REG - Macquarie Group Ltd - Publication of a Prospectus <Origin Href="QuoteRef">MQG.AX</Origin> - Part 3

MacquarieAnnouncement

15/06/2016 07:05

- Part 3: For the preceding part double click  ID:nRSO2097Bb 

                                                       of subscription rights not exercised:Process for notification to                         [Not Applicable/ ● ]                     
                                                                                          applicants of the amount                                                                                                          
                                                                                          allotted and the indication                                                                                                       
                                                                                          whether dealing may begin                                                                                                         
                                                                                          before notification is made:Amount of any expenses and                   [Not Applicable/ ● ]                                     
                                                                                          taxes specifically charged to                                                                                                     
                                                                                          subscribers or purchasers                                                                                                         
                                                                                          of PD Debt Instruments:Name(s) and address(es)                           [Not Applicable/ ● ]                                     
                                                                                          (to the extent known to                                                                                                           
                                                                                          the Issuer) of the Placers in                                                                                                     
                                                                                          the various countries where                                                                                                       
                                                                                          the offer takes place:                                                                                                            
 E.4   Interests material to the issue/offer including conflicts of interests             The relevant Dealers may be paid fees in relation to any issue of PD Debt Instruments under the Programme.  Any such Dealer and   
                                                                                          its affiliates may also have engaged, and may in the future engage, in investment banking and/or commercial banking transactions   
                                                                                          with, and may perform other services for, MGL and the Macquarie Group and their affiliates in the ordinary course of              
                                                                                          business.Issue specific summary[Save for  ● , so far as the Issuer is aware, no person involved in the issue of the PD Debt       
                                                                                          Instruments has an interest material to the offer, including conflicting interests/Not Applicable]                                
 E.7   Estimated expenses charged to the investor by the Issuer or an Authorised Offeror  It is not anticipated that the Issuer will charge any expenses to investors in connection with any issue of PD Debt Instruments   
                                                                                          under the Programme.Issue specific summary:[Not Applicable - No expenses will be charged to investors by the Issuer.] [No         
                                                                                          expenses are being charged to an investor by the Issuer.  For this specific issue, however, expenses may be charged by an         
                                                                                          Authorised Offeror (as defined above) in the range between  ●  per cent. and  ●  per cent. of the nominal amount of the PD Debt   
                                                                                          instruments to be purchased by the relevant investor.]                                                                            
 
 
E.7 
 
Estimated expenses charged to the investor by the Issuer or an Authorised Offeror 
 
It is not anticipated that the Issuer will charge any expenses to investors in connection with any issue of PD Debt
Instruments under the Programme.Issue specific summary:[Not Applicable - No expenses will be charged to investors by the
Issuer.] [No expenses are being charged to an investor by the Issuer.  For this specific issue, however, expenses may be
charged by an Authorised Offeror (as defined above) in the range between  ●  per cent. and  ●  per cent. of the nominal
amount of the PD Debt instruments to be purchased by the relevant investor.] 
 
2. Risk Factors 
 
Before applying for the PD Debt Instruments, you should consider whether the PD Debt Instruments are a suitable investment
for you. 
 
The following is a description of the principal risks and uncertainties which may affect the ability of the Issuer to
fulfil its respective obligations under the PD Debt Instruments 
 
This section describes the risks the Issuer believes may be material for the purpose of assessing the risks associated with
PD Debt Instruments and the market for PD Debt Instruments generally. They are not an exhaustive description of all the
risks associated with an investment in PD Debt Instruments and the Issuer may be unable to fulfil its payment or other
obligations under or in connection with the PD Debt Instruments due to a factor which the Issuer did not consider to be a
material risk based on information currently available to it or which it may not currently be able to anticipate. 
 
If any of the risks described below (or an unlisted risk) actually occur, the value, trading price and liquidity of the PD
Debt Instruments could decline, and an investor could lose all or part of their investment.  These factors are
contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any
such contingency occurring. 
 
Prospective investors should note that the risks relating to MGL and the Macquarie Group, its industry and the PD Debt
Instruments summarised in the "Summary of the Programme" section of this Base Prospectus are the risks that MGL believes to
be the most essential to an assessment by a prospective investor of whether to consider an investment in the PD Debt
Instruments.  However, as the risks which MGL faces relate to events and depend on circumstances that may or may not occur
in the future, prospective investors should consider not only the information on the key risks summarised in the "Summary
of the Programme" section of this Base Prospectus but also, among other things, the risks and uncertainties described
below. 
 
Organisation of the Risk Factors 
 
(a)          Factors that may affect the Issuer's ability to fulfil its obligations under the PD Debt Instruments issued
under the Programme 
 
(b)          Risks relating to PD Debt Instruments and the market generally 
 
(c)          Risks related to the market for PD Debt Instruments generally 
 
(d)          Risks related to PD Debt Instruments denominated in Renminbi 
 
(a)          Factors that may affect the Issuer's ability to fulfil its obligations under PD Debt Instruments issued under
the Programme 
 
The value, trading price and liquidity of the PD Debt Instruments depends upon, amongst other things, the ability of MGL to
fulfil its obligations under the PD Debt Instruments which, in turn is primarily dependent on the financial condition and
prospects of MGL and the Macquarie Group. 
 
The financial prospects of any entity are sensitive to the underlying characteristics of its business and the nature and
extent of the commercial risks to which the entity is exposed.  There are a number of risks faced by MGL and the Macquarie
Group, including those that encompass a broad range of economic and commercial risks, many of which are not within their
control.  The performance of all of the Macquarie Group's major businesses can be influenced by external market and
regulatory conditions. If all or most of the Macquarie Group's businesses were affected by adverse circumstances at or
about the same time, overall earnings would suffer significantly. 
 
The Macquarie Group's risk management framework incorporates active management and monitoring of risks including market,
credit, equity, liquidity, operational, compliance, foreign exchange, legal, regulatory and reputation risks. These risks
create the potential for MGL and the Macquarie Group to suffer loss. 
 
MGL's and the Macquarie Group's business and financial condition has been and may be negatively impacted by adverse global
credit and other market conditions. Economic conditions, particularly in Australia, the United States, Europe and Asia, may
have a negative impact on MGL's and the Macquarie Group's financial condition and liquidity. 
 
In recent years, global credit and equity markets have been characterised by uncertainty and volatility, with such markets
continuing to demonstrate reduced liquidity, widened credit spreads and decreased price transparency. More recently, these
challenging market conditions have resulted primarily from the on-going sovereign debt concerns in Europe and concerns
about Chinese and global economic growth, along with systemic reviews of the banking sector by rating agencies and
regulators, imposing additional capital and other regulatory requirements.  The Macquarie Group's businesses operate in or
depend on the operation of global markets, either directly or indirectly, including through exposures in securities, loans,
derivatives and other activities. In particular, uncertainty in global credit markets, increased funding costs, constrained
access to funding, and the decline in equity and capital market activity have impacted transaction flow in a range of
industry sectors, all of which have adversely impacted MGL's and the Macquarie Group's financial performance. 
 
The Macquarie Group may continue to endure similar or heightened adverse impacts from such conditions in the future.  The
Macquarie Group may also face new costs and challenges as a result of general economic and geopolitical events and
conditions. For instance, a European sovereign default, slowdown in the United States or Chinese economies, slowing growth
in emerging economies or departure of a member country from the Euro zone or the market perception of such events could
disrupt global funding markets and the global financial system more generally.  MGL and the Macquarie Group may also be
impacted indirectly through their counterparties that may have direct exposure to European sovereigns and financial
institutions. 
 
Since 2008, governments, regulators and central banks globally have taken numerous steps to increase liquidity and to
restore investor and public confidence. There can be no assurance that the relief measures implemented by governments and
central banks around the globe to restore confidence in financial systems and bolster economic growth will result in a
sustained long-term stabilisation of financial markets, or what impact the withdrawal of such relief measures or the
consequential impacts of substantial fiscal stimulus on the budgets of sovereigns will have on global economic conditions
or MGL's and the Macquarie Group's financial condition or prospects. 
 
MGL's and the Macquarie Group's businesses, including transaction execution, funds management and lending businesses have
been and may be adversely affected by market uncertainty, volatility or lack of confidence due to general declines in
economic activity and other unfavourable economic, geopolitical or market conditions or by the impact of changes in foreign
exchange rates. 
 
Poor economic conditions and other adverse geopolitical conditions can adversely affect and have adversely affected
investor and client confidence, resulting in significant industry-wide declines in the size and number of underwritings and
of financial advisory transactions and increased market risk as a result of increased volatility, which could have and have
had an adverse effect on the Macquarie Group's revenues and its profit margins. For example, the Macquarie Group's client
facilitation fee income may be, and have been, impacted by transaction volumes. 
 
In addition, in certain circumstances, market uncertainty or general declines in market or economic activity may affect the
Macquarie Group's client execution businesses by decreasing levels of overall activity or by decreasing volatility, but at
other times market uncertainty and even declining economic activity may result in higher trading volumes or higher spreads
or both. 
 
The Macquarie Group's trading income may be adversely impacted during times of subdued market conditions and client
activity and increased market risk from higher volatility can lead to trading losses or cause the Macquarie Group to reduce
the size of its trading businesses in order to limit its risk exposure. Market conditions, as well as declines in asset
values, may cause the Macquarie Group's clients to transfer their assets out of the Macquarie Group's funds or other
products or their brokerage accounts and result in reduced net revenues, principally in the Macquarie Group's funds
management business. The Macquarie Group's funds management fee income, including base and performance fees, may be
impacted by volatility in equity values and returns from the Macquarie Group's managed funds. The Macquarie Group's loan
portfolio may also be impacted by deteriorating economic conditions. The Macquarie Group assesses the credit quality of its
loan portfolio and the value of its proprietary investments, including its investments in managed funds, for impairment at
each reporting date. The Macquarie Group's returns from asset sales are also subject to the current economic climate. If
financial markets decline, revenues from the Macquarie Group's variable annuity products are likely to decrease. In
addition, increases in volatility increase the level of the Macquarie Group's risk weighted assets and increase the
Macquarie Group's capital requirements.  This may require the Macquarie Group to raise additional capital at a time, and on
terms, which may be less favorable than the Macquarie Group would otherwise achieve during stable market conditions.  If
this occurs, then this may have an impact on MGL's and the Macquarie Group's financial performance. 
 
MGL's and the Macquarie Group's liquidity, profitability and businesses may be adversely affected by an inability to access
international capital markets or by an increase in their cost of funding. 
 
Liquidity is essential to MGL's and the Macquarie Group's businesses, and MGL and the Macquarie Group rely on credit and
equity capital markets to fund their operations.  The Macquarie Group's liquidity may be impaired by an inability to access
secured or unsecured debt markets, an inability to sell assets or unforeseen outflows of cash or collateral.  MGL's and the
Macquarie Group's liquidity may also be impaired due to circumstances that MGL and entities in the Macquarie Group may be
unable to control, such as general market disruptions, which may occur suddenly and dramatically, an operational problem
that affects MGL and the Macquarie Group or MGL's and the Macquarie Group's trading clients, or changes in MGL's or the
Macquarie Group's credit spreads, which are continuous, market-driven, and subject at times to unpredictable and highly
volatile movements. 
 
General business and economic conditions are key considerations in determining MGL's and the Macquarie Group's access to
credit and equity capital markets, cost of funding and ability to meet their liquidity needs.  The impact of these include,
but are not limited to, changes in short-term and long-term interest rates, inflation, monetary supply, commodities
volatility and results, fluctuations in both debt and equity capital markets, relative changes in foreign exchange rates,
consumer confidence and changes in the strength of the economies in which MGL and the Macquarie Group operate.  Renewed
turbulence or a worsening general economic climate could adversely impact any or all of these factors.  Should conditions
remain uncertain for a prolonged period, or deteriorate further, MGL's and the Macquarie Group's funding costs may increase
and may limit MGL's and the Macquarie Group's ability to replace, in a timely manner, maturing liabilities, which could
adversely affect MGL's and the Macquarie Group's ability to fund and grow their businesses or otherwise have a material
impact on MGL and the Macquarie Group. 
 
In the event that MGL's or any Macquarie Group entity's current sources of funding prove to be insufficient, it may be
forced to seek alternative financing, which could include selling liquid securities or other assets.  The availability of
alternative financing will depend on a variety of factors, including prevailing market conditions, the availability of
credit, MGL's credit ratings and the Macquarie Group's credit capacity.  The cost of these alternatives may be more
expensive than the Macquarie Group's current sources of funding or include other unfavourable terms, or MGL or the
Macquarie Group may be unable to raise as much funding as they need to support their business activities.  This could slow
the growth rate of the Macquarie Group's businesses, cause MGL and the Macquarie Group to reduce their term assets and
increase MGL's cost of funding, all of which could reduce MGL's and the Macquarie Group's profitability.  In the event that
MGL and/or other entities in the Macquarie Group are required to sell assets, there is no assurance that MGL or any such
Macquarie Group entity will be able to obtain favourable prices on some or all of the assets it offers for sale or that it
will be able to successfully complete asset sales at an acceptable price or in an acceptable timeframe. In addition, the
sale of income earning assets may adversely impact MGL's and the Macquarie Group's income in future periods. 
 
Many of MGL's and the Macquarie Group's businesses are highly regulated and they could be adversely affected by temporary
and permanent changes in regulations and regulatory policy or unintended consequences from such changes and increased
compliance requirements, particularly for financial institutions, in the markets in which MGL and the Macquarie Group
operate. 
 
Many of MGL's and the Macquarie Group's businesses are highly regulated in most jurisdictions in which MGL and the
Macquarie Group do business.  The Macquarie Group has businesses in multiple sectors, including as licensed brokers,
investment advisers or other regulated financial services providers. The Macquarie Group operates similar kinds of
businesses across multiple jurisdictions, and some of its businesses operate across more than one jurisdiction or sector
and are regulated by more than one regulator. Additionally, some members of the Macquarie Group own or manage assets and
businesses that are regulated. The Macquarie Group's businesses include an "authorised deposit-taking institution" ("ADI")
in Australia (regulated by the Australian Prudential Regulation Authority ("APRA")) and branches in the United Kingdom, the
Dubai International Finance Centre, Singapore, Hong Kong and South Korea and representative offices in the United States,
New Zealand and Switzerland.  The regulations vary from country to country but generally are designed to protect depositors
and the banking system as a whole, not holders of the Macquarie Group's securities or creditors.  In addition, as a
diversified financial institution, many of the Macquarie Group's businesses are subject to financial services regulation
other than prudential banking regulation in most jurisdictions in which MGL and the Macquarie Group operate, including in
the United States in respect of the Macquarie Group's broker-dealer, over-the-counter (OTC) derivatives and funds
management businesses. Certain regulatory developments will significantly alter the regulatory framework and may adversely
affect MGL's and the Macquarie Group's competitive position and profitability. 
 
Regulatory agencies and governments frequently review banking and financial services laws, regulations and policies,
including fiscal policies, for possible changes. Changes to laws, regulations or policies, including changes in
interpretation or implementation of laws, regulations or policies, could substantially affect MGL and the Macquarie Group
or their businesses, the products and services MGL and the Macquarie Group offer or the value of their assets, or have
unintended consequences or impacts across MGL's and the Macquarie Group's businesses.  These may include changing required
levels of liquidity and capital adequacy, increasing tax burdens generally and on financial transactions, limiting the
types of financial services and products that can be offered and/or increasing the ability of other providers to offer
competing financial services and products, as well as changes to prudential regulatory requirements.  Future changes in
laws, regulations or policies as described above can be unpredictable, and beyond MGL's and the Macquarie Group's control
and could adversely affect their businesses. 
 
MGL is regulated by APRA as a non-operating holding company ("NOHC").  APRA may introduce new prudential regulations or
modify existing regulations, including those that apply to MGL as an NOHC.  Any such event could result in changes to the
organisational structure of the Macquarie Bank Group and/or the Macquarie Group and adversely affect the business or
financial performance of the MGL and/or the Macquarie Group. 
 
Global economic conditions have led to increased supervision and regulation, as well as changes in regulation in markets in
which MGL and the Macquarie Group operate, particularly for financial institutions, and will lead to further significant
changes of this kind.  In addition, regulation is becoming increasingly extensive and complex and some areas of regulatory
change involve multiple jurisdictions seeking to adopt a coordinated approach or certain jurisdictions seeking to expand
the territorial reach of their regulation.  Furthermore, the nature and impact of future changes are not predictable and
beyond MGL's and the Macquarie Group's control and there is operational and compliance risk associated with the
implementation of any new laws and regulations that apply to MGL as a financial institution.  In particular, changes in
applicable laws, regulations or other governmental policies could adversely affect one or more of the Macquarie Group's
businesses and could require MGL and/or the Macquarie Group to incur substantial costs. 
 
MGL is responsible for ensuring that it complies with all applicable legal and regulatory requirements (including
accounting standards, where applicable, as well as rules and regulations relating to corrupt and illegal payments and money
laundering) and industry codes of practice, as well as meeting its ethical standards.  The failure to comply with
applicable regulations could result in suspensions, restrictions of operating licenses, fines and penalties or limitations
on its ability to do business. They could also have adverse reputational consequences.  These costs, expenses and
limitations could have an adverse effect on MGL's and the Macquarie Group's business, results of operations, financial
performance or financial condition.  The legal and regulatory requirements described above could also adversely affect the
profitability and prospects of MGL and the Macquarie Group or their businesses to the extent that they limit MGL's and the
Macquarie Group's operations and flexibility of MGL's and the Macquarie Group's businesses.  The nature and impact of
future changes in such requirements are not predictable and are beyond MGL's and the Macquarie Group's control. 
 
MGL and the Macquarie Group may be adversely affected by increased governmental and regulatory scrutiny or negative
publicity. 
 
Governmental scrutiny from regulators, legislative bodies and law enforcement agencies with respect to matters relating to
the financial services sector generally, and MGL and the Macquarie Group's business operations, capital, liquidity and risk
management, compensation and other matters, has increased dramatically over the past several years.  The financial crisis
and the subsequent political and public sentiment regarding financial institutions has resulted in a significant amount of
adverse press coverage, as well as adverse statements or charges by regulators or other government officials, and in some
cases, to increased regulatory scrutiny, investigations and litigation.  Responding to and addressing such matters,
regardless of the ultimate outcome, is time-consuming and expensive and can divert the time and effort of MGL's senior
management from its business. Penalties and fines sought by regulatory authorities have increased substantially over the
last several years, and regulators have become aggressive in commencing enforcement actions or with advancing or supporting
legislation targeted at the financial services industry.  Adverse publicity, governmental scrutiny and legal and
enforcement proceedings can also have a negative impact on MGL's reputation with clients and on the morale and performance
of its employees, which could adversely affect MGL's and the Macquarie Bank Group's businesses and the results of their
operations. 
 
Changes and increased volatility in currency exchange rates may adversely impact MGL's financial results and its financial
and regulatory capital positions. 
 
While MGL's consolidated financial statements are presented in Australian Dollars, a significant portion of the operating
income of the Macquarie Group's is derived, and operating expenses are incurred, from its offshore business activities,
which are conducted in a broad range of currencies and with counterparties around the world. Changes in the rate at which
the Australian Dollar is translated from other currencies can impact the MGL's financial statements and the economics of
its business. 
 
Although the Macquarie Group seeks to carefully manage its exposure to foreign currencies through matching of assets and
liabilities in local currencies and through the use of foreign exchange forward contracts to hedge its exposure, the
Macquarie Group is still exposed to exchange risk.  Insofar as any member of the Macquarie Group is unable to hedge or has
not completely hedged its exposure to non-Australian currencies, the Macquarie Group's reported profit or foreign currency
translation reserve would be affected. 
 
Investors should be aware that exchange rate movements may adversely impact MGL's future financial results.  MGL's
regulatory capital position may be adversely impacted by a depreciating Australian Dollar, which increases the capital
requirement for assets denominated in currencies other than Australian Dollars. 
 
MGL's and the Macquarie Group's business may be adversely affected by a failure to adequately manage the risks associated
with certain strategic opportunities and new businesses, including acquisitions, and the exiting or restructuring of
existing businesses. 
 
From time to time, MGL and/or other entities in the Macquarie Group may evaluate strategic opportunities and undertake
acquisitions of businesses, some of which may be material to their operations. Certain acquisition opportunities may arise,
for example, as competitors choose to exit what they consider non-core activities.  MGL's and/or the Macquarie Group's
completed and prospective acquisitions and growth initiatives may cause them to become subject to unknown liabilities of
the acquired or new business and additional or different regulations. 
 
MGL and such other  Macquarie Group entities may over value the acquisition, may not achieve expected synergies from the
acquisition, may achieve lower than expected cost savings or otherwise incur losses, may lose customers and market share,
may face disruptions to their operations resulting from integrating the systems, processes and personnel (including in
respect of risk management) of the acquired business into their management's time may be diverted to facilitate the
integration of the acquired business into MGL or the relevant Macquarie Group entity, or the acquisition may have negative
impacts on MGL's and the Macquarie Group's results, financial condition or operations.  MGL or the Macquarie Group may also
underestimate the costs associated with outsourcing, exiting or restructuring existing businesses.  If these risks
eventuate they may have a negative impact on MGL's and the Macquarie Group's results, financial condition and prospects. 
 
Where MGL's and/or the Macquarie Group 's acquisitions are in foreign jurisdictions, or are in emerging economies in
particular, they may be exposed to heightened levels of regulatory scrutiny and political, social or economic disruption
and sovereign risk in emerging and growth markets.  In addition, there are current and prospective strategic risks
associated with timely business decisions, proper implementation of decisions or responsiveness to changes in MGL's and/or
the Macquarie Group's current operating environment. From time to time, MGL and/or the Macquarie Group may evaluate other
strategic opportunities, the outcome of which is dependent upon the quality of their strategic planning process, the
implications of the strategy on risk appetite and their ability to evaluate and, if determined to be worthwhile, implement
such strategic opportunities. 
 
MGL's and the Macquarie Group's businesses are substantially dependent on Macquarie's brand and reputation. 
 
MGL believes its reputation in the financial services markets and the recognition of the Macquarie brand by its customers
are important contributors to its business.  Many companies in the Macquarie Group and many of the funds managed by
entities owned, in whole or in part, by the Macquarie Bank Group and the Macquarie Group use the Macquarie name.  MGL does
not control those entities that are not in the Macquarie Group, but their actions may reflect directly on its reputation. 
MGL's and the Macquarie Group's reputation and, as a result, their businesses and business prospects could be adversely
affected if any of the entities using the Macquarie name take actions, or are publically accused of such actions, that
bring negative publicity on MGL and the Macquarie Group. 
 
The financial condition and results of operation of MGL and the Macquarie Group may be indirectly adversely affected by the
negative performance, or negative publicity in relation to, any Macquarie-managed fund or funds that the Macquarie Bank
Group has promoted or is associated with, as investors and lenders may associate such funds with the name, brand and
reputation of the Macquarie Group and the Macquarie Group and other Macquarie-managed funds. In addition, if funds that use
the Macquarie name or are otherwise associated with Macquarie-managed infrastructure assets, such as roads, airports,
utilities and water distribution facilities that people view as community assets, are perceived to be managed
inappropriately, those managing entities could be subject to criticism and negative publicity, harming MGL's and the
Macquarie Group's reputation and the reputation of other entities that use the Macquarie name. 
 
Competitive pressure, both in the financial services industry, as well as in the other industries in which MGL and the
Macquarie Group operates, could adversely impact its business and results of operation. 
 
MGL and the Macquarie Group face significant competition from local and international competitors, which compete vigorously
for participation in the various markets and sectors across which the Macquarie Group operates, including the financial
services industry.  MGL and the Macquarie Group compete on the basis of a number of factors, including their products and
services, depth of client relationships, innovation, reputation and price.  MGL believes that it and the Macquarie Group
will continue to experience pricing pressures in the future as some of their competitors seek to obtain or increase market
share.  MGL and the Macquarie Group compete, both in Australia and internationally, with asset managers, retail and
commercial banks, private banking firms, investment banking firms, brokerage firms, internet based firms and other
investment and service firms in connection with the various funds and assets they manage and services they provide.  In
addition, any trend toward consolidation in the global financial services industry may create stronger competitors with
broader ranges of product and service offerings, increased access to capital, and greater efficiency and pricing power.  In
recent years, competition in the financial services industry has also increased as large insurance and banking industry
participants have sought to establish themselves in markets that are perceived to offer higher growth potential and as
local institutions have become more sophisticated and competitive and have sought alliances, mergers or strategic
relationships.  Many of MGL's and the Macquarie Group's competitors are larger than they are and may have significantly
greater financial resources than the Macquarie Group and/or may be able to offer a wider range of products which may
enhance their competitive position.  The effect of competitive market conditions, especially in MGL's and the Macquarie
Group's main markets, products and services, may lead to an erosion in MGL's and the Macquarie Group's market share or
margins and adversely impact MGL's and the Macquarie Group's business and results of operation. 
 
MGL's and the Macquarie Group's ability to retain and attract qualified employees is critical to the success of their
business and the failure to do so may materially adversely affect their performance. 
 
MGL's and the Macquarie Group's employees are their most important resource, and their performance is largely dependent on
the talents and efforts of highly skilled individuals.  As such, MGL's and the Macquarie Group's continued ability to
compete effectively in their businesses and to expand into new business areas and geographic regions depends on their
ability to retain and motivate their existing employees and attract new employees.  Competition from within the financial
services industry and from businesses outside the financial services industry, such as professional service firms, hedge
funds, private equity funds and venture capital funds, for qualified employees has historically been intense and is
expected to increase during periods of economic growth. 
 
In order to attract and retain qualified employees, MGL and the Macquarie Group must compensate such employees at or above
market levels. Typically, those levels have caused employee remuneration to be the Macquarie Group's greatest expense as
its performance-based remuneration has historically been cash based and highly variable.  Recent market events have
resulted in increased regulatory and public scrutiny of corporate remuneration policies and the establishment of criteria
against which industry remuneration policies may be assessed.  If MGL and the Macquarie Group are unable to continue to
attract and retain qualified employees, as a result of such changes or otherwise, or are required to pay higher
remuneration in order to attract and retain qualified employees to maintain their competitive position, or if increased
regulation requires MGL and the Macquarie Group to further change their remuneration policies, their performance, including
their competitive position, could be materially adversely affected. 
 
In addition, current and future laws (including laws relating to immigration and outsourcing) may restrict MGL's and the
Macquarie Group's ability to move responsibilities or personnel from one jurisdiction to another.  This may impact MGL's
and the Macquarie Group's ability to take advantage of business and growth opportunities or potential efficiencies, which
could adversely affect their profitability. 
 
MGL's and the Macquarie Group's businesses are subject to the risk of loss associated with falling prices in the equity and
other markets in which they operate. 
 
MGL and the Macquarie Group are exposed to changes in the value of financial instruments and other financial assets that
are carried at fair market value, as well as changes to the level of their advisory and other fees due to changes in
interest rates, exchange rates, equity and commodity prices, credit spreads and other market risks.  These changes may
result from changes in economic conditions, monetary and fiscal policies, market liquidity, availability and cost of
capital, international and regional political events, acts of war or terrorism, corporate, political or other scandals that
reduce investor confidence in capital markets, natural disasters or pandemics or a combination of these or other factors. 
MGL and the Macquarie Group trade in foreign exchange, interest rate, commodity, bullion, energy, securities and other
markets and is an active price maker in the derivatives market.  Certain financial instruments that MGL and/or the
Macquarie Group hold and contract to which they are a party are increasingly complex, as the Macquarie Group employ
structured products to benefit their clients and themselves, and these complex structured products often do not have
readily available markets to access in times of liquidity stress.  The Macquarie Group may incur losses as a result of
decreased market prices for products they trade, which decreases the valuation of their trading and investment positions,
including their interest rate and credit products, currency, commodity and equity positions. 
 
In addition, reductions in the level of prices in the equity markets or increases in interest rates may reduce the value of
their clients' portfolios, which in turn may reduce the fees MGL and the Macquarie Group earn for managing assets in
certain parts of their business. Increases in interest rates or attractive conditions in other investments could cause
MGL's and the Macquarie Group's clients to transfer their assets out of their funds or other products. 
 
Defaults by one or more other large financial institutions or counterparties could adversely affect financial markets
generally. 
 
The commercial soundness of many financial institutions may be closely interrelated as a result of credit, trading,
clearing or other relationships among financial institutions. As a result of, and in light of, recent significant
volatility in the financial sector and the capital markets, concerns about, or a default by, one or more institutions or by
a sovereign could lead to market-wide liquidity problems, losses or defaults by other institutions globally that may
further affect MGL and the Macquarie Group.  This is sometimes referred to as "systemic risk" and may adversely affect
financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms, hedge funds and exchanges
that MGL and the Macquarie Group interacts with on a daily basis.  These risks may impact the value of financial
instruments and other financial assets that are carried at fair market value by the Macquarie Group or the Macquarie
Group's ability to deal in those assets.  If these risks eventuate, they may have an impact on MGL's and/or the Macquarie
Group's results, financial condition and prospects. 
 
An increase in the failure of third parties to honour their commitments in connection with MGL's and the Macquarie Group's
trading, lending and other activities, including funds that they manage, may adversely impact their business. 
 
MGL and the Macquarie Group are exposed to the potential for credit-related losses that can occur as a result of an
individual, counterparty or issuer being unable or unwilling to honour its contractual obligations.  MGL and the Macquarie
Group are also exposed to potential concentration risk arising from large individual exposures or groups of exposures. 
Like any financial services organisation, MGL and the Macquarie Group assume counterparty risk in connection with their
lending, trading, derivatives and other businesses where they rely on the ability of a third party to satisfy their
financial obligations to it on a timely basis.  The resulting credit exposure will depend on a number of factors, including
declines in the financial condition of the counterparty, the value of property MGL and the Macquarie Group hold as
collateral and the market value of the counterparty instruments and obligations MGL and the Macquarie Group holds. 
 
Credit losses can and have resulted in financial services organisations realising significant losses and in some cases
failing altogether.  To the extent MGL's and the Macquarie Group's credit exposure increases, it could have an adverse
effect on their business and profitability if material unexpected credit losses occur.  MGL and the Macquarie Group are
also subject to the risk that their rights against third parties may not be enforceable in all circumstances, which may
also adversely impact the Macquarie Group's business and profitability. 
 
Credit constraints of purchasers of MGL and the Macquarie Group's investment assets or on their clients may impact their
income. 
 
Historically, a portion of MGL and the Macquarie Group's income has been generated from the sale of assets to third
parties, including their funds. If buyers are unable to obtain financing to purchase assets that MGL and the Macquarie
Group currently hold or purchase with the intention to sell in the future, they may be required to hold investment assets
for a longer period of time than they historically have or may sell these assets at lower prices than they historically
would have expected to achieve, which may lower MGL's and the Macquarie Group's rate of return on these investments and
require funding for periods longer than they have anticipated. 
 
Failure of MGL or the Macquarie Group to maintain their credit ratings could adversely affect its cost of funds, liquidity,
competitive position and access to capital markets. 
 
The credit ratings assigned to certain Macquarie Group entities, including MGL, by rating agencies are based on an
evaluation of a number of factors, including the Macquarie Group's ability to maintain a stable and diverse earnings
stream, strong capital ratios, strong credit quality and risk management controls, funding stability and security,
disciplined liquidity management and its key operating environments, including the availability of systemic support in
Australia. In addition, a credit rating downgrade could be driven by the occurrence of one or more of the other risks
identified in this section or by other events that are not related to the Macquarie Group. 
 
If these Macquarie Group entities fail to maintain their current credit ratings, this could (i) adversely affect MGL's or
the Macquarie Group's cost of funds and related margins, liquidity, competitive position, the willingness of counterparties
to transact with the Macquarie Group and its ability to access capital markets or (ii) trigger MGL's or a Macquarie Group
entity's obligations under certain bilateral provisions in some of its trading and collateralised financing contracts. 
Under these provisions, counterparties could be permitted to terminate contracts with the Macquarie Group or require it to
post additional collateral.  Termination of MGL's or a Macquarie Group entity's trading and collateralised financing
contracts could cause it to sustain losses and impair its liquidity by requiring it to find other sources of financing or
to make significant cash payments or securities movements. 
 
MGL and the Macquarie Group may incur losses as a result of ineffective risk management processes and strategies. 
 
While MGL and the Macquarie Group employ a broad and diversified set of risk monitoring and risk mitigation techniques,
those techniques and the judgments that accompany their application cannot anticipate every economic and financial outcome
or the specifics and timing of such outcomes.  As such, MGL and the Macquarie Group may, in the course of their activities,
incur losses.  There can be no assurance that the risk management processes and strategies that MGL and the Macquarie Group
have developed will adequately anticipate or be effective in addressing market stress or unforeseen circumstances. 
 
Future growth, including through acquisitions, mergers and other corporate transactions, may place significant demands on
MGL's and the Macquarie Group's managerial, legal, accounting, IT, risk management, operational and financial resources and
may expose them to additional risks. 
 
Future growth, including through acquisitions, mergers and other corporate transactions, may place significant demands on
the Macquarie Group's legal, accounting, IT, risk management and operational infrastructure and result in increased
expenses. The Macquarie Group's future growth will depend, among other things, on its ability to integrate new businesses,
maintain an operating platform and management system sufficient to address its growth, attract employees and other factors
described below.  If the Macquarie Group does not manage its expanding operations effectively, its ability to generate
revenue and control its expenses could be adversely affected. 
 
A number of the Macquarie Group's recent and planned business initiatives and further expansions of existing businesses are
likely to bring it into contact, directly or indirectly, with individuals and entities that are new clients, with new asset
classes and other new products or new markets. These business activities expose the Macquarie Group to new and enhanced
risks, including reputational concerns arising from dealing with a range of new counterparties and investors, actual or
perceived conflicts of interest, regulatory scrutiny of these activities, potential political pressure, increased
credit-related and operational risks, including risks arising from accidents or acts of terrorism, and reputational
concerns with the manner in which these businesses are being operated or conducted.  If these risks eventuate, they may
have a negative impact on MGL's and the Macquarie Group's results, financial conditions or operations. 
 
Poor performance of funds would cause a decline in the Macquarie Group's revenue and results of operations and may
adversely affect Macquarie Group's ability to raise capital for future funds. 
 
The Macquarie Group's financial condition and results of operation are directly and indirectly affected by the results of
the funds and the assets it and other members of the Macquarie Group manage, particularly the Macquarie-managed funds.
Revenue from these funds is derived principally from three sources: (i) management fees, based on the size of the funds;
(ii) incentive income, based on the performance of the funds; and (iii) investment income based on investments in the
funds, referred to as "principal investments". If the value of the funds the Macquarie Group and other members of the
Macquarie Group manage declines, assets under management would also decline, which would result in a decrease in the
Macquarie Group's management fees from these funds. In the event that any of these funds perform poorly due to market
conditions or underperformance, the Macquarie Group's revenue and results of operations may decline. In addition, investors
may withdraw their investments in these funds or may decline to invest in future funds the Macquarie Group establishes as a
result of poor performance of these funds or otherwise. 
 
Long-term underperformance can have negative implications for incentive income. If the return of a fund is negative in any
period (quarterly, semi-annually or annually, depending on the fund), then the amount of the performance deficit must be
carried forward until eliminated. 
 
MGL and the Macquarie Group may experience writedowns of their fund management assets, investments, loans and other assets
related to volatile market conditions. 
 
Macquarie Group recorded A$796 million of impairment charges for the year ended 31 March 2016, including A$222 million of
impairment charges on investment securities available-for-sale, investments in associates and joint ventures, and other
non-financial assets, and A$574 million of loan impairment provisions. Further impairments and provisions may be required
in future periods if the market value of assets similar to those held were to decline. 
 
Sudden declines and significant volatility in the prices of assets may substantially curtail or eliminate the trading
markets for certain assets, which may make it very difficult to sell, hedge or value such assets. The inability to sell or
effectively hedge assets reduces MGL's and the Macquarie Group's ability to limit losses in such positions and the
difficulty in valuing assets may negatively affect their capital, liquidity or leverage ratios, increase their funding
costs and generally require them to maintain additional capital. 
 
In addition, market volatility has in recent years impacted the value of the Macquarie Bank Group's and the Macquarie
Group's funds.  Future valuations, in light of factors then prevailing, may result in further impairments to the
investments in these funds. In addition, at the time of any sale of any investments in these funds, the price ultimately
realised will depend on the demand in the market at the time and may be materially lower than their current market value. 
Any of these factors could require MGL and the Macquarie Group to make further writedowns on their investments in their
funds management assets and other investments and assets, which may be significant and may have an adverse effect on their
results of operations and financial condition in future periods. 
 
The business model of the Macquarie Group includes revenue it generates from management of funds and transactions with the
assets it manages. 
 
The Macquarie Group's financial condition and results of operation are directly and indirectly affected by the results of
the funds or the assets it and other members of the Macquarie Group manage.  In addition to risks relating to fee income
(as described above) and any credit exposure it may have to funds or assets owned by funds, the Macquarie Group's funds
model exposes it to such risks as: 
 
·           Equity at risk: the Macquarie Group maintains an equity interest in a number of the funds that it manages. The
market value of the Macquarie Group's assets is directly affected by the value of the funds managed by Macquarie Group to
the extent of its equity interest in those funds. 
 
·           Reputation risk: The Macquarie name is attached to many of the funds managed by the Macquarie Group. Any
adverse developments at any of the funds the Macquarie Group manages or the assets managed by those funds could have an
adverse impact on the Macquarie Group's reputation and public image which could adversely affect its business and financial
condition. 
 
·           Contingent liabilities: In some instances entities in the Macquarie Group have sold assets to funds managed by
the Macquarie Group mostly in circumstances when the Macquarie Group is seeding a newly-formed fund with assets, or the
Macquarie Group has sold its interest in such assets to third parties. Under the terms of some of the agreements pursuant
to which those assets have been sold the Macquarie Group may have contingent liabilities as a result of the representations
and warranties, covenants, indemnities or other provisions of those agreements. 
 
·           Conflicts of interest: the Macquarie Group manages and advises a large number of funds, many of which compete
for assets and investors.  The Macquarie Group has policies in place designed to manage conflicts of interest within the
Macquarie Group but no assurance can be given that those policies will be adequate to prevent actual or perceived conflicts
of interest. 
 
If the Macquarie Group is unable to effectively manage these risks, its funds management business and reputation could be
materially harmed or it could be exposed to claims or other liabilities to investors in the funds. 
 
MGL's and the Macquarie Group's business operations expose them to potential tax liabilities that could have an adverse
impact on their results of operation and reputation. 
 
MGL and the Macquarie Group are exposed to risks arising from the manner in which the Australian and international tax
regimes may be applied and enforced, both in terms of their own tax compliance and the tax aspects of transactions on which
they work with clients and other third parties.  MGL's and the Macquarie Group's international, multi-jurisdictional
platform increases their tax risks.  In addition, as a result of increased funding needs by governments employing fiscal
stimulus measures, revenue authorities in many of the jurisdictions in which MGL and the Macquarie Group operate are known
to have become more active in their tax collection activities.  While the Macquarie Group believes that it has in place
controls and procedures that are designed to ensure that transactions involving third parties comply with applicable tax
laws and regulations, any actual or alleged failure to comply with or any change in the interpretation, application or
enforcement of applicable tax laws and regulations could adversely affect its reputation and affected business areas,
significantly increase its own tax liability and expose it to legal, regulatory and other actions. 
 
MGL and the Macquarie Group may incur financial loss, adverse regulatory consequences or reputational damage due to
inadequate or failed internal or external operational systems, processes, people or systems or external events. 
 
MGL and the Macquarie Group's businesses are highly dependent on their ability to process and monitor, on a daily basis, a
very large number of transactions, many of which are highly complex, across numerous and diverse markets in many
currencies.  As MGL's and the Macquarie Group's client base, business activities and geographical reach expands, developing
and maintaining their operational systems and infrastructure becomes increasingly challenging.  MGL and the Macquarie Group
must continuously update these systems to support their operations and growth, which may entail significant costs and risks
of successful integration.  MGL's and the Macquarie Group's financial, accounting, data processing or other operating
systems and facilities may fail to operate properly or become disabled as a result of events that are wholly or partially
beyond their control, such as a spike in transaction volume or disruption in internet services provided by third parties,
adversely affecting their ability to process these transactions or provide these services. 
 
MGL and the Macquarie Group are exposed to the risk of loss resulting from human error, the failure of internal or external
processes and systems, such as from the failure of our IT systems, or from external events.  Such operational risks may
include theft and fraud, improper business practices, mishandling of client moneys or assets, client suitability and
servicing risks, product complexity and pricing, and valuation risk or improper recording, evaluating or accounting for
transactions or breaches of their internal policies and regulations.  There is increasing regulatory and public scrutiny
concerning outsourced and off-shored activities and their associated risks, including, for example, the appropriate
management and control of confidential data. The failure to appropriately manage this risk, including where external
service providers are used, may adversely impact MGL's and the Macquarie Group's reputation, financial performance and
position. 
 
In addition, there have been a number of highly publicised cases around the world involving actual or alleged fraud or
other misconduct by employees in the financial services industry in recent years, and MGL and the Macquarie Group run the
risk that employee misconduct could occur. It is not always possible to deter or prevent employee misconduct and the
precautions MGL and the Macquarie Group take to prevent and detect this activity may not be effective in all cases.  In
addition, MGL and the Macquarie Group also face the risk of operational failure, termination or capacity constraints of any
of the counterparties, clearing agents, exchanges, clearing houses or other financial intermediaries MGL and the Macquarie
Group use to facilitate their securities or derivatives transactions, and as MGL and the Macquarie Group's
interconnectivity with their clients and counterparties grows, MGL and the Macquarie Group increasingly face the risk of
operational failure with respect to their clients' and counterparties' systems.  Any such failure, termination or
constraint could adversely affect MGL's and the Macquarie Group's ability to effect or settle transactions, service their
clients, manage their exposure to risk, meet their obligations to counterparties or expand their businesses or result in
financial loss or liability to their clients and counterparties, impairment of their liquidity, disruption of their
businesses, regulatory intervention or reputational damage. 
 
The Macquarie Group may face information security risks. 
 
The Macquarie Group's businesses are highly dependent on its information technology systems.  The Macquarie Group devotes
significant effort to protecting the confidentiality, integrity and availability of its computer systems, software and
networks, including maintaining the confidentiality of information that may reside on those systems.  However, there can be
no assurances that the Macquarie Group's security measures will provide absolute security. Information security risks for
financial institutions have increased in recent years, in part because of the proliferation of new technologies, the use of
internet and telecommunications technology and the increased sophistication and activities of organised criminals and
hackers. The Macquarie Group's computer systems, software and networks may be vulnerable to unauthorised access, misuse,
denial-of-service attacks, phishing attacks, computer viruses or other malicious code and other events that could have a
security impact. Information security threats may also occur as a result of the Macquarie Group's plans to continue to
implement internet banking and mobile banking channel strategies and develop 

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