Macquarie Bank Ltd.

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Macquarie Bank Ltd.

Level 15, No. 1 Martin Pl.
Sydney
NSW 2000
Australia
Telephone: +61 2 8232 3333
Fax: +61 2 8232 7780
Web site: http://www.macquarie.com.au

Public Company
Incorporated: 1969 as Hill Samuel David Clarke
Employees: 5,716
Total Assets: $32.96 billion (2004)
Stock Exchanges: Australian
Ticker Symbol: MBL
NAIC: 522110 Commercial Banking; 522292 Real Estate Credit; 522320 Financial Transactions Processing, Reserve, and Clearing House Activities; 523120 Securities Brokerage; 523130 Commodity Contracts Dealing; 523210 Securities and Commodity Exchanges; 523920 Portfolio Management; 523999 Miscellaneous Financial Investment Activities

Macquarie Bank Ltd. is Australia's leading domestically owned investment bank, and also is one of the leading independent investment banks in the world. The company has more than 5,000 employees, with operations in 22 countries, and direct investments in a wide range of companies throughout the world. Macquarie operates through seven primary—and mostly autonomous—business groups. The group's Assets and Infrastructure Group controls some AUD 7 billion in global infrastructure assets, such as toll roads, airports (including the Sydney international airport), railroads, seaports, telecommunications networks, water supply and sewage pipelines, and energy transmission and other utilities. The Treasury and Commodities group is active in the markets for precious metals, foreign exchange, debt markets, agricultural commodities, and capital management markets in Australia, the United States, the United Kingdom, Brazil, Japan, Korea, and Hong Kong. The Corporate Finance Group provides mergers and acquisition and other corporate advisory services, while its Equity Capital Markets division provides services ranging from initial public offering (IPO) advice and management to share buy-backs, securities issuing, and the like. Macquarie's Equity Group is one of the top equity brokerages in Australia, targeting the institutional and corporate segments. The group also operates an Equity Markets division providing financial services and products to the retail and wholesale markets for clients in Australia, Hong Kong, South Africa, and elsewhere. Macquarie's Investment Services Group manages a portfolio of more than AUD 20 billion, primarily for its Australian clients, but also through joint ventures in South Africa, Korea, and Malaysia. The Banking and Property Group operates through eight divisions worldwide, including property investment management, financing, banking, securitization, lending, and professional and business banking services. Last, the Financial Services Group, formed in 2000, is the company's retail financial services arm, with more than AUD 10 billion in funds under management. In 2004, Macquarie acquired the Asian equities operations of The Netherlands' ING, providing the bank with a distribution network in ten of the region's major markets. Macquarie was formed in 1985 as one of Australia's independent private banking groups. Led by CEO Alan Moss, the bank boasts total assets of nearly $33 billion.

Creating Australian Trading Bank in the 1980s

Macquarie Bank was founded in 1969 as the Australian subsidiary of British investment house Hill Samuel. That company stemmed from a small business founded by Marcus Samuel in London in 1832. Samuel started out as an importer, bringing in goods, such as shells, from the Far East. By the middle of the 19th century, M. Samuel & Co. had developed a significant export business, shipping goods throughout Europe and to North America as well. Toward the end of that century, Samuel had begun trading oil, at first shipping cases from Russia to Japan. The company quickly launched full-scale oil shipping operations, and its first ship, the Murex, earned the distinction of being the first to pass through the Suez Canal. While Samuel maintained its focus as an investment house, the oil division later developed into the Shell Oil company, taking its name from one of Samuel's early trading successes.

In 1965, Samuel merged with the investment firm Philip Hill, Higginson, Erlangers Ltd., becoming Hill Samuel. In 1969, the company spotted the rising opportunities to provide localized investment banking services to the fast-growing Australian market, and established a subsidiary there, Hill Samuel David Clarke. That office became operational at the beginning of 1970, located in Sydney, and boasting a staff of just three people. Hill Samuel itself remained an important force in the U.K. and global merchant banking markets, later merging with the TSB Group in the late 1980s, which in turn merged with Lloyds Bank in 1995.

Hill Samuel David Clarke, set up by former Hill Samuel executive Stuart David Clarke, grew strongly through the 1970s and changed its name to Hill Samuel Australia as it expanded its focus to include direct investments in 1982. By then, the company had hired David Moss, who later emerged as a driving force behind the group's development into a world-leading investment bank.

Moss had started his career at the Australian Industries Development Corporation, before attending Harvard Business School, where he attracted the attention of Hill Samuel's CEO Tony Berg, in Cambridge on a recruiting mission. Moss joined Hill Samuel Australia in 1977 and by 1984 had been put in charge of establishing and leading the bank's risk management business. That operation became a critical part of the group's later growth.

Focused on the Australian market into the mid-1980s, Hill Samuel Australia made its first international move in 1985, setting up a branch in New Zealand. By then, however, Hill Samuel Australia had begun to outgrow its position as a subsidiary of a foreign company which, under Australian banking rules, was not allowed to establish full commercial banking services in the country. The Australian government, at the same time, had begun instituting a deregulation of the country's banking industry, including a proposal to allow a limited number of foreign banks to establish operations in Australia.

In 1981, Hill Samuel Australia began preparations for its transformation into an independent operation capable of competing in the deregulated Australian market. Because Hill Samuel remained small compared with the major banks petitioning for an entry into the country, the subsidiary determined that its best chance of winning one of the coveted new commercial banking licenses was in re-establishing itself as an independent, Australian-based business. In 1985, therefore, Hill Samuel Australia approached the Australian federal government with a proposal to change its shareholding structure in order to qualify for a license to operate as an Australian trading bank.

The Federal Treasurer agreed, and granted Hill Samuel Australia its license that same year, marking only the second time a private trading bank had been created in the country since the end of the 19th century. As part of that process, Hill Samuel reduced its share of the new bank to less than 14 percent. Hill Samuel Australia then changed its name, becoming Macquarie Bank.

Inspiration for the group's new name came from Lachlan Macquarie, one of the first governors of the early Australian settlement, who was given much of the credit for enabling Australia to shed its original role as a penal colony and become one of the Asia-Pacific region's most vibrant economies. One of Macquarie's achievements had been resolving an early currency shortage at the colony by creating a new currency when Macquarie bought up a number of Spanish coins, then worth five shillings, and had holes punched into them, creating the "Holey Dollar," worth five shillings, and a second coin, "the Dump," valued at one shilling three pence. In recognition of that early and inspired move, Macquarie Bank adopted the Holey Dollar as its own logo.

International Investment Bank in the New Century

From the start, Macquarie adopted a relatively flat operating structure, with central management overseeing a number of autonomously operating groups and divisions. In this way, the company encouraged an entrepreneurial culture from the outset, with its operations becoming directly responsible for, and rewarded by, the success of their business. In 1988, the bank's growing interests in direct investments led to the creation of a dedicated unit, Macquarie Direct Investment. In support of that business, the company established a third-party investment fund, Macquarie Investment Trust, later succeeded by the larger Macquarie Investment Trust II in 1994.

In the meantime, the company had brought in consultants to help it determine its future strategy. The consultants recommended that Macquarie limit its operations to the Australian market, rather than go head to head with its far larger competitors on the global market.

Yet Macquarie found it difficult to heed this advice. In the early 1990s, for example, Macquarie headed to the United States, forming its Security Capital Markets Group joint venture, later renamed as the Macquarie Capital Partners (MCP). By the beginning of the 2000s, MCP had already been involved in transactions worth more than AUD 33 billion, and also had been instrumental in raising more than AUD 25 billion debt and equity capital. Macquarie also moved into the Canadian market in the early 1990s, where it emerged as a major infrastructure investment group, adding to its portfolio of toll roads, airports, and the like.

Company Perspectives:

What We Stand For: Macquarie Bank aspires to be a preeminent provider of financial services over the long haul. We recognise that, however our achievements to date are judged, the quest for improvement is never ending.

The Macquarie culture is represented by the way in which we act and work together. The values to which we aspire can be summarised in six principles: Integrity; Client commitment; Strive for profitability; Fulfilment for our people; Team work; Highest standards.

South Africa represented another early international market for Macquarie Bank, where, through a joint venture, the bank developed significant activity in the bullion and other treasury-related commodities markets. The company later boosted its South African operations, establishing an infrastructure equity joint venture with Old Mutual Asset Managers in 2000, as well as a portfolio funds management joint venture with Samlam Ltd. In 2003, the company stepped up its South African presence again, forming an alliance with NedBank Ltd. to market equity derivatives products.

The fast-growing Asian markets became natural targets for Macquarie as well. The company opened an office in Hong Kong in 1994, then turned to the mainland, opening an office in Tianjin, China, in 1995, a property development operation. In 1996, the company opened a Shanghai office, managing an 88,000-square-meter residential complex in Pudong. As the Chinese market matured in the early 2000s, Macquarie added mortgage and securitization services in Shanghai, in 2002, then formed Macquarie Investment Advisory (Beijing) Co. in 2004 to offer investment and asset management for the Beijing and Chinese markets.

By the end of the century, Macquarie had added operations primarily through joint ventures with local partners in Malaysia and Korea. The company's Korean extension started in 1998, with an alliance with Kookmin Bank. Also in Korea, Macquarie formed a joint venture with Shinhan Bank targeting the investment banking market, and particularly the property development and infrastructure sectors. The company also formed a joint venture in 2000 with IMM Asset Management, which built a portfolio of nearly AUD 3 million in assets under management by 2003. In 2004 another Korean venture, Macquarie International Asset Management Company, successfully brought its Macquarie Central Office Corporate Restructuring REIT to the Korean stock exchange.

Macquarie also entered the Japanese market at the end of the 20th century. In 1999, the bank formed a joint venture with the Industrial Bank of Japan, in order to trade and issue equity derivatives for the Japanese market. That venture placed Macquarie as the first Australian bank to begin doing business in Japan's newly deregulated banking sector.

In 2004, Macquarie significantly boosted its presence in the Asian region when it agreed to acquire the ten offices of ING's Asian equity operation. The move was described as a crucial part of Macquarie's expansion in the region, giving it a Pan-Asian distribution network for the first time.

Macquarie had in the meantime continued to develop its interests elsewhere in the world. At home, for example, the company boosted its national presence through an extension into western Australia. The move, which included mergers with Nevitts, in Brisbane, and Day Cutten, in Adelaide, at the end of the 1990s, not only positioned Macquarie closer to the important natural resources region in Australia, but also moved its operations closer to its growing Asian interests. A key part of Macquarie's success was its ability to locate and dominate a number of niche markets, such as infrastructure holdings, over-looked by its larger competitors. Fueling the company's growth was its decision to go public, listing on the Australian Stock Exchange in 1996.

Macquarie extended its American interests south in 2000 with the creation of a partnership with Banco do Brazil to price risk protection to the country's agricultural sector, as well as derivative and other equity structured products.

Macquarie also had established a presence in Europe, with a strong focus on the German-speaking market. First established in 1994, Macquarie's operations grew to include offices in Frankfurt and Vienna. In these markets the company targeted cross-border leasing and project finance advisory services, in particular for the infrastructure and related markets. With more than 5,000 employees and nearly $33 billion in total assets, Macquarie had emerged as a major player in the global investment market.

Principal Subsidiaries

A-Train AB (Sweden); A-Train Invest AB (Sweden); The Falcon General Partnership (Hong Kong); Generator Bonds Limited (New Zealand); Hills Motorway Management Limited; Horizon Energy Investment Management Limited; ING International Holdings Limited (U.K.); Macquarie (HK) Financial Services Limited (Hong Kong); Macquarie Airports Management Limited; Macquarie Americas Corporation (U.S.A.); Macquarie Communications Infrastructure Management Limited; Macquarie CountryWide Management Limited; Macquarie Diversified Portfolio Investments Pty. Limited; Macquarie Equity Capital Markets Limited; Macquarie European Infrastructure Fund Limited Partnership; Macquarie Funds Management Holdings Pty. Limited; Macquarie Global Debt Investments No. 1 Pty. Limited; Macquarie Infrastructure Investment Management Limited; Macquarie International Asset Management Co. Limited (Korea); Macquarie Investment Management (UK) Limited; Macquarie Investment Trust; Macquarie Leisure Management Limited; Macquarie Marinas Management Limited; Macquarie Office Management Limited; Macquarie Specialised Asset Management Limited; Mongoose Pty. Limited; South East Water PLC (U.K.); SPAL Limited.

Key Dates:

1832:: Marcus Samuel & Co. is established in London.
1965:: Marcus Samuel merges to form Hill Samuel.
1969:: The Hill Samuel David Clarke subsidiary is created in Australia, subsequently renamed as Hill Samuel Australia.
1982:: Hill Samuel Australia begins direct investment operations in Australia.
1985:: Hill Samuel Australia receives a license to function as a commercial trading bank in Australia and changes its name to Macquarie Bank Ltd.
1988:: The bank establishes a dedicated direct investment division.
1991:: Macquarie Bank enters the U.S. market.
1994:: A German office is established in Frankfurt.
1995:: Macquarie establishes its first office in China, in Tianjin.
1996:: Macquarie goes public with a listing on the Australian Stock Exchange.
1999:: A joint venture with Industrial Bank of Japan is established.
2000:: An alliance with Banco do Brasil is established.
2004:: Macquarie acquires ING's Asian equity offices, gaining a Pan-Asian distribution network with operations in ten Asian markets.