## Understanding the data behind our performance 

Owing to recent retrospective changes in Australian income tax regulations which required that IOOF recognise a $63 million deferred tax liability, the statutory profit was significantly lower than the prior year. This liability has not resulted in a cash outflow for the group and will unwind to profit in future periods in line with the amortisation of the group’s intangible assets. This entry has no impact on IOOF’s dividend paying capacity. 

The key drivers affecting the underlying financial performance for the financial year ended 30 June 2012 were: decreased revenues associated with decreases in the market value of the assets underpinning IOOF’s Funds Under Management, Administration, Advice and Supervision (FUMAS) and net institutional outflows in Funds Under Management. This was partly offset by the increase in funds under advice associated with the DKN Financial Group acquisition. 

The uncertain economic environment responsible for the market value declines noted has also had an unfavourable impact on other revenue lines, most notably stockbroking where the sector’s trade volumes generally remain low in comparison to the years preceding the global financial crisis. 

IOOF constrained its costs to below inflation with the exception of increasing expenditure on its technology and brand to promote the long term interests of its businesses. 

## Funds Under Management, Administration, Advice and Supervision (FUMAS) 

The major influences on the growth of FUMAS include: 

## Market performance 

The largest contributor to the increase in FUMAS in 2012 was the acquisition of funds under advice associated with the DKN Financial Group. Generally, the performance of the markets in which IOOF FUMAS is invested, in particular equities, fixed interest and property, will influence financial performance. IOOF revenue will grow or reduce with the positive or negative impact of market valuations on average FUMAS for the current reporting period relative to the average FUMAS from the prior period. 

## Number of investors 

The number of investors in IOOF products affects the level of FUMAS and therefore IOOF’s performance. Investments can be placed into IOOF products through superannuation funds, via independent and aligned financial advisers or directly with IOOF. Funds can be invested into IOOF platforms or into external platforms that include IOOF products. 

## Number of advisers 

Independent and aligned financial advisers are a key source of investment funds as they provide a sales distribution network for IOOF products. The number of advisers supporting IOOF products, therefore, influences the growth in FUMAS. 

## Investment performance 

Good investment performance attracts funds. Individual fund performance is disclosed on the IOOF website at www.ioof.com.au 

## Shareholder value 

Shareholder value can be measured by: 

## Total shareholder return 

Total shareholder return (TSR) measures the change in share value over a specified period together with the return by way of dividends received. IOOF’s TSR for the year to 30 June 2012 was 20 per cent. TSR in the period from the acquisition of Australian Wealth Management on 30 April 2009 to 30 June 2012 is 73 per cent in total and 20 per cent on an annualised basis. 

## Earnings per share 

Basic earnings per share decreased from 43.1 cents per share down to 8.4 cents per share. This is due to the significant deferred tax liabilities raised in relation to intangible assets. 

On a Diluted basis, earnings per share were 8.3 cents per share compared to 42.9 cents per share for last year. 

On an underlying pre amortisation earnings basis, where the impact of certain non-operational and/or accounting adjustments is removed, basic earnings per share were 41.6 cents per share compared to 48.4 cents per share for last year. This reflected a lower level of underlying earnings and a reasonably stable weighted average number of issued shares. 

## Franking credits 

The balance of the franking account at 30 June 2012 of $42.7 million will support the payment of fully franked dividends as recommended by Directors. 

