MACQUARIE BANK RESULT ANNOUNCEMENT HALF YEAR ENDED 30 SEPTEMBER 2005

MACQUARIE BANK RESULT ANNOUNCEMENT HALF YEAR ENDED 30 SEPTEMBER 2005 www.macquarie.com.au MACQUARIE BANK LIMITED ACN 008 583 542

The Holey Dollar In 1813 Governor Lachlan Macquarie overcame an acute currency shortage by purchasing Spanish silver dollars (then worth five shillings), punching the centres out and creating two new coins the Holey Dollar (valued at five shillings) and the Dump (valued at one shilling and three pence). This single move not only doubled the number of coins in circulation but increased their worth by 25 per cent and prevented the coins leaving the colony. Governor Macquarie s creation of the Holey Dollar was an inspired solution to a difficult problem and for this reason it was chosen as the symbol for the Macquarie Group.

Contents 1.0 Financial Highlights 2 1.1 Profitability 2 1.2 Contribution by Operating Group 4 1.3 Ordinary Dividend 8 1.4 Balance Sheet 9 1.5 Capital Management 10 1.6 Asset Quality 12 1.7 Credit Ratings 12 1.8 Assets Under Management 13 2.0 Review of Results 16 2.1 Summary Profit and Loss 16 2.2 Net Interest Income 20 2.3 Net Fee and Commission Income 22 2.4 Net Trading Income 26 2.5 Net Other Income 27 2.6 Operating Expenses 29 2.7 Segment Contributions 31 3.0 Financial Information 33 3.1 Impact of adoption of Australian standards equivalent to International Financial Reporting Standards 33 3.2 Acquisitions and Disposals of Controlled Entities 35 3.3 Detailed Profit and Loss Information 36 3.4 Income Tax Expense 38 3.5 Earnings Per Share 39 3.6 Detailed Balance Sheet Information 42 3.7 Equity Investments 48 3.8 Contingent Liabilities 49 3.9 Capital Adequacy 50 3.10 Funds Management Information 54 4.0 Glossary 60 5.0 Index 64 6.0 Ten Year History 66 1

1.0 Financial Highlights 1.1 Profitability Half year to Movement on Sep 05 Mar 05 Sep 04 Mar 05 Sep 04 $m $m $m % % Total operating income 2,160 2,372 1,380 (9) 57 Total operating expenses (1,477) (1,584) (1,010) (7) 46 Profit from ordinary activities before income tax 683 788 370 (13) 85 Income tax expense (160) (190) (98) (16) 63 Profit from ordinary activities after income tax 523 598 272 (13) 92 Minority interests (26) (27) (2) (4) large Distributions paid or provided on Macquarie Income Securities (15) (15) (14) 7 Profit after income tax attributable to MBL ordinary equity holders 482 556 256 (13) 88 % % % Expense/income ratio 68.4 66.8 73.2 Cents per share Earnings Per Share Basic earnings per share 212.9 250.4 117.8 (15) 81 Diluted earnings per share 203.5 242.3 116.4 (16) 75 % % % Return on equity (refer to glossary) 28.3 37.9 20.3 Throughout this report, comparatives for 30 September 2004 and 31 March 2005 have been restated in accordance with Australian standards equivalent to International Financial Reporting Standards (AIFRS), with the exception of AASB 132 Financial Instruments: Disclosure and Presentation, and AASB 139 Financial Instruments: Recognition and Measurement, which became effective from 1 April 2005. Further details of the impact of adopting AIFRS are discussed in section 3.1 and throughout this report where applicable. 2 Macquarie Bank Limited Result Announcement 30 September 2005

Profit after income tax attributable to ordinary equity holders $ million half year Profit from formation of MGQ 600 500 400 300 200 100 0 2H 2003 1H 2004 2H 2004 * Restated in accordance with AIFRS 1H 2005* 2H 2005* 1H 2006 Macquarie s consolidated profit after income tax attributable to its ordinary equity holders for the half-year ended 30 September 2005 was $482 million, an increase of 88% on the prior corresponding period. Key effects on profit after tax due to the adoption of AIFRS include: Additional employee expense of $19 million in respect of employee share options; and Additional income of $24 million ($34 million pre-tax) resulting from the inability to achieve hedge accounting on derivatives hedging the Macquarie Income Preferred Securities (MIPS). Other impacts arising from the adoption of AIFRS are not material to Macquarie s profit after tax. As shown in the graph to the left, the result for the half-year is well up on the prior corresponding period, and a record first half result. Total operating income for the six months to 30 September 2005 increased 57% over the prior corresponding period to $2,160 million, with growth across all income categories over the same period. International income is up substantially to $954 million, more than double the prior corresponding period. International income amounted to 46% of Macquarie s total operating income (excluding earnings on capital) for the six months to 30 September 2005, compared with 33% for the prior corresponding period. The expense to income ratio improved from 73.2% for the prior corresponding period to 68.4% for the six months to 30 September 2005, as income growth outstripped growth in expenses despite staff numbers increasing by 17% to 7,125 over this period. Annualised return on equity for the six months to 30 September 2005 was 28.3%, up from 20.3% in the prior corresponding period, and basic earnings per share is up 81% from 117.8 cents for the prior corresponding period to 212.9 cents. The contribution by operating Groups is discussed in section 1.2. A review of contributions by segment is contained in section 2.7. 3

1.0 Financial Highlights continued 1.2 Contribution by Operating Group Half year to Sep 05 Mar 05 Sep 04 % % % Investment Banking Corporate Finance (including Infrastructure & Specialised Funds) 41 43 29 Macquarie Securities 8 7 7 Financial Products 5 2 8 Macquarie Capital 3 2 4 Total Investment Banking 57 54 48 Equity Markets 15 7 12 Treasury and Commodities 15 10 18 Banking and Property 8 25 16 Financial Services 4 3 5 Funds Management 1 1 1 100 100 100 The figures set out in this table are relative to the Bank s overall performance and are based on figures excluding earnings on capital, before staff profit sharing and before income tax. They are derived from management accounts and should be taken as a guide only to relative contributions. Contribution by Operating Group as at 30 September 2005 Investment Banking Corporate Finance (including Infrastructure & Specialised Funds) Macquarie Securities Financial Products Macquarie Capital Equity Markets Treasury and Commodities Banking and Property Financial Services Funds Management 1% 4% 8% 15% 15% 41% 8% 5% 3% Investment Banking Group The Investment Banking Group continued to be the largest contributor to the Bank s overall result, with an outstanding contribution which was substantially up on the prior corresponding period. The contribution from Corporate Finance was significantly up on the prior corresponding period due to increases in performance and base management fees from specialist funds and increases in advisory fees from major transactions in Australia and Europe. Macquarie maintained its position as Australia s leading equity capital markets (ECM) house (No.1 Australian equity raised, calendar year to 30 September 2005, Thomson Financial), whilst advisory activity remained strong. Significant advisory roles during the period included: advising Transurban on the $1.8 billion takeover of Hills Motorway Group advising General Property Trust on its $1.1 billion internalisation proposal and joint venture with Babcock & Brown sponsoring and underwriting the $2.0 billion refinancing of the Chicago Skyway in the US advising the Macquarie Capital Alliance Group-led consortium, European Directories SA, on the $3.0 billion acquisition of YBR Group in Europe 4 Macquarie Bank Limited Result Announcement 30 September 2005

advising the Challenger Infrastructure Fund-led consortium on the $1.2 billion acquisition of Inexus Group Holdings in the UK advising the project sponsors on the $1.4 billion greenfield financing of the Seoul Subway Line #9 in South Korea sole lead managing the $162 million initial public offering of SEEK Limited Corporate Finance continued its global specialist fund strategy with: the listing of new funds, including Macquarie Capital Alliance Group, an ASX-listed fund with a broad, global investment mandate, and Macquarie International Infrastructure Fund Limited, Macquarie s first fund in Singapore growth in total equity under management (market capitalisation for listed funds, committed equity for unlisted funds) by 17.0 per cent from $26.0 billion at 31 March 2005 to $30.4 billion. Additional raisings were undertaken by Macquarie Infrastructure Group, Macquarie Airports, Macquarie European Infrastructure Fund and Macquarie Global Infrastructure Fund II. Assets under management increased by 20 per cent from $37.8 billion at 31 March 2005 to $45.4 billion with the portfolio expanded to include four aged care facilities in Australia and New Zealand and one in Canada, a tollroad and gas utility in the US and a subway line, LNG power facility, digital cable operator and two tollroads in Korea. In the UK, assets acquired included a gas and electricity distribution network, a ferry and ports operator and a multimedia communications business, whilst in Europe the portfolio now includes a tank storage business in Germany and a Netherlands-based directories business. Macquarie Securities, the institutional stockbroking business, recorded an outstanding result, substantially up on the prior corresponding period. In Australia, growth in secondary market brokerage revenues continued. Macquarie Securities Asia continued to grow its market share and results were ahead of expectations. Financial Products result was steady on the prior corresponding period. The Division increased retail product diversification in Australia and loan and equity funds in the US. The business also launched closed-end infrastructure funds in Germany and Austria and a capital protected investment product in Switzerland. Joint initiatives with the Bank s Funds Management Group included the listing of Macquarie Global Infrastructure Total Return Fund on the New York Stock Exchange and the establishment of Macquarie International Infrastructure Securities Fund in Australia. There has also been an increase in opportunities for wholesale corporate and project financing. Macquarie Capital achieved a good result, significantly up on the prior corresponding period, with a strong contribution from the debt lending business. Asset-based leasing volumes increased by 3 per cent from $3.6 billion at 31 March 2005 to $3.7 billion. The Investment Banking Group will continue its international expansion in all major markets and will benefit from developing the team s skills, size and international presence. The Asian stockbroking business is expected to continue to develop, subject to market conditions. The corporate and ECM deal pipeline remains strong in all markets, with additional executive staff supporting higher levels of activity. It is unlikely the substantial performance fees earned from existing listed funds in the first half will be repeated in the six months ending 31 March 2006. However, the second half result may benefit from specialist fund initiatives and asset realisations. The Group is not immune to any downturn in global equity markets; however, subject to no material change in market conditions, the Group expects the full-year result to be up on the prior period. 5

1.0 Financial Highlights continued Equity Markets Group Equity Markets Group s contribution was more than double that of the prior corresponding period. Trading conditions during the half were extremely favourable, underpinned by strong liquidity in underlying equity markets. The Group continued to enhance its product and service offerings in response to customer demand. The domestic Australian business continued to perform well with strong market positions maintained in key products. Internationally, the Group continued to focus on Asian markets, offering products over Hong Kong, Korean, Taiwanese, Japanese and Singaporean equities. During the period a desk was established in New York to enhance international market trading operations. The Group s hedge funds business, operating under the Newton and Equinox brands, achieved excellent returns from its managed funds and continued to grow funds under management. Business alliances with Nedbank in South Africa and Woori Bank in Korea continued to perform well during the period. The business alliance with Mizuho Securities in Japan was terminated on 30 September. Equity Markets Group has continued to conduct business in Japan on its own account. The Group has developed a diversified business and product offering and is well placed to respond to changing market conditions. However, as always, the Group is not immune to a sustained downturn in global equity markets. Treasury and Commodities Group The contribution from Treasury and Commodities Group was significantly up on the strong prior corresponding period with increased contributions from most operating divisions. Foreign Exchange was well up on the prior corresponding period, as satisfactory volatility and increased volumes provided good opportunities for client deals and trading. The contribution from Metals and Energy Capital increased significantly, despite subdued metals trading during the period, reflecting the strong performance of both the Energy Capital business and Macquarie s metals equity interests. The result from Debt Markets was significantly up, with strong performances by the securities trading, debt arrangement and interest rate derivatives businesses in an environment fuelled by corporate and investor activity. Treasury s result was up on the prior corresponding period, reflecting successful management of balance sheet growth. The contribution from Futures was also up due to increased turnover in both clearing and execution. Agricultural Commodities and Energy Markets contributions were down on strong results in the prior corresponding period, reflecting difficult trading conditions. The Energy Markets result was also impacted by expansion investment. The outlook for the Treasury and Commodities Group is dependent on market conditions. High volatility within broad ranges in financial markets and satisfactory volatility in commodity markets is expected to continue, while transaction volumes should remain strong. The Group expects to maintain strong transaction activity levels across its businesses and will continue to expand its international operations. Banking and Property Group Banking and Property Group s contribution was down on the prior corresponding period due to substantial investment in new businesses, both in Australia and overseas, and also due to the timing of fees received on major property transactions. The contribution from Property was down due to the completion of a number of large investment banking transactions in the prior corresponding period. The funds management business made a strong contribution with assets under management, including associates, increasing by 10.6 per cent from $20.7 billion at 31 March 2005 to $22.9 billion. This growth was in part attributable to the establishment of several pre-reit warehouse funds and the increasing scale of the real estate funds management platform. Margin and capital protected loan portfolios grew by 14 per cent from $2.6 billion at 31 March 2005 to over $2.9 billion. The Australian mortgage portfolio grew by 12 per cent from $14.5 billion at 31 March 2005 to over $16.2 billion as a result of record new business settlements. The US mortgage business operated profitably however volumes were lower than expected due to rising US interest rates. The Italian mortgage business commenced operations in July 2005. Predominantly as a result of the start-up phase in Italy, the Securitised Lending Division s overall contribution was down on the prior corresponding period. 6 Macquarie Bank Limited Result Announcement 30 September 2005

The contribution from Banking was up on the prior corresponding period due to good client demand and growth in both deposit and loan volumes. The Banking and Property Group will maintain its longstanding conservative credit policies and a well secured development portfolio. While the international REIT and Australian property trust markets remain strong, softening in some sectors of the Australian residential market is expected to continue. The Group anticipates continued growth in the US and Italian mortgage businesses, the margin and personal lending portfolios and global property businesses, with these newer initiatives expected to contribute over the medium term. The Group is on target for a strong second half, with several major property investment banking transactions nearing completion. Subject to no material change in market conditions, the Group expects to meet or exceed its full year result from the prior period excluding the gain realised on formation of the Macquarie Goodman Group. Financial Services Group Financial Services Group s contribution was well up on the prior corresponding period due to favourable equity market conditions and significant inflows into Macquarie Wrap Solutions and Macquarie Cash Management Trust (CMT). Total assets under advice/administration/management grew 16 per cent from $43 billion at 31 March 2005 to $50 billion. The major contributors to this growth included (from 31 March 2005): Wrap funds under administration up 18 per cent from $14.1 billion to $16.6 billion CMT up 11 per cent from $10.6 billion to $11.8 billion Superannuation up 18 per cent from $12.6 billion to $14.9 billion. The Macquarie Professional Series, launched in March 2005, reached $322 million and continues to grow. Macquarie Adviser Services acquired financial planning software company, Coin Software, extending its service offering to intermediaries. It was also named Assirt Service Level Survey Best Fund Manager for the third consecutive year. Macquarie Financial Services full service stockbroking business consolidated its position as one of Australia s top retail brokers, increasing both adviser and client numbers. Macquarie Wealth Management launched the new Lachlan Wealth Management dealer group providing dealership support to advisers. Subject to generally favourable market conditions continuing, the Financial Services Group expects to continue to grow annuity sources of income and will have an increasing focus on alternative investment opportunities. The Group will launch a retail stockbroking operation in early 2006 in Thailand, in alliance with leading Thai bank, TMB. Funds Management Group Funds Management Group s contribution was well up on the prior corresponding period. Total assets under management increased by 13 per cent from $42.0 billion at 31 March 2005 to $47.3 billion. The Group achieved satisfactory investment performance across most asset classes, including Australian equities. Its market share in most asset classes in Australia and Korea increased over the 12 months to 30 June 2005 (InvestorInfo, Asset Management Association of Korea). Good fund-raising results over the period saw inflows into alternative investment products, including global active currency, hedge funds, private equity fund-of-funds and global REITs. The Group also experienced significant inflows from master trusts and wrap platforms, particularly into its Diversified Fixed Interest Fund. The Group opened an office in California during the period expanding its private equity fund-of-funds operations into the United States market. The Group expects its full-year result to exceed the prior year (noting that the prior year included an asset gain from the sale of the Group s Malaysian business), providing generally favourable market conditions continue. It will continue to pursue expansion opportunities in the Australian market through further specialist products and through new ventures overseas. 7

1.0 Financial Highlights continued 1.3 Ordinary Dividend Half year to Sep 05 Mar 05 Sep 04 Cents Franking Cents Franking Cents Franking per share % per share % per share % Interim ordinary dividend 90 90 61 90 Final ordinary dividend 100 90 Special dividend 40 90 $ m $ m $ m Aggregate amount of interim/final ordinary dividend 207 313 134 Payout ratio (%) (refer glossary) AIFRS 43.3 39.0 50.2 AIFRS (including special dividend) 43.3 54.5 50.2 AGAAP n/a 41.6 47.2 AGAAP (including special dividend) n/a 58.1 47.2 The interim ordinary dividend has increased by 29 cents over the prior corresponding period to 90 cents per share and will be franked at 90%. Under the current dividend policy announced in May 2003, the Bank targets a full-year payout ratio between 50% and 60%. Subject to the future composition of income, a franking rate of at least 80% is expected. This policy is designed to achieve the objective of more closely aligning dividends with movements in earnings. 8 Macquarie Bank Limited Result Announcement 30 September 2005

1.4 Balance Sheet As at Movement on Sep 05 Mar 05 Sep 04 Mar 05 Sep 04 $m $m $m % % Total Assets 84,220 67,980 59,150 24 42 Total Liabilities 79,227 63,555 55,259 25 43 Total Equity 4,993 4,425 3,891 13 28 $ per share Net tangible assets per ordinary share* 12.67 12.46 8.12 2 56 * Macquarie views assets and disposal groups held for sale as an investment that will be fully recovered, including their associated intangible assets. Excluding the intangibles (net of associated deferred tax liabilities) within assets and disposal groups held for sale, the NTA per ordinary share would have been $14.85 at 30 September 2005. Over the six months to 30 September 2005, total assets have grown by $16.2 billion to $84.2 billion, an increase of 24%. The primary drivers of this change have been the growth in loan assets, up $3.0 billion to $31.4 billion, and trading portfolio assets, up $4.6 billion to $12.4 billion. The remaining increase is due to general business growth over the period. The increase in trading portfolio assets is primarily related to equities, where very good market conditions have been experienced. Assets classified as held for sale are up $1.0 billion compared with 31 March 2005, partly as a result of Macquarie Regional Radioworks Pty Limited meeting the definition of held for sale (and hence being reclassified from other asset categories, including intangible assets, to assets classified as held for sale), and partly due to new acquisitions during the period, including Creative Broadcast Services (formerly BBC Broadcast), Macquarie East Daegu Investment Company and Korean Independent Energy Corporation. The major changes to the funding that supports these asset positions since 31 March 2005 has been in cash collateral on securities lent and repurchase agreements used to support trading strategies (up $3.1 billion); deposits (up $1.3 billion); and notes payable/issued debt (up $2.3 billion). Equity has increased by $568 million since 31 March 2005 largely as a result of the profit for the period, combined with increased share capital through the exercise of options and the combined net impact of the final 2005 dividend payment and the Dividend Reinvestment Plan. More detailed information relating to the balance sheet is contained in section 3.6. 9

1.0 Financial Highlights continued 1.5 Capital Management As at Movement on Sep 05 Mar 05 Sep 04 Mar 05 Sep 04 $m $m $m % % Tier 1 Capital before deductions 4,233 3,661 3,154 16 34 Tier 1 deductions (1,244) (808) (1,086) 54 15 Tier 1 Capital after deductions 2,989 2,853 2,068 5 45 Tier 2 Capital 1,756 1,920 1,602 (9) 10 Total Capital deductions (935) (580) (369) 61 153 Total Capital 3,810 4,193 3,301 (9) 15 Risk-weighted Assets 23,089 19,771 16,390 17 41 % of Risk-weighted Assets Tier 1 Capital 12.9 14.4 12.6 Tier 2 Capital 7.6 9.7 9.8 Total Capital Deductions (4.0) (2.9) (2.3) Total Capital 16.5 21.2 20.1 The Bank s capital management policy is to be conservatively capitalised and to maintain diversified funding sources in order to support business initiatives, particularly specialised funds and offshore expansion, whilst maintaining counterparty and client confidence. Capital initiatives undertaken by Macquarie represent a fine-tuning of the Bank s capital management position, rather than a major shift in capital management strategy. Although the Bank adopted the Australian standards equivalent to International Financial Reporting Standards (AIFRS) on 1 April 2005, capital ratios continue to be reported on a previous Australian Generally Accepted Accounting (AGAAP) basis, in line with APRA s transitional arrangements. 10 Macquarie Bank Limited Result Announcement 30 September 2005

Capital adequacy The Tier 1 Capital ratio of 12.9% at 30 September 2005 remains strong and maintains a comfortable buffer in excess of the Group s minimum acceptable ratios. Tier 1 Capital before deductions increased by $572 million since 31 March 2005 due to organic growth through retained earnings and shares created through the exercise of employee options, which further increases the proportion of Macquarie Income Preferred Securities able to be classified as Tier 1 capital. Tier 1 deductions have increased from $808 million to $1,244 million over the six months to 30 September 2005 as the Group continues to grow its specialist funds business and undertake new investments. As a result, net Tier 1 Capital grew by 5% over this period to $3.0 billion, and combined with a 17% growth in risk-weighted assets over the period, has resulted in a decrease in the Tier 1 ratio. The Group s Tier 1 Capital is depicted graphically to the right. Over the six months to 30 September 2005, Tier 2 Capital has decreased from 9.7% to 7.6% of Risk-weighted Assets while the Total Capital ratio has decreased from 21.2% to 16.5%. Tier 2 Capital has decreased mainly due to a higher proportion of Macquarie Income Preferred Securities attributable to Tier 1 capital. Total Capital deductions have increased as a result of growth in investments held as part of the Group s specialist funds strategy. More detailed information concerning the Bank s capital adequacy position is contained in section 3.9, including an analysis of the growth in the capital base over the six months to 30 September 2005. Tier 1 Capital Ordinary Equity MIS CPS MIPS Tier 1 Deductions Tier 1 Ratio Tier 1 Capital ($ billion) Tier 1 Ratio (%) 5.0 4.0 3.0 2.0 1.0 0-1.0-2.0 Mar 1997 Mar 1998 Mar 1999 Mar 2000 Mar 2001 Future Developments The adoption of AIFRS has a potential impact on Macquarie s capital management strategy. Over the course of 2005, APRA issued two discussion papers outlining the impact of AIFRS adoption upon ADI s. Discussions continue to be held with APRA as part of the consultation process in respect of these proposals. Until such time as APRA provides definitive guidelines on its approach, the extent of AIFRS impact upon Macquarie s capital adequacy remains uncertain. Mar 2002 Mar 2003 Mar 2004 Mar 2005 Sep 2005 20 16 12 8 4 0 11

1.0 Financial Highlights continued 1.6 Asset Quality As at/for the half year to Movement on Sep 05 Mar 05 Sep 04 Mar 05 Sep 04 $m $m $m % % Total loan assets including mortgage securitisation special purpose vehicles 31,410 28,425 25,108 11 25 Less: mortgage securitisation special purpose vehicles* (16,285) (14,184) (12,758) 15 28 Loan assets 15,125 14,241 12,350 6 22 Net impaired assets 65 42 28 55 132 Net loan losses 8 13 21 (38) (62) % % % Net impaired assets / loan assets 0.4 0.3 0.2 Net loan losses / loan assets 0.05 0.09 0.17 For the half year to Movement on Sep 05 Mar 05 Sep 04 Mar 05 Sep 04 $m $m $m % % Net loan losses (Profit and loss impact) provided during the period 17 23 27 (26) (37) recovery of loans previously provided for (11) (10) (8) 10 38 loan losses written-off 3 1 3 200 recovery of loans previously written off (1) (1) (1) Total net charge for loan losses 8 13 21 (38) (62) * Macquarie s exposure to the mortgage securitisation special purpose vehicles is largely mitigated by credit insurance. Loan losses in these vehicles are immaterial. The strength of Macquarie s risk management practices and policies is reflected in its asset quality. Net loan losses for the six months to 30 September 2005 amounted to $8 million, or 0.05% of total loan assets as at 30 September 2005. Net impaired assets as a percentage of total loan assets are also low at 0.4%. AASB 139 Financial Instruments: Recognition and Measurement, which became effective from 1 April 2005, requires an incurred loss model for loan provisioning. Provisions are recognised only in respect of those losses for which there is objective evidence of impairment and must be calculated based on the discounted values of expected future cash flows. Where individual loans are found not to be impaired, they are placed into pools of assets with similar risk profiles and collectively assessed for losses that have been incurred but not yet indentified. Under previous AGAAP, Macquarie s general provision for credit losses was maintained at 55 basis points of risk-weighted assets. Refer to section 2.5 for further discussion of net loan losses and section 3.6 for further details on impaired assets. 1.7 Credit Ratings Short-term Long-term Outlook Fitch Ratings F1 A+ Stable Moody s Investors Service P1 A2 Positive Standard & Poor s A1 A Stable There has been no change to the Bank s credit ratings since February 2000. In March 2005 Moody s Investors Service revised the Rating Outlooks for Macquarie Bank Limited, and its subsidiaries Macquarie International Finance Limited and Macquarie Finance Limited, to positive. Moody s said the revised Ratings Outlooks reflect Macquarie s increasingly diversified business lines, maturing fund operations and continued capital strength. 12 Macquarie Bank Limited Result Announcement 30 September 2005

1.8 Assets Under Management As at Movement on Sep 05 Mar 05 Sep 04 Mar 05 Sep 04 $m $m $m % % Specialist funds Infrastructure 44,475 37,993 27,234 17 63 Property 14,342 12,862 10,470 12 37 Other 5,043 3,413 3,071 48 64 Total specialist funds 63,860 54,268 40,775 18 57 Funds Management and Financial Services Retail 14,724 13,248 12,841 11 15 Wholesale 33,376 29,198 28,333 14 18 Total Funds Management and Financial Services 48,100 42,446 41,174 13 17 Total assets under management 111,960 96,714 81,949 16 37 Assets under management (AUM) at 30 September 2005 were $112 billion, an increase of 16% on 31 March 2005 and 37% on 30 September 2004. For reporting from 30 September 2005 Macquarie has revised the methodology for measuring AUM. The revised measure reflects the proportional ownership interest in the underlying assets of the Macquarie-managed funds and mandated assets in determining the amount to include in AUM. The main difference from the previous methodology is that for investments where a Macquarie-managed fund has significant influence, the relevant ownership interest in the gross assets of the investment is now included in AUM (previously only the equity value of the investment was included in AUM). Macquarie believes the revised measure is more reflective of the breadth of its funds management activities. AUM comparatives for 31 March 2005 and 30 September 2004 have been restated throughout this report in accordance with the revised methodology. AUM by fund type $ billion half-year ended Infrastructure Property Other FSG/FMG Retail FSG/FMG Wholesale 120 100 80 60 40 20 AUM Analysis of movement for the half-year $ billion half-year ended Total Infrastructure Property Other FSG/FMG Retail FSG/FMG Wholesale 120 100 80 60 40 20 16 14 12 10 8 6 4 2 0 Mar 2003 Sep 2003 Mar 2004 Sep 2004* Mar 2005* Sep 2005 0 Mar 2005 * Sep 2005 Movement 0 * Restated in accordance with revised methodology * Restated in accordance with revised methodology 13

1.0 Financial Highlights continued Growth over the six months to 30 September 2005 has been predominantly in infrastructure and wholesale nonspecialist funds. A summary of the key contributors to AUM growth is discussed below. More detailed information on Macquarie s funds management activities is contained in section 3.10. Infrastructure AUM Infrastructure AUM at 30 September 2005 was $44 billion, an increase of 17% on 31 March 2005. The growth is due to a combination of new funds and significant growth of existing infrastructure funds including Macquarie Airports (MAp), Macquarie European Infrastructure Fund (MEIF) and Macquarie Infrastructure Group (MIG). New funds established during the period include: Macquarie International Infrastructure Fund (MIIF) - listed on the Singapore stock exchange in May 2005. Macquarie Global Infrastructure Total Return Fund (MGU) listed on the New York stock exchange in August 2005. Property AUM Property AUM at 30 September 2005 was $14 billion, an increase of 12% on 31 March 2005. Growth is due to the expansion of existing funds, including Macquarie Office Trust (MOF) and Macquarie CountryWide (MCW). Other AUM Other AUM includes development capital and other investment funds. The main driver of growth in other specialist AUM in the six months to 30 September 2005 was the establishment of Macquarie Capital Alliance Group (MCAG), which listed on the ASX in April 2005. Funds Management and Financial Services AUM Funds Management and Financial Services AUM at 30 September 2005 was $48 billion, an increase of 13% on the prior period. This growth was largely due to strong inflows into cash, including the CMT which closed at $11.8 billion at 30 September 2005, up 11% since 31 March 2005. Diversity of specialist AUM Macquarie s specialist AUM is spread across a number of regions and industry sectors. The chart below shows the diversity of industry sectors over which Macquarie s specialist AUM is spread at 30 September 2005. AUM by Sector as at 30 September 2005 Retail Property Commercial Property Industrial Property Communications Utilities Airports Roads Tourism/Leisure & Residential Property Investment Funds Other Infrastructure Media Non-specialist funds 6.3% 42.3% 0.3% 3.9% 3.4% The extent of Macquarie s international expansion is reflected by the continued growth of AUM outside Australia. A total of $46 billion, or 42% of total AUM is located offshore at 30 September 2005. The chart below depicts the concentration of AUM in each of the main geographic regions at 30 September 2005. This chart includes non-specialist funds, which are predominantly located in Australia. Assets Under Management by Region as at 30 September 2005 Americas Asia Pacific Europe/Africa Australia 4.6% 1.3% 2.8% 6.3% 10.3% 17.8% 0.7% 18% 7% 17% 58% 14 Macquarie Bank Limited Result Announcement 30 September 2005

Isolating the specialist AUM better highlights the international distribution of Macquarie s AUM. The chart below displays specialist AUM by region at 30 September 2005. Of the total $64 billion in specialist AUM at 30 September, 65% is located outside Australia, with the largest concentration of AUM being in Europe/Africa and the Americas. This chart also highlights the potential the Asia Pacific region has to offer through increased penetration. Assets Under Management by Region (specialist only) as at 30 September 2005 Americas Asia Pacific Europe/Africa Australia Specialist AUM in the Americas accounts for 31% of total specialist AUM, and is strongly represented by property assets of: MCW MOF Macquarie ProLogis Trust (MPR) Macquarie DDR Trust (MDT) and infrastructure assets of: MIG (including Highway 407 ETR, Chicago Skyway and SR125 South) Macquarie Infrastructure Company (MIC) (including Atlantic Aviation and District Energy) Macquarie Power Income Fund (MPT) (Cardinal Power) 35% Specialist AUM in Europe/Africa accounts for 29% of total specialist AUM and includes assets of: MEIF (including South East Water, Arlanda Express, Brussels Airport, Wales and West Gas Utilities) MAp (Birmingham Airport, Bristol Airport, Brussels Airport, Copenhagen Airport, Rome Airport) Macquarie Communications Infrastructure Group (MCG) (ntl:broadcast UK, now known as Arqiva) MIG (including the M6 toll road) MCAG (including European Directories SA) African Infrastructure Investment Fund (AIIF) and South Africa Infrastructure Fund (SAIF) (toll roads and other infrastructure assets in South Africa and Tanzania) Global Fund 1. 31% 5% 29% Specialist AUM in the Asia-Pacific region at 30 September 2005 was relatively small, representing 5% of total specialist AUM. The assets of the Korean Road Infrastructure Fund (KRIF), which includes the Cheonan- Nonsan Expressway and Incheon International Airport Expressway, dominate AUM in this region. Macquarie has also recently established a new Asian property fund (Prime REIT) in addition to a joint venture with Macquarie Goodman acquiring $585 million in industrial properties in Hong Kong with the intention of selling these assets into a Hong Kong listed REIT. Macquarie has also acquired nine shopping malls in China on behalf of a syndicate of investors to be sold down into a Macquarie managed REIT, and has secured a number of other assets that it may sell into Macquarie managed funds, including Korean Independent Energy Corporation and CJ Cablenet. The majority of AUM in Australia is in non-specialist Funds Management and Financial Services funds. Specialist AUM in Australia accounts for 35% of total specialist AUM and includes the assets of: MAp (Sydney Airport) MIG (including the Eastern Distributor, M2, M4, M5, and M7 toll roads) Diversified Utilities and Energy Trust (DUET) (including Dampier to Bunbury Natural Gas Pipeline) MCG (Broadcast Australia) MCAG (Retirement Care Australia) ConnectEast (EastLink) Macquarie Goodman Group (MGQ) MCW MOF 15

2.0 Review of Results 2.1 Summary Profit and Loss Half year to Movement on Sep 05 Mar 05 Sep 04 Mar 05 Sep 04 $m $m $m % % Net interest income 295 284 252 4 17 Net fee and commission income 1,244 1,121 700 11 78 Net trading income 479 395 339 21 41 Net other income 142 572 89 (75) 60 Total operating income 2,160 2,372 1,380 (9) 57 Employment expense (1,170) (1,281) (764) (9) 53 Other expenses (307) (303) (246) 1 25 Total operating expenses (1,477) (1,584) (1,010) (7) 46 Profit before income tax 683 788 370 (13) 85 Income tax expense (160) (190) (98) (16) 63 Profit after income tax 523 598 272 (13) 92 Minority interests (26) (27) (2) (4) large Profit after income tax attributable to MBL equity holders 497 571 270 (13) 84 Distributions paid or provided on Macquarie Income Securities (15) (15) (14) 7 Profit after income tax attributable to MBL ordinary equity holders 482 556 256 (13) 88 16 Macquarie Bank Limited Result Announcement 30 September 2005

Total operating income for the six months to 30 September 2005 has grown significantly to $2,160 million, an increase of 57% on the prior corresponding period. Growth has been experienced across all income categories when compared to the prior corresponding period, with the most notable increase being in net fee and commission income. Total operating income is down on the prior period, however the six months to 31 March 2005 benefited from the formation of the Macquarie Goodman Group, which contributed $300 million to income. Ignoring this gain, income for the six months to 30 September 2005 increased by 4% on the prior period. Net interest income has increased $43 million on the prior corresponding period mainly due to a 31% increase in average loan assets offset by a 23 basis points fall in net margin on average loan assets (refer to section 2.2 for further details). Net fee and commission income increased $544 million on the prior corresponding period, with significant contributions from mergers and acquisitions, advisory and underwriting income (up $236 million) and funds management fees (up $214 million). Drivers of the strong performance in these income categories have been significant performance fees from MIG, MAp, MIIF and MCG, as well as growth in assets under management and very good global equity markets conditions (refer to section 2.3 for further details of net fee and commission income). Net trading income increased $140 million on the prior corresponding period, with a significantly increased contribution from equities trading income, which benefited from good market conditions during the period (refer to section 2.4 for further details). Net other income has increased $53 million on the prior corresponding period, the main contributor being profits from the sale of investments and increased equity accounting Income from investments in associates (refer to section 2.5 for further details). Overall, operating expenses have increased at a lesser rate than income, up 46% on the prior corresponding period to $1,477 million. Employment costs, the largest component of operating expenses, are up 53% on the prior corresponding period to $1,170 million (refer to section 2.6 for further details). 17

2.0 Review of Results continued International Income* $ million half-year 1200 1000 800 600 400 200 International vs Domestic Income*: By Operating Group $ million half-year ended 30 September 2005 International Domestic 1200 1000 800 600 400 200 0 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 0 FMG FSG EMG BPG T&C IBG * Excluding earnings on capital * Excluding earnings on capital International income Total international income for the six months to 30 September 2005 was $954 million, an increase of 103% on the prior corresponding period. International income represented 46% of total operating income (excluding earnings on capital) for the six months to 30 September 2005, up from 33% in the prior corresponding period. For the Investment Banking, Equity Markets and Treasury and Commodities groups, income from international activities contributed close to half, or more than half, of each group s total income. For the six months to 30 September 2005, income growth was particularly strong in Europe and the Asia-Pacific, with the total income for these regions more than doubling the prior corresponding period. The Investment Banking, Equity Markets and Fund Management groups more than doubled the contribution of international income compared with the prior corresponding period. Good market conditions have benefited the Treasury and Commodities group, who experienced strong growth in the Americas and Europe. The Banking and Property, Financial Services and Funds Management groups all increased their contribution from international income over the prior corresponding period. The growth in international funds management activities has seen income from Europe, where a number of Macquarie-managed funds have a strong presence, rise substantially. Europe was the largest contributor of international income for the six months to 30 September 2005, more than tripling the prior corresponding period to $434 million. The growth was driven by a combination of very good base and performance fees, and good mergers and acquisition activity. The six months to 30 September 2005 also saw increased income in Europe for the Equity Markets and Treasury and Commodities groups, as well as the expansion of the Banking and Property group into the region through property investment management activities and the opening of a residential mortgages operation in Italy to leverage the expertise gained from the US and Australian operations. 18 Macquarie Bank Limited Result Announcement 30 September 2005

International Income by Region* $ million half-year Africa Americas Asia Europe New Zealand 1200 1000 800 600 400 200 International Income by Group* $ million half-year IBG T&C EMG BPG FMG FSG 1200 1000 800 600 400 200 0 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 0 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 * Excluding earnings on capital * Excluding earnings on capital Income from the Asia-Pacific region has increased by $145 million compared with the prior corresponding period, to $309 million, an increase of 89%. The main driver of the growth was the very good equity markets conditions experienced in the region. These conditions have benefited the Equity Markets group and Macquarie Securities Asia, which both recorded strong increases in income over the prior corresponding period. During the period, Macquarie also listed the Macquarie International Infrastructure Fund and Prime REIT on the Singapore stock exchange, and finalised the sale of its 30% stake in AmInvest, the Malaysian joint venture with AmMerchant Bank Bhd. The income from the Americas has increased by a comparatively modest 27% over the prior corresponding period to $182 million. The increase has been generated via a combination of growth in the Treasury and Commodities Metals and Energy Capital division, which benefited from favourable trading conditions; and the establishment of the Macquarie Infrastructure Company, which listed on the New York stock exchange in December 2004 and has subsequently contributed significant base and performance fees. 19

2.0 Review of Results continued 2.2 Net Interest Income Half year to Movement on Sep 05 Mar 05 Sep 04 Mar 05 Sep 04 $m $m $m % % Interest income 1,462 1,318 1,247 11 17 Interest expense (1,167) (1,034) (995) 13 17 Net interest income 295 284 252 4 17 Analysis of Net Interest Margins 1 Half year to Sep 2005 1 Half year to Mar 2005 1 Half year to Sep 2004 1 Interest Volume Spread Interest Volume Spread Interest Volume Spread $ m $ m % $ m $ m % $ m $ m % Loan assets 213 15,903 2.68 180 13,902 2.59 176 12,101 2.91 Interest bearing trading assets 25 15,169 0.33 24 12,311 0.39 44 15,164 0.58 Interest bearing assets 238 31,072 1.53 204 26,213 1.56 220 27,265 1.61 Non-interest bearing assets (64) 13 (32) Mortgage Securitisation and other SPV assets excluding AASB 139 85 67 64 Total 259 284 252 1 The analysis of net interest margins has been performed on a basis consistent with previous AIFRS. This eliminates the impact of AASB 139. Refer to section 3.1 for further details of the impacts of AIFRS. Net interest income has increased 17% for the six months to 30 September 2005 and, as depicted in the graph below, has been steadily growing for some time. A discussion of net interest margins on a basis consistent with previous AIFRS is set out overleaf. The average balance sheet is included in section 3.6. Net Interest Income $ million half-year 350 300 250 200 150 100 50 0 2H 2003 1H 2004 2H 2004 1H 2005* 2H 2005* 1H 2006 * Restated in accordance with AIFRS 20 Macquarie Bank Limited Result Announcement 30 September 2005

Loan assets Net interest on average loan assets has increased 21% on the prior corresponding period to $213 million, driven by a 31% growth in average loan assets. As shown in the graph below, the average spread on loan assets for the six months to 30 September 2005 has decreased by 23 basis points compared to the prior corresponding period, and is up 9 basis points on the six months to 31 March 2005. The change in margins is largely attributable to product mix, with strong growth in the six months to 30 September 2005 in higher margin products including margin and capital protected loan portfolios. Interest bearing trading assets and other securities Net interest income on interest bearing trading assets and other securities is broadly in line with the six months to 31 March 2005, but down on the prior corresponding period. The change on the prior corresponding period is due to a reduction in the net margin on these loans and other securities from 58 basis points in the prior corresponding period to 33 basis points for the six months to 30 September 2005. The reduction in the interest margin is a result of underlying trading strategies and the mix of the portfolio. Non-interest bearing assets The funding expense associated with non-interest bearing assets has increased from $32 million for the six months to 30 September 2004, to $64 million in the current period. The increase is mainly due to an 86% increase in noninterest bearing assets over the same period, driven by increased trading activities and general business growth. Mortgage Securitisation SPV assets Net interest income here is due to the consolidation of mortgage securitisation special purpose vechicles under AIFRS. Previously under AGAAP, these amounts were included in fee and commissions income. Comparison of Loan Asset Volumes and Spreads Half-year Volume (average $ billion) Spread (bps) 20 400 15 300 10 200 5 100 0 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 0 21

2.0 Review of Results continued 2.3 Net Fee and Commission Income Half year to Movement on Sep 05 Mar 05 Sep 04 Mar 05 Sep 04 $m $m $m % % Funds management fees 444 470 230 (6) 93 Mergers and acquisitions, advisory and underwriting 422 385 186 10 127 Brokerage and commissions 198 171 158 16 25 Financial products 54 15 60 260 (10) Banking, lending and securitisation 24 5 12 380 100 Other fee and commission income 102 75 54 36 89 Net fee and commission Income 1,244 1,121 700 11 78 Net Fee and Commission Income $ million half-year 1400 1200 1000 800 600 400 Funds management fees Funds management fees include base management fees, which are ongoing fees generated from funds management activities, and performance fees, which are only earned when funds managed by Macquarie outperform a predetermined benchmark. Performance fees are recognised when Macquarie becomes entitled to them. Funds management fee income for the six months to 30 September 2005 is up 93% on the prior corresponding period to $444 million. This is primarily due to increased AUM and performance fees received from the specialist funds, in particular MIG, MAp, MCG and MIIF. 200 0 2H 2003 1H 2004 2H 2004 1H 2005* 2H 2005* 1H 2006 * Restated in accordance with AIFRS 22 Macquarie Bank Limited Result Announcement 30 September 2005

The table below shows the split of funds management fees into base and performance fees for specialist and non-specialist funds. Half year to Movement on Sep 05 Mar 05 Sep 04 Mar 05 Sep 04 $m $m $m % % Base fees Specialist Funds 172 121 95 42 81 Funds Management and Financial Services 99 88 84 13 18 271 209 179 30 51 Performance fees Specialist Funds 169 260 48 (35) 252 Funds Management and Financial Services 4 1 3 300 33 173 261 51 (34) 239 Total funds management fees 444 470 230 (6) 93 Share of fees from funds management joint ventures 1 Base fees 26 15 12 73 117 Performance fees Total funds management fees including joint ventures 470 485 242 (3) 94 1 These JV s are equity accounted and their results are included in equity accounted income (refer Net Other Income in section 2.5). The base management fees and performance fees included in equity accounted income have been included in this table to provide a more complete view of Macquarie s income from funds management activities. Base fees are up 51% on the prior corresponding period to $271 million, with particularly strong growth in base fees from specialist funds, which are up 81% on the prior corresponding period. The most significant driver of the increase is growth in AUM, which is up 36% on the prior corresponding period. As can be seen from the graph to the right, base fees trend the growth in AUM. Base Fee and AUM Growth Half-year ended AUM ($ billion) 120 100 80 Base Fees ($ million) 300 250 200 60 150 40 100 20 50 0 2H 2003 1H 2004 2H 2004 1H 2005* 2H 2005* 1H 2006* 0 * Based on revised methodology for the calculation of AUM. AUM for 30 September 2004 and 31 March 2005 has been restated in accordance with the revised methodology. Refer section 1.8 for further details. 23