2001 Annual Review - Macquarie Bank


	Divisions

	Direct Investment Division
	The Direct Investment Division manages the Bank’s direct investment activity through Bond Street Investments (a wholly-owned subsidiary) and six unlisted managed trusts. Since inception about $400 million in capital has been committed to the Division, with $230 million invested in 37 privately held Australian businesses.

	The Division had another busy year with considerable activity in fund-raising, new investments and realisations. Earnings were somewhat lower than in the prior corresponding year, reflecting a single completed realisation – the initial public offering (IPO) of Hermes Precisa Australia (HPA) in December. Both Macquarie Investment Trust II and Macquarie Investment Trust III (MIT III) held shares in HPA and received very satisfactory returns from this. Although offers for three other investee companies were received from trade buyers, these transactions were not completed by 31 March 2001.

	The fund-raising for MIT III yielded total commitments of $207 million, bringing total funds committed to the Division to approximately $360 million.

	All new investments are now being made through MIT III. During the year the trust completed one follow-on and four new investments, including investments in HPA, B HiFi, e-Bill, Staging Connections and Space Health Clubs, plus an additional follow-on investment in Nardell Coal. During March the Trust made two further investment commitments that are expected to settle during the first quarter of the new year. One of these, the $260 million management buyout of SCI Australia (the largest funeral business in Australia), is among the largest buyouts completed in recent years. Although the level of competition in the direct investment industry has increased dramatically, the Division is seeing a steady stream of business opportunities and is well positioned for further growth.
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	Quantitative Applications Division
	The Quantitative Applications Division works in partnership with individual Bank businesses. The Division supports an expanding library of derivative-pricing and analytical tools that facilitate risk management.

	The Division contributes to the financial community via derivatives courses and conferences. During the year the Division was invited to present at the First Conference of the Japan Academic Society for Financial Planning in Yokohama and later this year will present in Boston at the Risk 2001 USA Conference.
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	Economic Research Division
	The Economic Research Division provides forecasts and analytical advice on economic and financial trends to operating Divisions and clients of Macquarie Bank. It also communicates the Bank’s views on significant economic policy issues to media and industry groups.

	During the year the Division assumed responsibility for providing economic research to the Bank’s equities institutional client base. This is part of an ongoing effort to establish the Macquarie Research sub-brand and achieve greater consistency in communicating economic analysis.

	An important element of this strategy is the closer alignment of the Economic Research Division with both the Bank’s Treasury and Commodities Group and Corporate Advisory and Institutional Stockbroking Group. In the past year the Division has supported this initiative by increasing its focus on client relationships and making more frequent marketing visits to promote economic-research publications and services offered by the Macquarie Research teams.
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	Corporate Affairs Group
	The Human Resources and Administration Division provides key support services including recruitment, remuneration, employee relations, training and staff development, guest relations, business continuity, facilities management, library services, office services and the administration of interstate and overseas offices.

	Human Resources assists all areas of the Group in recruiting, developing, rewarding and retaining the very best people. This is achieved by:

–	sophisticated recruitment strategies and techniques

–	leadership, personal-development and training programmes that help people realise their potential and expand their career horizons

–	performance-based reward mechanisms.

	Administration delivers high-quality office environments and services to support each business. During the year the team was involved in significant office expansions and relocations in Australia and internationally.

	The Corporate Communications Division is responsible for protecting the strength and integrity of the Macquarie Bank brand. The Division oversees the Bank’s public, media, government and community relations in Australia and internationally. It is involved in managing name and reputation risks across the organisation. The Division supports the operating businesses in their marketing and promotional activities, and coordinates brand management, advertising, sponsorship management and client relations. Corporate Communications also administers the Macquarie Bank Foundation.

	The Company Secretarial and Investor Relations Division is responsible for the Bank’s share registry, compliance with certain ASX and ASIC requirements, employee-equity schemes, professional-risks insurances and investor relations.

	During the year the Division introduced the Deferred Exercise Share Option Plan amendments to the Bank’s Employee Option Plan, to encourage long-term holdings of the Bank’s shares by senior employees. It made important enhancements to the Bank’s insurances and continued to improve efficiency in administering one of Australia’s largest corporate structures.

	Investor Relations continues to service the Bank’s growing shareholder base. It is currently focused on increasing retail shareholder numbers and raising awareness of the Bank as an investment among institutions in Asia, North America and Europe.

	The Financial Operations Division is responsible for all financial operations of the Bank including management information, financial planning, budgeting, capital management and statutory and external financial reporting. It maintains a settlements function independent of the operating areas to provide prudential control.

	During the year the Division was responsible for successfully implementing the Bank’s GST project. In addition to key strategic projects, the main focus of the Division continues to be advising and assisting the business units on issues that impact their ongoing operations, including business-process improvements, new legislation and overseas expansion.

	The Taxation Division provides taxation support to all areas and manages the Bank’s relationship with revenue authorities and external advisers. The Division had a busy year preparing the Bank for GST implementation and other taxation-reform measures. As the Bank continues to expand its overseas operations, the Division will stay closely involved, ensuring taxation compliance in all operating jurisdictions.

	The Internet Division has been created to maximise the returns Macquarie can achieve from its use of internet technologies. Working with business Divisions of the Bank, it will implement a review of the Group’s websites both in Australia and internationally and deliver a new intranet platform to enhance productivity and communication.

	The Division will also manage the investments made by the Bank in new technology businesses associated with financial services. These investments include AnnounceTV.com (which disseminates company announcements, AGMs and other finance-related communications using webcasting technologies), Enrichment.com.au (which provides aggregation of financial information offering customers a single view of their online holdings), and Spectrumdesk.com (online exchange for radio frequency spectrum).
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	Information Services Division
	The Information Services Division (ISD) is responsible for:

–	managing the Bank’s technology infrastructure

–	supporting, maintaining and enhancing existing business systems

–	delivering and deploying new systems, technologies and services.

	ISD provides each major business in the Bank with a dedicated team that works closely with that business to understand its particular technology needs.

	A major IT Development Programme was commenced to support the business objectives of the Financial Services Group, formed in June 2000. A number of projects have already been delivered successfully and the programme is positioned to continue over the next 18 months.

	In addition, there are a variety of system replacement and enhancement initiatives in progress within the Treasury and Commodities, Equity Markets and Banking and Property Groups.

	The Bank’s network continues to expand with four new international offices. To ensure continued viability of communications the global network was upgraded to establish a flexible infrastructure capable of supporting new overseas offices and provide improved resilience for existing offices.
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	Risk Management Division
	Strong prudential management has been a key to the Bank’s success over many years. The Risk Management Division (RMD) is an independent, centralised unit responsible for assessing and monitoring risks across the Bank – market risk, credit risk, legal compliance risk, operational risk and liquidity risk. RMD personnel liaise closely with all operating areas to ensure risks are understood and properly managed. A full Risk Management Report is contained in the 2001 Financial Report.

	Credit assesses the credit risk on lending and trading transactions. It allocates credit limits for counterparties and countries, develops procedures for measuring credit exposures and reviews the adequacy of legal documentation.

	Finance reviews market risk in the trading and banking books. It sets trading limits and monitors exposures against those limits daily. It is responsible for liaison with the Australian Prudential Regulation Authority (APRA) and compliance with APRA’s prudential standards. Finance is also responsible for the Group’s funding and liquidity policies.

	Operational Risk Review independently reviews and reports on the management of operational risks, focusing on areas of greatest current and emerging risk.

	Compliance oversees measures to ensure compliance with applicable regulations and laws in Australia and overseas, and with obligations of fidelity and confidence to clients and counterparties.
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