Macquarie Group (Macquarie) is a global provider of banking, financial, advisory, investment and funds management services.

Macquarie’s main business focus is making returns by providing a diversified range of services to clients. Macquarie acts on behalf of institutional, corporate and retail clients and counterparties around the world.

Macquarie Group Limited is listed in Australia (ASX:MQG) and is regulated by APRA, the Australian banking regulator, as the owner of Macquarie Bank Limited, an authorised deposit taker. Macquarie also owns a bank in the UK, Macquarie Bank International, which is regulated by the FSA. Macquarie's activities are subject to regulation by over 100 agencies around the world.

As an owner and manager of significant community assets, Macquarie works closely with governments around the world to deliver important services including transport, roads, airports and utilities. Specialist funds which manage these assets contribute approximately 20 per cent of Macquarie’s total operating income.

Macquarie’s approach to risk management is long-standing. Strong risk management practices are embedded in business unit management with central oversight of credit, market, funding, compliance and operational risk. These, together with committed, quality staff are key drivers of Macquarie’s success.

Founded in 1969, Macquarie operates in more than 60 office locations in 25 countries and employs more than 13,000 people. Assets under management total more than $A225 billion.

Restructure

On 13 November 2007, Macquarie Bank Limited was restructured following shareholder approval for the creation of Macquarie Group Limited, a non-operating holding company and the ultimate listed parent for the Macquarie group (ASX: MQG).

Macquarie Group Limited comprises businesses across a range of investment, commercial and selected retail financial services.

Prior to the restructure, Macquarie Bank Limited (MBL) was the listed parent of the Macquarie group. MBL listed on the Australian Stock Exchange (ASX) and previously evolved from Hill Samuel Australia Limited, which was established in 1969 as a subsidiary of the UK merchant bank, Hill Samuel & Co.

Management approach

Macquarie’s strength lies in its unique structure and management style which enables businesses to exercise significant operating freedom balanced by limits on risk and observance of professional standards. Macquarie’s management approach fosters an entrepreneurial culture among staff. Strong prudential management is fundamental to this approach. The focus of central management is on risks to Macquarie arising from market and industry influences and issues of medium and long-term significance.

Other core elements of Macquarie’s approach are:

• Encouraging high ethical and professional standards 
• Commitment to clients 
• Commitment to growth 
• Recruiting, retaining and motivating quality staff 
• Aligning staff rewards with those of shareholders 
• Transparent and comprehensive reporting; including financial reporting and risk reporting.

Macquarie organises its activities into six operating Groups, specialising in defined product or market sectors:

•  Macquarie Capital
•  Treasury and Commodities Group
•  Equity Markets Group
•  Real Estate Group
•  Banking and Financial Services Group
•  Funds Management Group

Risk Management Approach

Risk is an integral part of Macquarie’s businesses. Management of that risk is therefore critical. Strong independent prudential management has been a key to Macquarie’s success over many years. Where risk is assumed, it is within a calculated and controlled framework.

The main risks faced by Macquarie are equity risk, credit risk, market risk, liquidity risk, operational risk and legal compliance and documentation risk. Responsibility for these risks lies with individual businesses. It is the responsibility of the Risk Management Group (RMG) to ensure appropriate assessment and management of these risks within Macquarie. RMG also ensures that these issues are quantified and that aggregated risk does not exceed Macquarie’s economic capability to bear risk.

The risk management principles followed by Macquarie are:

• Independence – RMG is independent of all other areas of Macquarie, reporting directly to the Managing Director and the Board. The Head of RMG is a member of Macquarie’s Executive Committee. RMG authority is required for all material risk acceptance decisions. It identifies, quantifies and assesses all risks and sets prudential limits. Where appropriate, these limits are approved by the Executive Committee and the Board.
• Centralised prudential management – RMG’s responsibility covers the whole of Macquarie, meaning it can assess risks from a Macquarie-wide perspective and ensure a consistent approach across all areas.
• Approval of all new business activities – Other areas of Macquarie cannot undertake new businesses or activities, offer new products or enter new markets without RMG’s approval.
• Continuous assessment – RMG continually reviews changes in risks brought about by both external developments and internal circumstances.
• Frequent monitoring – Centralised systems allow RMG to monitor credit and market risks daily. RMG staff liaise closely with other areas of Macquarie to ensure that, should any limit breaches occur, they are immediately addressed, and escalated as necessary.

Further details of Macquarie’s risk management practices are outlined in the Risk Management Report

¹ Excluding earnings on capital.

Macquarie Group Limited

Macquarie Bank Limited

Australian dollar amounts have been translated into Euro solely for the convenience of the reader at 31 March 2008 rate of $A1.00 = 0.5788EUR. Amounts or ratios are in accordance with these principles.

Macquarie’s six major business Groups

Macquarie has six operating Groups within which individual business Divisions operate. The Groups specialise in defined product or market sectors and work in close cooperation. Great emphasis is placed on a client's relationship with Macquarie as a whole.

Macquarie Capital ( formerly Investment Banking Group)

Macquarie Capital includes the Macquarie Group's wholesale structuring, underwriting, corporate advisory, specialised funds management (including infrastructure), specialised equipment financing, institutional stockbroking and equities research capabilities.

With offices in Australia, New Zealand, Asia, North America, Europe, South Africa and the Middle East, Macquarie Capital provides a depth of service including specialist capabilities in:

• Mergers and acquisitions, takeovers and corporate restructuring advice
• Equity capital markets and equity and debt capital management and raising
• Project financing
• Specialised funds management including infrastructure and private equity funds
• Specialised leasing and asset financing
• Manufacture and distribution of wholesale and retail financial products
• Institutional cash equities and equities research
  

Macquarie Securities Group* (MacSec)

Macquarie Securities is a full-service securities business in Asia and Australia, specialising in:

• Institutional and corporate stockbroking
• Equities research
• Equity-linked investment, trading and risk management products
• Services for hedge funds. including market access, leverage, stock-borrowing and execution
• Stock-borrowing and lending
• Structured equity finance

* Macquarie Securities Group was formed in April 2008 from the merger of the Equity Markets Group and Macquarie Capital Securities.

Treasury and Commodities Group

The Treasury and Commodities Group encompasses:

• Commodity, energy and environmental financial products, physical and derivatives structuring and trading
• Commodity (metals, bullion and agricultural) and energy finance
• Futures (listed derivatives) execution and clearing
• Debt arrangement, structuring and placement activities
• Interest rate and credit derivatives structuring and trading
• Foreign exchange trading and structuring
• Emerging market bond broking

Macquarie Funds Group^ (MFG)

Macquarie Funds group is a full-service fund manager with over 25 years' experience and offices in 17 locations around the world.

Macquarie Funds Group offers a diverse range of products including:

• Managed funds across a wide range of asset classes including cash, fixed income, currencies, listed property, equities, listed infrastructure and private equity
• Funds-based structured products
• Hedge funds
• Fund of funds
• Responsible entity and back-office services

^Macquarie Funds Group was formed in August 2008 from the merger of the funds and fund-based structured product businesses within the Funds Management Group, Equity Markets Group and Macquarie Capital Products.

Banking and Financial Services Group (BFS)

(formerly the Banking and Securitisation and the Financial Services Groups)

The Banking and Financial Services Group is Macquarie’s retail banking and financial services business with operations in Australia, New Zealand, Asia, North America and Europe. The Group was formed in February 2008 through the merger of the Banking and Securitisation Group and the Financial Services Group. Products and services include:

• Cash management trust and Wrap platform
• Full service stockbroking
• Investment lending including margin and capital protected lending
• Relationship banking services for businesses and professionals
• Private banking and executive wealth management
• Private portfolio management
• Residential and commercial mortgages
• Secured and unsecured personal loans
• Credit cards (issuer and wholesale service provider)
• Life insurance
• Funds management
• Online broking
  

Real Estate Group

Macquarie's Real Estate Group has businesses in Australia, North America, Asia, Europe and South Africa and provides a range of innovative real estate-related services including:

• Creation and fund management of listed real estate investment trusts (REITs), unlisted real estate funds and joint ventures
• Asset management services
• Investment and development project finance
• Unlisted equity raising, debt/transaction origination and structuring, real estate securitisation
• Real estate development
• Real estate research identifying market trends and opportunities