Macquarie Group Limited and its subsidiaries  2014 Annual Financial Report  macquarie.com.au  Notes to the financial statements  for the financial year ended 31 March 2014  continued  Options  Macquarie Group Employee Retained Equity Plan  Exchangeable Shares  Retention Securities and Options  Options granted to employees under the Macquarie Group Employee Share Option Plan (MGESOP) are considered to be potential  ordinary shares and have been included in the calculation of diluted earnings per share to the extent to which they are dilutive. The  exercise price used in this assessment incorporates the fair value of options yet to be recognised as an expense in the future.  Included in the balance of weighted average options are 32,847 (2013: 2,372) options that were converted, lapsed or cancelled  during the period. There are a further 64,635 (2013; 8,806,873) options that have not been included in the balance of weighted  average options on the basis that their adjusted exercise price was greater than the average market price of the Company’s fully  paid ordinary shares for the financial year ended 31 March 2014 and consequently, they are not considered to be dilutive.  The Company has suspended new offers under the MGESOP under the remuneration arrangements which were the subject of  shareholder approvals obtained at a General Meeting of MGL in December 2009. The last grant of options under the MGESOP was  on 8 December 2009. Currently MGL does not expect to issue any further options under the MGESOP.  In December 2009, the Company’s shareholders approved the implementation of the Macquarie Group Employee Retained Equity  Plan (MEREP).  Vested MEREP awards are considered to be ordinary shares and have been included in the determination of basic and diluted  earnings per share from their date of vesting. Unvested MEREP awards are considered to be potential ordinary shares and have been included in the calculation of diluted  earnings per share to the extent they are dilutive. Included in the balance of weighted average unvested MEREP awards are  3,884,630 (2013: 1,874,531) awards that were vested, lapsed or cancelled during the period. As at 31 March 2014, a further  48,518 (2013: 68,591) MEREP awards have not been included in the balance of weighted average unvested MEREP awards on the  basis that they are not considered to be dilutive. The exchangeable shares on issue (refer note 28—Contributed Equity) are considered to be ordinary shares and have been  included in the determination of basic and diluted earnings per share from their date of issue.  Retention securities and options are considered to be potential ordinary shares and have been included in the determination of  diluted earnings per share from their date of issue. The fair value of these securities and options are amortised over the vesting  period.  124  (1) The overall impact of the SYD distribution was that of a share repurchase at fair value, therefore no adjustment has been made to  financial year ended 31 March 2013. Refer to note 5 - Dividends and distributions paid or provided for.  (2) The Convertible Preference Securities have been included in diluted earnings per share weighted for the period through their date of  redemption, to the extent to which they were dilutive based on the conversion features measured at their date of redemption.  Consolidated  2014  Consolidated  2013  Note 6  Earnings per share  continued  Number of shares  Total weighted average number of externally held ordinary shares used in the calculation  of basic earnings per share$^{(1)}$  306,081,657  314,518,789  Weighted average number of shares used in the calculation of diluted earnings per share  Weighted average fully paid externally held ordinary shares  306,081,657  314,518,789  Potential ordinary shares:  Weighted average options  38,425  26,883  Weighted average Macquarie Group Capital Notes  8,837,685  –  Weighted average Macquarie Convertible Preference Securities (2) 3,222,037  16,167,729  Weighted average Exchangeable Capital Securities  5,067,970  6,800,228  Weighted average unvested MEREP awards  22,645,659  18,781,003  Weighted average retention securities and options  –  59,457  Total weighted average number of externally held ordinary shares and potential ordinary  shares used in the calculation of diluted earnings per share  345,893,433  356,354,089 