## Operations 

For internal reporting and risk management purposes, Macquarie 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. 

A summary of the performance of Macquarie’s operating segments is provided below. Further information on Macquarie’s operating segments can be found in Note 3 to the financial statements contained within the 2014 Financial Report. 

Annuity-style income is provided by three significant businesses: Macquarie Funds, Corporate and Asset Finance and Banking and Financial Services, which are delivering superior returns following years of investment and recent acquisitions. Macquarie’s three capital markets facing businesses: Macquarie Securities, Macquarie Capital and Fixed Income, Currencies and Commodities are well positioned to benefit from improvements in market conditions with strong platforms and franchise positions. 

Macquarie’s annuity style businesses continued to perform well, generating a combined net profit contribution for the year ended 31 March 2014 of $A2,137 million, an increase of 26 per cent on the prior year. The depreciation of the Australian dollar relative to the prior year was a significant contributor to the improved performance of Macquarie Funds, driving increased base fee income, and Corporate and Asset Finance, driving increased net interest and trading income and net operating lease income. Macquarie Funds also benefited from improved performance fees and returns from principal investments. Banking and Financial Services’ profit contribution was also up on the prior year, benefiting from growth in loan and deposit volumes and the gain on disposal of an investment in OzForex. 

Macquarie’s capital markets facing businesses delivered a combined net profit contribution for the year ended 31 March 2014 of $A1,113 million, an increase of 68 per cent on the prior year. For Macquarie Securities, the key drivers in the improved performance compared to the prior year were improved global equity market conditions combined with the wind down of legacy activities, while Macquarie Capital benefited from improved equity capital markets compared to the prior year. Fixed Income, Currencies and Commodities’ profit contribution improved on the prior year mainly due to improved trading opportunities from a general improvement in market conditions across most markets, and increased volatility in commodity markets driving a higher level of client hedging activity. 

Macquarie Funds  is a global asset manager offering a diverse range of products. 

Macquarie Funds delivered a net profit contribution of $A1,051 million, up 39 per cent on the prior year. The result was driven by increased annuity base fee income, with a 24 per cent increase in Macquarie Funds' AUM to $A424.8 billion, improved performance fee income and higher equity accounted gains. The increase in AUM was due to a combination of the acquisition of ING Investment Management Korea, a top 10 asset manager in Korea with approximately $A24 billion in AUM on acquisition in December 2013, favourable currency and market movements and positive net flows. Macquarie Investment Management is at record AUM and Macquarie Infrastructure and Real Assets raised more than $A5.3 billion in new equity commitments to invest in North American and Asian infrastructure, Mexican real estate, UK energy and global agriculture. It invested $A4.0 billion of equity in portfolio assets across the globe and divested assets of over $A6.5 billion. 

Corporate and Asset Finance  specialises in corporate debt and asset financing across aircraft, motor vehicles, technology, healthcare, manufacturing, industrial, energy, rail and mining equipment. 

Corporate and Asset Finance delivered a net profit contribution of $A826 million, up 19 per cent on the prior year. Corporate and Asset Finance increased its asset finance and corporate lending portfolio by 14 per cent to $A25.5 billion at 31 March 2014. Corporate and Asset Finance’s corporate and real estate lending portfolio increased by 12 per cent to $A9.0 billion, with additions of $A3.8 billion in new primary financings and loans acquired in the secondary market. Asset quality within the lending portfolio remained sound and the portfolio continued to generate strong overall returns. The asset finance portfolio increased by 14 per cent to $A16.5 billion, driven largely by strong growth in the motor vehicle and equipment finance operations, as well as the impact of foreign exchange movements. Other activities during the year included the establishment of Macquarie Rotorcraft Leasing, a helicopter leasing business; the initiation of commercial solar energy financing in Australia; and continued expansion of the UK meters portfolio and the mining equipment finance business. Securitisation activity continued with $A2.8 billion of motor vehicle and equipment leases and loans securitised during the period. 

