable to other
financial institutions nor may it be the price at which the asset
is sold or a liability repurchased in a market-based transaction:
• the fair values of liquid assets and other instruments
maturing within three months approximate their carrying
amounts. This assumption is applied to liquid assets and
the short-term portion of all other financial assets and
financial liabilities
• the fair value of demand deposits with no fixed maturity
approximates their carrying amount as they are
short-term in nature or are payable on demand
• the fair values of variable rate financial instruments,
including cash collateral on securities borrowed, cash
collateral on securities lent and repurchase agreements
approximates their carrying amounts
• the fair values of all loan assets, term deposits and debt
liabilities carried at amortised cost, are determined with
reference to changes in interest rates and credit spreads
• the fair value of fixed rate loans and debt investments
carried at amortised cost is estimated by reference to
current market rates offered on similar loans and the
creditworthiness of the borrower
• the fair value of issued debt and loan capital, where carried
at amortised cost, is based on quoted prices in active
markets where available. Where quoted prices are not
available the fair value is based on discounted cash flows
using rates appropriate to the term and incorporates
changes in the Consolidated Entity’s own credit spread
• substantially all of the Consolidated Entity’s commitments
to extend credit are at variable rates. As such, there is no
significant exposure to fair value fluctuations resulting from
interest rate movements relating to these commitments.
The following methods and significant assumptions have
been applied in determining the fair values of financial
instruments which are measured at fair value:
• trading assets and liabilities, derivative financial
instruments and other transactions undertaken for
trading purposes are measured at fair value by reference
to quoted prices in active markets where available (for
example listed securities). If quoted prices in active
markets are not available, then fair values are estimated
on the basis of pricing models or other recognised
valuation techniques
• repurchase and reverse repurchase agreements, being
collateralised financing arrangements, are measured at
fair value with reference to the securities which are held or
provided as the collateral for the financing agreement
• financial investments classified as FVTPL or FVOCI are
measured at fair value by reference to quoted prices
in active markets where available (for example listed
securities). If quoted prices in active markets are not
available, the fair values are estimated on the basis of
pricing models or other recognised valuation techniques
that maximise the use of quoted prices and observable
market inputs. Unrealised gains and losses on FVOCI debt
financial assets, excluding impairment write-downs on debt
instruments, are recorded in the FVOCI reserve in equity
until the asset is sold, collected or otherwise disposed of
• fair values of variable rate loans classified at FVOCI is equal
to its carrying value on the basis that the interest rates are
reflective of market rates offered on similar loans
249
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Note 38
Fair value of financial assets and
financial liabilities continued
• fair values of fixed rate loans classified as FVTPL or FVOCI
and issued debt classified as DFVTPL are estimated by
reference to current market rates offered on similar loans
and issued debt
• for financial assets carried at fair value, in order to
measure counterparty credit risk, an adjustment is
incorporated into the valuation. Where exposures are
managed on a portfolio basis then the adjustment is
calculated on a counterparty basis for those exposures
• for financial liabilities carried at fair value, in order to
measure the Consolidated Entity’s own credit risk, an
adjustment is incorporated into the valuations
• the Consolidated Entity has incorporated the market
implied funding costs for uncollateralised derivative
positions as a Funding Valuation Adjustment (FVA). FVA
is determined by calculating the net expected exposures
at a counterparty level and applying the Consolidated
Entity’s internal Treasury lending rates as an input into
the calculation. The approach takes into account the
PD of each counterparty, as well as any mandatory
break clauses.
Where valuation techniques are used to determine fair
values, they are validated and periodically reviewed by
qualified personnel independent of the area that created
them. All models are certified before they are used, and
models are calibrated periodically to test that outputs reflect
prices from observable current market transactions in the
same instrument or other available observable market data.
To the extent possible, models use only observable market
data (for example OTC derivatives), however management
is required to make assumptions for certain inputs that are
not supported by prices from observable current market
transactions in the same instrument such as volatility
and correlation.
250
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 38
Fair value of financial assets and financial liabilities continued
The following table summarises the fair value of financial assets and financial liabilities measured at amortised cost, including
the level within the fair value hierarchy:
Assets
Loan assets
Loans to associates and joint ventures
Total assets
Liabilities
Deposits
Borrowings
Debt issued
Loan capital
Total liabilities
Assets
Loan assets
Loans to associates and joint ventures
Total assets
Liabilities
Deposits
Borrowings
Debt issued
Loan capital
Total liabilities
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
CONSOLIDATED 2021
4,314
100,710
105,024
538
538
4,314
101,248
105,562
68,613
405
3,447
72,465
–
–
–
51,536
119
–
2,288
53,943
15,604
8,188
50,578
6,382
80,752
6,094
52
6,146
15,877
13,614
48,805
4,725
83,021
1,274
8,948
84,217
9,867
59,526
9,829
10,222
163,439
CONSOLIDATED 2020
85,351
704
86,055
–
3,298
12,156
–
91,445
756
92,201
67,413
17,031
60,961
7,013
15,454
152,418
The financial assets and liabilities measured at amortised cost in the Company as at 31 March 2021 and 31 March 2020 are
predominantly categorised as Level 2 in the fair value hierarchy except for Loan capital which is classified as Level 1.
251
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Note 38
Fair value of financial assets and financial liabilities continued
The following table summarises the levels of the fair value hierarchy for financial instruments, including commodities, measured
at fair value(1):
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
CONSOLIDATED 2021
10,269
235
711
16
27,397
10,978
332
20,137
7,283
1,258
162
499
270
1,554
71
575
96
27,397
21,746
332
20,642
9,548
1,329
753
96
11,231
67,547
3,065
81,843
6,090
224
345
115
17,053
605
2,722
302
345
6,205
17,579
605
2,722
6,314
20,840
302
27,456
CONSOLIDATED 2020
–
10,362
–
1,009
723
3
–
–
31,021
5,837
555
43,718
6,819
1,301
184
–
12,097
89,435
–
5,164
1,059
3
–
6,226
1,292
380
36,957
619
2,929
42,177
–
656
–
880
1,388
10
2,515
241
5,690
–
–
31,021
16,855
555
45,607
8,930
1,314
2,699
241
107,222
1,292
5,544
383
38,399
–
–
622
2,929
383
48,786
Assets
Cash collateral on securities borrowed and reverse repurchase agreements
Trading assets(2)
Margin money and settlement assets
Derivative assets
Financial investments
Held for sale and other assets
Loan assets
Loans to associates and joint ventures
Total assets
Liabilities
Cash collateral on securities lent and repurchase agreements
Trading liabilities
Derivative liabilities
Held for sale and other liabilities
Debt issued
Total liabilities
Assets
Cash collateral on securities borrowed and reverse repurchase agreements
Trading assets(2)
Margin money and settlement assets
Derivative assets
Financial investments
Held for sale and other assets
Loan assets
Loans to associates and joint ventures
Total assets
Liabilities
Cash collateral on securities lent and repurchase agreements
Trading liabilities
Derivative liabilities
Held for sale and other liabilities
Debt issued
Total liabilities
(1) The fair value of non-financial assets and liabilities, where applicable, is disclosed under the respective notes.
(2) Includes commodities measured at fair value which are HFT purposes.
252
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 38
Fair value of financial assets and financial
liabilities continued
The Company does not hold financial instruments measured
at fair value except for:
• $2,631 million (2020: $2,400 million) loan capital securities
held in subsidiaries which are Level 3 financial instruments
• $293 million (2020: $480 million) derivative assets
and $79 million (2020: $378 million) derivative liabilities
due with subsidiaries and $607 million (2020: $108 million)
structured notes issued which are Level 2
financial instruments.
Fair value sensitivity of these intercompany balances to
alternate assumptions and valuation inputs is not
significant and hence not covered under the sensitivity
analysis disclosures.
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Note 38
Fair value of financial assets and financial liabilities continued
Reconciliation of balances in Level 3 of the fair value hierarchy
The following table summarises the movements in Level 3 of the fair value hierarchy for financial instruments, including
commodities, measured at fair value by the Consolidated Entity:
Trading assets
$m
Financial investments
$m
Held for sale and
other assets
$m
Loan assets
Loans to associates
and joint ventures
Derivative financial instruments
(net replacement values)(1)
Balance as at 1 Apr 2019
Purchase, originations, issuances and other additions
Sales, settlements and repayments
Transfers into Level 3(2)
Transfers out of Level 3(2)
Fair value movements recognised in the
income statement
Net trading income(3),(4)
Other income/(loss)(5)
Fair value movements recognised in OCI(3)
Balance as at 31 Mar 2020
Fair value movements for the financial year
included in the current and prior year income
statements for assets and liabilities held at the end
of the financial year(3)
Balance as at 1 Apr 2020
Purchase, originations, issuances and other additions
Sales, settlements and repayments
Transfers into Level 3(2)
Transfers out of Level 3(2)
Fair value movements recognised in the
income statement
Net trading loss(3),(4)
Other income/(loss)(5)
Fair value movements recognised in OCI(3)
Balance as at 31 Mar 2021
Fair value movements for the financial year
included in the current and prior year income
statements for assets and liabilities held at the end
of the financial year(3)
225
363
(45)
107
(17)
23
–
–
656
23
656
526
(240)
126
(189)
(380)
499
(379)
1,502
366
(502)
42
(195)
100
62
13
1,388
146
1,388
552
(318)
186
(138)
(209)
54
39
1,554
(134)
97
15
(70)
–
(33)
1
–
–
10
–
10
22
25
(2)
16
71
14
(1) The derivative financial instruments in the table above are represented on a net basis. On a gross basis derivative assets are $270 million (2020: $880 million) and derivative liabilities
are $302 million (2020: $383 million).
(2) Assets and liabilities transferred in or out of Level 3 are presented as if the assets or liabilities had been transferred at the beginning of the financial year.
(3) The Consolidated Entity employs various hedging techniques in order to manage market risks including foreign exchange risks in Level 3 positions. The gains and losses relating to such
hedging techniques, that may include the purchase or sale of financial instruments measured at fair value that are classified as Level 1 or 2 positions or foreign currency denominated
financial instruments that are measured at amortised cost, are not presented in the table above.
(4) Net trading loss for the year for trading assets and derivatives include trading-related gains and losses and foreign exchange gains and losses. For all other Statement of financial
position items, trading loss represents foreign exchange losses only.
(5) Includes investment income and impairment charges on financial investments, loan assets and loans to associate and joint ventures.
254
$m
621
2,213
(208)
–
–
62
6
(179)
2,515
53
2,515
468
(2,043)
(25)
(351)
(54)
65
575
(281)
$m
208
256
(167)
–
(7)
33
(63)
(19)
241
(30)
241
82
(19)
5
(74)
(36)
(27)
(76)
96
(55)
$m
238
249
(113)
18
(6)
111
–
–
497
111
497
179
(289)
2
(38)
(383)
(32)
(382)
Total
$m
2,891
3,462
(1,105)
167
(258)
330
5
(185)
5,307
303
5,307
1,829
(2,909)
344
(464)
(1,361)
(11)
28
2,763
(1,217)
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 38
Fair value of financial assets and financial liabilities continued
Reconciliation of balances in Level 3 of the fair value hierarchy
The following table summarises the movements in Level 3 of the fair value hierarchy for financial instruments, including
commodities, measured at fair value by the Consolidated Entity:
Balance as at 1 Apr 2019
Purchase, originations, issuances and other additions
Sales, settlements and repayments
Transfers into Level 3(2)
Transfers out of Level 3(2)
Fair value movements recognised in the
income statement
Net trading income(3),(4)
Other income/(loss)(5)
Fair value movements recognised in OCI(3)
Balance as at 31 Mar 2020
Fair value movements for the financial year
included in the current and prior year income
statements for assets and liabilities held at the end
of the financial year(3)
Balance as at 1 Apr 2020
Purchase, originations, issuances and other additions
Sales, settlements and repayments
Fair value movements recognised in the
Transfers into Level 3(2)
Transfers out of Level 3(2)
income statement
Net trading loss(3),(4)
Other income/(loss)(5)
Fair value movements recognised in OCI(3)
Balance as at 31 Mar 2021
Fair value movements for the financial year
included in the current and prior year income
statements for assets and liabilities held at the end
of the financial year(3)
$m
225
363
(45)
107
(17)
23
–
–
656
23
656
526
(240)
126
(189)
(380)
499
(379)
$m
1,502
366
(502)
42
(195)
100
62
13
1,388
146
1,388
552
(318)
186
(138)
(209)
54
39
1,554
(134)
$m
97
15
(70)
–
(33)
1
–
–
10
–
10
22
25
(2)
16
71
14
(1) The derivative financial instruments in the table above are represented on a net basis. On a gross basis derivative assets are $270 million (2020: $880 million) and derivative liabilities
are $302 million (2020: $383 million).
(2) Assets and liabilities transferred in or out of Level 3 are presented as if the assets or liabilities had been transferred at the beginning of the financial year.
(3) The Consolidated Entity employs various hedging techniques in order to manage market risks including foreign exchange risks in Level 3 positions. The gains and losses relating to such
hedging techniques, that may include the purchase or sale of financial instruments measured at fair value that are classified as Level 1 or 2 positions or foreign currency denominated
financial instruments that are measured at amortised cost, are not presented in the table above.
(4) Net trading loss for the year for trading assets and derivatives include trading-related gains and losses and foreign exchange gains and losses. For all other Statement of financial
position items, trading loss represents foreign exchange losses only.
(5) Includes investment income and impairment charges on financial investments, loan assets and loans to associate and joint ventures.
Trading assets
Financial investments
Held for sale and
other assets
Loan assets
$m
Loans to associates
and joint ventures
$m
Derivative financial instruments
(net replacement values)(1)
$m
621
2,213
(208)
–
–
62
6
(179)
2,515
53
2,515
468
(2,043)
(25)
(351)
(54)
65
575
(281)
208
256
(167)
–
(7)
33
(63)
(19)
241
(30)
241
82
(19)
5
(74)
(36)
(27)
(76)
96
(55)
238
249
(113)
18
(6)
111
–
–
497
111
497
179
(289)
2
(38)
(383)
(32)
(382)
Total
$m
2,891
3,462
(1,105)
167
(258)
330
5
(185)
5,307
303
5,307
1,829
(2,909)
344
(464)
(1,361)
(11)
28
2,763
(1,217)
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Note 38
Fair value of financial assets and financial liabilities continued
Significant transfers between levels of the fair value hierarchy
During the financial year, the Consolidated Entity did not have significant transfers between Level 1 and 2.
Transfers into Level 3 were due to the lack of observable valuation inputs for certain investments and trading balances.
Transfers out of Level 3 were principally due to valuation inputs becoming observable during the year. Financial assets
reclassified into/out of the fair value hierarchy disclosure due to recognition and measurement category changes, or due to
changes in significant influence or control are also presented as transfers into/out of Level 3.
Unrecognised gains or losses
For financial instruments, the best evidence of fair value at initial recognition is its transaction price, unless its fair value is
evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation
technique for which variables include only data from observable markets. Where such alternative evidence exists, the
Consolidated Entity recognises profit or loss immediately when the financial instrument is recognised (‘day 1 profit or loss’).
When significant unobservable inputs are used to determine fair value, the day 1 profit or loss is deferred and is recognised in
the income statement over the life of the transaction or when the inputs become observable.
The table below summarises the deferral and recognition of profit or loss where a valuation technique has been applied for
which significant unobservable inputs are used:
Balance at the beginning of the financial year
Deferrals on new transactions and other adjustments
Foreign exchange movements
Recognised in net trading income during the year(1)
Balance at the end of the financial year
CONSOLIDATED
2021
$m
179
6
(23)
(75)
87
2020
$m
185
53
8
(67)
179
Sensitivity analysis of valuations using unobservable inputs
The table below shows the sensitivity to reasonably possible alternative assumptions, for Level 3 financial instruments whose
fair values are determined in whole or in part using unobservable inputs and valuation techniques such as discounted cash
flows based on assumptions by reference to historical company and industry experience. The impact of the sensitivity of
financial instruments which hedge the Level 3 positions but are classified as Level 1 or 2 is not included in the table below.
Product type
Equity and equity-linked products
Commodities
Interest rate and other products
Total
Product type
Equity and equity-linked products
Commodities
Interest rate and other products
Total
FAVOURABLE CHANGES
UNFAVOURABLE CHANGES
Profit or loss
$m
OCI
$m
Profit or loss
$m
OCI
$m
CONSOLIDATED 2021
(116)
(73)
(69)
(258)
‑
‑
(4)
(4)
CONSOLIDATED 2020
(122)
(133)
(213)
(468)
–
–
(49)
(49)
3
3
–
–
32
32
108
113
58
279
112
167
69
348
The favourable and unfavourable changes of using reasonable possible alternative assumptions for the valuation of above
product types have been calculated by recalibrating the valuation model using stressed significant unobservable inputs of the
Consolidated Entity’s range of possible estimates.
(1)
Includes amortisation, subsequent realisation due to unobservable inputs becoming observable, maturity and termination.
256
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 38
Fair value of financial assets and financial liabilities continued
Significant unobservable inputs
The following table contains information about the significant unobservable inputs used in Level 3 valuations, and the valuation
techniques used to measure fair value. The range of values represent the highest and lowest input used in the valuation
techniques. The range does not therefore reflect the level of uncertainty regarding a particular input, but rather the different
underlying characteristics of the relevant assets and liabilities.
Assets
$m
Liabilities
$m Valuation technique(s)
Significant unobservable inputs
RANGE OF INPUTS
Minimum
value
Maximum
value
CONSOLIDATED 2021
Equity and
equity-linked products
910
8 Net Asset Value (NAV)
Fund’s NAV(1)
Pricing model
Earnings multiple
3.2x
11.6x
Commodities
622
287 Pricing model
Commodity margin curves
(121.4)
1,458.0
Pricing model
Pricing model
Correlation
(43.0%)
100.0%
Volatility and related variables
Interest rate and other
products
1,533
7 Discounted cash flows
Discount rate
Pricing model
Correlation
Comparable transactions
Prices in %
Total
3,065
302
Equity and
equity-linked products
976
10 Net Asset Value (NAV)
Fund’s NAV(1)
Pricing model
Earnings multiple
Commodities
1,170
364 Pricing model
Commodity margin curves
Pricing model
Pricing model
Correlation
Volatility and related variables
Interest rate and other
products
3,544
9 Discounted cash flows
Discount rate
Pricing model
Correlation
Total
5,690
383
Correlation
8.3%
2.5%
0.0%
44%
290.5%
12.0%
100.0%
97%
CONSOLIDATED 2020
2.0x
(126.3)
15.0x
967.5
(55.0%)
100.0%
0.0%
2.0%
0.0%
293.4%
12.0%
100.0%
Correlation is a measure of the relationship between the movements of two variables (i.e. how the change in one variable
influences a change in the other variable). Correlation is a key input into the valuation of derivatives with more than one
underlying and is generally used to value hybrid and exotic instruments.
Volatility
Volatility is a measure of the variability or uncertainty in returns for a given derivative underlying. It represents an estimate of
the amount a particular underlying instrument, parameter or index will change in value over time. Volatility is an input into the
valuation of derivatives containing optionality. Volatility and skew are impacted by the underlying risk, term and strike price of
a derivative.
Correlations and volatilities are derived through extrapolation of observable volatilities, recent transaction prices, quotes from
other market participants, data from consensus pricing services and historical data adjusted for current conditions.
(1) The range of inputs related to NAV is not disclosed as the diverse nature of the underlying investments results in a wide range of inputs.
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Fair value of financial assets and financial liabilities continued
Inputs for equity and equity‑linked products
Unlisted equity securities are generally valued based on earnings or revenue multiples, referencing market transactions for
comparable companies adjusted as appropriate for current economic conditions. Other significant unobservable inputs may
include NAV and discount rates determined using inputs specific to the underlying investment, and forecast cash flows and
earnings/revenues of investee entities.
Inputs for interest rate products (discount rate)
Loans are generally valued using discount rates. Significant unobservable inputs may include interest rates and credit spreads of
counterparties, and original issue discounts on primary debt issuances.
Note 39
Offsetting financial assets and financial liabilities
The Consolidated Entity and the Company present financial assets and financial liabilities on a net basis in the Statements
of financial position when they meet the criteria described in Note 44(vii) Financial instruments. The following tables provide
information on the impact of offsetting of financial instruments in the Statements of financial position, as well as amounts
subject to enforceable netting arrangements that do not meet all the criteria for offsetting and therefore presented gross in
the Statements of financial position. Enforceable netting arrangements may allow for net settlement of specified contracts
with a counterparty only in the event of default or other pre-determined events, such that their potential effects on the
Consolidated Entity and Company’s financial position in that circumstance is to settle these contracts as one arrangement.
The Consolidated Entity uses a variety of credit risk mitigation strategies in addition to netting and collateral arrangements,
therefore amounts presented in this note are not intended to represent the credit risk exposure of the entity. Refer to Note 36.1
Credit risk for information on credit risk management.
AMOUNT SUBJECT TO ENFORCEABLE NETTING ARRANGEMENTS
SUBJECT TO OFFSETTING IN THE
STATEMENT OF FINANCIAL POSITION
RELATED AMOUNT
NOT OFFSET(1)
Gross
amount
$m
Amount
offset
$m
Net amount
presented
$m
Other
recognised
financial
instruments(2)
$m
Cash and
other
financial
collateral(3)
$m
Net
amount
$m
Cash collateral on
securities borrowed
and reverse repurchase
agreements
33,840
(583)
Settlement assets(4)
7,419
(5,153)
26,472
(6,461)
67,731
(12,197)
33,257
2,266
20,011
55,534
(26)
(21)
(32,781)
(11,048)
(4,433)
(11,095)
(37,214)
450
2,245
4,530
7,225
(4,669)
(7,266)
(22,747)
583
5,153
6,461
(4,086)
(2,113)
(16,286)
26
21
11,048
11,095
3,964
(96)
(2,092)
2,766
6,730
(2,472)
(4,660)
Total liabilities
(34,682)
12,197
(22,485)
Derivative assets
Total assets
Cash collateral on
securities lent and
repurchase agreements
Settlement liabilities(4)
Derivative liabilities
Amount not
subject to
enforceable
netting
arrangements
$m
Statement
of financial
position
total
$m
CONSOLIDATED 2021
3,424
7,279
631
11,334
(456)
(7,643)
(1,293)
(9,392)
36,681
9,545
20,642
66,868
(4,542)
(9,756)
(17,579)
(31,877)
(1) Related amounts not offset have been limited to the net amount presented in the Statements of financial position so as not to include the effect of over-collateralisation.
(2) Includes offsetting exposures the Consolidated Entity has with counterparties under master netting arrangements with a right to set off only in the event of default, or the offset
criteria are otherwise not satisfied.
(3) Includes cash and non-cash collateral received or pledged in relation to the gross amount of assets and liabilities which are subject to enforceable netting arrangements.
(4) Excludes margin money assets of $4,852 million and liabilities of $12,368 million presented under Note 8 Margin money and settlement assets and Note 20 Margin money and
settlement liabilities respectively on the Statement of financial position.
258
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 39
Offsetting financial assets and financial liabilities continued
AMOUNT SUBJECT TO ENFORCEABLE NETTING ARRANGEMENTS
SUBJECT TO OFFSETTING IN
THE STATEMENT OF FINANCIAL
POSITION
RELATED AMOUNT
NOT OFFSET(1)
Gross
amount
$m
Amount
offset
$m
Net
amount
presented
$m
Other
recognised
financial
instruments(2)
$m
Cash and
other
financial
collateral(3)
$m
Net amount
$m
Amount not
subject to
enforceable
netting
arrangements
$m
Statement
of financial
position
total
$m
CONSOLIDATED 2020
Cash collateral on
securities borrowed
and reverse repurchase
agreements
Settlement assets(4)
37,311
7,139
(944)
36,367
(353)
(35,269)
(5,796)
1,343
–
–
Derivative assets
61,467
(18,245)
43,222
(24,154)
(11,228)
Total assets
105,917
(24,985)
80,932
(24,507)
(46,497)
Cash collateral on
securities lent and
repurchase agreements
Settlement liabilities(4)
(2,862)
(7,355)
944
5,796
(1,918)
(1,559)
Derivative liabilities
(54,950)
18,245
(36,705)
Total liabilities
(65,167)
24,985
(40,182)
353
–
24,154
24,507
1,442
–
8,270
9,712
745
1,343
7,840
9,928
(123)
(1,559)
(4,281)
(5,963)
1,343
7,812
2,385
11,540
(416)
(7,362)
(1,694)
(9,472)
37,710
9,155
45,607
92,472
(2,334)
(8,921)
(38,399)
(49,654)
(1) Related amounts not offset have been limited to the net amount presented in the Statements of financial position so as not to include the effect of over-collateralisation.
(2) Includes offsetting exposures the Consolidated Entity has with counterparties under master netting arrangements with a right to set off only in the event of default, or the offset
criteria are otherwise not satisfied.
(3) Includes cash and non-cash collateral received or pledged in relation to the gross amount of assets and liabilities which are subject to enforceable netting arrangements.
(4) Excludes margin money assets of $7,238 million and liabilities of $13,894 million presented under Note 8 Margin money and settlement assets and Note 20 Margin money and
settlement liabilities respectively on the Statement of financial position.
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Note 39
Offsetting financial assets and financial liabilities continued
AMOUNT SUBJECT TO ENFORCEABLE NETTING ARRANGEMENTS
SUBJECT TO OFFSETTING IN THE
STATEMENT OF FINANCIAL POSITION
RELATED AMOUNT
NOT OFFSET
Gross
Amount
$m
Amount
offset
$m
Net
amount
presented
$m
Other
recognised
financial
instruments
$m
Cash and
other
financial
collateral
$m
Due from subsidiaries
Due to subsidiaries
Due from subsidiaries
Due to subsidiaries
24,929
(7,044)
29,806
(8,331)
(5,652)
5,652
(369)
369
19,277
(1,392)
29,437
(7,962)
(665)
665
(7,054)
7,054
–
–
Amount not
subject to
enforceable
netting
arrangement
$m
Statement
of financial
position
total
$m
COMPANY 2021
2,950
(812)
22,227
(2,204)
COMPANY 2020
2,897
(939)
32,334
(8,901)
Net
amount
$m
18,612
(727)
22,383
(908)
260
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 40
Pledged assets and transfers of financial assets
Pledged assets
Assets pledged as security for liabilities include the following:
• securities and commodities included under trading assets and off balance sheet collateral securities pledged for
repurchase transactions, stock lending arrangements and trading liabilities. These transactions are governed by standard
industry agreements
• loan assets held by the Consolidated SEs provided as collateral against debt issued
• cash and bank balances, trading assets, associate investments, financial investments, property, plant and equipment and
other assets provided as collateral for borrowings.
The table below represents assets that have been pledged as security for liabilities:
On Balance Sheet items:
Cash and bank balances
Trading assets(1)
Financial investments
Other assets
Loan assets(2)
Interests in associates and joint ventures
Margin money and settlement assets
Property, plant and equipment
Intangible assets
Total On Balance Sheet items pledged for liabilities
Off Balance Sheet items:
Collateral securities and commodities(3)
Total
CONSOLIDATED
2021
$m
116
3,826
202
572
14,157
92
520
434
19,919
8,796
28,715
2020
$m
146
3,235
267
332
17,335
2,853
95
303
451
25,017
7,852
32,869
(1) For trading securities, the transferee has the right to sell or re-pledge the entire value of securities received. The balance does not include securities amounting to $1,734 million
(2020: $1,214 million) transferred in return for the loan of other securities where there is no associated liability on the Consolidated Entity’s Statement of financial position.
(2) Includes $2,605 million of SEs securitised bonds that have been pledged against repurchase agreement liabilities, including $505 million (2020: $531 million) relating to a repurchase
liability with a related body corporate.
(3) Of the $37,149 million (2020: $38,072 million) of collateral received against reverse repurchase and collateral arrangements (refer Note 36.1 Credit risk), this balance represents
securities transferred under repurchase agreements for which a corresponding liability is recognised on the Consolidated Entity’s Statement of financial position and security swap
arrangements where there is no associated liability on the Consolidated Entity’s Statement of financial position.
261
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Financial investment – Total return swap
Financial assets sold, while concurrently entering into
a total return swap with the counterparty, continue to
be recognised along with an associated liability for the
consideration received. The Consolidated Entity does not
have legal rights to these assets but has full economic
exposure to them. The transferred assets cannot otherwise
be pledged or sold by the transferee.
Other financial transfers
Includes loans and leases sold or lent to an external funder
but the Consolidated Entity still has full economic exposure
to them. In such instances the Consolidated Entity has a right
to receive cash from the lessee and an obligations to pay
those cash flows to the external funder.
Trading assets under other financial assets not derecognised
represents gold and bonds transferred for margins in relation
to trading activities.
Note 40
Pledged assets and transfers of financial assets
continued
Transfer of financial assets
The Consolidated Entity may enter into transactions in the
normal course of business that transfer risks and rewards
of financial assets recognised in the Consolidated Entity’s
Statement of financial position to other entities. Depending
on the criteria discussed in Note 44(vii) Financial instruments,
the Consolidated Entity may be unable to derecognise the
transferred asset, be able to derecognise the transferred
assets in full or continue to recognise the asset to the extent
of its continuing involvement.
Transferred financial assets that are derecognised
When financial assets are derecognised in their entirety,
some continuing involvement may be retained in the assets
through liquidity support, financial guarantees, certain
derivatives or certain securitisation interests. For the
financial years ended 31 March 2021 and 31 March 2020, there
were no material transfers of financial assets where the
Consolidated Entity has had continuing involvement.
Transferred financial assets that are not derecognised
The Consolidated Entity did not derecognise any financial
assets to the extent of continuing involvement in the years
ended 31 March 2021 and 31 March 2020. The following
transactions typically result in the transferred assets
continuing to be recognised in full.
Repurchase and securities lending agreements
Securities and commodities sold under an agreement to
repurchase and securities subject to lending agreements
continue to be recognised in the Statements of financial
position and an associated liability is recognised for the
consideration received.
Where securities are transferred in return for loan of other
securities, the transferred asset continues to be recognised
in full. There is no associated liability as the non-cash
collateral received is not recognised on the balance sheet.
The Consolidated entity is unable to use, sell or pledge the
transferred assets for the duration of the transaction and
remains exposed to interest rate risk and credit risk on
these assets.
In certain arrangements transferee cannot otherwise sell or
pledge the transferred securities, however the assets may be
substituted if the required collateral is maintained.
262
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 40
Pledged assets and transfers of financial assets continued
Carrying
amount of
transferred
assets
$m
Carrying
amount of
associated
liabilities
$m
FOR THOSE LIABILITIES THAT ONLY HAVE
RECOURSE TO THE TRANSFERRED ASSETS
Fair value of
transferred
assets
$m
Fair value of
associated
liabilities
$m
Fair value
$m
CONSOLIDATED 2021
Financial assets not derecognised due to repurchase
and securities lending agreements:
Trading assets(1)
3,200
(1,454)
Financial assets not derecognised due to total
return/asset swaps:
Financial investments
202
(182)
Other financial assets not derecognised:
Trading assets(2)
Loan assets
Total financial assets not derecognised
988
208
4,598
(198)
(1,834)
Financial assets not derecognised due to repurchase
and securities lending agreements:
Trading assets(1)
1,959
(775)
Financial assets not derecognised due to total
return/asset swaps:
Financial investments
267
(245)
Other financial assets not derecognised:
Cash and bank balances(2)
Trading assets(2)
Loan assets
Total financial assets not derecognised
124
748
423
3,521
–
–
(412)
(1,432)
209
209
–
–
–
–
423
423
(199)
(199)
10
10
CONSOLIDATED 2020
–
–
–
–
(412)
(412)
–
–
–
–
11
11
There were no material transfers of financial assets for the Company where the financial assets were transferred but not
derecognised during the financial years ended 31 March 2021 and 31 March 2020.
Includes securities amounting to $1,734 million (2020: $1,214 million) transferred under security swap arrangements.
(1)
(2) Includes gold and bonds placed as initial margin for trading activities.
263
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Note 41
Audit and other services provided by PricewaterhouseCoopers
During the financial year, PricewaterhouseCoopers (PwC) and its network firms, the auditor of the Consolidated Entity and the
Company, earned the following remuneration:
PwC – Australia
Audit of the Group and controlled entities(2)
Total audit services
Other statutory assurance services(3)
Other assurance services(4)
Advisory services
Taxation
Total non‑audit services
Total remuneration paid to PwC Australia
Network firms of PwC Australia
Audit of the controlled entities(2)
Total audit services
Other statutory assurance services(3)
Other assurance services(4)
Advisory services
Taxation
Total non‑audit services
Total remuneration paid to network firms of PwC Australia
Total audit services remuneration paid to PwC
Total non‑audit services remuneration paid to PwC
Total remuneration paid to PwC
CONSOLIDATED
2021
$’000
24,049
24,049
2,622
4,342
28
415
7,407
31,456
11,498
11,498
595
852
293
2,759
4,499
15,997
35,547
11,906
47,453
2020(1)
$’000
24,603
24,603
1,673
2,905
265
588
5,431
30,034
14,068
14,068
542
1,080
286
1,706
3,614
17,682
38,671
9,045
47,716
Use of PwC’s services for engagements other than audit and assurance is restricted in accordance with the Consolidated
Entity’s Auditor Independence Policy. It is the Consolidated Entity’s policy to seek competitive tenders for all major advisory
projects and all non-audit services provided by PwC have been approved in accordance with its Auditor Independence Policy.
(1) Comparative information has been restated to conform to the presentation in the current year.
(2) Prior period includes additional fees of $5,603 thousand for PwC Australia ($2,049 thousand for network firms of PwC Australia) that related to the year ended 31 March 2020 but
were incurred during the 2021 financial year.
(3) Other statutory assurance services include audit of Australian Financial Services license requirements and other due diligence activities including comfort letters on debt issuance
programmes, generally performed by the auditor of the Consolidated Entity.
(4) Other assurance services consist of engagements in relation to an audit that are not the direct audit or review of financial reports. These services include engagements required under
prudential standards, accounting advice, certifications, due diligence and reviews of controls and other agreed upon procedures.
264
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 42
Acquisitions and disposals of subsidiaries and businesses
Significant acquisition of subsidiaries and businesses:
There were no individually significant businesses and subsidiaries where control was gained during the current financial year.
Other subsidiaries and businesses acquired:
During the year ended 31 March 2021, subsidiaries and businesses acquired or consolidated due to the acquisition of
control were:
Alira Energy, LLC, Woodway Holdings LLC, Vantage Commodities Financial Services LLC, Macquarie Fund Solutions – Global
Listed Real Assets Fund, Delaware Wilshire Private Markets Fund, Future Energy sp.z.o.o, Aragorn Holdco 2 Pte Limited,
Macquarie Corporate Bond Fund and Elwiatr Pruszynski sp.z.o.o.
The purchase price allocations for the business combinations are provisional as at 31 March 2021. The incremental impact of the
acquisitions on the Consolidated Entity’s revenue and earnings is immaterial.
During the year ended 31 March 2020, subsidiaries and businesses acquired or consolidated due to the acquisition of
control were:
Premier Technical Services Group, The Dovel Group, LLC, Ace Info Solutions LLC, Eolica Kisielice spólka z ograniczona
odpowiedzialnoscia Management Kisielice Spółka Z Ograniczona�
Windfarm Sp. z o.o, Business Keeper AG, Macquarie Fund Solutions Macquarie Corporate Bond, PESY II Holdings S.a.r.l and
Matrix Networks Group Limited.
, Lake Wind AB, Biocow Ltd, Zaja� czkowo
Odpowiedzialno´scia�
Aggregate provisional details of the above-mentioned acquisitions are as follows:
Fair value of net assets acquired
Cash and bank balances
Financial investments
Other assets
Loan assets
Property, plant and equipment and right-of-use assets
Intangible assets
Payables, provisions, borrowings and other liabilities
Non-controlling interests
Total fair value of net assets acquired
Consideration
Cash consideration
Deferred consideration
Total consideration
Goodwill recognised on acquisition
Net cash flow
Cash consideration
Less: cash and cash equivalents acquired
Net cash outflow
2021
$m
51
74
23
6
192
57
(60)
(58)
285
281
6
287
2
(281)
51
(230)
2020
$m
44
74
213
-
193
244
(527)
(69)
172
888
6
894
722
(888)
44
(844)
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Note 42
Acquisitions and disposals of subsidiaries and businesses continued
Significant disposal of subsidiaries and businesses:
There were no individually significant businesses and subsidiaries where control was lost during the current financial year.
Other disposal of subsidiaries and businesses:
During the year ended 31 March 2021, the Consolidated Entity disposed of Vestone Capital Pty Limited (formerly Macquarie
Equipment Rentals Pty Limited). This was achieved by contributing the net assets of the business to a newly formed joint
venture along with a third-party investor, in which the Consolidated Entity holds a 50% interest.
Other subsidiaries and businesses disposed of or deconsolidated due to the loss of control were:
VeenIX BaHo B.V, Acacia Renewables K.K, Macquarie European Rail, Macquarie Corporate Bond Fund, Hamel Renewables LLC,
Hamel Renewables HoldCo LLC, Macquarie Fund Solutions – Global Listed Real Assets Fund, IPM Global Macro 50 Fund and
Showa Planning K.K.
During the year ended 31 March 2020, the Consolidated Entity disposed of the Macquarie AirFinance business, by contributing
the net assets of the business to a newly formed joint venture along with a third-party investor in which Macquarie held a 75%
interest. Rental income and other operating lease related charges up to the date of the disposal have been included in the
Consolidated Entity’s net operating lease income.
Other subsidiaries and businesses disposed of or deconsolidated due to the loss of control were: Energy S. LSIS, Achim Solar
Power Co. Ltd, Aran Solar Company Limited, Suri Solar Company Limited, Sosu Solar Company Limited, Mir Solar Company
Limited, Maru Solar Company Limited, Laon Solar Company Limited, Nuix Pty Ltd, Nuix North America Inc., Nuix USG Inc.,
Nuix Ireland Ltd, Nuix Technology UK Ltd, Nuix Pte. Ltd, Nuix Holding Pty Ltd, Nuix Philippines ROHQ, Dalmatia WtE EUR Topco
Limited, Dalmatia WtE EUR Holdings Limited, LPC Venture I, LLC, Godo Kaisha Alpha Mega Solar Project No. 1, Godo Kaisha
Alpha Mega Solar Project No. 2, Alchemy Telco Solutions Limited, American Alpha Master Fund, Delaware Emerging Market
Debt Fund, Delaware Small Cap Growth Fund, Global Multi Asset Income, UCITS Corp Bond Fund, PPP Irish Accommodation
Limited, Zaja� czkowo Windfarm Sp. z o.o. Poland Bidco 1 Ltd, Kisielice Wind Limited, Eolica Kisielice spólka z ograniczona
odpowiedzialnoscia Management Kisielice Spółka Z Ograniczona�
Odpowiedzialno´scia�
.
Aggregate details of the diposals of are as follows:
Carrying value of assets and liabilities
Cash and bank balances
Financial investments
Loan assets
Held for sale and other assets
Property, plant and equipment and right-of-use assets
Interests in associates and joint ventures
Intangible assets
Deferred tax, held for sale and other liabilities
Non-controlling interests
Total carrying value of net assets
Consideration
Cash consideration
Consideration receivable
Fair value remeasurement of investment retained
Loan assets
Interest acquired through contribution to a joint venture
Total consideration
Direct costs relating to disposal
Net cash flow
Cash consideration
Less: cash and cash equivalents disposed of or deconsolidated(1)
Net cash inflow
(1)
Includes $25 million (2020: $1,083 million) of cash and bank balances included under held for sale and other assets above.
266
2021
$m
39
119
423
758
5
(307)
(53)
984
940
41
56
376
32
1,445
(5)
940
(64)
876
2020
$m
114
296
–
9,776
94
44
453
(7,288)
(349)
3,140
1,223
17
724
–
1,558
3,522
(8)
1,223
(1,197)
26
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 43
Events after the reporting date
On 30 April 2021, the Consolidated Entity acquired control
of Waddell & Reed Financial Inc., a publicly traded US
asset manager providing wealth management and asset
management services, for consideration of $2,175 million.
On completion, the Consolidated Entity sold the wealth
management business to LPL Financial Holdings Inc. for
$400 million. While the purchase price allocation for
the acquisition and disposal is yet to be completed, it is
estimated that it will result in an increase in goodwill and
other intangible assets net of deferred tax of approximately
$1,200 million and other net assets of approximately
$600 million. Had the Consolidated Entity acquired control
on 1 April 2020, the Consolidated Entity’s net operating
income for the year ended 31 March 2021, excluding the
wealth management business, would have increased
by approximately $660 million. The contribution to the
Consolidated Entity’s profit after income tax in this year,
after acquisition-related costs and the amortisation of
intangible assets but excluding integration costs and
synergies, would have been approximately $50 million.
There were no other material events subsequent to
31 March 2021 and up until the authorisation of the financial
statements for issue, that have not been disclosed elsewhere
in the financial statements.
Note 44
Significant accounting policies
(i) Principles of consolidation
Subsidiaries
The consolidated Financial Report reflects the financial
performance and financial position of the Consolidated
Entity. Subsidiaries are all those entities (including structured
entities) which the Consolidated Entity controls. The
Consolidated Entity controls an entity where it has:
• power to direct the relevant activities
• exposure, or rights, to significant variable returns, and
• the ability to utilise power to affect the entity’s returns.
The determination of control is based on current facts and
circumstances and is continuously assessed. The Consolidated
Entity has power over an entity when it has existing
substantive rights that provide it with the current ability to
direct the entity’s relevant activities, being those activities
that significantly affect the entity’s returns. The Consolidated
Entity also considers the entity’s purpose and design. If the
Consolidated Entity determines that it has power over an
entity, the Consolidated Entity then evaluates its exposure, or
rights, to variable returns by considering the magnitude and
variability associated with its economic interests.
All variable returns are considered in making that assessment
including, but not limited to, returns from debt or equity
investments, guarantees, liquidity arrangements, variable
fees and certain derivative contracts.
Structured entities
Structured Entities (SEs) are those entities that have
been designed so that voting or similar rights are not the
dominant factor in deciding who controls the entity, such
as when voting rights relate to administrative tasks only
and the relevant activities of the SE are directed by means
of contractual arrangements. When assessing whether the
Consolidated Entity controls (and therefore consolidates) a
SE, judgement is required as to whether the Consolidated
Entity has power over the relevant activities as well as
exposure, or rights, to significant variable returns of the SE.
Where the Consolidated Entity has power over the SE’s relevant
activities, has assessed that its exposure to variable returns
(through the residual risk associated with its involvement in
SEs) is sufficient, and is able to affect its returns, the underlying
assets, liabilities, revenues and expenses of these SEs are
reported in the consolidated financial statements.
Consolidation
The effects of all transactions between subsidiaries in the
Consolidated Entity are eliminated in full. Unrealised losses
are eliminated in the same manner as unrealised gains but
only to the extent that there is no evidence of impairment.
Non-controlling interests (NCI) in the results and equity of
subsidiaries are shown separately in the consolidated income
statement, consolidated statement of comprehensive
income and consolidated statement of financial position
and are determined on the basis of the Consolidated Entity’s
present ownership interest in the entity.
Where control of an entity was obtained during the financial year,
its results are included in the consolidated income statement
from the date on which control was obtained. Where control of
an entity ceased during the financial year, its results are included
for that part of the financial year during which control existed.
The Consolidated Entity determines the dates of obtaining
control (i.e. acquisition date) and losing control (i.e. disposal
date) of another entity based on an assessment of all
pertinent facts and circumstances that affect the ability
to direct the relevant activities and the extent of the
Consolidated Entity’s exposure to the entity’s variable returns.
Facts and circumstances that have the most impact include
the contractual arrangements agreed with the counterparty,
the manner in which those arrangements are expected
to operate in practice and whether regulatory approval
is required (including the nature of such approval). The
acquisition or disposal date does not necessarily occur when
the transaction is closed or finalised under law.
Subsidiaries held by the Company are carried in its financial
statements at cost less accumulated impairment.
Interests in associates and joint ventures
Associates and joint ventures are entities over which
the Consolidated Entity has significant influence or joint
control. Existing ownership interests (including in substance
ownership interests) in associates and joint ventures are
accounted for under the equity method. In-substance
ownership interests are interests that are substantially
similar to an investee’s ordinary shares. Equity accounting
of the ownership interests is applied from the date that the
Consolidated Entity has significant influence or joint control
and ceases when the Consolidated Entity no longer has
significant influence or joint control.
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Note 44
Significant accounting policies continued
(i) Principles of consolidation continued
The Consolidated Entity determines the dates of obtaining
or losing significant influence or joint control of another
entity based on an assessment of all pertinent facts and
circumstances that affect the ability to significantly influence
the financial and operating policies or jointly control the
relevant activities of that entity. Facts and circumstances
that have the most impact include the contractual
arrangements agreed with the counterparty, the manner
in which those arrangements are expected to operate
in practice, and whether regulatory approval is required
(including the nature of such approval). The acquisition
or disposal date does not necessarily occur when the
transaction is closed or finalised under law.
The equity method of accounting is applied in the
consolidated Financial Report and requires the recognition
of the Consolidated Entity’s share of its associates’ and
joint ventures’ post acquisition profits or loss (including
impairments of the associates’ or joint ventures’ assets) in
the consolidated income statement, and the share of the
post-acquisition movements in other comprehensive income
in the consolidated statement of comprehensive income.
Transactions reported directly in equity (besides those
reflected in other comprehensive income) are accounted for
by the Consolidated Entity in accordance with the substance
of the transaction and whether the transaction is dilutive
to the Consolidated Entity’s ownership interest. Where the
transaction is dilutive, the impact is recorded as part of the
Consolidated Entity’s share of profits or losses of associates
and joint ventures.
Equity accounting of losses is restricted to the Consolidated
Entity’s interests in its associate or joint venture, unless the
Consolidated Entity has an obligation or has made payment
on behalf of the entity.
Long-term interests in an associate or joint venture, to which
the equity method is not applied but in-substance form
part of the net investment in the associate or joint venture,
are accounted for in accordance with the Consolidated
Entity’s financial instruments’ accounting policies, which
includes accounting for expected credit losses, where
applicable. Subsequently, the loss allocation and impairment
requirements in AASB 128 Investments in Associates and
Joint Ventures are applied to long-term interests.
At the end of each reporting period, management reviews
the Consolidated Entity’s investments in associates and
joint ventures for indicators of impairment. Where there
is an indicator of impairment, the carrying amount of the
investment is tested for impairment by comparing its
recoverable amount with its carrying value. Impairment
losses are recognised in other impairment charges/reversal.
A reversal of a previously recognised impairment loss is
recognised only to the extent that the investment’s carrying
value does not exceed the carrying amount that would have
been determined (including consideration of any equity
accounted losses) if no impairment loss had been recognised.
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Interests in associates and joint ventures are classified as
held for sale when the Consolidated Entity determines that
the interest will be recovered principally through a sale
transaction rather than through continuing use. Equity
accounting is suspended when the interest is classified as
held for sale.
On disposal of an investment in an associate or a joint
venture, the difference between the sales consideration, any
retained interest and the carrying value is recognised as a
gain or loss in investment income as part of other operating
income and charges together with any gains and losses in OCI
that related to the associate or joint venture.
Changes in ownership interests
When acquiring additional interests:
• of a financial asset (such that it becomes an associate, joint
venture or subsidiary), or
• in an investment in an associate or joint venture (such that it
becomes a subsidiary), where the underlying entity constitutes
a business, previously held interests are revalued to their fair
value and any gain or loss is recognised in investment income
as part other operating income and charges.
Similarly, when selling ownership interests of a subsidiary
(such that control is lost), or an investment in an associate or
joint venture (such that it becomes a financial asset), retained
ownership interests are revalued to their fair value and any
gain or loss is recognised in investment income as part of other
operating income and charges. Retained ownership interests
are not revalued where the sale represents a contribution to an
associate or joint venture.
Increases and decreases in the Consolidated Entity’s interest
in a subsidiary (that do not result in the loss of control)
are accounted for directly within equity. Increases in the
Consolidated Entity’s ownership interest in an associate or joint
venture are accounted for as an increase in the carrying value
of the interest in associate or joint venture. The difference
between the reduction in the Consolidated Entity’s interest
in an associate or joint venture that remains an associate or
joint venture and the fair value of consideration received is
accounted for as a gain or loss within investment income as
part of other operating income and charges. A proportionate
amount of associated OCI is reclassified to profit or loss, or
reclassified within equity, as would otherwise be required on
disposal of the underlying position.
(ii) Business combinations
Distinguishing between whether assets or a business is acquired
involves judgement. The Consolidated Entity identifies a
business where an acquired integrated set of activities and
assets includes an economic resource (input) and a substantive
process that together significantly contribute to the ability to
provide goods or services to customers, generate investment
income or other income from ordinary activities (outputs).
On a transaction-by-transaction basis, the Consolidated
Entity may use a practical expedient to determine that
an acquired set of activities is not a business. Under this
assessment, the transaction is accounted for as an asset
acquisition if substantially all of the fair value of the gross
assets acquired is concentrated in a single identifiable asset
or group of similar identifiable assets.
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Note 44
Significant accounting policies continued
(ii) Business combinations continued
Business combinations are accounted for using the
acquisition method. The consideration exchanged is
measured as the aggregate of the acquisition-date fair values
of assets transferred, equity instruments issued, and liabilities
incurred. Transaction costs of a business combination are
recognised directly in the consolidated income statement as
part of other operating expenses.
Identifiable assets acquired, and liabilities and contingent
liabilities assumed in a business combination are measured
at fair value on the acquisition date. The Consolidated Entity
elects, on a transaction-by-transaction basis, to initially
measure NCI either at fair value or at the NCI’s proportionate
share of the fair values of the identifiable assets and liabilities.
Goodwill is measured as the excess of the consideration
exchanged, recognised NCI, and the fair value of previously
held equity interests over the fair value of the identifiable net
assets of the business acquired and is recognised as part of
intangible assets in the Statement of financial position. Goodwill
is subsequently measured at cost less accumulated impairment.
If the consideration is less than the Consolidated Entity’s
share of the fair value of the identifiable net assets of the
business acquired, the difference is recognised in investment
income as part of other operating income and charges,
but only after a reassessment of the identification and
measurement of the net assets acquired.
Contingent consideration that is dependent on any
subsequent event is measured at fair value with changes
in its fair value recognised in investment income as part of
other operating income and charges.
Where settlement of any part of cash consideration is
deferred, the amounts payable in the future are discounted
to their present values as at the acquisition date. The
discount rate used is the Consolidated Entity’s incremental
borrowing rate, being the rate at which a similar borrowing
could be obtained from an independent financier under
comparable terms and conditions.
(iii) Foreign currency translation
Functional and presentation currency
The functional currency of each entity in the Consolidated
Entity is determined as the currency of the primary
economic environment in which the entity operates. The
Consolidated Entity and the Company’s financial statements
are presented in Australian dollars (the presentation
currency), which is also the Company’s functional currency.
Transactions and balances
At initial recognition, a foreign currency transaction is
translated into the entity’s functional currency using the
spot exchange rate between the functional currency and the
foreign currency at the date of the transaction.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
At the end of each reporting period:
• foreign currency monetary assets and liabilities are
translated using the closing exchange rate
• non-monetary items (including equity) measured in
terms of historical cost in a foreign currency remain
translated using the spot exchange rate at the date of the
transaction, and
• non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the
date that the fair value was measured.
Foreign exchange gains and losses arising from the
settlement or translation of monetary items, or
non-monetary items measured at fair value are recognised
in net trading income, with one exception. Where such
monetary items are designated as hedging instruments
in qualifying cash flow hedge or net investment hedge
relationships, the foreign exchange gains and losses may be
deferred in OCI to the extent the hedge is effective (refer
to Note 35 Hedge accounting and Note 44(x) Derivative
instruments and hedging activities).
Subsidiaries and other entities
The results and financial position of all entities that have
a functional currency other than Australian dollars are
translated into Australian dollars as follows:
• assets and liabilities for each Statement of financial
position presented are translated at the closing exchange
rate at the date of that Statement of financial position.
Goodwill and fair value adjustments arising on the
acquisition of a foreign operation are treated as assets
and liabilities of the foreign operation and are translated at
the closing exchange rate
• income and expenses for each income statement are
translated at actual or average exchange rates at the
dates of the transactions
• all resulting exchange differences are recognised in OCI
within a separate component of reserves, being the
foreign currency translation reserve (FCTR).
Foreign currency gains and losses on intragroup loans are
recognised in the income statement except where the
loan is in substance part of the Consolidated Entity’s net
investment in the foreign operation, in which case the foreign
currency gains and losses are recognised in the Consolidated
Entity’s FCTR.
The exchange gains or losses recognised in FCTR are
reclassified to the income statement or reattributed within
equity as follows:
• if there is a disposal of a foreign operation, then the
accumulated FCTR is reclassified from OCI to investment
income within other operating income and charges
• if there is a partial disposal of a foreign operation that
is an associate or joint arrangement, without loss of
significant influence or joint control, then a proportionate
share of the accumulated FCTR is reclassified to
investment income
• if there is a partial disposal of a foreign operation that is a
subsidiary, without loss of control, then a proportionate
share of the accumulated FCTR is reattributed within
equity to non-controlling interests.
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Note 44
Significant accounting policies continued
(iv) Revenue and expense recognition
Net interest income
Interest income and interest expense (with the exception
of borrowing costs that are capitalised on a qualifying asset
which is not measured at fair value) are recognised using
the effective interest rate (EIR) method for financial assets
and financial liabilities carried at amortised cost, and debt
financial assets classified as at fair value through OCI. The
EIR method calculates the amortised cost of a financial
instrument at a rate that discounts estimated future cash
receipts or payments through the expected life of the
financial instrument to the net carrying amount of the
financial asset or liability. Fees and transaction costs that are
integral to the lending arrangement are recognised in interest
income or interest expense, as applicable, over the expected
life (or, when appropriate, a shorter period) of the instrument
in accordance with the EIR method.
When the estimates of payments or receipts of a financial
instrument are subsequently revised, the carrying amount
is adjusted to reflect the actual or revised cash flows with
the remeasurement recognised as part of interest income
(financial assets) or interest expense (financial liabilities).
The calculation of the EIR does not include ECL, except for
financial assets which on initial recognition are classified
as purchased or originated credit impaired (POCI). Interest
income on these assets is determined using a credit adjusted
EIR by discounting the estimated future cash receipts,
including credit losses expected at initial recognition, through
the expected life of the financial instrument to the net
carrying amount of the financial asset.
Interest income on financial assets that are not credit
impaired is determined by applying the financial asset’s
EIR to the financial asset’s gross carrying amount. Interest
income on financial assets that are not classified as POCI but
are subsequently classified as credit-impaired (stage III), is
recognised by applying the EIR to the amortised cost carrying
value (being the gross carrying value after deducting the
impairment loss).
Interest income and expense on financial assets and liabilities
that are classified as FVTPL is accounted for on a contractual
rate basis.
Fee and commission income
Revenue earned by the Consolidated Entity from its
contracts with customers primarily consists of the following
categories of fee and commission income:
Base and other asset management fees, and
performance fees
The Consolidated Entity earns base and other asset
management and performance fees for providing asset
management services for listed and unlisted funds, managed
accounts and co-investments arrangements. It has been
determined that the provision of asset management services
is typically a single performance obligation.
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Base management fees are recognised over the life of the
contract as the asset management services are provided.
Any associated performance fees are deemed to be a
variable component of the same asset management
service and are recognised only when it is highly probable
that the performance hurdles are met, and a significant
reversal of cumulative fees recognised to date will not occur.
Determining the amount and timing of performance fees
to be recognised involves judgement, the use of estimates
(including management estimates of underlying asset values)
and consideration of a number of criteria relating to both the
fund or managed account in which the asset(s) are held, as
well as the underlying asset(s), such as:
• the extent to which performance fee liabilities have been
accrued by the fund or managed account to date or
consideration of the current valuation case of the assets
in relation to the related performance fee hurdle rate
• the proportion of assets realised and returns on
those assets
• nature of remaining underlying fund or managed account’s
assets and potential downside valuation risks on each
• time remaining until realisation of the assets and the
fund’s life or asset management services’ timeline
• consideration of the ability to dispose of the asset,
including any barriers to divest.
Mergers and acquisitions, advisory and
underwriting fees
The Consolidated Entity earns revenue through its role as
advisor on corporate transactions as well as through its role
as manager and underwriter of equity and debt issuances.
The revenue from these arrangements is recognised at a
point in time, and when it has been established that the
customer has received the benefit of the service such that
the performance obligation is satisfied. For advisory services
this is typically at the time of closing the transaction.
Where mandates contain rights to invoice upon reaching
certain milestones, the Consolidated Entity assesses
whether distinct services have been transferred at these
milestones and accordingly recognises revenue. If not,
the fee recognition will be deferred until such time as the
performance obligation has been completed. Management
of capital raisings and underwriting of debt or equity capital
raisings are each considered distinct performance obligations
that are typically satisfied on the allocation date of the
underwritten securities.
Brokerage and other trading‑related income
The Consolidated Entity enters into contracts with
customers to act as an agent to buy and sell securities. The
brokerage and commission income related to this service is
recognised on trade date and is presented net of any rebates.
Other fee and commission income
Other fee and commission income includes fees earned on
a range of banking products and services platforms, wealth
services, credit cards, structuring fees, lending services, stock
borrow and lending activities and income on structured
products which is recognised when the performance
obligation is satisfied.
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 44
Significant accounting policies continued
(iv) Revenue and expense recognition continued
Net operating lease income
Operating lease income is recognised on a straight-line basis
over the lease term. It comprises operating lease income
and supplemental rent and is presented net of the related
depreciation expense.
Supplemental rent, maintenance liability and end of
lease compensation
Generally, under operating lease contracts the lessee is
responsible for maintenance. Supplementary rent received
from lessees in relation to maintenance is recognised as
a maintenance liability where the lessee is responsible for
maintenance and the Consolidated Entity is obligated to
reimburse lessees for the maintenance.
In certain circumstances, the Consolidated Entity, as lessor,
agrees to an alternative mechanism related to maintenance
known as end of lease compensation. This compensation
is typically calculated on the basis of the condition of each
major component at the end of the lease relative to the
commencement of the lease measured by hours, number
of cycles or calendar time at an agreed rate specified in the
lease. The expected compensation for the use of the asset
is accrued over the term of the lease and receipt of this
compensation is deferred until the end of the lease.
In other leases, the lessee is required to enter into a contract
with an approved third-party maintenance service provider
and make payments on a monthly basis to the service
provider based on hours operated.
Maintenance liabilities are recognised separately and are
disclosed in Note 23 Held for sale and other liabilities.
Other operating income and charges
Other operating income and charges includes investment
income, and other income.
Investment income includes gains and losses arising from
subsequent changes in the fair values of equity and debt
investment securities that are classified as FVTPL and
dividends or distributions on these securities which represent
the return on such investments. Impairment losses/reversal
of impairment losses on these financial assets are not
reported separately.
Gains or losses on the change of control, joint control and/or
significant influence and reclassifications to/from held
for sale also forms part of investment income. Refer to
Note 44(i) Principles of consolidation for details on the timing
of recognition of such gains or losses.
Dividends
Dividends or distributions are recognised when the right to
receive a dividend or distribution is established, it is probable the
economic benefits associated with the dividend will flow to the
Consolidated Entity and the dividend can be measured reliably.
Dividends or distributions from HFT assets are recognised in
net trading income, as investment income as part of other
operating income and charges for other financial assets
measured at FVTPL or FVOCI, or as a reduction to the
carrying amount of the investment in associates and joint
ventures in the Consolidated Entity’s Statement of financial
position. Where associates and joint ventures are classified as
held for sale, dividends or distributions are recognised within
other income as part of other operating income and charges.
Judgement is applied in determining whether distributions
from subsidiaries, associates and joint ventures are to be
recognised as dividend income or as a return of capital.
Distributions that represent a return of capital are accounted
for by the Company as a reduction to the cost of its
investment and are otherwise recognised by the Company
within investment income as part of other operating income
and charges when the recognition criteria are met.
Expenses
Expenses are recognised in the income statement as and
when the provision of services is received.
(v) Segment reporting
Operating segments are identified on the basis of internal
reports to Senior Management about components of
the Consolidated Entity that are regularly reviewed by
Senior Management who have been identified as the chief
operating decision makers, in order to allocate resources
to the segment and to assess its performance. Information
reported to Senior Management for the purposes of resource
allocation and assessment of performance is specifically
focused on core products and services offered, comprising
five reportable segments as disclosed in Note 3
Segment reporting.
Information about products and services is based on the
financial information used to produce the Consolidated
Entity’s financial statements. Information about
geographical segments is based on the jurisdiction of the
respective entities.
(vi) Taxation
The balance sheet approach to tax effect accounting has
been adopted whereby the income tax expense for the
financial year is the tax payable on the current year’s taxable
income adjusted for changes in deferred tax assets and
liabilities attributable to temporary differences between the
tax bases of assets and liabilities and their carrying amounts
in the financial statements, and unused tax losses.
Deferred tax assets are recognised when temporary
differences arise between the tax bases of assets and
liabilities and their respective carrying amounts which give
rise to a future tax benefit, or when a benefit arises due to
unused tax losses. In both cases, deferred tax assets are
recognised only to the extent that it is probable that future
taxable amounts will be available against which to utilise
those temporary differences or tax losses.
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Note 44
Significant accounting policies continued
(vi) Taxation continued
Deferred tax liabilities are recognised when such temporary
differences give rise to taxable amounts that are payable
in future periods. Deferred tax assets and liabilities are
recognised at the tax rates expected to apply when the
assets are recovered, or the liabilities are settled under
enacted or substantively enacted tax law.
Deferred tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the
same taxation authority.
Current tax assets and liabilities are offset when there is a
legally enforceable right to offset and an intention to either
settle on a net basis or realise the asset and settle the
liability simultaneously.
Current and deferred taxes attributable to amounts
recognised in OCI are also recognised in OCI.
The Consolidated Entity exercises judgement in determining
whether deferred tax assets, particularly in relation to tax
losses, are probable of recovery.
Factors considered include the ability to offset tax losses
within the tax consolidated group in Australia or groups
of entities in overseas jurisdictions, the nature of the tax
loss, the length of time that tax losses are eligible for carry
forward to offset against future taxable profits and whether
future taxable profits are expected to be sufficient to allow
recovery of deferred tax assets.
The Consolidated Entity undertakes transactions in the
ordinary course of business where the income tax treatment
requires the exercise of judgement. The Consolidated
Entity estimates the amount expected to be paid to/
(recovered from) tax authorities based on its understanding
and interpretation of the law. Uncertain tax positions are
presented as current or deferred tax assets or liabilities with
reference to the nature of the underlying uncertainty.
Tax consolidation
The Consolidated Entity’s Australian tax liabilities are
determined according to tax consolidation legislation.
The Company, together with all eligible Australian resident
wholly owned subsidiaries, comprise a tax consolidated group
with the Company as the head entity. As a consequence,
the relevant subsidiaries are not liable to make income tax
payments and do not recognise any current tax balances or
any deferred tax assets arising from unused tax losses.
The tax consolidated group recognises its current and
deferred taxes using the ‘group allocation approach’ detailed
in AASB Interpretation 1052 Tax Consolidation Accounting.
Under the terms and conditions of a tax funding agreement,
the Company charges each subsidiary for all current tax
liabilities incurred in respect of their activities and reimburses
each subsidiary for any tax assets arising from unused
tax losses.
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Should the Company be in default of its tax payment
obligations, or a default is probable, the current tax balances
of its subsidiaries will be determined in accordance with the
terms and conditions of a tax sharing agreement between
the Company and entities in the tax consolidated group.
Goods and Services tax (GST)
Where GST (or other value added tax) is not recoverable from
global tax authorities, it is either capitalised to the Statement
of financial position as part of the cost of the related asset or
is recognised as part of other operating expenses. Where GST
(or other value added tax) is recoverable from or payable to
global tax authorities, the amount is recorded as a separate
asset or liability in the Statement of financial position.
(vii) Financial instruments
Recognition of financial instruments
Financial instruments are recognised when the Consolidated
Entity becomes a party to the contractual provisions of
the instrument.
A financial instrument is initially recognised at fair value
and is adjusted (in the case of instruments not classified
at FVTPL) for transaction costs that are incremental and
directly attributable to the acquisition or issuance of the
financial instrument, and fees that are an integral part of the
effective interest rate. Transaction costs and fees paid or
received relating to financial instruments carried at FVTPL
are recorded in the income statement.
The best evidence of a financial instruments’ fair value at
initial recognition is its transaction price, unless its fair value
is evidenced by comparison with other observable current
market transactions in the same instrument or based on a
valuation technique for which variables include only inputs
from observable markets. Where such alternative evidence
exists, the Consolidated Entity recognises profit or loss
immediately when the instrument is recognised (‘day 1 profit
or loss’). When significant unobservable inputs are used
to determine fair value, the day 1 profit or loss is deferred
and is recognised in net trading income over the life of the
transaction or when the inputs become observable.
Financial instruments arising in multiple transactions are
accounted for as a single arrangement if this best reflects
the substance of the arrangement. Factors considered in this
assessment include whether the financial instruments:
• are entered into at the same time and in contemplation of
one another
• have the same counterparty
• relate to the same risk
• there is no apparent economic need or substantive
business purpose for structuring the transactions
separately that could not also have been accomplished in
a single transaction, or
• whether each of the financial instruments has its own
terms and conditions and may be transferred or
settled separately.
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 44
Significant accounting policies continued
(vii) Financial instruments continued
Derecognition of financial instruments
Financial assets
Financial assets are derecognised from the Statement of
financial position when:
• the rights to cash flows have expired, or
• the Consolidated Entity has transferred the financial asset
such that it has transferred substantially all the risks and
rewards of ownership of the financial asset.
A financial asset is transferred if, and only if, the Consolidated
Entity i) transfers the contractual rights to receive the cash
flows of the financial asset, or ii) retains the contractual rights
to receive the cash flows of the financial asset, but assumes
a contractual obligation to pay the cash flows to one or more
recipients in an arrangement where:
• the Consolidated Entity is not obligated to pay amounts
to the eventual recipients unless it collects equivalent
amounts from the original asset
• the Consolidated Entity is prohibited from selling or
pledging the original asset other than as security to the
eventual recipients, and
• the Consolidated Entity is obligated to remit any cash
flows it collects on behalf of the eventual recipients
without material delay.
In transactions where the Consolidated Entity neither retains
nor transfers substantially all the risks and rewards of ownership
of a financial asset, the asset is derecognised if control over the
asset is lost. Any interest in the transferred and derecognised
financial asset that is created or retained by the Consolidated
Entity is recognised as a separate asset or liability.
In transfers where control over the asset is retained, the
Consolidated Entity continues to recognise the asset to the
extent of its continuing involvement as determined by the
extent to which it is exposed to changes in the value of the
transferred asset.
Financial liabilities
Financial liabilities are derecognised from the Statement of
financial position when the Consolidated Entity’s obligation
has been discharged, cancelled or has expired.
Gains and losses on the derecognition of debt
financial assets and liabilities
Gains and losses arising from the derecognition of debt
financial assets or financial liabilities are recognised in:
• net trading income in respect of trading-related balances
that are subsequently measured at amortised cost
• investment income within other operating income and
charges in respect of financial investments and loans to
associates, and
• other income and charges as part of other operating
income and charges for all other financial assets and
financial liabilities.
Financial guarantee contracts issued
Financial guarantee contracts are recognised as a financial
liability at the time the guarantee is issued. The liability is
initially measured at fair value and subsequently at the
higher of:
• the amount determined in accordance with the expected
credit loss model under AASB 9, or
• the amount initially recognised less, where appropriate,
the cumulative amount of income recognised in
accordance with the principles of AASB 15 Revenue from
Contracts with Customers.
Modification of financial instruments
A financial instrument is modified when its original
contractual cash flows are renegotiated or modified. A
financial asset that is renegotiated is derecognised if the
rights to receive cash flows from the existing agreement have
expired, either through replacement by a new agreement
or the existing terms are modified to that effect. A financial
liability that is renegotiated is derecognised if the existing
agreement is cancelled and a new agreement is made on
substantially different terms or if the existing terms are
modified such that the renegotiated financial instrument
is a substantially different financial instrument. Where the
modification results in derecognition of the original financial
instrument, the new financial instrument is recorded initially
at its fair value and the resulting difference is recognised in
the income statement in accordance with the nature of the
financial instrument as described in the derecognition of
financial instruments policy.
For financial instruments measured at amortised cost,
and for debt financial assets measured at FVOCI, when the
modification does not result in derecognition, a gain or loss
is recognised in the income statement in accordance with
the nature of the financial instrument as described in the
derecognition of financial instruments policy. The gain or loss
is measured as the adjustment of the gross carrying amount
to reflect the renegotiated or modified contractual cash
flows, discounted at the instrument’s original EIR.
Classification and subsequent measurement
Financial assets
Financial assets are classified based on the business model
within which the asset is held and on the basis of the financial
asset’s contractual cash flow characteristics.
Business model assessment
The Consolidated Entity uses judgement in determining
the business model at the level that reflects how groups of
financial assets are managed and its intention with respect
to its financial assets. In determining the business model,
all relevant evidence that is available at the date of the
assessment is used including:
• how the performance of the financial assets held within
that business model is evaluated and reported to the
Consolidated Entity’s Senior Management personnel and
senior executives
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Note 44
Significant accounting policies continued
(vii) Financial instruments continued
• the risks that affect the performance of the business
model (and the financial assets held within that business
model) and, in particular, the way in which those risks are
managed, and
• how managers of the business are compensated (for
example, whether the compensation is based on the fair
value of the assets managed or on the contractual cash
flows collected).
Solely payment of principal and interest (SPPI)
The contractual cash flows of a financial asset are assessed
to determine whether these represent SPPI on the principal
amount outstanding. This includes an assessment of whether
the cash flows primarily reflect consideration for the time
value of money and credit risk of the principal outstanding.
Interest may also include consideration for other basic
lending risks and costs.
Amortised cost
A financial asset is subsequently measured at amortised cost
using the EIR method where:
• the financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows,
• the contractual terms of the financial asset give rise
on specified dates to cash flows that meet the SPPI
requirements, and
• the financial asset has not been classified as DFVTPL.
Interest income is determined in accordance with the
EIR method and recognised as part of interest and
similar income.
Fair value through other comprehensive income
A financial asset is subsequently measured at FVOCI if the
following conditions are met:
• the financial asset is held within a business model whose
objective is to both collect contractual cash flows and to
sell the financial asset,
• the contractual terms of the financial asset give rise
on specified dates to cash flows that meet the SPPI
requirements, and
• the financial asset has not been classified as DFVTPL.
Subsequent changes in fair value are recognised in OCI, with
the exception of interest (which is recognised as part of
interest income), ECL (which is recognised in credit and other
impairment charges/reversal) and foreign exchange gains
and losses (which are recognised in net trading income) and
is net of any related hedge accounting adjustments. When
debt financial assets classified as at FVOCI are derecognised,
the cumulative gain or loss previously recognised in OCI is
reclassified from OCI to investment income in respect of
debt financial investments and loans to associates, or to
other income and charges as part of other operating income
and charges for all other financial assets.
Fair value through profit or loss
Financial assets that do not meet the criteria to be
measured at amortised cost or FVOCI are subsequently
measured at FVTPL.
For the purposes of the Consolidated Entity’s financial
statements, the FVTPL classification consists of the
following:
• financial assets that are held for active trading (held for
trading (HFT)). This classification includes all derivative
financial assets, except those that are designated as
hedging instruments in qualifying hedge relationships and
are classified as FVTPL
• financial assets in a business model whose objective is
achieved by managing the financial assets on a fair value
basis in order to realise gains and losses as opposed
to a business model in which the objective is to collect
contractual cash flows (FVTPL)
• financial assets that fail the SPPI test (FVTPL), and
• financial assets that have been designated to be measured
at fair value through profit or loss to eliminate or
significantly reduce an accounting mismatch (DFVTPL).
Equity financial assets that are not held for active trading
are measured at FVTPL. Subsequent changes in fair value
are recognised as investment income within other operating
income and charges.
Subsequent changes in the fair value of debt financial assets
measured at FVTPL are presented as follows:
• changes in the fair value of financial assets that are
classified as HFT and financial assets managed on a fair
value basis are recognised in net trading income
• changes in the fair value of debt financial investments
and loans to associates and joint ventures that fail SPPI
are recognised in investment income as part of other
operating income and charges
• changes in the fair value of all other FVTPL and DFVTPL
financial assets are recognised as part of other income
and charges within other operating income and charges.
Where applicable, the interest component of these financial
assets is recognised as interest and similar income.
274
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 44
Significant accounting policies continued
(vii) Financial instruments continued
Reclassification of financial instruments
The Consolidated Entity reclassifies debt financial assets
when and only when its business model for managing those
assets changes. Financial assets that are reclassified are
subsequently measured based on the financial asset’s new
measurement category.
The Consolidated Entity does not reclassify financial liabilities
after initial recognition.
Financial liabilities
Financial liabilities are subsequently measured at amortised
cost, unless they are either HFT, or have been designated to
be measured at FVTPL (DFVTPL). A financial liability may be
DFVTPL if:
• such a designation eliminates or significantly reduces an
accounting mismatch that would otherwise have arisen
• a group of financial liabilities, or financial assets and
financial liabilities, is managed and its performance is
evaluated on a fair value basis, in accordance with a
documented risk management or investment strategy, or
• the liability contains embedded derivatives which must
otherwise be separated and carried at fair value.
All derivative financial liabilities are classified as HFT, except
those that are designated as hedging instruments in
qualifying hedge relationships and are classified as FVTPL.
Refer to Note 44(x) Derivative instruments and hedging
activities for the detailed hedge accounting policy.
Changes in the fair value of financial liabilities that are not
classified as HFT are, with the exception of changes in fair
value relating to changes in the Consolidated Entity’s own
credit risk, that are presented separately in OCI and are not
subsequently reclassified to profit or loss, recognised in
other income and charges as part of other operating income
and charges.
Where applicable, the interest component of these financial
liabilities is recognised as interest and similar expense.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the
net amount reported in the Statement of financial position,
when there is a current legally enforceable right to offset
the amounts and either there is an intention to settle on a
net basis or realise the financial asset and settle the financial
liability simultaneously.
(viii) Cash collateral on securities borrowed and lent and
repurchase and reverse repurchase agreements
As part of its trading and financing activities, the Consolidated
Entity borrows and lends securities, commodities and other
assets (‘underlying’) on a collateralised basis. The underlying
that is subject to the arrangement is not derecognised from
the Statement of financial position of the relevant parties,
as the risks and rewards of ownership remain with the
initial holder.
These transactions include:
• reverse repurchase transactions, where the
Consolidated Entity purchases an underlying under an
agreement to resell
• repurchase transactions, where the Consolidated Entity
sells an underlying under an agreement to repurchase.
The Consolidated Entity continually reviews the fair values
of the underlying on which the above transactions are based
and where appropriate, requests or provides additional
collateral to support the transactions, in accordance with the
terms of the respective agreements.
Reverse repurchase agreements are measured as follows by
the Consolidated Entity:
• agreements that are collateralised with commodities
are measured at amortised cost when they are held in
a business model to collect contractual cash flows and
AASB 9’s SPPI criteria are met
• agreements that are held within the Consolidated Entity’s
cash and liquid assets portfolio are measured at FVOCI
as they are held in a business model to both collect
contractual cash flows and with the intention to sell
• all other reverse repurchase agreements are measured
at FVTPL to reflect the Consolidated Entity’s business
model to realise fair value gains and losses as opposed
to a business model in which the objective is to collect
contractual cash flows.
Also refer to Note 37 Measurement categories of
financial instruments.
Repurchase agreements are subsequently measured
at amortised cost, except where they are DFVTPL to
eliminate an accounting mismatch created by managing the
agreements together with the associated reverse repurchase
agreements that are measured at FVTPL.
(ix) Trading assets and liabilities
The Consolidated Entity uses trade date accounting when
recording regular way purchases and sales of financial
assets and liabilities that are classified as HFT. At the date
a purchase transaction is entered into (trade date), the
Consolidated Entity recognises the resulting financial asset
or liability and any subsequent unrealised gain or loss arising
from revaluing that contract to fair value as part of net
trading income, except for interest income on HFT debt
financial assets which is recognised in interest income. Refer
to Note 44(vii) Financial instruments.
Trading assets (long positions) comprise financial instruments
such as debt and equity securities, bank bills, treasury
notes, and loans, commodity contracts and commodities
purchased with the intent of being actively traded either
individually or as part of a portfolio.
Trading liabilities comprise obligations to deliver assets (short
positions) across the same trading categories and which the
Consolidated Entity intends to actively trade.
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Hedge accounting
As part of its ongoing business, the Consolidated Entity
is exposed to several financial risks, principally that of
interest rate, foreign exchange rate and commodity price
risk (collectively referred to as the hedged risk or exposure).
The Consolidated Entity has limited appetite for such risks
and has policies and practices in place to ensure that these
risks are effectively managed. The Consolidated Entity
mitigates these risks through the use of derivative financial
instruments, and, in the case of foreign currency risk,
foreign-denominated debt issued (collectively referred to as
hedging instruments). The Consolidated Entity applies hedge
accounting to manage accounting mismatches arising from
the difference in measurement bases or location of the gains
and losses recognised between the exposure that is being
hedged and the hedging instrument. Refer to details provided
in the table on the following page.
Note 44
Significant accounting policies continued
(ix) Trading assets and liabilities continued
Commodity inventory is recognised when the Consolidated
Entity controls the commodity, the determination of which
includes consideration of price risk, and is measured at fair
value less costs to sell in accordance with the broker-trader
exemption, on the basis that such assets are acquired with
the purpose of selling in the near future and generating a
profit from fluctuations in price or broker traders’ margin.
When the Consolidated Entity becomes party to a sale
contract, and the derecognition criteria are met (refer to
Note 44(vii) Financial instruments), it derecognises the trading
asset or liability and recognises a trade receivable or trade
payable from trade date until settlement date.
(x) Derivative instruments and hedging activities
Derivative instruments entered into by the Consolidated
Entity include futures, forwards and forward rate
agreements, swaps and options in the interest rate,
foreign exchange, commodity, credit and equity
markets. These derivative instruments are principally
used by the Consolidated Entity for the purposes of risk
management of existing financial assets and liabilities and
forecast transactions and are also entered into for client
trading purposes.
Derivatives are recognised in the Statement of financial
position as an asset where they have a positive fair value at
the reporting date or as a liability where they have a negative
fair value at the reporting date.
Derivatives that may have both positive or negative values
must meet both the asset and liability derecognition
tests before being derecognised from the Statement of
financial position.
Fair values are obtained from quoted prices in active markets
where available, or valuation techniques including discounted
cash flow models and option pricing models, as appropriate.
The accounting for derivatives is subject to the application
of the day 1 profit or loss policy as described in Note 44(vii)
Financial instruments.
The Consolidated Entity applies trade date accounting to the
recognition and derecognition of derivative financial instruments.
276
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 44
Significant accounting policies continued
(x) Derivative instruments and hedging activities continued
Fair value hedge
Cash flow hedge
Net investment hedge
Nature of hedge The hedge of the fair value risk of
a financial asset or non-financial
asset or liability.
The hedge of the change in cash
flows of a financial liability or a highly
probable forecast transaction.
Nature of
material
hedged risks
• Interest rate risk
• Commodity price risk.
Material hedged
items
• Fixed interest rate financial
assets and liabilities
• Commodity transportation
contracts.
• Interest rate risk
• Foreign exchange risk
• Commodity price risk.
• Floating interest rate
financial liabilities
• Highly probable forecast floating
interest rate financial assets
• Highly probable forecast foreign
currency payments
• Highly probable forecast
commodity sales
The hedge of changes in the
Consolidated Entity’s foreign
denominated net assets for changes in
foreign currency rates.
• Foreign exchange risk.
• Net Investment in
foreign operations.
Material
hedging
instruments
• Interest rate swaps
• Cross currency swaps
• Commodity forward contracts.
• Foreign currency denominated
interest bearing financial liabilities.
• Interest rate swaps and options
• Cross currency swaps
• Foreign exchange contracts
• Commodity swaps and futures.
• Foreign exchange contracts
• Foreign currency denominated
issued debt.
Designation and
documentation
At inception of the hedge relationship, documentation is required of the risk management objective and strategy for
the hedge, the hedging instrument, hedged item, hedged risk and how the hedge relationship will meet the hedge
effectiveness requirements.
Hedge
effectiveness
method
All hedge relationships are assessed for prospective hedge effectiveness both at the inception of the hedge, at each
reporting period and following any significant change in circumstances affecting the hedge, by demonstrating that:
• an economic relationship exists between the hedged item and the hedging instrument
• credit risk does not dominate the changes in value of either the hedged item or the hedging instrument; and
• the hedge ratio is reflective of the Consolidated Entity’s risk management approach.
The hedge effectiveness assessment is performed by a combination of qualitative and, where applicable,
quantitative assessments. Changes in the hedge ratio, or rebalancing, may be required to adjust the designated
quantities of either the hedged item or the hedging instrument.
Accounting
treatment for
the hedging
instrument
Fair value through the income
statement, aligned to the
presentation of the hedged item.
Fair value through the cash flow
hedge reserve as part of OCI, and
then recognised in the income
statement at the time at which the
hedged item affects the income
statement for the hedged risk.
Foreign exchange gains and losses
are recognised in the Net Investment
Hedge Reserve (NIHR), a separate
component of FCTR in OCI.
Accounting
treatment for
the hedged
item
Adjustments to the carrying value
are recognised in the income
statement for changes in fair
value attributable to the
hedged risk.
Accounted for on an amortised cost
basis or under other accounting
standards as appropriate (such as
executory contracts for the sale of
commodities).
Foreign exchange gains and losses are
recognised in the Consolidated Entity’s
foreign currency translation reserve as
part of OCI.
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Note 44
Significant accounting policies continued
(x) Derivative instruments and hedging activities continued
Fair value hedge
Cash flow hedge
Net investment hedge
Accounting treatment for
hedge ineffectiveness
Accounting treatment if
the hedge relationship
is discontinued
Recognised as part of net
trading income in the income
statement to the extent that
changes in fair value of the
hedged item attributable to
the hedged risk are not offset
by changes in fair value of the
hedging instrument.
Where the hedged item still
exists, adjustments to the
hedged item are amortised to
the income statement on an
EIR basis.
Recognised as part of net trading income in the income statement
to the extent to which changes in the fair value of the hedging
instrument exceed, in absolute terms, the change in the fair value of
the hedged item.
The gain or loss remains in the
cash flow hedge reserve to
the extent that the hedged
cash flows are still expected to
take place and subsequently
recognised in the income
statement at the time at which
the hedged item affects the
income statement for the
hedged risk.
Where the hedged cash flows
are no longer expected to take
place, the gain or loss in the cash
flow hedge reserve is recognised
immediately in the income
statement.
The exchange gains or losses
recognised in the NIHR
within FCTR are reclassified
to the income statement or
reattributed within equity as
follows:
• if the hedge is discontinued
due to a disposal of the
hedged foreign operation,
then the accumulated NIHR
is reclassified from OCI to
investment income within
other operating income
and charges
• if there is a partial disposal
of a foreign operation that
is an associate or joint
arrangement, without loss of
significant influence or joint
control, then a proportionate
share of the accumulated
NIHR is reclassified to
investment income
• if there is a partial disposal
of a foreign operation that is
a subsidiary, without loss of
control, then a proportionate
share of the accumulated NIHR
is reattributed within equity to
non-controlling interests.
Other accounting policies
None
The foreign currency basis spread of the hedging instrument, being
the liquidity charge for exchanging different currencies, is excluded
from the hedge designation. This spread is deferred in the cost of
hedging reserve and released to the income statement at the time
at which the hedged exposure affects the income statement.
278
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Right-of-use (ROU) assets are measured at cost and comprise
of the amount that corresponds to the amount recognised
for the lease liability on initial recognition together with any
lease payments made at or before the commencement date
(less any lease incentives received), initial direct costs and
restoration-related costs.
Property, plant and equipment and right-of-use assets
includes assets leased out under operating leases.
Depreciation to allocate the difference between cost and
residual values over the estimated useful life is calculated on
the following bases:
• diminishing balance method for aviation assets
• unit of production method for certain
infrastructure assets
• straight-line basis for all other assets.
A ROU asset is depreciated on a straight-line basis over the
shorter of the asset’s useful life and the lease term.
Annual depreciation rates are summarised below:
Property, plant and equipment
Depreciation rates
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Buildings
Furniture, fittings and leasehold
improvements(1)
Equipment
Infrastructure assets(2)
Aviation(3)
Meters
Rail cars
Telecommunications
Other operating lease assets
2 to 3.3%
10 to 20%
33 to 50%
2 to 12%
2 to 8%
5 to 15%
3 to 5%
24.5 to 41.4%
2 to 25%
Useful lives, residual values and depreciation methods are
reviewed annually and reassessed in the light of commercial
and technological developments. Gains and losses on
disposal are determined by comparing the proceeds with the
asset’s carrying amount and are recognised in other income
as part of other operating income and charges.
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Note 44
Significant accounting policies continued
(xi) Margin money and settlement assets and liabilities
Margin money and settlement assets and liabilities includes
trade settlement balances, margin monies and balances with
clearing houses. Margin monies primarily represent deposits
placed with clearing houses in relation to futures trading and
other derivatives transactions. The balance includes both
initial and variance margin which varies based on trading
activities. The balance also includes client margin calls which
are funded by the Consolidated Entity. Settlement balances
represent outstanding trade timing balances as at the
reporting date due to the timing difference between trade
and settlement date. Balances are carried at amortised cost
except for certain margin money balances that are held in
money market funds and certain settlement balances which
are carried at FVTPL.
(xii) Financial investments
Investment securities in this category include investments in
equity or debt securities which are not actively traded by the
Consolidated Entity.
Debt investment securities in this category comprise bonds,
negotiable certificates of deposits (NCD), floating rate notes
(FRN), commercial paper and other debt securities.
Financial investments are initially recognised on trade date at
fair value (adjusted for directly attributable transaction costs
for debt investments subsequently measured at FVOCI)
and subsequently measured in accordance with Note 44(vii)
Financial instruments.
(xiii) Loan Assets
This category includes loans that are not held for trading
purposes and typically includes the Consolidated Entity’s
lending activities to its customers.
Loan assets are initially recognised on settlement date at fair
value (adjusted for directly attributable transaction costs
for loan assets subsequently measured at amortised cost or
FVOCI) and subsequently measured in accordance with
Note 44 (vii) Financial instruments.
Certain finance lease receivables are also presented as
part of asset financing within loan assets. For the detailed
policy on financial instruments, including treatment of
derecognition, refer to Note 44(vii) Financial instruments.
(xiv) Property, plant and equipment and
right‑of‑use assets
Property, plant and equipment are stated at historical cost
(which includes, where applicable, directly attributable
borrowing costs and expenditure directly attributable to the
acquisition of the asset) less, accumulated depreciation and,
where applicable, accumulated impairment losses.
(1) Where remaining lease terms are less than five years, leasehold improvements are depreciated over the remaining lease term.
(2) Includes infrastructure assets, for which depreciation is calculated on a unit of production basis.
(3) Includes aircraft, for which depreciation is calculated on a diminishing value basis.
279
Certain other intangible assets held for trading, including
emission certificates, are measured at fair value less costs
to sell in accordance with the broker-trader exemption (on
the basis that such assets are acquired with the purpose
of selling in the near future and generating a profit from
fluctuations in price or broker traders’ margin).
Amortisation of intangible assets held by trading related
business is recorded in net trading income and for others
is recognised in other operating expenses. Impairments
(reversal of impairments) of intangible assets are recognised
in other impairment charges/reversal.
Software
Certain internal and external costs directly incurred in
acquiring and developing certain computer software
programmes are capitalised and amortised over the
estimated useful life, usually a period of three to seven years
on a straight-line basis. The capitalised software asset is
subject to impairment testing on an annual basis.
Costs incurred on the maintenance of software is expensed
as incurred and recognised in other operating expenses.
(xvi) Deposits
Deposits include customer deposits, business banking
and home loan related deposits, deposits from financial
institutions and other balances such as client monies.
These deposits are initially recognised at fair value less
directly attributable transaction costs and are subsequently
measured at amortised cost.
(xvii) Other assets and liabilities
Contract assets, contract liabilities and capitalised expenses
Where the Consolidated Entity provides services to
clients and the consideration is unconditional, a receivable
is recognised. Where the consideration is conditional
on something other than the passage of time, such as
performance fees, these are recorded as contract assets.
Both receivables and contract assets are assessed for
impairment in accordance with AASB 9.
The Consolidated Entity, as permitted by AASB 15, has
applied the practical expedient that allows for costs incurred
to obtain a contract to be expensed as incurred where the
amortisation period for any asset recognised would be
less than 12 months. The Consolidated Entity also applies
the practical expedient not to adjust consideration for the
effects of a significant financing component, where the
period between transferring a good or service and when the
customer pays for that good or service is expected to be one
year or less.
Contract liabilities relate to prepayments received from
customers where the Consolidated Entity is yet to satisfy its
performance obligation.
Note 44
Significant accounting policies continued
(xiv) Property, plant and equipment and
right‑of‑use assets continued
The depreciation charge relating to corporate building
leases is presented as part of Occupancy expenses while
depreciation relating to leases entered into or assets held
by trading-related businesses for the purpose of facilitating
trading activities is presented as part of Net trading income.
All other depreciation is presented as part of Other operating
expenses. The Consolidated Entity does not recognise a ROU
asset for short-term or low value leases, instead the expense
is recognised over the lease term as appropriate as part of
operating expenses.
(xv) Goodwill and other identifiable intangible assets
Goodwill
Goodwill is measured as the excess of consideration,
recognised NCI, and the fair value of previously held equity
interests over the fair value of the identifiable net assets
of the business acquired. Goodwill arising from business
combinations is included in intangible assets in the
Statement of financial position.
Other acquired identifiable intangible assets
At the time at which the Consolidated Entity determines that
it has acquired a business, the Consolidated Entity identifies
intangible assets that are required to be initially recognised
at fair value. An intangible asset is considered to have an
indefinite useful life where it is expected to contribute to the
Consolidated Entity’s net cash inflows indefinitely.
The following intangible assets are typically identified and
recognised by the Consolidated Entity:
• licences and trading rights: generally carried at cost less
accumulated impairment loss. Where no contractual or
legal limitation exists, these assets are not amortised
because they are considered to have an indefinite
useful life
• management rights: carried at cost less accumulated
amortisation and accumulated impairment loss. Certain
management right intangible assets, which have indefinite
useful lives as the underlying income stream is related
to the management of funds that have no defined end
date and are expected to operate perpetually, are not
amortised. For management rights that have a finite
useful life, amortisation is calculated using the straight-line
method to allocate the cost of management rights
over the estimated useful life usually being a period not
exceeding 20 years
• customer and servicing contracts acquired with a finite
useful life: carried at cost less accumulated amortisation
and accumulated impairment loss. Amortisation is
calculated over the period for which the customer
relationship is expected to exist
• customer and servicing contracts with an indefinite useful
life: carried at cost less accumulated impairment loss.
280
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 44
Significant accounting policies continued
(xvii) Other assets and liabilities continued
Non‑current assets and liabilities of disposal groups
classified as held for sale
This category includes assets and disposal groups (groups
of assets to be disposed in a single transaction and directly
attributable liabilities) for which the carrying amount will
be recovered principally through a sale or distribution
transaction rather than continuing use. This includes assets
and liabilities of businesses and subsidiaries, associates and
joint ventures, other assets and liabilities, and subsidiaries
that are acquired exclusively with a view to sell or distribute.
These assets and disposal groups are classified as held for
sale when they are available for immediate sale in their
present condition and the sale or distribution is highly
probable, including that the sale or distribution is expected
to occur within 12 months. Where there is a planned partial
disposal of a subsidiary resulting in loss of control, but the
Consolidated Entity retains an interest in the disposed
subsidiary, the entire carrying value of the subsidiary’s assets
and liabilities is classified as held for sale.
Non-current assets and liabilities of disposal groups classified
as held for sale are measured at the lower of their carrying
amount and fair value less costs to sell. Equity accounting,
depreciation and amortisation is suspended when the held
for sale criteria are met.
An impairment loss is recognised for any initial or subsequent
write down of the asset to fair value less costs to sell and
is recognised in other impairment charges/reversal. A gain
is recognised for any subsequent increase in fair value
less costs to sell, limited to the cumulative impairment
loss previously recognised. A gain or loss not previously
recognised by the date of sale is recognised at the
date of sale.
Financial assets and liabilities that are classified as held for
sale are measured in accordance with the Consolidated
Entity’s financial instruments’ policies.
Provisions and contingent liabilities
Provisions are recognised when it is probable that an outflow
of economic benefits will be required to settle a present legal
or constructive obligation that has arisen as a result of past
events and for which a reliable estimate can be made.
Contingent liabilities, which generally include letters of
credit, indemnities, performance-related contingents
and guarantees (other than financial guarantees) are not
recognised in the financial statements but are disclosed
in the notes to the financial statements unless they are
considered remote.
Employee benefit provisions
Employee benefit provisions are recognised by the
Consolidated Entity as and when the service has been
rendered after deducting amounts already paid. Liabilities for
unpaid salaries, salary-related costs and provisions for annual
leave are recorded in the Statement of financial position
at the salary rates which are expected to be paid when the
liability is settled. Provisions for long service leave and other
long-term benefits are recognised at the present value of
expected future payments to be made.
In determining this amount, consideration is given to
expected future salary levels and employee service histories.
Expected future payments are discounted to their net
present value using discount rates on high quality corporate
bonds, except where there is no deep market, in which case
rates on Government securities are used. Such discount rates
have terms that match as closely as possible the expected
future cash flows.
Provisions for unpaid employee benefits are derecognised
when the benefit is settled or is transferred to another entity
and the Company and Consolidated Entity are legally released
from the obligation and do not retain a constructive obligation.
Dividends
Where a dividend is determined or resolved by the
Company’s Board of Directors, consideration is given to
the record date when determining the date on which the
provision for the dividend is recognised in the Statement of
financial position as a liability, with a corresponding reduction
in retained earnings.
(xviii) Borrowings
Borrowings include loans and other payables due to banks
and financial institutions. These balances are subsequently
measured at amortised cost.
(xix) Due to/from subsidiaries
Transactions between the Company and its subsidiaries
principally arise from the provision of lending arrangements
and acceptance of funds on deposit, intercompany services
and transactions and the provision of financial guarantees,
and are accounted for in accordance with Note 44(iv)
Revenue and expense recognition and Note 44(vii) Financial
instruments. Financial assets and financial liabilities are
presented net where the offsetting requirements are met
(Note 44(vii)), such that the net amount is reported in the
Statement of financial position.
281
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Note 44
Significant accounting policies continued
(xx) Debt issued
Debt issued includes debt securities issued by the
Consolidated Entity. These balances are subsequently
measured at either amortised cost or are DFVTPL and
measured at fair value in accordance with the Consolidated
Entity’s accounting policy for financial instruments, refer to
Note 44(vii) Financial instruments.
(xxi) Loan capital
Loan capital represents issued debt with terms and
conditions that qualify for inclusion as capital under
Australian Prudential Regulatory Authority (APRA) Standards.
Capital instruments are first assessed to determine whether
the Consolidated Entity is required to deliver cash or another
financial asset on the occurrence of a contingent event that
is considered genuine and is beyond the control of both
the issuer and the holder (such as Common Equity Tier 1
Trigger Events or Non-Viability Trigger Events). Where such
a contingent event exists, the Consolidated Entity does
not have the unconditional right to avoid delivering cash or
another financial asset and the capital instrument is classified
as a financial liability. The financial liability is initially measured
at fair value plus directly attributable transaction costs and is
subsequently measured at amortised.
For compound instruments that have both equity and
liability features, the liability component is initially measured
at fair value plus directly attributable transaction costs
(and is thereafter measured at amortised cost using the EIR
method), with the residual being accounted for within the
Consolidated Entity’s equity.
(xxii) Impairment
Expected credit losses
The ECL requirements apply to financial assets measured
at amortised cost or FVOCI, lease receivables, amounts
receivable from contracts with customers, loan
commitments, certain letters of credit and financial
guarantee contracts issued that are not DFVTPL. The
Consolidated Entity applies a three-stage approach to
measuring the ECL based on changes in the financial asset’s
underlying credit risk and includes forward looking and
macroeconomic information (FLI).
The calculation of ECL requires judgement and the choice
of inputs, estimates and assumptions. Refer to Note 13
Expected credit losses for further information. Outcomes
within the next financial period that are different from
management’s assumptions and estimates could result in
changes to the timing and amount of ECL to be recognised.
The ECL is determined with reference to the following stages:
Stage I – 12 month ECL
At initial recognition, and for financial assets for which there
has not been a significant increase in credit risk (SICR) since
initial recognition, ECL is determined based on the probability
of default (PD) over the next 12 months and the lifetime
losses associated with such PD, adjusted for FLI.
(i) Stage II – Not credit‑impaired
When there has been a SICR since initial recognition, the
ECL is determined with reference to the financial asset’s
lifetime PD and the lifetime losses associated with that PD,
adjusted for FLI. The Consolidated Entity exercises judgement
in determining whether there has been a SICR since initial
recognition based on qualitative, quantitative, and reasonable
and supportable information that includes FLI. Detail on the
Consolidated Entity’s process to determine whether there
has been a SICR is provided in Note 13 Expected credit losses.
Use of alternative criteria could result in significant changes to
the timing and amount of ECL to be recognised. Lifetime ECL
is generally determined based upon the contractual maturity
of the financial asset. For revolving facilities, the Consolidated
Entity exercises judgement based on the behavioural, rather
than contractual characteristics of the facility type.
(ii) Stage III – Credit‑impaired
Financial assets are classified as stage III where they are
determined to be credit impaired, which generally matches
the APRA definition of default. This includes exposures that
are at least 90 days past due and where the obligor is unlikely
to pay without recourse against available collateral.
The ECL for credit impaired financial assets is generally
measured as the difference between the contractual and
expected cash flows from the individual exposure, discounted
using the EIR for that exposure. For credit-impaired exposures
that are modelled collectively for portfolios of exposures,
ECL is measured as the product of the lifetime PD, the
loss given default (LGD) and the exposure at default (EAD),
adjusted for FLI.
(iii) Purchased or originated credit‑impaired financial
assets (POCI)
POCI financial assets are initially recognised at fair value with
interest income subsequently determined using a credit-adjusted
EIR, which is the EIR adjusted for ECL on initial recognition.
This ECL is measured as the product of the lifetime PD, LGD
and EAD adjusted for FLI or by discounting the difference
between the contractual and expected cash flows from
the individual exposure using the credit adjusted EIR, with
increases and decreases in the measured ECL from the date
of origination or purchase being recognised in the income
statement as a credit impairment charges/reversal.
282
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Note 44
Significant accounting policies continued
(xxii) Impairment continued
Presentation of ECL allowances
The ECL allowances are presented in the Statement of
financial position as follows:
• loan assets, loans to related body corporate entities and
subsidiaries, associates and joint ventures measured
at amortised cost – as a deduction to the gross
carrying amount
• loan assets, loans to associates and joint ventures,
and debt financial investments measured FVOCI – as a
reduction in the FVOCI reserve within equity. The carrying
amount of the asset is not adjusted as it is measured at
fair value
• lease receivables, contract receivables and other assets
measured at amortised cost – as a deduction to the gross
carrying amount
• undrawn credit commitments and financial guarantees (not
measured at FVTPL) – as a provision included in other liabilities.
When the Consolidated Entity concludes that there is no
reasonable expectation of recovering cash flows from the
financial asset, and all possible collateral has been realised,
the financial asset is written off, either partially or in full,
against the related provision. Recoveries of loans previously
written off are recorded based on the cash received.
Impairment of interests in associates and
joint ventures
The Consolidated Entity performs an assessment at each
reporting date to determine whether there is any objective
evidence that its interests in associates and joint ventures are
impaired. The main indicators of impairment are significant
changes in the market, economic or legal environment and a
significant or prolonged decline in fair value below cost.
In making this judgement, the Consolidated Entity evaluates,
among other factors, the normal volatility in share price and
the period of time for which fair value has been below cost.
If there is an indication that an investment in an associate
or joint venture may be impaired, then the entire carrying
amount of the investment in the associate or joint venture
is tested for impairment by comparing the recoverable
amount, being the higher of fair value less costs to sell and
value-in-use, with its carrying amount.
Impairment losses recognised in the income statement
for investments in associates and joint ventures are
subsequently reversed through the income statement
if there has been a change in the estimates used to
determine the recoverable amount since the impairment
loss was recognised. The impairment losses (reversal of
impairments) on investments in associates and joint ventures
are recognised in the income statement as part of other
impairment charges/reversal.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Fair value less costs to sell is estimated using market-based
approaches using revenues, earnings and assets under
management and multiples based on companies deemed
comparable as well as other publicly available information
relevant to the business.
Value-in-use is calculated using pre-tax cashflow projections
of operating revenue and expenses. Forecasts are
extrapolated using a growth rate and discounted using a
pre-tax discount rate incorporating market risk determinants,
adjusted for specific risks related to the cash generating
units, if any, and the environment in which it operates.
Impairment of investments in subsidiaries
Investments in subsidiaries in the Company’s financial
statements are reviewed annually for indicators of
impairment or more frequently if events or changes in
circumstances indicate that the carrying amount may
not be recoverable. An impairment is recognised in other
impairment charges/reversal, for the amount by which
the investment’s carrying amount exceeds its recoverable
amount, being the higher of fair value less costs to sell
and value-in-use. At each reporting date, investments
in subsidiaries that have been impaired are reviewed for
possible reversal of impairment. The amount of any reversal
of impairment recognised must not cause the investment’s
carrying value to exceed its original cost.
Impairment of goodwill and other intangible assets;
property, plant and equipment and right‑of‑use assets
Intangible assets with indefinite lives (goodwill and certain
intangible assets) are not subject to amortisation but are
tested annually for impairment, or more frequently if events
or changes in circumstances indicate that the carrying
amount may not be recoverable.
For intangible assets that have a finite useful life and property,
plant and equipment and ROU assets, an assessment is made
at each reporting date for indications of impairment.
Impairment losses are recognised in other impairment
charges as part of other operating income and charges for
the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of
the asset’s fair value less costs to sell and value-in-use.
For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows
from other assets or groups of assets (cash-generating
units). Intangible assets (other than goodwill) for which an
impairment loss has been recognised are reviewed for possible
reversal of the impairment at each reporting date. A reversal
is recognised only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
In relation to businesses acquired and held for disposal, the
individual business is treated as a cash generating unit. Assets
associated with strategic business acquisitions are allocated
to each of the operating segments (refer to Note 3 Segment
reporting) and assessed for impairment.
283
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Note 44
Significant accounting policies continued
(xxiii) Performance based remuneration
Share‑based payments
The Consolidated Entity operates share-based compensation
plans, which include awards (including those delivered
through the Macquarie Group Employee Retained Equity Plan
(MEREP)) granted to employees under share acquisition plans.
Information relating to these schemes is set out in Note 32
Employee equity participation.
The Consolidated Entity accounts for its share-based
payments as follows:
Equity settled awards: The awards are measured at their
grant date fair value and based on the number of equity
instruments expected to vest. Expenses are recognised as
part of employment expenses with a corresponding increase
in equity with reference to the vesting period of those
awards. Performance hurdles attached to Performance
Share Units (PSUs) under the MEREP are not taken into
account when determining the fair value of the PSUs at the
grant date. Instead, these vesting conditions are taken into
account by adjusting the number of equity instruments
expected to vest. On vesting, the amount recognised in the
share-based payments reserve is transferred to contributed
equity. For the Company, the accounting is dependent on
whether the Company is compensated for its obligations
under the MEREP award. To the extent that employing
subsidiaries compensate the Company for the MEREP offered
to their employees, a recharge liability due to subsidiaries is
recognised by the Company at grant date representing the
payment received in advance of the award being settled. This
liability reduces over the vesting period with a corresponding
increase in the share-based payments reserve. MEREP
liabilities are recognised and disclosed in Note 30 Related
party information. To the extent that employing subsidiaries
do not compensate the Company for the MEREP offered
to their employees’, the Company reflects the provision of
the equity settled award as a contribution to its subsidiary
and as a result increases its investment in the subsidiary
with a corresponding increase in the share-based payments
reserve. On vesting, amounts recognised in the share-based
payments reserve are transferred to contributed equity.
Cash settled awards: The award liability is measured with
reference to the number of awards and the fair value
of those awards at each reporting date. Expenses are
recognised as part of employment expenses with reference
to the vesting period of those awards. Changes in the value of
the liability are recognised in employment expenses.
(xxiv) Leases
At the inception of a contract, the Consolidated Entity
assesses whether a contract is, or contains, a lease. At
inception, or on reassessment of a contract that contains
a lease component, the Consolidated Entity allocates the
consideration in the contract to each lease component
unless an election is made to account for the lease and non
lease components as a single lease component.
(i) Accounting where the Consolidated Entity is the lessee
The Consolidated Entity leases corporate buildings,
commodity storage facilities, technology and other
equipment for which contracts are typically entered into
for fixed periods of 12 months to 33 years and may include
extension options. Leases are recognised as an ROU asset
(as explained in Note 44(xiv) Property, plant and equipment
and right-of-use assets) and a corresponding liability at the
commencement date, being the date the leased asset is
available for use by the Consolidated Entity.
Lease liability
Lease liabilities are initially measured at the present value
of the future lease payments at the commencement date,
discounted using the interest rate implicit in the lease
(or if that rate cannot be readily determined, the lessee’s
incremental borrowing rate). Lease payments are allocated
between principal and interest expense. Interest expense
is, unless capitalised on a qualifying asset which is not
measured at fair value, recognised as part of interest and
similar expense over the lease period on the remaining
lease liability balance for each period. Any variable lease
payments not included in the measurement of the lease
liability are also recognised as net operating lease income in
the period in which the event or condition that triggers those
payments occurs.
Lease liabilities are remeasured when there is a change in
future lease payments arising from a change in lease term, an
assessment of an option to purchase the underlying asset, an
index or rate, or a change in the estimated amount payable
under a residual value guarantee.
When the lease liability is remeasured, a corresponding
adjustment is made to the carrying value of the ROU asset,
or, as net operating lease income, where the carrying value of
the ROU asset has been reduced to zero.
Presentation
The Consolidated Entity presents ROU assets in Property,
plant and equipment and right-of-use assets (refer to Note 15)
and lease liabilities in Held for sale and other liabilities (refer
to Note 23) in the Statement of financial position.
Profit share remuneration
(ii) Accounting where the Consolidated Entity is a lessor
The Consolidated Entity recognises a liability and an expense
for profit share remuneration to be paid in cash with
reference to the performance period to which the profit
share relates.
Leases where the lessee has substantially all the risks and
rewards incidental to ownership of the leased assets are
classified as finance leases. All other leases are classified as
operating leases.
284
Notes to the financial statementsFor the financial year ended 31 March 2021 continued Macquarie Group Limited and its subsidiaries 2021 Annual Report
Note 44
Significant accounting policies continued
(xxiv) Leases continued
Finance lease
Where finance leases are granted to third parties, the present
value of the minimum lease payments plus an estimate of
the value of any unguaranteed residual value is recognised as
a receivable and included in loan assets.
The difference between the gross receivable and the present
value of the receivable is unearned interest income. Lease
receipts are discounted using the interest rate implicit in the
lease. Interest income is recognised over the term of the
lease using the EIR method, which reflects a constant rate of
return. Finance lease income is presented within interest and
similar income in the income statement.
Operating lease
Where the Consolidated Entity is the lessor under an
operating lease, the underlying asset is carried at cost and
depreciated over its useful life in accordance with the rates
specified in Note 44(xiv) Property, plant and equipment and
right-of-use assets. Operating lease income is recognised
on a straight-line basis over the period of the lease unless
another systematic basis is more appropriate. Assets leased
out under operating leases are included in property, plant and
equipment and right of-use assets.
When the Consolidated Entity is an intermediate lessor,
it accounts for its interests in the head lease and the sub
lease separately. The lease classification of the sublease is
determined with reference to the ROU asset arising from the
head lease.
(xxv) Contributed equity
Ordinary shares and other similar instruments are classified
as equity. Incremental costs directly attributable to the issue
of new shares are recorded in equity as a deduction, net of
tax, from the issue proceeds.
(xxvi) Fiduciary assets and client money
The Consolidated Entity engages in trust, fund or other
fiduciary activities as well as certain brokerage and other
trading-related activities that result in the holding or placing
of assets on behalf of third parties. Where such assets are
controlled, and future economic benefits are expected to
be realised by the Consolidated Entity, such assets and the
income thereon are reflected in the Statement of financial
position and income statement respectively. Where this
is not the case, these assets and the income thereon are
excluded from the Consolidated Entity’s financial statements
as they are not the assets of the Consolidated Entity. Fee
income earned by the Consolidated Entity relating to its
responsibilities from fiduciary and brokerage and other
trading-related activities is included as part of fee and
commission income.
(xxvii) Cash and bank balances
Cash and bank balances includes currency on hand, demand
deposits and short-term balances with Central and other
banks including unallocated precious metal balances. These
balances are subsequently measured at amortised cost
except unallocated precious metals which are held at FVTPL.
(xxviii) Cash and cash equivalents
Cash and cash equivalents comprise of cash and bank
balances (except unallocated precious metal balances) as
well as certain liquid financial investments and non trading
reverse repurchase agreements that have a contractual
maturity of three months or less from the date of acquisition
and which are readily convertible to known amounts of cash,
are subject to an insignificant risk of changes in value, and are
available to meet the Consolidated Entity’s short-term cash
commitments. Cash and cash equivalents exclude margin
money balances, trading assets and certain client-related
balances which are segregated from the Consolidated Entity’s
own funds and are thus restricted from use.
(xxix) Investment property
Investment properties are initially recognised at cost and
subsequently stated at fair value at each reporting date.
Any change in fair value, in addition to any lease income
generated, is recognised in other income as part of other
operating income and charges.
(xxx) Comparatives
Where necessary, comparative information has been
re-presented to conform to changes in presentation in the
current year.
(xxxi) Rounding of amounts
In accordance with ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191, amounts in the
Directors’ Report and Financial Report have been rounded off to
the nearest million Australian dollars unless otherwise indicated.
(xxxii) New Australian Accounting Standards and
amendments to Australian Accounting Standards and
Interpretations that are not yet effective for the
financial year
(i) AASB 17 Insurance Contracts
AASB 17 Insurance Contracts, amends the accounting for
insurance contracts and will replace AASB 4 Insurance
Contracts, AASB 1023 General Insurance Contracts and AASB
1038 Life Insurance Contracts. The standard is mandatorily
effective for the Consolidated Entity’s annual reporting
period beginning on 1 April 2023. The Consolidated Entity is
assessing the impact of the revised standard.
(ii) Other amendments made to existing standards
Other amendments to existing standards that are not
mandatorily effective for the annual reporting period
beginning on 1 April 2020 and have not been early
adopted, are not likely to result in a material impact on the
Consolidated Entity’s financial statements.
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Directors’ declaration
Macquarie Group Limited
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 149
to 285 are in accordance with the Corporations Act 2001
(Cth) including:
(i) complying with Australian accounting standards, and
(ii) giving a true and fair view of the Company’s and the
Consolidated Entity’s financial positions as at 31 March
2021 and their performance for the financial year
ended on that date, and
(b) there are reasonable grounds to believe that the
Company will be able to pay its debts as and when they
become due and payable.
Note 1(i) includes a statement that the Financial Report
complies with International Financial Reporting Standards.
The Directors have been given the declarations by the CEO
and CFO required by section 295A of the Corporations Act
2001 (Cth). This declaration is made in accordance with a
resolution of the Directors.
Peter Warne
Independent Director and Chairman
Shemara Wikramanayake
Managing Director and Chief Executive Officer
Sydney 7 May 2021
286
Independent auditor’s report
To the members of Macquarie Group Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Macquarie Group
Limited (the Company) and its controlled entities (together
the Consolidated Entity) is in accordance with the
Corporations Act 2001 (Cth), including
• giving a true and fair view of the Company’s and
Consolidated Entity’s financial positions as at 31 March
2021 and of their financial performance for the year
then ended
• complying with Australian Accounting Standards and the
Corporations Regulations 2001 (Cth).
What we have audited
The Consolidated Entity and Company financial report comprises:
• the Consolidated and Company statements of financial
position as at 31 March 2021
• the Consolidated and Company income statements for
the year then ended
• the Consolidated and Company statements of
comprehensive income for the year then ended
• the Consolidated and Company statements of changes in
equity for the year then ended
• the Consolidated and Company statements of cash flows
for the year then ended
• the notes to the financial statements, which include
significant accounting policies and other explanatory
information
• the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian
Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s
responsibilities for the audit of the financial report section of
our report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company and the Consolidated
Entity in accordance with the auditor independence
requirements of the Corporations Act 2001 (Cth) and the
ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the
Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Our audit approach for the Consolidated Entity
An audit is designed to provide reasonable assurance
about whether the financial report is free from material
misstatement. Misstatements may arise due to fraud
or error. They are considered material if individually or in
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the
financial report.
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on
the financial report as a whole, taking into account the
geographic and management structure of the Consolidated
Entity, its accounting processes and controls and the
industry in which it operates.
The Consolidated Entity is structured into four operating
groups and a corporate segment. The Consolidated Entity
has operations in multiple overseas locations, including
sites in Gurugram in India, Jacksonville in the United States
and Manila in the Philippines, which undertake operational
activities that are important to the financial reporting
processes.
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Consolidated Entity materiality
For the purpose of our audit we used overall Consolidated
Entity materiality of $182 million, which represents
approximately 5% of the Consolidated Entity’s profit
before tax.
We applied this threshold, together with qualitative
considerations, to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements on the financial report
as a whole.
We chose Consolidated Entity profit before tax because, in
our view, it is the benchmark against which the performance
of the Consolidated Entity is most commonly measured.
We utilised a 5% threshold based on our professional
judgement, noting it is within the range of commonly
acceptable thresholds.
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Independent auditor’s report
To the members of Macquarie Group Limited
Consolidated Entity audit scope
Our audit focused on where the Consolidated Entity
made subjective judgements; for example, significant
accounting estimates involving assumptions and inherently
uncertain future events. To conduct this risk assessment,
we considered the inherent risks facing the Consolidated
Entity, including those arising from its respective business
operations, and how the Consolidated Entity manages
these risks. We also considered a number of other factors
including the design and implementation of the Consolidated
Entity’s control environment relevant to the audit, the
appropriateness of the use of the going concern basis of
accounting in the preparation of the financial report and the
risk of management override of controls.
We aligned our audit to the Consolidated Entity’s structure
by instructing a component audit team for each of the
four operating groups and the corporate segment. These
component audit teams, in consultation with the group
audit team, established an audit strategy tailored for each
operating group and the corporate segment.
Given the extent of the overseas operations of the
Consolidated Entity, the component audit teams instructed a
number of other member firms of the PwC global network to
perform audit procedures ranging from an audit of financial
information to specified procedures. The group audit team
determined the level of supervision and direction it needed
to have over the audit work performed by the component
audit teams, including over the component audit teams’
review and supervision of the overseas audit teams they, in
turn, instructed.
The work performed by the component audit teams and
the overseas audit teams, together with additional audit
procedures performed by the group audit team such as
procedures over the Consolidated Entity’s consolidation
and the financial report disclosures, provided us with the
information we needed for our opinion on the Consolidated
Entity’s financial report as a whole.
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the
outcomes of a particular audit procedure is made in that context. We communicated the key audit matters to the Board Audit
Committee. The key audit matters identified below relate to the audit of the Consolidated Entity, unless otherwise noted.
Key audit matter
How our audit addressed the key audit matter
Provision for expected credit losses on loan assets (Refer to Note 13)
Under the credit impairment model required by AASB 9: Financial
Instruments (AASB 9), losses are recognised on an Expected
Credit Loss (ECL) basis. ECLs are required to incorporate
forward-looking information, reflecting the Consolidated Entity’s
view of potential future economic scenarios.
The global economic outlook remains uncertain, the
impact of COVID 19 has been more pronounced on certain
industries, and the economic recovery from the pandemic
has been markedly different around the world. As a result,
significant judgement was required to be exercised by the
Consolidated Entity in calculating the ECL. Specifically, this
includes judgements around the use of forward-looking
information, including developing macroeconomic scenarios
and their associated weightings and the use of post model
adjustments in the calculation of the ECL. In order to meet
the ECL requirements of AASB 9, the Consolidated Entity
has developed models that involve judgement including
determining assumptions such as defining a significant
increase in credit risk (SICR). The ECL models of the
Consolidated Entity rely on numerous data elements and
certain post model adjustments are applied based on the
Consolidated Entity’s judgement.
Given the extent of judgement involved, we consider this to
be a key audit matter.
Our procedures included assessing the design and testing the
operating effectiveness of certain controls supporting the
Consolidated Entity’s estimate of the ECL including controls
relating to:
• review, challenge and approval of certain forward-looking
macroeconomic assumptions and scenario weightings,
including specifically the consideration of impacts
from COVID-19
• monitoring of the effectiveness of models used to support
ECL estimates, and the validation of new and revised
models implemented
• assessment of the credit quality of counterparties
• accuracy of certain critical data elements used in key ECL
models, and
• review and challenge forums to assess the ECL output and
post model adjustments.
In addition to controls testing, we also performed substantive
procedures including:
• using PwC credit modelling experts to assess the
appropriateness of conclusions reached by the
Consolidated Entity from model monitoring performed on
key models. This included assessing key model components
such as SICR and also involved independent reperformance
of certain tests within the model monitoring performed
• using PwC credit modelling experts to test the
appropriateness of changes to key models
• using PwC credit modelling experts to assess whether the
list of critical data elements identified by the Consolidated
Entity was appropriate for key models
• engaging PwC economics experts to assess and challenge
the appropriateness of macroeconomic scenarios
developed and certain forward-looking economic data
developed by the Consolidated Entity, with a particular
focus on the impacts of COVID-19 in light of certain
available information and consensus views
• assessing the appropriateness of individual credit ratings
used in ECL models to determine whether these have
incorporated the impact of COVID-19 at balance date
• tests of the completeness and accuracy of certain critical
data elements used in key ECL models
• assessing certain post model adjustments identified by
the Consolidated Entity
• considering the impacts on the ECL of events occurring
subsequent to balance date.
For credit impaired loan (stage III) provisions, we examined
a sample of individual loan exposures to consider the
appropriateness of provisions adopted.
We assessed the reasonableness of the Consolidated Entity’s
disclosures in the financial report.
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Independent auditor’s report
To the members of Macquarie Group Limited
Key audit matter
How our audit addressed the key audit matter
Impairment of interests in associates and joint ventures, intangible assets including goodwill, held for sale assets, property, plant
and equipment (PPE) and right‑of‑use assets (Refer to Note 2, Note 14, Note 15 and Note 16)
In accordance with AASB 136: Impairment of Assets (AASB
136), interests in associates and joint ventures, identifiable
intangible assets including goodwill, PPE and right-of-use
assets need to be assessed by the Consolidated Entity
for indicators of impairment at the reporting date. If
indicators of impairment, or reversal of impairment exist, the
recoverable amount for each asset needs to be estimated.
Irrespective of whether there is any indication of impairment,
goodwill is required to be tested annually for impairment by
comparing its carrying amount with its recoverable amount.
In accordance with AASB 5: Non-current Assets Held for Sale
and Discontinued Operations, held for sale assets need to
be measured at the lower of their carrying amount and fair
value less costs to sell. These assessments involve significant
judgements such as estimating future cash flows and the
rate at which they are discounted and in evaluating fair value
less costs to sell.
Given the extent of judgement involved in light of the
continued impact and uncertainty surrounding the COVID-19
pandemic and the financial significance of impairments and
impairment reversals recognised, we considered this to be a
key audit matter.
We evaluated the Consolidated Entity’s valuation
methodologies used to estimate the recoverable amounts
of material interests in associates and joint ventures,
intangible assets including goodwill, held for sale assets, PPE
and right-of-use assets and the process by which they were
developed. For samples selected, our procedures included:
• evaluating the Consolidated Entity’s assessments of
whether there were any indicators of impairment or
whether impairment losses recognised in prior periods
should be reversed
• evaluating the appropriateness of the impairment
assessment methodology and significant assumptions
applied in calculating the recoverable amount
• comparing previous cashflow forecasts to actual results
to assess the ability of the Consolidated Entity to
forecast accurately
• assessing the appropriateness of discount rates used
in valuations
• assessing the competence, capability and objectivity of
the external appraisers, where relevant
• engaging PwC valuation experts where relevant
• applying sensitivity analysis to key assumptions
• assessing certain underlying data used in determining the
carrying value and recoverable amount, and
• testing the mathematical accuracy of the Consolidated
Entity’s discounted cashflow models which were used to
determine the recoverable amount of the asset.
We assessed the reasonableness of the Consolidated Entity’s
disclosures in the financial report.
Valuation of financial assets and liabilities held at fair value with significant unobservable inputs (Level 3 financial instruments)
(Refer to Note 38)
The Consolidated Entity exercises judgement in valuing
certain financial assets and liabilities at fair value where there
are significant unobservable inputs for the valuation of these
assets and liabilities. These assets and liabilities are known as
Level 3 financial instruments.
For the Consolidated Entity, these Level 3 financial
instruments predominantly consist of trading assets,
financial investments, loan assets and derivative financial
instruments. Judgement is required in estimating the
fair value of these financial instruments in determining
appropriate models and inputs.
Given the extent of judgement involved in valuing these
Level 3 financial instruments, we considered this to be a key
audit matter.
Our procedures included assessing the design and testing the
operating effectiveness of certain controls relating to Level 3
financial instruments, including controls over:
• approval and validation of the models adopted
• accuracy of inputs to models
• the Consolidated Entity’s process for testing
valuations, and
• governance and review.
For derivative financial instruments and trading assets, we
assessed a sample of valuations by considering the modelling
approaches and inputs, assisted by PwC valuation experts.
We also considered a sample of collateral disputes, gains
and losses on disposals and other events to help assess the
appropriateness of the valuations.
For a sample of financial investments and loan assets, we
assessed the appropriateness of the valuation methodologies
applied, as well as the appropriateness of the inputs used.
For a sample of financial investments we assessed the
sensitivity of the valuations to alternative assumptions where
appropriate.
We assessed the reasonableness of the Consolidated Entity’s
disclosures in the financial report.
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Macquarie Group Limited and its subsidiaries 2021 Annual Report
Key audit matter
How our audit addressed the key audit matter
IT systems and controls over financial reporting
The Consolidated Entity’s operations and financial reporting
systems are heavily dependent on IT systems, including
automated accounting procedures and IT dependent
manual controls. The Consolidated Entity’s controls over IT
systems include:
• the framework of governance over IT systems
• controls over program development and changes
• controls over access to programs, data and IT
operations, and
• governance over generic and privileged user accounts.
Given the reliance on the IT systems in the financial reporting
process and the impact on relevant controls we seek to
rely on as part of our audit, we considered this to be a key
audit matter.
Our procedures included evaluating the design and testing
the operating effectiveness of certain controls over the
continued integrity of the IT systems that are relevant to
financial reporting.
We also carried out direct tests, on a sample basis, of system
functionality that was key to our audit testing in order to
assess the accuracy of certain system calculations, the
generation of certain reports and the operation of certain
system enforced access controls.
Where we identified design and operating effectiveness
matters relating to IT systems or application controls
relevant to our audit, we performed alternative audit
procedures. We also considered mitigating controls in order
to respond to the impact on our overall audit approach.
Valuation of tax payable relating to tax uncertainties and tax receivable (Refer to Note 11 and Note 23)
The Consolidated Entity is subject to taxation in a number
of jurisdictions. The assessment of the amounts expected
to be paid to and received from tax authorities is considered
initially by the Consolidated Entity at a local level and then
reviewed centrally, with consideration given to particular
tax positions in certain jurisdictions. In some cases, the
treatment of tax positions requires judgement to estimate
the ultimate amounts of tax that will be paid and received.
Given the extent of judgement involved, we consider this to
be a key audit matter.
Our procedures included evaluating the analysis conducted
by the Consolidated Entity which sets out the basis for
judgements made in respect of the ultimate amounts
expected to be paid to and received from tax authorities.
Assisted by PwC tax experts, we read a risk focused selection
of correspondence with tax authorities and external
advice obtained by the Consolidated Entity and used our
understanding of the business to assess and challenge the
completeness and quantum of the provision for tax and tax
receivable. We independently considered the likelihood of
additional tax exposures occurring based on our knowledge
of tax legislation, applicable precedent and industry
developments, noting the level of judgement involved.
We assessed the reasonableness of the Consolidated Entity’s
disclosures in the financial report.
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Independent auditor’s report
To the members of Macquarie Group Limited
Key audit matter
How our audit addressed the key audit matter
Revenue recognition (Refer to Note 2)
In some cases, judgement is required by the Consolidated
Entity in relation to the timing of recognition and
measurement of revenue streams, including non-routine
fee income, revenue from the disposal of assets and
performance fees. Further, the determination of
performance fees recognition involves judgements relating to
the timing and amount of variable consideration to
be recognised.
Given the extent of judgement involved, we considered this
to be a key audit matter.
Our audit procedures included evaluating the design and
testing the operating effectiveness of relevant controls
relating to the recognition and measurement of fee income,
revenue from disposal of assets and performance fees.
In assessing the appropriateness of the recognition of
revenue from fee income and performance fees, we
recalculated revenue for a sample of fees based on relevant
information in supporting documents including contracts,
trust constitutions and management agreements.
Specifically for performance fees, we also considered the
nature of the underlying fund assets, the proportion of
assets already realised, the returns on the assets realised to
date and the potential for volatility in the valuation of the
remaining unrealised assets.
We performed testing to confirm the timing of revenue
recognition in respect of certain transactions where sale
agreements were in place at year end but the transaction had
not yet been fully completed to assess the appropriateness
of the recognition of revenue from the disposal of assets.
We assessed the appropriateness of the Consolidated
Entity’s disclosures in the financial report.
Carrying amount of investment in subsidiary (Company Only) (Refer to Note 17)
At year end, the Company considered whether there were
any indicators of impairment or whether impairment losses
recognised in prior periods on an investment in subsidiary
should be reversed.
Given the impairment losses recognised in prior periods on
an investment in subsidiary, an estimate of the investment’s
recoverable amount was calculated by determining the
higher of the value-in-use and fair value less cost of disposal
for the investment.
The Company’s calculation of the recoverable amount of the
subsidiary supported the current carrying value. Given the
quantum of the investment and the judgement involved in
determining the recoverable amount, we considered this to
be a key audit matter.
Our procedures included:
• evaluating the Company’s assessment of whether there
were any indicators of impairment or whether impairment
losses recognised in prior periods should be reversed
• evaluating the appropriateness of the impairment
assessment methodology and significant assumptions
applied in calculating the recoverable amount
• comparing previous cashflow forecasts to actual results to
assess the ability of the Company to forecast accurately
• engaging PwC valuation experts to assist in assessing
the appropriateness of key inputs in determining
the recoverable amount including applicable
valuation multiples
• applying sensitivity analysis to key assumptions
• assessing certain underlying data used in determining the
carrying value and recoverable amount, and
• testing the mathematical accuracy of the Company’s
valuation model which was used to determine the
recoverable amount of the subsidiary.
We assessed the reasonableness of the Company’s
disclosures in the financial report.
292
Other information
The directors are responsible for the other information. The
other information comprises the information included in the
annual report for the year ended 31 March 2021, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other
information and accordingly we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial report or our knowledge
obtained in the audit, or otherwise appears to be
materially misstated.
If, based on the work we have performed on the other
information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material
misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the
financial report
The directors of the Company are responsible for the
preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards
and the Corporations Act 2001 (Cth) and for such internal
control as the directors determine is necessary to enable the
preparation of the financial report that gives a true and fair
view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are
responsible for assessing the ability of the Company and
the Consolidated Entity to continue as a going concern,
disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless
the directors either intend to liquidate the Company or
the Consolidated Entity or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial report
Our objectives are to obtain reasonable assurance about
whether the financial report as a whole is free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with the
Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis
of the financial report.
A further description of our responsibilities for the audit of
the financial report is located at the Auditing and Assurance
Standards Board website at: https://www.auasb.gov.au/
admin/file/content102/c3/ar1_2020.pdf. This description
forms part of our auditor’s report.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in
pages 100 to 145 of the Directors’ Report for the year ended
31 March 2021.
In our opinion, the remuneration report of Macquarie Group
Limited for the year ended 31 March 2021 complies with
section 300A of the Corporations Act 2001 (Cth).
Responsibilities
The directors of the Company are responsible for the
preparation and presentation of the remuneration report
in accordance with section 300A of the Corporations Act
2001 (Cth). Our responsibility is to express an opinion on
the remuneration report, based on our audit conducted in
accordance with Australian Auditing Standards.
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PricewaterhouseCoopers
Kristin Stubbins
Partner
Sydney
7 May 2021
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay,
Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999,
www.pwc.com.au
Liability limited by a scheme approved under
Professional Standards Legislation.
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Further
information
Oxy Low Carbon Ventures, Americas
Macquarie and Oxy Low Carbon Ventures deliver
the world’s first shipment of carbon neutral oil.
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05
Additional investor information
Shareholder calendar
2021
Date
7 May
17 May
18 May
10 June
15 June
18 June
2 July
29 July
Event
Full-year result announcement
Ex-dividend date for final ordinary dividend
Record date for final ordinary dividend
Payment date for MCN4 distribution
Payment date for MCN3 distribution
Payment date for MCN5 distribution
Payment date for final ordinary dividend
AGM
10 September
Payment date for MCN4 distribution
15 September
Payment date for MCN3 distribution
20 September Payment date for MCN5 distribution
30 September
Financial half-year end
29 October(1)
Half-year result announcement
8 November(1)
Ex-dividend date for interim ordinary dividend
9 November(1)
Record date for interim ordinary dividend
10 December
Payment date for MCN4 distribution
14 December(1)
Payment date for interim ordinary dividend
15 December
Payment date for MCN3 distribution
20 December
Payment date for MCN5 distribution
2022
Date
10 March
15 March
18 March
31 March
Event
Payment date for MCN4 distribution
Payment date for MCN3 distribution
Payment date for MCN5 distribution
Financial year end
2021 Annual General Meeting
Macquarie Group Limited’s 2021 AGM will be held at 10:30 am
on Thursday, 29 July 2021. Details of the meeting will be sent
to shareholders separately.
The closing date for the receipt of nominations from
persons wishing to be considered for election as a director
is Wednesday, 26 May 2021.
Dividend details
Macquarie generally pays a dividend on its fully paid ordinary
shares twice a year following the interim and final results
announcements. The proposed dates for the 2021 calendar
year are in the calendar above.
Dividend Reinvestment Plan (DRP)
The DRP allows shareholders to apply their dividends to
acquire new Macquarie ordinary shares rather than receiving
dividends in cash.
Stock exchange listing
Equity or hybrid security
Stock
exchange listing
Trading code
Macquarie Group Limited Securities
Macquarie ordinary shares
Macquarie Group Capital
Notes 3 (MCN3)
Macquarie Group Capital
Notes 4 (MCN4)
Macquarie Group Capital
Notes 5 (MCN5)
ASX
ASX
ASX
ASX
MQG
MQGPC
MQGPD
MQGPE
Macquarie Bank Limited Convertible Securities
Macquarie Bank Capital
Notes 2 (BCN2)
Macquarie Additional
Capital Securities (MACS)
ASX
SGX
MBLPC
6F6B
Macquarie also has debt securities quoted on the London
Stock Exchange, SGX and Taipei Exchange.
Equity and hybrid securities
The following information is correct as at 31 March 2021.
Macquarie Group Limited securities
Fully paid ordinary shares
Voting rights
At meetings of members or classes of members, each
member holding ordinary shares may vote in person or
by proxy, attorney or (if the member is a body corporate)
corporate representative. On a show of hands, every person
present who is a member or a proxy, attorney or corporate
representative of a member has one vote and on a poll every
member present in person or by proxy, attorney or corporate
representative has:
(i) one vote for each fully paid share held by the
member, and
(ii) that proportion of a vote for any partly paid ordinary
share calculated in accordance with clause 8.18 of the
MGL Constitution.
A copy of the Constitution is available at
macquarie.com/corporate‑governance
(1) These dates are subject to change.
296
Macquarie Group Limited and its subsidiaries 2021 Annual Report
20 largest holders
Registered holder
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
Bond Street Custodians Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Bond Street Custodians Limited
Citicorp Nominees Pty Limited
Argo Investments Limited
HSBC Custody Nominees (Australia) Limited
Bond Street Custodians Limited
Australian Foundation Investment Company Limited
Milton Corporation Limited
Nicholas Moore
Netwealth Investments Limited
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
BNP Paribas Nominees Pty Ltd Six Sis Ltd
Aljebra Pty Ltd
Mr Nicholas Moore
Total
Number of ordinary shares held
% of ordinary shares
98,516,318
66,411,695
21,345,810
11,795,482
11,653,097
11,601,794
5,098,457
3,492,050
2,907,587
2,458,151
2,447,938
2,025,999
1,786,967
1,625,990
1,534,227
1,413,290
1,107,755
964,022
670,591
575,565
27.23
18.35
5.90
3.26
3.22
3.21
1.41
0.97
0.80
0.68
0.68
0.56
0.49
0.45
0.42
0.39
0.31
0.27
0.19
0.16
249,432,785
68.94
Substantial shareholders
The following holders are registered by MGL as a substantial shareholder, having declared a relevant interest in accordance with
the Act, in the voting shares below:
Registered holder
Macquarie Group Limited
BlackRock Group
Vanguard
Spread of shareholdings
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 shares and over
Total
Number of ordinary shares held
22,142,064
18,119,950
17,726,376
Number of shareholders
Number of shares
% of shares
173,755
20,028
1,323
622
59
195,787
40,169,084
37,927,086
8,931,552
15,396,626
259,397,029
361,821,377
There were 2,104 shareholders (representing 3,240 shares) who held less than a marketable parcel.
11.10
10.48
2.47
4.26
71.69
100.00
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Additional investor information
Continued
Macquarie Group Capital Notes 3 (MCN3)
Voting rights
MCN3 may convert into a variable number of MGL ordinary shares on 15 December 2027 or at other times, subject to various
conditions. Holders of MCN3 have no voting rights in respect of meetings of members of MGL prior to conversion.
20 largest holders
Registered holder
HSBC Custody Nominees (Australia) Limited
Australian Executor Trustees Limited
National Nominees Limited
Netwealth Investments Limited
J P Morgan Nominees Australia Pty Limited
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
Diocese Development Fund – Catholic Diocese of Paramatta
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
Navigator Australia Ltd
Longhurst Management Services Pty Ltd
BNP Paribas Nominees Pty Ltd
Mutual Trust Pty Ltd
Nulis Nominees (Australia) Limited
Dimbulu Pty Ltd
Invia Custodian Pty Limited
Australian Executor Trustees Limited
Australian Executor Trustees Limited
Netwealth Investments Limited
Federation University Australia
Total
Spread of noteholdings
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 notes and over
Total
Number of MCN3 held
% of MCN3
696,887
205,158
186,219
145,073
123,981
116,393
115,000
89,192
72,769
61,257
60,000
54,830
54,390
49,232
40,000
38,495
35,674
35,578
33,885
30,158
6.97
2.05
1.86
1.45
1.24
1.16
1.15
0.89
0.73
0.61
0.60
0.55
0.54
0.49
0.40
0.38
0.36
0.36
0.34
0.30
2,244,171
22.44
Number of MCN3 holders
Number of MCN3
% of MCN3
11,571
1,257
88
48
7
12,971
3,921,738
2,589,298
665,280
1,234,973
1,588,711
39.22
25.89
6.65
12.35
15.89
10,000,000
100.00
There were 3 noteholders (representing 8 notes) who held less than a marketable parcel.
298
Macquarie Group Limited and its subsidiaries 2021 Annual Report
Macquarie Group Capital Notes 4 (MCN4)
Voting rights
MCN4 may convert into a variable number of MGL ordinary shares on 10 September 2029 or at other times, subject to various
conditions. Holders of MCN4 have no voting rights in respect of meetings of members of MGL prior to conversion.
Number of MCN4 held
% of MCN4
608,952
180,845
169,313
102,132
100,000
86,319
65,000
57,195
57,089
47,205
39,955
38,950
34,862
32,967
30,000
29,649
28,000
27,818
25,000
25,000
1,786,251
6.73
2.00
1.87
1.13
1.10
0.95
0.72
0.63
0.63
0.52
0.44
0.43
0.39
0.36
0.33
0.33
0.31
0.31
0.28
0.28
19.73
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20 largest holders
Registered holder
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Netwealth Investments Limited
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
Dimbulu Pty Ltd
National Nominees Limited
John E Gill Trading Pty Ltd
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
Navigator Australia Ltd
Invia Custodian Pty Limited
Mutual Trust Pty Ltd
JDB Services Pty Ltd
Nora Goodridge Investments Pty Limited
BNP Paribas Nominees Pty Ltd
Qushan Pty Ltd
Australian Executor Trustees Limited
Pendant Realty Pty Ltd
Sneath & King Pty Ltd
Total
Spread of noteholdings
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 notes and over
Total
Number of MCN4 holders
Number of MCN4
% of MCN4
10,827
1,163
92
48
4
12,134
3,707,694
2,413,400
677,634
1,194,940
1,061,242
9,054,910
40.95
26.65
7.48
13.20
11.72
100.00
There were 8 noteholders (representing 30 notes) who held less than a marketable parcel.
299
Additional investor information
Continued
Macquarie Group Capital Notes 5 (MCN5)
Voting rights
MCN5 may convert into a variable number of MGL ordinary shares on 18 September 2030 or at other times, subject to various
conditions. Holders of MCN5 have no voting rights in respect of meetings of members of MGL prior to conversion.
Number of MCN5 held
% of MCN5
580,687
278,191
203,607
153,365
130,800
124,717
73,254
55,000
47,276
41,404
40,160
36,095
32,500
32,400
28,486
27,370
24,657
24,483
24,259
24,170
1,982,881
8.00
3.83
2.81
2.11
1.80
1.72
1.01
0.76
0.65
0.57
0.55
0.50
0.45
0.45
0.39
0.38
0.34
0.34
0.33
0.33
27.33
Number of MCN5 holders
Number of MCN5
% of MCN5
9,021
855
51
39
6
9,972
2,673,967
1,841,018
385,450
882,598
1,471,367
7,254,400
36.86
25.38
5.31
12.17
20.28
100.00
20 largest holders
Registered holder
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
BNP Paribas Noms Pty LTD
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
National Nominees Limited
Netwealth Investments Limited
Diocese Development Fund – Catholic Diocese of Paramatta
Dimbulu Pty Ltd
BNP Paribas Nominees Pty Ltd
UBS Nominees Pty Ltd
Mutual Trust Pty Ltd
Australian Executor Trustees Limited
UURO Pty Ltd
Mr Hui Lin & Mrs Ting Wei
Nulis Nominees (Australia) Limited
Federation University Australia
Netwealth Investments Limited
Citicorp Nominees Pty Limited
Certane Ct Pty Ltd
MF Investments No1 Pty Ltd
Total
Spread of noteholdings
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 notes and over
Total
There was 1 noteholder (representing 1 note) who held less than a marketable parcel.
300
Macquarie Bank Limited convertible
securities
Macquarie Additional Capital Securities (MACS)
MACS are unsecured subordinated notes issued by MBL,
acting through its London Branch that may be exchanged
for MGL ordinary shares in certain limited circumstances.
MACS holders have no voting rights in respect of meetings
of members of MBL and have no voting rights in respect
of meetings of members of MGL in the absence of such
an exchange.
As at 31 March 2021, the $US750 million of MACS were held by
one holder, Cede & Co, as authorised representative for the
Depository Trust Company being the common depository
for the MACS global security. The Bank of New York Mellon as
Registrar keeps the register in respect of MACS.
Macquarie Bank Capital Notes 2 (BCN2)
BCN2 are unsecured, subordinated notes issued by MBL.
They are non-cumulative and mandatorily convertible
into MGL ordinary shares in certain limited circumstances.
BCN2 holders have no voting rights in respect of meetings
of members of MBL, and have no voting rights in respect
of meetings of members of MGL prior to conversion. As at
31 March 2021, there were 6,410,270 BCN2 on issue held by
11,362 registered holders.
Unlisted securities
The following information is correct as at 31 March 2021.
Exchangeable shares
60,587 exchangeable shares on issue are held by 10 former
employees of Orion Financial Inc. The exchangeable shares
were issued by a controlled entity and are eligible to be
exchanged one for 0.9438 of an MGL ordinary share. They
reached their 10-year anniversary in November 2017, upon
which the scheme conditions remain in place, however a
redemption date may be set at any time. They carry no
voting rights in respect of meetings of members of MGL
prior to exchange.
38,082 exchangeable shares on issue are held by 8 former
employees of Tristone Capital Global Inc. The exchangeable
shares were issued by a controlled entity and are eligible
to be exchanged one for 0.9438 of an MGL ordinary share.
They reached their 10-year anniversary in August 2019, upon
which the scheme conditions remain in place, however a
redemption date can be set at any time. They carry no
voting rights in respect of meetings of members of MGL
prior to exchange.
Macquarie Group Limited and its subsidiaries 2021 Annual Report
MEREP
3,512,371 DSUs are held by 557 participants and 872,276 PSUs
are held by 18 participants in the MEREP.
American Depository Receipt (ADR) program
Macquarie ADRs are negotiable certificates issued by BNY
Mellon, with one ADR representing one MGL ordinary share.
They are traded under the symbol MQBKY and are classified
as Level 1. They are not listed on any exchange and are only
traded over-the-counter via brokers.
BNY Mellon:
BNY Mellon Shareowner Services
PO Box 358516
Pittsburgh, PA 15252-8516 USA
Toll-free telephone number for domestic callers:
1 888 BNY ADRs
Telephone number for international callers:
+1 201 680 6825
Further information can be found at:
adrbnymellon.com/resources/individual‑investors
Enquiries
Investors who wish to enquire about any administrative
matter relating to their MGL shareholding, MCN3, MCN4,
MCN5 or BCN2 security holding are invited to contact the
Share Registry at:
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000 Australia
Telephone:
1300 554 096 (within Australia)
+61 1300 554 096 (international)
Email:
Website:
macquarie@linkmarketservices.com.au
linkmarketservices.com.au
All other enquiries relating to an MGL share investment can
be directed to:
Investor relations
Macquarie Group Limited
Level 6, 50 Martin Place
Sydney NSW 2000 Australia
Telephone:
Email:
Website:
+61 2 8232 3333
macquarie.shareholders@macquarie.com
macquarie.com/investors
Macquarie’s Company Secretary, Dennis Leong, may be
contacted on the above number and email address.
Website
The Interim and Annual Reports, presentations,
dividend information and other investor information
is available macquarie.com/investors
301
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Ten year history
The financial information for the full years ended 31 March 2012-2021 is based on the reported results using the Australian
Accounting Standards that were effective and adopted by the Consolidated Entity at the reporting dates, which also comply
with IFRS as issued by the IASB. Reporting periods have been restated only to the extent as required by the accounting
standards. The financial reporting periods may hence not be fully comparable with one another as a result of changes in
accounting standards’ requirements.
Financial years ended 31 March
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Income statement ($ million)
Net operating income
Total operating expenses
Operating profit before income tax
Income tax expense
Profit after income tax
Macquarie income securities
distributions
Macquarie income preferred
securities distributions
Loss/(profit) attributable to other
non-controlling interests
Profit attributable to ordinary
equity holders
Statement of financial position
($ million)
Total assets
Total liabilities
Net assets
Loan assets
Shareholders’ equity(1)
Impaired loan assets
(net of provisions)(2)
Share Information
Dividends per share (cents)
Interim
Final
Special(3)
Total
Basic EPS (cents per share)
Share price at reporting date ($)
Ordinary shares (million shares)
Market capitalisation at reporting
date (fully paid ordinary shares)
($ million)
Net tangible assets per ordinary
share ($)
Ratios (%)
Return on average ordinary
shareholders’ funds
Ordinary dividend payout ratio
Expense/income ratio
Net loan losses as % of loan assets
(excluding securitisation SPVs)
Assets under management ($b)
Staff numbers
12,774
(8,867)
3,907
(899)
3,008
12,325
(8,871)
3,454
(728)
2,726
12,754
(8,887)
3,867
(879)
2,988
10,920
(7,456)
3,464
(883)
2,581
10,364
(7,260)
3,104
(868)
2,236
10,158
(7,143)
3,015
(927)
2,088
9,262
(6,740)
2,522
(899)
1,623
8,132
(6,026)
2,106
(827)
1,279
6,657
(5,252)
1,405
(533)
872
6,963
(5,914)
1,049
(287)
762
‑
‑
7
(12)
(15)
(14)
(15)
(16)
(18)
(18)
(21)
(26)
–
17
–
9
–
(10)
–
(4)
(1)
(8)
(5)
4
(4)
8
(4)
4
(4)
(2)
3,015
2,731
2,982
2,557
2,217
2,063
1,604
1,265
851
730
245,653 255,802
234,018
223,302
21,784
22,351
94,117
105,026
21,063
22,048
197,757
179,393
18,364
77,811
17,761
191,325
173,145
18,180
73,509
16,357
182,877
165,607
17,270
69,288
15,563
196,755
181,091
15,664
72,393
15,116
187,976
173,580
14,396
67,663
13,909
153,904
141,990
11,914
49,965
11,418
144,748
132,793
11,955
47,449
11,403
153,626
141,894
11,732
41,930
11,203
1,544
1,528
1,674
351
547
418
594
365
368
357
135
335
470
842.9
152.83
361.8
250
180
–
430
791.0
85.75
354.4
215
360
–
575
883.3
129.42
340.4
205
320
–
525
758.2
102.90
340.4
190
280
–
470
657.6
90.20
340.4
160
240
–
400
619.2
66.09
340.3
130
200
–
330
502.3
76.67
333.5
100
160
116
376
383.6
57.93
321.1
75
125
–
200
251.2
37.15
339.5
65
75
–
140
210.1
29.08
348.6
55,297
30,388
44,052
35,024
30,700
22,491
25,569
18,601
12,613
10,137
53.91
50.21
46.21
45.12
42.74
41.23
38.19
31.71
29.94
28.12
14.3
56.4
69.4
14.5
55.8
72.0
18.0
65.6
69.7
0.4
563.5
16,459
0.8
598.9
15,849
0.4
551.3
15,602
16.8
69.8
68.3
0.3
496.7
14,810
15.2
72.0
70.1
14.7
65.7
70.3
14.0
67.6
72.8
0.5
481.7
13,925
1.0
478.6
14,660
0.7
486.3
14,373
11.1
66.8
74.1
0.4
426.9
14,180
7.8
79.0
78.9
0.4
347.4
13,905
6.8
66.4
84.9
0.5
326.9
14,519
(1) Represents capital and reserves attributable to ordinary equity holders of Macquarie Group Limited.
(2) Represents net exposure in credit impaired loan assets as per Australian Accounting Standards since 31 March 2019. For financial years ended 31 March 2012–2018, represents net
exposure in impaired loan assets disclosed as per Australian regulatory authority requirements.
(3) The special dividend for the year ended 31 March 2014 represented the special dividend component of the in-specie distribution of Sydney Airport stapled securities in January 2014.
The total distribution including return of capital was 373 cents per share.
302
Glossary
Defined term
Definition
A
AASB
ABCN
Australian Accounting
Standards Board
Australian Business and
Community Network
the Act
Corporations Act 2001 (Cth)
ADI
ADR
AEC
AGM
ALA
Authorised deposit-taking institution
American Depository Receipt
Australian Electoral Commission
Annual General Meeting
alternative liquid assets
All Ords Index
All Ordinaries Accumulation Index
ALCO
AMA
Asset and Liability Committee
Advanced Measurement Approach
Annual Report
MGL’s 2021 Annual Report
ANZ
APRA
ARR
ASIC
ASX
AUM
B
BAC
Australia and New Zealand
Australian Prudential
Regulation Authority
alternative reference rates
Australian Securities & Investments
Commission
Australian Securities Exchange or
ASX Limited ABN 98 008 624 691 and
the market operated by ASX Limited
assets under management
Board Audit Committee
Bank Group
MBL and its subsidiaries
Banking Group
BBSW
BCBS
BCN2
BEAR
BFS
BGCC
BNC
the Banking Group comprises of BFS,
certain activities of CGM and certain
activities of the Equities business in
Macquarie Capital
Australian Financial Markets
Association’s bank-bill rate published
daily on AAP Reuters website. The
Australian equivalent of LIBOR,
SIBOR, etc.
Basel Committee on Banking
Supervision
Macquarie Bank Capital Notes 2
Banking Executive
Accountability Regime
Banking and Financial Services Group
Board Governance and
Compliance Committee
Board Nominating Committee
the Board,
Macquarie Board
the Board of Voting Directors
of Macquarie Group Limited
BRC
BRiC
Businesses
Board Remuneration Committee
Board Risk Committee
the areas within the Operating Groups
carrying out various operations
Macquarie Group Limited and its subsidiaries 2021 Annual Report
C
CAF
CAGR
CCB
CCyB
CDS
CEFC
Corporate and Asset Finance Group
compound annual growth rate
capital conservation buffer
countercyclical capital buffer
credit default swaps
Clean Energy Finance Corporation
Central
Service Groups
the Central Service Groups consist
of RMG, LGL, FMG and COG
CEO
CGM
CFO
CLF
COG
the Company, MGL
Comparable Key
Management
Personnel
(Comparable KMP)
Conduct Risk
The Consolidated
Entity, Macquarie
Corporate
CRD IV
CRO
CSIRO
CVA
D
Deed
Deed Poll
DFVTPL
Directors
Divisions
DPS Plan
DRP
DSU
DVA
Managing Director and Chief
Executive Officer
Commodities and Global
Markets Group
Chief Financial Officer
committed liquidity facility
Corporate Operations Group
Macquarie Group Limited
ABN 94 122 169 279
Executive KMP who were members
of the Executive Committee for the
full year in both FY2020 and FY2019
the risk of behaviour, action or
omission by individuals employed by,
or on behalf of, Macquarie or taken
collectively in representing Macquarie
that may have a negative outcome
for our clients, counterparties, the
communities and markets in which we
operate, our staff, or Macquarie.
MGL and its subsidiaries
Head office and Central Service
Groups including Group Treasury
Capital Requirements Directive IV
Chief Risk Officer
Commonwealth Scientific and
Industrial Research Organisation
credit valuation adjustments
Deed of Access, Indemnity, Insurance
and Disclosure
Indemnity and Insurance Deed Poll
dated 12 September 2007
designated as FVTPL
the Voting Directors of MGL (unless
the context indicates otherwise)
named divisions within Macquarie
Directors’ Profit Share Plan
Dividend Reinvestment Plan
Deferred Share Unit issued
under the MEREP
debit valuation adjustment
303
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exposure at default
Economic Capital Adequacy Model
Key Management
Personnel (KMP)
all Voting Directors and members
of the Executive Committee of MGL
K
Glossary
Continued
E
EAD
ECAM
ECL
EIR
EMEA
EPS
ESP
ESG
ESR
EU
Executive Director
Executive Key
Management
Personnel
(Executive KMP)
Executive
Voting Director
F
FCTR
FIRB
FLI
FMG
expected credit loss
effective interest rate
Europe, Middle East and Africa
earnings per share
Macquarie Group Employee
Share Plan
Environmental, Social and
Governance
Environmental and Social Risk
the European Union
Macquarie’s most senior level of
employee including Group Heads,
Division Heads and senior business
unit managers
members of the Executive
Committee of MGL
an executive Board member
foreign currency translation reserve
Foundation Internal Ratings
Based Approach
forward looking information
Financial Management Group
the Foundation
Macquarie Group Foundation
floating rate notes
funding valuation adjustment
fair value through other
comprehensive income
fair value through profit or loss
gross domestic product
Green Investment Group
Global Reporting Initiative
the Head of a particular Operating
or Central Service Group
Goods and Service Tax
held for trading
high quality liquid assets
International Accounting
Standards Board
Interbank-offered rates
International Financial
Reporting Standards
interest rate risk in the banking book
FRN
FVA
FVOCI
FVTPL
G
GDP
GIG
GRI
Group Head
GST
H–J
HFT
HQLA
IASB
IBOR
IFRS
IRRBB
304
L
LGBTQ
LGL
LMI
Lesbian Gay Bisexual
Transgender and Queer
Legal and Governance Group
lenders mortgage insurance
Loss Given Default
(LGD) Estimate
Macquarie’s estimated economic loss
should a counterparty default occur
LTIFR
LVR
M
M&A
Lost Time Injury Frequency Rate
loan to value ratio
mergers and acquisitions
Macquarie Bank, MBL Macquarie Bank Limited
ABN 46 008 583 542
Macquarie
Board, the Board
Macquarie, the
Consolidated Entity
MAF
MFHPL
MGL ordinary
shares, MQG
MGSA
Malus
MAM
Management
MCN2
MCN3
MCN4
MCN5
MEREP
MGL, the Company
MIDIS
MIM
MIRA
MIS
MSCI
MSIS
the Board of Voting Directors of MGL
MGL and its subsidiaries
Macquarie AirFinance
Macquarie Financial Holdings
Pty Limited
MGL fully paid ordinary shares
Macquarie Group Services Australia
Pty Limited
the ability of the Board or its delegate
to reduce or eliminate unvested profit
share for certain senior employees in
certain circumstances
Macquarie Asset Management Group
Division Directors and Executive
Directors who have management
or risk responsibility for a Division
or business area
Macquarie Group Capital Notes 2
Macquarie Group Capital Notes 3
Macquarie Group Capital Notes 4
Macquarie Group Capital Notes 5
Macquarie Group Employee Retained
Equity Plan
Macquarie Group Limited
ABN 94 122 162 279
Macquarie Infrastructure Debt
Investment Solutions
Macquarie Investment Management
Macquarie Infrastructure and
Real Assets
Macquarie Income Securities
Morgan Stanley Capital International
Macquarie Specialised
Investment Solutions
negotiable certificates of deposit
non-controlling interests
Non-Executive Director
S
S&P
Senior Executive
net investment in foreign operations
Scope 1
N
NCD
NCI
NED
NIFO
NOHC
Non-Bank Group
Non-Banking Group
NPAT
O
OCI
OECD
Operating Groups
Operationally
Segregated
Subsidiaries, OSS
OTC
P
PD
POCI
PPAs
PRI
Probability of Default
(PD) Estimate
PSU
PwC
Q–R
RAS
RBA
RMG
ROE
ROU
RSU
Non-Operating Holding Company
MGL, MFHPL and its subsidiaries,
MAMHPL and its subsidiaries
the Non-Banking Group comprises
Macquarie Capital (excluding certain
activities of the Equities business),
MAM and some business activities
of CGM that use certain offshore
regulated entities
net profit after tax
other comprehensive income
Organisation for Economic
Cooperation and Development
the Operating Groups consist of
MAM, BFS, CGM and MacCap
the operations of some controlled
subsidiaries are “segregated” from
the rest of Macquarie, and a tailored
Risk Management Framework may
be adopted
over-the-counter
probability of default
purchased or originated
credit-impaired
power purchase agreements
UN Principles for Responsible
Investment
an estimate of the likelihood of the
rated entity defaulting on its financial
obligations to Macquarie over the
period of a year and should look
‘through the cycle’ – i.e. represent
the probability of default in natural
economic conditions
Performance Share Unit issued
under the MEREP
PricewaterhouseCoopers
Risk Appetite Statement
Reserve Bank of Australia
Risk Management Group
return on ordinary equity
right-of-use
Restricted Share Unit issued
under the MEREP
Macquarie Group Limited and its subsidiaries 2021 Annual Report
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Standard & Poor’s
Macquarie’s combined Division
Director and Executive Director
population
emissions released to the atmosphere
as a direct result of an activity, or
series of activities controlled by an
organisation. For example, emissions
from natural gas and diesel usage in
corporate offices.
indirect emissions released to the
atmosphere associated with the
generation of purchased or acquired
electricity, heating and cooling
consumed by the organisation.
indirect emissions, other than Scope
2 emissions, that are a consequence
of the activities of the company
but occur from sources not owned
or controlled by the company. For
example, emissions associated with
employee travel.
members of Macquarie’s Executive
Committee and Executive Directors
who have a significant management
or risk responsibility in the
organisation
structured entities
Sydney Futures Exchange
Singapore Stock Exchange
significant increase in credit risk
special purpose entities
solely payment of principal
and interest
Financial Stability Board’s Task
Force on Climate-related Financial
Disclosures
metric measure used to compare the
emissions from various greenhouse
gases based upon their global
warming potential (US Environment
Protection Agency)
terajoules
total shareholder return
Scope 2
Scope 3
Senior Management
SEs
SFE
SGX
SICR
SPEs
SPPI
T
TCFD
tCO2-e (Carbon
dioxide equivalent
in tonnes)
TJ
TSR
U–V
the UK Code
the UK Remuneration Code
VaR
Value-at-Risk
Voting Directors
the Voting Directors of MGL as
defined in the MGL Constitution
W–Z
WHS
WHSE
XVA
Work Health and Safety
work health, safety and
environmental
derivative valuation adjustments,
including CVA, DVA and FVA
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Contact details
Macquarie Group Limited
Principal Administrative Office
50 Martin Place
Sydney NSW 2000
Australia
Tel: +61 2 8232 3333
Registered Office
Macquarie Group Limited
Level 6, 50 Martin Place
Sydney NSW 2000
Australia
Tel: +61 2 8232 3333
macquarie.com