## Directors’ Report 

for the financial year ended 31 March 2014 

continued 

## Principal activities 

The principal activity of the Company during the financial year ended 31 March 2014 was to act as a non-operating holding company (NOHC) for the Consolidated Entity. The activities of the Consolidated Entity were those of a financial services provider of banking, financial, advisory, investment and funds management services. In the opinion of the Voting Directors, there were no significant changes to the principal activities of the Consolidated Entity during the financial year under review not otherwise disclosed in this report. 

## Result 

The financial report for the financial years ended 31 March 2014 and 31 March 2013, and the results herein, have been prepared in accordance with Australian Accounting Standards. 

The consolidated profit after income tax attributable to ordinary owners for the financial year ended 31 March 2014 was $A1,265 million (2013: $A851 million). 

## Dividends and distributions 

Subsequent to year end, the Directors have announced a final ordinary dividend of $A1.60 per share, 40 per cent franked based on tax paid at 30 per cent ($A509 million in aggregate). The final ordinary dividend is payable on 2 July 2014. 

On 13 January 2014, the Company distributed the majority of its investment in Sydney Airport stapled securities to its ordinary shareholders through a special dividend and capital reduction (SYD distribution). The special dividend component of the distribution was $1.1563 per share, 40 per cent franked ($A389 million in aggregate). 

On 12 December 2013, the Company paid an interim ordinary dividend of $A1.00 per share 40 per cent franked ($A336 million in aggregate) in respect of the financial year ended 31 March 2014. 

On 2 July 2013, the Company paid the final dividend of $A1.25 per share 40 per cent franked ($A419 million in aggregate) in respect of the financial year ended 31 March 2013. 

No other ordinary dividends or distributions were declared or paid during the financial year by the Company. 

## State of affairs 

There were no other significant changes in the state of the affairs of the Consolidated Entity that occurred during the financial year under review not otherwise disclosed in this report. 

## Review of operations and financial result 

## Financial position 

Profit attributable to ordinary equity holders was $A1,265 million for the year ended 31 March 2014, up 49 per cent from $A851 million in the prior year. 

Net operating income of $A8,132 million for the year ended 31 March 2014 increased 22 per cent from $A6,657 million in the prior year. Key drivers of the change from the prior year were: 

– A 25 per cent increase in net interest income to $A1,705 million for the year ended 31 March 2014 from $A1,367 million in the prior year primarily due to higher interest bearing asset volumes across the Group combined with reduced funding margins. 

– A 14 per cent increase in fee and commission income to $A3,853 million for the year ended 31 March 2014 from $A3,379 million in the prior year, driven by: 

– increased base fees of $A1,289 million for the year ended 31 March 2014, up 26 per cent from $A1,019 million in the prior year primarily due to an increase in assets under management (AUM) that was largely driven by favourable currency and market movements, acquisitions and positive fund flows across Macquarie Funds; 

– increased mergers and acquisitions, advisory and underwriting fees of $A809 million for the year ended 31 March 2014, up 23 per cent from $A659 million in the prior year, mainly due to improved equity capital markets which benefited Macquarie Capital; and 

– increased brokerage and commissions income of $A903 million for the year ended 31 March 2014, up 11 per cent from $A811 million in the prior year reflecting improved client activity in cash equities across most regions, partially offset by the sale of Macquarie Private Wealth Canada. 

– A 27 per cent increase in net trading income to $A1,570 million for the year ended 31 March 2014 up from $A1,234 million in the prior year, mainly driven by improved trading conditions for Fixed Income, Currencies and Commodities, particularly in commodities markets, and improved trading conditions and market sentiment for Macquarie Securities. 

– A 46 per cent increase in other operating income and charges to $A855 million for the year ended 31 March 2014 from $A585 million in the prior year. The increase was mainly due to: 

– the gain on SYD distribution of $A228 million, while the prior year included a gain on change of ownership interests of $A121 million where Macquarie was required to re-measure ownership interests due to the loss of control or significant influence in certain investments; 

