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Turn your life goals into a reality
ioof.com.au
Contents
About IOOF
Our major brands
Chairman and Managing Director’s commentary
Our financial performance
Directors
Environmental, Social & Governance report
IOOF Foundation
Financial report
1
2
3
7
10
13
21
23
Share registry
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
Auditor
KPMG
Tower Two, Collins Square, 727 Collins Street
Docklands VIC 3008
Solicitors
King & Wood Mallesons
Level 50, Bourke Place
600 Bourke Street
Melbourne VIC 3000
Bankers
Commonwealth Bank Limited
Tower 1, 201 Sussex Street, Sydney NSW 2000
Securities exchange listing
IOOF Holdings Ltd shares are listed on the
Australian Securities Exchange
(ASX: IFL)
Website address
www.ioof.com.au
Corporate directory
(as at 28 September 2017)
Directors
Mr George Venardos
B.Com, FCA, FGIA, FAICD, FTIA
Chairman
Mr Christopher Kelaher
B.Ec, LL.B, F Fin
Managing Director
Ms Elizabeth Flynn
LL.B, Grad Dip AppCorpGov, FAICD, FGIA, FCIS, F Fin
Ms Jane Harvey
B.Com, MBA, FCA, FAICD
Mr Allan Griffiths
B.Bus, DipLi
Mr John Selak
Dip Acc, FCA, FAICD
Company Secretary
Mr A Paul M Vine
LL.B, FGIA, GAICD
Notice of Annual General Meeting
The Annual General Meeting of IOOF Holdings Ltd
will be held at:
Verandah Room
Grand Hyatt
123 Collins Street
Melbourne, Victoria 3000
Time 9.30am
Date 23 November 2017
A formal notice of meeting is available on our website
and has been sent to shareholders
Principal registered office in Australia
Level 6, 161 Collins Street
Melbourne, VIC 3000
(03) 8614 4400
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About IOOF
At IOOF, we have been helping Australians secure their financial independence for over 170 years, and
have grown to become a leading provider of quality financial advice, products and services.
Today, IOOF is one of the largest financial services group in Australia. We are an ASX top 100 company with $147.2 billion in funds
under management, administration, advice and supervision, and we currently provide services to more than 500,000 customers
around Australia.*
Our broad range of products and services means that our ability to provide tailored solutions to help our clients achieve their
financial goals is unparalleled.
What does IOOF do?
IOOF provides a range of wealth management solutions for Australians, including:
Financial Advice and
Distribution Services
We believe in the value of
financial advice. Whether
provided through the
organisations we partner
with or our own extensive
network of financial advisers
and stockbrokers, our goal is
to help clients build, maintain
and protect their wealth.
Platform Management
and Administration
We offer financial advisers,
their clients and hundreds
of employers around Australia
leading superannuation and
investment administration
platforms. Our unique open
architecture model means
we not only offer our IOOF
platforms but selective leading
external platforms to ensure
advisers and their clients
can choose the product and
service solutions that best suit
their individual needs.
Investment Management
Through our investment
management expertise,
we offer a range of highly
rated multi-manager
solutions that add value on
several fronts; those being
our active management
of underlying investment
managers, our dynamic asset
allocation and our robust
risk management approach.
We also offer a tax effective
alternative to Super through
our leading investment bond.
Trustee Services
Our trustee business includes
compensation trusts, estate
planning and administration,
personal trustee services,
philanthropy, self-managed
super fund (SMSF) solutions
and corporate trust services.
* As at 30 June 2017
1
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Our major brands
Financial advice
Platform management
and administration
Investment management
Trustee
IOOF Employer Super
IOOF MultiMix
IOOF PlatformConnect
IOOF MultiSeries
Corporate
Trust
Private Client
Services
Superannuation
IOOF Alliances
IOOF Pursuit
IOOF WealthBuilder
As at 28 September 2017
2
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Chairman and Managing Director’s
Commentary
George Venardos
Christopher Kelaher
Meeting our commitments to clients,
advisers and shareholders
2017 has delivered another year of consistent, strong financial performance.
IOOF’s unique value proposition
2017 was hallmarked by solid financial
results and positive momentum in
each of our businesses. During the
year, we achieved outstanding funds
growth, exceptional cost control and our
underlying business performance metrics
are on an upward trajectory. Our strong
balance sheet remains and will allow us to
capitalise on future growth opportunities
when they arise.
Our advice-led wealth management
strategy, multi-brand model and unique
open architecture means that IOOF is
an extremely attractive alternative for
advisers looking to partner with a non-
bank aligned dealer group. In addition,
we have delivered on implementation of
strategic initiatives – including ClientFirst
and the IOOF Advice Academy – ensuring
we are providing the level of service that
often exceeds advisers’ and their clients’
expectations.
3
3
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Meeting commitments delivers
shareholder value
Strong organic growth
continues
Underlying profit for the year was
$169.4m. For our shareholders, this strong
financial performance translated into a
total dividend for the full year of 53cps,
fully franked.
This result is a testament to the continued
hard work and dedication of all of our
people, the Leadership Group and our
fellow Board members. Thank you all for
your ongoing commitment to delivering
efficiencies and generating long-term,
sustainable shareholder value. value.
2017 saw IOOF recording an 18th
consecutive quarter of positive platform
net inflows, with $1.2 billion of net
inflows. This is an increase of 130% vs 2016
and demonstrates that our commitment
to service excellence is resulting in
significantly increased flows.
Our adviser numbers continue to grow,
which appears to be counter to industry
trend. Advice net inflows of $3.0 billion,
up 131% vs 2016, included $976 million
from 33 new advisers joining IOOF from
another licensee. Our advice-led strategy
is leading to record levels of interest in our
advice businesses. Our open architecture
approach continues to set us apart from
our peers. The choice that this affords is
a major reason why advisers choose to
partner with an IOOF advice group, as it
is a tangible demonstration of offering
solutions which best service the needs
of our advisers and their clients.
The value of financial advice
At IOOF, we believe in the value of
financial advice. With our Advice
Academy, we are committed to
improving the quality of financial advice
for all Australians, in addition to improving
the efficiency of its delivery.
Recently, 14 of the top 50 advisers in
Barron’s inaugural survey of Australian
financial advisers were IOOF employed
or aligned. This was the highest
number achieved by any institution and
showcases that our advisers are delivering
high quality financial advice and superior
outcomes for their clients.
Focus on core capabilities
During the year, we continued to
undertake activities to simplify and
streamline our business. In 2017,
we divested a number of small non-core
businesses which allows us to focus on
our core wealth management capabilities.
In addition, with the major platform
consolidation finalised in June 2016, early
completion of the MySuper transition,
continual product enhancements and
dedication to our ClientFirst approach,
we are demonstrating our ongoing
commitment to reducing complexity
and duplication to best serve the interests
of our advisers and their clients.
44
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Outlook
IOOF’s unique positioning in the industry
sees us well placed to deliver positive
long-term outcomes for our advisers,
their clients and our shareholders. As
the industry continues to consolidate,
there is ample opportunity for acquisitive
growth to augment our significant
organic growth momentum. We have
an exceptional track record of delivering
value-accretive acquisitions and have
the scale, experience and, importantly,
financial strength, to take advantage of
these opportunities.
To our shareholders, the Board and
management of IOOF thank you again for
your support over this past year. We are
excited by the prospects that our unique
position in the wealth management
industry present and look forward to
continuing our track record of success.
George Venardos
Chairman
Christopher Kelaher
Managing Director
Acquisition to bolster
Trustee business strength
Board and Management
changes
In June 2017, we announced the
acquisition of National Australia Trustees
Limited. Upon completion of the
acquisition, IOOF will become the largest
provider of compensation trusts in
Australia. This acquisition demonstrates
our commitment to building our Trustee
business, enhancing our national
presence and providing our clients with a
range of financial solutions to meet their
individual needs.
Environmental, Social and
Governance matters
We are committed to ensuring
Environmental, Social and Governance
(ESG) practices are deeply embedded in
our culture and we consider ESG as our
responsibility to clients, shareholders and
the communities in which we operate.
Our IOOF Foundation has continued
its work in assisting some of our most
disadvantaged communities. The
Foundation has now surpassed the
$12.5m mark in total donations since its
formal establishment in 2001.
In 2017, we continued our journey to
ensure we are appropriately monitoring
and reporting our material ESG matters.
Our ESG Report provides further details
on our approach to material ESG matters,
how these are linked to strategic
initiatives and our assessment of their
impact. We remain committed to the
sector with our significant shareholding
in Australian Ethical, Australia’s largest
dedicated ESG investment manager.
We encourage you to read the further
detail on our ESG matters and the IOOF
Foundation in our ESG report on page 13.
This year we welcomed three new
non-executive Directors; John Selak,
who joined the IOOF Holdings Limited
Board, and Dawn Oldham and Martin
Walsh, who joined our APRA Regulated
Entity Boards. John, Dawn and Martin
bring valuable experiences, skills and
perspectives which bolster the existing
strength of our Boards of Directors. We
recognise the importance that individual
skills and experiences can bring to
ensuring diversity of thinking at Board
level and at all staff levels around the
Group. The skills of our Directors are
outlined in our Board Skills Matrix which
can be found at www.ioof.com.au/about-
us/about-ioof/corporate-governance
At Management level, 2017 saw us
welcome Sharam Hekmat to the role
of Chief Information Officer. Sharam is
also a member of the IOOF Leadership
Group. Sharam joined IOOF at a time of
significant growth in IOOF’s technology
capabilities following recent simplification
and enhancements to its platform
offerings and client experience.
In addition, Dan Farmer was appointed to
the role of Chief Investment Officer. Dan’s
appointment followed the retirement of
longstanding CIO, Steve Merlicek. Steve
built a strong and capable investment
team, testament to which is the elevation
of Dan to the Chief Investment Officer
role. Dan has been with IOOF for seven
years and during this time has played
an integral part in the award winning
team’s delivery of quality multi-manager
investment solutions and strong
performance. Steve will be remaining
on IOOF’s Investment Management
Committee.
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IOOF annual report 2017
We are excited by the
prospects that our unique
position in the wealth
management industry present
and look forward to continuing
our track record of success.
6
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Our financial performance
divisional updates
Funds by segment
■ Funds Under Supervision
■ Investment Management
■ Platform Management and Administration
■ Financial Advice and Distribution
$134.3b
$131.1b
$29.6b
$27.0b
$20.0b
$19.6b
$34.9b
$34.5b
$147.2b
$32.2b
$20.6b
$37.2b
$49.9b
$50.0b
$57.2b
$103.1b
$26.0b
$12.6b
$31.9b
$32.6b
June 2014
June 2015
June 2016
June 2017
Financial Advice & Distribution
% contribution to Group UNPAT
Key activities
$’m
Revenue
UNPAT
Closing FUA ($’b)
About the division
45%
2016/2017
2015/2016
• Advice-led strategy delivers growth in adviser numbers – 50
advisers committed to join IOOF licenses, counter to industry trend.
•
IOOF achieved the top ranking for the number of advisers in
Barron’s inaugural survey of Australian financial advisers. Among
the list of ‘Australia’s Top 50 Financial Advisers’, 14 out of 50 advisers
and 4 out of the top 15, were IOOF aligned advisers.
• Business simplification activities undertaken to divest non-core
businesses. This allows us to focus on our core Wealth Management
capabilities.
354.9
76.4
57.2
354.5
78.4
50.0
• Continued focus on quality of advice via our IOOF Advice Academy
- a training and coaching resource for the financial planning
industry helping advisers build high quality businesses that in turn
helps clients to achieve their financial and lifestyle goals.
Our IOOF Advice division supports over 1,000 financial advisers
and stockbrokers that provide financial advice services to over
500,000 clients across both retail and institutional sectors.
Advice covers wealth accumulation, retirement planning and
investment strategies and is provided by our well-known brands
Shadforth Financial Group, Bridges Financial Services, Consultum
Financial Advisers, Lonsdale Financial Group and Ord Minnett.
• Ongoing commitment to open architecture through
PlatformConnect, providing IOOF with an attractive differentiator
by offering real choice. Two key initiatives implemented during the
year included:
– launch of the Symetry Active platform, including a managed
account service to the Bridges Financial Services group; and
– launch of a superannuation version of Asset Administrator
platform.
7
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Platform Management & Administration
Investment Management
% contribution to Group UNPAT
% contribution to Group UNPAT
46%
19%
$’m
Revenue
UNPAT
Closing FuAd ($’b)
2016/2017
2015/2016
$’m
2016/2017
2015/2016
393.8
77.3
37.2
399.9
Revenue
79.0
34.5
UNPAT
Closing FuM ($’b)
84.1
32.7
20.6
101.2
31.4
19.6
About the division
About the division
Our platforms allow clients, employers and advisers to manage a
wide range of superannuation and investment options, including
managed and listed investments. Our flagship platforms are
IOOF Pursuit and IOOF Employer Super.
Key activities
• Launch of a brand new adviser website for IOOF Employer
Super featuring a powerful search facility, enhanced reporting
and transaction capabilities as well as the ability for advisers to
grant access to their support staff. The launch of this website
consolidated five adviser portals into one convenient location.
• Upgrade of the member website for IOOF Employer Super
including simplified trading for both managed and listed
investments, functionality for members to update their
investment strategy, personalised performance information,
and the visual representation of their account balance over
time.
• A new reweight portal was released for IOOF Pursuit
which allows advisers to rebalance their client’s portfolio in
percentages and automatic reweights gave advisers the ability
to nominate an investment strategy which is reviewed and
rebalanced at the chosen frequency.
• Other IOOF Pursuit enhancements included the addition of an
online pension application form and reporting for regulatory
change such as capital gains/losses for pensions, rate of return
for closed accounts, client deposit reporting, and fee reporting.
• Consolidation of the Kingston Superannuation Trust into IOOF
Pursuit Select completed in March 2017. This is another tangible
example of our commitment to reducing complexity and
duplication to deliver better outcomes for our clients.
• Successful transfer of Accrued Default Amounts (ADA) from
an external non-MySuper authorised superannuation fund to
IOOF MySuper within IOOF Employer Super.
8
Our investment management business offers multi-manager
products that are easy to understand with well-rounded
investment options across a range of asset classes. In addition,
the Wealthbuilder investment bond products and the equity
accounted contribution from our 42% stake in Perennial Value
Management are reported in this segment.
Key activities
• Dan Farmer appointed Chief Investment Officer following
the retirement of Stephen Merlicek – (effective 3 July 2017).
Stephen Merlicek to remain on IOOF Investment Committee.
• Stanley Yeo appointed Deputy Chief Investment Officer
(May 2017).
• Successful launch of the low-cost multi-manager range of
funds, IOOF MultiSeries in October 2016 to complement the
award winning fully active IOOF MultiMix range of funds.
• Following the upgrade of IOOF MultiMix International
Shares Trust and IOOF MultiMix Australian Equities Trust to
‘Recommended’, the full suite of IOOF multi-manager funds
are now rated as ‘Recommended’ by Lonsec. The IOOF
MultiSeries range on its debut was given this ‘Recommended’
rating – a fantastic achievement for a new range of funds.
• Launch of an online client engagement tool for advisers
called Investment Central, allowing more transparency
and enhancing the conversation on the multi-manager
investment solution.
•
IOOF WealthBuilder celebrated 35 years of the bond in 2016
and continues to grow in popularity for when super is not an
option.
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We believe that success comes from
caring about people and providing
quality financial advice, product
and service solutions.
Trustee Services
% contribution to Group UNPAT
4%
$’m
Revenue
UNPAT
Closing FuS ($’b)
About the division
2016/2017
2015/2016
30.8
6.7
32.2
29.6
6.0
27.0
Our Trustee Services business includes estate planning, estate
administration, compensation trust services, fiduciary services,
philanthropic services and corporate trust services, operating
under the brand Australian Executor Trustees (AET). AET is also a
specialist provider of self-managed super fund (SMSF) solutions
including the AET Small APRA Fund.
Acquisition of National Australia Trustees
In June 2017, IOOF announced the acquisition of National Australia
Trustees (NATL).
• On completion of the purchase, IOOF will:
– become Australia’s largest provider of compensation
trust services for personal injury clients.
– increase its distribution network on the East Coast
of Australia.
– expand its Wills bank.
– deepen its capability towards becoming Australia’s
preferred Trustee.
Key activities
• Significant growth from the compensation trust and Native
Title Trust businesses – particularly in the Western Australian
market.
• Successful partnerships with industry bodies including the
Australian Lawyers Alliance (ALA) and the SMSF Association.
• Stronger alignment between the AET and IOOF Distribution
and Operations teams to provide specialist estate and trustee
solutions to advisers and their clients.
•
Importantly, AET continues to be a highly complementary
business to IOOF. AET’s advice partners direct funds under
supervision for compensation trusts, Native Title trusts,
philanthropic trusts to IOOF platforms.
• Development of a national estate planning offering.
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IOOF annual report 2017
Directors
Mr George Venardos
B.Com, FCA, FGIA, FAICD, FCIS
Chairman – Independent Non-Executive Director
Independent Non-Executive Director since 2009
Mr Venardos is an experienced director with broad listed
company experience across a range of different industries including
financial services, affordable leisure, oil and gas services and
technology development.
Mr Venardos has over 30 years’ experience in executive
roles in financial services, insurance and funds management.
For a period of 10 years, Mr Venardos was the Chief Financial Officer
of Insurance Australia Group and Chairman of the Insurance Council
of Australia’s Finance and Accounting Committee.
Mr Venardos was a director of Miclyn Express Offshore Ltd from
2010 to 2013, Bluglass Ltd from 2008 to 2016 and Ardent Leisure
Group from 2009 to 2017.
Significant non-listed directorships
• Chairman of Guild Group
• Cuscal Ltd
• Lawcover Pty Ltd
Special responsibilities
• Chairman of IOOF since November 2016
• Chairman of the Nominations Committee
• Member of the Group Audit Committee
• Member of the Remuneration Committee
10
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Mr Christopher Kelaher
B.Ec, LL.B, F Fin.
Managing Director
Managing Director since 2009
Mr Kelaher is the Managing Director of IOOF Holdings Ltd.
He was appointed in 2009, after IOOF’s merger with Australian
Wealth Management Limited (AWM), a company he had led
since 2006. Prior to AWM, Mr Kelaher was the CEO of Select
Managed Funds Limited for nine years, a private company
which was brought to market in 2005 and in turn ultimately
merged with AWM in 2006. In the following periods, he
has been instrumental in executing multiple mergers and
acquisitions that have added materially to the IOOF Group
and its antecedent businesses. Mr Kelaher has extensive
capital markets experience from his time during the late 1980s
with Citicorp where he oversaw the establishment of Citicorp
Investment Management and Global Asset Management
businesses in Australia and New Zealand.
He holds a Bachelor of Economics and a Bachelor of Laws
from Monash University and is a Fellow of the Financial
Services Institute of Australia.
Ms Elizabeth Flynn
LL.B, Grad Dip AppCorpGov, FAICD, FFin, FGIA, FCIS.
Independent Non-Executive Director
Independent Non-Executive Director since 2015
Ms Flynn has more than 30 years’ experience in the financial
services industry, including roles within law and corporate
governance as well as executive responsibilities. From
1998 to 2010, Ms Flynn was the Chief Legal Counsel, Group
Compliance Manager and Group Company Secretary of
financial services group Aviva Australia, and a director of
NULIS Nominees, Aviva Australian’s superannuation trustee
company. Prior to her time at Aviva, Ms Flynn spent 18 years
as a commercial lawyer with Minter Ellison, including eight
years as a partner, specialising in managed funds, banking
and securitisation and superannuation. Ms Flynn was a
director of Bennelong Funds Management from 2010 to 2015.
Significant non-listed directorships
• AIA Australia Limited
• Victorian Government’s Emergency Services
Superannuation Board
Special responsibilities
Special responsibilities
• Managing Director of the IOOF Group since 2009
• Chair of the Risk and Compliance Committee
• Member of the Nominations Committee
• Member of the APRA Regulated Entities Audit
Committee
• Member of the Remuneration Committee
11
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Directors
Ms Jane Harvey
B.Com, MBA, FCA, FAICD
Mr Allan Griffiths
B.Bus, DipLi
Mr John Selak
Dip Acc, FCA, FAICD
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive Director
since 2005
Independent Non-Executive Director
since 2014
Independent Non-Executive Director
since 2016
Ms Harvey has more than 30 years’
experience in the financial and advisory
services industry. Prior positions include
as a Partner at PricewaterhouseCoopers,
a Director of David Jones Limited from
2012 to 2014, a Director of UGL Limited
from 2015 to 2017, and as a Director of
DUET Finance Limited, a stapled entity
within the ASX Listed DUET Group from
2013 to 2017.
More than 30 years’ experience with
a deep understanding of the financial
services industry. Mr Griffiths has held a
number of executive positions within the
industry most notably as Chief Executive
Officer Aviva Australia and later Managing
Director South Asia, Aviva Asia Pte Ltd
based in Singapore. Prior to joining Aviva
he held executive positions with Colonial
Ltd and Commonwealth Bank of Australia.
Significant non-listed
directorships
Significant non-listed
directorships
• Bupa Health Services Pty Ltd
• Chairman of the Westpac/
Mr Selak has over 40 years’ experience
in the financial and advisory services
industry. From 2000 to 2016 he was a
partner in the Corporate Finance Practice
of Ernst & Young, providing valuation
services to a broad range of local and
international clients and also serving on
their Global Corporate Finance Executive.
Significant non-listed
directorships
• Chairman of Corsair Capital
• National Tiles
• Advisory board member of Turi Foods
BT Insurance Boards
• Chairman of Metrics Credit Partners
Special responsibilities
• CARE Australia
Special responsibilities
• Chairman of the APRA Regulated
Entities Audit Committee
• Member of the Risk and Compliance
• Chairman of the Remuneration
Committee
Committee
• Member of the Group Audit
• Member of the Group Audit
Committee
Committee
• Opera Victoria Ltd
• Colonial Foundation Ltd
Special responsibilities
• Chair of the Group Audit Committee
• Member of the APRA Regulated
Entities Audit Committee
• Member of the Nominations
Committee
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Environmental Social and Governance
report
Our ethics, values and culture are key factors to our continued success.
Environmental, Social & Governance (ESG) practices are about managing risks and opportunities in a way that balances the long term
needs of stakeholders, including customers, employees, shareholders, suppliers, the community and the environment.
Material exposure to Environmental and Social Sustainability Risks
There are a number of material ESG matters that impact the IOOF Group, the achievement of our strategic aims and the communities
in which we operate.
In determining our material ESG matters, the Board considers our business model, the industry in which we operate, current areas of
focus of our regulators, media and public commentary and the interests of our stakeholders, including industry bodies, investors and
analysts.
Material ESG matters and their link to our strategic initiatives are outlined below.
Governance
Stakeholder
Material ESG matter
Strategic initiative
• Corporate Governance
• Establishing trusted relationships with advisers
• Responsible investment
• Tax transparency
• Climate change and the environment
• ClientFirst
• Open Architecture
• Advice Academy
• Business simplification
Our business
e
r
u
t
l
u
C
Our clients & community
• Acting in the best interests of our clients
• Advocating for quality financial advice for all Australians
• ClientFirst
• Advice Academy
• Diversity and inclusion
• Corporate culture and attracting and retaining talent
• Engagement
Our people
The IOOF corporate brand and our reputation as a leading provider of quality financial services could be damaged by failing to
identify, monitor and report our material ESG matters.
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Our business
At IOOF, we believe in the value of financial advice.
In today’s complex and ever-changing financial world, it has never been more important for people to seek qualified and experienced
guidance to secure their financial future. One of our major goals is to make it easier for all Australians to access and benefit from receiving
the right advice for their individual needs and objectives. ESG practices are deeply embedded in our day to day operations and to the creation
of long-term financial outcomes for our advisers, clients and shareholders.
Corporate Governance
Robust corporate governance policies,
practices and procedures are a
fundamental part of our culture and
lay the foundations that underpin
everything we do.
IOOF has adopted Listing Rule 4.10.3
which allows companies to publish
their corporate governance statement
on their website rather than in their
annual report. The Directors of IOOF
have reviewed and approved the
statement, which is available at:
www.ioof.com.au/about-us/about-ioof/
corporate-governance
Establishing trusted
relationships with advisers
At IOOF, we recognise the true value
of advice and, because of this, we have
trusted relationships with over 1,000
financial advisers.
The true value of advice
IOOF undertook a survey of 521 advised
and non-advised clients and discovered
that those who receive ongoing financial
planning advice experience1:
• 13% greater levels of overall
personal happiness.
• 21% overall increase in peace of mind.
• 19% less likelihood to have
arguments with loved ones.
Meanwhile those who don’t receive
financial advice were:
• 22% more likely to have their sleep
disrupted due to money concerns.
• 15% more likely to feel stress
and anxiety.
• 11% more likely to feel concerned
about their finances.
14
In addition, 83% of clients surveyed
endorsed the value of financial advice
by saying it’s also important for their loved
ones to have good financial advice.
A financial adviser provides the peace
of mind of a well thought out plan which
ensures better preparation for the future.
Also, advice extends beyond measurable
financial gains, to improved physical
health, stronger relationships and personal
happiness.
Due to our advice-led wealth
management strategy, we are seeing
record levels of interest in our advice
businesses. In 2017, this has resulted
in 33 new advisers joining IOOF since
31 December 2016 from another large
financial institution, with further growth
in adviser numbers targeted.
New advisers can join one of IOOF’s
Advice Groups subject to meeting
minimum adviser education standards
and undergoing rigorous compliance and
onboarding processes, to ensure that the
quality of financial advice IOOF is offering
our clients is uncompromised.
In addition to our advice-led strategy,
IOOF offers open architecture. This means
that our advisers have the choice to use
our platform, or those of competitors.
Choice of products and services presents
a fundamental difference from our peers
in the industry. This is a major reason for
advisers to choose to partner with an IOOF
advice group and a tangible demonstration
of offering solutions which best service our
advisers and their clients’ individual needs.
Our IOOF Advice Academy ensures we are
at the forefront of advocacy for improving
the quality of financial advice. Further
information on our Advice Academy can
be found in the ‘Our clients & community’
section of this report.
Responsible investment
Our multi-manager investment management
offering ensures ESG factors are considered
by underlying investment managers in their
investment decision-making processes in order to
protect and manage investments for the long term.
In 2017 an ESG clause was added to all of our
Investment Management Agreements with
external fund managers. These managers must
now identify and manage risks associated with
ESG as part of their investment process.
In addition, IOOF has a 20% shareholding
in Australian Ethical (ASX: AEF). This represents
a long-standing commitment to responsible
investing with our initial investment dating back
to 2005.
Tax Transparency
The IOOF Group is committed to tax transparency
and integrity. IOOF is a signatory to the Board
of Taxation’s Voluntary Tax Transparency Code
(the Code), which was released on 3 May 2016.
The Code is a set of principles and ‘minimum
standards’ to guide disclosure of tax information
by businesses, encourage those businesses to
avoid aggressive tax planning, and to help educate
the public about their compliance with Australia’s
tax laws.
Tax strategy and governance
Tax governance is part of the IOOF Group’s
overall risk management framework, as well
as being part of an overall tax strategy. The overall
tax strategy drives the IOOF Group’s approach
to tax risk management and is aimed at good
corporate tax compliance and reporting, the ability
to meet and be prepared for regulatory changes,
and in ensuring shareholder value. The IOOF Group
regards its relationship with the ATO as effective
and open, thereby maintaining transparency and
collaboration.
1 IOOF: The true value of advice (2015)
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We will seek to measure, report and
incrementally improve our emissions
year on year, once the move to our new
premises has completed in our major
locations.
Other environmental activities
We also continue to seek better ways
to minimise our environmental impact,
including:
• Working with contractors, landlords
and service providers to increase
waste recycling. Outside of our major
office movements, we continue to
work with our landlords in all locations
to ensure we are limiting our waste
emissions and will look to report on
total overall improvements as part of
our annual ESG reporting process.
• Reducing non-essential air travel.
During 2017, we upgraded our internal
communications system to better
facilitate video conferencing in all
of our office locations. In July 2017,
we changed our corporate air travel
arrangements to a single provider for
all domestic and international travel.
• Encouraging employee work
practices that reduce environmental
impacts. To encourage a move to a
paperless environment, during 2017
we implemented ‘Follow Me’ printing
to reduce unnecessary printing of
documents and paper wastage.
Tax contribution analysis
The IOOF Group contributed a total
of $131.5m in taxes to Australian, New
Zealand and Hong Kong governments
(state and federal) in the 2017 tax year.
$131.0m or 99.6% of this amount was
attributable to the Australian Government.
The below tables provide an analysis of the
types of taxes the IOOF Group is liable for
and those payable in Australia versus those
in foreign jurisdictions.
Further detail on tax paid by the IOOF
Group can be found in note 2-6 to the
financial statements within this Annual
Report.
2017 tax contribution by type
(total $131.5m)
Income Tax
GST
Payroll Tax
Fringe Benefits Tax
Other
$70.4m
$45m
$12.2m
$1.3m
$2.6m
2017 tax contribution by country
(total $131.5m)
Australia
New Zealand
Hong Kong
$131m
$0.495m
$0.005m
Climate change and the
environment
Climate change presents significant
challenges for society and generates both
risks and opportunities for IOOF’s business
and stakeholders. As a diversified financial
services company, we seek to minimise
our impact on the environment through
a range of waste, energy and emission-
reduction activities.
Environmental impact
During 2017 we commenced a significant
project to consolidate our property
footprint, which will better enable us to
monitor and manage our environmental
impact.
In Melbourne, our current corporate
headquarters is undergoing significant
refurbishment. We expanded our existing
floorplan to enable all Melbourne based
staff to work in one energy efficient office
building from the end of September 2017.
Once stage 1 building works are complete,
a 4 Star NABERS Energy Rating is targeted,
with the intention to target a 4.5 Star
NABERS rating once all stage 2 building
works are complete. A designated waste
area with a co-mingled recycling capability
is also planned for the completed building
to ensure we are managing our waste
outputs in an environmentally sustainable
way.
In Sydney, we are moving all of our
people to 30 The Bond by the end of
December 2017; a 5.5 Star NABERS rated
building. Environmental sustainability
and enablement of our people were
significant factors in choosing this
building. Combining heritage preservation
and modern day environmentally
sustainable design, the building offers
some of the largest floor plates in Sydney
which provides for optimum workspace
efficiency, integration and staff interaction.
It has a 3.5 Star NABERS water rating
and a 5 Green Star rating, meaning it is
currently one of the most environmentally
sustainable buildings in Sydney.
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Our clients and community
Over 170 years ago, IOOF was established with a commitment to helping people and positively
contributing to the communities we serve. This commitment remains unchanged.
Advocating for quality financial advice for all Australians
Our unique advice-led wealth management strategy is differentiating us from our peers and is focused on delivering quality financial
advice to all Australians.
As one of Australia’s leading financial services businesses, we are pleased to be investing in the continued improvement in the quality
of advice for the benefit of all Australians.
In July 2016, we launched the IOOF Advice Academy, which aims to be the pre-eminent training and coaching resource for the
financial planning industry. Our vision for the IOOF Advice Academy is to create an environment where ongoing financial planning
relationships deliver continued mutual value and enable our clients to live their ideal lives and be free of financial concern.
The 2017 target for participation in the IOOF Advice Academy was 10% of our adviser base. For the 2017/18 year, the IOOF Advice
Academy is fully subscribed, with 100 advisers scheduled to commence various modules of the Academy.
Objectives and outcomes
based advice framework
Integrated advice
philosophies
Developing
industry talent
our
Advice Academy
Enabling advice businesses
and their clients to achieve
their ultimate measure
of success
Coaching focused on
client progression
Practice support and
team member training
Tools, templates
and education
In addition to our investment in the quality of financial advice via the IOOF Advice Academy, 14 of the top 50 advisers in Barron’s
inaugural survey of Australian financial advisers were IOOF employed or aligned. This was the highest number achieved by any
institution. This result showcases that our advisers are delivering high quality financial advice and superior outcomes for their clients.
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Acting in the best interests of our clients
Supported by robust corporate governance foundations, IOOF is committed to our ClientFirst strategy. In an environment where
product has become a commodity, and technology can be easily replicated, client experience is fast becoming a sustainable
competitive advantage.
ClientFirst is much more than changing a process or a technology system. It’s about completely changing the way we work. It requires
us to systematically understand client demand types, variation and the roles all people through the organisation play in delivering
demand. ClientFirst is about revealing unmet client needs, reframing client problems, and helping us to rethink the entire client
experience.
Deep alignment on culture and new
operating model around our clients
Trusted by clients and partners as a leader
in advice and financial services.
T
U
I O N ADVICE
Vision and
Leadership
Our people
Are embracing our ClientFirst strategy. It is
driving empowerment and enablement.
New methods and measures emerging.
Leadership development
Investing in our leaders to help
them better support our people.
Our leaders meet quarterly to
discuss progress.
T & DIS T R I B
Celebrate
success
C
U
D
O
R
P
System
capability
G
O
Operating
rhythm
M
E
A
S
U
P U RPOSE
Cl ients
V
E
Knowledge and documentation
We have documented processes from
a client perspective. This is revealing
significant opportunity to innovate and
redesign the way our clients interact with us.
N
R
A
N
C
E
R
ES
Visual
Management
M E T
S
E
R
Knowledge and
documentation
VICES F I N A N C
Improvement
E T EC
Coaching
and
capability
O
P
E
R
A
T
I
O
N
S
Data driven
decision
making
S
D
O
H
Planning
Y
G
O
L
O
N
H
Date driven decision making
Capturing new data that reveals ‘what
really matters’ to clients. Building
new capability to utilise the data to
deliver more value for clients.
Improvement
Empowering our people and leaders to
solve client problems in ‘the moment’. New
support tools and techniques to identify
and address the root cause of client issues.
Giving back to our communities
IOOF Foundation
Reconciliation Action Plan
Since its formal establishment in 2001, the IOOF Foundation
has donated more than $12.5 million to community groups
across Australia. Our IOOF Foundation develops strong
partnerships with non-profit organisations that are bringing
opportunities to those less fortunate and are helping
communities to grow and thrive.
We have continued our financial support for programs that
support the aged, disadvantaged families, children and young
people. In 2017, we also maintained our focus on programs that
improve financial literacy to support young people in making
confident and informed choices about their money.
Further information on the programs that have been
supported by the IOOF Foundation, can be found on page 21
of this report.
We believe that all Australians can contribute to the
reconciliation of the nation. With this in mind, two of our
businesses, AET and Shadforth Financial Group (SFG) are
coming together to develop a joint Reconciliation Action
Plan (RAP). The purpose of the RAP is to promote and facilitate
reconciliation by building relationships, respect and trust
between the wider Australian community and Aboriginal
and Torres Strait Islander peoples. The AET / SFG Reconciliation
Action Plan will articulate clearly how AET and SFG will play
their part in achieving this goal. AET and SFG have committed
to completing their Reconciliation Action Plan by the end
of 2017.
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Our people
Our people are our most important asset. Our success depends on them.
Corporate culture & attracting and retaining talent
We are committed to attracting and retaining the best talent.
We recognise the value of diversity and embrace an inclusive
culture where people from diverse backgrounds, with different
skills, knowledge and experiences can develop their unique
talents.
Our culture is underpinned by four core values;
• Commitment – We do what we say we will do. We
persevere in the face of challenges.
• Excellence – We search for ways to improve. We strive to
exceed expectations.
• Empathy – We listen, we feel and we care. We treat each
Employee engagement and alignment
In August 2016, we undertook a comprehensive survey
of our people in order to identify opportunities to further
improve employee engagement and alignment. Employee
engagement and alignment is a critical requirement for
achieving sustainable high performance. The survey was
completed by 73% of our people across the entire IOOF Group.
Using the results of this survey, we implemented initiatives to
develop and foster improved employee engagement which
will lead to increased job satisfaction for our people. During
2017, some of the group-wide initiatives have introduced are:
other with respect.
• Our renewed Purpose Statement.
• Trust – We act honestly, openly and reliably. We nurture
• Leadership Group Webinars showcasing strategic areas
positive working relationships.
Development of our people
of focus.
•
Inspire (Staff Newsletter).
Equipping our people with the right tools, knowledge and
development opportunities is an investment we make for our
future success. IOOF has a number of initiatives to support all
of our people, including career development and planning,
extensive tailored learning and development opportunities
and commitment to financial study support.
These programs not only provide scope to extend individual
skills, but remain critical to succeed in a complex and
competitive industry landscape. All employees are encouraged
to set personal development plans with their managers and
to undertake training which is appropriate for their role and
future career aspirations.
We have been holding innovation events to harness the
creativity and abilities of our people. These innovation
days invite our people to form multi-disciplinary teams and
generate innovative ideas for new services and products. The
best ideas have moved into an incubation stage with funding
for further development.
• Refreshed IOOF values and behaviours.
• New platform for IOOF Performance Management.
• Leadership programs.
To ensure we were on the right track in key areas, in early
2017, we undertook a ‘pulse survey’ with a focus on five key
areas; Alignment, Engagement, Long Term Direction, Team
Leadership and Investment in People.
The 2017 Pulse Survey results show that we have made
improvements in all of these key areas. We look forward to
continually improving to ensure we are building a workplace
which attracts and retains the best talent.
Commitment to balance and encouraging
community participation
We offer a range of programs and services to employees to
help achieve an appropriate balance between work and family.
As well as offering flexible work arrangements, we provide our
employees with a range of additional benefits
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Salary packaging
Volunteering and giving
For the last decade, we have supported employees who are
interested in volunteering through the use of paid volunteer
leave. This equates to more than 16,000 hours of volunteer
time available for our people.
Activities ranged from cooking at homeless shelters,
supporting Christmas giving programs, looking after
neglected/ maltreated animals, to supporting local school
programs and providing gardening support. Organisations
assisted include Hobart City Mission, RSCPA, Wesley Mission,
Salvation Army and Easy Gardens.
Our people actively support a number of key community
initiatives in our offices throughout the year. In 2017, some
of the initiatives we supported include the Cancer Council’s
Biggest Morning Tea, Fight Cancer Foundations ‘Footy Colours
Day’, RSPCA ‘Cupcake Day’, Legacy Appeal, R U OK day and
Earth Hour.
Our Workplace Giving program encourages all of our people
to make a tax-effective donation that IOOF matches dollar
for dollar. This is a simple and effective way for our people to
make small regular donations. We have committed to invest
further in this program, moving to a new online platform
and expanding the number of organisations we will support.
We have listened to our employees and understand that it is
important to give them a choice in where they give their time
and money, which encourages greater participation.
IOOF offers employees a range of salary sacrifice options:
• Additional superannuation contributions.
• Motor vehicle novated leasing.
• Car parking, where available.
• Workplace charitable giving program.
Work flexibility
To enable our people to make arrangements about their
working conditions to suit their personal circumstances, IOOF
provides a range of flexible working arrangements:
• Opportunity to purchase additional annual leave.
• Eight weeks paid parental leave.
•
Job share.
• Community Day.
Leisure and Lifestyle Benefits
We believe in promoting a healthy work/life balance and, to
assist with this, IOOF offers:
• Confidential Employee Assistance program (EAP).
• Wellbeing program including Nutrition checks, Health
Heart check and Flu vaccinations.
•
IOOF’s iBenefits program – exclusive access to discounted
gift cards, e-gift cards and discounts at large retailers and
leisure outlets.
• Gymnasium discounts.
• Service awards.
• Recruitment referral bonuses.
• Study leave and CPD support.
• One Professional membership paid annually.
• Preferred health insurance rates with select insurers.
• Discounted public transport tickets (Victoria).
•
IOOF Pursuit Select staff rates.
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Diversity and inclusion
People with different skills and experience and from different
backgrounds bring fresh ideas and perspectives. IOOF
acknowledges diversity as critical to enabling innovation and
broader thinking and, ultimately, to the group’s greater success.
IOOF has a Diversity and Inclusion Plan 2017/2018 that sets
out the diversity initiatives for the IOOF Group. In this context,
diversity and inclusion covers gender, age, ethnicity, race,
sexual orientation, physical abilities, religious beliefs and
other beliefs. It also extends to differences surrounding socio
economic or educational background, marital status, mental
health, family responsibilities and addressing matters of
domestic violence.
We recognise that building a diverse, inclusive workforce
increases the possibility to recruit, retain and develop the best
talent whilst forging a stronger understanding and connection
with our clients and broader communities. As part of our
employee engagement survey completed in August 2016,
31% of our people identified as being from a culturally or
linguistically diverse background.
In order to create a focus on encouraging a gender balanced
workplace, IOOF has supported a number of initial research
programs to address any gaps that may be evident. A pay
equity audit has been conducted annually since 2011 amongst
all levels of IOOF staff to determine whether a gender pay gap
existed within the IOOF Group in order to identify any trends.
Our People and Culture Committee will continue to address
matters of equal pay and continue to support the programs to
further increase the number of women in senior management
positions.
In 2017, 49% of appointments to Manager roles were women.
Other initiatives include:
•
leadership fundamentals education series and mentoring
programs;
• awareness/education on work life balance and flexibility;
• a section dedicated to wellbeing on employee intranet
portal;
• networking functions; and
IOOF targets being a diversity leader in the financial sector by;
• opportunities for small groups to attend industry
networking and skills specific conferences and workshops
to enhance their education and potential to encourage
networking with industry and business peers.
The Board approved Diversity and Inclusion Plan for 2017-2018
is available on our website.
• providing a diverse, inclusive workplace in which everyone
has the opportunity to participate and be valued for their
distinctive skills, experiences and perspectives;
•
incorporating diversity into business practices through its
corporate social responsibility initiatives that aim to improve
quality of life for our workforce, their families, communities
and society at large; and
• ensuring diversity extends and is embraced across
all aspects of the Group, including recruitment and
appointment to roles, talent development, Board
appointments, retention, mentoring and coaching
programs, flexible work arrangements, succession planning,
training and development and across all of the relevant
Group policies and procedures.
The table below sets out the number of women at board,
senior management and all staff levels:
Group
September
2016
September
2017
Women on the IOOF Holdings
Limited Board
Women in senior management
Women at all staff levels
33%
31%
50%
33%
29%
49%
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During 2017, the IOOF Foundation passed the $12.5 million mark in grants it has awarded since its
formation in 2001. This year, the Foundation has continued to support charitable organisations working
to benefit the community on a range of initiatives.
The IOOF Foundation is provided with
ongoing support from the IOOF group,
covering the expenses and resourcing
of our Foundation. With the support of
IOOF our Foundation aspires to create
opportunities for the aged, disadvantaged
families, youth and children by investing
in initiatives that reduce the obstacles to
improved quality of life and help others
achieve their potential and meaningfully
participate in the community.
The grants that are approved are
innovative, yet sustainable, and are those
that will provide value to the community.
This helps ensure that grants provided
make a real impact on the community and
achieve a meaningful result.
Youth Focus WA
Youth Focus WA Youth Focus do an
incredible job with young people in
Western Australia, providing counselling
and other support services to prevent
depression and youth suicide. We were
pleased to provide $45,000 to support
their counselling service and support their
annual fundraising event – the Hawaiian
Ride for Youth. Some 11,000km from
Honolulu, this charity rides actually travels
700km through the wheat belt of Western
Australia over five days in March. The 2017
Hawaiian Ride for Youth was a record
breaking success with more the $2.5 million
raised.
Juvenile Diabetes Research
Foundation
The effects of Type 1 Diabetes are life
changing. For many people who face
this diagnosis it can be a frightening and
overwhelming time. The IOOF Foundation
was pleased to provide a $30,000 grant
to the JDRF peer support program. This
program allows sufferers to reach out
to the diabetes community for practical
advice and support.
2017 Community
Partners
• Spinal Research Institute
• Red Dust
• The Smith Family
• Maggie Beer Foundation
• Righteous Pups
• Kids Under Cover
• Ardoch Youth Foundation
• Parkinsons Australia
• Youth Focus WA
•
Juvenile Diabetes Research
Foundation
• Ronald McDonald House
Westmead
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Alzheimer’s Australia
Ardoch Youth Foundation
Maggie Beer Foundation
We are proud to support the good work
of Edie (pronounced Eddie). You won’t
ever meet him, however. Edie’s just an app,
after all. Edie is the ‘Educational Dementia
Immersive Experience’ – an innovative way
to increase empathy and awareness of the
devastating effects of dementia by letting
anybody view the world through the eyes
of a person suffering from this condition.
The 360-degree virtual reality experience
was developed with the help of $160,000
funding from the IOOF Foundation. This
initiative lets Alzheimer’s Australia use
technology to improve care for dementia
patients, in Australia and around the world.
With financial support from the IOOF
Foundation, the Shadforth team in
Melbourne worked with the Ardoch
Youth Foundation to support schools
in disadvantaged communities. The
Shadforth volunteers have been
instrumental in helping build students’
literacy and social skills through the Literacy
Buddies® program. Both the teachers and
students alike have been very inspired by
the Big Buddies’ creative letter writing skills.
The program will expand to Queensland,
Western Australia and New South Wales
in late 2017 with the help of the IOOF
Foundation.
‘Stop using the F word’ is the catch-cry
Australian chef Maggie Beer uses to
grab attention for her Foundation’s new
workshop ‘Creating an Appetite for Life’.
The ‘F’, in this case, refers to facilities for
aged care. Ms Beer believes that aged
care homes should feel like home and a
significant part of that comes down to
cooking healthy, flavoursome meals that
don’t have to break the bank. ‘If we can give
aged care residents the smells of home
cooked food, that feeling they are a person
and still living, not just existing, that’s
the thing we most want to do,’ Maggie
said. As an official community partner of
the Maggie Beer Foundation, the IOOF
Foundation offers scholarships for not-for-
profits to attend her Creating an Appetite
for Life workshops. We have committed to
expand our partnership to further support
these worthwhile educational programs
throughout 2018.
Find out more about the IOOF Foundation
at www.iooffoundation.org.au
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Financial report
for the year ended 30 June 2017
Contents
Directors’ Report
Remuneration Report
Directors’ Declaration
Lead Auditor’s Independence Declaration
Independent Auditor’s Report to the Members
24
38
55
56
57
Consolidated Statement of Comprehensive Income 61
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the financial statements
62
63
65
66
23
232323
IOOF annual report 2017
Directors’ report
The Directors present their report together with the financial report of IOOF Holdings Ltd (the “Company” or “Parent”) and of the
IOOF Group, being the Company and its subsidiaries and the consolidated Group’s interest in associates for the financial year ended
30 June 2017 and the auditor’s report thereon.
Directors
The Directors of the Company during or since the end of the financial year were:
Name, qualifications and
independence status
Mr George Venardos
BComm, FCA, FGIA, FAICD.
Independent Non-Executive
Director
Director since 2009
Chairman since
November 2016
Dr Roger Sexton AM
B.Ec. (Hons), M.Ec. Ph.D (Econ),
FAICD, FAIM. SFFin, C. P Mgr,
C.Univ
Chairman and Independent
Non-Executive Director
Retired 24 November 2016
Mr Christopher Kelaher
B.Ec, LL.B, F Fin.
Managing Director
Director since 2009
Mr Allan Griffiths
B.Bus, DipLI.
Independent Non-Executive
Director
Director since 2014
Ms Jane Harvey
B.Com, MBA, FCA, FAICD.
Independent Non-Executive
Director
Director since 2005
Ms Elizabeth Flynn
LLB, Grad Dip App Corp Gov,
FAICD, FFin, FGIA, FCIS.
Director since 2015
Experience, special responsibilities and other directorships
An experienced Director with broad listed company experience across a range of different industries,
including financial services, affordable leisure, oil and gas services and technology development.
Over 30 years’ experience in executive roles in financial services, insurance and funds management
including 10 years as CFO of Insurance Australia Group and Chairman of the Insurance Council of
Australia Finance and Accounting Committee. Other ASX listed directorships include Ardent Leisure
Group since 2009, appointed Chairman in November 2016. Former Director of Miclyn Express Offshore
Ltd from 2010 to 2013 and Bluglass Ltd from 2008 to 2016. Member of the Risk and Compliance
Committee until 24 November 2016 and Chairman of the Remuneration and Nominations Committee
until 24 November 2016. Member of the Group Audit and Remuneration Committees from
24 November 2016. Chairman of the Nominations Committee from 24 November 2016.
More than 30 years experience in senior management in finance and the investment banking industry.
A specialist in the areas of corporate reconstruction, mergers and acquisitions, and asset management.
Chairman of Beston Global Food Company Ltd. A Former Member of the Australian Accounting
Standards Board.
Chairman of the Remuneration and Nominations Committee and Chairman of Perennial Investment
Partners Ltd. Member of the Group Audit and Remuneration and Nominations Committees. Director
from 2012 to November 2016.
In 2009, Mr Kelaher became the Managing Director of the IOOF Group after its merger with Australian
Wealth Management Limited (AWM), a company he had led since 2006. Prior to AWM, Mr Kelaher was
the CEO of Select Managed Funds Limited for nine years, a private company which was brought to
market in 2005 and in turn ultimately merged with AWM in 2006. In the following periods, he has been
instrumental in executing multiple mergers and acquisitions that have added materially to the IOOF
Group and its antecedent businesses. Mr Kelaher has extensive capital markets experience from his
time during the late 1980s with Citicorp where he oversaw the establishment of Citicorp Investment
Management and Global Asset Management businesses in Australia and New Zealand. Member of the
Nominations Committee from 24 November 2016.
More than 30 years’ experience with a deep understanding of the financial services industry.
Mr Griffiths has held a number of executive positions within the industry most notably as Chief
Executive Officer Aviva Australia and later, Managing Director South Asia, Aviva Asia Pte Ltd based in
Singapore. Prior to joining Aviva Mr Griffiths held executive positions with Colonial Ltd and Norwich
Union. Chairman of the Risk and Compliance Committee until 24 November 2016. Member of the
Group Audit and Risk and Compliance Committees. Chairman of the Remuneration Committee from
24 November 2016.
Ms Harvey has more than 30 years’ experience in the financial and advisory services industry. Prior
positions include as a Partner at PricewaterhouseCoopers, a Director of David Jones Limited from
2012 to 2014, a Director of UGL Limited from 2015 to 2017, and as a Director of DUET Finance Limited,
a stapled entity within the ASX Listed DUET Group from 2013 to 2017. Ms Harvey is currently a Director
of BUPA ANZ. Ms Harvey is the Chairperson of the IOOF Group Audit Committee and member of the
Risk and Compliance Committee. Member of Remuneration and Nominations Committee until 24
November 2016. Member of Nominations and APRA Regulated Entity Audit Committees from
24 November 2016.
Ms Flynn has more than 30 years’ experience in the financial services industry, including roles within
law and corporate governance as well as executive responsibilities. From 1998 to 2010, Ms Flynn was
the Chief Legal Counsel, Group Compliance Manager and Group Company Secretary of financial
services group Aviva Australia, and a director of NULIS Nominees, Aviva Australia’s superannuation
trustee company. Prior to her time at Aviva, Ms Flynn spent 18 years as a commercial lawyer with
Minter Ellison, including eight years as a Partner, specialising in managed funds, banking and
securitisation and superannuation. Ms Flynn was a director of Bennelong Funds Management from
2010 to 2015. Member of the Group Audit Committee until 24 November 2016. Member of the Risk
and Compliance Committee and appointed as Chairperson from 24 November 2016. Member of
Remuneration and APRA Regulated Entity Audit Committees from 24 November 2016.
24
24
IOOF annual report 2017
Name, qualifications and
independence status
Mr John Selak
Dip Acc, FCA, FAICD
Appointed 14 October 2016
Experience, special responsibilities and other directorships
Mr Selak has over 40 years’ experience in the financial and advisory services industry. From 2000
to 2016 Mr Selak was a Partner in the Corporate Finance Practice of Ernst & Young serving on their
Global Corporate Finance Executive. From 2014 to 2017 Mr Selak was an advisory board member of
Quest Apartment Hotels. Mr Selak is currently Chairman of Corsair Capital, a non-executive director of
National Tiles and an advisory board member of Turi Foods. Chairman of APRA Regulated Entity Audit
Committee from 24 November 2016 and member of Group Audit Committee from 24 November 2016.
All Directors held office during and since the end of the financial year, unless otherwise noted.
The Remuneration and Nominations Committees review the balance of skills, experience, independence, knowledge and diversity
of Directors. This involves the creation of a board skills matrix setting out the mix of skills and diversity that the Board currently has
or is looking to achieve in its membership.
During the year each Board member completed a skills matrix. The Board was satisfied that the skills matrix results demonstrate that
the Board has the appropriate skills and experience necessary to oversee the operations and governance of the IOOF Group. The
Board Skills Matrix is available as part of our Corporate Governance Statement which is available on the IOOF website.
Principal activities
The principal continuing activities of the IOOF Group during the financial year consisted of:
• financial advice and distribution;
• platform management & superannuation administration;
•
•
investment management; and
trustee services including estate planning and corporate trust.
Operating and financial review
In accordance with current Australian Accounting Standards, the audited financial results of the benefit funds of IOOF Ltd are included
in the consolidated results of the IOOF Group. The inclusion of the benefit funds has no impact on the profit after tax for the year
(2016: $nil), but results in offsetting pre-tax profit and income tax amounts not available to shareholders.
The following table, which has not been audited, provides a reconciliation between the reported results of the IOOF Group and
underlying net profit after tax pre-amortisation (UNPAT), with the results of the benefit funds excluded. In calculating its UNPAT,
the IOOF Group reverses the impact on profit of certain, predominantly non cash, items to enable a better understanding of its
operational result. It is the UNPAT result which will be analysed in detail in this section of the Directors’ Report. It should be noted,
however, that the items reversed, and the rationale for that reversal, is also addressed in detail.
Shareholders can review the more detailed results presentation by visiting the Company website at www.ioof.com.au
25
25
IOOF annual report 2017
Directors’ report (cont’d)
Operating and financial review (cont’d)
Note
2-4
2-4
2-2,2-3
2-3
2-4
2-4
2-4
2017
$’000
119,851
(3,861)
115,990
-
2016
$’000
140,542
(2,620)
137,922
58,924
115,990
196,846
38,611
4,125
(6,261)
(11,930)
2,013
(5,707)
38,592
39,681
6,005
(71,988)
(8,125)
5,061
-
-
(10,056)
(10,056)
-
-
-
3,980
169,357
-
169,357
1,516
951
(825)
14,301
173,367
(2,097)
171,270
Self-Managed - the fund member acts as Trustee for his or
her pool of funds, which may include funds from a limited
number of other family members and associates. These funds
are predominantly utilised where the Trustee perceives they
have the requisite time and expertise to manage their own
investment strategy and a sufficient scale of funds to make the
fixed administration costs economically justifiable.
Corporate - funds established for the benefit of employees
of a particular entity or a group of related entities, with joint
member and employer control.
Public Sector - funds which provide benefits largely for
government employees or employees of statutory authorities,
or are schemes established by a Commonwealth, State
or Territory law.
Self Managed Funds are regulated by the Australian Taxation
Office (ATO) whereas all others above are regulated by the
Australian Prudential Regulation Authority (APRA).
Profit for the year from continuing operations
Less non-controlling interest
Profit attributable to Owners of the Company from continuing operations
Profit for the year from discontinued operation
Profit attributable to Owners of the Company - total
Underlying net profit after tax pre-amortisation (UNPAT) adjustments:
Reverse the impact of:
Amortisation of intangible assets
Termination and retention incentive payments
Gain on divestment of subsidiaries
Profit on divestment of assets
Non-recurring professional fees
Acquisition tax provision release
Impairment of goodwill
Unwind of deferred tax liability recorded on intangible assets
Acquisition and divestment transaction costs
Onerous contracts
Reinstatement of Perennial non-controlling interests
Income tax attributable
UNPAT
Discontinued operation
UNPAT from continuing operations
The IOOF Group services the needs of financial advisers and
their clients through appropriately licensed and regulated
entities. The pool of investable funds emanates predominantly
from superannuation which has been supported by Australia’s
mandatory contributions regime since the early 1990s.
Competition for service offerings to superannuants and
investors (fund members) in the Australian market place is
currently drawn from five main fund types with the following
differentiating features:
Retail - privately operated trusts and other schemes. The
majority of funds are channelled to administration services and
investment management products through financial advisers.
However, technological development is enabling an increasing
range of offerings direct to fund members.
Industry Funds - superannuation entities which historically
have provided for employees working in the same union,
industry or group of related industries. Many industry funds
now offer membership to members of the public. Industry
funds generally administer these funds, but may outsource the
management of investments.
26
26
The IOOF Group administers and manages Retail funds.
Australian Superannuation assets totalled $2.3 trillion as at
30 June 2017. Over the 12 months to June 2017 there was
an 10.0% increase in total superannuation assets and retail
providers had a market share of approximately 25%. The
IOOF Group’s market share of that sub-set, as represented
by our platform administration segment’s flows to Funds
Under Administration, was approximately 9%. There is a high
degree of competition between the five fund types and
fragmentation and competition among the participants within
each fund type.
As at the end of June 2017, for funds with greater than four
members, 49.8% of investments were invested in equities;
with 22.8% in Australian listed equities, 22.9% in international
listed equities and 4.0% in unlisted equities. Fixed income and
cash investments accounted for 33.3% of investments; 20.9%
in fixed income and 12.4% in cash. Property and infrastructure
accounted for 13.3% of investments and 3.7% were invested in
other assets, including hedge funds and commodities.
The IOOF Group operates in the Wealth Management sector.
The sector has a substantial and growing pool of funds
underpinned by government compulsion. The attraction
of the sector is further enhanced by high regulatory and
technological barriers to entry from new competitors. As an
incumbent participant, we seek to grow our Funds Under
Management, Administration, Advice and Supervision
(FUMAS) faster than our competitors. In doing so, the portion
of our revenue net of direct costs (gross margin) which is
levied on asset balances may reasonably be expected to rise
proportionately with FUMAS. This proportionate rise may
be affected by the impact of differentiated product pricing
and competitive pressure on management fee rates. In
conjunction, we seek to leverage a cost base which is largely
fixed relative to the scale of our FUMAS.
The IOOF Group’s future FUMAS growth will be underpinned
by organic and acquisition initiatives. Organic growth will be
advanced through:
•
increasing brand and product awareness to
increase revenue;
• enhancing the adviser and fund client experience through
continued technology development and experienced
knowledgeable support staff;
• operating an open architecture environment which allows
our advisers and clients to utilise the administration service
which best meets their objectives irrespective of whether
it is an IOOF Group proprietary service or a competitor’s
service. All options, however, generate a favourable
economic return for the IOOF Group;
IOOF annual report 2017
• enhanced training initiatives and leading minimum
qualification standards to give our staff and advisers every
opportunity to optimise the experience of our clients;
• establishing skilled teams and robust analytical processes
to enhance the prospect of achieving above benchmark
performance in investment management; and
• continuous improvement in process efficiency to minimise
operating costs.
The IOOF Group also has a long-term strategy of pursuing
growth through acquisitions and has completed several
acquisitions in previous years. The IOOF Group will continue
to pursue acquisitions within the Wealth Management sector
on an opportunistic basis. However acquisitions will only be
considered where they present a logical strategic fit with
existing operations and are priced reasonably for the expected
value accretion to shareholders. The funding of acquisitions
will be considered on a case by case basis taking into account
the relative cost of available funding sources and the impact
on balance sheet structure overall.
On 14 June 2017, the IOOF Group announced its agreement
with National Australia Bank Limited to acquire National
Australia Trustees Limited (NATL). NATL is a significant provider
of trustee services with a recognised history in Western
Australia, New South Wales, Queensland and Victoria. NATL’s
offering is considered a strong strategic fit with the IOOF
Group’s existing trustee business, Australian Executor Trustees
Limited (AET), as combined customers will benefit from greater
scale and more specialist product offerings. Completion of
the sale is subject to regulatory approval and is expected to
be finalised in the next half-yearly reporting period. As such,
there has been no impact on the IOOF Group’s results for
the current year.
The IOOF Group’s UNPAT of $169.4m for the year ended 30
June 2017 was materially in line with $171.3m UNPAT from
continuing operations in the prior year.
In the prior year Perennial Fixed Interest and Perennial
Growth Management were divested to the Henderson Group
plc (Henderson) for an upfront consideration of $71.6m
and a deferred component dependent on future business
performance, payable after two and four years. $0.7m has been
recognised in statutory profit only as deferred consideration
for the year ended 30 June 2017. The results of these
businesses have been disclosed as a discontinued operation
in the financial statements. These divestments allow the IOOF
Group to concentrate on its core advice, superannuation,
multimanager and trustee business. The proceeds from the
divestment will fund congruent acquisitions.
27
27
IOOF annual report 2017
Directors’ report (cont’d)
Operating and financial review (cont’d)
Analysis of financial results - IOOF Group
Operating expenditure decreased by $9.0m
The decrease in operating expenditure excludes the impact
of expenditure items identified as reversed in calculating
UNPAT. As a financial services provider, labour represents the
IOOF Group’s most material cost. Labour costs have reduced
by $2.1m despite higher rates of pay due to lower staff
numbers following realisation of efficiencies through platform
rationalisation. This rationalisation, in addition to a strategic
imperative to build enhanced functionality in the prior year,
has also seen computer expenditure reduce by approximately
$8.8m relative to prior year. Professional fees have increased
largely because specialist advisers have been engaged to
assess significant acquisition opportunities. In addition,
the IOOF Group has outsourced a significant component
of its research capability which has the effect of increasing
professional fees, but lowering staff numbers.
Net financing costs stable
Net financing costs have not varied materially as there has
been a reasonably stable interest rate environment over the
two years to 30 June 2017 in addition to similar patterns of
sources and applications of funds over that period.
Other profit impacts decreased by $1.7m
Non-controlling interests excluded Perennial entities due
to classification as discontinued operations and was $1.2m
higher in line with Ord Minnett’s increased profitability. Share
of associates profits declined $1.4m relative to prior year as
a result of mandate outflows and higher costs within the
Perennial Value Management (PVM) Group. Share-based
payments expense was $0.7m lower due to the roll off of
non-employee stakeholder plans.
Income tax increased by $2.4m
Income tax expense relative to prior year reflected a $4.1m
lower spend on treasury shares to fulfil employee share plans
($1.2m tax impact). This was due principally to a wind down
in scale and breadth of plans overall. Assessable income, as
opposed to accounting profit before tax, was higher than the
prior year and R&D claims lower on the back of lower software
development expenditure.
Analysis of the IOOF Group’s result excludes the divested
Perennial businesses from the review and the impact on
particular items of revenue or expense highlighted in
discontinued operations disclosures. Variances compare the
year to 30 June 2017 with the year to 30 June 2016.
Gross margin decreased $9.6m
During the current year, average Funds Under Management,
Administration and Advice (FUMA) were $109.5b, an increase
of 5.5% on the prior year average. The increases were derived
largely from equity market performance in the current year
augmented by organic growth in advice based funds. Platform
and advice flows of $4.2b were up 131% on prior year. Organic
growth benefited from higher levels of flows across the sector
and better penetration of the IOOF Group’s exisiting client
base. As far as the latter is concerned, the transfer of clients
from the Bridges aligned TPS platform to the IOOF Group’s
contemporary, more marketable, Pursuit offering was the
prime cause of this positive outcome. The improvement
on prior year was also impacted by the loss of a single low
margin corporate account which had an outsize impact in
that prior year.
The revenue impact from higher average funds was offset
by negative impacts from product mix on earning rates or
margins. It should be noted, however, that margins improved
significantly across the two halves of the current year. Within
platform administration, the lower rates for the current year
principally reflected the ability of clients transferred via
platform rationalisation to access lower fee scales. In addition,
there is a continuing trend for a higher proportion of funds
to be directed towards more contemporary platforms with
lower fees, but commensurately lower attributable overheads.
Notwithstanding, higher platform margins were achieved
in the second half of the current year due to service fee
repricing. Investment management margins were stable,
with an improved second half of the current year driven by
consolidation of underlying fund managers and resultant lower
costs. In financial advice, Shadforth margins declined due to
divestment and service mix impacts whilst new business from
incoming advisers was dilutive on segment margin overall.
Other revenue increased $2.7m
The IOOF Group’s broking businesses’, (Ord Minnett and
Bridges) contributions were up in comparison to prior year
due to improved equity market conditions for new issues and
traded volumes more broadly. In comparison to prior year,
service charges to associated entities were reduced in line
with the significant number of divested holdings enacted in
2015 and 2016.
28
28
IOOF annual report 2017
Analysis of financial results - Segments (excluding discontinued operations)
Financial advice and distribution
Net operating revenue
Other revenue (incl equity accounted profits)
Operating expenditure
Net financing
Net non-cash items
Income tax expense and non-controlling Interest
Underlying Profit after Tax
2017
$’000
261,808
3,856
(148,755)
560
(3,221)
(37,894)
76,354
2016
$’000
261,667
4,700
(147,715)
731
(3,967)
(36,981)
78,435
Movement
$’000
141
(844)
(1,040)
(171)
746
(913)
(2,081)
%
0.1%
(18.0%)
(0.7%)
(23.4%)
18.8%
(2.5%)
(2.7%)
• Average funds growth has been offset by Shadforth fee mix impacts and divestments of owned advice business into owner
operated dealer groups. The addition of advisers has brought new revenue streams into the IOOF group, albeit at a dilutive margin
in percentage of average funds terms.
• Operating expenditure has been impacted by redistribution of corporate charges in the wake of significant divestments in the
prior year. In particular, there has been significant re-weighting toward front line support for advisers under the IOOF Group’s Client
First initiatives.
Platform management and administration
Net operating revenue
Other revenue (incl equity accounted profits)
Operating expenditure
Net financing
Net non-cash items
Income tax expense and non-controlling Interest
Underlying Profit after Tax
2017
$’000
212,450
-
(95,865)
1
(5,380)
(33,939)
77,267
2016
$’000
218,161
375
(99,409)
2
(5,288)
(34,820)
79,021
Movement
$’000
(5,711)
(375)
3,544
(1)
(92)
881
(1,754)
%
(2.6%)
(100.0%)
3.6%
(50.0%)
(1.7%)
2.5%
(2.2%)
• Average funds benefited from significantly improved organic growth. Improvements in fund flows in the sector more generally,
the transfer of Bridges’ clients to Pursuit and the administration of increased native title and compensation funds from the trustee
segment were the key drivers of this outcome. This growth was complemented by positive investment returns.
• Net operating revenue decrease was driven primarily by lower pricing tiers for Bridges’ clients following the rationalisation of two
flagship retail platforms to one and a full year of MySuper pricing on higher balance accounts.
• Significantly reduced operating expenditure resulted primarily from reduced staff numbers and technology support and license
costs following platform rationalisation. In addition, there was higher IT investment in the prior year in order to facilitate higher
levels of on-line transacting in future periods.
29
29
IOOF annual report 2017
Directors’ report (cont’d)
Operating and financial review (cont’d)
Investment management
Net operating revenue
Other revenue (incl equity accounted profits)
Operating expenditure
Net financing
Net non-cash items
Income tax expense and non-controlling Interest
Underlying Profit after Tax
2017
$’000
57,508
2,737
(14,284)
436
(723)
(12,967)
32,707
2016
$’000
57,719
5,572
(19,769)
1,236
(1,383)
(11,996)
31,379
Movement
$’000
(211)
(2,835)
5,485
(800)
660
(971)
1,328
%
(0.4%)
(50.9%)
27.7%
(64.7%)
47.7%
(8.1%)
4.2%
• Net operating revenue was stable with broadly equivalent average funds and margins across both years. Other revenue was
affected by PVM performance.
• Decreased operating expenditure resulted from lower allocation of IOOF Group service costs following the divestment of Perennial.
Trustee services
Net operating revenue
Other revenue (incl equity accounted profits)
Operating expenditure
Net financing
Net non-cash items
Income tax expense and non-controlling Interest
Underlying Profit after Tax
2017
$’000
28,490
-
2016
$’000
27,422
-
(18,341)
(18,601)
-
(578)
(2,876)
6,695
-
(246)
(2,578)
5,997
Movement
$’000
1,068
-
260
-
(332)
(298)
698
%
3.9%
n/a
1.4%
n/a
LARGE
(11.6%)
11.6%
• Net operating revenue has increased in line with higher client numbers; in particular, an improved contribution from the
compensation trust and native title trust businesses resulted from an investment in capability and service delivery.
• Reduced operating expenditure resulted from efficiencies following stronger alignment with the broader IOOF Group
operating model.
Financial Position
The IOOF Group held cash and cash equivalents of $208.2m at 30 June 2017 (30 June 2016: $187.0m). Cash is held to satisfy regulatory
net asset requirements and also to ensure adequate liquidity given management fee receipts are less frequent than payroll and service
fee cash outflows.
The overall debt to equity ratio stood at 13% at 30 June 2017 (30 June 2016: 13%). Net debt, borrowings less cash, stood at 0.0 times
underlying earnings before interest, tax, depreciation and amortisation. This compares favourably to a covenant ratio upper limit
of 2.5 times. Cash flow forecasting is conducted monthly which indicates that the IOOF Group’s debt levels are able to be serviced
from current business operations. We also conduct stress testing of lending covenants when assessing acquisition opportunities and
monitor adherence to licence conditions monthly.
Risks
The IOOF Group manages a number of risks in conducting its operations and implementing its strategy. An in depth discussion of risks
and sensitivities is outlined in Section 1 of the financial statements. Material risks faced by the IOOF Group include, but may not be
limited to, the following:
30
30
IOOF annual report 2017
(i) Changes in investment markets
(iv) Cyber security
The IOOF Group derives a significant proportion of its earnings
from fees and charges based on the level of FUMAS. The
level of FUMAS will reflect (in addition to other factors such
as the funds flowing into and out of FUMAS) the investment
performance of those funds. Therefore, changes in domestic
and/or global investment market conditions could lead to
a decline in FUMAS, adversely impacting the amount we
earn in fees and charges. Deterioration in investment market
conditions could also lead to reduced consumer interest in the
IOOF Group’s financial products and services. The principal
response to this risk has been to establish comprehensive
investment governance committees, policies and procedures
which are subject to continuous monitoring and oversight.
(ii) Competition
There is substantial competition for the provision of financial
services in the markets in which the IOOF Group operates. A
variety of market participants in specialised investment fund
management, wealth advice and corporate trustee services
compete vigorously for customer investments and the
provision of wealth management services. These competitive
market conditions may adversely impact earnings and assets.
The IOOF Group manages this risk by continuously investing
in product design, stakeholder relationships and continuous
improvement initiatives.
(iii) Information technology
The IOOF Group relies heavily on information technology.
Therefore, any significant or sustained failure in the IOOF
Group’s core technology systems could have a materially
adverse effect on operations in the short term, which in turn
could undermine longer term confidence and impact the
future profitability and financial position of the IOOF Group.
The IOOF Group has implemented a next-generation firewall,
pursues continuous improvements to protect user devices
and imposes segregation of duties between technology
environments. More broadly, the IOOF Group uses policies and
procedures which are subject to continuous monitoring and
oversight, maintains a significant complement of experienced
staff and employs specialist advisers. Information technology
controls are highly complementary to those employed to
minimise cyber security risks.
There is a risk of significant failure in the IOOF Group’s
operations and/or material financial loss as a result of cyber
attacks. To manage this risk, the IOOF Group has followed
the recommendation of ASIC and adopted the United States
government’s National Institute of Standards and Technology
cybersecurity framework. In doing so, the IOOF Group has
implemented measures and controls that cover identification,
detection, monitoring and response in relation to cyber
threats. More broadly, we have developed and tested our
disaster recovery capability and procedures, implemented
high availability infrastructure and architectures, conducted
mandatory staff training which is focused on cyber risk and
continually monitor our systems for signs of poor performance,
intrusion or interruption. Cyber security controls are highly
complementary to those employed to minimise information
technology risks.
(v) Brands and reputation
The IOOF Group’s capacity to attract and retain financial
advisers, employees, clients and FUMAS depends to a certain
extent upon the brands and reputation of its businesses. A
significant and prolonged decline in key brand value or group
reputation could contribute to lower new business sales,
reduced inflows of investment funds and assets, damage to
client strategies and may impact adversely upon our future
profitability and financial position. The IOOF Group actively
monitors media and other public domain commentary on its
affairs as well as proactively promoting the value of its services,
products and community initiatives and building a customer
centric culture.
(vi) Provision of investment advice
The IOOF Group’s financial advisers and authorised
representatives provide advice to clients and may be exposed
to litigation if this advice is judged to be incorrect or if the
authorised representative otherwise becomes liable for client
losses. This risk is managed by having high educational,
compliance and training standards for the IOOF Group’s
advisers whilst its potential financial impact is generally
mitigated by taking out appropriate insurance cover.
31
31
IOOF annual report 2017
Directors’ report (cont’d)
Operating and financial review (cont’d)
(vii) Operational risks
(x) Cash flow and interest rate risk
Operational risk is the risk arising from the daily functioning
of the IOOF Group’s businesses. The IOOF Group has specific
operational exposures relevant to the industry in which we
operate including exposures in connection with product
disclosure statements, investment management, tax and
financial advice, legal and regulatory compliance, product
commitments, process error, fraud, system failure, failure of
security and physical protection systems and unit pricing
errors. This risk is minimised via policies and procedures which
are subject to continuous monitoring and oversight. The IOOF
Group maintains a significant complement of experienced
staff, builds a positive culture and utilises specialist advisers to
carry out such monitoring.
(viii) Conduct risk
Conduct risk is the risk of failure of the IOOF Group’s
frameworks, product design or practices to prevent
inappropriate, unethical or unlawful conduct (either
by negligence or deliberate actions) on the part of the
IOOF Group’s management, employees, contractors or
representatives. The IOOF Group’s culture of honest and
ethical behaviour is supported by the IOOF Code of Conduct
and its Compliance Manual for Authorised Representatives,
which set out the tenets of professional and personal
conduct with which directors, employees, contractors,
Authorised Representatives, agents and consultants are
required to comply. These include promoting a healthy
and safe environment, protecting private and confidential
information, acting at all times within the law and acting in
the best interests of the IOOF Group, its shareholders, clients
and investors. As an additional safeguard, the IOOF Group’s
Whistleblower Policy protects employees from detrimental
action where employees disclose, in good faith and with
reasonable grounds, any unethical, illegal, fraudulent or
undesirable conduct.
(ix) Credit risk
Credit risk refers to the risk that a counterparty will fail to
meet its contractual obligations resulting in financial loss
that arises from receivables, loans and other receivables.
The IOOF Group’s counterparties generally do not have an
independent credit rating. The IOOF Group assesses the credit
quality of the debtor taking into account its financial position,
past experience with the debtor, and other available credit
risk information.
32
32
Interest rate risk is the risk to the IOOF Group’s earnings and
capital arising from changes in market interest rates. The
financial instruments held that will be impacted by interest
rate risk consist of cash and cash equivalents, loans, and
borrowings. Short and long-term investment mixes and
loans to related entities are influenced by liquidity policy
requirements. Interest rates (both charged and received)
are based on market rates, and are closely monitored by
management. They are primarily at variable rates of interest,
and will expose the IOOF Group to cash flow interest rate risk.
(xi) Liquidity risk
Liquidity risk relates to the IOOF Group having insufficient
liquid assets to cover current liabilities and unforeseen
expenses. The IOOF Group manages liquidity risk exposure
by maintaining sufficient liquid assets and an ability to
access a committed line of credit. The liquidity requirements
for licensed entities in the IOOF Group is also regularly
reviewed and carefully monitored in accordance with those
licence requirements.
(xii) Reliance on Australian Financial Services
Licence, Registrable Superannuation Entity and
other licences
In order to provide the majority of its services in Australia, a
number of the IOOF Group’s controlled entities are required to
hold a number of licences, most notably AFS or RSE licences.
If any of those entities fails to comply with the general
obligations and conditions of its licence, this could result in
the suspension or cancellation of the licence. While it is not
expected to occur, a breach or loss of licences could have a
material adverse effect on business and financial performance.
AFS and RSE licences also require the licence holder to
maintain certain levels of capital. These capital requirements
may change from time to time. Earnings dilution may occur
where a higher capital base is required to be held.
(xiii) Insurance
The IOOF Group holds insurance policies, including errors and
omissions (professional indemnity) and directors’ and officers’
insurance, which are commensurate with industry standards,
and adequate having regard to our business activities.
These policies provide a degree of protection for the IOOF
Group’s assets, liabilities, officers and employees. However, no
assurance can be given that any insurance that the IOOF Group
currently maintains will:
IOOF annual report 2017
• be available in the future on a commercially
(xvii) Acquisitions
reasonable basis; or
• provide adequate cover against claims made against or by
the IOOF Group, noting that there are some risks that are
uninsurable (e.g. nuclear, chemical or biological incidents)
or risks where the insurance coverage is reduced (e.g.
cyclone, earthquake, flood, fire).
The IOOF Group also faces risks associated with the financial
strength of its insurers to meet indemnity obligations when
called upon which could have an adverse effect on earnings. If
the IOOF Group incurs uninsured losses or liabilities, its assets,
profits and prospects may be adversely affected.
(xiv) Unit pricing errors
Systems failures or errors in unit pricing of investments are
issues affecting the broader funds management industry that
may result in significant financial losses and brand damage to a
number of financial services organisations. A unit pricing error
made by the IOOF Group or its service providers could cause
financial or reputation loss. This risk is minimised via policies,
procedures and contractual enforcement which are subject
to continuous monitoring and oversight. The IOOF Group
maintains a significant complement of experienced staff and
utilises specialist service providers to maintain robust systems
and accurate inputs.
(xv) Dependence on key personnel
The IOOF Group’s performance is dependent on the talents
and efforts of key personnel. The IOOF Group’s continued
ability to compete effectively depends on our capacity to
retain and motivate existing employees as well as attract new
employees. The loss of key executives or advisers could cause
material disruption to operations in the short to medium term.
While equity incentives of key personnel align their interests
with the IOOF Group’s future performance, they do not
provide a guarantee of their continued employment. The IOOF
Group utilises succession planning to manage this risk.
(xvi) Dependence on financial advisers
The success of the IOOF Group’s advice and platform business
is highly dependent on the quality of the relationships with
its financial advisers and the quality of their relationships with
their clients. The IOOF Group’s ability to retain productive
advisers is managed by monitoring and, where necessary,
improving service levels, technological capability, suitability
of product offerings and the quality and relevance of
professional training.
Acquisition transactions involve inherent risks, including:
• accurately assessing the value, strengths, weaknesses,
contingent and other liabilities and potential profitability of
acquired businesses;
•
integration risks including the risk that integration could take
longer or cost more than expected or that the anticipated
benefits and synergies of the integration may be less
than estimated;
• diversion of management attention from existing business;
• potential loss of key personnel and key clients;
• unanticipated changes in the industry or general economic
conditions that affect the assumptions underlying the
acquisition; and
• decline in the value of, and unanticipated costs, problems or
liabilities associated with, the acquired business.
Any of these risks could result in a failure to realise the benefits
anticipated to result from any acquisition of new business
and could have a material adverse impact on our financial
position. The IOOF Group maintains a significant complement
of experienced staff and holds relationships with specialist
advisers to assess acquisition opportunities. This is designed to
ensure the Board is fully informed of the risks and opportunities
associated with any potential individual acquisition.
(xviii) Dilution
The IOOF Group’s need to raise additional capital in the future
in order to meet its operating or financing requirements,
including by way of additional borrowings or increases in the
equity of any of the consolidated entity’s companies, may
change over time. Future capital raisings or equity funded
acquisitions may dilute the holdings of particular shareholders
to the extent that such shareholders do not subscribe to
additional equity, or are otherwise not invited to subscribe in
additional equity. This risk will be managed by examination of
relevant factors and circumstances prevailing at that time.
(xix) Regulatory and legislative risk and reform
The financial services sectors in which the IOOF Group operates
are subject to extensive legislation, regulation and supervision
by a number of regulatory bodies in multiple jurisdictions.
The regulatory regimes governing the IOOF Group’s business
activities are complex and subject to change. The impact of
future regulatory and legislative change upon the IOOF Group
cannot be predicted. In addition, if the amount and complexity
of new regulation increases, so too may the cost of compliance
and the risk of non-compliance. The IOOF Group maintains
a significant complement of experienced staff and holds
relationships with specialist advisers to minimise this risk.
33
33
IOOF annual report 2017
Directors’ report (cont’d)
Operating and financial review (cont’d)
Shareholder returns
The IOOF Group dividend is calibrated to provide shareholders with a benefit which reflects performance and offers an attractive yield
when assessed against a range of other external economic factors and investment options. The Board also understands that dividend
payments should not hinder future organisational plans. The Board has therefore determined that a pay-out ratio range of 60% - 90%
of UNPAT is generally appropriate, but not binding. Based on historical precedent, the occasions on which this range is not met or
exceeded are expected to be infrequent.
Total Shareholder Return (TSR) measures the change in share value over a specified period together with the return by way of
dividends received. The IOOF Group’s TSR for the twelve months to 30 June 2017 was 31.9% with 99% of UNPAT paid as dividends
augmented by strong share price growth of 25.2%. The market valuation of the IOOF Group remained reflective of movements in
global equity markets generally. TSR in the 5 year period from 1 July 2012 was 103% in total and 15.3% on a compounding annualised
basis. The IOOF Group is in a strong financial position with low gearing and significant free cash.
Profit attributable to owners of the Company ($'000s)1
Profit for the year from continuing operations ($'000s)
Basic EPS (cents per share)
Diluted EPS (cents per share)
Basic EPS (continuing operations) (cents per share)
UNPAT ($'000s)
UNPAT EPS (cents per share)
UNPAT EPS (continuing operations) (cents per share)
Dividends declared ($'000s)
Dividends per share (cents per share)
Opening share price
Closing share price at 30 June
Return on equity (non-statutory measure)2
2017
115,990
119,851
38.7
38.6
38.7
2016
196,846
140,542
65.7
65.4
46.0
2015
138,371
140,527
47.7
47.4
45.8
2014
101,285
103,378
43.7
43.1
43.7
2013
79,769
80,432
34.4
34.1
34.4
169,357
173,367
173,758
123,047
108,756
56.5
56.5
57.8
57.1
59.9
58.6
53.1
53.1
159,071
163,573
159,070
127,260
53.0
$7.83
$9.80
12.1%
54.5
$8.99
$7.83
12.3%
53.0
$8.40
$8.99
13.4%
47.5
$7.36
$8.40
15.0%
46.9
46.9
97,485
42.0
$6.05
$7.36
13.2%
1 Profit attributable to owners of the Company has been calculated in accordance with Australian Accounting Standards.
2 Return on equity is calculated by dividing UNPAT by average equity during the year.
Returns to shareholders increase/decrease through both dividends and capital growth/decline. Dividends for 2017 and prior years
were fully franked.
Items excluded from underlying net profit after
tax pre-amortisation (UNPAT)
Amortisation of intangible assets: Non-cash entry reflective
of declining intangible asset values over their useful lives.
Intangible assets are continuously generated within the IOOF
Group, but are only able to be recognised when acquired.
The absence of a corresponding entry for intangible asset
creation results in a conservative one sided decrement to
profit only. It is reversed to ensure the operational result is
not impacted. The reversal of amortisation of intangibles is
routinely employed when performing company valuations.
However, the amortisation of software development costs is
not reversed in this manner.
Termination and retention incentive payments: Facilitation
of restructuring to ensure long term efficiency gains which are
not reflective of conventional recurring operations.
Gain on divestment of subsidiaries: During the year, the
IOOF Group divested its interests in Perennial Investment
Management Limited to Perennial Value Management Ltd. The
IOOF Group also partially divested a subsidiary (2016: Perennial
Fixed Interest and Perennial Growth Management).
Profit on divestment of assets: Divestments of non-core
businesses, client lists and associates.
Non-recurring professional fees: Costs relating to specialist
service and advice providers enlisted to assist the IOOF Group
in better informing key stakeholders. These services were
required following negative media allegations. In particular,
but not limited to, process review, senate inquiry support,
government relations, litigation defence and communications
advice. It is not anticipated that this type and level of support
will be required on a recurrent basis. Costs were predominantly
in the prior year.
34
34
Acquisition tax provision release: The acquisition of
DKN in the 2012 financial year necessitated recognition of
a provision related to an uncertain tax position. This was
recognised at estimated fair value, however the provision
was released during the current year as it was adjudged that
a present obligation no longer existed. This was a one-off,
non-cash, non-operational increment to the IOOF Group’s
statutory profitability.
Impairment of goodwill: A non-cash impairment of $38.6m
has been recognised in relation to goodwill allocated to PVM
and its subsidiaries. Reduced profitability from both lower
revenue and higher costs has led to calculated value-in-
use declining to below the carrying value of the aggregate
goodwill and investment balances. Revenue decline has arisen
due to institutional outflows. These outflows reflect changing
market dynamics where larger institutions now weight a
greater proportion of funds to indexed products. This has
combined with below benchmark performance in 2012 which
adversely affected 3 and 5 year fund performance numbers.
Higher costs resulted from an absence of operations scale
and subsidisation following the divestment of other Perennial
entities as PVM moved to virtually complete autonomy during
the current year.
Unwind of deferred tax liability recorded on intangible
assets: Acquired intangible asset valuations for AASB 3
Business Combinations accounting are higher than the
required cost base as set under tax consolidation rules
implemented during 2012. A deferred tax liability (DTL) is
required to be recognised as there is an embedded capital
gain should the assets be divested at their accounting values.
This DTL reduces in future years at 30% of the amortisation
applicable to those assets which have different accounting
values and tax cost bases. The recognition of DTL and
subsequent reductions are not reflective of conventional
recurring operations and are regarded as highly unlikely to
be realised due to the IOOF Group’s intention to hold these
assets long term.
Acquisition and divestment transaction costs: In 2016,
one off payments to external advisers in pursuit of corporate
transactions, such as the divestment of certain Perennial
subsidiaries, which were not reflective of conventional
recurring operations.
Onerous contracts: In 2016, non-cash entry to record
the estimated present value of expected costs of meeting
the obligations under terminated information technology
contracts associated with platform rationalisation. For these
contracts, the costs exceed the economic benefits expected
to be received.
IOOF annual report 2017
Reinstatement of Perennial non-controlling interests:
In 2016, embedded derivatives existed given the IOOF Group’s
obligation to buy-back shareholdings in certain Perennial
subsidiaries if put under the terms of their shareholders’
agreements. International Financial Reporting Standards deems
the interests of these non-controlling holders to have been
acquired. Those interests must therefore be held on balance
sheet as a liability to be revalued to a reserve each reporting
year. In calculating UNPAT, the non-controlling interest holders
share of the profit of these subsidiaries is subtracted from
the IOOF Group result as though there were no embedded
derivatives to better reflect the current economic interests of
Company shareholders in the activities of these subsidiaries.
Income tax attributable: This represents the income tax
applicable to certain adjustment items outlined above.
Dividends
In respect of the financial year ended 30 June 2017, the
Directors declared the payment of a final dividend of 27.0 cents
per share franked to 100% at 30% corporate income tax rate
to the holders of fully paid ordinary shares to be paid on 1
September 2017. This dividend will be paid to all shareholders
recorded on the Register of Members on 18 August 2017.
The Directors declared the payment of an interim dividend
of 26.0 cents per share franked to 100% at 30% corporate
income tax rate to the holders of fully paid ordinary shares paid
on 30 March 2017.
In respect of the financial year ended 30 June 2016, a final
dividend of 26.0 cents per share franked to 100% at 30%
corporate income tax rate was paid to the holders of fully paid
ordinary shares on 13 October 2016.
Environmental regulation
The IOOF Group is not subject to significant
environmental regulation.
Events occurring after balance date
The Directors have declared the payment of a final dividend of
27.0 cents per ordinary share franked to 100% based on tax paid
at 30%, to be paid on 1 September 2017.
The Directors are not aware of any other matter or
circumstance not otherwise dealt with in this report, or the
accompanying financial statements and notes thereto, that has
arisen since 30 June 2017 that has significantly affected, or may
significantly affect:
•
•
•
the IOOF Group’s operations in future financial years; or
the results of those operations in future financial years; or
the IOOF Group’s state of affairs in future financial years.
35
35
IOOF annual report 2017
Directors’ report (cont’d)
Lead auditor’s independence declaration
The lead auditor’s independence declaration is included on page 56 of the annual financial report and forms part of the Directors’
Report for the year ended 30 June 2017.
Company secretary
The Company Secretary is Mr A Paul M Vine LLB FGIA FCIS GAICD. Mr Vine was appointed to the position in December 2015 and is also
the General Manager Legal, Risk and Compliance, with over 25 years’ experience in legal and governance roles in public companies
and leading law firms.
Directors’ meetings
The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of the
Directors of the Company during the financial year are:
Director
Directors Meetings
Remuneration
Committee
Committee Meetings
Nominations Committee
Remuneration
& Nominations
Committee1
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
C Kelaher
G Venardos
R Sexton
J Harvey
A Griffiths
E Flynn
J Selak
Director
C Kelaher
G Venardos
R Sexton
J Harvey
A Griffiths
E Flynn
J Selak
13
13
8
12
13
13
7
13
13
8
13
13
13
7
n/a
2
n/a
n/a
2
2
n/a
n/a
2
n/a
n/a
2
2
n/a
2
2
n/a
2
n/a
n/a
n/a
Committee Meetings
2
2
n/a
2
n/a
n/a
n/a
n/a
n/a
2
2
2
n/a
n/a
n/a
2
2
2
n/a
n/a
n/a
Group Audit Committee
APRA Regulated Entity
Audit Committee2
Risk and Compliance
Committee2
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
n/a
n/a
2
6
8
8
6
2
2
6
8
8
6
2
n/a
n/a
n/a
3
n/a
3
3
n/a
n/a
n/a
3
n/a
3
3
n/a
6
n/a
7
7
7
n/a
7
n/a
7
7
7
n/a
n/a
1 The Remuneration and Nominations Committee was reorganised into two separate Committees effective 24 November 2016.
2 These Committees include additional members that are not Directors of IOOF Holdings Ltd.
Meetings held represents the number of meetings held during the time the Director held office.
The Directors meetings are those held for IOOF Holdings Ltd. This does not include the meetings held and attended by Directors for
the various subsidiary companies. Major subsidiaries averaged a further 7 meetings each during the year.
In addition to the meetings attended during the year, a number of matters were considered and addressed separately via
circular resolution.
36
36
Shares issued on exercise of options
During the financial year, the IOOF Group did not issue any
ordinary shares of the Company as a result of the exercise of
options. All plans were satisfied from the purchase of shares.
Unexercised options over shares,
performance rights and deferred shares
At the date of this report unexercised options over
shares of the Company under deferral arrangements and
performance rights are:
Performance rights
Vesting date
30 Jun 18
30 Jun 19
31 Dec 19
Deferred shares
Vesting date
31 Jul 18
Number
of rights
135,000
329,567
30,000
494,567
Number
of shares
35,420
35,420
Shares allocated on vesting will rank equally with all other
ordinary shares on issue.
These performance rights do not entitle the holder to participate
in any share issue or receive dividends of the Company.
Indemnification and insurance
Rule 84 of the IOOF Holdings Ltd Constitution requires the
Company to indemnify to the extent permitted by law, each
Director and Secretary against liability incurred in, or arising out
of the conduct of the business of the Company or the discharge
of the duties of the Director or Secretary. The Directors and
Secretary named in this Directors’ Report have the benefit of
this requirement, as do individuals who formerly held one of
those positions.
In accordance with this requirement the Company has entered
into Deeds of Access, Indemnity and Insurance (Deeds of
Indemnity) with each Director and Secretary. During the
financial year, the IOOF Group paid insurance premiums to
insure against amounts that the IOOF Group may be liable
to pay the Directors and Secretary pursuant to Rule 84. The
insurance policy also insures the Directors and Secretary of the
Company and its controlled entities, and the general officers of
each of the companies in the IOOF Group. Details of the amount
of the premium paid in respect of the insurance contract have
not been disclosed as such disclosure is prohibited under the
terms of the contract.
IOOF annual report 2017
The liabilities insured are legal costs that may be incurred in
defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of entities in
the IOOF Group and any other payments arising from liabilities
incurred by the officers in connection with such proceedings,
other than where such liabilities arise out of conduct involving
a wilful breach of duty by the officers or the improper use
by the officers of their position or of information to gain
advantage to themselves or someone else or to cause detriment
to the Company.
Rounding off of amounts
The Company is a company of the kind referred to in ASIC
Corporations Instrument 2016/191, dated 24 March 2016, and
in accordance with that Instrument amounts in the financial
report are rounded off to the nearest thousand dollars,
narrative disclosures are expressed in whole dollars or as
otherwise indicated.
Non-audit services
The Directors are satisfied that the provision of non-audit
services during the year of $499,958, by the auditor is compatible
with the general standard of independence for auditors
imposed by the Corporations Act 2001. Non-audit services are
managed as follows:
•
fees earned from non-audit work undertaken by KPMG are
capped at 1.0 times the total audit fee;
• all non-audit services have been reviewed and approved to
ensure that they do not impact the integrity and objectivity
of the auditor; and
• none of the services undermine the general principles
relating to auditor independence as set out in the Code
of Conduct APES 110 Code of Ethics for Professional
Accountants issued by the Accounting Professional &
Ethical Standards Board, including reviewing or auditing
the auditor’s own work, acting in a management or
decision-making capacity for the IOOF Group, acting as
advocate for the IOOF Group or jointly sharing economic
risks and rewards.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the
Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the
Company is a party, for the purpose of taking responsibility on
behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf
of the Company with leave of the Court under section 237 of the
Corporations Act 2001.
37
37
IOOF annual report 2017
Remuneration report
Executive Summary
1. Overview
1.1 Key Management Personnel
1.2 Summary - Key Management Personnel remuneration
1.3 Summary - Non-Executive Directors remuneration
2. Remuneration Framework
2.1 Objectives
2.2 Remuneration governance
2.3 Committee members
2.4 How remuneration is determined
2.5 Services from consultants
2.6 Consequences of performance on shareholder wealth
3. Managing Director Remuneration
3.1 Summary of Managing Director remuneration outcomes for 2017
3.2 Managing Director remuneration
3.2.1 Short term incentive: targets and outcomes
3.2.2 Long term incentive: targets and outcomes
3.3 Change of control and cessation of employment
3.4 Remuneration for the year ended 30 June 2018
4. Key Management Personnel remuneration
4.1 Key Management Personnel remuneration
4.1.1 Short term incentive: targets and outcomes
4.1.2 Long term incentive: targets and outcomes
5. Remuneration tables
5.1 Deferred shares and performance rights over equity instruments granted as compensation during 2017
5.2 Summary of Key Management Personnel deferred shares and performance rights holdings
5.3 Performance rights granted since the end of the financial year
6. Summary of Key Management Personnel Contracts
7. Shareholdings of Key Management Personnel
8. Non-Executive Directors’ Remuneration
8.1 Overview
8.2 Terms of appointment
8.3 Shareholdings of Non-Executive Directors
9. Payments to persons before taking office
39
39
39
40
42
43
43
43
43
43
45
45
46
46
46
47
47
48
49
49
49
49
49
50
50
51
52
52
52
53
53
53
54
54
The information in this report is in accordance with AASB 124 Related Party Disclosures and section 300A of the Corporations Act 2001,
and has been audited as required by Section 308(3C) of the Corporations Act 2001 unless otherwise stated.
38
IOOF annual report 2017
2017 profitability was broadly equivalent to 2016’s record
result from continuing operations, with sustained returns to
shareholders over the last three years. These strong results
have been reflected in the short and long term incentive
outcomes received by the KMP.
The IOOF Group’s Total Shareholder Return (TSR) performance
over the three years to 30 June 2017 was 36.9%, placing it at
the 58th percentile relative to the ASX 200. Return on Equity
(RoE) for the year to 30 June 2017 was 12.1%. The impact
of these outcomes on the Managing Director and other
executive KMP Long Term Incentives is detailed at sections
3.2.2 and 4.1.2 below.
Following an independent remuneration consultant review
completed during the year, Non-Executive Directors
received an increase in fees to align with comparable peers
in the financial services sector. The remuneration for all
Non-Executive Directors remains within the shareholder
approved limits.
Executive Summary
This report details the remuneration framework and
outcomes for Key Management Personnel (KMP) of the
IOOF Group for the year ended 30 June 2017. The Board of
Directors is committed to a remuneration strategy that aligns
remuneration practices with the creation of shareholder value.
A number of amendments have been made to the policies
over the past few years to ensure that the policies have
remained aligned with shifts in the IOOF Group’s business
strategy and focus. The key principles of the IOOF Group’s
remuneration policy remain unchanged from last year.
This report aims to communicate our remuneration practices,
and their link to the creation of shareholder value, in a
clear, concise and transparent way and demonstrate how
these practices:
• align to our strategic objectives;
• are sufficient to attract, motivate and retain an ambitious
and highly talented executive team; and
• support an appropriate governance culture to minimise
risks to our clients and shareholders.
1. Overview
1.1 Key Management Personnel
This report covers the IOOF Group’s KMP. KMP are the people who have the authority and responsibility for planning, directing and
controlling the activities of the IOOF Group:
Name
Position
Managing Director
Mr C Kelaher
Managing Director
Other Executive KMP
Mr D Coulter
Mr S Merlicek1
Mr R Mota
Mr G Riordan
Chief Financial Officer
Chief Investment Officer
Group General Manager – Wealth Management
Full year
Group General Counsel & General Manager Trustee Services
Full year
Term as KMP
Full year
Full year
Full year, retired 3 July 2017
1 Mr D Farmer has taken on this role from 4 July 2017.
The Non-Executive Directors of the IOOF Group are also required to be disclosed as part of this report and are listed below:
Non-Executive Directors
Mr G Venardos
Independent Non-Executive Director & Chairman
Full year, appointed as Chairman
24 November 2016
Dr R Sexton AM
Independent Non-Executive Director & Chairman
Retired 24 November 2016
Ms J Harvey
Mr A Griffiths
Ms E Flynn
Mr J Selak
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Full year
Full year
Full year
Appointed 14 October 2016
39
IOOF annual report 2017
Remuneration report (cont’d)
1.2 Summary - Key Management Personnel remuneration
The IOOF Group uses a total remuneration package approach in determining remuneration that comprises both “fixed” and “at risk”
components. These components reflect an employee’s contribution to the IOOF Group, their skills and qualifications, market benchmarks
and the remuneration environment.
The remuneration arrangements for KMP comprise three key components:
• a base package which is a fixed amount and is reviewed on an annual basis with consideration given to cost of living increases (CPI),
market movements or changes in the scope of the individual’s role and responsibilities;
• a Short Term Incentive (STI) amount which is tied to the successful achievement of a set of performance scorecard objectives
(including financial, strategic, customer, people and governance objectives) for the annual performance period. STI awards are
considered “at risk” components of an individual’s remuneration and can be awarded as either cash or share-based arrangements; and
• a Long Term Incentive (LTI) which is intended to provide incentives to KMP to remain with the IOOF Group to enhance the sustainable
performance of the IOOF Group over the long term. LTI awards are considered “at risk” components of an individual’s remuneration
and are all share-based arrangements.
40
IOOF annual report 2017
The following table sets out the remuneration received by the Managing Director and other executive KMP for the financial year ended
30 June 2017 and the prior year to 30 June 2016. The share-based payments shown below are not amounts actually received by KMP
during the year, as they include accounting values for unvested share awards. Actual share-based payment amounts received are shown
as cash remuneration. Further details are disclosed in sections 2 to 7 below.
Element of
Remuneration
Component of
Remuneration
Managing Director
Post
employ-
ment
Share-
based
payments3
Salary
Bonus1
Non-
monetary2
Super-
annu-
ation
Perform-
ance
Rights
Total
Cash
remun-
eration4
Fixed
$
At risk
$
Fixed
$
Fixed
$
At risk
$
$
$
Remuneration
components as
a % of total
remuneration
Fixed
%
At risk5
%
C Kelaher
2017
1,211,363
697,765
2016
1,187,756
651,891
Other Executive KMP
D Coulter
S Merlicek6
R Mota
G Riordan
2017
2016
2017
2016
2017
2016
2017
2016
420,384
300,000
383,066
200,000
406,948
63,645
411,744
225,000
480,384
350,000
453,016
200,000
447,048
140,000
438,287
140,000
Executive KMP – Former
5,898
8,877
4,904
4,918
4,904
4,918
9,218
4,918
1,961
801
19,616
1,102,138 3,036,780 2,886,590
19,308
1,051,796 2,919,628
5,005,194
19,616
20,052
17,352
20,052
19,616
20,052
19,616
19,308
130,138
875,042
810,747
130,884
738,920
786,618
18,495
511,344
649,300
80,167
741,881
869,796
130,138
989,356
870,747
130,884
808,870
876,567
130,138
738,763
777,411
130,884
729,280
801,095
M Farrell7
Total
2016
224,764
70,000
830
11,510
29,599
336,703
559,524
2017
2,966,127
1,551,410
26,885
95,816
1,511,047 6,151,285 5,994,795
2016
3,098,633
1,486,891
25,262
110,282
1,554,214 6,275,282
8,898,794
41
42
51
55
84
59
51
59
63
63
70
59
58
49
45
16
41
49
41
37
37
30
1
The bonus reflects amounts provided under the STI program in relation to the financial year. One third of the bonus awarded to Mr Kelaher has been deferred into
shares which will vest in July 2018 subject to a “look back.” This component of the STI is included as a share-based payment expense. The expected payment value of
the bonuses is the amount shown and includes any amounts that may be sacrificed into superannuation.
2 Non-monetary benefits include company funded benefits and fringe benefits tax payable on those benefits, typically car parking.
3
4
Share-based payments include accruals in relation to the Executive Performance Share Plan and accruals in relation to other grants of performance rights over shares
in the Company. The value of the number of shares and options expected to vest has been apportioned over the term from grant date to vesting date.
This non-statutory disclosure provides shareholders with a view of the cash and other benefits received by KMP. Cash remuneration includes all remuneration paid
during the financial year, including superannuation and STIs which were awarded for performance in previous financial years. In addition, any shares received by the
KMP during the year are included at the value the shares were or could have been converted to cash on the date they were received. This value has been determined
as the cash received by the employee where known, or the closing share price on the date the shares were allocated to the KMP less any consideration paid.
5 As payment of the at-risk component is at the discretion of the Board, the minimum value is nil and the maximum is the total amount paid.
6
7
S Merliceck ceased employment with the IOOF Group on 3 July 2017 and received a termination payment of $160,077. Performance rights due to vest in 2018 and
future financial years have lapsed.
M Farrell ceased employment with the IOOF Group on 22 January 2016. On 26 November 2015, the Board resolved to approve early vesting of 50% of the 2015 rights
on the date of Mr Farrell’s cessation of employment. All other rights awarded to Mr Farrell have lapsed. Mr Farrell received a termination payment of $29,407.
41
IOOF annual report 2017
Remuneration report (cont’d)
1.3 Summary - Non-Executive Directors remuneration
The total fees paid to the Chairman and the Non-Executive Directors (including fees paid for their involvement on Board committees)
have been determined within the total amount for Non-Executive Directors as approved by shareholders. Following an independent
remuneration consultant review completed during the year, Non-Executive Directors received an increase in Directors’ fees to align
with comparable peers in the financial services sector.
Short-term
benefits
Post-em
ployment
benefits
Shareholder
approved
remuner-
ation
Post-em
ployment
benefits
Total
Directors
fees1
$
Non-
monetary
$
Superan-
nuation
$
Retirement2
$
$
G Venardos
J Harvey
A Griffiths
E Flynn
J Selak3
2017
2016
2017
2016
2017
2016
2017
2016
2017
Former Non-Executive Directors
R Sexton
I Griffiths4
Total
2017
2016
2016
2017
2016
221,800
148,832
155,297
148,832
155,924
149,826
155,297
115,255
111,064
105,379
251,531
38,584
904,761
852,860
-
-
-
-
-
-
-
-
-
2,980
-
2,871
2,980
2,871
17,692
14,139
14,753
14,139
14,126
13,145
14,753
10,949
10,551
8,722
20,052
3,666
80,597
76,090
239,492
162,971
170,050
162,971
170,050
162,971
170,050
126,204
121,615
117,081
271,583
45,121
988,338
931,821
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
239,492
162,971
170,050
162,971
170,050
162,971
170,050
126,204
121,615
117,081
271,583
45,121
988,338
931,821
1 Directors’ fees includes any fees sacrificed into superannuation funds.
2
Non-Executive Directors appointed after 13 April 2003 are not entitled to retirement benefits. Non-Executive Directors appointed prior to this date accrued retirement
benefits. Where entitled, the provision was based on the average emoluments of Non-Executive Directors over the previous three years’ of service. The benefit
accrued after three years of service and varied according to the number of years of service, reaching twice the average annual emoluments after ten years of service.
R Sexton was paid $475,000 on his retirement on 24 November 2016. This amount was accrued at 30 June 2016 and relates to Director appointment pre 13 April 2003.
Refer to ‘post employment benefits’ in section 8.2 for further details.
3 Mr J Selak was appointed as Non-Executive Director effective 14 October 2016.
4 Mr I Griffiths resigned as Non-Executive Director effective 2 October 2015.
42
IOOF annual report 2017
2. Remuneration Framework
2.3 Committee Members
2.1 Objectives
The Board of Directors is committed to a remuneration
strategy that aligns remuneration practices with the creation
of shareholder value. To realise this objective, the Board is
committed to remuneration practices which align to the IOOF
Group’s strategic objectives, are sufficient to attract, motivate
and retain an ambitious and highly motivated executive team
and promote an appropriate governance culture in line with
the IOOF Group’s risk appetite.
2.2 Remuneration governance
The Board of Directors oversees the IOOF Group’s
remuneration policies on recommendation from the
Remuneration Committee. The Board and the Remuneration
Committee review the remuneration policies of the IOOF
Group annually to ensure that they support the IOOF
Group’s objectives.
The IOOF Group’s Remuneration Framework, established by
the Remuneration Committee, considers the adequacy of
remuneration policies and practices within the IOOF Group on
an annual basis, including:
• determination of Managing Director and other executive
remuneration arrangements;
• ensuring that succession planning and development plans
are in place for KMP and their potential successors;
• on-going review and monitoring of short-term and long-
term incentive schemes;
• setting key performance indicators and assessment of the
Managing Director’s and the IOOF Group’s performance
against those key performance indicators;
• overall compensation arrangements of the IOOF Group;
• ensuring remuneration policies are appropriate to Non-
Executive Directors;
• ongoing review of the composition, skill base and
performance of Non-Executive Directors; and
• compliance with regulatory requirements including the ASX
Listing Rules and the associated ASX Corporate Governance
Principles and meeting both ASIC and APRA requirements.
The Remuneration Committee reviews and makes
recommendations to the Board on the remuneration structure
and policies applicable to the KMP and Non-Executive
Directors of the IOOF Group.
The Remuneration Committee’s charter is available on the
Corporate Governance page of the Company’s website at
www.ioof.com.au
The Remuneration and Nominations Committee was in
existence until 24 November 2016. Separate committees were
formed for these functions post this date. The members of the
Remuneration and Nominations Committee were Mr George
Venardos (Chairman), Ms Jane Harvey and Dr Roger Sexton.
The Remuneration Committee was established on 24
November 2016. The Committee is comprised solely of
Non-Executive Directors, all of whom are independent. The
members of the Remuneration Committee during 2017 were
Mr Allan Griffiths (Chairman), Mr George Venardos and Ms
Elizabeth Flynn.
The Board considers that the members of the Remuneration
Committee provide an appropriate mix of skills to undertake
its terms of reference, having regard to qualifications,
knowledge of the financial services industry and experience in
business management.
In order to ensure that it is fully informed when making
remuneration decisions, the Remuneration Committee
receives regular reports and updates from the Company
Secretary and the Group General Manager, People and
Culture and other members of management invited by
the Remuneration Committee to attend meetings when
appropriate. The Remuneration Committee can also draw on
services from a range of external sources, including access
to benchmarking material and remuneration consultants.
This enables the IOOF Group to remain competitive with
relevant competitors in the financial services sector and the
broader spectrum of public companies of similar size, revenue
and profitability.
2.4 How remuneration is determined
Executive remuneration comprises a number of components
including total fixed remuneration (TFR), STIs, partially (cash)
deferred STI (for the Managing Director only) and LTIs in
the form of deferred shares (Managing Director only) and
performance rights over ordinary shares. LTIs are subject to
appropriate, pre-determined performance hurdles. Each of
these forms of remuneration are described in detail below.
Total Fixed Remuneration (TFR)
TFR includes a combination of base salary, employer
superannuation contributions and other fringe benefits
that an individual employee could choose to salary sacrifice
(e.g. superannuation, motor vehicle). TFR is based on what
is appropriate to the position taking into consideration
expertise, responsibility, knowledge, experience and market
competitiveness.
43
IOOF annual report 2017
Remuneration report (cont’d)
Early vesting may occur in certain circumstances, subject
to the performance hurdle being achieved and Board
approval received:
• on a person/entity acquiring more than 20% of the voting
shares in the Company pursuant to a takeover bid that has
become unconditional;
• on the termination of employee due to death or
permanent disability; or
•
in other exceptional circumstances where the Board
determines appropriate.
The performance hurdle for current LTI plans has been linked
to IOOF Group TSR compared to S&P ASX200 companies at the
date of grant. TSR represents the change in the value of a share
plus the value of dividends paid. TSR was chosen as the most
appropriate comparative measure as it focuses on the delivery
of shareholder value and is a well understood and tested
metric of performance.
The Remuneration Committee engaged the services of an
independent external organisation (Value Adviser Associates)
to calculate the IOOF Group’s performance against the TSR
performance hurdles.
Deferral arrangements
The Board has implemented deferral arrangements and “look
back” provisions on a portion of the STI (cash payment) for
the Managing Director. The deferral element of the Managing
Director’s remuneration is described in detail in Section 3.2
of this report.
Hedging of unvested securities
The IOOF Group Policy - Personal Trading in IOOF Holdings
Limited Securities contains a restriction on KMP and other
employees entering into a hedging transaction to remove
the “at risk” aspect of securities that have been granted
to them as part of their remuneration package and which
have not vested subject to performance conditions and/or
which are still subject to forfeiture conditions. Employees are
provided with a copy of this policy and are required to provide
annual certification that they have complied with the policy.
Failure to comply with the policy may result in disciplinary
action, including forfeiture of the securities, suspension or
termination of employment.
Short Term Incentive (STI)
The STI opportunity is a cash-based incentive forming part of
each KMP’s total remuneration package, the value of which is tied
to the successful achievement of a set of performance objectives,
as outlined below. STI opportunities vary for each individual. For
the Managing Director, the maximum STI is up to 100% of TFR.
The Chief Investment Officer had up to 100% of TFR if additional
KPIs on the performance of the investment management
business were satisfied (ie. top quartile performance). Other
executive KMP’s maximum STI opportunity for 2017 is up to
50% of TFR, however variations to STIs may be awarded at the
discretion of the Managing Director, subject to Board approval.
Objectives are drawn from the following categories:
• Financial
Performance measures include Underlying Profit After Tax
(UNPAT), TSR and RoE.
• Business excellence
Performance measures for the year ended 30 June 2017
included operational targets such as long-term structural
reductions to the cost base of the IOOF Group, balance
sheet and liquidity initiatives and improvements to the
performance of business units.
• Strategy
Measurable progress towards achieving longer term strategic
goals. This includes, but is not limited to, implementation of
major platform consolidation, regulatory adherence, growth
through acquisition, divestment of non-core assets and
product rationalisation initiatives.
• Governance adherence
KMP are provided with a number of targets at the beginning
of the performance period that are set and agreed with the
Managing Director. KMP have included in their targets an
objective relating to risk management, regulatory and IOOF
Group compliance and ensuring that outcomes from internal
and external audit are actioned. In addition, KMP have
specific targets relating to their businesses to ensure they are
working towards the IOOF Group’s overall objectives.
Long Term Incentive (LTI)
The Board considers a long-term performance-related incentive
component to be an important element of the executive reward
framework. The IOOF Group utilises equity based incentives
in the form of deferred shares (Managing Director only) and
performance rights. These LTIs are subject to the achievement
of a gateway qualifying condition (Managing Director only),
minimum service periods and appropriate performance hurdles.
The LTI element of the Managing Director’s remuneration is
described in detail in section 3 of this report.
44
IOOF annual report 2017
Remuneration mix
The table below shows the TFR and target and actual performance base remuneration as a proportion of the total of all forms of
remuneration for the 2017 financial year:
Position
Managing Director
Chief Investment
Officer
Other Executives
Target
Actual1
Target
Actual
Target
Actual
TFR
%
35
41
49
84
56
55
STI
%
34
23
49
12
28
29
LTI
%
31
36
2
4
16
15
1 Actual STI for the Managing Director includes one third of the STI awarded for the 2017 year settled in deferred shares.
2.5 Services from consultants
The Remuneration Committee seeks and considers advice from independent, external remuneration consultants where appropriate.
Remuneration consultants are engaged directly by and report to the Remuneration Committee. Egan Associates Pty Ltd were
engaged in July 2016 to provide advice on Non-Executive Director remuneration and benchmarking data on Managing Director
remuneration at a cost of $7,881. Following these reviews, the Remuneration Committee resolved to recommend to the Board an
increase of 2% for the Managing Director and 8% for the Non-Executive Directors respectively to align fees with comparable peers
in the financial services sector. The Board is satisfied that this review was made free from undue influence as the recommendation
relied on peer data.
2.6 Consequences of performance on shareholder wealth
In considering the IOOF Group’s performance and benefits for shareholder wealth, the Remuneration Committee has regard to the
following indices in respect of the current financial year and the previous four financial years.
Profit attributable to owners of the Company
($'000s)
UNPAT ($'000s)1
UNPAT EPS (cents per share)
Basic EPS (cents per share)
Basic EPS (continuing operations) (cents per share)
Share price at start of year
Share price at end of year
Change in share price
Dividends per share (cents per share)
Return on equity (non-statutory measure)2
Total STIs paid to key management personnel
($'000s)
2017
2016
2015
2014
115,990
196,846
138,371
101,285
2013
79,769
169,357
173,367
173,758
123,047
108,756
56.5
38.7
38.7
7.83
9.80
1.97
53.0
12.1%
1,900
57.8
65.7
46.0
8.99
7.83
(1.16)
54.5
12.3%
1,813
59.9
47.7
45.8
8.40
8.99
0.59
53.0
13.4%
1,573
53.1
43.7
43.7
7.36
8.40
1.04
47.5
15.0%
1,681
1 UNPAT is reconciled to profit attributable to owners of the Company in the Operating and Financial Review at page 26 of the Directors’ Report.
2 RoE is calculated by dividing UNPAT by average capital on issue during the year.
46.9
34.4
34.4
6.05
7.36
1.31
42.0
13.2%
1,156
45
IOOF annual report 2017
Remuneration report (cont’d)
Underlying Profit & STI Payments
3.2 Managing Director remuneration
During the financial year ended 30 June 2017, Mr Kelaher
received a remuneration package comprising TFR of $1,231,350.
Mr Kelaher was entitled to a total STI opportunity of up to a
maximum of $1,231,350 (100% of TFR) based on achievement
of superior performance against set targets determined
by the Board on recommendation from the Remuneration
Committee, as outlined in section 3.2.1. In August 2017 the
Remuneration Committee assessed Mr Kelaher’s performance
against those targets and recommended an STI amount of
$1,046,648, being 85% of the eligible amount, which was
approved by the Board.
The STI opportunity was settled two thirds by cash and one
third in the form of deferred shares. The number of deferred
shares granted to Mr Kelaher was determined on the basis
of the STI deferral amount divided by the five day Volume
Weighted Average Price up to and including 30 June 2017,
which was $9.85. The number of deferred shares to be issued
accordingly was 35,420 (capped at 75,000 annually) and there is
no consideration payable for the grant of the deferred shares.
The Board has determined that the portion of STI awarded
as deferred shares will be subject to Board “look back”
arrangements. This means the Board will conduct a review of
Mr Kelaher and the IOOF Group’s performance in July 2018
and assess whether any significant unexpected or unintended
consequences have occurred that were not foreseen by the
Remuneration Committee when it made its recommendation
in August 2017, and whether it is still appropriate to award the
deferred shares
During August 2017, the Remuneration Committee performed
a “look back” review in regards to the 41,895 deferred
shares issued in July 2016. The Remuneration Committee
recommended that all of the deferred shares should vest in
accordance with the terms of the arrangement and this was
approved by the Board. The 41,895 shares have since been
transferred to Mr Kelaher.
$m
200
180
160
140
120
100
80
60
40
20
0
T
A
P
N
U
2013
2014
2015
2016
2017
UNPAT
Aggregate KMP Bonuses
$’000s
2000
1800
1600
1400
1200
1000
800
600
400
200
0
t
n
u
o
m
A
I
T
S
STI payments awarded to KMP are commensurate to the
IOOF Group’s levels of profitability and scale of operations.
As is consistent with the IOOF Group’s adherence to effective
cost management, STI levels from 2013 to 2017 recognise KPIs
specific to individuals rather than being solely determined
by profitability.
3. Managing Director Remuneration
3.1 Summary of Managing Director
remuneration outcomes for 2017
Performance outcomes for the Managing Director for 2017
were as follows:
the maximum opportunity for STI in 2017 was 100% of
base salary. Assessment against Key Performance Indicators
(KPIs) resulted in awarding 85% of the Managing Director’s
base salary. Two thirds of this payment was paid in cash
($697,765) and one third in 35,420 deferred shares;
the Remuneration Committee performed a look-back
for the 41,895 deferred shares awarded in July 2016 and
determined it was still appropriate to award the deferred
shares. The Remuneration Committee recommended
this to the Board. These were released to Mr Kelaher in
August 2017; and
the performance rights awarded in 2015 were subject to
performance testing during 2017. The IOOF Group’s TSR of
36.9% over the three year performance period placed it at
the 58th percentile relative to the ASX 200 as a comparator
group. This percentile ranking means that 66%, or 49,500 of
the 75,000 performance rights awarded to
Mr Kelaher, have vested.
•
•
•
46
IOOF annual report 2017
3.2.1 Short term incentive: targets and outcomes
The key areas of focus for the Managing Director’s STI targets/objectives for the 2017 performance period are shown below.
The targets/objectives which were set for the 2016/2017 year included both objective and subjective measures. The Board through
its Remuneration Committee assessed each of the Managing Director’s targets and awarded an STI amount of $1,046,648. The STI
awarded represents 85% of the total opportunity for the 2017 performance period.
KPI
Customer
Operations
Measure
Outcome
Improve key processes and implement new
operating model from ClientFirst strategy
Achieved - significant progress on ClientFirst and
improvement in Wealth Insights ranking
Continue to simplify the business and drive
productivity improvements
Achieved - implementation of Project Unite, product
rationalisations and business restructures
Growth/Strategy
Drive organic growth initiatives, net flows and
consider appropriate acquisitions
Achieved - net flows improvement. Consideration of
various potential acquisitions, with National Australia
Trustees transaction successful
Leadership and
people
Employee alignment and engagement,
governance KPIs, leadership of the executive team
Achieved - launch of IOOF purpose and strategy on a page
and action planning on employee engagement initiatives
Compliance and
risk
Testing of implementation of review
recommendations
Achieved - all recommendations successfully implemented
The Managing Director received a higher overall STI than in the prior financial year in large part for the significant progress on
customer initiatives, financial performance during a period of significant change, organic growth, cost reduction and a continued
disciplined approach to potential acquisition opportunities.
3.2.2 Long term incentive: targets and outcomes
The Managing Director is eligible for an LTI payment, with the amount to be determined each year by the Board. The LTI amount is
paid via performance rights, subject to a gateway qualifying condition and TSR hurdle.
Performance rights - gateway condition
Notwithstanding the gateway qualifying condition and TSR hurdle, the awarding of performance rights or similar remuneration
bonuses remains at the discretion of the Board.
For consideration to be given to the awarding of any performance rights to the Managing Director, the IOOF Group must achieve
a minimum RoE of 1.5 times the Long Term Bond Rate (10 year bond yield) (LTBR). Only when this gateway condition is met, is
consideration given to the TSR hurdle and the potential vesting of performance rights. That is, if less than 1.5 times the LTBR is
achieved, no performance rights are eligible to vest. If 1.5 and up to 2.0 times the LTBR is achieved, 50% of the performance rights are
eligible to vest. If 2.0 to up to 2.5 times is met, then 75% of the performance rights will be eligible to vest and 100% will be eligible to
vest if 2.5 times (or above) the LTBR is achieved. The RoE gateway condition has been developed by the Board to ensure that an LTI is
not paid in a period of low or negative performance.
RoE is calculated by dividing UNPAT pre-amortisation by average equity on issue during the year. Summary of RoE performance
against the LTBR over the past 5 years is outlined below:
IOOF RoE v LTBR
Performance rights eligible to be tested
against hurdles
Performance rights - 2017 series performance hurdle
2017
4.5 x
100%
2016
3.8 x
100%
2015
3.9 x
100%
2014
4.0 x
100%
2013
3.3 x
100%
As noted above, only once the gateway qualifying condition is satisfied, will the performance hurdle be assessed.
The performance hurdle relates to the IOOF Group’s TSR over a three year period from 1 July 2016 to 30 June 2019 measured against the
TSR of a group of companies comprising the S&P ASX 200 as at 1 July 2016. The performance rights are subject to a TSR hurdle whereby
the IOOF Group’s TSR must be greater than the median TSR of S&P/ASX200. The TSR hurdle has progressive vesting on a straight line basis,
such that 2% of LTI awards vest for each 1% ranking increase from 50th percentile. All vest if 75th percentile is achieved.
47
IOOF annual report 2017
Remuneration report (cont’d)
As approved at the Annual General Meeting on 24 November 2016, Mr Kelaher is entitled to participate in an LTI program offering
a maximum reward opportunity of 120,000 performance rights in respect of the 1 July 2016 to 30 June 2019 performance period.
The number of rights submitted to the AGM for approval was determined on 28 July 2016 by the Remuneration and Nominations
Committee based on the face value of the shares, up to a maximum of 90% of the Managing Directors base salary. On that date,
the face value of IOOF shares was $9.00, hence 120,000 performance rights were granted for a total maximum value of $1,080,000
(89% of total base salary).
A summary of the current performance rights on issue to Mr Kelaher is as follows:
Year
Performance Hurdle
2017
2016
2015
TSR greater than median TSR of the S&P/ASX200
(progressive vesting)
TSR greater than median TSR of the S&P/ASX200
(progressive vesting)
TSR greater than median TSR of the S&P/ASX200
(progressive vesting) (66% satisfied)
Grant
date
Performance
period
24 Nov 16
2017-2019
Rights
eligible
to vest
120,000
Vesting
date
30 Jun 19
26 Nov 15
2016-2018
75,000
30 Jun 18
25 Nov 14
2015-2017
49,500
30 Jun 17
2015-2017 performance results (2015 series
performance rights)
The below figure compares IOOF’s TSR performance against
the median TSR of the ASX 200 over the 2015 to 2017
performance period.
Figure 1 IOOF TSR Versus ASX200 Median
and Upper Quartile
IOOF Total Shareholder Return Performance vs Members
of ASX200
Final data points (as at 30 June 2017) are based on 20-day
VW APs rather than closing prices.
)
4
1
-
n
u
J
-
0
3
@
0
0
1
=
e
s
a
b
(
x
e
d
n
I
n
r
u
t
e
R
l
a
t
o
T
200
150
100
50
0
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
IOOF Holdings Ltd
ASX200 Upper Quartile
ASX200 Median
The IOOF Group’s TSR performance over the period was
36.9% placing it at the 58th percentile relative to the ASX 200.
This resulted in 66% or 49,500 of 75,000 performance rights
vesting in July 2017.
2018 Series Approval to be sought at the November
2017 Annual General Meeting - Managing Director
Approval will be sought at the 24 November 2017 Annual
General Meeting for the issue of 122,500 performance rights.
The gateway qualifying condition and performance hurdles
will remain the same as those selected for the 2015, 2016 and
48
2017 grants. The performance period will be from 1 July 2017
to 30 June 2020, with vesting to occur on 1 July 2020. The
number of rights was determined on 1 August 2017 by the
Remuneration Committee and Board based on the face value
of the shares, up to a maximum of 100% of the Managing
Director’s base salary. On that date, the face value of IOOF
shares was $10.04, hence 122,500 performance rights were
granted for a total maximum value of $1,231,350 (100% of
total base salary).
3.3 Change of control and cessation of
employment
The Board has determined that, if there is a change of control,
any unvested LTIs may vest subject to the approval of the
Board. If the Board so determines, any unvested performance
rights may become exercisable. On cessation of employment,
unvested LTIs will be dealt with as follows:
Reason for
termination
Treatment of unvested LTIs
Termination of
employment
by IOOF by
notice
The Board has discretion to waive the
performance hurdles or determine that the
proportion (if any) of unvested LTIs that will
vest
Termination of
employment
by IOOF for
cause
Resignation by
Mr Kelaher
Dismissal
for serious
misconduct
(eg fraud)
Unvested performance rights and share
options are forfeited
The Board has discretion to waive the
performance hurdles or determine that the
proportion (if any) of unvested LTIs that will
vest
Unvested performance rights and share
options are forfeited
IOOF annual report 2017
3.4 Remuneration for the year ended 30 June 2018
The Board, on the recommendation of the Remuneration Committee, has increased the Managing Director’s total fixed annual
remuneration to $1,257,208 for the financial year commencing 1 July 2017.
STI terms will be the same as for the year ended 30 June 2017, with an opportunity of up to 100% of total fixed remuneration, with
specific performance hurdles relating to: the continuing growth of the business, product development, achievement of management
efficiencies, succession planning, profitability, compliance, risk management and corporate governance. The STI deferral arrangements
remain unchanged with two thirds of the STI award to be paid in cash shortly after the performance assessment has been completed
at year end, and one third will be used to purchase Company shares which will vest in July 2019 after a “look back” review.
4. Key Management Personnel Remuneration
4.1 Key Management Personnel remuneration
The remuneration of other executive KMP is determined by the Managing Director, recommended by the Remuneration Committee
and approved by the Board. Details of the total value of fixed, STI and LTI for each other executive KMP is provided in section 1
of this report.
4.1.1 Short term incentive: targets and outcomes
At the end of the year, their targets were assessed by the Managing Director and considered and approved by both the Remuneration
Committee and the Board. The outcome of each assessment is set out below:
Other Executive KMP
D Coulter1
S Merlicek
R Mota1
G Riordan
TFR
$
440,000
424,300
500,000
466,800
STI
opportunity
STI
awarded
% awarded
in year
% forfeited
in year
$
$
220,000
424,300
250,000
233,400
300,000
63,645
350,000
140,000
136%
15%
140%
60%
0%
85%
0%
40%
1 Total STI awarded exceeded the maximum STI opportunity at the discretion of the Managing Director, as approved by the Board.
4.1.2 Long term incentive: targets and outcomes
A summary of the current performance rights on issue to key management personnel is as shown below. Vesting of performance
rights is subject to serving a three year employment period commencing on the date of grant. 50% of the grant is then subject to a
TSR progressive vesting scale. This scale is the same as applies to the Managing Director as outlined in section 3.2.2 of this report.
In July 2017, the other executive KMP each had 8,250 of 12,500 performance rights vest under this TSR measure and a further 12,500
each vested on the basis of fulfilling a three year service period obligation. The aggregated vested performance rights for other
executive KMP was 83,000.
Year
2018
2017
2016
2015
Performance
period
Grant date
IOOF TSR for the period
%
Ranking
relative to
ASX200
Vesting
status at
30 Jun 2017
2018-2020
2017-2019
2016-2018
2015-2017
21 Aug 17
Performance period not complete
10 Jul 16
02 Jul 15
18 Jul 14
Performance period not complete
Performance period not complete
36.9%
58th
66% vested
Vesting
date
30 Jun 20
30 Jun 19
30 Jun 18
30 Jun 17
49
IOOF annual report 2017
Remuneration report (cont’d)
5. Remuneration tables
5.1 Deferred shares and performance rights over equity instruments granted as compensation
during 2017
Details of deferred shares and performance rights over ordinary shares in the Company that were granted as compensation to each
Executive during the reporting year are as follows:
Name
Type of instrument
Number
granted
Grant
date
Vesting
date
Instrument
fair value
Vested
during 2017
Managing Director
C Kelaher
LTI performance rights
120,000
24-Nov-16
30-Jun-19
STI deferred shares
35,420
30-Jun-17
01-Jul-18
Other Executive KMP
D Coulter
S Merlicek1
R Mota
G Riordan
1 Rights lapsed on 30 June 2017.
LTI performance rights
LTI performance rights
LTI performance rights
LTI performance rights
30,000
30,000
30,000
30,000
09-Sep-16
09-Sep-16
09-Sep-16
09-Sep-16
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
$4.50
$9.85
$6.10
$6.10
$6.10
$6.10
-
-
-
-
-
-
In addition to a continuing employment service condition, the ability to exercise the performance rights is conditional on the IOOF
Group achieving certain performance hurdles. Details of the performance criteria are included in the performance rights hurdles at
sections 3 and 4 of the Remuneration Report.
The following series performance hurdles were tested during the financial year:
Name
Type of instrument
Managing Director
C Kelaher
Other Executive KMP
D Coulter
S Merlicek
R Mota
G Riordan
2015 deferred shares2
2015 rights3
2015 rights3
2015 rights3
2015 rights3
2015 rights3
% vested
in year
% forfeited
in year1
100.0%
66.0%
66.0%
66.0%
66.0%
66.0%
0.0%
34.0%
34.0%
34.0%
34.0%
34.0%
1
The percentage forfeited in the year represents the reduction from the maximum number of options or performance rights available to vest due to performance
criteria not being achieved.
2 The Remuneration and Nominations Committee performed a “look back” for these deferred shares and determined it was still appropriate to award them.
3 These performance rights are subject to a TSR hurdle. Refer section 2.4 for further details.
50
IOOF annual report 2017
5.2 Summary of Key Management Personnel deferred shares and performance rights holdings
There have been no alterations to the terms of share-based payment transactions during the current or the prior reporting years.
Details on deferred ordinary shares and performance rights in the Company that were granted as compensation to each key
management person during the reporting year and details on the vesting profiles of each are as follows:
Name
Type of
instrument
Grant
date
Number
granted1
Balance
as at
1 Jul 16
Granted
as
compen-
sation
Exercised Forfeited/
Lapsed
Balance
as at
30 Jun 17
-
-
-
-
-
(25,500)
120,000
75,000
49,500
Deferred
shares
vested
during
the year
Financial
years in
which
grant
vests/
vested
2019
2018
2017
2016
2015-2017
-
-
-
-
-
35,420
-
2019
-
41,895
41,895
2018
19-Aug-15
26,984
26,984
-
(26,984)
-
-
2017
Managing Director
C Kelaher 2017 rights
24-Nov-16
120,000
-
120,000
2016 rights
26-Nov-15
2015 rights
25-Nov-14
75,000
75,000
75,000
75,000
2014 rights
26-Nov-13
100,000
54,000
2012 rights
1-Jul-11
150,000
32,175
-
-
-
-
30-Jun-17
35,420
-
35,420
30-Jun-16
41,895
41,895
-
2017 deferred
shares2
2016 deferred
shares
2015 deferred
shares
Other Executive KMP
D Coulter 2017 rights
9-Sep-16
2016 rights
2-Jul-15
2015 rights
18-Jul-14
2014 rights
22-Aug-13
S Merlicek 2017 rights
9-Sep-16
2016 rights
2-Jul-15
2015 rights
18-Jul-14
R Mota
2017 rights
9-Sep-16
2016 rights
2-Jul-15
2015 rights
18-Jul-14
2014 rights
22-Aug-13
G Riordan 2017 rights
9-Sep-16
2016 rights
2-Jul-15
2015 rights
18-Jul-14
2014 rights
22-Aug-13
1 Exercise price at grant date is $nil.
30,000
15,000
25,000
25,000
30,000
15,000
25,000
30,000
15,000
25,000
25,000
30,000
15,000
25,000
25,000
-
30,000
15,000
25,000
19,250
-
-
-
-
30,000
15,000
25,000
-
-
-
30,000
15,000
25,000
19,250
-
-
-
-
30,000
15,000
25,000
19,250
-
-
-
(54,000)
(32,175)
-
-
-
-
-
(19,250)
-
-
-
-
-
-
(19,250)
-
-
-
-
-
-
(4,250)
-
(30,000)
(15,000)
(4,250)
-
-
(4,250)
-
-
-
(4,250)
30,000
15,000
20,750
-
-
-
20,750
30,000
15,000
20,750
-
30,000
15,000
20,750
(19,250)
-
-
2
In August 2017, Mr Kelaher was awarded an STI amount of $1,046,648 for the 2017 financial year of which one-third was settled in the form of deferred shares.
The number of deferred shares issued was 35,420 which will vest in July 2018 subject to Board look-back provisions.
2019
2018
2017
2016
2019
2018
2017
2019
2018
2017
2016
2019
2018
2017
2016
51
IOOF annual report 2017
Remuneration report (cont’d)
5.3 Performance rights granted since the end of the financial year
The Board resolved on 1 August 2017 to offer the following performance rights to Other Executive KMP:
Name
Type of instrument
D Coulter
R Mota
G Riordan
LTI performance rights
LTI performance rights
LTI performance rights
Number
granted
Vesting
date
30,000
30,000
20,000
30-Jun-20
30-Jun-20
30-Jun-20
Exercise
price
$
$nil
$nil
$nil
In addition to continued service to the IOOF Group, the performance hurdle remains unchanged from previous TSR hurdle over three
years as outlined in section 3.2.2.
6. Summary of Key Management Personnel Contracts
Details of the employment contracts, as applied during the financial year, are as follows:
Executive
Term
Managing Director
Termination notice period –
IOOF1,2
Termination notice period –
Executive
C Kelaher
Ongoing
12 months
Other Executive KMP
D Coulter
S Merlicek
R Mota
G Riordan
Ongoing
Ongoing
Ongoing
Ongoing
6 months
6 months
7 months
6 months
3 months
3 months
3 months
5 weeks
6 months
1
Termination provisions - the IOOF Group may elect to make a payment in lieu of part or all of the notice periods, incorporating unpaid leave entitlements and pro-
rated entitlement to STI (if applicable).
2 The Board has discretion regarding treatment of unvested short and long-term incentives.
7. Shareholdings of Key Management Personnel
The relevant interest of KMP in the shares issued by the Company, is as follows:
Ordinary shares
Managing Director
C Kelaher
Other Executive KMP
D Coulter
S Merlicek
R Mota
G Riordan
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Balance at
1 July
No.
3,305,290
4,856,291
252,043
242,043
170,000
141,805
93,009
68,009
25,000
-
Received on vesting
of performance
No.
113,159
352,817
19,250
25,000
-
25,000
19,250
25,000
19,250
25,000
Net other
change
No.
Balance at
30 June1
No.
25,000
3,443,449
(1,903,818)
3,305,290
-
(15,000)
(70,000)
3,195
(9,250)
-
-
-
271,293
252,043
100,000
170,000
103,009
93,009
44,250
25,000
1 The equity holdings for the above individuals is inclusive of both direct and indirect shareholdings.
52
IOOF annual report 2017
8. Non-Executive Directors’ Remuneration
8.1 Overview
Non-Executive Directors are remunerated for their skilled input, time responsibilities and commitment to the IOOF Group through the
payment of a fixed fee inclusive of superannuation. Non-Executive Directors do not receive additional fees for service on individual
Board Committees or subsidiary companies.
To ensure that independence and impartiality is maintained, fees to Non-Executive Directors are not linked to the performance of the
Company and Non-Executive Directors are not eligible to participate in any of the IOOF Group’s incentive arrangements.
8.2 Terms of appointment
All Non-Executive Directors have letters of appointment detailing the terms under which they are engaged. The term of appointment
for each is open-ended, subject to the provisions of the Corporations Act and the Company’s Constitution. Under the Constitution,
one-third of Directors must retire from office each year and may seek re-election by shareholders at the Annual General Meeting
of the Company.
The Company’s Constitution requires that the aggregate remuneration paid or provided to all Non-Executive Directors in any financial
year by the Company, its subsidiaries and associated entities may not exceed an amount approved by shareholders. This ceiling
amount includes all remuneration provided to Non-Executive Directors, including superannuation but not including retirement
benefits. The current limit of $1,250,000 per annum was approved by shareholders at the 2013 Annual General Meeting and the
remuneration for all Non-Executive Directors remains within the shareholder approved limits.
Elements
Details
Current Board fees
2016/2017 Fees per annum were:
IOOF Holdings Board Chairperson fee
IOOF Holdings Board Non-Executive Director fee
$285,000
$170,000
Post-employment benefits
Superannuation contributions are made at a rate of 9.5% (up to the Government’s prescribed
maximum contributions limit) which satisfies the IOOF Group’s statutory superannuation contributions
and are included in the base fee.
The Board withdrew the retirement benefit from the potential remuneration for new Non-Executive
Directors. The program continued for Directors appointed prior to 13 April 2003 to fulfil the terms of an
historical agreement. However the maximum payment available was capped at $475,000. This benefit
provided for a cash based payment to Non-Executive Directors at the time of their retirement and,
subject to the cap noted above, was calculated as follows:
Period of service as a Non-Executive Director
Benefit Value1
0 to < 3 years
3 to 5 years
> 5 years to 10 years
> 10 years
Nil
AAE times 1.0
AAE times 1.5
AAE times 2.0
The retirement benefits plan sole participant was R Sexton and a payment of $475,000 was paid upon
his retirement on 24 November 2016. This plan is no longer in operation.
1
“AAE” = Annual Average Emoluments over the last 3 years of service to date of retirement.
53
IOOF annual report 2017
Remuneration report (cont’d)
8.3 Shareholdings of Non-Executive Directors
The relevant interest of each Non-Executive Director in the shares issued by the Company, as notified by the Directors to the ASX in
accordance with s.205G(1) of the Corporations Act 2001 is as follows:
Name
G Venardos
J Harvey
A Griffiths
E Flynn
J Selak
Balance as at
1 Jul 2016
Shares from changes
during the year
Balance as at
30 Jun 2017 1
Balance as at
report sign-off date
41,816
23,578
30,000
20,000
-
10,000
-
-
-
25,000
51,816
23,578
30,000
20,000
25,000
51,816
23,578
30,000
20,000
25,000
1
The following shares (included in the holdings above) were held on behalf of the Non-Executive Directors (ie. indirect beneficially held shares) as at 30 June 2017:
G Venardos - 51,816; J Harvey - 23,578; A Griffiths - 30,000; E Flynn - 20,000; and J Selak - 25,000.
9. Payments to persons before taking office
No Director or member of senior management appointed during the year received a payment as part of his or her consideration for
agreeing to hold the position.
This Directors’ report is signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001.
This report is made by a resolution of the Directors:
Mr George Venardos
Chairman
29 August 2017
54
Directors’ declaration
For the year ended 30 June 2017
IOOF annual report 2017
1. In the opinion of the Directors of the Company:
(a) the consolidated financial statements and notes set out on pages 61 to 117, and the Remuneration Report, set out on pages
38 to 54 in the Directors’ Report, are in accordance with the Corporations Act 2001 including:
(i) giving a true and fair view of the IOOF Group’s financial position as at 30 June 2017 and its performance for the financial year
ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director
and Chief Financial Officer for the financial year ended 30 June 2017.
3. The Directors draw attention to section 7-2 to the consolidated financial statements, which includes a statement of compliance
with International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Mr George Venardos
Chairman
Melbourne
29 August 2017
55
IOOF annual report 2017
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of IOOF Holdings Ltd
I declare that, to the best of my knowledge and belief, in relation to the audit of IOOF Holdings Ltd for the
To the Directors of IOOF Holdings Ltd
financial year ended 30 June 2017 there have been:
i.
no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
I declare that, to the best of my knowledge and belief, in relation to the audit of IOOF Holdings Ltd for the
financial year ended 30 June 2017 there have been:
no contraventions of any applicable code of professional conduct in relation to the audit.
ii.
no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
i.
ii.
KPMG
KPMG
DM Waters
Partner
Melbourne
DM Waters
29 August 2017
Partner
Melbourne
29 August 2017
KPMG
KPMG
Rachel Milum
Partner
Melbourne
Rachel Milum
29 August 2017
Partner
Melbourne
29 August 2017
30
56
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
30
Liability limited by a scheme approved under
Professional Standards Legislation.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
Independent Auditor’s Report
Independent Auditor’s Report
To the members of IOOF Holdings Ltd
To the members of IOOF Holdings Ltd
Opinion
Opinion
We have audited the Financial Report of
We have audited the Financial Report of
The Financial Report comprises:
The Financial Report comprises:
IOOF Holdings Ltd (the Company).
IOOF Holdings Ltd (the Company).
In our opinion, the accompanying Financial
In our opinion, the accompanying Financial
Report of the Company is in accordance
Report of the Company is in accordance
with the Corporations Act 2001, including:
with the Corporations Act 2001, including:
•
•
•
•
giving a true and fair view of the
giving a true and fair view of the
Group’s financial position as at 30
Group’s financial position as at 30
June 2017 and of its financial
June 2017 and of its financial
performance for the year ended on
performance for the year ended on
that date; and
that date; and
complying with Australian Accounting
complying with Australian Accounting
Standards and the Corporations
Standards and the Corporations
Regulations 2001.
Regulations 2001.
• Consolidated statement of financial position as at 30
• Consolidated statement of financial position as at 30
June 2017;
June 2017;
• Consolidated statement of comprehensive income,
• Consolidated statement of comprehensive income,
Consolidated statement of changes in equity, and
Consolidated statement of changes in equity, and
Consolidated statement of cash flows for the year
Consolidated statement of cash flows for the year
• Notes including a summary of significant accounting
• Notes including a summary of significant accounting
then ended;
then ended;
policies; and
policies; and
• Directors’ Declaration.
• Directors’ Declaration.
The Group consists of the Company and the entities it
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
controlled at the year-end or from time to time during
the financial year.
the financial year.
Basis for opinion
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
The Key Audit Matter we identified is:
The Key Audit Matter we identified is:
Key Audit Matters are those matters that, in our
Key Audit Matters are those matters that, in our
Key Audit Matters
Key Audit Matters
• Valuation of Goodwill and Intangible
• Valuation of Goodwill and Intangible
Assets
Assets
professional judgment, were of most significance in our
professional judgment, were of most significance in our
audit of the Financial Report of the current period.
audit of the Financial Report of the current period.
These matters were addressed in the context of our
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in forming
audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate
our opinion thereon, and we do not provide a separate
opinion on these matters.
opinion on these matters.
KPMG, an Australian partnership and a member firm of the KPMG
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Liability limited by a scheme approved under
Professional Standards Legislation.
Professional Standards Legislation.
31
31
IOOF annual report 2017
Independent Auditor’s Report
Independent Auditor’s Report
Independent Auditor’s Report
To the members of IOOF Holdings Ltd
To the members of IOOF Holdings Ltd
To the members of IOOF Holdings Ltd
Opinion
Opinion
We have audited the Financial Report of
We have audited the Financial Report of
Opinion
IOOF Holdings Ltd (the Company).
IOOF Holdings Ltd (the Company).
We have audited the Financial Report of
In our opinion, the accompanying Financial
In our opinion, the accompanying Financial
IOOF Holdings Ltd (the Company).
Report of the Company is in accordance
Report of the Company is in accordance
with the Corporations Act 2001, including:
with the Corporations Act 2001, including:
In our opinion, the accompanying Financial
Report of the Company is in accordance
•
giving a true and fair view of the
•
giving a true and fair view of the
with the Corporations Act 2001, including:
Group’s financial position as at 30
Group’s financial position as at 30
June 2017 and of its financial
June 2017 and of its financial
giving a true and fair view of the
performance for the year ended on
performance for the year ended on
Group’s financial position as at 30
that date; and
that date; and
June 2017 and of its financial
performance for the year ended on
complying with Australian Accounting
complying with Australian Accounting
that date; and
Standards and the Corporations
Standards and the Corporations
Regulations 2001.
Regulations 2001.
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
•
•
•
•
The Financial Report comprises:
The Financial Report comprises:
• Consolidated statement of financial position as at 30
• Consolidated statement of financial position as at 30
The Financial Report comprises:
June 2017;
June 2017;
• Consolidated statement of financial position as at 30
• Consolidated statement of comprehensive income,
• Consolidated statement of comprehensive income,
June 2017;
Consolidated statement of changes in equity, and
Consolidated statement of changes in equity, and
Consolidated statement of cash flows for the year
Consolidated statement of cash flows for the year
• Consolidated statement of comprehensive income,
then ended;
then ended;
Consolidated statement of changes in equity, and
Consolidated statement of cash flows for the year
• Notes including a summary of significant accounting
• Notes including a summary of significant accounting
then ended;
policies; and
policies; and
• Notes including a summary of significant accounting
• Directors’ Declaration.
• Directors’ Declaration.
policies; and
The Group consists of the Company and the entities it
The Group consists of the Company and the entities it
• Directors’ Declaration.
controlled at the year-end or from time to time during
controlled at the year-end or from time to time during
the financial year.
the financial year.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
the financial year.
Basis for opinion
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
Basis for opinion
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
the audit of the Financial Report section of our report.
the audit of the Financial Report section of our report.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
the audit of the Financial Report section of our report.
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
Key Audit Matters
The Key Audit Matter we identified is:
The Key Audit Matter we identified is:
Key Audit Matters
• Valuation of Goodwill and Intangible
• Valuation of Goodwill and Intangible
The Key Audit Matter we identified is:
Assets
Assets
• Valuation of Goodwill and Intangible
Assets
Key Audit Matters are those matters that, in our
Key Audit Matters are those matters that, in our
professional judgment, were of most significance in our
professional judgment, were of most significance in our
audit of the Financial Report of the current period.
audit of the Financial Report of the current period.
Key Audit Matters are those matters that, in our
professional judgment, were of most significance in our
These matters were addressed in the context of our
These matters were addressed in the context of our
audit of the Financial Report of the current period.
audit of the Financial Report as a whole, and in forming
audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate
our opinion thereon, and we do not provide a separate
These matters were addressed in the context of our
opinion on these matters.
opinion on these matters.
audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
31
31
KPMG, an Australian partnership and a member firm of the KPMG
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
International Cooperative (“KPMG International”), a Swiss entity.
31
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Liability limited by a scheme approved under
Professional Standards Legislation.
Professional Standards Legislation.
Liability limited by a scheme approved under
Professional Standards Legislation.
57
IOOF annual report 2017
Valuation of Goodwill and Intangible Assets - $954.8m and $441.1m
Other Information
Refer to Note 4-3 Goodwill and 4-2 Intangible Assets to the Financial Report
The key audit matter
How the matter was addressed in our audit
responsible for the Other Information.
A key audit matter was whether the
Group’s value in use models for goodwill
and intangible assets impairment included
assumptions that were supportable and
appropriate under accounting standards.
Specific intangible assets we focussed on
related to customer relationships and
brand names.
The size of the goodwill and intangible
assets relative to the total assets of the
Group (being 34.7% and 16.0%
respectively) and the level of judgement
required by the Group, contributed to this
being a key audit matter.
The models and forecast assumptions
incorporated significant judgement in
respect of key factors such as discount
rates, revenue growth, and forecasted
funds under management, as well as
economic assumptions such as inflation
rates. Changes in the underlying
assumptions can significantly impact the
recoverable amount of the relevant
intangible assets and can therefore give
rise to impairment.
The Group recorded an impairment charge
of $38.6m against goodwill. This related
to the Perennial Cash Generating Unit
(“CGU”) as a result of reduced profitability
from both lower revenue due to
institutional outflows, and higher costs
due to the absence of operational scale
and subsidisation following the divestment
of other Perennial entities. This increased
the sensitivity of the model to small
changes and further increased our audit
effort in this key audit area.
We involved valuation specialists to
supplement our senior audit team
members in assessing this key audit
matter.
Working with our valuation specialists, our procedures
included:
•
Testing of key controls, such as the review and
approval of internal forecasts, to evaluate the
Group’s goodwill and intangible asset valuation
process;
•
• We considered the appropriateness of the value in
use method applied by the Group to perform the
annual test of goodwill and intangibles for
impairment against the requirements of the
accounting standards.
For goodwill, customer relationships and brand
names we challenged the Group’s key
assumptions, in particular those relating to discount
rates, revenue growth and forecasted funds under
management by analysing historical data and taking
into consideration expected future events, and
corroborating the key market related assumptions
to external data, through the following procedures:
- We compared relevant data in the models to
the latest Board approved forecasts.
- We assessed the accuracy of previous Group
forecasts to inform our evaluation of forecasts
incorporated in the models.
- We independently developed a discount rate
range considered comparable using publicly
available market data for comparable entities,
adjusted by risk factors specific to the Group’s
CGUs and the industry they operate in.
- We assessed the integrity of the value in use
models used, including the accuracy of the
underlying calculation formulas.
- We considered the sensitivity of the models by
varying key assumptions such as revenue
growth and discount rates, within a reasonably
possible range, to identify those CGUs at
higher risk of impairment and to focus our
further procedures.
- We assessed the key assumptions for
consistent application across the Group.
• We recalculated the impairment charge from the
Perennial CGU model against the recorded amount
and reconciled it to the amount disclosed; and
• We assessed the disclosures in the financial report
using our understanding of the issue obtained from
our testing and against the requirements of the
accounting standards.
Other Information is financial and non-financial information in IOOF Holdings Ltd’s annual reporting
which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ report
and Remuneration report. The remaining other information is expected to include: About IOOF, Our
Major Brands, Chairman’s Letter, Managing Director’s Commentary, Our financial Performance,
Divisional Updates and Shareholder Information and is expected to be made available to us after the
date of the Auditor's Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
and will not express an audit opinion or any form of assurance conclusion thereon, with the exception
of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
•
•
•
•
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Group’s ability to continue as a going concern. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf.
This description forms part of our Auditor’s Report.
58
32
33
IOOF annual report 2017
Other Information
Other Information is financial and non-financial information in IOOF Holdings Ltd’s annual reporting
which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ report
and Remuneration report. The remaining other information is expected to include: About IOOF, Our
Major Brands, Chairman’s Letter, Managing Director’s Commentary, Our financial Performance,
Divisional Updates and Shareholder Information and is expected to be made available to us after the
date of the Auditor's Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
and will not express an audit opinion or any form of assurance conclusion thereon, with the exception
of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
•
•
implementing necessary internal control to enable the preparation of a Financial Report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Group’s ability to continue as a going concern. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf.
This description forms part of our Auditor’s Report.
33
59
IOOF annual report 2017
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of IOOF Holdings Ltd for the year ended
30 June 2017, complies with Section
300A of the Corporations Act 2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration
Report in accordance with Section 300A of the
Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in
pages 14 to 28 of the financial report for the year ended
30 June 2017.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPM_INI_01
KPMG
DM Waters
Partner
Melbourne
29 August 2017
29 August
KPMG
Rachel Milum
Partner
Melbourne
29 August 2017
60
34
Consolidated statement of comprehensive income
For the year ended 30 June 2017
IOOF annual report 2017
Continuing operations
Revenue
Expenses
Share of profits of associates accounted for using the equity method
Finance costs
Profit before tax
Income tax expense
Statutory fund
Statutory fund revenue*
Statutory fund expenses*
Income tax (expense)/benefit - statutory*
Statutory fund contribution to profit, net of tax
Profit for the year from continuing operations
Non-controlling interest
Profit attributable to Owners of the Company from continuing operations
Discontinued operation
Profit for the year from discontinued operation
Profit for the year attributable to owners of the Company
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Net change in fair value of available-for-sale financial assets
Exchange differences on translating foreign operations
Income tax on other comprehensive income
Other comprehensive income/(expense) for the year, net of income tax**
Non-controlling interest
Total comprehensive income for the year
Profit attributable to:
Owners of the Company
Non-controlling interest
Profit for the year
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interest
Total comprehensive income for the year
Earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Earnings per share - continuing operations:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Note
2-3
2-4
2-6
5-4
5-4
5-4
2017
$’000
907,519
(724,745)
3,478
(6,828)
179,424
(59,573)
65,016
(52,124)
(12,892)
-
119,851
(3,861)
115,990
2016
$’000
907,882
(713,217)
4,831
(7,353)
192,143
(51,601)
62,937
(58,200)
(4,737)
-
140,542
(2,620)
137,922
2-2
-
58,924
115,990
196,846
3,770
15
(1,134)
2,651
3,861
3,648
118
(1,109)
2,657
2,620
122,502
202,123
115,990
3,861
119,851
118,641
3,861
122,502
38.7
38.6
38.7
38.6
196,846
2,620
199,466
199,503
2,620
202,123
65.7
65.4
46.0
45.8
Notes to the consolidated financial statements are included on pages 66 to 117.
*
A subsidiary of the Company, IOOF Ltd, is a friendly society in accordance with the Life Insurance Act 1995. The funds operated by IOOF Ltd, and any trusts controlled
by those funds, are treated as statutory funds in accordance with the Life Insurance Act 1995. These statutory funds are required to be consolidated in accordance
with accounting standards and are shown separately from shareholder funds in the financial statements.
** Total items that may be reclassified subsequently to profit or loss.
61
IOOF annual report 2017
Consolidated statement of financial position
For the year ended 30 June 2017
Assets
Cash
Receivables
Other financial assets
Prepayments
Deferred acquisition costs
Associates
Property and equipment
Intangible assets
Goodwill
Assets relating to statutory funds*
Total assets
Liabilities
Payables
Borrowings
Current tax liabilities
Contingent consideration
Provisions
Deferred tax liabilities
Deferred revenue liability
Lease incentives
Liabilities relating to statutory funds*
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity attributable to equity holders of the Company
Non-controlling interest
Total equity
Note
1-1(d)
1-1(d)
1-1(d)
4-1
4-2
4-3
5-1
1-1(d)
3-2
1-1(d)
4-4
2-6
2017
$’000
208,218
108,401
45,430
14,403
1,913
21,081
21,480
441,079
954,867
934,119
2016
$’000
186,992
102,378
43,378
11,828
2,482
22,667
21,863
480,169
991,712
879,349
2,750,991
2,742,818
60,007
206,948
25,813
1,839
64,639
92,949
1,800
2,429
68,781
206,975
17,930
1,491
62,394
101,163
2,499
2,536
5-2
934,119
879,349
1,390,543
1,343,118
1,360,448
1,399,700
3-3
3-5
1,434,459
1,436,460
13,349
(97,048)
11,266
(57,501)
1,350,760
1,390,225
9,688
9,475
1,360,448
1,399,700
Notes to the consolidated financial statements are included on pages 66 to 117.
*
A subsidiary of the Company, IOOF Ltd, is a friendly society in accordance with the Life Insurance Act 1995. The funds operated by IOOF Ltd, and any trusts controlled
by those funds, are treated as statutory funds in accordance with the Life Insurance Act 1995. These statutory funds are required to be consolidated in accordance
with accounting standards and are shown separately from shareholder funds in the financial statements.
62
Consolidated statement of changes in equity
For the year ended 30 June 2017
For the year ended
30 June 2017
Ordinary
shares
Treasury
shares
Reserves
Accu-
mulated
losses
Total
Non-
controlling
interest
Total
equity
IOOF annual report 2017
$’000
1,439,276
$’000
(2,816)
$’000
11,266
$’000
$’000
$’000
$’000
(57,501)
1,390,225
9,475
1,399,700
Balance at 1 July 2016
Total comprehensive income
for the year
Profit for the year attributable to
owners of the Company
Other comprehensive income for
the year, net of income tax
Total comprehensive income
for the year
Contributions by and (distributions
to) owners
Dividends to equity holders
Share-based payment expense
Operating Risk Financial Reserve
Transfer from employee equity-
settled benefits reserve on
exercise of options
Treasury shares transferred to
recipients during the year
Transfer of lapsed share options
to retained earnings
Purchase of treasury shares
-
115,990
115,990
3,861
119,851
2,651
-
2,651
-
2,651
2,651
115,990
118,641
3,861
122,502
-
(155,934)
(155,934)
(3,648)
(159,582)
1,295
(144)
(1,322)
-
-
-
-
1,295
(144)
-
-
-
(1,997)
1,997
-
-
(397)
397
-
-
-
-
-
-
1,295
(144)
-
-
-
(3,323)
-
-
-
-
-
-
1,322
-
-
-
-
-
-
-
-
-
(3,323)
(1,326)
(4,142)
Total transactions with owners
(675)
Balance at 30 June 2017
1,438,601
Notes to the consolidated financial statements are included on pages 66 to 117.
-
-
(3,323)
(568)
(155,537)
(158,106)
(3,648)
(161,754)
13,349
(97,048)
1,350,760
9,688
1,360,448
63
IOOF annual report 2017
Consolidated statement of changes in equity
For the year ended 30 June 2017
For the year ended
30 June 2016
Ordinary
shares
Treasury
shares
Reserves
Accu-
mulated
losses
Total
Non-
controlling
interest
Total
equity
$’000
1,444,903
$’000
(7,146)
$’000
(8,918)
$’000
$’000
$’000
$’000
(66,224)
1,362,615
9,643
1,372,258
Balance at 1 July 2015
Total comprehensive income
for the year
Profit for the year attributable to
owners of the Company
Other comprehensive income for
the year, net of income tax
Total comprehensive income
for the year
Transactions with owners,
recorded directly in equity
Contributions by and (distributions
to) owners
Dividends to equity holders
Share-based payment expense
Operating Risk Financial Reserve
Proceeds from exercise of
options under executive and
employee share option plan
Transfer from employee equity-
settled benefits reserve on
exercise of options
Treasury shares transferred to
recipients during the year
Divestment of discontinued
operation
Transfer of lapsed share options
to retained earnings
Purchase of treasury shares
-
-
-
-
-
-
210
5,931
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,438)
4,330
(2,816)
1,966
2,799
-
(5,931)
(35)
-
17,527
11,266
-
196,846
196,846
2,620
199,466
2,657
-
2,657
-
2,657
2,657
196,846
199,503
2,620
202,123
-
(169,430)
(169,430)
(2,788)
(172,218)
-
-
-
-
-
35
-
1,966
2,799
210
-
-
-
-
(7,438)
-
-
-
-
-
-
-
-
1,966
2,799
210
-
-
-
-
(7,438)
(11,768)
11,768
-
18,728
(18,728)
Total transactions with owners
(5,627)
Balance at 30 June 2016
1,439,276
(188,123)
(171,893)
(2,788)
(174,681)
(57,501)
1,390,225
9,475
1,399,700
Notes to the consolidated financial statements are included on pages 66–117.
64
Consolidated statement of cash flows
For the year ended 30 June 2017
IOOF annual report 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends from associates
Net stockbroking purchases
Non-recurring professional fees
Termination and retention incentive payments
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Dividends and distributions received
Interest received
Net proceeds on divestment of discontinued operation, net of tax
Acquisition and divestment transaction costs
Interest and other costs of finance paid
Gain on divestment of subsidiaries
Purchase of shares in subsidiaries
Proceeds on divestment of other assets
Receipt/(payment) of deferred purchase consideration
Purchase of non-controlling interests in subsidiaries
Net proceeds from sales/(purchases) of financial assets
Payments for property and equipment
Amounts borrowed from other entities
Payments for intangible assets
Net cash provided by investing activities
Cash flows from financing activities
Net borrowings repaid
Purchase of treasury shares
Proceeds from exercise of IFL share options
Dividends paid:
- members of the Company
- non-controlling members of subsidiary entities
- shareholders entitled to contractual share buy-back
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents divested
Effects of cash reclassified as assets held for sale at 30 June 2015
Operating Risk Financial Reserve cash requirement
3-5
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of year
Notes to the consolidated financial statements are included on pages 66 to 117.
Note
2017
$’000
2016
$’000
967,166
1,004,844
(725,564)
(757,836)
2-5
3,966
(55)
(2,013)
(3,933)
(60,288)
179,279
823
4,313
-
-
(6,608)
6,261
(1,045)
14,814
325
-
1,015
(7,440)
18
(4,934)
7,542
(212)
(3,323)
-
(155,934)
(3,648)
-
(163,117)
23,704
186,992
(2,350)
-
(144)
16
2,757
(596)
(5,061)
(5,799)
(69,458)
168,851
839
5,002
54,586
(1,516)
(7,022)
-
-
5,868
(4,188)
(2,112)
(944)
(8,390)
352
(842)
41,633
(1,087)
(7,438)
210
(169,430)
(2,788)
(1,698)
(182,231)
28,253
150,533
-
5,314
2,799
93
208,218
186,992
65
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Section 1 – Financial instruments and risk management
The IOOF Group’s activities expose it to a variety of financial and non-financial risks. Financial risks include: market risks (including
price risk, currency risk and interest rate risk), credit risk, statutory fund and liquidity risk. The nature of the financial risk exposures
arising from financial instruments, the objectives, policies and processes for managing these risks, and the methods used
to measure them are detailed below. Key non-financial exposures, such as operational risk and a failure to meet regulatory
compliance obligations, are discussed in detail in the Operating and Financial Review.
Similarly the objectives, policies and processes for managing
the risks of the IOOF Group are separate and distinct from
those for the benefit funds and trusts. The funds and trusts
are managed under extensive regulatory requirements,
and in accordance with specific investment guidelines, risk
management strategies, risk management plans, and product
disclosure statements. The IOOF Group is managed under
a set of separate corporate policies and review processes
that are directed toward the interests of the shareholders of
the IOOF Group.
Information in relation to financial risks associated with the
benefit funds and controlled trusts is available in their Product
Disclosure Statements and the individual annual financial
reports of those trusts.
Further information in relation to the Australian Accounting
Standards requirement to consolidate the benefit funds and
controlled trusts in the consolidated financial statements of the
IOOF Group is available in Note 7-3(b) Basis of consolidation.
(a) Market risk
(i) Price risk
Price risk is the risk that the fair value or future earnings of
a financial instrument will fluctuate because of changes in
market prices (other than from interest rate risk or currency
risk, as described later). The financial instruments managed
by the IOOF Group that are impacted by price risk consist
of investment units held in trusts and available for sale
financial assets.
The price risk associated with the units held in trusts is that the
fair value of those units will fluctuate with movements in the
redemption value of those units, which in turn is based on the
fair value of the underlying assets held by the trusts. Available
for sale financial assets are exposed to price risk as the share
price fluctuates.
1-1 Risk management
IOOF risk management framework
Risk is defined as the chance of an event occurring that will have
an impact on the strategic or business objectives of the IOOF
Group, including a failure to exploit opportunities. The IOOF
Group’s risk management process involves the identification
of material risks, assessment of consequence and likelihood,
implementation of controls to manage risks, and continuous
monitoring and improvement of the procedures in place.
The IOOF Group’s objective is to satisfactorily manage its risks in
line with the IOOF Group’s Risk Management Policy set by the
Board, and this aligns to International Standard ISO 31000. The
IOOF Group’s Risk Management Framework manages the risks
faced by the IOOF Group, with approaches varying depending
on the nature of the risk. The IOOF Group maintains a framework
to ensure regulatory compliance obligations are managed
in accordance with Australian Standard 3806 Compliance
Programs. The IOOF Group’s exposure to all material risks is
monitored by the Risk Team and this exposure, and emerging
risks, are regularly reported to the Risk and Compliance
Committee, and the Board.
The IOOF Group’s income and operating cash flows are
indirectly impacted by changing market conditions. Its
exposure is through the impact of market changes on the
level of funds under management and administration, and
consequently management fee and service fee revenue.
Information has been provided below only on the direct impact
of changing market conditions to the IOOF Group’s income and
operating cash flows.
Financial risk
The financial risk management objectives, policies and
processes and the quantitative data about the exposure to risk
at the reporting date, as set out in the remainder of this note,
excludes the benefit funds and the controlled unit trusts. This
is because the risks associated with financial instruments held
by the benefit funds and controlled trusts are borne by the
policyholders and members of those funds and trusts, and
not the shareholders of the IOOF Group. There is no direct
impact on the net profit or the equity of the IOOF Group as a
consequence of changes in markets as they apply to financial
instruments held by those funds and trusts at the reporting date.
66
IOOF annual report 2017
IOOF Group sensitivity
(b) Credit risk
At 30 June 2017 had the price of the units / shares held by the
IOOF Group in unlisted unit trusts / shares in other entities
increased / decreased by 1% (2016: 1%) with all other variables
held constant, post-tax profit for the year would increase /
decrease by $5,000 (2016: $15,000) as a result of gains / losses
recorded through profit or loss, and available-for-sale reserves
would increase / decrease by $178,000 (2016: $147,000).
(ii) Currency risk
The IOOF Group is exposed to insignificant foreign exchange
risk in relation to the financial instruments of its foreign
activities in New Zealand and Hong Kong.
(iii) Cash flow and interest rate risk
Interest rate risk is the risk to the IOOF Group’s earnings and
capital arising from changes in market interest rates. The
financial instruments held that are impacted by interest rate
risk consist of cash, loans, and borrowings.
Short and long-term investment mixes and loans to related
entities are influenced by liquidity policy requirements. Interest
rates (both charged and received) are based on market rates,
and are closely monitored by management. They are primarily
at variable rates of interest, and expose the IOOF Group to cash
flow interest rate risk.
Management regularly assesses the appropriateness of
the investment of surplus funds with the objective of
maximising returns.
There is limited exposure to fair value interest rate risk because
of the relatively short time frame of any fixed rate investments
and borrowings.
IOOF Group sensitivity
At 30 June 2017, if interest rates had changed by +/- 100
basis points (2016: +/- 100 basis points) from the year-end
rates with all other variables held constant, post tax profit
for the year would have increased/decreased by $1,448,000
(2016: $1,451,000). Equity would have been higher/lower by
the same amount.
Credit risk refers to the risk that a counterparty will fail to meet
its contractual obligations resulting in financial loss to the
IOOF Group. Credit risk arises for the IOOF Group from cash,
receivables and loans.
The IOOF Group mitigates its credit risk by ensuring cash
deposits are held with high credit quality financial institutions
and other highly liquid investments are held with trusts
operated by the IOOF Group. Where investments are held
in units in a trust operated by the IOOF Group, that trust is
subject to the rules of the trust deed and the investment in
underlying assets is subject to asset allocation guidelines.
Receivables consist of management fees receivable, service
fees receivable and other amounts receivable from related
parties. These counterparties generally do not have an
independent credit rating, and the IOOF Group assesses the
credit quality of the debtor taking into account its financial
position, past experience with the debtor, and other available
credit risk information. In relation to management fees
receivable, the IOOF Group is contractually entitled to deduct
such fees from investors’ account balances, in accordance
with the Product Disclosure Statements, and pass the fees to
the Responsible Entity or Trustee. Due to this pass-through
process the embedded credit risk is considered minimal. Other
receivables are regularly monitored by line management.
The maximum exposure to credit risk at the reporting date
is the carrying value of the financial assets as summarised
in the table included in this note below. The IOOF Group
does not hold any significant collateral as security over its
receivables and loans, apart from its recourse to certain shares
in subsidiaries in relation to loans to executives of subsidiaries.
There are no significant concentrations of credit risk within
the IOOF Group.
The IOOF Group does not hold any financial assets whose
terms have been renegotiated, but which would otherwise be
past due or impaired.
The credit quality of the financial assets that are neither past
due nor impaired as at balance date was consistent with that
described above, and management assesses the credit risk
associated with these reported balances as being minimal.
Information in relation to impaired receivables and past due
but not impaired receivables is included below.
67
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Impaired receivables
(c) Statutory Fund Risk
Financial risks are monitored and controlled by selecting
appropriate assets to back policy liabilities. The assets
are regularly monitored by the Investment Management
Committee to ensure there are no material exposures and
that liability mismatching issues and other risks such as
liquidity risk and credit risk are maintained within acceptable
limits. The Investment Management Committee is chaired by
an independent expert and its membership is drawn from
appropriately skilled senior management. There are no Non-
Executive Directors on this Committee.
The IOOF Group’s friendly society operations are subject to
regulatory capital requirements which prescribe the amount
of capital to be held depending on the type, quality and
concentration of investments held. Procedures are in place to
monitor compliance with these requirements. Refer to Section
5 - Statutory funds for further details.
(d) Liquidity risk
Liquidity risk relates to the IOOF Group having insufficient
liquid assets to cover current liabilities and unforeseen
expenses. The IOOF Group maintains a prudent approach to
managing liquidity risk exposure by maintaining sufficient
liquid assets and an ability to access a committed line of credit.
It is managed by continuously monitoring actual and forecast
cash flows and by matching the maturity profiles of financial
assets and liabilities. Temporary surplus funds are invested in
highly liquid, low risk financial assets.
The IOOF Group had access to undrawn bank borrowing
facilities at the balance date, on the terms described and
disclosed in section 3-2 Borrowings. The liquidity requirements
for licensed entities in the IOOF Group are regularly
reviewed and carefully monitored in accordance with those
licence requirements.
As at 30 June 2017, $3,447,000 trade receivables of the IOOF
Group were past due or impaired (2016: $3,495,000). The amount
of the impairment provision was $585,000 (2016: $598,000).
Collectability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectible are written off
by reducing the carrying amount directly. An allowance account
(provision for impairment of trade receivables) is used when
there is objective evidence that the IOOF Group may not be
able to collect all amounts due according to the original terms
of the receivables. Significant financial difficulty of the debtor,
probability that the debtor will enter bankruptcy or financial
reorganisation, and default or delinquency in payments (more
than 120 days overdue) are considered indicators that the trade
receivable is impaired. The amount of the impairment allowance
is the difference between the asset’s carrying amount and
the present value of estimated future cash flows, discounted
at the original effective interest rate. Cash flows relating to
short-term receivables are not discounted if the effect of
discounting is immaterial.
The amount of the impairment loss is recognised in profit or
loss within other expenses. When a trade receivable for which
an impairment allowance has been recognised becomes
uncollectible in a subsequent year, it is written off against
the allowance account. Subsequent recoveries of amounts
previously written off are credited against other expenses in
profit or loss.
Movements in the
provisions for impairment
of trade receivables are
as follows:
Carrying value at 1 July
Provision for impairment
provided/(written back)
during the year
Receivables written back
during the year as collectible
Carrying value at 30 June
Ageing of trade receivables
that were not impaired at
30 June
Neither past due nor impaired
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
Trade receivables past due
but not impaired
68
2017
2016
$’000
598
(13)
-
585
2017
$’000
54,594
1,568
563
731
57,456
3,447
$’000
605
32
(39)
598
2016
$’000
47,561
1,042
504
1,351
50,458
3,495
IOOF annual report 2017
Maturities of financial liabilities
The tables below analyse the IOOF Group’s financial liabilities into relevant maturity groupings based on the remaining years at the
balance date to the contractual maturity date. The amounts disclosed therein are the contractual undiscounted cash flows. Statutory
funds are excluded on the basis that monies held in the benefit funds and controlled trusts are held for the benefit of the members of
those funds, and are not available to shareholders or creditors.
2017
Carrying Amount
Current Non-Current
Total
Contractual cash flows
1-5 years
5+ years
1 year
or less
Total
contractual
cash flows
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Financial liabilities
Payables
Total payables
Borrowing facilities
Finance lease
liabilities
Total borrowings
Contingent
consideration
60,004
60,004
90,000
40
90,040
1,447
3
3
60,007
60,007
116,908
206,908
-
40
116,908
206,948
392
1,839
60,004
60,004
90,000
40
90,040
1,447
3
3
116,908
-
116,908
392
151,491
117,303
268,794
151,491
117,303
Financial assets available to meet
the above financial liabilities
208,218
57,456
44,838
-
102,294
-
-
718
5,389
6,107
208,218
57,456
45,556
5,389
208,218
57,456
44,838
-
108,401
102,294
18
-
-
-
18
679
25,445
679
25,445
18
-
-
-
8,404
8,404
-
3,731
-
3,731
3,731
-
7,153
7,153
-
-
-
718
-
718
-
679
-
-
-
-
Cash
Trade receivables
Other receivables
Security bonds
Total receivables
Fair value through
profit or loss
Shares in listed
companies
Unlisted unit trusts
Available-for-sale
investments
Loans and other
receivables
Loans to directors
and executives of
associated entities
Receivables from
statutory benefit
funds
Seed capital
receivable
Total other
financial assets
Net financial assets/
(liabilities)
3,749
41,681
45,430
3,749
679
41,002
45,430
314,261
162,770
47,788
(69,515)
362,049
93,255
314,261
162,770
1,397
(115,906)
46,391
46,391
362,049
93,255
69
-
-
-
-
-
-
-
-
-
-
5,389
5,389
-
-
25,445
60,007
60,007
206,908
40
206,948
1,839
268,794
208,218
57,456
45,556
5,389
108,401
18
679
25,445
8,404
8,404
-
3,731
7,153
7,153
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
2016
Carrying Amount
Current Non-Current
Total
Contractual cash flows
1-5 years
5+ years
1 year
or less
Total
contractual
cash flows
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Financial liabilities
Payables
Total payables
Borrowing facilities
Finance lease
liabilities
Total borrowings
Contingent
consideration
68,778
68,778
–
192
192
721
3
3
68,781
68,781
68,778
68,778
206,730
206,730
53
245
206,783
770
206,975
1,491
–
192
192
721
3
3
206,730
53
206,783
770
69,691
207,556
277,247
69,691
207,556
Financial assets available to meet
the above financial liabilities
186,992
186,992
–
–
–
–
–
–
–
–
–
–
5,374
5,374
–
–
–
20,999
68,781
68,781
206,730
245
206,975
1,491
277,247
186,992
50,458
46,546
5,374
102,378
132
181
1,963
20,999
8,409
8,409
–
4,541
7,153
7,153
186,992
50,458
44,761
–
95,219
132
181
–
–
–
–
1,785
5,374
7,159
–
–
1,963
20,999
50,458
46,546
5,374
102,378
132
181
1,963
20,999
–
8,409
8,409
4,541
–
4,541
4,541
–
7,153
7,153
–
50,458
44,761
–
95,219
132
181
–
–
–
–
–
1,785
–
1,785
–
–
1,963
–
–
–
–
4,854
38,524
43,378
4,854
1,963
36,561
43,378
287,065
217,374
45,683
(161,873)
332,748
55,501
287,065
217,374
3,748
(203,808)
41,935
41,935
332,748
55,501
Cash
Trade receivables
Other receivables
Security bonds
Total receivables
Fair value through
profit or loss
Certificates of
deposit
Shares in listed
companies
Unlisted unit trusts
Available-for-sale
investments
Loans and other
receivables
Loans to directors
and executives of
associated entities
Receivables from
statutory benefit
funds
Seed capital
receivable
Total other
financial assets
Net financial assets/
(liabilities)
70
IOOF annual report 2017
(e) Accounting policies and fair value estimation
Financial assets at fair value through profit or loss
The fair values of financial assets and liabilities are equal to
the carrying amounts shown in the statement of financial
position with the exception of finance lease liabilities which are
disclosed in note 3-2 Borrowings.
Offsetting assets and liabilities
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and
only when, the IOOF Group has a legal right to offset the
amounts and intends either to settle on a net basis or to realise
the asset and settle the liability simultaneously.
Non-derivative financial assets
The IOOF Group initially recognises loans and receivables and
deposits on the date that they are originated. All other financial
assets (including assets designated at fair value through
profit or loss) are recognised initially on the date at which the
IOOF Group becomes a party to the contractual provisions of
the instrument.
The IOOF Group derecognises a financial asset when the
contractual rights to the cash flows from the asset expire, or
it transfers the rights to receive the contractual cash flows on
the financial asset in a transaction in which substantially all
the risks and rewards of ownership of the financial asset are
transferred. Any interest in transferred financial assets that
is created or retained by the IOOF Group is recognised as a
separate asset or liability.
The IOOF Group has the following non-derivative
financial assets:
• cash;
• financial assets at fair value through profit or loss;
•
loans and receivables; and
• available-for-sale financial assets.
Cash
Cash includes cash on hand, deposits held at call with financial
institutions, other short-term, highly liquid investments with
original maturities of three months or less that are readily
convertible to known amounts of cash.
A financial asset is classified as at fair value through profit or
loss if the IOOF Group manages such investments and makes
purchase and sale decisions in accordance with the IOOF
Group’s documented risk management or investment strategy.
Upon initial recognition attributable transaction costs are
recognised in profit or loss when incurred. Financial assets at
fair value through profit or loss are measured at fair value, and
changes therein are recognised in profit or loss.
Units in unlisted trusts are carried at the current unit price for
redemption of those units with the trust.
The fair value of financial instruments traded in active
markets is based on quoted market prices at the reporting
date. The quoted market price used for financial assets is
the closing price.
Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted on
an active market. They arise when the IOOF Group provides
money, assets, or services directly to a debtor with no intention
of selling the receivable. Subsequent to initial recognition,
loans and receivables are measured at amortised cost using
the effective interest method and closely approximate their
estimated fair value due to their short-term nature.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative assets
comprising principally marketable equity securities that are
either designated in this category or are not classified in any of
the other categories of financial instruments. Available-for-sale
financial assets are recognised initially at fair value plus any
directly attributable transaction costs.
Subsequent to initial recognition, they are measured at fair
value and changes therein, other than impairment losses, are
recognised in other comprehensive income and presented
within equity in the available-for-sale investment revaluation
reserve. When an investment is derecognised, the cumulative
gain or loss in equity is transferred to profit or loss.
71
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Non-derivative financial liabilities
Payables
The IOOF Group initially recognises financial liabilities on
the date at which the IOOF Group becomes a party to the
contractual provisions of the instrument. The IOOF Group
derecognises a financial liability when its contractual
obligations are discharged, cancelled or expire.
The IOOF Group has the following non-derivative
financial liabilities:
• payables;
• borrowings (including finance leases); and
• other financial liabilities (including contingent
consideration).
Such financial liabilities are recognised initially at fair value plus
any directly attributable transaction costs. Subsequent to initial
recognition these financial liabilities are measured at amortised
cost using the effective interest method.
1-2 Financial Instruments
Fair value hierarchy
The carrying value of payables are assumed to approximate
their fair values due to their short-term nature.
Borrowings and finance leases
Borrowings and finance leases are further explained in section
3-2 Borrowings.
Contingent consideration
The contingent consideration amounts payable can rise and
fall depending on performance hurdles achieved during
the deferral period specific to each agreement which may
include revenue targets, gross margin targets and/or FUMAS
retention requirements.
Where contingent consideration is due for payment after
12 months, the estimated amounts payable are discounted.
Assumptions used include pre-tax discount rates in the range
of 3-4% which were based on market interest rates upon
acquisition of related intangibles.
The fair values of financial assets and liabilities are equal to the carrying amounts shown in the statement of financial position with the
exception of finance lease liabilities which are disclosed in note 3-2 Borrowings.
The table below analyses financial instruments carried at fair value, by valuation method.
30 June 2017
Financial assets measured at fair value
Available-for-sale investments
Shares in listed companies
Unlisted unit trusts
Financial liabilities measured at fair value
Contingent consideration
30 June 2016
Financial assets measured at fair value
Available-for-sale investments
Certificates of deposit
Shares in listed companies
Unlisted unit trusts
Financial liabilities measured at fair value
Contingent consideration
72
Level 1
$’000
Level 2
$’000
Level 3
$’000
25,445
18
-
25,463
-
-
20,999
-
181
-
21,180
-
-
-
-
679
679
-
-
-
132
-
1,963
2,095
-
-
-
-
1,839
1,839
-
-
-
-
-
-
-
1,491
1,491
Total
25,445
18
679
26,142
1,839
1,839
20,999
132
181
1,963
23,275
1,491
1,491
IOOF annual report 2017
The definitions of each level and the valuation techniques used are as follows:
• Level 1: quoted closing prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included with Level 1 that are observable for the asset or liability, either directly
(ie. as prices) or indirectly (ie. derived from prices). Level 2 fair values for the over-the-counter foreign exchange and index swap
are provided by the counterparty and verified by the IOOF Group. Fair values are derived from published market indices and
include adjustments to take account of the credit risk of the IOOF Group entity and counterparty.
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The IOOF Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting year during
which the transfer has occurred. There were no transfers between Level 1 to Level 2 of the fair value hierarchy during the year
ended 30 June 2017.
Reconciliation of movements in level 3 financial liabilities
Contingent consideration
Opening balance as at 1 July 2016
Acquisition of intangibles
Fair value gain from derecognition of contingent consideration payable
Unwinding of discount
Settlement of contingent consideration
Closing balance as at 30 June 2017
$’000
1,491
1,069
(209)
36
(548)
1,839
73
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Section 2 - Results for the year
This section focuses on the results and performance of the IOOF Group. On the following pages you will find disclosures explaining
the IOOF Group’s results for the year, segmental information, taxation and earnings per share.
Where an accounting policy is specific to a single note, the policy is described in the note to which it relates.
2-1 Operating segments
Corporate and other
Corporate and other costs include those of a strategic,
shareholder or governance nature incurred in carrying on
business as a listed entity managing multiple business units.
Information regarding the results of each reportable segment
is included below. Performance is measured based on
segment underlying profit before income tax as management
believes that such information is the most relevant in
evaluating the results of certain segments relative to other
entities that operate within these industries.
The IOOF Group has the following five strategic divisions,
which are its reportable segments. All segments’ operating
results are regularly reviewed by the IOOF Group’s Managing
Director to make decisions about resources to be allocated
to the segment and assess its performance, and for which
discrete financial information is available.
Financial advice and distribution
The provision of financial planning advice and stockbroking
services supported by services such as investment research,
training, compliance support and access to financial products.
Platform management and administration
The provision of administration and management services
through master trust platforms, which offer a single access
point to a range of investment products.
Investment management
The management and investment of monies on behalf of
corporate, superannuation, institutional clients and private
individual investor clients.
Trustee services
The provision of estate planning, trustee, custodial, agency and
estate administration services to clients.
74
IOOF annual report 2017
Financial advice
and distribution
Platform
management
and
administration
Investment
management
Trustee services Corporate and
Total
other
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
263,494 260,285 387,608 394,082
81,942
99,318
26,695
24,995
-
- 759,739 778,680
16,167
22,656
6,239
5,829
2,146
1,847
3,833
4,213
489
562
28,874
35,107
(126,443) (119,933) (109,026) (113,866)
(26,339)
(43,187)
(2,321)
(2,171)
398
419 (263,731) (278,738)
(372)
(603)
(157)
(517)
-
-
-
-
-
-
(529)
(1,120)
External management
and service fee
revenue
External other fee
revenue
Service fees and other
direct costs
Deferred acquisition
costs
Gross Margin
152,846 162,405 284,664 285,528
57,749
57,978
28,207
27,037
887
981 524,353 533,929
Stockbroking revenue
85,478
73,841
Stockbroking service
fees expense
Stockbroking net
contribution
(48,549)
(41,683)
36,929
32,158
Inter-segment revenuei
75,467
71,879
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 85,478
73,841
- (48,549)
(41,683)
- 36,929
32,158
-
283
385
139
137
75,889
72,401
Inter-segment
expensesi
Net Operating
Revenue
(3,434)
(4,775)
(72,214)
(67,367)
(241)
(259)
-
-
-
- (75,889)
(72,401)
261,808 261,667 212,450 218,161
57,508
57,719
28,490
27,422
1,026
1,118 561,282 566,087
Other external revenue
3,028
3,537
603
12
816
800
17
1,146
-
1
-
-
375
2
-
-
75
436
1,887
1,236
-
-
2,662
3,685
-
-
-
-
-
-
-
-
1,197
4,190
-
-
549
4,300
6,348
3,743
5,230
5,781
-
-
12
17
3,478
4,831
(148,755) (147,715)
(95,853)
(99,392)
(14,284)
(19,769)
(18,341)
(18,601)
(40,682)
(41,477)
(317,915) (326,954)
(102)
(409)
(189)
(503)
(211)
(296)
(15)
(20)
(778)
(726)
(1,295)
(1,954)
(43)
-
(69)
-
-
(12)
-
(17)
-
-
-
-
-
-
-
-
(3,119)
(3,558)
(3,454)
(3,048)
(512)
(1,087)
(563)
(226)
-
-
(1,737)
(1,737)
-
-
-
-
(6,785)
(7,284)
(6,828)
(7,353)
-
-
-
-
-
-
(12)
(17)
(7,648)
(7,919)
(1,737)
(1,737)
(3,861)
(2,620)
-
-
-
-
-
-
-
-
(3,861)
(2,620)
Finance income
Inter-segment revenuei
Share of net profits of
associates
Operating and other
expenditure
Share-based payments
expense
Finance costs
Inter-segment
expenses(i)
Depreciation
Amortisation of
intangible assets -
IT Development
Non-controlling
interests
Income tax expense
(34,033)
(34,361)
(33,939)
(34,820)
(12,967)
(11,996)
(2,876)
(2,578)
18,166
20,515
(65,649)
(63,240)
UNPAT from
continuing operations
Discontinued
Operations
UNPAT
76,354 78,435 77,267 79,021 32,707 31,379
6,695
5,997 (23,666) (23,562) 169,357 171,270
-
2,097
169,357 173,367
i
Segment revenues, expenses and results include transfers between segments. Such transfers are priced on a commercial basis and are eliminated on consolidation.
Segment disclosures have been prepared on an underlying (UNPAT) basis as discussed in the Operating and Financial Review section
of the Directors’ Report. Comparatives have been restated to be on a comparable basis.
75
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Reconciliation of reportable segment revenues and expenses
Profit for the year from continuing operations
Less non-controlling interest
Profit attributable to Owners of the Company from continuing operations
Profit for the year from discontinued operation
Profit attributable to Owners of the Company - total
Underlying net profit after tax pre-amortisation (UNPAT) adjustments:
Amortisation of intangible assets
Termination and retention incentive payments
Gain on divestment of subsidiaries
Profit on divestment of assets
Non-recurring professional fees
Acquisition tax provision release
Impairment of goodwill
Unwind of deferred tax liability recorded on intangible assets
Acquisition and divestment transaction costs
Onerous contracts
Reinstatement of Perennial non-controlling interests
Income tax attributable
UNPAT
Discontinued operation
UNPAT from continuing operations
Note
2-4
2-4
2-2,2-3
2-3
2-4
2-4
2-4
2017
$’000
119,851
(3,861)
115,990
-
2016
$’000
140,542
(2,620)
137,922
58,924
115,990
196,846
38,611
4,125
(6,261)
(11,930)
2,013
(5,707)
38,592
(10,056)
-
-
-
3,980
169,357
-
169,357
39,681
6,005
(71,988)
(8,125)
5,061
-
-
(10,056)
1,516
951
(825)
14,301
173,367
(2,097)
171,270
The significant accounting policies which apply to the major revenue and expense items below follow each of the notes. More
general information on how these are recognised/measured can be found in note 7-2 Basis of preparation.
2-2 Discontinued operation
In the prior year Perennial Fixed Interest and Perennial Growth Management were divested to Henderson for an upfront consideration
of $71.6m and a deferred component dependent on future business performance, payable after two and four years. The divestment
to Henderson was completed on 1 November 2015. $735k has been recognised as deferred consideration at 30 June 2017. These
components of the Perennial Group were previously classified as held-for-sale.
76
IOOF annual report 2017
Results of the discontinued operation
4 months ended 1 Nov 15
Revenue
Expenses
Results from operating activities
Income tax
Results from operating activities, net of tax
Gain on divestment of discontinued operation
Income tax on gain on sale of discontinued operation
Gain on divestment of discontinued operation, net of tax
Profit for the year
Basic earnings per share
Diluted earnings per share
Cash flows from the discontinued operation
Net cash provided by operating activities
Net cash provided by investing activities
Net cash flow for the year
Accounting policies
$’000
9,486
(5,435)
4,051
(1,221)
2,830
71,988
(15,894)
56,094
58,924
19.7
19.6
2,830
54,586
57,416
A discontinued operation is a component of the IOOF Group’s business, the operations and cash flows of which can be clearly
distinguished from the rest of the IOOF Group and which:
•
•
represents a separate major line of business or geographic area of operations; and
is part of a single co-ordinated plan to divest a separate major line of business or geographical area of operations.
Classification as a discontinued operation occurs at the earlier of divestment or when the operation meets the criteria to be classified
as held for sale.
When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is re-presented as if
the operation had been discontinued from the start of the comparative year.
77
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
2-3 Revenue
Management and service fees revenue
Stockbroking revenue
External other fee revenue
Finance income
Interest income on loans to Directors of controlled and associated entities
Interest income from non-related entities
Dividends and distributions received
Net fair value gains/(losses) on other financial assets at fair value through profit or loss
Other revenue
Service revenue charged to related parties
Profit on divestment of assets
Gain on divestment of subsidiaries
Other
Policy
note
(i)
(ii)
(ii)
(iii)
2017
2016
$’000
759,739
85,478
28,874
254
4,098
824
54
5,230
-
11,930
6,261
10,007
28,198
$’000
778,680
73,841
35,107
295
4,661
839
(14)
5,781
1,887
8,125
-
4,461
14,473
Total revenue from continuing operations
907,519
907,882
Accounting policies
Revenue is measured at the fair value of the consideration received or receivable.
(i) Management and service fees revenue
The IOOF Group provide management services to unit trusts and funds operated by the IOOF Group at normal commercial rates.
Management and service fees earned from the unit trusts and funds are calculated based on an agreed percentage of the respective
funds under management or administration as disclosed in the respective product disclosure statements, and are recognised on an
accruals basis.
Management and service fees revenue from the provision of financial advisory services together with revenue from the rendering of
services are recognised at the time the service is provided.
(ii) Stockbroking revenue and external other fee revenue
Other fee revenue and stockbroking revenue from the rendering of services are recognised at the time the service is provided.
(iii) Finance income
Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains
on the divestment of available-for-sale financial assets and changes in the fair value of financial assets at fair value through profit or
loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in
profit or loss on the date that the IOOF Group’s right to receive payment is established, which in the case of quoted securities is the
ex-dividend date.
78
2-4 Expenses
Service Fees and other direct costs
Service and marketing fees expense
Stockbroking service fees expense
Other direct costs
Operating expenditure
Salaries and related employee expenses
Employee defined contribution plan expense
Information technology costs
Professional fees
Marketing
Office support and administration
Occupancy related expenses
Travel and entertainment
Other
Other expenses
Share-based payments expense
Acquisition and divestment transaction costs
Termination and retention incentive payments
Depreciation of property and equipment
Amortisation of intangible assets
Amortisation of intangible assets - IT development
Loss on divestment of non-current assets
Impairment of goodwill
Deferred acquisition costs
Non-recurring professional fees
Onerous contracts
Total expenses from continuing operations
Policy
note
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vi)
(vi)
(vii)
IOOF annual report 2017
2017
2016
$’000
$’000
241,153
48,549
22,578
312,280
254,591
41,683
24,147
320,421
197,898
199,990
14,089
41,532
10,959
8,446
17,120
21,989
5,877
5
14,812
50,296
7,492
9,250
18,539
20,335
6,066
-
317,915
326,780
1,295
-
4,125
7,648
38,611
1,737
-
38,592
529
2,013
-
1,954
1,414
6,005
7,919
39,681
1,737
174
-
1,120
5,061
951
94,550
724,745
66,016
713,217
79
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Accounting policies
Annual and long service leave benefits
Expenses are recognised at the fair value of the consideration
paid or payable for services received, further specific expense
policies are listed below.
(i) Service Fees and other direct costs
Service fees and other direct costs include amounts paid to
advisers, dealer groups and other suppliers in the course of
operating and marketing products and services of the IOOF
Group. Examples of direct costs include custodian fees, audit
services and the printing and mailing of client statements and
other communications. The values are recognised at the fair
value of the consideration paid or payable for the goods or
services received.
(ii) Salaries and related employee expenses
These entitlements including salaries, wages, bonuses,
overtime, allowances, annual and long service leave, but
exclude share-based payments. The accounting policies for
the three major expense categories under this definition
are as follows.
Short-term employee benefits
Short-term employee benefit obligations are measured
on an undiscounted basis and are expensed as the related
service is provided.
A liability is recognised for the amount expected to be paid if
the IOOF Group has a present legal or constructive obligation
to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Short-term incentive plans
A provision for employee benefits in the form of an incentive
plan is recognised when there is no realistic alternative
but to settle the liability, and at least one of the following
conditions is met:
•
•
there are formal terms in the plan for determining the
amount of the benefit;
the amounts to be paid are determined before the time of
completion of the financial report; or
• past practice gives clear evidence of the amount of
the obligation.
The IOOF Group’s net obligation in respect of long-term
employee benefits is the amount of future benefit that
employees have earned in return for their service in the current
and prior years plus related on-costs.
Liabilities for long-term benefits that are expected to be
settled beyond 12 months are discounted using rates attaching
to high quality corporate bonds which most closely match the
terms of maturity of the related liabilities at balance date.
In determining the liability for employee entitlements,
consideration is given to future increases in wage and
salary rates, experience with employee departures and
years of service.
(iii) Employee defined contribution plan expense
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined
contribution plans are recognised in profit or loss in the years
during which services are rendered by employees. Prepaid
contributions are recognised as an asset to the extent that a
cash refund or a reduction in future payments is available.
(iv) Share-based payments expense
The grant date fair value of share-based payment awards
granted to employees is recognised as a share-based payment
expense, with a corresponding increase in the share-
based payments reserve, over the year that the employees
unconditionally become entitled to the awards. The amount
recognised as an expense is adjusted to reflect the number of
awards for which the related service and non-market vesting
conditions are expected to be met, such that the amount
ultimately recognised as an expense is based on the number
of awards that meet the related service and non-market
performance conditions at vesting date.
For share-based payment awards with non-vesting conditions,
the grant date fair value of the share-based payment is
measured to reflect such conditions and there is no true-up for
differences between expected and actual outcomes.
The fair value at grant date is independently determined where
considered appropriate.
80
IOOF annual report 2017
(vii) Deferred acquisition costs
Deferred acquisition costs relate to service fees paid, and are
deferred as an asset in recognition that they relate to a future
economic benefit. Deferred acquisition costs are initially
measured at historical cost and are written down immediately
to their recoverable amount if the carrying amount is greater
than its estimated recoverable amount.
Deferred acquisition costs are progressively amortised in
profit or loss by a systematic allocation over the years the
future economic benefits are expected to be received. The
amortisation period is between 5 and 7 years.
Shares held by the IOOF Equity Plan Trust will contribute to
the employee allocation of shares on satisfaction of vesting
performance hurdles. The IOOF Group has no right to recall
placed shares. However, a subsidiary company acts as the
Trustee of the Trust, and can direct the voting rights of shares
held and strategic direction.
Non-Executive Directors have the opportunity to participate
in the IOOF Deferred Share Purchase Plan. The plan provides
a facility for Non-Executive Directors to sacrifice base salary or
future incentive entitlements in order to acquire shares. As the
purchase is funded by Directors’ salary sacrifice, no additional
expense is recorded by the IOOF Group.
(v) Termination and retention incentive payments
Termination benefits or redundancy costs are recognised as an
expense when the IOOF Group is committed demonstrably,
without realistic opportunity of withdrawal, to a formal
detailed plan without possibility of withdrawal, or providing
termination benefits as a result of an offer made to encourage
voluntary redundancy.
(vi) Amortisation and impairment
The value of intangible assets, with the exception of goodwill
and brand names with indefinite useful lives, reduces over
the number of years the IOOF Group expects to use the asset,
the useful economic life, via an annual amortisation charge
to profit and loss. The values and useful lives ascribed are
reflective of arms-length transactions and independent expert
advice thereon.
Where there has been a technological change or decline
in business performance the Directors review the value of
assets to ensure they have not fallen below their amortised
value. Should an asset’s value fall below its amortised value an
additional one-off impairment charge is made against profit.
81
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
2-5 Net cash provided by operating activities
Cash includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to known amounts of cash.
This note reconciles the operating profit to the cash provided by operating activities per the cash flow statement.
2017
$’000
119,851
7,648
40,348
38,592
(18,228)
6,828
(4,352)
(823)
3,966
(3,478)
1,295
-
1,144
(7,575)
(833)
1,674
569
(8,275)
(699)
1,919
7,871
1,089
103
(9,355)
2016
$’000
199,466
7,919
41,418
-
(80,533)
7,353
(4,990)
(839)
2,757
(4,831)
1,966
1,516
(49)
8,444
52
3,031
1,157
(3,515)
(1,238)
(6,078)
(11,219)
(9)
(114)
7,187
179,279
168,851
Profit for the year
Depreciation on property and equipment
Amortisation of intangible assets
Impairment of goodwill
(Profit)/loss on divestment of assets
Interest and other costs of finance
Interest received and receivable
Dividends and distributions received and receivable
Dividends received from associates
Share of profits of associates accounted for using the equity method
Share-based payments expense
Acquisition and divestment transaction costs
Other
Changes in net operating assets and liabilities:
(Increase)/decrease in receivables
(Increase)/decrease in other assets
(Increase)/decrease in other financial assets
(Increase)/decrease in deferred acquisition costs
Increase/(decrease) in payables
Increase/(decrease) in deferred revenue liabilities
Increase/(decrease) in provisions
Increase/(decrease) in income tax payable
Increase/(decrease) in contingent consideration
Increase/(decrease) in other liabilities
Increase/(decrease) in deferred taxes
Net cash provided by operating activities
82
2-6 Income taxes
Income taxes
Current tax expense
Current year
Adjustment for prior years
Deferred tax expense
Origination and reversal of temporary differences
Adjustments recognised in the current year in relation to the deferred tax of prior years
Total income tax expense from continuing operations
Income tax recognised in other
comprehensive income
2017
$’000
IOOF annual report 2017
2016
$’000
61,494
(958)
60,536
(8,606)
(329)
(8,935)
51,601
2017
$’000
70,408
(1,478)
68,930
(9,460)
103
(9,357)
59,573
2016
$’000
Available-for-sale financial assets
Exchange differences on translating
foreign operations
Before tax
Tax expense
Net of tax
Before tax
Tax expense
Net of tax
3,770
15
(1,131)
(3)
2,639
12
3,648
118
(1,105)
(4)
2,543
114
3,785
(1,134)
2,651
3,766
(1,109)
2,657
Reconciliation of effective tax rate
Profit before tax from continuing operations
Tax using the IOOF Group's domestic tax rate
Tax effect of:
Share of tax credits with statutory funds
(Non assessable income)/Non-deductible expenses
Impairment of goodwill
Share of net profits of associates
Assessable associate dividends
Imputation credits
Other
Under/(over) provided in prior years
2017
2016
%
$’000
%
$’000
30.0%
0.5%
(1.8%)
6.5%
(0.6%)
2.1%
(2.2%)
(0.5%)
(0.8%)
179,424
53,827
978
(3,264)
11,578
(1,044)
3,771
(4,012)
(886)
(1,375)
30.0%
0.7%
(1.5%)
-
(0.8%)
2.2%
(2.3%)
(0.8%)
(0.7%)
192,143
57,643
1,304
(2,874)
-
(1,449)
4,264
(4,509)
(1,491)
(1,287)
33.2%
59,573
26.9%
51,601
The IOOF Holdings Ltd tax consolidated group (the IOOF tax group) paid $66.6m in income tax relating to the financial year ended 30
June 2016. In December 2016 the ATO published the tax information in respect of large public taxpayers in its tax transparency report.
For the IOOF tax group the ATO published payment of $78.9m in income tax relating to the financial year ended 30 June 2015.
For statutory reporting purposes, the Group had an effective tax rate of 33.2% on its continuing operations for the year ended 30 June
2017 (2016: 26.9%) compared to a statutory corporate tax rate of 30%. The rate difference in the year ended 30 June 2017 is primarily
due to research and development tax offsets, tax offsets for fully franked dividend income and impairment of goodwill. For the year
ended 30 June 2016, the rate difference is primarily due to research and development tax offsets and tax offsets for fully franked
dividend income. Excluding these items IOOF’s effective tax rate would be 30% across both years. The effective tax rate for New
Zealand and Hong Kong operations was 29.7%, and 18.0% respectively.
83
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Deferred tax assets and liabilities
Deferred tax asset balance comprises temporary differences attributable to:
Salaries and related employee expenses
Provisions, accruals and creditors
Carry forward capital and revenue losses
Other
Deferred tax asset balance as at 30 June
Set-off of deferred tax liabilities pursuant to set-off provisions
Net deferred tax asset balance as at 30 June
Deferred tax liability balance comprises temporary differences attributable to:
Customer relationships
Unrealised gains
Fixed assets and computer software
Other
Set-off of deferred tax liabilities pursuant to set-off provisions
Net deferred tax liability balance as at 30 June
Reconciliation of movements
Net carrying amounts at the beginning of the year
Acquisitions and divestments
Credited/(charged) to profit or loss
Discontinued operation
Temporary differences directly attributable to equity
Carrying amount at the end of the year
Unrecognised deferred tax assets
Tax losses
Potential tax benefit at the Australian tax rate of 30%
2017
$’000
2016
$’000
18,721
3,349
99
1,934
24,103
(24,103)
-
17,525
4,642
102
2,413
24,682
(24,682)
-
107,534
117,869
5,087
1,230
3,201
117,052
(24,103)
92,949
3,947
1,987
2,042
125,845
(24,682)
101,163
(101,163)
(92,527)
(9)
9,357
-
(1,134)
-
8,935
(16,459)
(1,112)
(92,949)
(101,163)
-
-
-
-
The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been
recognised in respect of these items because it is not probable that future taxable profit will be available against which the IOOF
Group can utilise the benefits there from.
Accounting policies
Income tax
Income tax comprises current and deferred tax. Current
and deferred tax are recognised in profit or loss except
to the extent that it relates to a business combination,
or items recognised directly in equity or in other
comprehensive income.
Current tax
Current tax is the expected tax payable or receivable on
the taxable income for the year, using tax rates enacted
or substantively enacted at the reporting date, and any
84
adjustment to tax payable in respect of previous years. Current
tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain
criteria are met.
Deferred tax
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is not recognised for:
IOOF annual report 2017
The Code is a set of principles and ‘minimum standards’ to
guide disclosure of tax information by businesses, encourage
those businesses to avoid aggressive tax planning, and
to help educate the public about their compliance with
Australia’s tax laws.
The IOOF Group provides a reconciliation of accounting profit
to tax expense, and to income tax paid/payable including
identification of material temporary and non-temporary
differences and accounting effective company tax rates for the
IOOF Groups Australian and global operations.
Information about international related party
dealings
The IOOF Group conducts foreign activities in New Zealand,
via IOOF New Zealand, and in Hong Kong, via share broking
business, Ord Minnett. Each of those entities is subject to the
local tax regime and effective tax rates are disclosed with
the IOOF Group’s effective tax rate. Related party dealings
between the IOOF Group’s Australian and foreign jurisdictions
are supported by transfer pricing documentation.
Approach to tax strategy and governance
Tax governance is part of the IOOF Group’s overall risk
management framework, as well as being part of an overall
tax strategy. The overall tax strategy drives the IOOF Group’s
approach to tax risk management and is aimed at good
corporate tax compliance and reporting, ability to meet and be
prepared for regulatory changes, and in ensuring shareholder
value. Tax governance is continuously monitored and in line
with the IOOF Group’s strategy. The IOOF Group regards
its relationship with the ATO as effective and open thereby
maintaining transparency and collaboration.
•
•
temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable
profit or loss;
temporary differences related to investments in subsidiaries
and associates to the extent that the IOOF Group is able
to control the timing of the reversal of the temporary
differences and it is probable that they will not reverse in
the foreseeable future; and
•
taxable temporary differences arising on the initial
recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, based
on the laws that have been enacted or substantively enacted
by the reporting date.
Deferred tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when deferred tax balances relate to the same
taxation authority.
Tax consolidation
IOOF Holdings Ltd and its wholly owned Australian resident
entities (including IOOF Ltd benefit funds) are part of a
tax-consolidated group under Australian taxation law. As a
consequence, all members of the tax-consoldiated group are
taxed as a single entity.
Tax transparency
The IOOF Group is committed to tax transparency and
integrity. It is a signatory to the Board of Taxation’s Voluntary
Tax Transparency Code (the Code), which was released
on 3 May 2016.
Tax contribution analysis
The IOOF Group contributed a total of $131.5m in taxes to Australian, New Zealand and Hong Kong governments (state and federal)
in the 2017 tax year. $131.0m or 99.6% of this amount was attributable to the Australian Government. The below tables provide an
analysis of the types of taxes the IOOF Group is liable for and those payable in Australia versus those in foreign jurisdictions.
2017 tax contribution by type (total $131.5m)
2017 tax contribution by country (total $131.5m)
Income Tax $70.4m
GST $45m
Payroll Tax $12.2m
Fringe Benefits Tax $1.3m
Other $2.6m
Australia $131m
New Zealand $0.495m
Hong Kong $0.005m
Further taxes paid by the IOOF Group on behalf of others, including employees and members, are not directly borne by the Group.
These include income tax, GST, pay-as-you-earn withholding taxes, and local duties, which total a further $76.0m.
85
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
2-7 Dividends
After 30 June 2017 the following dividends were declared by the directors. The dividends have not been provided for and there are no
income tax consequences.
Final 2017 dividend
Cents per
share
27.0
Total
amount
$’000
81,036
Date of
payment
Franked/
unfranked
1 September 2017
Franked
Dividend franking account
30 per cent franking credits available to shareholders of IOOF Holdings Ltd
for subsequent financial years
2017
$’000
2016
$’000
84,469
83,923
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:
(a) franking credits that will arise from the payment of the current tax liabilities; and
(b) franking credits that the IOOF Group may be prevented from distributing in subsequent years.
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. The impact
on the dividend franking account of dividends declared after the balance date but not recognised as a liability is to reduce it by
$34,730,000 (2016: $33,443,000).
The following dividends were declared and paid by the IOOF Group during the current and preceding financial year:
2017
Interim 2017 dividend
Final 2016 dividend
2016
Interim 2016 dividend
Final 2015 dividend
Cents per
share
26.0
26.0
52.0
28.5
28.0
56.5
Total
amount
$’000
78,035
78,035
156,070
85,538
84,037
169,575
Date of
payment
Franked/
unfranked
30 March 2017
13 October 2016
Franked
Franked
07 April 2016
15 October 2015
Franked
Franked
Franked dividends declared or paid during the year were franked at the tax rate of 30 per cent.
Dividend amounts shown are inclusive of any dividends paid on treasury shares.
86
2-8 Earnings per share
Basic earnings per share
Diluted earnings per share
Continuing operations
Basic earnings per share
Diluted earnings per share
Basic earnings per share
IOOF annual report 2017
2017
2016
Cents per
share
Cents per
share
38.7
38.6
38.7
38.6
65.7
65.4
46.0
45.8
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
Profit for the year attributable to owners of the Company
Earnings used in the calculation of basic EPS
Weighted average number of ordinary shares
Weighted average number of ordinary shares (basic)
Effect of unvested performance rights
Effect of share options on issue
Weighted average number of ordinary shares (diluted)
Accounting policies
2017
$’000
115,990
115,990
2016
$’000
196,846
196,846
2017
2016
No. ’000
No. ’000
299,820
299,838
673
-
1,011
4
300,493
300,853
The IOOF Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by
dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares
outstanding during the year, adjusted for treasury shares held.
Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding, adjusted for treasury shares held, for the effects of all dilutive potential ordinary
shares, which comprise performance rights and share options granted to employees.
At 30 June 2017, there were no options outstanding.
The average market value of the Company’s shares for purposes of calculating the dilutive effect of share options was based on
quoted market prices for the year.
87
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Section 3 - Capital management and financing
This section outlines how the IOOF Group manages its capital structure and related financing costs, including its balance sheet
liquidity and access to capital markets.
The IOOF Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can
continue to provide returns to shareholders and benefits to other stakeholders, and to maintain an optimal structure to reduce the
cost of capital.
3-1 Capital management
In order to maintain or adjust the capital structure, the
IOOF Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, buy back its
shares on market, issue new shares, sell assets, or otherwise
adjust debt levels.
The IOOF Group monitors capital on the basis of investment
capital, working capital and regulatory capital.
Investment capital is the IOOF Group’s capital that is not
required for regulatory and working capital requirements of
the business. The investment capital is invested in:
• bank bills and deposits;
• subsidiaries;
• available-for-sale assets;
• unit trusts, as investments; and
•
IOOF Group operated unit trusts, as seed capital.
The investment capital is available to support the organic
development of new businesses and products and to
respond to investment and growth opportunities such as
acquisitions, as they arise. Seed capital is primarily available
to support the business in establishing new products and is
also used to support capital adequacy requirements of the
benefit funds.
Working capital is the capital that is required to meet the day
to day operations of the business.
Regulatory capital is the capital which the IOOF Group is
required to hold as determined by legislative and regulatory
requirements in respect of its friendly society and financial
services licensed operations. During the year, the IOOF Group
has complied with all externally imposed capital requirements
to which it is subject.
The Board of each operational subsidiary manages its own
capital required to support planned business growth and meet
regulatory requirements. Australian Prudential Regulation
Authority (APRA) regulated subsidiaries have their own capital
management plan which specifically addresses the regulatory
requirements of that entity and sets a target surplus over
minimum regulatory requirements. Regular monitoring of
regulatory requirements ensures sufficient capital is available
and appropriate planning is made to retain target surpluses.
IOOF Holdings Ltd is primarily the provider of equity capital to
its subsidiaries. Such investment is funded by IOOF Holding
Ltd’s own investment capital, through capital issues, profit
retention and, in some instances, by debt.
Subsidiary capital generated in excess of planned requirements
is returned to IOOF Holdings Ltd, usually by way of dividends.
A standby facility is in place as a safeguard against a temporary
need for funds and to provide a short term funding facility
that allows the business to take advantage of acquisition
opportunities as they arise.
The weighted average cost of capital is regularly monitored.
Funding decisions take into consideration the cost of debt
versus the cost of equity with emphasis on the outcome that is
best for shareholder interests.
The IOOF Group’s capital risk management strategy was not
changed during the year.
Further information in relation to capital adequacy
requirements imposed by the Life Insurance Act is provided in
section 5-7 Capital adequacy position.
88
IOOF annual report 2017
3-2 Borrowings
This note provides information about the contractual terms of the IOOF Group’s interest-bearing borrowings, which are measured at
amortised cost.
For more information about the IOOF Group’s exposure to interest rate and liquidity risk, see section 1-1 Risk management.
Syndicated facility agreement
Finance lease liabilities – refer (c)
2017
$’000
2016
$’000
206,908
206,730
40
245
206,948
206,975
(a) Cash Advance & Working Capital Facility
The unsecured cash advance facilities and working capital facility is provided under an Australian dollar line of credit facility, to which
unrestricted access was available at balance date as follows:
Total facilities
Used at 30 June
Unused at 30 June
2017
$’000
225,000
206,908
18,092
2016
$’000
225,000
206,730
18,270
The financial liability under the facility has a fair value equal to its carrying amount.
Accounting policies
Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial
assets at fair value through profit or loss and impairment losses recognised on financial assets.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in
profit or loss using the effective interest method.
(b) Other bank facilities
In addition to the cash advance and working capital facilities, the IOOF Group has a number of facilities under the Syndicated Facility
Agreement. These include equipment finance and contingent liability facilities. The aggregate of these facilities is $40 million of which
$34.3m was used at 30 June 2017 (2016: $31.8m). The IOOF Group has other facilities outside the Syndicated Facility Agreement of $8m
of which $5.05m was used at 30 June 2017 (2016: $0.2m).
(c) Finance lease liabilities
Finance leases relate to computer hardware.
IOOF Group Finance lease liabilities are payable as follows:
Less than one year
Between one and five years
Less future finance charges
2017
2016
Future
minimum
lease
payments
Present
value of
minimum
lease
payments
Future
minimum
lease
payments
Present
value
of minimum
lease
payments
$’000
$’000
$’000
$’000
40
-
40
-
40
40
-
40
213
40
253
(8)
245
205
40
245
89
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
3-3 Share capital
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. The holders
of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of
the Company. All shares rank equally with regard to the Company’s residual assets.
300,133,752 fully paid ordinary shares (2016: 300,133,752)
476,411 treasury shares (2016: 320,731)
Ordinary shares
On issue at 1 July
Issue of shares on exercise of options under executive and employee
share option plan
Transfer from employee equity-settled benefits reserve on exercise of
options
Treasury shares transferred to recipients during the year
On issue at 30 June
Treasury shares
On issue at 1 July
Purchase of treasury shares
Treasury shares transferred to recipients during the year
On issue at 30 June
Accounting policies
Ordinary shares
2017
$’000
2016
$’000
1,438,601
1,439,276
(4,142)
(2,816)
1,434,459
1,436,460
2017
2016
No. ’000
$’000
No. ’000
$’000
300,134
1,439,276
300,134
1,444,903
-
-
-
-
1,322
(1,997)
-
-
-
210
5,931
(11,768)
300,134
1,438,601
300,134
1,439,276
(321)
(380)
225
(476)
(2,816)
(3,323)
1,997
(4,142)
(732)
(830)
1,241
(321)
(7,146)
(7,438)
11,768
(2,816)
299,658
1,434,459
299,813
1,436,460
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares and share options are shown
in equity as a deduction, net of any tax effects.
Treasury shares
Shares in the Company which are purchased on-market by the IOOF Equity Plan Trust are classified as treasury shares and are
deducted from share capital. Treasury shares are excluded from the weighted average number of ordinary shares used in the earnings
per share calculations. The IOOF Equity Plan Trust is controlled by the IOOF Group and is therefore consolidated. Dividends received
on treasury shares are eliminated on consolidation.
90
IOOF annual report 2017
3-4 Capital commitments and contingencies
The only capital commitments entered into by the IOOF Group are operating lease commitments disclosed below.
Operating lease commitments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
2017
Premises
Office equipment
2016
Premises
Office equipment
Guarantees and underwriting commitments
Rental bond guarantees
ASX settlement bond guarantee
ASIC bond guarantees
Other guarantees
Contingent liabilities
Less than
one year
1 to 5 years
Later than
five years
$’000
18,045
3
$’000
50,600
-
$’000
30,322
-
Total
$’000
98,967
3
18,048
50,600
30,322
98,970
Less than
one year
1 to 5 years
$’000
17,307
117
17,424
$’000
31,676
3
31,679
Later than
five years
$’000
4,619
-
4,619
2017
$’000
Total
$’000
53,602
120
53,722
2016
$’000
16,281
11,447
500
140
3,000
19,921
500
120
3,000
15,067
Contingent liabilities exist in relation to claims and/or possible claims which, at the date of signing these accounts, have not been
resolved. An assessment of the likely loss to the Company and its controlled entities has been made in respect of the identified
claims, on a claim by claim basis, and specific provision has been made where appropriate. The IOOF Group does not consider
that the outcome of any other current proceedings, either individually or in aggregate, is likely to materially affect its operations or
financial position.
91
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
3-5 Reserves
Available-for-sale investment revaluation reserve
Business combinations reserve
Foreign currency translation reserve
Operating Risk Financial reserve*
Share-based payments reserve
2017
$’000
13,074
(326)
121
2,655
(2,175)
2016
$’000
10,436
(326)
109
2,799
(1,752)
13,349
11,266
*This reserve is held for certain AET Superannuation products. Other similar reserves exist within the IOOF Group, however these are generally held by the relevant funds.
92
IOOF annual report 2017
Section 4 - Operating assets and liabilities
This section shows the assets used to generate the IOOF Group’s trading performance and the liabilities incurred as a result.
Liabilities relating to the Group’s financing activities are addressed in Section 3.
4-1 Associates
Associates are those entities over which the IOOF Group has significant influence, but not control, over the financial and
operating policies.
The IOOF Group has interests in a number of associates. For one of these associates, Perennial Value Management Limited, the IOOF
Group owns 52.4% (2016: 52.4%) of the equity interests but has 42.4% of the voting rights and dividend entitlements. The IOOF Group
has determined that it does not have control but has significant influence because it has representation on the board of the investee.
The table below discloses material associates individually:
Associate
Country of
incorporation
Ownership interest
2017
2016
Carrying
value
Perennial Value Management Ltd
Australia
Other associates
%
52.4
%
52.4
$’000
9,733
11,348
21,081
IOOF
Group’s
share of
profit/
(loss)
$’000
2,662
816
3,478
Other associates had a carrying value of $12,634,000 and share of profit of $1,147,000 in 2016.
The following table summarises the financial information of the IOOF Group’s material associate, Perennial Value Management Limited,
as included in its own financial statements. All fair values and accounting policies are consistent with those of the IOOF Group.
Beneficial ownership interest
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets (100%)
IOOF Group's share of net assets (42.4%)
IOOF Group's share of movements in equity and other reserves (42.4%)
Goodwill
Carrying value of interest in associate
Revenue (100%)
Profit and total comprehensive income (100%)
Profit and total comprehensive income (42.4%)
Dividends received by the IOOF Group
2017
$’000
42.4%
14,655
7,516
(5,376)
(619)
16,176
6,851
(1,569)
4,451
9,733
27,196
6,285
2,662
2,961
None of the IOOF Group’s equity-accounted investees are publicly listed entities and consequently do not have published
price quotations.
Dividends received from associates
During the year, the IOOF Group has received dividends of $3,966,000 (2016: $2,757,000) from its associates.
2016
$’000
42.4%
18,854
1,226
(3,350)
(500)
16,230
6,873
(1,291)
4,451
10,033
25,497
8,700
3,684
2,115
93
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Accounting policies
Interests in associates are accounted for using the equity method. They are initially recognised at cost, which includes any transaction
costs. Subsequent to initial recognition, the consolidated financial statements include the IOOF Group’s share of the profit or loss and
Other Comprehensive Income of the associates, until the date on which significant influence ceases.
4-2 Intangible assets (other than goodwill)
2017
$’000
670,159
(229,080)
441,079
IT Develop-
ment
Computer
software
Customer
relationships
Brand
names
Other
Intangibles
$’000
2,378
-
-
(1,737)
641
$’000
6,090
178
-
(1,022)
5,246
$’000
394,232
5,663
(3,417)
(34,920)
361,558
$’000
68,547
-
-
(801)
67,746
$’000
8,922
340
(1,506)
(1,868)
5,888
2016
$’000
669,101
(188,932)
480,169
Total
$’000
480,169
6,181
(4,923)
(40,348)
441,079
Cost
Accumulated amortisation
Carrying value at 1 July 2016
Additions
Divestments
Amortisation expense
Carrying value at 30 June 2017
Accounting policies
Intangible assets are non-physical assets used by the IOOF Group to generate revenues and profits. These assets include brand names,
software, customer and adviser relationships and contractual arrangements. The cost of these assets is the amount that the IOOF
Group has paid or, where there has been a business combination, the fair value of the specific intangible assets that could be sold
separately or which arise from legal rights.
The value of intangible assets, with the exception of goodwill and brand names with indefinite useful lives, reduces over the number
of years the IOOF Group expects to use the asset, the useful economic life, via an annual amortisation charge to profit and loss. The
values and useful lives ascribed are reflective of arms-length transactions and independent expert advice thereon. Where there has
been a technological change or decline in business performance the Directors review the value of assets to ensure they have not
fallen below their amortised value. Should an asset’s value fall below its amortised value an additional one-off impairment charge is
made against profit.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which
it relates. All other expenditure, including expenditure on brands, is recognised in profit or loss as incurred.
Amortisation
Amortisation is charged to the income statement over the estimated useful lives of intangible assets unless such lives are judged to be
indefinite. Indefinite life assets are not amortised but are tested for impairment at each reporting date. The estimated useful lives for
the current and comparative years are as follows:
• adviser relationships 5–10 years
• software 2.5–10 years
• customer relationships 10–20 years
• brand names 20 years
• contract agreements 9–10 years
•
IT development 4 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
94
IOOF annual report 2017
Impairment testing for cash-generating units containing indefinite life intangible assets
For the purposes of impairment testing, indefinite life intangibles are allocated to the IOOF Group’s operating divisions, or CGUs,
which represent the lowest level within the IOOF Group at which intangible assets are monitored for internal management purposes.
Each CGU is not higher than the IOOF Group’s operating segments as reported in Note 2-1 operating segments.
Indefinite life intangible assets
The indefinite life intangible assets relate to brand names. The below table excludes $9.5m of intangibles which have a finite life.
The aggregate carrying amounts of indefinite-life intangible assets allocated to each CGU are as follows:
Shadforth
Ord Minnett group
Lonsdale
2017
$’000
51,000
6,773
500
2016
$’000
51,000
6,773
500
58,273
58,273
In designating brand names as indefinite life, consideration was given to the length of time the brand names have been in existence
and it was determined that there is no foreseeable limit to the years over which the brand names are expected to generate net cash
inflows for the IOOF Group.
The recoverable amount for the brand names have been determined based on a royalty savings method of calculating value in use.
The calculation incorporates estimated costs of brand maintenance. The discount rate of 12.5% (2016: 10.7%) used reflects the IOOF
Group’s pre-tax nominal weighted average cost of capital (WACC). Management’s assessment of indefinite life intangible value-in-use
exceeds the value of the intangible asset allocated to the CGU, therefore any reasonably possible changes to assumptions used in
management’s assessment is not expected to result in impairment.
4-3 Goodwill
Cost
Accumulated impairment
Net carrying value of goodwill
Carrying value at 1 July
Acquisition of subsidiaries
Impairment of goodwill
Divestment of discontinued operation
Carrying value at 30 June
2017
$’000
2016
$’000
1,010,468
1,008,721
(55,601)
954,867
991,712
1,747
(38,592)
-
954,867
(17,009)
991,712
1,013,105
-
-
(21,393)
991,712
A non-cash impairment of $38.6m has been recognised in relation to goodwill allocated to Perennial Value Management (PVM) and
its subsidiaries. Reduced profitability from both lower revenue and higher costs has led to calculated value-in-use declining to below
the carrying value of the aggregate goodwill and investment balances. Revenue decline has arisen due to institutional outflows. These
outflows reflect changing market dynamics where larger institutions now weight a greater proportion of funds to indexed products.
This has combined with below benchmark performance in 2012 which adversely affected 3 and 5 year fund performance numbers.
Higher costs resulted from an absence of operations scale and subsidisation following the divestment of other Perennial entities as
PVM moved to virtually complete autonomy during the current year.
95
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Accounting policies
Goodwill represents the future economic benefits that arise from assets that are not capable of being individually identified and
separately recognised. Its cost is the amount the IOOF Group has paid in acquiring a business over and above the fair value of the
individual assets and liabilities acquired. The value of goodwill is an ‘intangible’ value that comes from, for example, a uniquely strong
market position and the outstanding productivity of its employees. The goodwill recognised by the IOOF Group has all arisen as a
result of business combinations.
For the measurement of goodwill at initial recognition, see section 7-3(b)(i) Business combinations.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses. In respect of equity-accounted investees, the carrying amount of
goodwill is included in the carrying amount of the investment, and any impairment loss is allocated to the carrying amount of the
equity accounted investee as a whole.
Impairment testing for cash-generating units containing goodwill
For the purposes of impairment testing, goodwill is allocated to the IOOF Group’s cash-generating units (CGUs). These represent the
lowest level within the IOOF Group at which the goodwill is monitored for internal management purposes. Assets that cannot be
tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows from continuing use of other assets or groups of assets (the CGU).
These CGUs are not higher than the IOOF Group’s operating segments as reported in 2-1 Operating segments.
The aggregate carrying amounts of goodwill allocated to each CGU are as follows:
2017
2016
Cash inflows
yrs 2-5
Cash out
flows yrs 2-5
Cash flows
– perpetuity
Value in Use element
Shadforth1
Platform management and
administration
Perennial
DKN
Multi manager
IOOF Ltd
Consultum1
Bridges2
$’000
431,191
347,509
37,829
80,339
39,735
11,970
4,344
1,950
$’000
434,812
347,509
76,421
80,339
39,735
11,970
723
203
954,867
991,712
B
B
C
B
B
D
A
B
E
E
-
E
E
D
E
E
2.5% growth from yr 5
2.5% growth from yr 5
2.5% growth from yr 5
2.5% growth from yr 5
2.5% growth from yr 5
2.5% growth from yr 5
2.5% growth from yr 5
2.5% growth from yr 5
A Reserve Bank of Australia forecast GDP growth rate3
B Observed Australian managed funds annual compounding growth for March 2012 to March 20174
C Forecast for Perennial Value Management Limited
D Observed Australian friendly societies annual compounding growth for March 2012 to March 20174
E Blended rate of the underlying Australian forecast inflation levels and the applicable Reserve Bank of Australia GDP growth rate3
1 Reflects adviser transfer during the year
2 Bridges includes CUA FP and SA Carrington
3 source - RBA Statement of Monetary Policy
4 source - ABS 5655.0 Managed Funds Australia
96
IOOF annual report 2017
The recoverable amounts for goodwill allocated to all CGUs have been determined based on value-in-use calculations using 2017
actual balances to forecast 2018 and beyond cash flows. The manner in which the IOOF Group conducts each impairment assessment
for years 2 to 5 and into perpetuity is discussed below for each relevant CGU.
The growth rates applied do not exceed the long-term average growth rate for businesses in which each CGU operates. The pre-
tax discount rate of 12.5% (2016: 10.7%) used reflects the IOOF Group’s pre-tax nominal weighted average cost of capital (WACC).
Management’s assessment of goodwill’s value-in-use exceeds the value of goodwill allocated to these CGUs, except for the Perennial
CGU where a $38.6m non-cash impairment has been recognised in 2017. Any reasonably possible changes to assumptions used in
management’s assessment is not expected to result in impairment.
Management has applied post tax WACC increments of 2.5% for Perennial and 3.5% for Consultum to reflect specific company risk
premiums. These incremental amounts are judgement based and are consistent with accepted valuation industry practice.
4-4 Provisions
Directors' retirement obligations
Onerous contracts
Employee entitlements
Other provisions
Balance at 1 July 2016
Provisions made during the year
Provisions utilised during the year
Balance at 30 June 2017
Accounting policies
2017
$’000
-
350
62,456
1,833
64,639
2016
$’000
475
2,063
57,999
1,857
62,394
Other
Total
$’000
1,857
1,724
(1,748)
1,833
$’000
62,394
34,818
(32,573)
64,639
Directors'
retirement
Onerous
contracts
$’000
475
-
(475)
-
$’000
2,063
-
(1,713)
350
Employee
entitle-
ments
$’000
57,999
33,094
(28,637)
62,456
A provision is recognised if, as a result of a past event, the IOOF Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money.
Directors’ retirement obligations
Retirement benefits were paid to Non-Executive Directors appointed prior to 13 April 2003 to fulfil the terms of historical agreements.
The benefit provided for a cash based payment to Non-Executive Directors at the time of their retirement. The retirement benefit
obligation was measured on an undiscounted basis, was capped at $475,000 and was expensed as the related service was provided.
The sole participant of this plan Dr Roger Sexton was paid $475,000 on his retirement on 24 November 2016. The plan is no
longer in operation.
Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the IOOF Group from a contract are
lower than the unavoidable cost of meeting its obligations under the contract. The provision is valued as the estimated present value
of future lease payments net of anticipated recoveries from third parties, that the IOOF Group is presently obligated to make under
non-cancellable operating lease contracts. The estimate may vary as a result of changes in the utilisation of the leased premises
and sub-lease arrangements where applicable. Provisions relate to onerous lease contracts. The unexpired term of these leases is
less than 1 year.
97
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Employee entitlements
The provision for employee benefits includes provisions for remuneration in the form of incentive plans and expected leave benefits
that employees have earned in return for their service in the current and prior years plus related on-costs.
A provision for employee benefits in the form of an incentive plan is recognised when there is no realistic alternative but to settle the
liability, and at least one of the following conditions is met:
•
•
there are formal terms in the plan for determining the amount of the benefit;
the amounts to be paid are determined before the time of completion of the financial report; or
• past practice gives clear evidence of the amount of the obligation.
A provision for restructuring is recognised when the IOOF Group has approved a detailed and formal restructuring plan, and the
restructuring either has commenced or has been announced publicly. Future operating losses are not provided for.
Liabilities for incentives are expected to be settled within 12 months and are measured at the amounts expected to be paid when
they are settled.
Other provisions
Other provisions have been made for the present value of the Directors’ best estimates of legal settlements. The information usually
required by AASB 137 Provisions, Contingent Liabilities and Contingent Assets, is not disclosed on the grounds that it can be expected
to prejudice the outcome of litigation.
98
IOOF annual report 2017
Section 5 - Statutory funds
A subsidiary of the Company, IOOF Ltd, is a friendly society in accordance with the Life Insurance Act 1995. Balances below are
disclosed inclusive of amounts collected/receivable from or paid/payable to IOOF Group entities. These funds are not available
to shareholders.
5-1 Assets relating to statutory funds
Cash at bank
Receivables
Unlisted unit trusts
Loans to policyholders
Investments backing policyholder liabilities designated at fair value through profit or loss
Statutory
2017
$’000
3,717
32,794
875,079
22,529
934,119
2016
$’000
5,263
26,716
832,061
15,309
879,349
Assets held in the Statutory Funds (including the Benefit Funds) are subject to the distribution and transfer restrictions and other
requirements of the Life Insurance Act 1995. Monies held in the benefit funds and controlled trusts are held for the benefit of the
members of those funds, and are subject to the constitution and rules of those funds. Accordingly, with the exception of permitted
profit distributions, the investments held in the statutory funds are not available for use by other parties of the IOOF Group.
The IOOF Group has determined that all financial assets held within its reported statutory funds (including the benefit funds which
are treated as statutory funds) represent the assets backing policy liabilities and are measured at fair value through profit or loss. Other
than loans and receivables held by the IOOF Group and its controlled entities, assets backing policy liabilities have been designated at
fair value through profit or loss as the assets are managed on a fair value basis.
5-2 Liabilities relating to statutory funds
Payables
Seed capital
Deferred tax liabilities
Investment contract liabilities with DPF
Investment contract liabilities
Statutory
2017
$’000
6,360
7,153
2,307
267,220
651,079
934,119
2016
$’000
6,421
7,153
1,718
300,259
563,798
879,349
Policy liabilities have been determined in accordance with applicable accounting standards. Policy liabilities for life insurance contracts
are valued in accordance with AASB 1038, whereas life investment contracts are valued in accordance with AASB 139 and AASB 118.
There are differences between the valuation requirements of the accounting standards and those of the Life Insurance Act 1995.
99
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Accounting policies
Contract classification
The accounting treatment of certain transactions varies depending on the nature of the contract underlying the transaction.
The major contract classifications are insurance contracts and investment contracts.
(i) Insurance contracts
Insurance contracts are those containing significant insurance risk at the inception of the contract, or those where at the inception
of the contract there is a scenario with commercial substance where the level of insurance risk may be significant. The significance
of insurance risk is dependent on both the probability of an insured event and the magnitude of its potential effect. Life insurance
contract liabilities are calculated in accordance with actuarial standards.
Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its lifetime, even if
the insurance risk reduces significantly during the year.
(ii) Investment contracts
Contracts not considered insurance contracts are classified as investment contracts. The accounting treatment of investment
contracts depends on whether the investment has a discretionary participation feature (‘DPF’). A DPF represents a contractual right to
receive, as a supplement to guaranteed benefits, additional benefits that are:
•
likely to be a significant portion of the total benefits;
• distributed at the discretion of the insurer; and
• are based on the performance of a specified pool of assets.
Deposits collected and benefits paid under investment contracts with DPF are accounted for through profit or loss. The gross
change in the liability to these policyholders for the year, which includes any participating benefits vested in policyholders and any
undistributed surplus attributed to policyholders, is also recognised in profit or loss.
Deposits collected and withdrawals processed for investment contracts without DPF are accounted for directly through the statement
of financial position as a movement in the investment contract liability. Distributions on these contracts are charged to profit or
loss as an expense.
Where contracts contain both an investment component and an insurance component and the deposit component can be
separately measured, the underlying amounts are unbundled. Premiums relating to the insurance component are accounted for
through profit or loss and the investment component is accounted for as a deposit through the statement of financial position as
described above.
100
5-3 Reconciliation of movements in contract liabilities
IOOF annual report 2017
Statutory
2017
$’000
2016
$’000
Investment contract liabilities with DPF
Investment contract liabilities with DPF at beginning of the year
300,259
338,709
Net increase in investment contract liabilities with DPF
Investment contract liabilities with DPF contributions
Investment contract liabilities with DPF withdrawals
Investment contract liabilities with DPF at end of the year
Other investment contract liabilities
Investment contract liabilities at beginning of the year
Net increase in investment contract policy liabilities
Investment contract contributions
Investment contract withdrawals
Investment contract liabilities at end of the year
5-4 Statutory fund contribution to profit or loss, net of tax
Statutory fund revenue
Interest income
Dividends and distributions received
Net fair value gains/(losses) on other financial assets designated as fair value through profit or loss
Investment contracts with DPF:
Contributions received - investment contracts with DPF
DPF policyholder liability decrease
Non - DPF policyholder liability (increase)
Other fee revenue
Statutory fund expenses
Service and marketing fees expense
Direct operating expenses
Investment contracts with DPF:
Benefits and withdrawals paid
Termination bonuses
Interest
Income tax
Statutory fund contribution to profit, net of tax
2,371
6,249
(41,659)
267,220
563,798
36,490
129,571
(78,780)
651,079
Statutory
2017
$’000
563
54,595
4,999
6,249
33,038
(36,490)
2,062
65,016
10,354
5
2,027
6,105
(46,582)
300,259
533,281
12,256
113,266
(95,005)
563,798
2016
$’000
552
44,841
(17,827)
6,105
38,450
(12,256)
3,072
62,937
11,523
5
41,636
46,516
23
106
52,124
12,892
-
66
90
58,200
4,737
-
101
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Accounting policies
Processes used to select assumptions
Investment contracts with DPF
Mortality and Morbidity
All mortality and morbidity risk is fully reinsured and the gross
risk to the IOOF Group is low. The mortality and morbidity
assumptions have been taken to be equal to the reinsurer’s
mortality and morbidity assumptions.
Other Assumptions
In adopting the accumulation method to assess the policy
liabilities, one material assumption is required. It is assumed
that the future overall experience as to expense levels,
surrender/lapse rates and discount rates will likely remain
within a satisfactory range so that the policies produce future
profits for the business. In which case, there is no need to set
aside provisions, in addition to the accumulation amounts, for
future losses (i.e. there is no loss recognition concerns for the
business). This assumption has been adopted on the basis that,
based on the current actual experience of the business, the
policies are producing satisfactory profits for the business and
there is no circumstances known that would indicate that the
current position (i.e. general experience levels and ongoing
profitability) will not continue into the future.
Sensitivity analysis
The policy liabilities are not sensitive to changes in variables
within a moderate range. Increases in mortality and morbidity
assumptions will result in an increase in gross policy liabilities
for IOOF Ltd, however as the mortality and morbidity risk is
fully reinsured any change in these assumptions would be
consistent with the reinsurer’s assumptions and the net change
in policy liabilities would be nil.
The value of these liabilities changes in relation to the change
in unit prices for unit linked contracts, and are decreased by
management fee charges. In accordance with the rules of the
funds, any remaining surplus is attributed to the policyholders.
Adjustments to the liabilities at each reporting date are
recorded in profit or loss.
Other investment contracts
The value of these liabilities changes in relation to the change
in unit prices for unit linked contracts, and are decreased by
management fee charges. In accordance with the rules of the
funds, any remaining surplus is attributed to the members of
the fund. Amounts distributable to members are recorded in
profit or loss as an expense.
There is no claims expense in respect of life investment
contracts. Surrenders and withdrawals which relate to life
investment contracts are treated as a movement in life
investment contract liabilities. Surrenders are recognised when
the policyholder formally notifies of their intention to end the
policy previously contracted.
Insurance contract liabilities and claims expense
A claim expense is recognised when the liability to
the policyholder under the policy contract has been
established, or upon notification of the insured event.
Withdrawal components of life insurance contracts are not
expenses and are treated as movements in life insurance
contract liabilities.
5-5 Actuarial assumptions and methods
The effective date of the actuarial report on the policy liabilities
and capital adequacy reserves is 30 June 2017. The actuarial
report for IOOF Ltd was prepared by Mr Andrew Mead, FIAA,
and was dated 18 August 2017. The actuarial report indicates
that Mr Mead is satisfied as to the accuracy of the data upon
which the policy liabilities have been determined.
Actuarial Methods
Policy liabilities have been calculated in accordance with
relevant actuarial guidance issued by the Australian Prudential
Regulation Authority under the Life Insurance Act 1995.
Policy liabilities are based on a systematic release of planned
margins as services are provided to policyholders and
premiums are received.
102
IOOF annual report 2017
5-6 Disclosures on asset restrictions, managed
(ii) Managed Funds and other fiduciary duties
assets and trustee activities
(i) Restrictions on assets
Investments held in life statutory funds can only be used in
accordance with the relevant regulatory restrictions imposed
under the Life Act and associated rules and regulations. The
main restrictions are that the assets in a life statutory fund can
only be used to meet the liabilities and expenses of that life
statutory fund, to acquire investments to further the business
of the life statutory fund or as distributions when capital
adequacy and other regulatory requirements are met.
5-7 Capital adequacy position
Entities in the IOOF Group, including the IOOF Ltd Benefit
Funds, hold controlling investments in managed funds. A
subsidiary of the Company is the Responsible Entity for these
managed funds and has a fiduciary responsibility for managing
these trusts. Arrangements are in place to ensure that such
activities are managed separately from the other activities of
the IOOF Group.
Capital adequacy reserves are required to meet the prudential standards determined in accordance with Prudential Standard LPS 110
Capital Adequacy issued by the Australian Prudential Regulation Authority under paragraph 230A(1)(a) of the Life Insurance Act 1995.
Capital adequacy reserves provide additional protection to policy holders against the impact of fluctuations and unexpected adverse
circumstances on the Company.
The figures in the table below represent the number of times coverage of the aggregate of all benefit funds and statutory funds in the
Life Group over the prescribed capital amount.
(a) Capital Base
(b) Prescribed capital amount
Capital in excess of prescribed capital amount = (a) - (b)
Capital adequacy multiple (%) (a) / (b)
Capital Base comprises:
Net Assets
Regulatory adjustment applied in calculation of Tier 1 capital
(A) Common Equity Tier 1 Capital
Additional Tier 1 Capital
Regulatory adjustment applied in calculation of Additional Tier 1 capital
(B) Total Additional Tier 1 Capital
Tier 2 Capital
Regulatory adjustment applied in calculation of Tier 2 capital
(C) Total Tier 2 Capital
Total capital base
Statutory
2017
$’000
35,139
14,883
20,256
236%
2016
$’000
28,292
6,623
21,669
427%
35,139
28,292
-
-
35,139
28,292
-
-
-
-
-
-
-
-
-
-
-
-
35,139
28,292
For detailed capital adequacy information on a statutory fund basis, users of this annual financial report should refer to the financial
statements prepared by the friendly society.
103
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Section 6 - Other disclosures
6-1 Parent entity financials
As at and throughout the financial year ended 30 June 2017, the parent entity of the IOOF Group was IOOF Holdings Ltd.
Result of the parent entity
Profit for the year
Total comprehensive income for the year
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Share-based payments reserve
Retained earnings
Total equity
Parent entity contingent liabilities
2017
$’000
2016
$’000
159,871
159,871
138,091
138,091
75,845
62,842
1,677,687
1,667,452
114,215
231,124
17,257
223,988
1,438,601
1,439,276
2,062
5,900
2,485
1,702
1,446,563
1,443,464
There are currently no complaints or claims made against the parent entity.
The parent entity does not provide any guarantees to subsidiaries or related parties.
6-2 Share-based payments
The IOOF Group operates a number of employee share and option schemes operated by the IOOF Equity Plan Trust (the “Trust”).
The employee share option plans were approved by the Board of Directors.
IOOF Executive and Employee Share Option Plan
The IOOF Group has an ownership-based compensation scheme for executives and senior employees.
Selected employees may be granted options which entitle them to purchase ordinary fully paid shares in the Company at a price fixed
at the time the options are granted. Voting and dividend rights will be attached to the unissued ordinary shares when the options
have been exercised. Options may be exercised at any time from the date of vesting to the date of their expiry.
The Remuneration Committee regards the grant of options to employees as an appropriate long-term incentive and retention
component of total remuneration for executives and senior employees. It is expected that future annual grants of options will
be made, the vesting of which will be subject to attainment of appropriate performance hurdles and on the basis of continuing
employment with the IOOF Group.
Options granted under the plan carry no dividend or voting rights. All plans are equity-settled. There were no options granted in 2017.
104
IOOF annual report 2017
IOOF Executive Performance Rights Plan
The IOOF Executive Performance Rights Plan is the vehicle used to deliver equity based incentives to executives and senior employees
of the IOOF Group.
Each employee receives ordinary shares of the Company on vesting of the performance rights. No amounts are paid or payable by the
recipient on receipt of the performance rights or on vesting. The performance rights carry neither rights to dividends nor voting rights
prior to vesting.
The Remuneration Committee regards the grant of performance rights to employees as an appropriate long-term incentive
and retention component of total remuneration for executives and senior employees. It is expected that future annual grants of
performance rights will be made, subject to the Board’s determination of the overall performance of the Company and market
conditions. The vesting of any performance rights awarded will be subject to attainment of appropriate performance hurdles and on
the basis of continuing employment with the IOOF Group.
Performance rights granted under the plan carry no dividend or voting rights. All plans are equity-settled.
Deferred Share Plan
A Short Term Incentive (STI) mandatory deferral program exists with equity deferral relating to a third of the Managing Directors’
STI for each year.
The following share-based payment arrangements were in existence during the current and comparative reporting years:
Options Series – Recipient
2012-02 Managing Director
2010-03 Executives
2009-16 Managing Director
Exercise
price
Earliest
vesting
date
Exercise year
$
$6.81
$7.01
$5.20
Commence
1-Jul-14
1-Jul-14
Expires
1-Jul-17
4-May-13
4-May-13
4-May-16
27-Nov-12
27-Nov-12
27-Nov-15
EPS & RoE
Performance
related
vesting
conditions
EPS & RoE
Nil
On vesting of performance rights, ordinary shares are transferred to the employee’s name or sold. The employee receives all dividends
on the ordinary shares while held in trust. The vesting of all issuances is subject to continuing employment.
Opening balance at 1 July 2016
Forfeited or lapsed during the year
Exercised during the year
Granted during the year
Outstanding at 30 June 2017
Exercisable at 30 June 2017
Performance
Rights
Number of
rights
Deferred
Shares
Number of
shares
Total
Number of
rights & shares
No.
587,425
(176,750)
(182,425)
419,567
647,817
-
No.
68,879
-
(26,984)
35,420
77,315
-
No.
656,304
(176,750)
(209,409)
454,987
725,132
-
105
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Disclosure of share-based payment plans
Series – Recipient
Performance rights
2012-01 Managing Director
2014-01 Executives
2014-02 Managing Director
2015-01 Executives
2015-02 Managing Director
2016-01 Executives
2016-02 Managing Director
2017-01 Executives
2017-02 Managing Director
2017-03 Executives
2017-04 Other Key Stakeholders
Deferred shares
2015-03 Managing Director
2016-03 Managing Director
2017-03 Managing Director
Exercise
price
Opening
balance
as at
1 July 2016
Granted
Forfeited
or Lapsed
Exercised
Closing
balance
as at
30 June 2017
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
32,175
96,250
54,000
150,000
75,000
105,000
75,000
-
-
-
-
587,425
26,984
41,895
-
68,879
-
-
-
-
-
-
-
240,000
120,000
30,000
29,567
419,567
-
-
35,420
35,420
-
-
-
(46,250)
(25,500)
(45,000)
-
(60,000)
-
-
-
(32,175)
(96,250)
(54,000)
-
-
-
-
-
-
-
-
(176,750)
(182,425)
-
-
-
-
(26,984)
-
-
(26,984)
-
-
-
103,750
49,500
60,000
75,000
180,000
120,000
30,000
29,567
647,817
-
41,895
35,420
77,315
656,304
454,987
(176,750)
(209,409)
725,132
There are no options outstanding at 30 June 2017.
Inputs for measurement of grant date fair values granted during the financial year
The grant date fair value of share-based payment plans granted during the year were measured based on a binomial options pricing
model for non-market performance conditions and a monte carlo simulation model for market performance conditions. Expected
volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of the fair values at
grant date of the share-based payment plans are the following:
Series
Fair value
Grant date
share price
Expected
volatility
Expected
life (years)
Dividend
yield
Risk-free
interest rate
2017-01 Executives
2017-02 Managing Director
2017-03 Executives
2017-04 Other Key Stakeholders
$6.10
$4.50
$5.60
$7.11
$8.80
$8.40
$8.68
$8.74
25%
25%
25%
n/a
3
3
3
3
6.2%
6.3%
6.1%
6.0%
1.5%
1.9%
2.0%
2.0%
106
IOOF annual report 2017
The following share-based payment arrangements were in existence during the current and comparative reporting years:
Performance Rights Series – Recipient
Exercise
price
Earliest
vesting
date
Last tranche
vesting date
2017-04 Other Key Stakeholders
2017-03 Executives
2017-02 Managing Director
2017-01 Executives
2016-02 Managing Director
2016-01 Executives
2015-02 Managing Director
2015-01 Executives
2014-02 Managing Director
2014-01 Executives
2013-04 Other Key Stakeholders
2013-03 Other Key Stakeholders
2012-01 Managing Director
2010-06 Managing Director
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
30-Jun-19
31-Dec-19
30-Jun-19
30-Jun-19
30-Jun-18
30-Jun-18
30-Jun-17
30-Jun-17
30-Jun-16
30-Jun-16
30-Nov-15
30-Nov-15
01-Jul-14
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
01-Jul-16
23-Nov-13
23-Nov-15
Performance
related
vesting
conditions
n/a
TSR
TSR & RoE
TSR
TSR & RoE
TSR
TSR & RoE
TSR
TSR & RoE
TSR
Compliance1
Compliance1
TSR & RoE
TSR & RoE
1
The compliance condition requires maintenance of authorised representative status, attendance at professional development days, compliance with CPD
requirements and the achievement of a minimum compliance audit score.
The breakdown of share-based payments expense for the year by recipient is as follows. This represents the expense recorded to date
and does not reflect the opportunity to transfer to retained profits the value of those legacy series that will lapse.
Recipient
Managing Director
Senior Management
Other Key Stakeholders
Accounting policies
2017
$’000
753
513
29
2016
$’000
726
806
434
1,295
1,966
The grant date fair value of share-based payment awards granted to employees is recognised as a share-based payment expense,
with a corresponding increase in the share-based payments reserve, over the years that the employees unconditionally become
entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service
and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on
the number of awards that meet the related service and non-market performance conditions at vesting date.
For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured
to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The fair value at grant date is independently determined where considered appropriate. The option pricing model used takes into
account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility
of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
Shares held by the Trust will contribute to the employee allocation of shares on satisfaction of vesting performance hurdles. The IOOF
Group has no right to recall placed shares. However, a subsidiary company acts as the Trustee of the Trust, and can direct the voting
rights of shares held.
Shares in the Company held by the Trust are classified and disclosed as treasury shares, and deducted from share capital. Dividends
received by the Trust are recorded as dividend income in the financial statements of the Trust and are eliminated on consolidation.
107
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
Set out below is a list of material subsidiaries of the IOOF Group.
Parent entity
IOOF Holdings Ltd
Material subsidiaries
AET Structured Finance Services Pty Limited
Australian Executor Trustees Limited
Bridges Financial Services Pty Limited
Consultum Financial Advisers Pty Ltd
Executive Wealth Management Financial Services Pty Limited
I.O.O.F. Investment Management Limited
IOOF Ltd
IOOF Equity Plan Trust
IOOF NZ Ltd
IOOF Service Co Pty Ltd
Lonsdale Financial Group Limited
Questor Financial Services Pty Ltd
SFG Australia Limited
Financial Acuity Limited
Shadforth Financial Group Limited
Perennial Investment Management Limited
Actuate Alliance Services Pty Ltd
Ord Minnett Limited
Ord Minnett Financial Planning Pty Limited
Ord Minnett Management Limited
Unconsolidated structured entities
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ownership interest
2017
%
2016
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
-
100.0
70.0
70.0
70.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
70.0
70.0
70.0
The IOOF Group has interests in various structured entities that are not consolidated. An ‘interest’ in an unconsolidated structured
entity is any form of contractual or non-contractual involvement which exposes the IOOF Group to variability of returns from the
performance of that entity. Such interests include holdings of equity securities, seed capital and fees from funds management
activities. The seed capital is primarily available to support the business in establishing new products and is also used to support
capital adequacy requirements of the benefit funds.
The IOOF Group has investments in managed investment funds through its asset management subsidiaries. Control of these
managed investment funds may exist since the IOOF Group has power over the activities of the fund. However, these funds have
not been consolidated because the IOOF Group is not exposed to significant variability in returns from the funds. The IOOF Group
earns management fees from the management of these investment funds which are commensurate with the services provided and
are reported in external management and service fee revenue in note 2-3. Management fees are generally based on the value of
the assets under management. Therefore, the fees earned are impacted by the composition of the assets under management and
fluctuations in financial markets.
Investment funds are investment vehicles that consist of a pool of funds collected from several investors for the purpose of investing
in securities such as money market instruments, debt securities, equity securities and other similar assets. For all investment funds, the
IOOF Group’s maximum exposure to loss is equivalent to the carrying amount of the investment in the fund.
108
IOOF annual report 2017
6-4 Remuneration of auditors
Auditors’ remuneration paid or payable by members of the IOOF Group to the auditors of the corporate entities in relation to audit
services of the corporate entities and products operated by the IOOF Group during the year and for the prior year:
Audit services
Auditors of the Company
KPMG Australia
Audit and review of financial reports
Other regulatory audit services
Other services
Auditors of the Company
KPMG Australia
Taxation services
Due diligence services
Other services
All amounts payable to the Auditors of the Company were paid by an IOOF Group subsidiary.
6-5 Key management personnel
The key management personnel compensation comprised:
Short-term employee benefits
Post-employment benefits
Share-based payments
Key management personnel compensation reconciles to disclosures in the remuneration report as follows:
Executive key management personnel
Non-executive Directors
2017
$
2016
$
2,903,518
2,856,236
1,052,624
3,956,142
1,187,388
4,043,624
131,452
185,744
182,762
499,958
267,585
82,398
180,305
530,287
4,456,100
4,573,911
2017
$
2016
$
5,452,163
5,466,517
176,413
186,372
1,511,047
1,554,214
7,139,623
7,207,103
6,151,285
6,275,282
988,338
931,821
7,139,623
7,207,103
Individual Directors and executives compensation disclosures
Information regarding individual Directors and executives compensation and some equity instruments disclosures as required by
Corporations Regulation 2M.3.03 is provided in the remuneration report section of the Directors’ Report.
No Director has entered into a material contract with the IOOF Group since the end of the prior financial year and there were no
material contracts involving directors’ interests existing at year-end.
109
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
6-6 Related party transactions
(a) Ultimate parent entity
IOOF Holdings Ltd is the ultimate parent entity in the IOOF Group.
(b) Loans to Directors and executives of associates and subsidiaries
Financial
year
Opening
balance
1 July
Closing
balance
June
Interest paid
and payable
during
the year
Interest free loans
Perennial Value Management Limited
Interest bearing loans
Perennial Value Management Limited
2017
2016
2017
2016
Highest
balance
during
the year
$
2,286,717
2,286,717
$
$
2,286,717
2,286,717
2,286,717
2,286,717
$
-
-
6,263,882
6,267,091
234,588
6,336,367
6,183,013
6,263,882
250,543
6,393,615
The amounts above were advanced by Perennial Investment Partners Pty Ltd and I.O.O.F. Investment Management Limited for the
specific purpose of assisting executives to acquire an equity interest in subsidiaries and associates of the Company. Secured interest
bearing loans totalling $6,267,091 were made on commercial terms and conditions and loans totalling $2,286,717 are unsecured
interest free loans.
(c) Transactions with key management personnel
i. Key management personnel compensation
Details of key management personnel compensation are disclosed in section 6-5 to the financial statements and in the
Remuneration Report.
ii. Loans to key management personnel
There are no loans between the IOOF Group and key management personnel.
iii. Other transactions with key management personnel of the IOOF Group
There were no other transactions with key management personnel of the IOOF Group during the 2017 and 2016 financial years.
(d) Transactions with other related parties
Other related parties of the IOOF Group include associates listed in section 4-1 Associates.
Receipt of service charge revenue from associates
Payment of management fees to associates
2017
$
-
-
2016
$
1,886,860
8,096,435
110
IOOF annual report 2017
Section 7 - Basis of preparation
This section sets out the IOOF Group’s accounting policies that relate to the financial statements as a whole. Where an accounting
policy is specific to a single note, the policy is described in the note to which it relates. This section also shows new accounting
standards, amendments and interpretations, and whether they are effective in 2017 or later years. We explain how these changes
are expected to impact the financial position and performance of the IOOF Group.
7-1 Reporting entity
(c) Functional and presentation currency
The Company is a public company listed on the Australian
Stock Exchange (trading under the symbol ‘IFL’), domiciled
in Australia. The consolidated financial statements of the
Company as at and for the year ended 30 June 2017 comprise
the Company and its controlled entities and the IOOF Group’s
interests in associates.
The IOOF Group is a for-profit entity and is primarily involved in
the provision of wealth management services.
The Company’s registered office and its principal place of
business are Level 6, 161 Collins Street, Melbourne.
7-2 Basis of preparation
(a) Statement of compliance
These general purpose financial statements have been
prepared in accordance with Australian Accounting Standards
(AASBs) adopted by the Australian Accounting Standards
Board (AASB) and the Corporations Act 2001. The consolidated
financial statements comply with International Financial
Reporting Standards (IFRS) adopted by the International
Accounting Standards Board (IASB).
The annual financial report was approved by the Board of
Directors on 29 August 2017.
(b) Basis of measurement
The consolidated financial statements have been prepared on
the historical cost basis except for the following material items
in the statement of financial position:
• financial instruments at fair value through profit or loss are
measured at fair value; and
• available-for-sale financial assets are measured at fair value.
The statement of financial position is presented in
order of liquidity.
These consolidated financial statements are presented in
Australian dollars, which is the Company’s functional currency.
All amounts have been rounded to the nearest thousand
unless otherwise stated.
(d) Rounding of amounts
The Company is a company of the kind referred to in ASIC
Corporations Instrument 2016/191, dated 24 March 2016, and
in accordance with that Instrument amounts in the financial
report are rounded off to the nearest thousand dollars,
narrative disclosures are expressed in whole dollars or as
otherwise indicated.
(e) Use of estimates and judgements
To conform with AASBs management is required to make
judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts
of assets, liabilities, income and expenses. Actual results may
differ from these estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the year in which the estimates are revised and
in any future years affected.
Information about critical judgements in applying accounting
policies that have the most significant effect on the amounts
recognised in the financial statements is included in the
following notes:
• section 2-4 - (vii) Deferred acquisition costs;
•
•
•
section 4-2 - Intangible assets (other than goodwill);
section 4-3 - Goodwill; and
section 6-2 - Share-based payments.
Information about assumptions and estimation uncertainties
that have a significant risk of resulting in a material
adjustment within the next financial year are included in the
following notes:
• note 4-2 & 4-3 - key assumptions used in discounted cash
flow projections; and
• note 3-4 & 4-4 - contingencies and provisions.
111
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
When share-based payment awards (replacement awards) are
required to be exchanged for awards held by the acquiree’s
employees (acquiree’s awards) and relate to past services, then
all or a portion of the amount of the acquiree’s replacement
awards is included in measuring the consideration transferred
in the business combination. This determination is based on
the market-based value of the replacement awards compared
with the market-based value of the acquiree’s awards and the
extent to which the replacement awards relate to past and/or
future service.
(ii) Non-controlling interests (NCI)
NCI are measured at their proportionate share of the acquiree’s
identifiable net assets at the acquisition date. Changes in the
IOOF Group’s interest in a subsidiary that do not result in a loss
of control are accounted for as equity transactions.
(iii) Subsidiaries
Subsidiaries are entities controlled by the IOOF Group. The
IOOF Group controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power
over the entity. The financial statements of subsidiaries are
included in the consolidated financial statements from the
date on which control commences until the date on which
control ceases.
(iv) Loss of control
When the IOOF Group loses control over a subsidiary, it
derecognises the assets and liabilities of the subsidiary, and
any related NCI and other components of equity. Any resulting
gain or loss is recognised in profit or loss. Any interest retained
in the former subsidiary is measured at fair value when
control is lost.
(v) IOOF Equity Plan Trust (the “Trust”)
The IOOF Group has formed a trust to administer the IOOF
Group’s employee share schemes. The Trust is consolidated, as
the substance of the relationship is that the Trust is controlled
by the IOOF Group. Shares held by the Trust are disclosed as
treasury shares and are deducted from share capital.
7-3 Other significant accounting policies
Significant accounting policies have been included in the
relevant notes to which the policies relate. Other significant
accounting policies are listed below.
Certain comparative amounts have been reclassified to
conform with the current year’s presentation.
(a) Changes in accounting policies
The IOOF Group has consistently applied the accounting
policies to all years presented in these consolidated
financial statements.
(b) Basis of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of the Company as at 30 June
2017 and the results of all controlled subsidiaries for the year
then ended. This includes the benefit funds of its subsidiary,
IOOF Ltd, and any controlled trusts.
The benefit funds, and any trusts controlled by those funds,
are treated as statutory funds in accordance with the Life
Insurance Act 1995. These statutory funds, in addition to the
statutory funds of the life insurance business conducted by the
IOOF Group, are shown separately from shareholder funds in
the notes to the financial statements.
Refer to Note 5-2 Liabilities relating to statutory funds for
information in relation to the different accounting treatment of
investment contracts with discretionary participating features.
(i) Business combinations
The IOOF Group accounts for business combinations using
the acquisition method when control is transferred. The
consideration transferred in the acquisition is generally
measured at fair value, as are the identifiable net assets
acquired. Any goodwill that arises is tested annually for
impairment. Any gain on a bargain purchase is recognised
in profit or loss immediately. Transaction costs are expensed
as incurred, except if related to the issue of debt or
equity securities.
Any contingent consideration payable is recognised at fair
value at the acquisition date. If the contingent consideration
is classified as equity, it is not remeasured and settlement is
accounted for within equity. Otherwise, subsequent changes
to the fair value of the contingent consideration are recognised
in profit or loss.
112
(vi) Transactions eliminated on consolidation
Intra-IOOF Group balances and transactions, and any
unrealised income and expenses arising from intra-IOOF Group
transactions, are eliminated in preparing the consolidated
financial statements. Unrealised gains arising from transactions
with equity accounted investees are eliminated against the
investment to the extent of the IOOF Group’s interest in
the investee. Unrealised losses are eliminated in the same
way as unrealised gains, but only to the extent that there is
no evidence of impairment. Dividends paid to the Trust are
also eliminated.
(c) Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are translated to Australian dollars at the
foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in profit or
loss. Non-monetary assets and liabilities that are measured
in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
Foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation,
are translated to Australian dollars at foreign exchange rates
ruling at the balance sheet date. The revenue and expenses of
foreign operations are translated to Australian dollars at rates
approximating the foreign exchange rates ruling at the dates
of the transactions.
Foreign currency differences are recognised directly in equity
in the foreign currency translation reserve (FCTR).
(d) Property and equipment
(i) Recognition and measurement
Property and equipment are measured at cost less
any accumulated depreciation and any accumulated
impairment losses.
Cost includes expenditure that is directly attributable to the
acquisition of the asset.
IOOF annual report 2017
The gain or loss on divestment of an item of property and
equipment is determined by comparing the proceeds from
divestment with the carrying amount of the property and
equipment and is recognised net within other income/other
expenses in profit or loss. When revalued assets are sold,
any related amount included in the revaluation reserve is
transferred to retained earnings.
(ii) Subsequent costs
Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the
item will flow to the IOOF Group. Repairs and maintenance
costs are charged to profit or loss as they are incurred.
(iii) Depreciation
Depreciation is recognised in profit or loss on a straight-line
basis over the estimated useful lives of each component
of an item of property and equipment. Leased assets are
depreciated over the shorter of the lease term and their useful
lives unless it is reasonably certain that the IOOF Group will
obtain ownership by the end of the lease term.
Items of property and equipment are depreciated from the
date that they are installed and are ready for use, or in respect
of internally constructed assets, from the date that the asset is
completed and ready for use.
The estimated useful lives for the current and comparative year
are as follows:
• office equipment 3-10 years
•
leasehold improvements 3-10 years
• equipment under finance lease 3-10 years
Depreciation methods, useful lives and residual values are
reviewed at each reporting date, and adjusted if appropriate.
113
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
(e)
Impairment
(i) Non-derivative financial assets
A financial asset not carried at fair value through profit or loss
is assessed at each reporting date to determine whether there
is objective evidence that it is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has
occurred after the initial recognition of the asset, and that the
loss event had a negative effect on the estimated future cash
flows of that asset that can be estimated reliably.
Objective evidence that financial assets (including equity
securities) are impaired can include default or delinquency by
a debtor, restructuring of an amount due to the IOOF Group
on terms that the IOOF Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy,
adverse changes in the payment status of borrowers or
issuers in the IOOF Group, economic conditions that correlate
with defaults or the disappearance of an active market of a
security. In addition, for an investment in an equity security, a
significant or prolonged decline in its fair value below its cost is
considered objective evidence of impairment.
Financial assets measured at amortised cost
An impairment loss in respect of a financial asset measured
at amortised cost is calculated as the difference between its
carrying amount and the present value of the estimated future
cash flows discounted at the asset’s original effective interest
rate. Losses are recognised in profit or loss and reflected as
an allowance account against loans and receivables. Interest
on the impaired asset continues to be recognised. When
a subsequent event (eg. a repayment by a debtor) causes
the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss.
Available-for-sale financial assets
Impairment losses on available-for-sale financial assets are
recognised by reclassifying the losses accumulated in the
investment revaluation reserve, to profit or loss. The cumulative
loss that is reclassified from equity to profit or loss is the
difference between the acquisition cost, net of any principal
repayment and amortisation, and the current fair value, less
any impairment loss previously recognised in profit or loss.
114
Changes in impairment provisions attributable to application
of the effective interest method are reflected as a component
of interest income. If, in a subsequent year, the fair value of
an impaired available-for-sale debt security increases and the
increase can be related objectively to an event occurring after
the impairment loss was recognised in profit or loss, then the
impairment loss is reversed, with the amount of the reversal
recognised in profit or loss. However, any subsequent recovery
in the fair value of an impaired available-for-sale equity security
is recognised in other comprehensive income.
Associates
An impairment loss in respect of an associate is measured by
comparing the recoverable amount of the investment with its
carrying amount. An impairment loss is recognised in profit or
loss, and is reversed if there has been a favourable change in
the estimates used to determine the recoverable amount.
(ii) Non-financial assets
The carrying amounts of the IOOF Group’s non-financial
assets, other than deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication
of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. For goodwill, and intangible
assets that have indefinite useful lives or that are not yet
available for use, the recoverable amount is estimated each
year at the same time.
An impairment loss is recognised if the carrying amount of
an asset or its related cash-generating unit (CGU) exceeds its
estimated recoverable amount.
The recoverable amount of an asset or cash-generating unit
is the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value
of money and the risks specific to the asset. Subject to an
operating segment ceiling test, for the purposes of goodwill
impairment testing, CGUs to which goodwill has been
allocated are aggregated so that the level at which impairment
is tested reflects the lowest level at which goodwill is
monitored for internal reporting purposes. Goodwill acquired
in a business combination is allocated to groups of CGUs that
are expected to benefit from the synergies of the combination.
Impairment losses are recognised in profit or loss. Impairment
losses recognised in respect of CGUs are allocated first to
reduce the carrying amount of any goodwill allocated to the
units, and then to reduce the carrying amounts of the other
assets in the unit (group of units) on a pro rata basis.
IOOF annual report 2017
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, impairment losses recognised in prior
years are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates
used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if
no impairment loss had been recognised.
Goodwill that forms part of the carrying amount of an
investment in an associate is not recognised separately, and
therefore is not tested for impairment separately. Instead, the
entire amount of the investment in an associate is tested for
impairment as a single asset when there is objective evidence
that the investment in an associate may be impaired.
(f) Goods and service tax (GST)
Revenues, expenses and assets (excluding receivables) are
recorded net of GST. GST input tax credits are initially recorded
as an asset and GST collected as a liability. These balances
are offset as at the reporting date and recognised as either
an amount receivable or payable to the Australian Taxation
Office. The GST portion relating to financial supplies and non-
deductible expenditure, for which an input tax credit cannot
be claimed, is expensed or is recognised as part of the cost of
acquisition of an asset.
Receivables and payables are stated inclusive of the amount of
GST receivable or payable. The net amount of GST recoverable
from, or payable to, the Australian Taxation Office is included
with other receivables or payables in the statement of
financial position.
Cash flows are presented in the statement of cash flows on a
gross basis. The GST components of cash flows arising from
investing or financing activities which are recoverable from,
or payable to, the Australian Taxation Office are presented as
operating cash flows.
(g) Leases
Leases in terms of which the IOOF Group assumes substantially
all the risks and rewards of ownership are classified as finance
leases. Upon initial recognition the leased asset is measured at
an amount equal to the lower of its fair value and the present
value of the minimum lease payments. Subsequent to initial
recognition, the asset is accounted for in accordance with the
accounting policy applicable to that asset.
Minimum lease payments made under finance leases
are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense
is allocated to each year during the lease term so as to
produce a constant periodic rate of interest on the remaining
balance of the liability. Other leases are operating leases
and are not recognised on the IOOF Group’s statement of
financial position.
7-4 New standards and interpretations not yet
adopted
A number of new standards and amendments to standards are
effective for annual years beginning after 1 January 2016 and
earlier application is permitted; however the IOOF Group has
not early adopted the following new or amended standards in
preparing these consolidated financial statements.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for
determining whether, how much and when revenue is
recognised. It replaces existing revenue recognition guidance,
including IAS 18 Revenue, IAS 11 Construction Contracts and
IFRIC 13 Customer Loyalty Programmes.
IFRS 15 is effective for annual years beginning on or after
1 January 2018, with early adoption permitted.
The IOOF Group has completed an initial assessment of the
potential impact of the adoption of IFRS 15 on its consolidated
financial statements and does not expect that there will be a
significant impact.
115
IOOF annual report 2017
Notes to the financial statements
For the year ended 30 June 2017
(i) Management and service fees revenue
IFRS 16 Leases
The IOOF Group provide management services to unit trusts
and funds operated by the IOOF Group at normal commercial
rates. Management and service fees earned from the unit
trusts and funds are calculated based on an agreed percentage
of the respective funds under management or administration
as disclosed in the respective product disclosure statements,
and are recognised on an accruals basis.
The IOOF Group currently recognises management and service
fees revenue at the time the service is provided. No significant
changes are expected to this treatment under IFRS 15.
Stockbroking revenue and external other fee revenue are also
recognised at the time the service is provided. No significant
changes are expected to this treatment under IFRS 15.
The IOOF Group plans to adopt IFRS 15 in its consolidated
financial statements for the year ending 30 June 2019.
IFRS 9 Financial Instruments
IFRS 9 is effective for annual years beginning on or after 1
January 2018, with early adoption permitted. The IOOF Group
plans to adopt IFRS 9 in its consolidated financial statements
for the year ending 30 June 2019.
At 30 June 2017, the IOOF Group had equity investments
classified as available-for-sale with a fair value of $25.4m that
are held for long-term strategic purposes. Upon application
of IFRS 9 the IOOF Group will classify these as Fair Value
Other Comprehensive Income with all fair value gains and
losses reported in other comprehensive income in line with
current treatment.
IFRS 9 replaces the “incurred loss” model in IAS 39 with a
forward looking ‘expected credit loss’ (ECL) model when
determining provision for impairment of receivables. This
will require considerable judgement as to how changes in
economic factors affect ECLs, which will be determined on a
probability-weighted basis. Given the IOOF Group’s receivables
are short term, loss allowances are not expected to change
significantly when IFRS 9 is adopted.
IFRS 16 introduces a single, on-balance sheet lease accounting
model for lessees. A lessee recognises a right-of-use asset
representing its right to use the underlying asset and a lease
liability representing its obligation to make lease payments.
There are optional exemptions for short-term leases and leases
of low value items.
IFRS 16 replaces existing leases guidance including IAS
17 Leases, IFRIC 4 Determining whether an Arrangement
contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27
Evaluating the Substance of Transactions involving the Legal
Form of a Lease.
The standard is effective for annual years beginning on or after
1 January 2019. Early adoption is permitted for entities that
apply IFRS 15 Revenue from Contracts with Customers at or
before the date of initial application of IFRS 16.
The IOOF Group has started an initial assessment of the
potential impact of its consolidated financial statements. So
far, the most significant impact identified is that the IOOF
Group will recognise new assets and liabilities for its property
operating leases ($85m). The nature of expenses related to
those leases will now change as IFRS 16 replaces the straight-
line operating lease expense with a depreciation charge for
right-of-use assets and interest expense on lease liabilities.
No significant impact is expected for the IOOF Group’s
finance leases.
The IOOF Group will apply the standard using a retrospective
approach and plans to adopt IFRS 16 in the consolidated
financial statements for the year ended 30 June 2020.
Disclosure Initiative (Amendments to IAS 7)
The amendments require disclosures that enable users of
financial statements to evaluate changes in liabilities arising
from financing activities, including both changes arising from
cash flow and non-cash changes.
The amendments are effective for annual years beginning on
or after 1 January 2017, with early adoption permitted.
To satisfy the new disclosure requirements, the Group intends
to present a reconciliation between the 2017 opening and
2018 closing balances for liabilities with changes arising from
financing activities.
116
Other amendments
The following new or amended standards are not expected
to have a significant impact on the IOOF Group’s consolidated
financial statements.
• Classification and Measurement of Share-based payment
Transactions (amendments to IFRS 2)
• Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture (amendments to
IFRS 10 and IAS 28)
• Recognition of Deferred Tax Assets for Unrealised Losses
(amendments to IAS 12)
7-5 Subsequent events
The Directors have declared the payment of a final dividend
of 27.0 cents per ordinary share franked to 100% based on tax
paid at 30%, to be paid on 1 September 2017.
The Directors are not aware of any other event or circumstance
since the end of the financial year not otherwise dealt with in
this report or the consolidated financial report that has or may
significantly affect the operations of the consolidated entity,
the results of those operations or the state of affairs of the
consolidated entity in subsequent financial years.
IOOF annual report 2017
117
IOOF annual report 2017
Shareholder information
Share Capital
IOOF has on issue 300,133,752 fully paid ordinary shares held by 59,932 holders as at 28 September 2017.
Balance at
28-Sep-17
41,302,623
25,412,867
23,788,928
23,322,538
8,982,179
4,770,787
4,571,120
2,760,419
2,265,506
1,946,474
1,928,518
1,716,464
1,214,453
1,174,094
1,133,098
1,124,199
1,095,032
1,000,000
797,756
777,520
151,084,575
300,133,752
% of issued
capital
13.76
8.47
7.93
7.77
2.99
1.59
1.52
0.92
0.75
0.65
0.64
0.57
0.40
0.39
0.38
0.37
0.36
0.33
0.27
0.26
50.34
Voting Rights
IOOF’s fully paid ordinary shares carry voting rights of one vote per share.
Twenty largest shareholders as at 28 September 2017
The following table sets out the top 20 registered holders of shares.
Rank Holder Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
THE TRUST COMPANY (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
MR IAN GREGORY GRIFFITHS
SAM GANNON PTY LTD
CITICORP NOMINEES PTY LIMITED
MRS SALLY KELAHER
MILTON CORPORATION LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
BKI INVESTMENT COMPANY LIMITED
WPQ HOLDINGS PTY LTD
CUSTODIAL SERVICES LIMITED
AMP LIFE LIMITED
THANECORP AUSTRALIA PTY LTD
THANECORP AUSTRALIA PTY LTD
MRS SUSAN JANE GRIFFITHS
Total Securities of Top 20 Holdings
Total of Securities
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
118
IOOF annual report 2017
Distribution of members and their holdings
The following table summarises the distribution of our listed shares as at 28 September 2017.
Range
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001+
Totals
No of Holders
No of Units
% Issued Capital
34,498
20,181
3,414
1,715
124
59,932
13,425,631
46,635,460
24,391,533
36,315,053
179,366,075
300,133,752
4.47
15.54
8.13
12.10
59.76
100.00
There were 787 shareholders holding less than a marketable parcel of shares based on a market price of $11.12 at the close of trading
on 28 September 2017 and there were 20 per cent of shareholders with registered addresses outside Australia.
Substantial Shareholdings
Substantial shareholders as at 28 September 2017 are shown below, with the date of their last notice lodged in accordance with
section 671B of the Corporations Act:
Name
Bruce W Neill
Legg Mason Asset Management Australia Limited
Share register and other enquiries
Date of
last notice
21-Aug-2014
20-Jun-2017
No of
Ord Shares
27,812,867
21,394,719
% of Issued Share Capital
as at date of last notice
9.29%
7.12%
If you have any questions in relation to your shareholding, share transfers or dividends, please contact our share registry:
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
1300 737 760 (Australia only)
Phone:
Phone: + 612 9290 9600
Email:
IOOF@boardroomlimited.com.au
Website: www.boardroomlimited.com.au
Please include your shareholder reference number (SRN) or holder identification number (HIN) in all correspondence to
the share registry.
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Contents
About IOOF
Our major brands
Chairman and Managing Director’s commentary
Our financial performance
Directors
Environmental, Social & Governance report
IOOF Foundation
Financial report
1
2
3
7
10
13
21
23
Share registry
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
Auditor
KPMG
Tower Two, Collins Square, 727 Collins Street
Docklands VIC 3008
Solicitors
King & Wood Mallesons
Level 50, Bourke Place
600 Bourke Street
Melbourne VIC 3000
Bankers
Commonwealth Bank Limited
Tower 1, 201 Sussex Street, Sydney NSW 2000
Securities exchange listing
IOOF Holdings Ltd shares are listed on the
Australian Securities Exchange
(ASX: IFL)
Website address
www.ioof.com.au
Corporate directory
(as at 28 September 2017)
Directors
Mr George Venardos
B.Com, FCA, FGIA, FAICD, FCIS
Chairman
Mr Christopher Kelaher
B.Ec, LL.B, F Fin.
Managing Director
Ms Elizabeth Flynn
LL.B, Grad Dip AppCorpGov, FAICD, FFin, FGIA, FCIS.
Ms Jane Harvey
B.Com, MBA, FCA, FAICD
Mr Allan Griffiths
B.Bus, DipLi
Mr John Selak
Dip Acc, FCA, FAICD
Company Secretary
Mr A Paul M Vine
LL.B, FGIA, FCIS, GAICD
Notice of Annual General Meeting
The Annual General Meeting of IOOF Holdings Ltd
will be held at:
Verandah Room
Grand Hyatt
123 Collins Street
Melbourne, Victoria 3000
Time 9.30am
Date 23 November 2017
A formal notice of meeting is available on our website
and has been sent to shareholders
Principal registered office in Australia
Level 6, 161 Collins Street
Melbourne, VIC 3000
(03) 8614 4400
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