On Friday morning Macquarie Bank employees received this email. What is criminal about this is that some Macquarie employees are on AWAs – in recent months they have been forced to work public holidays, weekends, late nights with no compensation. On occasion they have been bought a “meal” which usually consists of some kind of cheap take away. No wonder they are posting record profits …


Today we announced that we expect Macquarie’s half year result for the period ending 30 September 2007 to be up strongly on the prior corresponding period. This would be a record half year result. This announcement was made in the context of a regular Operational Briefing to investors and analysts. On this occasion the main focus of the briefing was our European businesses which are going very well. In line with our normal practice we took the opportunity of this briefing to give the market a general update. Global credit market conditions have been volatile and challenging in recent months.

However, we are well placed. All Groups are operating profitably, our businesses are diversified by product and geography, we have no unusual provisions or write-downs, we are conservatively capitalised and well-funded and we are continuing to grow our staff numbers which total, at present, approximately 11,000.

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Today we informed investors that we have: no material exposures not already known to them; no problem trading exposures; no material problem credit exposures; no exposure to Structured Investment Vehicles (SIVs); only modest holdings of AAA and AA rated Collateralised Loan Obligations and Collateralised Debt Obligations; no material problems with debt underwritings; no underwriting of leveraged loans; and very little underwriting of corporate loans. Non-Operating Holding Company (NOHC) update We also announced that we have received formal approval from the Australian Prudential Regulation Authority (APRA) to establish Macquarie Group Limited (MGL) as a NOHC.

An Explanatory Memorandum detailing the proposal to establish MGL has been released to Australian Securities Exchange today following an Australian Federal Court hearing. The proposal remains subject to approval by the Australian Federal Treasurer. Macquarie Bank Limited shareholders and option holders will be asked to consider the proposal at General Meetings planned for 25 October 2007. We will continue to keep you updated over the coming months on the establishment of MGL. Planning of strategic initiatives As advised in the last issue of eUpdate (Macquarie’s monthly staff newsletter), we feel that current credit market disruptions may give rise to some strategic opportunities.

To enable us to take advantage of these opportunities, we are taking the following initiatives: Group-level management and the Business Improvement and Strategy Division have been tasked to identify suitable prospects. We are slowing risk-weighted asset growth to leave plenty of room for strategic activities. We are continuing to hire quality staff, especially in areas where we see special opportunities, and looking for boutique acquisitions.

Attached is our media release and presentations made to investors and analysts today by European business heads Jim Craig (IBG) and Mark Baillie (REG), Richard Sheppard (who is responsible for leading the team creating MGL), Greg Ward (CFO) and me. We know that for some businesses current market conditions are especially trying.

Let me take this opportunity to say how very professionally every business has responded to these markets and how much your commitment is appreciated by the Board and by management.

With thanks for your contribution to what we expect will be an outstanding half year.