## Note 3 

## Segment reporting 

## (i) Operating segments 

For internal reporting and risk management purposes, the Consolidated Entity is divided into six operating groups and a corporate group. These segments have been set up based on the different core products and services offered. Segment information has been prepared in conformity with the Consolidated Entity’s segment accounting policy. 

Macquarie Funds Group  is the Consolidated Entity’s funds management business. It is a full-service asset manager, offering a diverse range of capabilities and products including investment management, infrastructure and real asset management and fund and equity based structured products. 

Corporate and Asset Finance is the lending and leasing business of the Consolidated Entity. 

Banking and Financial Services Group is the primary relationship manager for the Consolidated Entity’s retail client base. The group brings together the retail banking and financial services businesses providing a diverse range of wealth management products and services to financial advisers, stockbrokers, mortgage brokers, professional service industries and the end consumer. 

Macquarie Securities Group activities include institutional and retail derivatives, structured equity finance, arbitrage trading, synthetic products, capital management, collateral management and securities borrowing and lending. It is a full-service institutional cash equities broker in the Asia Pacific region and South Africa, and offers specialised services in other regions. It also provides an equity capital markets service through a joint venture with Macquarie Capital. 

Macquarie Capital comprises the Consolidated Entity’s corporate advisory, equity underwriting and debt structuring and distribution businesses, private equity placements and principal products. 

Fixed Income, Currencies and Commodities provides a variety of trading, research, sales and financing services across the globe with an underlying specialisation in interest rate, commodity and foreign exchange related institutional trading, marketing, lending, and clearing or platform provision. 

Corporate  is not considered an operating group and includes head office and central support functions including Group Treasury. The Corporate segment also holds certain investments not aligned with any of the Operating Groups. Items of income and expense within the Corporate segment include the net impact of managing liquidity for Macquarie, earnings on capital, non-trading derivative volatility, earnings from investments, unallocated head office costs and 

employment related costs of central support functions (service areas), income tax expense and certain distributions attributable to non controlling interests (NCI) and holders of loan capital. 

## Internal transactions 

All transactions and transfers between segments are determined on an arm’s length basis and are included within the relevant categories of income. These transactions eliminate on aggregation/consolidation. Below is a selection of the key policies. 

## Internal funding arrangements 

Group Treasury has the responsibility for managing funding for the Group and Operating Groups obtain their funding from Group Treasury. The interest rates charged by Group Treasury are determined by the currency and term of the funding and are fully costed. 

Generally, Operating Groups may only source funding directly from external sources when there is recourse only to the assets being funded and not to the Group. 

Deposits are a funding source for Macquarie. Banking and Financial Services receives a deposit premium from Group Treasury on deposits they generate. This deposit premium is included within net interest and trading income for segment reporting purposes. 

During the year ended 31 March 2014, Group Treasury revised internal funding transfer pricing arrangements relating to Banking and Financial Services’ deposit and lending activities. Comparative information presented in this document has been restated to reflect the current methodology. 

## Transactions between Operating Groups 

Operating Groups that enter into arrangements with other Operating Groups must do so on commercial terms. There is a requirement for accounting symmetry in such transactions. 

Internal transactions are recognised in each of the relevant categories of income and expense as appropriate. 

## Internal management revenue/charges 

Internal management revenue/charges are primarily used to recognise an Operating Group’s contribution to income tax expense and benefits. Non-assessable income generated by an Operating Group results in management revenue added to that group’s operating result. Conversely a non-deductible expense results in a management charge to the operating result. These internal management revenue/charges are offset by an equal and opposite amount recognised in the Corporate segment such that on aggregation the total nets to nil. 

