IOOF Holdings Annual Report 2020

FY2020 Annual Report · IOOF Holdings
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annual 
report
2020

Contents

About IOOF 

Our diversified business model 

Chairman's commentary 

CEO’s commentary 

2020 results at a glance 

2020 strategic priorities 

Directors 

Environmental, Social and Governance report 

Financial report 

3

4

5

7

9

10

11

14

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About IOOF

At IOOF, we have been helping Australians secure their financial independence for over 
170 years.

Today, IOOF is one of the largest financial services groups in Australia. As an ASX top 200 company, and with more than $202.3 billion 
in funds under management, administration and advice, we currently service over one million 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. 

Our services

IOOF provides a range of wealth management solutions including:

Financial advice 

Estate administration

We believe in the value of financial advice. Whether provided 
through the organisations we partner with or our own 
extensive network, we believe financial advisers provide 
strong and enduring value to clients by helping them build, 
maintain and protect their wealth.  

Portfolio administration 

We offer financial advisers, clients and thousands of 
employers around Australia leading superannuation and 
investment administration solutions. Our unique open 
architecture model means we not only offer our products 
but a selection of leading external products also to ensure 
advisers and their clients can choose the solutions that 
best suit their individual needs. 

Australian Executor Trustees is part of the IOOF group and has 
been providing estate and trustee services to Australians for 
over 135 years. Trustee services offered by the Group include 
estate planning and administration, compensation trusts, 
personal trustee services, philanthropy, Small APRA Funds 
(SAFs) and self-managed super fund (SMSF) solutions.

Investment Management 

Our investment capabilities are driven by a highly skilled 
investment team, with a proven investment process that is 
focused on delivering strong, consistent returns. The team 
accesses world-leading investment managers across a 
broad range of highly rated single and multi-manger 
funds, combining them with other attractive investment 
opportunities to create carefully diversified portfolios. 

* 30 June 2020

3

IOOF | annual report 2020Our diversified business model

Salaried
advisers

Self-employed
advice
licensees

Clients

Adviser
support

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Asset
solutions

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(cid:24) (cid:19)(cid:25)(cid:18)(cid:17)(cid:25)(cid:22)(cid:16)
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> (cid:24)(cid:15)(cid:14)(cid:14)(cid:13)(cid:24)(cid:31)(cid:11)(cid:11)(cid:28)(cid:22)(cid:21)(cid:20)(cid:26)(cid:27)
> (cid:24)(cid:15)(cid:14)(cid:14)(cid:13)(cid:24)(cid:10)(cid:26)(cid:20)(cid:9)(cid:8)(cid:18)(cid:21)(cid:21)(cid:26)(cid:20)(cid:23)
> (cid:24)(cid:13)(cid:31)(cid:7)(cid:6)(cid:31)(cid:24)(cid:23)(cid:25)(cid:22)(cid:21)(cid:27)(cid:28)(cid:23)(cid:28)(cid:18)(cid:21)(cid:24)(cid:27)(cid:5)(cid:4)(cid:4)(cid:18)(cid:25)(cid:23)

Intergenerational
and estate
management

Best of breed 
administration

As at 30 September 2020

4

IOOF | annual report 2020Chairman's 
Commentary

The 2020 Financial Year has been one of 
volatility, change and disruption. Not only 
the way we live our lives, but also the 
ongoing COVID-19 pandemic has had 
a significant impact on equity markets 
and the economy as whole. To all of our 
shareholders, thank you for your continued 
support over this challenging year.

Our ClientFirst approach 

IOOF was created 173 years ago with a 
clear mission – to serve the community, 
particularly those who are most vulnerable. 
During the COVID-19 pandemic, this mission 
to serve has only become more pertinent.  

At IOOF we believe in the value of 
financial advice. It is important for not 
only our existing clients and members, 
but also for the 80% of Australians who 
currently do not have access to quality 
financial advice. In support of this 
commitment, in May 2020 we launched 
the IOOF Community Offer, which saw 
IOOF advisers offering at-no-cost financial 
guidance to those who needed it most 
in their local community, to assist them 
through the personal and financial 
challenges they face during COVID-19. 

We also welcomed the Federal 
Government’s Early Access to Super 
initiative, which was designed to support 
those in our community most impacted 
financially by COVID-19. IOOF was and 
remains well placed to support this initiative 
with minimal business impact given our 
high degree of liquidity and the diverse 
demographic of our members and clients. 

Adapting to change

A key priority for IOOF during the 
COVID-19 pandemic has been the 
health and wellbeing of our people. 

I am incredibly proud of how all of our 
talented people - led by Renato and 
the Executive Team – have stepped up 
to support and guide our clients and 
members at this challenging time. As a 
Board, we have been deeply impressed 
by their commitment and flexibility, 
and I thank them for their efforts. 

This includes our network of advisers, 
who have continued to offer their vital 
services to clients. We have provided 
them with the highest levels of support 
and service, as they experience 
increased workloads and intensified 
client interactions. This support 
includes access to our employee 
assistance program, and free access 
to a range of new technologies to 
assist in remote advice delivery.

Additionally, as announced previously, 
we as a Board and our Executive Team 
recognise that COVID-19 has had an 
impact on business outcomes and 
returns to shareholders. In this context, 
it is appropriate that no discretionary 
bonuses were paid to the Executive 
Team for the financial year. In addition, 
Renato and I took a 20% reduction 
in base pay for six months from 
1 August 2020. All other Directors 
and our CFO took a 10% reduction 
in base pay for the same period.

Allan 
Griffiths

Transforming our 
business for the future

Despite the challenges IOOF has faced 
during the year, we have remained 
focused on our long-term strategy 
to reshape our business to be at the 
forefront of the wealth management 
industry of the future.  

This has seen our business being 
transformed and streamlined 
considerably over the last 12 months. 
We completed the acquisition of 
ANZ Pensions & Investments (P&I) 
in February 2020 which bolsters our 
advice-led business. We have also made 
select divestments of businesses that are 
no longer core to our advice-led business 
model. We completed the divestment 
of Ord Minnett, AET Corporate Trust 
and IOOF's operations in New Zealand 
during the year. 

Post year-end, we also divested 
our majority shareholding stake in 
Australian Ethical Fund. These divestments 
realised significant profits from sale and 
allow us to focus on our core strategic 
advice-led offerings. 

This culminated in the announcement of 
the transformational acquisition of MLC 
Wealth, which will see IOOF become 
the largest provider of financial advice in 
Australia. This is an enviable position and 
gives us significant additional scale for our 
clients and ultimately, our shareholders.

5

IOOF | annual report 2020The addition of MLC is a once in a 
generation opportunity which we 
believe will provide all of our shareholders 
– retail and institutional – with long 
term value creation. In determining the 
funding structure for this acquisition, 
we considered multiple options to 
ensure equivalency for all shareholders 
to participate equally. IOOF has a large 
retail shareholder base and we were 
determined to ensure loyal retail holders 
had the opportunity to participate 
in the capital raise at an equivalent 
price to large institutions, which I 
am pleased to say occurred.  

Board changes

In February 2020, Jane Harvey retired from 
the IOOF Holdings Ltd Board. She had 
served on the Board for 12 years with 
unwavering diligence and I would like to 
thank her for her support and dedication 
over those years. Fortunately, Jane has 
remained as a member of a number of 
IOOF subsidiary Boards so her immense 
experience and knowledge of IOOF 
will remain within the business. 

Future outlook 

I am immensely proud of the progress 
we have made over the year and look 
forward to continuing the hard work 
to embed P&I and complete the MLC 
acquisition by June 2021. 

We are building scale in our business 
for the benefit of the long term. 
This includes two key strategic initiatives; 
Evolve 21 which is simplifying our platform 
suite down to one contemporary platform; 
and Advice 2.0 which will allow us to 
deliver more accessible and cost effective 
financial advice to more Australians in 
an economically viable way.

The completion of the acquisition of 
MLC in the coming year heralds a new 
era for IOOF providing scale, economic 
diversification and business strength 
to deliver better long-term outcomes 
for our clients, members, advisers 
and shareholders.

The new IOOF will have the ability to 
offer unmatched choice and accessibility 
of quality financial advisory and wealth 
management services to all Australians. 

We are a business with diversified income 
streams and the scale and financial 
strength to endure the present crisis 
and be well positioned for the recovery. 
In the current interest rate environment, 
we recognise the importance of 
dividends to our shareholders and we 
will continue to prudently manage 
capital to keep dividend payments 
to shareholders front of mind.

We have a clear strategy in place 
to transform our business which 
will generate significant benefits 
for all stakeholders including you 
– our shareholders.

I thank you again for your 
ongoing support.

Allan Griffiths

6

IOOF | annual report 2020CEO's commentary

2020 has been one of the most 
challenging and volatile years in recent 
history. In the first half of the financial 
year Australia experienced serious and 
prolonged drought conditions; the bush 
fires in early 2020 caused devastation 
along the eastern seaboard, and since 
then, the global COVID-19 pandemic has 
been causing unprecedented disruption 
and significant distress to many Australians. 

Despite the significant challenges 
the business has faced, we remain in 
a strong position. We achieved the 
milestone of $200 billion funds under 
management, advice and administration 
(FUMA) and made significant headway 
in our transformation program as we 
reshape IOOF to be Australia’s leading 
advice-led wealth manager. 

Supporting our clients 

As our Chairman has noted, 2020 has 
brought significant disruption, and it 
continues to be an unprecedented and 
concerning time for our clients, employees, 
advisers, the community and our country. 

IOOF has always had a clear mission 
and purpose – to serve the community 
and those who are most in need – 
a purpose that is more important than 
ever at this time. It’s pleasing to see our 
people providing guidance and support, 
and helping communities achieve peace 
of mind and confidence about their own 
futures. The value and importance of 
quality financial advice, for all Australians, 
has never been more evident.

I am extremely grateful for the hard work 
and dedication of our people at what 
has been a difficult time for them as 
well. Our ClientFirst philosophy gives us 
a competitive advantage, as we deliver 
service excellence through a simpler, 
more cost-effective business model.

At the height of the pandemic, our client 
service team experienced a 250% increase 
in call volume, yet call wait times peaked 
at just 10 minutes, before quickly 
returning to below just five minutes.

Payments made under the 
Federal Government's Early Release of 
Superannuation during the year totalled 
$743 million across 99,174 requests. 
Our ClientFirst approach ensured that 
97% of all IOOF platform payments were 
paid to clients within five business days. 
For the newly acquired P&I business, 
83% of payments were made within 
five business days. 

Financial performance

Against the COVID-19 backdrop, 
IOOF’s business performance has 
demonstrated strength and resilience in 
the face of volatile market conditions.  

Statutory net profit after tax was 
$147.0 million, and included substantial 
profit on sale of non-core businesses 
as noted by the Chair.

IOOF has delivered an Underlying 
Net Profit After Tax of $128.8 million. 
A significant milestone for the business 
was reaching $200 billion in total funds 
under management, administration and 

Renato 
Mota

advice (FUMA), which was $202.3 billion 
on 30 June 2020. We also continued to 
see net inflows in platform of $1.3 billion 
and advice net inflows of $730 million 
which is a testament to the strength of 
our advice-led offerings.

Transformation 
through focus

During the year we welcomed a number 
of new executives across Finance, Risk, 
Legal and Company Secretariat after the 
completion of my senior management 
review. Each one of them has brought with 
them a purpose-led mindset and a fresh 
perspective to our behaviours and practices. 
I believe we have the right team in place to 
continue on our transformation journey.

In 2020, we made significant progress on our 
long term strategic initiatives to transform 
the business to be at the forefront of the 
financial advice industry of the future. 

We are at an inflection point of change 
for the Australian advice landscape. 
The value of quality financial advice 
has never been more apparent than it 
is today. Equally the need to create a 
professional business model has never 
been more apparent. Building an advice 
business model that is sustainable in its 
own right, without economic support 
from other segments of the business 
and supports ongoing investment in 
technology and processes is critical. 
While this industry-wide transformation 
will challenge some in the industry, IOOF 
is firmly of the view that it is critical for the 
long-term benefit of the clients we serve.

7

IOOF | annual report 2020We announced the next phase in our 
Advice 2.0 transformation strategy – 
which is IOOF’s long-term strategy to 
reshape the Australian advice landscape 
through the delivery of quality, 
goals-based advice that is accessible 
and affordable for all Australians. 
In 2019, we committed to undertaking a 
significant advice remediation program 
and we commenced payments to 
clients during the financial year.

In support of the transformation, 
we acquired Wealth Central, a proprietary 
financial advice and client engagement 
technology platform. Additionally, IOOF’s 
self-employed aligned adviser brands have 
been reorganised into two core groups 
that will allow IOOF to better and more 
efficiently support the unique needs of 
each advice brand, and drive them to 
become self-sustaining by the end of 2022.

We also continued to make significant 
progress on Project Evolve. Evolve is a cross 
enterprise program of work to design, build 
and deliver a contemporary and flexible 
Platform technology capable of supporting 
our existing and future product suites. 

The Evolve platform administered 
$12.9 billion as at 30 June 2020 and 
continues to see significant inflows. 
This demonstrates we are delivering 
what advisers need from a platform to 
look after their clients’ assets. We expect 
our current platform consolidation to 
be complete by the end of 2021. 

Transformational 
acquisitions

During FY20, we successfully completed 
the acquisition of the P&I business, 
which added significant scale. We have 
made significant strides to integrate the 
P&I business and we remain on track to 
deliver $68 million in total synergies by 
FY22 on an annualised basis. 

Consolidating IOOF’s transformation 
agenda, in August 2020, we announced 
the acquisition of MLC for $1.44 billion 
from the National Australia Bank (NAB). 
MLC is a highly complementary wealth 
management business which is a natural fit 
with IOOF. It presents a unique opportunity 
to create Australia’s leading wealth manager 
along with significant opportunities for 
synergies realisation, for the benefit of 
clients and shareholders. The transaction is 
expected to complete before June 2021.

In order to ensure we deliver on our 
objectives with the integration of 
both P&I and MLC, I have appointed a 
Chief Transformation Officer who will 
sit on the Executive Team and report 
directly to me. The Executive team and 
I are committed to delivering on the 
value realisation opportunities these 
transformational acquisitions present, 
in a prudent and timely manner. 
This has meant ensuring we have the 
people, capabilities and accountabilities 
in the coming years to support the 
transformation of the business.

Outlook 

The Australian wealth management 
market is currently experiencing a 
period of industry disruption, with new 
industry structures forming over the 
coming 12-24 months. To acquire a highly 
complementary business of the quality 
and size of a company such as MLC was a 
once in a generation opportunity to create 
the leading wealth manager of the future. 

IOOF has a strong track record in relation to 
integration of businesses. The acquisition of 
MLC will deliver significant future benefits 
for all of our stakeholders, including for you, 
our shareholders. We expect to deliver in 
excess of 20% earnings per share accretion 
in future years, underpinned by $150 million 
p.a. of targeted pre-tax synergies by the 
third full year of ownership.

As the financial services industry reshapes, 
a much bigger and better IOOF will be at the 
forefront of industry transformation. In this 
new era the new IOOF will have the ability 
to offer unmatched choice and accessibility 
of quality financial advice and wealth 
management services to all Australians.

To our shareholders – Thank you for your 
continued support in what has been an 
extremely volatile year. I know we have 
the right strategy, people, governance 
and operational structures to continue 
to deliver financially for years to come.

Renato Mota

8

IOOF | annual report 20202020 results at a glance

$128.8 million
Underlying NPAT

$147.0 million
Statutory NPAT

$202.3 billion FUMA
Up +46% 
from 30 June 2019

$743.0 million
Assisting clients during COVID-19 
Total Early Access to 
Superannuation withdrawals

27.5 cps
Fully franked 
dividends per share

($10.1 billion)
Market declines 
primarily due to COVID-19

$77.1 billion FUMA
Growing the business
Completion of ANZ 
Wealth Management 
Pensions & Investments

Adviser NPS +141
Delivering for clients

Attracting net inflows
Platform $1.3 billion
Advice $730 million

1 Based on member NPS result June 2020.

9

IOOF | annual report 20202020 strategic priorities
Focusing on advice-led wealth management

Simplify

Consolidating to one platform 
– Project Evolve on track for 
completion by end 2021

Proprietary technology developed 
in-house – ASIS technology  
platform already servicing  
$12.9 billion of FUMA

Deliver service excellence via 
ClientFirst –  Adviser NPS +411

Grow

Completion of P&I transaction 
in February 2020 with P&I 
integration tracking to plan

Step-change in scale drives 
benefits for clients and 
accretion for shareholders

Revised cost synergies 
of   $68 million pre-tax pa 
(from  $65 million pre-tax pa) to 
be realised in full from 1 July 2023

Focus

Advice 2.0 will reshape the 
delivery of financial advice for 
the benefit of all Australians

Re-organisation of the 
operating structure for IOOF 
advice businesses – to meet the 
changing needs of clients

Significant opportunity 
to reinvent the advice 
landscape in Australia

Creating strategic clarity

Net proceeds from divestments of 
non-core subsidiaries – $105 million 
total consideration from sale of 
subsidiaries during FY2020.

Sale of 14.2 million shares in Australian 
Ethical for total cash consideration of 
$74.5 million post year end. 

10

1 Based on member NPS result June 2020.

IOOF | annual report 2020Directors

Allan 
Griffiths

Renato 
Mota

Qualifications and 
independence status 

•  B.Bus, DipLI.
• 
•  Director since 2014

Independent Non-Executive Director

•  BComm(Hons), B.Bus
•  Chief Executive Officer 
since 25 June 2019

Experience, special 
responsibilities, listed 
and other significant 
directorships

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 Pty Ltd based in Singapore.

Prior to joining Aviva, Mr Griffiths held 
executive positions with Colonial 
Ltd and Norwich Union. Mr Griffiths 
is Chairman of the Westpac/BT 
Insurance Boards and the Chairman 
of Metrics Credit Partners. Mr Griffiths 
is also Chair of the Group Nomination 
Committee and member of the Group 
Audit, Group Risk and Compliance and 
Group Remuneration Committees.

With more than 20 years’ experience 
in financial services prior to being 
appointed CEO, Mr Mota held a 
number of senior executive roles 
within IOOF. In December 2018, 
Mr Mota was appointed Acting CEO 
and prior to that was Group General 
Manager – Wealth Management since 
January 2016. During this time he was 
instrumental in leading IOOF through 
a series of forward-thinking, strategic 
initiatives including IOOF’s advice-led 
strategy, the group’s ClientFirst 
transformation and establishing 
the IOOF Advice Academy.

Previously, he held numerous executive 
roles as General Manager of Distribution, 
Investor Solutions and Corporate 
Strategy and Communications. 
Before joining IOOF in 2003, Mr Mota 
worked for Rothschild and NAB in 
corporate finance roles with a focus 
on mergers and acquisitions where he 
was involved in wealth management 
transactions including the demerger 
of Henderson Group plc from AMP 
in 2003 and NAB’s acquisition of MLC 
and Deutsche Financial Planning.

11

IOOF | annual report 2020Andrew 
Bloore

Elizabeth 
Flynn

Qualifications and 
independence status 

Independent Non-Executive Director

• 
•  Director since 2 September 2019

•  LLB, Grad Dip App Corp Gov, FAICD, 

FFin, FGIA, FCG

Independent Non-Executive Director

• 
•  Director since 2015

Experience, special 
responsibilities, listed 
and other significant 
directorships

12

Andrew Bloore is an experienced 
Non-Executive Director, Entrepreneur 
and farmer.  He has designed, built and 
sold a number of businesses focussed 
on the development of key disruptive 
technologies and distribution services 
in traditional markets, to create business 
efficiencies. Businesses Mr Bloore 
has been actively involved in, both 
as an Executive and/or as a Director 
and in the capacity of investment 
funding, development and leadership, 
include  Smartsuper, SuperIQ and 
Class Super.  Mr Bloore has worked 
on a range of Senate and Treasury 
Committees, and with the Australian 
Taxation Office Regulations Committee 
on regulation of the superannuation 
industry. In 2016, Mr Bloore sold 
his superannuation administration 
business to AMP, stepped down from 
the Senate and Treasury Committees 
and is now focussed on contributing 
to organisations as a non-executive 
director.  Mr Bloore was a non-executive 
director of FBR Ltd until November 2019. 

Mr Bloore is a member of the Group 
Audit, Group Risk and Compliance and 
Group Remuneration Committees.

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 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 non-executive director 
of Bennelong Funds Management from 
2010 to 2015 and is a non-executive 
director of AIA Australia Limited, 
the Colonial Mutual Life Assurance 
Society and AIA Health Insurance Pty Ltd. 

Ms Flynn is Chair of the Group Risk 
and Compliance Committee and 
a member of the Group Audit, 
Group Remuneration and Group 
Nomination Committees.

IOOF | annual report 2020John 
Selak

Michelle 
Somerville

Qualifications and 
independence status 

•  Dip Acc, FCA, FAICD
• 
•  Director since 2016

Independent Non-Executive Director

•  BBus (Accounting), MApp Finance, 

FCA, GAICD 

Independent Non-Executive Director

• 
•  Director since 1 October 2019 

Experience, special 
responsibilities, listed 
and other significant 
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. From 2016 
to 2020, Mr Selak was a non-executive 
director of National Tiles.  

Mr Selak is currently Chairman of 
Corsair Capital and a non-executive 
director of Turosi Food Solutions and 
the IOOF Foundation. 

Mr Selak is Chair of the Remuneration 
Committee and a member of the Group 
Audit, Group Nomination and the Group 
Risk and Compliance Committees. 

Michelle Somerville is an experienced 
Non-Executive Director, bringing 
deep and relevant finance, risk and 
governance experience to the Board, 
having worked in the financial services 
industry in both her executive and 
non-executive roles. 

Previously she was an audit partner 
with KPMG Australia for nearly 
14 years, with a focus on the financial 
services industry in both Australia and 
overseas. Ms Somerville is currently 
a non-executive director of The GPT 
Group (since 2015), Bank Australia, 
and ED Credit Services. 

Ms Somerville is Chair of the Group 
Audit Committee and a member of the 
Group Risk and Compliance Committee.

13

IOOF | annual report 2020Environmental, Social and Governance report

Strong ESG practices and performance are critical to our continued success

Maintaining strong Environmental, Social 
& Governance (ESG) practices enables 
us to manage risks and opportunities 
in a way that balances the long-term 
needs of stakeholders, including clients, 
employees, shareholders, suppliers, the 
community and the environment.

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Understand me
Look after me
Secure my future

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Material exposure to Environmental, Social and Governance matters

Our reputation as a leading provider of quality financial services and ability to achieve our strategic aims could be damaged 
by failing to identify, monitor and report material ESG risk exposures. 

In determining our exposure, 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, 
clients, members and analysts. 

Material ESG matters are outlined below.

Governance

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Our business

Our clients and community

Our people

Material ESG matter

Material ESG matter

Accelerating corporate governance

Advice review

Cyber security and privacy

Responsible investment

Our environmental impact

Tax transparency 

Establishing trusted 
relationships with advisers

Advocating for quality financial  
advice for all Australians

Putting the best interests 
of our clients first

Giving back to our communities

Material ESG matter

Our culture

Leadership and capability

Supporting our people

Diversity and inclusion 

IOOF | annual report 2020 
Our business

ESG practices are embedded in our day-to-day business operations and the creation of long-term financial 
outcomes for our advisers, clients and shareholders.

Accelerating corporate governance

Three lines of defence

IOOF remains committed to uplifting and strengthening 
our governance framework. 

On 7 December 2018 APRA gave notice of additional 
licence conditions on IOOF's APRA regulated entities. 
These conditions required, inter-alia:
•  separation of responsible entity and registrable 

superannuation entity duties to separate independent 
corporate entities

•  the implementation and effective operation of an 
independent member outcomes driven function; 
the Office of the Superannuation Trustee (OST) 

•  monitoring and reporting on progress via an 

independent expert.

Effective 30 November 2019, IOOF met the requirement 
under the licence conditions to separate the responsible 
entity and registrable superannuation entities duties into 
separate independent corporate entities. The OST was 
implemented and continues to independently support 
IOOF's APRA regulated entities drive member outcomes.

In October 2019, ASIC varied the AFS licence conditions of 
IOOF’s responsible entity and IDPS operator, IOOF Investment 
Services Limited (IISL). The licence conditions required IOOF to 
establish an Office of the Responsible Entity (ORE), which is the 
first of its kind in Australia. The ORE is an independent office 
appointed by the licensee board of directors to undertake 
specific tasks required by the licence and to help the licensee 
meet its fiduciary and statutory obligations. 

The ORE’s key strategic priorities are to uplift the monitoring 
and assessment of scheme service providers, implement 
strategies that advance investors’ interests, review and assess 
the licensee’s compliance and risk management frameworks 
and oversee all reporting to the IISL Board. Implementation of 
these requirements will be reviewed by an independent expert 
and reported to ASIC before the end of the 2020 calendar year. 

Advice review 

We are holding ourselves to higher standards and ensuring 
that our obligations to clients are met. 

IOOF is committed to completing a voluntary advice review 
to identify any instances of fees for no service, fees for 
inadequate documentation and inappropriate advice. 
IOOF continues to make progress in relation to its advice 
review and has commenced customer remediation payments. 
IOOF has arrangements with ANZ with regard to remediation 
relating to ex-ANZ Wealth Management Advice Licensees. 

We apply a ‘three lines of defence’ model to the identification 
and management of risk and compliance issues. Our first line 
of defence is the operational areas of the business that are 
responsible for identifying, assessing, mitigating, monitoring 
and reporting on risks within their area including the 
development and operation of internal controls. 

Our second line of defence is the Enterprise Risk and Compliance 
Team, which provides oversight and challenge of risk management 
and practices by first line, and provides advice and support on 
the implementation of the risk and compliance frameworks.

Our third line of defence provides independent assurance on the 
effectiveness of governance and risk management practices and 
control environment across the whole organisation. We continue 
to invest resources dedicated to our three lines of defence and 
continue to see a maturing risk and compliance culture. 

In addition, we continue to revisit our executive and business 
level forums established to improve accountability, transparency 
and oversight of risk and compliance across the organisation.

Corporate governance statement

IOOF has adopted ASX 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/corporate_governance

Cyber security and privacy

In line with our purpose of understand me, look after me, 
secure my future, we are committed to keeping our clients’ 
personal data secure, by ensuring we have robust and 
evolving cybersecurity and privacy controls in place.

Cyber security

As with other participants in the financial services industry, cyber 
risk is one of the top operational risks faced by the IOOF Group. 

Six years ago, we established a dedicated cyber security and 
technology risk team (Cyber Security Team) to ensure an 
enhanced focus on cyber security controls. Cyber security 
roles and responsibilities are clearly defined and documented. 
Our cyber security strategy, policies, tactical initiatives and 
operational controls are based on the National Institute of 
Standards and Technology (NIST) cyber security framework 
and comply with ISO27001 standard – an international 
standard for information security management. 

15

IOOF | annual report 2020IOOF has a Cyber Security Governance Forum that meets 
regularly to ensure a cross business functional overview 
of cyber risks and related controls. Our Cyber Security 
Team reports to the Board on cyber incidents, events, 
readiness and improvement projects. 

The aim of our cyber security policies and frameworks 
is to ensure that: 
•  appropriate controls are implemented 
•  our cyber risk exposure is minimised 
•  our risk management processes are effective. 

Like all business operations, cyber security relies on people, 
processes and technologies. We understand that the key to 
a holistic, effective and lasting cyber security program is the 
human element. Our people are our first line of defence and 
IOOF has a considerable focus on enabling and embedding 
a ‘cyber security culture’ throughout the business.

Our people undergo various levels of awareness training, 
including at induction, mandatory annual online training, as well 
as personal one-on-one training sessions where there is a high 
cyber risk. Training sessions include awareness of cyber risks and 
behaviours, privacy fundamentals and principles, fraud detection 
and reporting and AML/CTF obligations. We use positive 
reinforcement in our training programs to drive high levels of 
engagement. Each month we reward employees who have 
been successful in preventing cyber threats with enterprise-wide 
recognition of their vigilance as well as an award for their efforts.

Phishing email simulation testing is conducted regularly to test 
the effectiveness of training sessions. Results from the phishing 
tests are used to further fine tune training opportunities. 
Job-specific security training is also embedded in our wider 
teams. The training programs are constantly reviewed to ensure 
relevance and to ensure latest concepts are covered. Our aim is 
to ensure that our staff have leading edge knowledge in areas 
of technology risk and cyber threats.

Third party risk management is of key importance for IOOF. 
All third-party relationships are established only after a rigorous 
due diligence process governed by our Vendor Management 
Policy. Security risk assessments are conducted at the initiation 
of the contract, as well as on a regular basis throughout the 
contract. This ensures that IOOF has adequate assurance over 
the conduct and controls that third parties have in place for the 
protection of information that is in custody of the third party. 

IOOF collaborates with both Government bodies and the 
industry to keep abreast of cyber trends, emerging cyber threats 
and controls, as well as to discuss, collaborate and share new 
strategies and tactics relating to cyber controls. 

IOOF is an active member of Joint Cyber Security Centre 
(JCSC) and a partner with Australia’s national Computer 
Emergency Response Team (CERT). IOOF is also a founding 
member of the Australian Chapter of the Global Cybersecurity 
Alliance, which is an international, cross-sector effort designed 
to confront, address, and prevent malicious cyber activity. 
The Cyber Security Team at IOOF is also a member of industry 
groups such as the CISO Lens, ISACA and the Australian 
Information Security Association (AISA) which ensures that 
they are updated with relevant knowledge and intelligence 
into latest trends and threats impacting the Australian and 
Global cyber landscape.

With the onset of COVID-19 pandemic, IOOF’s Business 
Continuity Plan was enacted and the workforce switched to 
work from home (WFH). A detailed threat risk assessment was 
conducted in view of the rapidly changing threat universe. 
Increase in COVID-19 related phishing emails and scams 
was anticipated, and users/staff were made aware of the 
increased threat level via multiple communications starting 
from 27 February 2020.

Privacy

Our clients trust us to look after them by ensuring that 
their personal information is safe and secure. Any personal 
information we collect is handled in accordance with the 
IOOF Group Privacy Policy, which outlines how we manage 
personal information. We have a robust program in place 
to ensure privacy awareness remains at the forefront of our 
employees’ minds.

Since 2015, IOOF has been an active participant in the Office 
of the Australian Information Commissioner’s annual Privacy 
Awareness Week (PAW), during which employees engage in 
initiatives and activities to reinforce the importance of protecting 
information. This year, we held a widely attended Q&A session 
in which our Privacy Officer responded to on-the-spot privacy 
questions and concerns. With our employees working from 
home and an expectation that many will continue to do so 
after COVID-19 restrictions are lifted, extra information has 
been provided to keep our employees well informed and to 
ensure they are implementing additional measures to keep 
our clients protected.

Online privacy awareness training is provided to all 
employees annually and targeted training is delivered several 
times a year. We support a strong culture of privacy compliance, 
where reporting and responding to privacy breaches is 
second nature. We are continually looking for better ways 
to enhance our capabilities, to ensure our controls remain 
effective and to build privacy awareness.

16

IOOF | annual report 2020Integration is considered the most appropriate approach to 
responsible investing given our objectives. All four approaches 
may be deployed and deemed appropriate. Exclusion is 
reserved for companies or industries where other approaches 
cannot reasonably be expected to achieve our objectives.

IOOF Advice Research and ESG

IOOF consider ESG principles in both investment philosophy 
and in the construction of ESG Model Portfolios, looking at 
ethical and responsible investing to prioritise client choice. 
The Research team ESG Model Portfolios utilise investment 
strategies to effect change across ESG concerns. 

Exclusion Strategies – this includes funds that negatively 
screen investments which are associated with specific 
industries. This includes such industries like tobacco, alcohol, 
weapons, pornography, gambling, animal testing, genetic 
engineering, deforestation, oil and gas, nuclear power, 
mining, and climate change (just to name a few). 

Impact investing – this includes funds that look to generate 
positive returns while measuring an investment’s environmental 
and social impact alongside its financial return. Funds in the 
category tend to be more active when voting and advising 
companies. They seek to positively reward firms which take 
a proactive approach to improving their ESG footprint. 

IOOF has taken the approach of integrating ESG in the 
investment process holistically via tactical investing. 
Over the investment horizon, we expect the ESG model 
to have a different journey than that of a non-ESG model. 
However, we anticipate that over the long term, the 
client in either portfolio will achieve a broadly similar 
investment outcome. 

Our approach to ESG includes exclusion strategies, 
impact strategies, and non-ESG strategies (for diversification). 
ESG integration should not mean that an investor is 
prohibited from investing in specific sectors, countries and 
companies, or that portfolio returns are sacrificed to perform 
ESG integration. By taking this approach, we hope to meet 
the client's investment objectives. 

Responsible investment

What we mean by ESG in the context 
of responsible investment?

Environmental, social, and governance (ESG) are a set of 
criteria that help constitute standards an investor can use to 
analyse a company’s operations.

•  Environmental refers to how conscious a 

company/investment is towards their direct 
environment and towards nature.

•  Social refers to how a company/investment manages its 

impact on people. This encapsulates employees, suppliers, 
customers, and the communities it operates in. 
•  Governance focuses on the corporate structure of the 

company/investment. This includes leadership, internal 
controls, shareholder rights, executive pay, compliance 
with the law. 

IOOF Multi-Manager Investments and ESG

The management of IOOF's multi-manager investment 
offering ensures ESG factors are considered in the investment 
process in order to protect and manage investments for the 
long term. In 2018, IOOF’s Investment Division developed a 
Responsible Investing Statement of Principles. Approval and 
the commencement of implementing the principles followed 
in 2019. The Statement defines the role that responsible 
investment plays in the assessment, selection and monitoring 
process of externally appointed managers in the multi-manager 
funds. Furthermore, it outlines the framework for identifying 
and managing ESG impacts, risks and opportunities 
across the various funds we manage.

ESG factors that form the basis of our statement are wide 
ranging and their impact on our products’ risk and return 
may vary. 

A number of approaches can be taken in relation to ESG 
issues including:
• 

Integration: Inclusion of ESG factors in the investment 
decision making process to improve investment outcomes.
•  Active ownership: Engaging with companies (including via 

proxy voting) to improve investment outcomes.
•  Themed Investing: Targeting investment areas which 

generate attractive returns with sustainability and social 
improvement themes.

•  Exclusions: Screen out companies or industries assessed 
to represent a long-term risk to returns due to negative 
ESG factors that cannot be mitigated via Integration, 
Active Ownership, or Themed Investing.

17

IOOF | annual report 2020Information 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 (now a discontinued operation). 
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. 

Tax contribution analysis

The IOOF Group contributed a total of $120.2m in taxes 
to Australian, New Zealand and Hong Kong governments 
(state and federal) in the 2020 tax year. $119.9m or 99.75% of 
this amount was attributable to the Australian Government. 

Further taxes paid by the IOOF Group on behalf of others, 
including employees and clients, 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 $95m.

Model portfolio research and selection

IOOF applies a multi-manager approach to the construction 
of the ESG Model Portfolios. This is based on the notion that 
portfolio returns can be enhanced through considered and 
skilful selection of investment managers whose processes 
enable them to outperform the benchmark return of their 
respective asset classes over different market conditions. 

IOOF will continue to follow the existing process employed 
when selecting managers and building its portfolio with the 
added ESG integration which includes how the managers 
conduct their:

•  ESG scoring and approach 
•  Active engagement (voting) – including collaborative 

investor engagement

• 
Industries screened 
•  ESG profile and history
•  ESG agenda when meeting with investment teams
•  SWOT analysis on ESG factors
•  ESG integrated research notes

Our environmental impact 

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. 

During 2017 we commenced a significant project to consolidate 
our property footprint, which has better enabled us to monitor 
and manage our environmental impact. We are always looking 
for new ways to improve our environmental impact, working 
with our landlords on waste, water and energy reduction.

Tax transparency 

The IOOF Group is committed to tax transparency and integrity. 
It has been a signatory to the Board of Taxation’s Voluntary Tax 
Transparency Code (the Code), since January 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 Group's Australian and global operations. 

18

IOOF | annual report 2020Our clients and community 

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.

Establishing trusted relationships with advisers

At IOOF, we believe in the value of financial advice. 

We currently employ or licence approximately 1,500 advisers and also have trusted relationships with financial advisers who 
operate independently. 

We also believe in setting the highest standards in advice. Advisers joining one of IOOF’s advice groups are subject to meeting 
minimum adviser education standards and undergo rigorous compliance and on-boarding processes, to ensure that the 
quality of financial advice IOOF is offering our clients is uncompromised. 

IOOF Community Offer

At IOOF, we have a rich history of helping Australians secure 
their financial future. Living our purpose has meant looking 
after and delivering what matters to our clients, people and 
the wider community. That’s why we are digging back to our 
roots, where the notion of helping Australians who have fallen 
on tough times get back on their feet began. As an Advice led 
company, we want to help those in need by making financial 
guidance and support accessible to the community, free of 
cost through the IOOF Community Offer. 

Through the IOOF Community Offer we are helping everyday 
Australians by providing the following support and guidance: 

•  Pro bono support – practical financial guidance and 
support provided by a select group of IOOF aligned 
advisers (at no cost)

•  Educational videos and content – a series of video 

education and support material.

•  Wealth Report – online personal snapshot report 
will be available to everyone to complete and keep.

We want to make sure that all Australians can talk to an adviser, 
an expert that can help them through this difficult time, get 
them back on their feet and plan for their future. The type 
of help and support needed include simple conversations, 
education sessions or general guidance on particular issues 
– not always resulting in personal advice, that’s why we are 
including this non-personal advice help and support into our 
pro bono offering.

We have created www.ioof.com.au/community as a resource 
for all Australians to access educational material or request 
for pro-bono support. Across our national footprint we have 
426 Advisers who have offered to provide guidance and 
support to those who need it most within their communities 
from 1 July 2020 to 30 September 2020. Many of our advisers 
will continue to provide pro bono advice as part of their 
standard value proposition for their community. 

19

IOOF | annual report 2020Our four-year investment in ClientFirst thinking, new ways 
of working, and supporting systems and processes, 
delivered scalable operations that allowed us to absorb wide 
variations in client demands, deliver personalised service 
tailored to individual client needs, and without location 
being a barrier.

As a result of this, we have a high level of confidence and 
trust in our ability to withstand and respond to disruption. 
This is very important given we are entrusted with the life 
savings and incomes of Australians, and even more so given 
that our clients reflect a higher proportion of older and more 
vulnerable Australians. We have been there when needed 
on phones, making pension payments, and delivering early 
release access quickly.

The speed and agility of our people, systems and processes 
was further highlighted by our response to early access 
to super. From 20 April to 28 June 2020, IOOF made 
99,174 payments under the Early Release of Superannuation 
scheme to satisfy requests totalling $743 million.

IOOF's ClientFirst approach ensured that 97% of all payments 
were made to clients within 5 business days. The P&I business 
made 83% of payments within 5 business days. This was 
important because Early Release requests were being made 
by clients with immediate and urgent needs. We also worked 
together with Government and Regulators to provide feedback 
on aspects of the Early Release of Superannuation scheme.

We continue to invest in growing robotics and artificial 
intelligence capabilities to create more capacity for ClientFirst 
specialists to speak to clients. Real people talking to real people 
is a foundation of ClientFirst thinking. At times call volumes 
were up by over 300% for sustained periods.

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. 

Four years on from its inception, our IOOF Advice Academy 
continues to lead the way in specialist coaching for financial 
advice businesses. Through bespoke workshops, in-practice 
specialist coaching and implementation, we address the 
challenges of providing quality advice through ever-changing 
technology, regulation and consumer expectations. 

Putting the best interests of 
our clients first

IOOF continues to invest in, and mature its ClientFirst 
strategy, under which we believe that focussing on client 
experiences that deliver what matters to our clients will give 
us a sustainable competitive advantage. We do this in the 
context of robust corporate governance.

ClientFirst is about understanding client needs, reframing client 
problems, and helping to rethink the entire client experience. 
We look forward to rolling this model out to clients of our 
recently acquired P&I business.

The strength of the ClientFirst operating model was 
highlighted through our response to the covid-19 pandemic. 
The pandemic brought twin challenges: prioritising the health 
and safety of our people and communities, and at the same 
time making sure there was minimal disruption to delivering 
what matters to our clients.

20

IOOF | annual report 2020Established as a not-for-profit organisation in June 2002, at the time of IOOF’s demutualisation, 
the IOOF Foundation recognises the historical origins of IOOF and the important role it has 
played in the Australian community since 1846.

•  Mental health – All people, regardless of where they 
live or economic status should have access to quality 
mental health care. We have seen that impacts of mental 
health may have flow on effects with many experiencing 
poverty, homelessness and unemployment as a result. 
To make inroads into these issues, we need to address this. 
Integrated within our core programs is access to resources 
that focus on early intervention and prevention.

Since its formal establishment in 2002 the IOOF Foundation has 
donated more than $15 million to community groups across 
Australia. The IOOF Foundation is funded by the income from 
a $18 million plus corpus provided by IOOF. IOOF also funds 
running costs, ensuring that all of the investment income goes 
to supported community programs . 

Our grants program offers long-term grants (up to three years) 
in areas important to the history of IOOF and the wider 
Australian community aligned to our focus areas. 
To date these have been in the areas of: 

•  Aged care – The IOOF Foundation gives priority to 

programs that are committed to providing the quality 
of life for individuals and their families with progressive 
neurological and physical diseases.

•  Families – Our basic needs program, supports community 
groups that are assisting families that are struggling to be 
self-sufficient and support long-term solutions that help 
families move out of poverty or avoid a crisis. 

•  Children and youth – The IOOF Foundation supports 

education projects that help break the cycle of disadvantage 
and empower young Australians to reach their potential. 
Priority is given to programs addressing prevention and 
early intervention and education, employment and 
training for young people.

2020 Community Partners 

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. 

•  Aboriginal Literacy Foundation
•  Ardoch Youth Foundation
•  Blaze Aid
•  Giant Steps Australia
•  Girl from Oz
•  Kids Under Cover
•  Let's Talk 

•  Life4Life
•  Mama Lana's Community 

Foundation

•  Menzies Research Foundation
•  Parkinsons Australia (WA)
•  Red Dust Role Models
•  Righteous Pups Australia

•  Rural Aid
•  Spinal Research Institute
•  The Funding Network 
•  The Reach Foundation
•  The Smith Family
•  Very Special Kids
•  Youth Focus WA

21

IOOF | annual report 2020Our people 

Our culture

At IOOF, our people are critical to our success. We strive to 
create an environment where our employees are engaged, 
inspired and growing with us. An environment where we are 
living our purpose, understand me, look after me, secure 
my future, and delivering what matters most to our clients 
and our people.

IOOF’s culture is defined by putting at the centre of 
everything we do. It’s why our organisational purpose is 
written in the first-person ‘understand me, look after me, 
secure my future’. This unique ClientFirst approach is about 
everyone at IOOF putting themselves in the shoes of clients 
or ‘outside-in thinking’. With this approach, we challenge 
everything we do with a mind-set of understanding 
‘what matters’ and finding the best way to deliver this value 
to clients. It also means we empower our people to do what 
they do best: have an impact and truly make a difference. 
We innovate through finding different ways. 

Employee engagement and alignment

In May 2020, we held our annual Alignment and Engagement 
Survey (AES). We were pleased to see 83% of our people 
respond to the survey and our results significantly improved 
from 2019, with a 12-point uplift in our employee engagement 
score and four-point increase in our alignment score. We are 
now in the top quartile of the alignment industry benchmark. 

There were significant increases in sentiment towards long-term 
direction of the organisation and investment in our people. 
People have clarity about where the organisation is headed 
and feel they are contributing towards this. They also feel well 
supported through the COVID-19 period and connected to 
the organisation despite the challenges of remote working. 

Pleasingly, all governance and risk indicators measured through 
the survey also increased, reflecting our commitment to 
embedding a strong governance and risk culture. 

Following the survey, the Executive Team and leaders across 
IOOF have committed to actions plans that will focus on 
addressing key opportunities identified in the results. 

Supporting our people through COVID-19

At IOOF we were an ‘early mover’ in response to COVID, 
moving most of our people to working from home in a matter 
of days, with minimal disruption to our business operations 
and clients. Since that time our people have been fluently 
working from home. 

Supporting our people through this transition to remote 
working, as well as the challenges of the external COVID 
environment has been critically important for us since. 
We’ve been focusing on remaining connected through 
regular communications and events and giving our people 
the tools and information, they need, when they need it. 

We created of a well-being hub to support our people across 
physical, mental and emotional wellbeing. We’ve also run 
educational sessions on topics like balancing work and care, 
work health and safety from home, financial well-being and 
resilience in addition to supporting people to manage their 
energy through exercise programs that can be completed 
at home. Our people and their families also get access to 
confidential coaching 24/7 through our Employee Assistance 
Program (EAP). Our EAP program offers support on a broad 
range of topics including nutrition and financial wellbeing. 

We are conducting regular pulse surveys to get feedback 
on how our people are feeling and what support they need 
during this period. Feedback from these pulse surveys indicates 
our people are feeling supported and are connected to what 
we are working to achieve. The sentiment around working from 
home has been extremely positive with 87% of respondents 
saying they have had a positive experience overall and most 
eager to continue balancing office and remote working 
in the future. IOOF has seen this period as an opportunity 
for reshaping the way we work and introducing more 
flexibility on an ongoing basis. 

22

IOOF | annual report 2020Planning for the future of work

To help define and plan for our post-COVID work environment, 
we’ve launched a project called ‘Our Work Life’. 

The Our Work Life project is about rethinking the way we 
work longer term. Focusing on technology, home and office 
environments and ways of working, the Our Work Life project 
will enable continued flexible working and ensure collaboration 
and connection across teams and with clients wherever our 
people work.

Diversity and Inclusion

IOOF is committed to creating an environment where everyone 
can bring their whole self to work and where diversity is 
celebrated across all areas of difference, including gender, age, 
cultural identity, ethnicity, disability, sexual orientation, religious 
beliefs, family/lifestyle needs, personal styles and backgrounds. 

IOOF has a Diversity and Inclusion Action Plan to support this 
commitment. The plan sets out the diversity and inclusion 
initiatives for the IOOF Group to help drive progress against 
key focus areas. 

We have a Diversity and Inclusion Advisory Committee in place 
made up of a cross-representation of our people, chaired by 
Renato Mota, our CEO. The Diversity and Inclusion Advisory 
Committee reviews and proposes initiatives through a 
consultation process, to help drive our Diversity and Inclusion 
agenda at IOOF and in the broader community. 

Our current key areas of focus include gender diversity, 
creating a strong and diverse pipeline of talent for critical roles, 
financial wellbeing, flexible working, fostering a culture of 
belonging and leadership capability. 

Some of the key achievements over 

2019/2020 include:

•  Launch of the ‘Our Leading Women’ 
female development program. 

•  Campaign to educate and raise awareness 

on all forms of flexible working. 

•  Launch of the Growing Together 

mentoring program.  

•  Free financial advice offer for all employees, 

whatever their life stage. 

•  Signed a partnership with Financial Executive 

Women which provides education and 

support which all our employees can access. 

•  Refresh of the Diversity and Inclusion Advisory 

Committee who act as a representative 

body on behalf of all employees and a 

sounding board for matters related to the 

Diversity and Inclusion Action Plan.  

•  Capturing employee perceptions about 

Diversity and Inclusion and demographic 

data through the annual engagement survey. 

•  Creation of a wellbeing hub to support 
employees across physical, mental and 

emotional wellbeing.

The table below sets out the number of women in board, 
executive, senior management positions, and across the 
whole workforce:

Category

Board (excluding CEO)

Executives (including CEO)

Senior Managers1

Other Managers2

Other

Total

Female 
Representation

40.00%

27.27%

36.27%

40.53%

51.61%

49.12%

1 Senior Managers includes all roles reporting to an Executive, 

excluding administrative support roles.

2 Other Managers includes all other managers.

23

IOOF | annual report 2020Growth and development of our 
people and leaders

Ensuring our people, at all levels, are growing with us is 
critical to us achieving our strategic and cultural objectives.

We strive to create an environment where our people have 
the tools and support to own and drive their own growth. 
We adopt the 3E Framework – Experience, Education and 
Exposure and encourage our people to display learning 
behaviours to foster their own growth and contribute to 
the growth of others. 

We encourage leaders and team members to have 
conversations about career development on an ongoing 
basis ensuring our people are actively working towards their 
goals. We contribute to the development of our people 
though structured mentoring relationships, a study support 
program and access to professional memberships.

At IOOF we know great leadership is fundamental to our 
success. Developing, aligning and empowering leaders has 
been a key focus of the last 12 months. IOOF is committed 
to developing our existing and future leaders and our 
Leading@IOOF and Leadership Foundation programs are 
designed to strengthen our leadership capability across 
the organisation. 

We have also launched a targeted communications strategy 
for our people leaders to ensure they receive key messages, 
information and education that is specific to their role as 
a leader of others. 

Graduate program

We value the new ideas, skills and energy graduates bring to 
IOOF. In 2019 we launched a refreshed graduate program which 
aims to provides graduates with a structured 12-month learning 
path to accelerate their transition to the workforce and get an 
understanding of IOOF holistically. 

Volunteering and giving

For the last decade, we have supported employees who are 
interested in volunteering through the use of paid volunteer 
leave. This year we expanded our support to the community 
offering significant changes to the program: 
•  Support for emergency volunteers: To make it easier 
for you to support communities during emergencies, 
IOOF introduced crisis leave to assist our employees that are 
members of a volunteer organisation such as the Rural Fire 
Service (RFS), Country Fire Authority (CFA) or State Emergency 
Service (SES) and are called to assist during a declared 
emergency, or in other exceptional circumstances.

•  Support for community volunteers: To acknowledge the 
need for volunteers in a range of areas, IOOF are now 
providing all eligible permanent staff the opportunity 
to increase their volunteer leave to any charitable 
organisation from the current one day to two days.

Our Workplace Giving program encourages 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. 

24

IOOF | annual report 2020Growth mindsetHaving the belief that you are in control of your own ability and there is no end to how much you can learn and developCuriosityCuriosity is driven by the desire to learn and acquire informationFeedbackActively, confidently and continuously seeking feedback on performance and development to continue to growIOOF | annual report 2020

financial 
report
for the year ended 
30 June 2020

Contents

Directors’ Report 

Remuneration Report 

Directors’ Declaration 

Lead Auditor’s Independence Declaration 

Independent Auditor’s Report to the Members 

 Consolidated Statement of Comprehensive Income 

Consolidated Statement of Financial Position 

Consolidated Statement of Changes in Equity 

Consolidated Statement of Cash Flows 

Notes to the Financial Statements 

26

42

59

60

61

67

68

69

71

72

25

 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 (“IOOF Group” or the “Group”) 
for the financial year ended 30 June 2020 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 Allan Griffiths
B.Bus, DipLI.
Independent Non-Executive Director 
and Chairman
Director since 2014

Mr Renato Mota
BComm(Hons), B.Bus
Chief Executive Officer and Managing 
Director

Mr Andrew Bloore
Independent Non-Executive Director
Director since 2 September 2019

Ms Elizabeth Flynn
LLB, Grad Dip App Corp Gov, FAICD, 
FFin, FGIA, FCIS.
Independent Non-Executive Director
Director since 2015

Ms Jane Harvey
B.Com, MBA, FCAANZ, FAICD
Independent Non-Executive Director
Director since 2005
Resigned effective 18 February 2020

26

Experience, special responsibilities, listed and other significant directorships

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. Mr Griffiths is Chairman of the Westpac/
BT Insurance Boards and the Chairman of Metrics Credit Partners.
Mr Griffiths is also Chair of the Group Nominations Committee and a member of the 
Group Audit, Group Risk and Compliance and Group Remuneration Committees.

With more than 20 years’ experience in financial services, prior to being appointed CEO 
in June 2019, Mr Mota held a number of senior executive roles within IOOF. In December 
2018, Mr Mota was appointed Acting CEO and prior to that was Group General Manager 
– Wealth Management since January 2016. During this time he was instrumental in 
leading IOOF through a series of forward-thinking, strategic initiatives including IOOF’s 
advice-led strategy, the group’s ClientFirst transformation and establishing the IOOF 
Advice Academy. Previously, he held numerous executive roles as General Manager of 
Distribution, Investor Solutions and Corporate Strategy and Communications. Before 
joining IOOF in 2003, Mr Mota worked for Rothschild and NAB in corporate finance roles 
with a focus on mergers and acquisitions where he was involved in wealth management 
transactions including the demerger of Henderson Group plc from AMP in 2003 and 
NAB’s acquisition of MLC and Deutsche Financial Planning.

Mr Bloore is an experienced Non-Executive Director, entrepreneur and farmer. He has 
designed, built and sold a number of businesses, focussed on the development of key 
disruptive technologies and distribution services in traditional markets, to create business 
efficiencies. Businesses Mr Bloore has been actively involved in, both as an Executive and/
or as a Director and in the capacity of investment funding, development and leadership, 
include Smartsuper, SuperIQ, and Class Super. Mr Bloore has worked on a range of Senate 
and Treasury Committees, and with the Australian Taxation Office (ATO) Regulations 
Committee on regulation for the superannuation industry. In 2016, Andrew sold his 
superannuation administration business to AMP, stepped down from the Senate and 
Treasury Committees and is now focussed on contributing to organisations as a Non-
Executive Director. Mr Bloore was a non-executive director of FBR Ltd until November 2019.
Mr Bloore is a Board Member and a Member of the Group Risk and Compliance, Group 
Audit, and Group Remuneration Committees. 

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 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, securitisation and superannuation. Ms Flynn was 
a non-executive director of Bennelong Funds Management from 2010 to 2015 and is a 
non-executive director of AIA Australia Limited and The Colonial Mutual Life Assurance 
Society Limited.
Ms Flynn is Chair of the Group Risk and Compliance Committee, and member of the 
Group Audit and Group Remuneration and Nomination Committees.

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 
Dulux Group Limited from 2018 to 2019, 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 A&NZ entities.
Ms Harvey was the Chair of the Group Audit and Remuneration Committees and member 
of the Group Nominations and Group Risk and Compliance Committees until her 
resignation effective 18 February 2020.

IOOF | annual report 2020Name, qualifications and 
independence status

Mr John Selak
Dip Acc, FCA, FAICD
Independent Non-Executive Director
Director since 2016

Experience, special responsibilities, listed and other significant 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. From 2016 to 2020 Mr Selak 
was a non-executive director of National Tiles. Mr Selak is currently Chair of Corsair 
Capital, a non-executive director of Turosi Food Solutions and the IOOF Foundation.
Mr Selak is Chair of the Group Remuneration Committee and a member of Group 
Nominations, Group Audit and Group Risk and Compliance Committees.

Ms Michelle Somerville
B Bus (Accounting), FCA, GAICD, Master 
Applied Finance
Independent Non-Executive Director
Director since 1 October 2019

Mr George Venardos
BComm, FCA, FGIA, FAICD, FCIS.
Independent Non-Executive Director
Director since 2009
Resigned effective 28 November 2019

Ms Somerville is an experienced Non-Executive Director, bringing deep and relevant 
finance, risk and governance experience to the Board, having worked in the financial 
services industry in both her executive and non-executive roles. Previously she was an 
audit partner with KPMG Australia for nearly 14 years, with a focus on the financial services 
industry in both Australia and overseas. Ms Somerville is currently a non-executive 
director of The GPT Group (since 2015), Bank Australia, ED Credit Services, and Save the 
Children (Australia).
Ms Somerville is the Chair of the Group Audit Committee and a member of Group Risk 
and Compliance Committee.

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. Former Director of Bluglass Ltd from 2008 to 2016 and Ardent 
Leisure Group from 2009 to 2017.
Chair of the Nominations Committee and member of the Group Audit and Remuneration 
Committees until 10 December 2018.

The Group 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 – financial advisers provide strong and enduring value to clients by helping clients build, maintain 
and protect their wealth, helping clients navigate their way through a range of financial products and services, and by educating 
clients, contributing to financial literacy in Australia and giving clients and their families peace of mind about their financial future;
•  Portfolio and estate administration – IOOF Employer Super is one of Australia’s leading superannuation solutions, offering a wide 
choice of investments, tailored insurance options, competitive fees, and personalised advice. The IOOF Pursuit platform offers 
multiple retail insurers, group insurance, tax effective features, and smart online trading and transacting capabilities;

• 

Investment management – through our investment management expertise, we offer a range of highly rated multi-manager funds 
that offer an easy and effective way to diversify investment portfolios;

•  Ex-ANZ Advice Licensees (Ex-ANZ AL) – Acquired from ANZ in October 2018, they provide financial planning advice services to 
clients. As part of the Advice 2.0 strategy, these businesses are in the process of being integrated with heritage IOOF Advice 
division with a focus of embedding IOOF’s ClientFirst methodology throughout; and

•  Ex-ANZ pensions and investments (Ex-ANZ P&I or P&I)– Acquired from ANZ in January 2020, the P&I business provides platform 
services across retail and corporate, and an in-house multi-asset management team with OptiMix as flagship product. The P&I 
integration strategy is focussed on ensuring efficient integration of the P&I business with IOOF’s existing Portfolio and Investment 
management businesses.

27

IOOF | annual report 2020 Directors’ report (cont’d) 

Operating and financial review

In accordance with current Australian Accounting Standards, 
the audited financial results of the benefit funds1 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 (2019: $nil) but results in offsetting pre-tax 
profit and income tax amounts not available to shareholders.

The following table 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 and non-recurring, 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. 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

Profit attributable to Owners of the Company

Discontinued operations

Profit/(Loss) from continuing operations attributable to Owners of the Company

Underlying net profit after tax pre–amortisation (UNPAT) adjustments:

Amortisation of intangible assets

Unwind of deferred tax liability recorded on intangible assets

Acquisition costs – Acquisition advisory

Acquisition costs – Integration preparation

Acquisition costs – Finance costs

Termination payments

Profit on divestment of assets

Non–recurring professional fees paid

Impairment of goodwill 

Remediation costs

Governance uplift costs

Other

Income tax attributable

UNPAT from continuing operations

UNPAT from discontinued operations

UNPAT

Further detail on UNPAT is provided in Notes 2-1 to 2-4 of the financial statements.

Note

2–2

2–4

2–4

2–4

2–4

2–4

2–3

2–4

2–4

2–4

2–4

2020

$'000

146,964

(88,166)

58,798

36,749

(9,717)

6,010

24,955

65

2,865

(1,528)

6,426

4,344

1,511

4,461

1,444

(12,337)

124,046

4,788

128,834

2019

$'000

28,560

(58,374)

(29,814)

37,651

(9,881)

2,488

20,766

416

2,043

(368)

2,027

–

235,278

–

875

(78,180)

183,301

14,688

197,989

1  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.

28

IOOF | annual report 2020UNPAT adjustments:

Amortisation of intangible assets (excluding software 
development): Non-cash entry reflective of the value 
of intangible assets diminishing over their useful lives. 
While intangible assets are continuously generated within 
the IOOF Group they are only able to be recognised when 
acquired, such as brand names and customer relationships. 
The absence of a corresponding entry for intangible asset 
creation results in a one-sided decrement to profit as the 
acquired intangible assets are amortised. The amortisation of 
software development costs is not excluded from UNPAT as it 
represents the utilisation of these assets within the business.

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 costs – Acquisition advisory: One off payments 
to external advisers assisting in corporate transactions, such as 
the acquisition of the ANZ OnePath Pensions and Investments 
(ANZ P&I) business (prior comparative period (pcp): ANZ Advice 
Licensees (ANZ ALs)), which were not reflective of conventional 
recurring operations.

Acquisition costs – Integration preparation: Staff and 
specialist contractor costs related to integration preparation 
for the acquisition the ANZ P&I business (pcp: ANZ ALs). Costs 
include project labour costs, IT and other consultancy fees, 
outsourced hosting services, and Advisor recognition accruals

Acquisition costs – Finance costs: Costs of securing finance 
for the acquisition of the ANZ P&I business.

Termination payments: Represents termination payments 
to staff which facilitates restructuring to ensure long term 
efficiency gains.

Profit on divestment of assets: Divestments of non-core 
businesses, client lists and associates.

Non-recurring professional fees (recovered)/paid: Payment 
of specific legal costs that are not reflective of conventional 
recurring operations. Includes costs associated with assistance 
with APRA and ASIC related matters

Impairment of goodwill: A non-cash impairment of $4.3m 
has been recognised in relation to goodwill allocated to the 
Consultum business. Reduced profitability from lower revenue 
led to its expected fair value less costs to sell declining to 
below the carrying value of the goodwill. Revenue decline 
has arisen due to changes in the regulatory landscape and 
the impacts of COVID-19.

Remediation costs: Remediation costs that arose 
predominantly as a result of fees for no service and quality 
of advice remediation programs.

Governance uplift costs: Costs incurred in undertaking 
projects that are outside the ordinary course of business. 
Activities undertaken during the year that have resulted in 
governance uplift can be found in the Governance Uplift 
section on the following page. Costs predominantly relate to 
project labour costs and consultancy fees in relation to APRA 
MAP costs and RE/RSE separation costs.

Other: Impairment of customer related intangibles and losses 
on divestment of non-current assets.

Income tax attributable: This represents the income tax 
applicable to certain adjustment items outlined above.

Review of strategy

The IOOF Group currently has a transformational strategic 
focus. The key pillars to this are Advice 2.0, Evolve21 and P&I 
integration. These pillars are designed to focus, simplify and 
grow the business to deliver on the strategy of ‘advice-led 
wealth management’ with IOOF’s ClientFirst methodology 
underpinning every aspect of the business.

Advice 2.0

The Advice 2.0 project is focussed on the long-term 
sustainability of the Advice division, an initiative that focusses 
on redesigning the advice experience. The core benefits of 
this project are to deliver more accessible and cost-effective 
financial advice, improve adviser efficiency and ensure a 
profitable division that is independent from product.

Changes in 2020 that have been building the foundation 
for Advice 2.0 are:
•  acquisition of advice businesses to seed the expansion 
of the employed channel, such as Buyer of Last Resort 
Acquisitions in Bridges as well as embedding the purchases 
of Bendigo and financial arm of IMB Bank.

•  Critical governance harmonisation work across each of 

the Licensees has been completed to ensure a consistent 
operating model, across multiple brands.

•  Critical optimisation work across the self-employed 

Australian Financial Service Licensees has been rolled out 
that underpins the sustainability and future state of advice.

29

IOOF | annual report 2020 Directors’ report (cont’d) 

Operating and financial review (cont’d)

Evolve21

Evolve21 is a key enabler to IOOF’s group strategy supporting 
the three business pillars, being our clients, our business, and 
our people. It is a programme of work that will simplify the 
platform suite to one contemporary and simplified platform 
offering by the end of the 2021 calendar year.

Evolve21 will enable significant simplification of our business, 
support the ClientFirst methodology and deliver for our 
people by reducing waste and complexity, allowing greater 
focus on service excellence. Evolve21 is critical to IOOF’s 
ability to deliver improved client outcomes through efficiency, 
sustainability and our ability to innovate.

In 2020, the delivery of enhanced features has continued with 
the release of IDPS SMSF account structures, online corporate 
actions and Managed Discretionary Accounts functionality. 
These enhancements are important milestones to enable 
the ultimate consolidation. A dedicated Steering Committee 
made up of members of the IOOF Executive Team has been 
established. Several work streams are in operation to support 
the project and a dedicated project manager and engagement 
and communications manager have been recruited to help 
lead and support the project as activities ramp up.

P&I Integration

In January 2020 IOOF completed the purchase of ANZ’s 
OnePath Pensions and Investments business. In doing so, 
IOOF has now moved to the next phase of separating the 
business from ANZ and realising the expected benefits via 
meaningful operating cost synergies. The Integration Program 
is responsible for managing and overseeing the delivery 
of these activities.

The separation from ANZ is primarily reliant on system 
separation, which is currently forecast to be delivered 
in early 2022. Until this time ANZ is supporting IOOF by 
providing transitional services under a Transitional Services 
Agreement (TSA). Key functions and staff under this TSA 
will be progressively transitioned on an as ready basis. This 
will ensure functions are both bedded down as early as 
possible and IOOF’s reliance on the TSA services is reduced 
as soon as possible.

In parallel, IOOF are working towards realising the benefits 
of joining the businesses. Key areas of focus include 
rationalisation of products and services, optimisation of 
organisational structure, elimination of duplicate back office 
functions and leveraging the benefits of increased scale.

Governance and executive oversight have been implemented, 
with the key forums including (a) Executive Transformation 
and Integration Steering Committee and (b) Design 
Integration Group.

Right sized stream delivery teams have been, or are in the 
process of being, mobilised, with key milestones such as 
finalisation of the Joint Project Separation Planning and Phase 
1 of an organisational redesign, system separation, transition 
of additional ANZ staff to IOOF, phase 2-3 of organisational 
redesign, product rationalisation roadmap and the entity 
rationalisation strategy. Underlying this is ensuring that IOOF’s 
ClientFirst strategy is embedded in all aspects of integration.

Governance uplift

On 7 December 2018, APRA gave notice of additional licence 
conditions on IOOF’s APRA regulated entities. These conditions 
required, inter-alia:
•  separation of responsible entity and registrable 

superannuation entity duties to separate independent 
corporate entities;

• 

implementation and effective operation of an independent 
member outcomes driven function (the Office of the 
Superannuation Trustee or “OST”); and

•  monitoring and reporting on progress via an 

independent expert.

Effective 30 November 2019, IOOF met the requirement 
under the licence conditions to separate the Responsible 
Entity and Registrable Superannuation Entities duties into 
separate independent corporate entities. The OST was 
implemented and continues to independently support IOOF’s 
APRA regulated entities and advance member outcomes, 
supporting SPS515.

The Australian Financial Services Licence of the newly 
appointed IOOF Responsible Entity and Service Operator 
contains additional conditions imposed by ASIC. These 
conditions included the establishment of the Office of 
Responsible Entity (ORE) and monitoring and reporting 
on progress on the conditions via an independent expert. 
The newly established ORE is an independent function 
focused on assessing service providers to IOOF’s investment 
schemes, uplifting the investment governance framework 
and ensuring that IOOF’s investment schemes are operated in 
the best interests of investors. IOOF is tracking well towards 
meeting all of its licensing conditions as required by ASIC and 
under the independent review process.

Response to COVID-19 pandemic

The IOOF Group Crisis Management Team (CMT) was convened 
in February 2020 to manage the Group’s response to the 
COVID-19 global pandemic. The CMT undertook a review of 
critical processes, systems, third party providers and capital 
management to ensure continuity of business operations.

30

IOOF | annual report 2020The CMT facilitated communication with IOOF Group staff to, 
among other things, impose restrictions on staff attending 
work premises, highlight increased risks of cybercrime during 
the pandemic, suspend work travel, and implement working 
from home arrangements as the Australian Federal and State 
Government responses to the pandemic progressed.

The IOOF Group quickly responded to the requirement to 
work from home and successfully maintained client service 
standards in line with the ClientFirst methodology while 
moving to and maintaining work from home arrangements.

While the IOOF Group has seen reduced revenues flowing 
from market volatility and Federal Government initiatives 
related to the pandemic, the Group has been able to manage 
operations without impacting debt covenants or longer-
term viability. The Group has assessed sensitivities of key 
assumptions considering the impacts of market volatility and 
disclosed these where appropriate.

IOOF welcomed the Federal Government’s initiatives to 
support those in our community most impacted by the 
current environment. This includes the ability to withdraw up 
to $20,000 from superannuation over two financial years. IOOF 
was well placed to support this initiative given high levels of 
investment liquidity as well as the diversified demographic 
nature of our members and clients. 

Payments made under the Early Release of Superannuation 
scheme from 20 April to 28 June 2020 have impacted Q4 
2020 net flows. IOOF (including P&I) has paid 99,174 requests 
totalling approximately $743 million in relation to the Early 
Access to Superannuation scheme: 
• 

IOOF (excluding P&I) has paid 21,818 requests 
totalling $170 million. 

•  The P&I business has paid 77,356 requests 

totalling $573 million. 

IOOF’s ClientFirst approach ensured that 97% of all payments 
were paid to clients within 5 business days. For P&I, 83% of 
payments were made within 5 business days.

Remediation Provisions

Work has been progressing throughout the year as IOOF 
reviews advice remediation provisions and remediates clients. 
Information available to date indicates that:

•  The current provisions around the IOOF advice remediation 
have not changed materially from the prior year, however, 
have reduced as a result of payment of program costs and 
customer remediation payments during the financial year.

•  An increase in the ex-ANZ AL remediation provision of 
$80m is required, in addition, the provision has been 
drawn down by client remediation payments and program 
costs paid throughout the year. This increase is driven by 
a change in methodology relating to adviser categorisation, 
now aligning to that used by IOOF, and this is offset by a 
corresponding increase in the equivalent receivable from 
ANZ. The provision remains under the financial cap of the 
remediation program arrangements with ANZ. 

As part of the acquisition of the ex-ANZ P&I business, 
additional remediation provisions have been taken on.

Acquisitions and divestments

The IOOF Group has a long-term strategy of pursuing growth 
through acquisitions and has completed several acquisitions 
in recent years. The IOOF Group will continue to pursue 
acquisitions within the Wealth Management sector on an 
opportunistic basis. Acquisitions will only be considered where 
they present a logical strategic fit with existing operations and 
are priced reasonably.

The following are material acquisitions and divestments in the 
2019/20 financial year.

ANZ P&I acquisition

Final completion of the acquisition of the ANZ P&I business 
occurred on 31 January 2020. A renegotiated sale price of 
$850m (subject to net asset adjustment), down $125m (14.7%) 
from the original $975m, was announced on 17 October 2019.

Since completion on 31 January 2020, the P&I business has 
been impacted by the market volatility and government 
policy decisions in relation to the COVID-19 pandemic. Market 
volatility is highly correlated to revenue volatility in the P&I 
business, with market shocks causing equivalent percentage 
movements in net operating revenue in this business.

Estimated cost synergies were revised to $68m pre-tax per 
annum (from $65m pre-tax per annum) in January 2020, 
with $13m of those savings having been achieved prior to 
completion. The Group has committed to achieving these 
synergies and delivering on them in full from 1 July 2023.

Ord Minnett divestment

On 24 September 2019, IOOF completed the divestment of its 
70% holding in the Ord Minnett business for a total purchase 
consideration of $115.0m, $10.0m of which was received in the 
previous financial year as a non-refundable deposit. The Group 
recognised a post-tax profit on divestment of $83.7m.

Further detail on these divestments is provided at Note 2-2 
of the financial statements.

31

IOOF | annual report 2020 Directors’ report (cont’d) 

Operating and financial review (cont’d)

Analysis of financial results – IOOF Group

On a continuing operations basis, the IOOF Group’s UNPAT of $124.0m represented a $59.3m (32%) decrease on prior year. Inclusive of 
discontinued operations – Ord Minnett and AET Corporate Trust – UNPAT decreased by $69.2m (35%) to $128.8m. The variances below 
compare only the continuing operations of the IOOF Group.

Gross margin

Other net operating revenue

Other revenue (incl share of profits of associates)

Operating expenditure

Net financing

Net non-cash items

Income tax expense and non-controlling interest

2020

$’000

2019

$’000

577,597

496,780

2,063

7,417

3,268

11,079

(384,382)

(307,223)

(1,621)

(26,931)

(50,097)

65,558

(13,874)

(72,287)

Movement

$’000

80,817

1,205

(3,662)

(77,159)

(67,179)

(13,057)

22,190

Underlying Profit after Tax

124,046

183,301

(59,255)

Gross margin increased by $80.8m

Other revenue decreased by $3.7m

%

16.3% 

(36.9%)

(33.1%)

(25.1%)

(102.5%)

(94.1%)

(30.7%)

(32.3%)

Excluding the $118.5m gross margin contribution from the 
ex-ANZ P&I business, gross margin declined by $37.7m. The 
following analysis discusses gross margin ex-ANZ P&I.

During the current year, average Funds Under Management, 
Administration and Advice (FUMA) were $136.7b, an increase of 
21.3% on prior year. This increase was derived largely from the 
inclusion of the ex-ANZ AL average FUMA of $16.2b, excluded 
in the prior year due to its acquisition in October 2018 skewing 
the average. Equity market performance, driven by market 
volatility as a result of the COVID-19 pandemic has resulted in 
FUM outflows of $2.6b in the current year offsetting organic 
growth in advice and platform funds. Platform flows of $1.3b 
were broadly equivalent to $1.4b in the prior year. Financial 
advice flows of $0.7b were slightly up on the prior year ($0.5b). 
Investment management outflows of $0.4b were largely 
derived from pension payment based redemptions.

The higher level of market volatility impacted revenues across 
the entire business through lower FUMA. Within platform, 
the lower rates also reflected the continuing trend for funds 
to be directed towards more contemporary platforms with 
lower fees, but commensurately lower attributable overheads. 
Investment management margins were relatively stable which 
is reflective of the steady state maturity and complementary 
nature of that segment. In financial advice, price competition 
and the need to re-set fees in response had a negative impact 
on segment margin overall.

The reduction in other revenue relates predominantly to lower 
conference revenue received as a result of the cancellation of 
conferences due to COVID-19 restrictions. Lower conference 
revenue is predominantly offset by lower conference costs 
included in operating expenditure.

Operating expenditure increased by $77.1m

ANZ P&I contributed an additional $64.0m in operating 
expenditure since completion on 31 January 2020. 
In addition to this, the full year impact of the ex-ANZ AL 
business contributed an additional $8.2m of costs compared 
to 9 months in the prior year. Outside the impact of the 
ex-ANZ P&I and ALs, operating expenditure increased 
$4.9m or 2% on prior year. The modest increase in operating 
expenditure excludes the impact of expenditure items 
reversed when calculating UNPAT. The introduction of AASB 
16 meant there was a $13.9m favourable reclassification of 
occupancy expenses to interest ($2.8m) and depreciation 
($15.8m) charges. Labour costs are the IOOF Group’s 
most material at 73% of operating expenditure overall. 
These costs, ex-ANZ P&I and ALs, have increased by $9.2m 
chiefly due to an increased number of high salary employees 
required to uplift our governance activity in the Office 
of the Superannuation Trustee as well as a higher cohort 
of risk, compliance and governance professionals added. 
IT expenditure increased $3.0m due to the implementation 
of new systems in preparation for the acquisition of ANZ P&I 
and enhanced governance monitoring. Administration costs 
increased $1.4m principally due to increased licence fees and 
subscriptions. Professional fees increased $5.0m driven by 
increases in consultants and legal costs as a result of activity 
to uplift governance.

32

IOOF | annual report 2020Net interest income decreased by $67.2m

Net interest income decreased largely in line with the 
11 May 2019 12.4% step down of the coupon rate on the debt 
note of $800m issued to ANZ and an additional $2.8m in 
interest charges under AASB16.

Other impacts decreased UNPAT by $13.1m

Depreciation expenses have increased by $14.8m, 
predominantly reflecting the impact of adoption of AASB16. 

Share-based payments expense was $1.9m lower due to 
non-vesting of previously expensed grants.

Income tax expense decreased by $22.2m 
Income tax expense relative to prior year principally reflects 
the decline in the IOOF Group’s profitability driven in large 
part due to the reduction in interest revenue on the $800m 
debt note and the market volatility as a result of COVID-19. 
IOOF’s effective tax rate is 32.5% (pcp 34.5%).

Analysis of financial results – Segments (excl Ex-ANZ wealth management and 
discontinued operations)

Financial advice and distribution

Net operating revenue

Other revenue (incl share of profits of associates)

Operating expenditure

Net financing

Net non-cash items

Income tax expense and non-controlling interest

Underlying Profit after Tax

2020

$’000

179,514

2,884

2019

$’000

191,522

4,009

(103,572)

(106,863)

(534)

(9,690)

(20,175)

48,427

130

(4,320)

(25,117)

59,361

Movement

$’000

(12,008)

(1,125)

3,291

(664)

(5,370)

4,942

(10,934)

%

(6.3%)

(28.1%)

(3.1%)

(510.8%)

124.3%

(19.7%)

(18.4%)

•  Average funds growth through net inflows have been more than offset by the impact of market volatility through the COVID-19 
pandemic and compounded by competitive pricing from third party administrators which IOOF has since matched with an 
equivalent offer. In addition, Shadforth advisers have increased their clients’ weighting to IOOF administration. This results in 
the portfolio administration fee being increasingly apportioned to that segment whereas margin revenue from third party 
administration platforms was previously recognised in the advice segment.

•  Operating expenditure has decreased slightly in line with an increasing share of managerial and compliance oversight occurring 

within the ex-ANZ segment.

•  Net non-cash items increased in line with group share based payment and depreciation impacts noted above.

Portfolio and estate administration

Net operating revenue

Other revenue (incl share of profits of associates)

Operating expenditure

Net financing

Net non-cash items

Income tax expense and non-controlling interest

Underlying Profit after Tax

2020

$’000

211,430

–

2019

$’000

231,952

–

(115,005)

(108,932)

(34)

(11,385)

(26,918)

58,088

–

(7,700)

(35,932)

79,388

Movement

$’000

(20,522)

–

(6,073)

(34)

(3,685)

9,014

(21,300)

%

(8.8%)

n/a

5.6%

(100.0%)

47.9%

(25.1%)

(26.8%)

•  Net operating revenue decreased as a result of net funds diminution as a result of market volatility through the COVID-19 
pandemic, in addition to funds movement from higher priced legacy and transition platforms to contemporary platforms 
with competitive fees.

• 

Increased operating expenditure resulted primarily from increased governance via implementation of the Office of the 
Superannuation Trustee and additional Risk and Compliance FTE.

•  Net non-cash items increased in line with depreciation impacts noted above.

33

IOOF | annual report 2020 Directors’ report (cont’d) 

Operating and financial review (cont’d)

Investment management 

Net operating revenue

Other revenue (incl share of profits of associates)

Operating expenditure

Net financing

Net non-cash items

Income tax expense and non-controlling interest

Underlying Profit after Tax

•  Net operating revenue improved in line with higher 
average FUMA for the year. Volatility due to COVID-19 
in Q4 did not offset the impact of higher FUMA for the 
majority of the year.

•  Net non-cash items increased in line with depreciation 

impacts noted above.

Financial Position

The IOOF Group held cash and cash equivalents of $374.7m 
at 30 June 2020 (30 June 2019: $97.4m). 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. Restricted cash 
of $145.6m, relating to the Operating Risk Financial Reserve 
(ORFR) cash reserves, acquired as part of the net assets of the 
ex-ANZ P&I acquisition included on the corporate balance 
sheet and $3.7m cash held by the Group’s statutory benefit 
funds at 30 June 2020 (30 June 2019: $5.8m) both of which 
are not available to shareholders.

On 27 October 2019, IOOF Group amended the syndicated 
facility agreement (SFA) with lenders to reduce the available 
facilities to reflect the reduced consideration for the ANZ P&I 
business. The amended SFA consists of the following facilities 
with the repayment term effective from 27 September 2018:
•  $240m revolving cash advance facility with a 3-year 

repayment term, amended to 4 years post 30 June 2020.

•  $375m revolving cash advance facility with a 5-year 

repayment term.

•  $60m multi-option facility with a 3-year repayment term.

Proceeds from SFA borrowings were initially applied towards 
the subscription of a debt note with face value $800m from 
ANZ. The debt note was redeemed on 31 January 2020 
and applied against the consideration owing for the 
ANZ P&I business.

The overall net debt to equity ratio stood at 25% at 30 June 
2020 (30 June 2019: 0%) reflecting a net $430.9m in borrowings 
(including lease liabilities), principally $460m under the SFA.

2020

$’000

66,451

–

2019

$’000

63,144

–

(10,537)

(10,698)

–

(1,863)

(16,396)

37,655

–

(1,799)

(15,538)

35,109

Movement

$’000

3,307

–

161

–

(64)

(858)

2,546

%

5.2%

n/a

(1.5%)

n/a

3.6%

5.5%

7.3%

Cash flow forecasting and monitoring of lending covenants 
is conducted monthly. This is principally to ensure sufficient 
liquidity for future needs and to monitor adherence to 
licence conditions.

Risks

The IOOF Group manages exposure to risks in the course of 
conducting our everyday operations and implementing our 
strategy. The material risks faced by the IOOF Group include, 
but may not be limited to:

Strategic and Tactical

(i) Competition

In the markets in which the IOOF Group operates a variety of 
participants compete for investments from clients and for the 
provision of wealth management services. Competitive market 
conditions may limit the level of assets managed and earnings 
available to us. We manage this risk by continuously investing 
in client service, product design and stakeholder relationships, 
among other improvements.

(ii) Dependence on key personnel

The IOOF Group’s continued ability to compete effectively 
depends on our capacity to attract, retain and motivate 
our employees. The loss of key executives or staff without 
suitable replacements could cause material disruption to 
our operations in the short to medium term. We undertake 
succession planning and offer competitive employment 
conditions and benefits to manage this risk.

(iii) Dependence on financial advisers

The success of the IOOF Group’s advice and platform business 
is dependent on the quality of our relationships with financial 
advisers and, in turn, the quality of their relationships with their 
clients. Our ability to maintain productive adviser relationships 
is managed by monitoring and, where necessary, enhancing 
our service levels, technological capability, product offerings 
and professional training.

34

IOOF | annual report 2020(iv) Acquisitions

Acquisitions involve inherent risks which could negatively 
impact the potential benefits of a new business and could 
have a material effect on the IOOF Group’s financial position. 
Our prior experience with acquisitions means that we 
have a significant complement of experienced staff and 
relationships with specialist advisers to support the assessment 
of acquisition opportunities. This ensures the Board is fully 
informed of the risks and opportunities associated with any 
potential individual acquisition.

(v) Environmental, social and governance (ESG)

ESG risks can have a material impact on our ability to deliver 
good long-term outcomes for our clients, investors and the 
community. To ensure we fulfil our purpose, we consider a 
broad range of ESG risks and opportunities, including climate 
change, human capital management, modern slavery, diversity 
and inclusion and tax transparency, among others. Our ESG 
activities are discussed in the ESG section of the annual report.

Governance

(vi) Governance

IOOF applies the Three Lines of Defence governance model to 
govern risk management and compliance activities across the 
Group. All IOOF entities, including IOOF Holdings Ltd and its 
controlled entities are supported by a number of committees, 
including their respective designated Risk and Compliance and 
Audit Committees. These committees provide the required 
structure to manage governance issues such as conflicts of 
interest, board independence, appropriate audit and review, 
among others. If these are inadequate, we may not meet our 
legal, compliance and regulatory responsibilities, and the 
expectations the community has of a listed company.

In addition, IOOF has strengthened governance 
activities through the establishment of the OST and the 
ORE. As independent functions, they are focussed on 
uplifting governance and ensuring member and investor 
driven outcomes.

Reputation

(vii) Brand and reputation

Actions which damage the IOOF Group’s brand and reputation 
may impact our ability to attract and retain the support of 
clients, employees, financial advisers, and employers, as well 
as our future profitability and financial position. We actively 
monitor media and other public domain commentary on 
our affairs, proactively promote the value of our services, 
products and community initiatives and focus on building 
a ClientFirst culture.

Conduct

(viii) Conduct risk

Conduct risk is the risk of intentionally or unintentionally 
delivering poor outcomes for stakeholders (including clients, 
staff and shareholders) as a result of improper conduct (including 
conduct that is not consistent with our values, Code of Conduct 
and ClientFirst philosophy) or inadequate systems (including 
complexity). Conduct risk goes beyond our legal and regulatory 
obligations. It is about how we treat our stakeholders 
(includes fairness of outcomes) and whether our products and 
services meet our stakeholders’ needs and expectations. Our 
management of conduct risk is supported by the IOOF Group 
Code of Conduct, which sets out the tenets of professional and 
personal conduct which apply to all our people. These include 
acting at all times within the law and in the best interests of our 
members, clients, shareholders and the IOOF Group.

(ix) Provision of investment advice

The IOOF Group’s financial advisers and authorised 
representatives provide advice to clients and may be exposed 
to regulatory action or litigation if the advice is judged to be 
incorrect, if the authorised representative otherwise becomes 
liable for client losses, and in certain other circumstances. 
This risk is managed by having high professional, educational, 
compliance, assurance and training standards for our advisers. 
The potential financial impact is mitigated by taking out 
appropriate insurance cover.

The assurance and governance framework, used to monitor 
and supervise advisers, has been enhanced to ensure 
compliance with ASIC’s 515 Report. It has also been assured 
by an external independent expert.

Financial and Liquidity

(x) Credit

Credit risk refers to the risk that a counterparty will fail to meet 
its contractual obligations, resulting in financial loss that arises 
from loans and other receivables. Our counterparties generally 
do not have an independent credit rating except for ANZ. 
The IOOF Group assesses the credit quality of each debtor 
considering its financial position, past experience with the 
debtor, and other available credit risk information.

(xi) Interest rate and cash flow

Interest rate risk is the risk to the IOOF Group’s earnings and 
capital arising from changes in market interest rates. Financial 
instruments that may be impacted by interest rate risk consist 
of cash and cash equivalents, certificates of deposit, 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 may expose the Group to cash flow interest rate risk.

35

IOOF | annual report 2020 Directors’ report (cont’d) 

Operating and financial review (cont’d)

(xii) Liquidity

Liquidity risk relates to the IOOF Group having insufficient 
liquid assets to cover cash flow requirements. We manage 
liquidity risk by maintaining sufficient liquid assets and an 
ability to access a committed line of credit. The liquidity 
requirements for our licensed entities are regularly 
reviewed and carefully monitored in accordance with 
their licence requirements.

(xiii) 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 examining the 
relevant factors and circumstances prevailing at that time.

(xiv) Financing

Financing risk refers to the IOOF Group’s inability to refinance 
debt facilities or to secure new financing on satisfactory 
terms which could adversely affect our financial performance 
and prospects. To the extent that this occurs, we may not 
be able to take advantage of acquisition and other growth 
opportunities, develop new ideas or respond to competitive 
pressures, which may have an adverse impact on our 
financial position and performance. This risk is minimised 
through oversight by a dedicated Treasury function with 
established policies and procedures which are subject to 
continuous monitoring and review. Banking covenants 
are regularly reviewed to ensure any potential issues are 
identified well in advance.

Investment Governance

(xv) Changes in investment markets

The IOOF Group derives a significant proportion of its 
earnings from fees and charges based on the level of funds 
under management, administration, advice, and supervision 
(FUMAS). Among other factors, the level of FUMAS reflects the 
performance of investment markets. Changes in domestic or 
global investment market conditions could lead to a decline 
in FUMAS, adversely impacting the amount we earn in fees 
and charges, as well as reduced client interest in our financial 
products and services. To manage this risk, we offer a range 
of products and services suitable for different investment 
markets and establish comprehensive investment governance 
committees, policies and procedures that are subject to 
continuous monitoring and oversight.

Operational

(xvi) Operational

Operational risks may arise in the daily functioning of the 
IOOF Group’s businesses, in connection with, investment 
management, tax and financial advice, legal and regulatory 
compliance, product commitments, process error, system 
failure, failure of security and unit pricing errors, among 
other functions. These risks are managed through IOOF’s Risk 
Management Framework which includes systems, structures, 
policies, procedures and staff to identify, measure, evaluate, 
monitor, report, control and mitigate internal and external risks.

IOOF’s response to the COVID-19 crisis resulted in the 
execution of the organisation’s Crisis Management Plan, 
including pandemic planning process, which resulted in the 
deployment of the organisation’s work from home strategy 
and has now become part of ‘Our Work Life’.

(xvii) Unit pricing errors

A unit pricing error by the IOOF Group or its service providers 
could cause financial or reputation loss. This risk affects 
the broader funds management industry and may result 
in significant financial losses and brand damage to several 
financial services organisations. We minimise this risk through 
controls, procedures and contractual enforcement which are 
subject to continuous monitoring and oversight. We maintain 
a significant complement of experienced staff and utilise 
specialist service providers to maintain robust systems and 
accurate inputs.

(xviii) Information technology

The IOOF Group relies heavily on information technology 
(IT). A significant or sustained failure in the core technology 
systems could materially affect our operations, which could 
impact our future profitability and financial position. We have 
implemented a next-generation firewall, pursue continuous 
improvements to protect user devices and impose segregation 
of duties between technology environments. More broadly, 
we apply controls (including disaster recovery testing) and 
procedures which are subject to continuous monitoring and 
oversight, maintain a significant complement of experienced 
staff and employ specialist IT advisers. Our IT controls are 
aligned with our management of cyber security risks (below).

(xix) Cyber security

There is a risk of significant failure in the IOOF Group’s 
operations or material financial loss as a result of cyber-attacks. 
We have implemented measures and controls that cover 
identification, detection, monitoring and response in relation 
to cyber threats. Cyber security controls are aligned with those 
employed to minimise IT risks.

36

IOOF | annual report 2020(xx) COVID-19

(xxiii) Regulatory and legislative reform

The existence of COVID-19 was confirmed in early 2020 and 
in March 2020 was declared a pandemic by the World Health 
Organisation. This has resulted in significant volatility in global 
and domestic financial markets.

There is still significant uncertainty on the likely duration and 
the ultimate impact COVID-19 will have on world economies. 
Given the high degree of correlation between IOOF’s revenue 
and movements in the stock markets, there are potential 
unpredictable short or longer term financial impacts 
on the Company.

Insurance

(xxi) Insurance

If the IOOF Group incurs uninsured losses or liabilities, 
its assets, profits and prospects may be adversely affected. 
To protect against this risk, we hold insurance policies, 
including 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 our assets, liabilities, 
officers and employees. However, there are some risks that 
are uninsurable (e.g. nuclear, chemical or biological incidents) 
and risk incidents where the insurance coverage is reduced 
(e.g. cyclone, earthquake, flood, fire). In addition, we face risks 
associated with the financial strength of our insurers to meet 
indemnity obligations when called on which could have an 
adverse effect on earnings.

Legal and Compliance

(xxii) Reliance on licences and authorities

A number of the IOOF Group’s controlled entities are required 
to hold a number of licences, most notably Australian Financial 
Services (AFS) or Registrable Superannuation Entity (RSE) 
licences. Failure to comply with the general obligations and 
conditions of a licence could result in the suspension or 
cancellation of a licence, which would have a material adverse 
effect on our 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. Policies and procedures are 
in place across the organisation to ensure compliance with 
licences is monitored closely.

The financial services sector in which the IOOF Group 
operates is subject to extensive legislation, regulation and 
supervision by regulatory bodies across multiple jurisdictions. 
The regulatory regimes governing our business activities 
are complex and subject to change. If the amount and 
complexity of new regulation increases, so too may the costs 
of compliance and risks of non-compliance. We maintain an 
appropriately skilled and experienced staff and relationships 
with specialist advisers to minimise this risk.

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. The Board has 
determined that a dividend of 11.5 cents per share, resulting in 
a total payout ratio of 75% for the financial year, is appropriate. 
Current year profits support the payout.

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 12 months 
to 30 June 2020 was 1.8%, with a dividend yield of 6.7% (based 
on the financial year volume weighted average price) which 
was partially offset by share price decline of 4.8%. The market 
valuation of the IOOF Group remains reflective of uncertainty 
over the impacts of COVID-19 in addition to the long term 
effects of adoption of Royal Commission recommendations 
for wealth management, the acceleration of margin 
compression in administration and the yet to be realised 
potential for institutions to unlock a profitable business model 
in non-salaried advice businesses. TSR in the 5 year period 
from 1 July 2015 was -4.2% on a compounding annualised 
basis. The IOOF Group is in a strong financial position with 
borrowings within covenants, a low interest rate environment 
which reduces borrowing costs and significant free cash. 
TSR figures for 2020 include the special dividend paid on 
27 September 2019.

37

IOOF | annual report 2020 Directors’ report (cont’d) 

Operating and financial review (cont’d)

Profit attributable to owners of the Company ($'000s) (1)

Profit for the year for 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) (2)

Dividends per share (cents per share) (2)

Opening share price

Closing share price at 30 June

Return on equity (non-statutory measure) (3)

2020

146,964

58,629

42.0

41.9

16.8

2019

28,560

(29,993)

8.1

8.1

(8.5)

2018

88,301

105,358

26.4

26.4

31.6

2017

115,990

119,851

38.7

38.6

38.7

2016

196,846

140,542

65.7

65.4

46

128,834

197,989

191,417

169,357

173,367

36.8

36.7

56.5

56.3

57.3

52.6

56.5

56.5

57.8

57.1

121,121

131,653

189,582

159,071

163,573

34.5

$5.17

$4.92

7.59%

37.5

$8.99

$5.17

54

$9.80

$8.99

53

$7.83

$9.80

54.5

$8.99

$7.83

10.90%

11.30%

12.10%

12.30%

(1) Profit attributable to owners of the Company has been calculated in accordance with Australian Accounting Standards.
(2) Dividends declared and dividends per share are on an accruals basis.
(3) 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 2020 
and prior years were fully franked.

Dividends

In respect of the financial year ended 30 June 2020, the 
Directors declared the payment of a final dividend of 
11.5 cents per share franked to 100% at 30% corporate 
income tax rate to the holders of fully paid ordinary shares 
to be paid on 22 September 2020. This dividend will be paid 
to all shareholders recorded on the Register of Members on 
8 September 2020.

The Directors declared the payment of an interim dividend 
of 16.0 cents per share franked to 100% at 30% corporate 
income tax rate to the holders of fully paid ordinary shares 
paid on 16 March 2020 and a special dividend of 7.0 cents per 
share franked to 100% at 30% corporate income tax rate to 
the holders of fully paid ordinary shares, which was paid on 
27 September 2019.

In respect of the financial year ended 30 June 2019, 
the Directors declared the payment of a final dividend of 
12.0 cents per share franked to 100% at 30% corporate income 
tax rate to the holders of fully paid ordinary shares, which was 
paid on 27 September 2019.

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 
11.5 cents per share franked to 100% at 30% corporate income 
tax rate to the holders of fully paid ordinary shares to be paid 
on 22 September 2020.

On 31 August 2020 the IOOF Group announced that it has 
entered into transaction agreements with National Australia 
Bank (NAB) to acquire 100% of NAB’s wealth management 
business (MLC) for $1,440 million, (subject to completion 
adjustments) and upfront integration and transaction costs 
(approximately $90 million). The acquisition is expected to be 
completed before 30 June 2021 and is subject to a number 
of conditions precedent including regulatory approvals from 
APRA and ACCC. This acquisition will be funded through 
a combination of:
•  $1,040 million fully underwritten institutional placement 
and accelerated non-renounceable entitlement offer, 
launched on 31 August 2020;

•  $250 million of incremental senior debt via an underwritten 

syndicated debt facility;

•  $200 million in a subordinated loan note issued to NAB; and
•  $40 million of existing IOOF cash.

The existing $670 million syndicated facility is expected to 
remain in place and IOOF will seek consent from its lender 
group in relation to the acquisition. As part of the transaction, 
IOOF will expand its total debt facilities by $250 million in 
total facility limits. IOOF is confident of receiving lender group 
support for this transaction. To ensure funding certainty, IOOF 
has engaged Citi and NAB to underwrite $920 million of total 
debt facilities as a backstop to the syndicated facility.

38

IOOF | annual report 2020The $200 million of subordinated loan note issued to NAB has 
the following key components:
•  Coupon of 1% per annum. Steps up to 4% p.a. if the 

subordinated loan note is not redeemed prior to 42 months 
post completion

•  Five year maturity date with an early redemption start 
period of the later of three years from Completion and 
30 September 2024

•  Redemption amount equal to principal plus accrued 
interest plus additional amount equal to any uplift in 
notional securities over a reference price (being a 15% 
premium to the theoretical ex-rights price for the Equity 
Offer) and subject to adjustment

•  Structurally subordinated to senior secured creditors

On 7 August 2020, the IOOF Group sold approximately 14.2 
million shares of its total minority holding of 19.7 million shares 
in Australian Ethical Investment Ltd (ASX:AEF) for total cash 
consideration of $74.5 million (purchase cost $5.2 million). 
This sale has reduced IOOF’s stake to approximately 5.5 million 
shares (4.9%) of AEF. The proceeds from the divestment will be 
used to reduce debt and provide strategic flexibility for growth 
opportunities. The impact on underlying net profit after 
tax is immaterial.

Subsequent to the end of the financial year, the IOOF Group 
has renegotiated the terms of its borrowings. This has 
extended the repayment term of its 3 year facility to be a 
4 year repayment term from 27 September 2018, which is the 
SFA effective date.

On 21 August 2020, ASIC commenced proceedings against 
RI Advice Group Pty Limited (RI Advice), a wholly-owned 
subsidiary of IOOF. ASIC makes complaints relating to 
RI Advice’s management of cybersecurity and cyber 
resilience risk, some of which relate back to events from 
2016. No provision has been recorded at this point as 
ultimately the quantum of penalty (if any) is not reliably 
estimable at this point.

As part of the Advice 2.0 strategy, it is estimated that the 
Group will acquire practices through Buyer of Last Resort 
agreements due to the conversion of Bridges to a fully salaried 
network. The estimated spend is $15 million to $20 million 
for the 2021 financial year. In addition, on 28 August 2020, 
the Board approved the 100% acquisition of Wealth Central 
for $30 million, an online client engagement tool that creates 
a better and more transparent advice experience as well 
as delivering practitioners a more streamlined exchange 
of client data.

IOOF evaluates potential opportunities for investments or 
divestments on a regular basis. IOOF has received an approach 
from a third party (who has commenced due diligence), 
relating to the potential divestment of its professional trustee 
services business, Australian Executor Trustees Limited. While 
discussions are on-going, there is no assurance that any 
divestment will occur, or if so, on what terms. 

The existence of COVID-19 was confirmed in early 2020 and 
in March 2020 was declared a pandemic by the World Health 
Organisation. This has resulted in significant volatility in global 
and domestic financial markets. Refer to note 1–1 for the 
sensitivity analysis of risks.

At the date of signing of the financial statements, there is still 
significant uncertainty on the likely duration and the ultimate 
impact COVID-19 will have on world economies. Given the 
high degree of estimation uncertainty, management cannot 
reasonably assess or quantify the potential short or longer 
term financial impact on the Company.

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 2020 that has significantly affected, or may 
significantly affect:

•  the IOOF Group’s operations in future financial years;
•  the results of those operations in future financial years; or
•  the IOOF Group’s state of affairs in future financial years.

Lead auditor’s independence 
declaration

The lead auditor’s independence declaration is included on 
page 59 of the annual financial report and forms part of the 
Directors’ Report for the year ended 30 June 2020.

Company secretary

The Company Secretary is Ms Adrianna Bisogni LLB (Hons) 
BA GAICD. Ms Bisogni was appointed to the position in 
November 2019. She is a lawyer with over 25 years’ experience 
in corporate law.

Prior to Ms Bisogni’s appointment, the Company Secretary 
was Mr A Paul M Vine LLB FGIA FCIS GAICD. Mr Vine held the 
position from December 2015 until March 2020.

39

IOOF | annual report 2020Directors’ 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

Director

Committee Meetings

Status

Meetings
attended

Meetings
held

A Griffiths

Chair

R Mota

Managing 
Director

G Venardos (1) Director

J Harvey

E Flynn

J Selak

A Bloore

Director to  
18 Feb 2020

Director

Director

Director from  
2 Sep 2019

M Somerville Director from  

1 Oct 2019

19

19

1

11

19

19

15

14

19

19

8

11

19

19

16

14

Remuneration Committee

Status

Meetings
attended

Meetings
held

A Griffiths

Member

J Harvey

E Flynn

J Selak

A Bloore

Chair to  
18 Feb 2020

Member

Member from  
16 Oct 2019;  
Chair from  
18 Feb 2020

Member from  
16 Oct 2019

G Venardos (1) Member to  
28 Nov 2019

4

3

4

2

2

0

4

3

4

2

2

2

Director

Committee Meetings

Director

Committee Meetings

Nominations Committee

Status

Meetings
attended

Meetings
held

A Griffiths

Chair

J Harvey

E Flynn

Member to  
18 Feb 2020

Member from  
14 Feb 2020

J Selak

Member

G Venardos (1) Member to  
28 Nov 2019

5

4

1

5

0

5

4

1

5

3

Director

Committee Meetings

Group Audit Committee

Status

Meetings
attended

Meetings
held

A Griffiths

Member

J Harvey

E Flynn

J Selak

A Bloore

Chair to  
18 Feb 2020

Member from  
26 May 2020

Member

Member from  
16 Oct 2019

M Somerville Member from  

16 Oct 2019; 
Chair from  
30 Apr 2020

G Venardos (1) Member to 28 

Nov 2019

8

6

1

8

4

5

0

8

6

1

8

5

5

5

Risk and Compliance Committee

Status

Meetings
attended

Meetings
held

J Harvey

E Flynn

J Selak

A Bloore

Member to  
18 Feb 2020

Chair

Member

Member from  
16 Oct 2019

M Somerville Member from  

16 Oct 2019

4

5

5

3

3

4

5

5

3

3

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 8 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.

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.

40

(1) Leave of absence from 10 December 2018 until resignation on 28 November 2019.

IOOF | annual report 2020 Directors’ report (cont’d)Unexercised options over 
shares, performance rights 
and deferred shares

At the date of this report, performance rights on issue are:

Performance rights

Vesting date

30-Jun-21

30-Jun-22

Deferred shares

Vesting date

24-Apr-19

8-Apr-20

Number of
rights

351,617

367,757

719,374

Number of
shares

42,020

57,592

99,612

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.

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 $1,476,265 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 0.5 times the total audit fee;

•  services have been reviewed and approved to ensure 
that they do not impact the integrity and objectivity 
of the auditor; and

•  services do not 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.

41

IOOF | annual report 2020Remuneration report

Letter from the Remuneration 
Committee Chair

Dear Shareholder

On behalf on the IOOF Board, I am pleased to present our 
Remuneration Report for 2020. 

The IOOF Group strives to have a remuneration philosophy 
and practices which evolve with the market. In the current 
environment, this means ensuring we continue to meet 
shareholder, community, and regulatory expectations. 
In doing so, we can attract and retain the best talent and drive 
strong alignment between business purpose and strategy and 
individual behaviours and outcomes. In 2020, I am pleased 
to say we have taken significant steps in transforming our 
framework to better achieve these goals. 

A year of significant change 

The 2020 financial year has been one of significant change, 
adaptation and consolidation for IOOF. 

As a result of the CEO’s management review, there was 
transition in five executive team roles, including Chief Financial 
Officer, Chief Legal Officer, Chief Risk Officer, Company 
Secretary and Chief People Officer. This has resulted in 
changes to our KMP as outlined in section 1 of this Report. 
The reshaping of the executive team and changes in Board 
compositions across the Group has provided strong business 
and cultural foundations and the impetus for the organisation 
to move forward. 

The ANZ P&I acquisition was completed at the end of January 
with the transition of hundreds of employees from ANZ 
to IOOF. This has resulted in significant change and new 
challenges as we integrate these businesses together. 

IOOF was impacted by the COVID-19 pandemic, as were 
many organisations. The workforce transitioned seamlessly 
to a remote working environment and continued to support 
our customers at a challenging time for them. The uncertain 
environment coupled with the early release of super 
scheme saw high demand on our teams, to which they 
responded strongly. 

Reshaping of the Executive Remuneration 
Framework

As foreshadowed in last year’s remuneration report, the 
executive remuneration framework was redesigned 
in 2020. The Group Remuneration Committee, with 
independent recommendations provided by KPMG 3dc 
(executive remuneration and performance advisory), have 
designed a framework that supports IOOF’s cultural and 
remuneration principles. 

The following considerations were central to the design 
of the new framework:
•  supporting IOOF’s strategic, cultural and talent agendas 

including the “advice-led” strategy and ClientFirst culture; 
•  aligning with best practice and stakeholder expectations 

post the Royal Commission; and

•  considering pending regulatory developments. 

The new framework, known as the Executive Equity Plan (EEP), 
removed STI and LTI for the CEO and Executive Team. The new 
incentive framework balances financial and non-financial 
priorities and is delivered wholly in equity, vesting over 
a four-year performance period to encourage long term, 
sustainable decision making. 

The measures underpinning the framework are aligned with 
key strategic value drivers of the business, both short and long 
term, to enable enduring performance. 

Executive Remuneration Outcomes

With the redesign of the framework, the 2020 financial year 
has been a transitionary one for the CEO and Executive Team. 
No STIs were awarded to the current executive team for 
the second year in succession. This is with the exception of 
the Chief Investment Officer who maintains a portion of his 
remuneration as STI (as explained in section 1 of this Report). 
The EEP commenced on 1 July 2021 and is relevant for the 
2021 performance year. It is a prospective plan, with equity 
applied at the commencement of the four-year period. 

Testing of the 2018 LTI saw the Total Shareholder Return 
(TSR) hurdles not meeting target performance levels and 
accordingly, the executive performance rights subject to this 
hurdle have not vested. 

In relation to Non-Executive Director (NED) remuneration, 
no increases were made to NED fees for the fifth year in a row. 
In addition, to reflect the current economic environment, the 
Chairman and CEO took a 20% reduction in pay for 6 months 
from 1 August 2020. All other IOOF Holdings Ltd Directors and 
the CFO took a 10% reduction in pay for the same period. 

We are proud of our people and the progress we have 
made in 2020 and we will continue to monitor our 
remuneration arrangements to ensure they are meeting the 
standards we have set. 

On behalf of the Board, I thank you for your support and 
feedback, and commend this report to you. 

Yours sincerely

42

John Selak 
Remuneration Committee Chair 

31 August 2020

IOOF | annual report 2020Contents

1.   Year to 30 June 2020 remuneration key features 

Changes to the 2020 remuneration framework 

Changes in Key Management Personnel (KMP) 

 Key features of the year to 30 June 2020 KMP 
remuneration 

Summary of KMP remuneration received in 2020 

44

44

44

44

45

7.   Company performance and remuneration impacts  53

5 year Group performance 

Impact of Group performance on LTIs 

8.    Key Management Personnel remuneration – 

Additional statutory disclosure 

Additional statutory disclosure 

2.   Key Management Personnel covered by this report  46

9.   Other information 

Equity holdings 

Contract terms 

Payments to persons before taking office 

3.    Year to 30 June 2021 Key Management Personnel 

remuneration 

 Year to 30 June 2021 remuneration framework 
performance periods 

4.    Year to 30 June 2020 Key Management Personnel 
variable remuneration targets and outcomes 

STIs 

LTIs 

5.   Remuneration governance 

Remuneration Framework 

The Group Remuneration Committee 

6.   Non-Executive Director remuneration 

NED fees 

2020 Statutory Remuneration – NEDs 

Equity holdings of NEDs 

Terms of appointment 

47

47

53

49

49

51

51

51

56

52

52

53

53

53

54

55

55

56

56

58

58

43

IOOF | annual report 2020 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1. Year to 30 June 2020 remuneration 
key features

Changes to the 2020 
remuneration framework

Following a full review of the remuneration 
framework by the Group Remuneration Committee, 
with independent recommendations provided by KPMG 
3dc (executive remuneration and performance advisory), 
in February 2020, the Remuneration Committee approved 
the redesign of the executive remuneration framework. 
This included a review and benchmarking of fixed salaries 
and a new incentive framework called the Executive 
Equity Plan (EEP). 

The EEP framework has replaced the LTI and STI programs 
for the CEO, Key Management Personnel (KMP) and the 
remaining Executive Team. The STI is removed under the 
framework except for the Chief Investment Officer who will 
retain a short term incentive which will closely tie a portion 
of his variable remuneration to the performance of IOOF’s 
investment portfolio.

The EEP is delivered wholly in equity to closely align Executives 
with shareholders and encourage long-term sustainable 
decision making in the interests of shareholders.

The changes were implemented from 1 July 2019 for KMP and 
the current Executive Team, with STI and LTI removed for the 
2020 performance year. The EEP commenced from 1 July 2020.

The framework encompasses financial and non-financial 
measures. All amounts under the EEP are provided in equity 
(there are no cash components) and the EEP comprises:

The first allocation of EEP rights relating to the 2020 
financial year (to be assessed against the above measures) 
will be granted post the release of IOOF’s full-year results 
(expected to be in September 2020) and will be eligible to 
vest on 30 June 2024.

Further details of remuneration framework changes 
are included in section 3 of this report.

Changes in Key Management Personnel 
(KMP)

Post the appointment of R Mota in June 2019, the Executive 
Team has been restructured resulting in the following 
additions to KMP.

D Chalmers

D Whereat

M Oliver

A Noble

L Stewart

Chief Financial Officer
Appointed 16 March 2020

Chief Advice Officer
Appointed 1 February 2020

Chief Distribution Officer
Appointed 1 February 2020

Chief Risk Officer
26 July 2019 to 12 November 2019

Chief Risk Officer
Appointed 15 June 2020

The following ceased to be KMP during 2020:

D Coulter

G Riordan

Chief Financial Officer
Ceased 28 February 2020(1)

Group General Counsel
Ceased 28 February 2020

(1)   Following his cessation as KMP, D Coulter was on gardening leave which 

•  A four year performance measure (40%) This will be 

ceased 28 August 2020.

based on Relative Total Shareholder Return (TSR), assessed 
at the end of the four year performance period.

•  Annual performance measures with no vesting of any 
amounts until the end of the four year performance 
period (60%) Targets will be set and assessed annually 
against five key areas, one of which is financial and four 
non-financial metrics. 

However vesting does not occur until the end of the four-year 
performance period. 

•  The areas assessed, which align with the key strategic 

drivers of the business, are:
 – Financial (10%)
 – Non-financial measures (50%) comprised of:

 – Environment, Social & Governance (ESG) (10%)
 – Client (10%)
 – People (10%)
 – Individual, role specific measures (20%) 

44

Key features of the year to 30 June 2020 
KMP remuneration

Short term incentive (STI)

There were no STIs awarded to KMP during 2020 with the 
exception of D Farmer of $173,036 under the specific terms 
of his contract as Chief Investment Officer, and G Riordan of 
$75,000. There will be no STIs for KMP as part of the EEP. The 
first tranche of the 2018 deferred STI component was tested 
during the period and 52,847 shares were transferred to KMP. 

Full details of STIs vested during the year are included 
in section 4 of this report.

IOOF | annual report 2020Remuneration report (cont’d)Long term incentive (LTI)

The 2017 performance rights – D Farmer were tested during 
the year. 50% did not vest and lapsed for all KMP due to the 
TSR hurdle relative to the ASX 200 not being met. 50% vested 
based on the three year tenure hurdle being met.

The 2018 LTI performance rights hurdles were tested during 
the year. 50% did not vest and lapsed for all KMP due to the 
TSR hurdle relative to the ASX 200 not being met. 50% vested 
based on the three year tenure hurdle being met for R Mota, 
F Lombardo, D Coulter and G Riordan.

D Coulter remained employed during the three year period. 
G Riordan is considered a “good leaver” and remained eligible 
for the 2018 LTI performance rights.

Full details of LTIs vested during the year are included 
in section 4 of this report.

Non-Executive Director (NED) remuneration

Full details of NED remuneration arrangements are 
included in section 6 of this report.

Summary of KMP remuneration received in 2020

Taking into account the above changes to KMP and remuneration arrangements, this table shows a summarised year-on-year 
comparison of the value of remuneration received by KMP.

Financial year

Total Fixed 
Remuneration

Variable

Total value of
remuneration received

Name

R Mota

D Farmer

F Lombardo(3)

2020

2019

2020

2019

2020

2019

KMP appointed during 2020

D Chalmers(4)

D Whereat(5)

M Oliver(5)

A Noble(6)

L Stewart(7)

Former KMP

D Coulter(8)

G Riordan(8)

C Kelaher

2020

2020

2020

2020

2020

2020

2019

2020

2019

2019

TFR

STI(1)

1,206,778

788,644

433,218

341,668

550,000

295,192

215,385

211,541

219,286

143,147

23,846

320,773

474,868

336,565

485,958

1,330,403

–

–

173,036

142,713

–

–

–

–

–

–

–

–

–

75,000

–

–

LTI(2)

152,594

68,475

90,163

–

102,502

–

–

–

–

–

–

185,636

68,475

148,386

68,475

–

1,359,372

857,119

696,417

484,381

652,502

295,192

215,385

211,541

219,286

143,147

23,846

506,409

543,343

559,951

554,433

1,330,403

(1)  Cash STI awarded during the year. 

(2)  Tenure-based LTI value calculated using closing share price at date of issue of shares. 

(3)  Appointed as KMP from 10 December 2018.

(4)  Appointed as KMP from 16 March 2020.

(5)  Appointed as KMP from 1 February 2020.

(6)  Appointed as KMP from 26 July 2019 to 12 November 2019.

(7)  Appointed as KMP from 15 June 2020.

(8)  Operated as KMP to 28 February 2020.

This table supplements, and is different to, the Statutory Remuneration table which presents the accounting expense for both 
vested and unvested awards in accordance with the Australian Accounting Standards. Outside of remuneration, there were no other 
transactions with key management personnel of the IOOF Group during the 2020 and 2019 financial years.

45

IOOF | annual report 20202. Key Management Personnel covered by this report

The KMP whose remuneration is disclosed in this year’s report are:

Name

R Mota

D Coulter

D Chalmers

G Riordan

D Farmer

F Lombardo

D Whereat

M Oliver

A Noble

L Stewart

NEDs

A Griffiths

E Flynn

J Selak

A Bloore

M Somerville

J Harvey

G Venardos

Role

Chief Executive Officer and Managing Director (CEO)

Chief Financial Officer

Chief Financial Officer

Group General Counsel

Chief Investment Officer

Chief Operating Officer

Chief Advice Officer

Chief Distribution Officer

Chief Risk Officer

Chief Risk Officer

Independent Non-Executive Director & Chairman

Independent Non-Executive Director

Independent Non-Executive Director

Independent Non-Executive Director

Independent Non-Executive Director

Independent Non-Executive Director

Independent Non-Executive Director

Term as KMP

Full year

1 Jul 2019 to 28 Feb 2020

16 Mar 2020 to present

1 Jul 2019 to 28 Feb 2020

Full year

Full year

1 Feb 2020 to present

1 Feb 2020 to present

26 Jul 2019 to 12 Nov 2019

15 Jun 2020 to present

Full year

Full year

Full year

2 Sep 2019 to present

1 Oct 2019 to present

To 18 Feb 2020

To 28 Nov 2019

Disclosures of remuneration and other transactions with KMP who were appointed or ceased during the year are limited to those 
transactions occurring the in period of appointment as KMP.

The Remuneration Report is prepared, and audited, in accordance with the requirements of the Corporations Act 2001. It forms part 
of the Directors’ Report.

The Remuneration Report is designed to provide shareholders with an understanding of the Group’s remuneration principles, policies, 
and programs, and their link with the Group’s strategy and financial performance.

46

IOOF | annual report 2020Remuneration report (cont’d)3. Year to 30 June 2021 Key Management Personnel remuneration

In determining the key objectives of the KMP and Executive reward framework, the Remuneration Committee gave consideration 
to the following objectives:

Attraction and retention 
of the best talent

Strategy-led and 
supporting IOOF's purpose

Promote a sound risk 
management culture

Shareholder alignment

Meeting regulatory and 
governance expectations 
and impacts on 
remuneration

Attract, motivate and retain world-class talent to drive the performance of the Company

Support our advice-led approach to delivering customer outcomes
Emphasis on delivering quality advice
Support IOOF's ClientFirst philosophy to deliver a sustainable competitive advantage

Sound management of non-financial and financial risk and individual and collective accountability
Meet the expectations of stakeholders in a fast-paced regulatory environment and upholding the 
highest governance standards

Align outcomes with the shareholder experience through allocation of equity and delivery of 
shareholder returns
Facilitate an 'ownership mindset' and long-term focus among participants

Consider the draft Financial Accountability Regime ("FAR") proposals and APRA's draft Prudential 
Standards CPS 511 standards and their potential impact on remuneration

In recognition of the impact that COVID-19 has had on business outcomes and returns to shareholders, the Chief Executive Officer will 
take a 20% reduction in base pay for 6 months from 1 August 2020. The Chief Financial Officer will take a 10% reduction in base pay for 
the same period.

Year to 30 June 2021 remuneration framework performance periods

A summary of the Executive team remuneration framework is as follows:

d
e
x
i
F

P
E
E

Fixed salary

Annual review process with adjustments only for change in role or promotion, 
internal relativities and significant market changes (not CPI/wage growth increases)

Relative TSR against ASX 200 (40%) assessed over 4 years

Financial measure (10%) measured by achievement of annual UNPAT target (released after 4 years)

Non-financial component (50%) - set and assessed annually (released after 4 years) with one measure in each 
category being (1) ESG (2) client (3) people (4) individual

Year 0 

Year 1 

Year 2 

Year 3 

Year 4

Further detail on each measure is included on the following page.

47

IOOF | annual report 2020 
Area

Measure & Description 

D
E
X
I
F

d
e
x
i
F

y Base salary plus super

r
a

l

a
s

Determined annually 
Adjustments only made for changes in role or promotion, internal relativities and significant 
market changes.

s Financial (40%)

e
r
u
s
a
e
m

r
a
e
y
4

e
c
n
a
m
r
o
f
r
e
p

Delivering to shareholders
Long-term shareholder return as measured by TSR percentile ranking >50% 

N
A
L
P
Y
T
I
U
Q
E
E
V
I
T
U
C
E
X
E

s
e
r
u
s
a
e
M
e
c
n
a
m
r
o
f
r
e
P

l

a
u
n
n
A

y
l
l

a
u
n
n
a
d
e
s
s
e
s
s
a
d
n
a
t
e
S

s
r
a
e
y
4
r
e
t
f
a
d
e
s
a
e

l

e
r
–

Financial (10%)

Achieving the Annual Financial Plan
Measured by achievement of an annual UNPAT target 

Non-financial performance measures

Environment, Social & 
Governance (ESG) (10%)

Strengthening sustainability 
Delivery against board endorsed ESG scorecard

Client (10%)

People (10%)

Individual (20%)

Delivering what matters to Clients
Improving service delivery to members and advisors as measured through advisor and 
member Net Promoter Scores (NPS)

Connecting with employees
Uplift in employee engagement and experience to achieve top quartile engagement score 

Transforming the Organisation
Measures to be set on an individual basis. Will predominantly link to the successful delivery 
of key transformation programs against FY21 milestones, namely: Evolve 21, P&I Integration, 
and Advice 2.0. 

Consistent with best practice and to further strengthen the alignment between executives and shareholders, a minimum 
shareholding requirement will be in place for participants of the EEP. Participants will be required to accumulate shares in IOOF equal 
to 100% of TFR for the CEO and 50% of TFR for other participants. Participants will need to meet this requirement by 30 June 2024.

For comparative purposes and for the LTI issued in December 2019, the previous variable remuneration framework is outlined below. 
The 2019 remuneration framework for KMP comprised STI and LTI components.

Component

Performance Conditions

Remuneration Principle

Variable

STI

50% cash.
50% deferred 
shares, vesting 
over 2 years, 
subject to 
'look back'.
Maximum is 
100% of TFR.

LTI

100% 
share-based 
arrangements.
Maximum is 
100% of TFR.

48

STIs are discretionary and determined for each individual KMP based on a balanced 
scorecard which includes: 
Customer: Net Promoter Score, Wealth Insights rankings
Financial: Total Shareholder Return (TSR), Return on Equity (RoE), underlying 
profitability
Business Excellence: Balance sheet and liquidity initiatives, expense management
Strategy: Regulatory adherence, acquisitions, divestment of non-core assets
Governance: Risk management, regulatory compliance
People and Culture: Action plans from employee Engagement and Alignment survey.
Chief Investment Officer – D Farmer only
50% determined based on investment performance relative to relevant composite 
benchmarks
50% discretionary based on balanced scorecard 

Support the financial and 
strategic direction of the 
Group, and in turn, translate 
to shareholder return.
Targets for each measure are 
set by the Board to provide 
a challenging but purposeful 
incentive.
Individual performance 
measures are specific to the 
KMP's role. 

50% performance rights – relative TSR against ASX 200 – 3 year vesting period subject 
to retesting if some or all of the rights do not vest
50% tenure-based – 3 year vesting period subject to an additional 1 year holding lock

TSR focuses on the delivery 
of shareholder value.
The tenure based LTI element 
assists the Group to attract 
and retain quality people and 
aligns future performance with 
shareholders’ expectations.
Incentives to remain with the 
Group to enhance sustainable 
performance over the long term.

IOOF | annual report 2020Remuneration report (cont’d) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTIs

LTI: targets and outcomes

The Board considers a long-term performance-related 
incentive component to be an important element of the 
KMP reward framework.

Year ended 30 June 2020

Vesting of 50% 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 over three years. TSR was chosen as the most 
appropriate comparative measure as it focuses on the delivery 
of shareholder value. TSR represents the change in the value 
of a share plus the value of dividends paid.

The tenure based element for KMP was determined to assist 
the IOOF Group to attract and retain quality people and aligns 
future performance with shareholders’ expectations.

Early vesting may occur in certain circumstances, subject to 
the performance hurdle being achieved and Board approval:
•  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 employment due to death or 

permanent disability; or

• 

in other exceptional circumstances where the Board 
determines appropriate.

The Committee engaged the services of an independent 
external organisation (Deloitte) to calculate the IOOF Group’s 
performance against the TSR performance hurdles.

4. Year to 30 June 2020 Key 
Management Personnel variable 
remuneration targets and outcomes

Remuneration of KMP is proposed by the CEO, recommended 
by the Remuneration Committee and approved by the Board. 

As noted, the first allocation of EEP will be granted post the 
release of IOOF’s full-year results (expected to be in September 
2020) and will be eligible to vest after a 4 year period 
on 30 June 2024.

As 2020 was a transitional period while the final EEP was 
being determined, LTIs relating to the 2019 financial year 
were allocated on 17 December 2019 to R Mota, F Lombardo, 
and D Farmer. This was the final grant of LTIs to KMP before 
implementation of the EEP.

Full details of all outstanding LTI performance rights for each 
KMP are set out in section 8 of this report. 

STIs

STI: targets and outcomes

No discretionary STIs were awarded to any KMP or certain 
other senior management personnel. An STI of $75,000 was 
paid to G Riordan at the time of his exit.

‘Look back’ events

In 2018, the Board implemented a two year ‘look back’ on 
a portion of STIs to ensure events that are found to have 
occurred after determination of incentives are appropriately 
factored into the allocation of those awards. ‘Look back’ 
events include: 
•  the KMP engages or has engaged in fraud, dishonesty 

or gross misconduct; 

•  the financial results that led to the KMP’s reward 
being provided are subsequently shown to be 
materially misstated; 

•  the KMP behaves or has behaved in a manner which brings 

the IOOF Group into disrepute; or 

•  the Board determines, in its absolute discretion, that the 

KMP’s reward is an inappropriate benefit. 

The ‘look back’ on STI deferred shares granted in 2018 was 
performed, and a summary of deferred shares allocated to 
KMP is included in section 9 of this report. 

49

IOOF | annual report 2020The below LTI performance rights are in place at the date of this report:

Year

Performance 
period

Grant date

IOOF TSR for the period
%

Ranking relative 
to ASX200

Vesting status 
at 30 June 2020

Vesting
date

2020 LTI 
performance rights

2019 LTI 
performance rights

2018 LTI 
performance rights

2017 LTI 
performance rights 
– D Farmer

2020-2022

17 Dec 19

Performance period not complete

2019-2021

17 Aug 18

Performance period not complete

30 Jun 22

30 Jun 21

2018-2020

21 Aug 17

-37.86%

2018-2020

01 Mar 17

7.02%

150th

124th

0% vested

30 Jun 20

0% vested

31 Dec 19

The performance period for the 2017 performance rights – D Farmer was completed in 2020. With a TSR ranking of 124th relative 
to the ASX 200, no performance rights vested under the TSR performance hurdle. D Farmer remained employed during the 
three year period.

The performance period for the 2018 LTI performance rights was completed in 2020. With a TSR ranking of 150th relative to 
the ASX 200, no performance rights vested under the TSR performance hurdle for any KMP. R Mota, F Lombardo, and D Coulter 
remained employed during the three year period. G Riordan is considered a “good leaver” and remained eligible for the 2018 
LTI performance rights.

Accordingly, the following shares vested for KMP under 2017 and 2018 LTI performance rights:

Name

Type of instrument

R Mota

2018 LTI performance rights

F Lombardo

2018 LTI performance rights

D Farmer

Former KMP

D Coulter

G Riordan

2017 LTI performance rights – D Farmer

2018 LTI performance rights

2018 LTI performance rights

Change of control and cessation of employment

Employment
condition -
50%

TSR
Performance
hurdle - 50%

Number of shares vested

% vested 
in year

% forfeited
in year

15,000

15,000

7,500

15,000

10,000

–

–

–

–

–

50.0%

50.0%

50.0%

50.0%

50.0%

50.0%

50.0%

50.0%

50.0%

50.0%

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

Unvested performance rights and share options are forfeited

Dismissal for serious misconduct (eg fraud)

Unvested performance rights and share options are forfeited

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.

50

IOOF | annual report 2020Remuneration report (cont’d)5. Remuneration governance

Remuneration Framework

The Board oversees the IOOF Group’s remuneration policies 
on recommendation from the Committee. The Committee 
reviews 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 Committee, considers the adequacy of remuneration 
policies and practices within the IOOF Group on an annual 
basis, including:
•  ensuring remuneration practices enable realisation 

of IOOF’s purpose;

•  determination of CEO and other KMP 

remuneration arrangements;

•  on-going review and monitoring of the total Executive 

award framework;

•  setting key performance indicators and assessment of the 
Managing Director and the IOOF Group’s performance 
against those key performance indicators;

•  overall compensation arrangements of the IOOF Group;
•  ongoing review of the composition, skill base and 

performance of NEDs;

•  compliance with regulatory requirements including the ASX 
Listing Rules and the associated ASX Corporate Governance 
Principles and meeting both ASIC and APRA requirements 
relating to remuneration; and

•  ensuring remuneration practices support the sound 
management of financial as well as non-financial risk.

The Group Remuneration Committee

The Committee reviews and makes recommendations to the 
Board on the remuneration structure and policies applicable 
to the KMP and NEDs of the IOOF Group, as well as the wider 
IOOF employee population.

The Committee’s charter is available on the Corporate Governance 
page of the Company’s website at www.ioof.com.au

The Committee is comprised solely of NEDs, all of whom are 
independent. The members of the Committee for the year 
ended 30 June 2020 were J Harvey (Chair) to 18 February 2020, 
J Selak member from 16 October 2019 and Chair from 
18 February 2020, A Griffiths (full year), E Flynn (full year), 
A Bloore member from 16 October 2019, and G Venardos 
(member until 28 November 2019).

The Board considers that the members of the Committee provide 
an appropriate mix of skills to undertake its terms of reference, 
having regard to their qualifications, knowledge of the financial 
services industry and experience in business management.

Reviews and makes recommendations 
to the Board on remuneration policies, 
to ensure that they support the 
Group’s objectives and comply with 
regulatory requirements.

IOOF Holdings Ltd Board

Group Remuneration Committee

Establishment and maintenance 
of the IOOF Group’s Remuneration 
Framework, including determination 
of KMP remuneration arrangements, 
ongoing review of incentive schemes, 
and assessment of performance 
against key performance indicators.

Ensuring remuneration policies are 
appropriate for NEDs, and the ongoing 
review of the composition, skill base 
and performance of NEDs.

In order to ensure that it is fully informed when making remuneration decisions, the Committee receives regular reports and 
updates from the Company Secretary, Chief Risk Officer, and Chief People Officer and other members of management invited by 
the Committee to attend meetings when appropriate. The 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.

The Committee seeks and considers advice from independent, external remuneration consultants where appropriate. KPMG 3dc 
was engaged during the year to provide remuneration-related advice in respect of senior executives. The advice did not constitute 
a remuneration recommendation for the purposes of the Corporations Act 2001.

The Committee’s charter is available on the Corporate Governance page of the Company’s website at www.ioof.com.au

51

IOOF | annual report 20206. Non-Executive Director remuneration

NEDs receive a fixed fee including superannuation for being a Director of the Board, with an additional fee for the Chairman 
of the Board. No additional fees are paid for service on Board Committees or subsidiary company Boards.

In setting fees, the Board considers general industry practice; best principles of corporate governance; the responsibilities and 
risks attached to the NED role; the time commitment expected of NEDs on Group and Company matters; and fees paid to NEDs 
of comparable companies.

In order to ensure NED independence and impartiality, fees are not linked to Company performance and NEDs are not eligible 
to participate in any of the Group’s incentive arrangements

The Board has reviewed NED fees for 2021 and, for the fifth year, has determined not to increase their fees. In recognition of the impact 
that COVID-19 has had on business outcomes and returns to shareholders, the Group Chairman will take a 20% reduction in base pay 
for 6 months from 1 August 2020. All other NEDs will take a 10% reduction in base pay for the same period.

NED fees

Elements

NED fees 
(no change to 2019)

Details

2019/20 Fees per annum were:
IOOF Holdings Board Chair fee 
IOOF Holdings Board NED 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) and are included in the NED fee.

The current aggregate fee pool for NEDs of $1.25 million was approved by shareholders at the 2013 Annual General Meeting. 
The annual total of NEDs’ fees, including superannuation contributions, is within this agreed limit.

2020 Statutory Remuneration – NEDs

NED

Short-term benefits

Post-employment

Total

Directors' fees(5)

Superannuation

A Griffiths(1)

G Venardos(1)

J Harvey(2)

E Flynn

J Selak

A Bloore(3)

M Somerville(4)

Total

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2020

2020

2019

$

274,499

216,272

65,086

239,265

99,259

155,251

162,626

155,251

155,251

155,251

152,185

113,453

1,022,359

921,290

$

$

10,501

285,000

17,863

7,597

20,531

9,430

14,749

7,374

14,749

14,749

14,749

14,458

10,778

74,887

82,641

234,135

72,683

259,796

108,689

170,000

170,000

170,000

170,000

170,000

166,643

124,231

1,097,246

1,003,931

(1)  A Griffiths was appointed Acting Chairman on 10 December 2018 and Chairman on 4 April 2019. G Venardos was on leave from the Board from 10 December 2018. 
He resigned as Chairman effective 4 April 2019 and resigned as a Non-Executive Director on 28 November 2019. The variation in fees year-on-year reflects these 
changes.

(2)  Resigned as a Non-Executive Director on 19 February 2020.

(3)  Appointed 2 September 2019.

(4)  Appointed 1 October 2019.

(5)  Directors’ fees include any fees sacrificed into superannuation funds.

52

IOOF | annual report 2020Remuneration report (cont’d)Equity holdings of NEDs

Name

A Griffiths

G Venardos

J Harvey

E Flynn

J Selak

A Bloore

M Somerville

Balance 
as at

1 July 2019 (1)

Changes
during 
the year

Balance
as at

30 June 2020 (2)

Balance as at
 report 
sign-off 

41,428

91,429

35,256

26,428

55,000

–

–

–

–

–

6,729

–

5,830

–

41,428

91,429

35,256

33,157

55,000

5,830

–

date (2)

41,428

n/a

n/a

33,157

55,000

5,830

–

(1)  Balance at date of appointment for NEDs appointed during the year.

(2)  Balance at date of cessation for NEDs resigning during the year.

Terms of appointment

All NEDs 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.

7. Company performance and remuneration impacts

In considering the IOOF Group’s financial performance and impacts on shareholder wealth for STI, for LTI (excluding for the 2020 
financial year as no LTI is being awarded in respect of the year ended 30 June 2020), and in future for EEP determination, the 
Committee has regard to the following financial metrics in respect of the current financial year and the previous four financial years.

5 year Group performance

Profitability measures

Profit attributable to owners of the Company ($'000s)

UNPAT ($'000s)(1)

UNPAT EPS (cents per share)

Share information

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

2020

2019

2018

2017

2016

146,964

128,834

36.8

28,560

197,989

56.5

88,301

191,417

57.3

115,990

169,357

56.5

196,846

173,367

57.8

42.0

16.8

5.17

4.92

(0.25)

8.1

(8.5)

8.99

5.17

(3.82)

26.4

31.6

9.80

8.99

(0.81)

38.7

38.7

7.83

9.80

1.97

53.0

12.1%

31.9%

36.9%

65.7

46.0

8.99

7.83

(1.16)

54.5

12.3%

(6.8)%

29.3%

Dividends per share (cents per share)

34.5

37.5

54.0

Ratios

Return on equity (non-statutory measure)(2)

Total shareholder return

Total shareholder return – three year cumulative

7.6%

1.8%

(37.9)%

10.9%

(36.8)%

(21.6)%

11.3%

(2.8)%

11.8%

STIs paid to KMP

Total STIs paid to KMP ($'000s)

173

143

2,046

1,900

1,813

(1)   UNPAT is reconciled to profit attributable to owners of the Company in the Operating and Financial Review at page 28 of the Directors’ Report.

(2)   RoE is calculated by dividing UNPAT by average capital on issue during the year.

53

IOOF | annual report 2020UNPAT vs STI vs TSR (cumulative)

UNPAT $'000

250,000

200,000

150,000

100,000

50,000

0

2016
UNPAT ($'000s)

2017

STIs paid to KMP ($'000s)

2018

2019
TSR - 3 yr cumulative (%)

2020

STIs $’000

TSR %

2,500

2,000

1,500

1,000

500

0

-500

-1,000

-1,500

100%

80%

60%

40%

20%

0%

--20%

--40%

--60%

Impact of Group performance on LTIs

As discussed in section 4, TSR performance over the three years to 30 June 2020 was -37.9%, placing it at the 150th position relative 
to the ASX 200. As a result, none of the TSR hurdle based 2018 performance rights vested in July 2020.

54

IOOF | annual report 2020Remuneration report (cont’d)8. Key Management Personnel remuneration – Additional statutory disclosure

Additional statutory disclosure

The following table sets out the remuneration received by KMP for the year ended 30 June 2020. 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.

Short-term benefits

Post-
employ-
ment 

Share-based 
payments(2)

Salary

Bonus -
cash

Non-
mone-
tary(1)

Super-
annu-
ation

Perform-
ance
rights

Bonus -
deferred
shares

Termin-
ation
benefits

Total

Component 
as a % of 
total 
remuneration

Fixed Variable

Fixed

Fixed  Variable Variable

Fixed 

Fixed Variable(3)

Element of 
Remuneration

Component of 
Remuneration

R Mota

2020 1,182,459

2019

762,065

$

$

–

–

D Farmer

2020

403,997

173,036

2019

317,919

142,713

F Lombardo(4) 2020

528,997

2019

283,347

KMP appointed during 2020

D Chalmers(4) 2020

209,730

D Whereat(4)

2020

203,461

M Oliver(4)

2020

209,392

A Noble(4)

2020

132,076

L Stewart(4)

2020

23,038

Former KMP

D Coulter(4)

2020

303,321

2019

451,119

–

–

–

–

–

–

–

–

–

G Riordan(4)

2020

322,025

75,000

2019

465,426

C Kelaher(5)

2019

1,303,163

–

–

$

3,316

6,048

8,218

3,218

–

–

–

2

1,008

–

–

$

$

21,003

280,677

20,531

446,166

21,003

93,908

20,531

179,479

21,003

227,484

11,845

104,331

5,655

8,078

8,886

11,071

808

–

17,936

17,936

–

–

3,316

3,218

14,136

(8,783)

20,531

446,166

–

–

14,540

75,121

20,531

307,499

$

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

$

$

– 1,487,455

– 1,234,810

–

–

–

–

–

–

–

700,162

663,860

777,484

399,523

215,385

229,477

237,222

57,212

200,359

–

23,846

472,165

784,155

–

921,034

438,312

924,998

–

793,457

3,467

23,774

(204,460)

– 1,268,129 2,394,072

%

81

64

62

51

71

74

100

92

92

100

100

101

52

84

61

109

%

19

36

38

49

29

26

–

8

8

–

–

(1)

48

16

39

(9)

Total

2020 3,518,496

248,036

15,860

126,183

704,279

–

967,689 5,580,543

2019 3,583,039

142,713

15,950

117,744

1,279,181

– 1,268,129

6,406,756

(1)  Non-monetary benefits include company funded benefits and fringe benefits tax payable on those benefits, typically car parking. There are no other monetary nor 

non-monetary short term benefits for KMP.

(2)  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. STIs awarded 
in deferred shares are also shown here.

(3)  As payment of the variable component is at the discretion of the Board, the minimum value is nil and the maximum is the total amount paid.

(4)  Amounts represent payments relating to the period during which the individuals were identified as KMP.

(5)  Total termination payment of $1,273,379 as disclosed to the ASX includes $5,250 of annual leave and long service leave entitlements which are included in salary for 

accounting purposes. The remaining termination payment as disclosed above being $1,268,129.

55

IOOF | annual report 20209. Other information

Equity holdings

The table below sets out details of deferred shares and rights that were granted to KMP during the 2020 financial year or in prior years 
and that then vested, were exercised/sold or which lapsed/were forfeited during the 2020 financial year.

Type of instrument

Grant date

Fair value per 
right at grant date

Number granted(1)

Balance at 

1 July 2019

Granted as

 compensation

Exercised/

Vested

Forfeited/

Lapsed

Balance at 

30 June 2020

Financial year 

of vesting

Name

KMP

R Mota

Total R Mota

D Farmer

Total D Farmer

F Lombardo

2018 deferred shares(2)

2018 deferred shares(2)

2020 LTI performance rights

2019 LTI performance rights

2018 LTI performance rights

2018 deferred shares(2)

2018 deferred shares(2)

2020 LTI performance rights

2019 LTI performance rights

2017 LTI performance rights

2018 deferred shares(2)(4)

2018 deferred shares(2)(4)

2020 LTI performance rights

2019 LTI performance rights(4)

2018 LTI performance rights

Total F Lombardo

D Whereat

2020 LTI performance rights(4)

2019 LTI performance rights(4)

Total D Whereat

M Oliver

Total M Oliver

Former KMP

D Coulter

Total D Coulter

G Riordan

Total G Riordan

Total KMP

2020 LTI performance rights(4)

2019 LTI performance rights(4)

2018 deferred shares(2)

2018 deferred shares(2)

2019 LTI performance rights

2018 LTI performance rights

2018 deferred shares(2)

2018 deferred shares(2)

2019 LTI performance rights

2018 LTI performance rights

30-Jun-18

30-Jun-18

17-Dec-19

26-Sep-18

1-Sep-17

30-Jun-18

30-Jun-18

17-Dec-19

26-Sep-18

1-Mar-17

30-Jun-18

30-Jun-18

17-Dec-19

26-Sep-18

1-Sep-17

17-Dec-19

26-Sep-18

17-Dec-19

26-Sep-18

30-Jun-18

30-Jun-18

26-Sep-18

1-Sep-17

30-Jun-18

30-Jun-18

26-Sep-18

1-Sep-17

$8.58

$8.58

$5.90

$4.93

$8.32

$8.58

$8.58

$5.90

$4.93

$5.72

$8.58

$8.58

$5.90

$4.93

$8.32

$5.90

$4.93

$5.90

$4.93

$8.58

$8.58

$4.93

$8.32

$8.58

$8.58

$4.93

$8.32

13,112

13,112

75,000

50,000

30,000

6,761

6,761

25,000

25,000

15,000

11,538

11,538

44,000

44,000

30,000

10,000

10,000

10,000

10,000

13,112

13,112

50,000

30,000

8,324

8,324

30,000

20,000

13,112

13,112

–

50,000

30,000

106,224

6,761

6,761

–

25,000

15,000

53,522

11,538

11,538

–

–

–

44,000

30,000

97,076

10,000

10,000

10,000

10,000

13,112

13,112

50,000

30,000

106,224

8,324

8,324

30,000

20,000

66,648

449,694

75,000

75,000

25,000

25,000

44,000

44,000

10,000

10,000

10,000

10,000

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

164,000

(13,112)

(15,000)

(28,112)

(6,761)

(7,500)

(14,261)

(11,538)

(15,000)

(26,538)

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(13,112)

(15,000)

(28,112)

(8,324)

(10,000)

(18,324)

(115,347)

(15,000)

(15,000)

(7,500)

(7,500)

(15,000)

(15,000)

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(50,000)

(15,000)

(65,000)

(10,000)

(10,000)

(112,500)

13,112

75,000

50,000

138,112

6,761

25,000

25,000

56,761

11,538

44,000

44,000

99,538

10,000

10,000

20,000

10,000

10,000

20,000

13,112

–

–

–

–

–

–

–

–

–

–

–

13,112

8,324

30,000

38,324

385,847

2021

2020

2022

2021

2020

2021

2020

2022

2021

2020

2021

2020

2022

2021

2020

2022

2021

2022

2021

2021

2020

2021

2020

2021

2020

2021

2020

(1)  Exercise price at grant date is $nil.
(2)  In August 2018, KMP were awarded STIs for the 2018 financial year, of which one half was settled in cash and the remaining half in the form of deferred shares. 

Half of the deferred shares vested in July 2019 with the remaining half in July 2020 subject to Board ‘look back’ provisions.

(3)   D Chalmers and L Stewart were appointed KMP after the grant of 2020 LTI performance rights. A Noble was not awarded any deferred shares or rights in her time 

56

as KMP. Therefore, these individuals are not included in the above table.

(4) In existence upon appointment as KMP.

IOOF | annual report 2020Remuneration report (cont’d)9. Other information

Equity holdings

The table below sets out details of deferred shares and rights that were granted to KMP during the 2020 financial year or in prior years 

and that then vested, were exercised/sold or which lapsed/were forfeited during the 2020 financial year.

Type of instrument

Grant date

Fair value per 

Number granted(1)

right at grant date

Balance at 
1 July 2019

Granted as
 compensation

Exercised/
Vested

Forfeited/
Lapsed

Balance at 
30 June 2020

Financial year 
of vesting

13,112

13,112

–

50,000

30,000

106,224

6,761

6,761

–

25,000

15,000

53,522

11,538

11,538

–

44,000

30,000

97,076

–

10,000

10,000

–

10,000

10,000

13,112

13,112

50,000

30,000

106,224

8,324

8,324

30,000

20,000

66,648

449,694

–

–

75,000

–

–

75,000

–

–

25,000

–

–

25,000

–

–

44,000

–

–

44,000

10,000

–

10,000

10,000

–

10,000

–

–

–

–

–

–

–

–

–

–

164,000

–

(13,112)

–

(15,000)

(28,112)

–

(6,761)

–

–

(7,500)

(14,261)

–

(11,538)

–

–

(15,000)

(26,538)

–

–

–

–

–

–

–

(13,112)

–

(15,000)

(28,112)

–

(8,324)

–

(10,000)

(18,324)

(115,347)

–

–

–

(15,000)

(15,000)

–

–

–

–

(7,500)

(7,500)

–

–

–

–

(15,000)

(15,000)

–

–

–

–

–

–

–

–

(50,000)

(15,000)

(65,000)

–

–

–

(10,000)

(10,000)

(112,500)

13,112

–

75,000

50,000

–

138,112

6,761

–

25,000

25,000

–

56,761

11,538

–

44,000

44,000

–

99,538

10,000

10,000

20,000

10,000

10,000

20,000

13,112

–

–

–

13,112

8,324

–

30,000

–

38,324

385,847

2021

2020

2022

2021

2020

2021

2020

2022

2021

2020

2021

2020

2022

2021

2020

2022

2021

2022

2021

2021

2020

2021

2020

2021

2020

2021

2020

57

Name

KMP

R Mota

Total R Mota

D Farmer

Total D Farmer

F Lombardo

Total D Whereat

M Oliver

Total M Oliver

Former KMP

D Coulter

Total D Coulter

G Riordan

2018 deferred shares(2)

2018 deferred shares(2)

2020 LTI performance rights

2019 LTI performance rights

2018 LTI performance rights

2018 deferred shares(2)

2018 deferred shares(2)

2020 LTI performance rights

2019 LTI performance rights

2017 LTI performance rights

2018 deferred shares(2)(4)

2018 deferred shares(2)(4)

2020 LTI performance rights

2019 LTI performance rights(4)

2018 LTI performance rights

2020 LTI performance rights(4)

2019 LTI performance rights(4)

2018 deferred shares(2)

2018 deferred shares(2)

2019 LTI performance rights

2018 LTI performance rights

2018 deferred shares(2)

2018 deferred shares(2)

2019 LTI performance rights

2018 LTI performance rights

30-Jun-18

30-Jun-18

17-Dec-19

26-Sep-18

1-Sep-17

30-Jun-18

30-Jun-18

17-Dec-19

26-Sep-18

1-Mar-17

30-Jun-18

30-Jun-18

17-Dec-19

26-Sep-18

1-Sep-17

17-Dec-19

26-Sep-18

17-Dec-19

26-Sep-18

30-Jun-18

30-Jun-18

26-Sep-18

1-Sep-17

30-Jun-18

30-Jun-18

26-Sep-18

1-Sep-17

Total F Lombardo

D Whereat

2020 LTI performance rights(4)

2019 LTI performance rights(4)

$8.58

$8.58

$5.90

$4.93

$8.32

$8.58

$8.58

$5.90

$4.93

$5.72

$8.58

$8.58

$5.90

$4.93

$8.32

$5.90

$4.93

$5.90

$4.93

$8.58

$8.58

$4.93

$8.32

$8.58

$8.58

$4.93

$8.32

13,112

13,112

75,000

50,000

30,000

6,761

6,761

25,000

25,000

15,000

11,538

11,538

44,000

44,000

30,000

10,000

10,000

10,000

10,000

13,112

13,112

50,000

30,000

8,324

8,324

30,000

20,000

Total G Riordan

Total KMP

(1)  Exercise price at grant date is $nil.

(2)  In August 2018, KMP were awarded STIs for the 2018 financial year, of which one half was settled in cash and the remaining half in the form of deferred shares. 

Half of the deferred shares vested in July 2019 with the remaining half in July 2020 subject to Board ‘look back’ provisions.

(3)   D Chalmers and L Stewart were appointed KMP after the grant of 2020 LTI performance rights. A Noble was not awarded any deferred shares or rights in her time 

as KMP. Therefore, these individuals are not included in the above table.

(4) In existence upon appointment as KMP.

IOOF | annual report 2020The relevant interest of KMP in the shares issued by the Company, is as follows:

Ordinary shares(1)

R Mota

D Farmer

F Lombardo(2)

KMP appointed during 2020

D Chalmers(2)

D Whereat(2)

M Oliver(2)

A Noble(2)(3)

L Stewart(2)

Former KMP

D Coulter(3)

G Riordan(3)

C Kelaher(3)

Balance at 
1 July 2019

Received on
vesting of
performance
rights(4)

Net other
change

Balance at 
30 June 2020

No.

122,115

108,115

–

–

–

–

–

–

–

–

–

300,971

293,471

72,500

65,000

3,566,381

No.

28,112

7,500

14,261

–

19,038

–

–

–

–

–

–

28,112

7,500

23,324

7,500

–

No.

54,000

6,500

–

–

–

–

–

–

–

–

–

–

–

–

–

–

No.

204,227

122,115

14,261

–

19,038

–

–

–

–

–

–

329,083

300,971

95,824

72,500

3,566,381

2020

2019

2020

2019

2020

2019

2020

2020

2020

2020

2020

2020

2019

2020

2019

2019

(1)  The equity holding for the above individuals is inclusive of both direct and indirect shareholdings.

(2)  Opening balance is number of shares held at the time of appointment as KMP.

(3)  Closing balance is number of shares held at the time of cessation as KMP.

(4)  2018 LTI performance rights that vested on 30 June 2020 were not transferred to participants until July 2020 and are therefore not included in this table.

Contract terms

The term of each KMP’s contract is ongoing. Either IOOF or the individual KMP (excluding the CEO) can terminate their contract 
on 6 months’ notice. In the case of the CEO, either IOOF or the CEO can terminate his contract on 12 months’ notice.

In the case of termination of employment, 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 EEP (if applicable). The Board has discretion regarding 
treatment of unvested short and long-term incentives received under the previous remuneration framework. 

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 report is signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001.

John Selak 
Remuneration Committee Chair 

31 August 2020

58

IOOF | annual report 2020Remuneration report (cont’d)Directors’ declaration

For the year ended 30 June 2020

1 

In the opinion of the Directors of the Company:

a  the consolidated financial statements and notes set out on pages 67 to 130 and the Remuneration Report, set out on pages 42 

to 58 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 2020 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 Chief Executive 

Officer and Chief Financial Officer for the financial year ended 30 June 2020.

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 Allan Griffiths 
Chairman

Melbourne 
31 August 2020

59

IOOF | annual report 202060

IOOF | annual report 2020     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.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 financial year ended 30 June 2020 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 ii.no contraventions of any applicable code of professional conduct in relation to the audit.     KPMG  Chris Wooden  Partner  Melbourne  31 August 2020       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.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 financial year ended 30 June 2020 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 ii.no contraventions of any applicable code of professional conduct in relation to the audit.     KPMG  Chris Wooden  Partner  Melbourne  31 August 2020  61

IOOF | annual report 2020     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.Independent Auditor’s Report   To the shareholders of IOOF Holdings Ltd Report on the audit of the Financial Report  Opinion We have audited the Financial Report of IOOF Holdings Ltd (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and • Complying with Australian Accounting Standards and the Corporations Regulations 2001.  The Financial Report comprises:  • Consolidated Statement of Financial Position as at 30 June 2020; • Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, and Consolidated Statement of Cash Flows for the year then ended; • Notes including a summary of significant accounting policies; and  • Directors' Declaration. 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 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. Our responsibilities under those standards are further described in the Auditor’s responsibilities for 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 requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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.    62

IOOF | annual report 2020   Key Audit Matters The Key Audit Matters we identified are: •Valuation of Goodwill and Intangible Assets  •Provisions for client remediation and related costs  •Information technology related controls Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our 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. Valuation of Goodwill and Intangible Assets - $1,596.0m and $344.0m  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 A key audit matter for us was the Group’s testing of goodwill and intangible assets for impairment, given the:  •Size of the balance (being 38% and 8% of total assets respectively); and •Increased estimation uncertainty continuing from the impact of the COVID-19 global pandemic. This increased the level of judgement applied by us when evaluating the evidence available. We focussed on the significant forward-looking assumptions the Group applied in their value in use models, including: •Forecast cash flows, growth rates and terminal growth rates – the Group has experienced reduced FUMA in the current year, as a result of COVID-19. This impacted the Group through a reduction in revenue. These conditions and the uncertainty of their continuation increase the possibility of goodwill and intangible assets being impaired, plus the risk of inaccurate forecasts or a significantly wider range of possible outcomes for us to consider.  •Discount rate – this is complicated in nature and varies according to the conditions and environment the specific Cash Generating Unit (CGU)/intangible is subject to from time to time as well as the approach to incorporating risks into the cash flows or discount rates. Working with our valuation specialists, our procedures included: •We considered the appropriateness of the value in use method applied by the Group to perform the test of goodwill and intangibles impairment against the requirements of the accounting standards. •We assessed the integrity of the value in use models used, including the accuracy of the underlying calculation formulas.   •We met with management to understand the impact of COVID-19 on the Group’s FY20 results and related forecasts.  •We challenged the forecast cash flows, growth rates and terminal value contained in the value in use model against our understanding of the relevant CGU/intangible and externally sourced industry based growth rates. We assessed the application of key forecast cash flow assumptions for consistency across the Group’s CGUs/intangibles. •We independently developed a discount rate range using publicly available data for comparable entities, adjusted by risk factors specific to the Group’s CGUs/intangibles and the industry they operate in. •We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the models. •We considered the sensitivity of the models by varying key assumptions, such as forecast growth rates and discount rates, within a reasonably possible range. We considered key assumptions when performing the sensitivity analysis and what the Group consider to be reasonably possible. We did this to identify those CGUs at higher risk of 63

IOOF | annual report 2020   Key Audit Matters The Key Audit Matters we identified are: •Valuation of Goodwill and Intangible Assets  •Provisions for client remediation and related costs  •Information technology related controls Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our 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. Valuation of Goodwill and Intangible Assets - $1,596.0m and $344.0m  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 A key audit matter for us was the Group’s testing of goodwill and intangible assets for impairment, given the:  •Size of the balance (being 38% and 8% of total assets respectively); and •Increased estimation uncertainty continuing from the impact of the COVID-19 global pandemic. This increased the level of judgement applied by us when evaluating the evidence available. We focussed on the significant forward-looking assumptions the Group applied in their value in use models, including: •Forecast cash flows, growth rates and terminal growth rates – the Group has experienced reduced FUMA in the current year, as a result of COVID-19. This impacted the Group through a reduction in revenue. These conditions and the uncertainty of their continuation increase the possibility of goodwill and intangible assets being impaired, plus the risk of inaccurate forecasts or a significantly wider range of possible outcomes for us to consider.  •Discount rate – this is complicated in nature and varies according to the conditions and environment the specific Cash Generating Unit (CGU)/intangible is subject to from time to time as well as the approach to incorporating risks into the cash flows or discount rates. Working with our valuation specialists, our procedures included: •We considered the appropriateness of the value in use method applied by the Group to perform the test of goodwill and intangibles impairment against the requirements of the accounting standards. •We assessed the integrity of the value in use models used, including the accuracy of the underlying calculation formulas.   •We met with management to understand the impact of COVID-19 on the Group’s FY20 results and related forecasts.  •We challenged the forecast cash flows, growth rates and terminal value contained in the value in use model against our understanding of the relevant CGU/intangible and externally sourced industry based growth rates. We assessed the application of key forecast cash flow assumptions for consistency across the Group’s CGUs/intangibles. •We independently developed a discount rate range using publicly available data for comparable entities, adjusted by risk factors specific to the Group’s CGUs/intangibles and the industry they operate in. •We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the models. •We considered the sensitivity of the models by varying key assumptions, such as forecast growth rates and discount rates, within a reasonably possible range. We considered key assumptions when performing the sensitivity analysis and what the Group consider to be reasonably possible. We did this to identify those CGUs at higher risk of    The Group uses complex models to perform their annual testing of goodwill and intangibles for impairment.  The models are largely manually developed, adjusted for historical performance, and use a range of internal and external sources as inputs to the assumptions. Complex modelling, using forward-looking assumptions, tends to be prone to greater risk for potential bias, error and inconsistent application. These conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and their consistent application. We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. impairment and to focus our further procedures. •We assessed the disclosures in the financial report using our understanding obtained from our testing, discussions with management and the Board and against the requirements of the accounting standards.    Provisions for client remediation and related costs - $630.6m  Refer to Note 4-4 Provisions to the Financial Report The key audit matter How the matter was addressed in our audit The provisions for client remediation and related costs is a Key Audit Matter due to the judgments required by us in assessing the Group’s determination of: •The existence of a present legal or constructive obligation as a basis for recognition of a provision against the criteria in the accounting standards. •Reliable estimates of amounts which may be paid arising from the present obligation, including estimates of the number of affected customers, expected average remediation payments and related costs. •The potential for legal proceedings and external reviews leading to a wider range of estimation outcomes for us to consider. The Group uses a complex model to estimate the amount which may be paid in future periods.  The model is manually developed and uses a range of internal and external sources as inputs to the assumptions. Complex modelling, using forward-looking assumptions, tends to be prone to greater risk for potential bias, error Working with our regulatory specialists, our procedures included: •We obtained an understanding of the Group’s process for identifying and assessing the potential impact of the ongoing reviews into client remediation activities. •We assessed the integrity of the model used, including the accuracy of the underlying calculation formulas •We inquired with the Group regarding ongoing reviews into other remediation activities. •We read the minutes and other relevant documentation of the Company’s Board of Directors, Board Committees, various management committees, and attended the Company’s Audit Committee and Risk and Compliance Committee meetings. •We inspected correspondence with regulatory bodies and reports from external consultants provided to the Group. •We challenged the Group’s basis for recognition of a provision and associated costs against the requirements of the accounting standards.  We did this by understanding the provisioning methodologies and challenging underlying 64

IOOF | annual report 2020   and inconsistent application. These conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and their consistent application. We involved regulatory specialists to supplement our senior audit team members in assessing this key audit matter. assumptions including expected average remediation payments and related costs. •We tested a sample of customer files to assess the accuracy of the Group’s expected number of affected customers included in the provisions. •We assessed the appropriateness of the Group’s conclusions against the requirements of the accounting standards where estimates were unable to be reliably made for a provision to be recognised. •We assessed the disclosures in the financial report using our understanding obtained from our testing, discussions with management and the Board and against the requirements of the accounting standards.   Information Technology related controls The key audit matter How the matter was addressed in our audit The Information Technology (IT) related controls are a key audit matter as the Group’s key financial accounting and reporting processes are highly dependent on the automated controls over the Group’s IT systems.  There is a risk that gaps in the change management, segregation of duties or user access management controls (in relation to key financial accounting and reporting systems) may undermine our ability to place some reliance thereon in our audit.  Our audit approach could significantly differ depending on the effective operations of the Group’s IT controls. We involved IT specialists to supplement our senior audit team members in assessing this key audit matter. Working with our IT specialists we challenged the design of General IT controls and sample tested the operation of key controls (in relation to financial accounting and reporting systems) including:   •Change management control operation:  Inspected the Group’s change management policies and for a sample of system changes during the year checked consistency of the system changes to the Group’s policy. •Segregation of duties control operation: Sample tested key automated controls designed to enforce segregation of duties. •User access management controls operation: We assessed the Group’s evaluation of the user access rights, including privileged user access rights, granted to application systems. We checked for evidence of resolution of exceptions. We also assessed the operating effectiveness of management approval controls over the granting and removal of access rights, including privileged access rights.       65

IOOF | annual report 2020   and inconsistent application. These conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and their consistent application. We involved regulatory specialists to supplement our senior audit team members in assessing this key audit matter. assumptions including expected average remediation payments and related costs. •We tested a sample of customer files to assess the accuracy of the Group’s expected number of affected customers included in the provisions. •We assessed the appropriateness of the Group’s conclusions against the requirements of the accounting standards where estimates were unable to be reliably made for a provision to be recognised. •We assessed the disclosures in the financial report using our understanding obtained from our testing, discussions with management and the Board and against the requirements of the accounting standards.   Information Technology related controls The key audit matter How the matter was addressed in our audit The Information Technology (IT) related controls are a key audit matter as the Group’s key financial accounting and reporting processes are highly dependent on the automated controls over the Group’s IT systems.  There is a risk that gaps in the change management, segregation of duties or user access management controls (in relation to key financial accounting and reporting systems) may undermine our ability to place some reliance thereon in our audit.  Our audit approach could significantly differ depending on the effective operations of the Group’s IT controls. We involved IT specialists to supplement our senior audit team members in assessing this key audit matter. Working with our IT specialists we challenged the design of General IT controls and sample tested the operation of key controls (in relation to financial accounting and reporting systems) including:   •Change management control operation:  Inspected the Group’s change management policies and for a sample of system changes during the year checked consistency of the system changes to the Group’s policy. •Segregation of duties control operation: Sample tested key automated controls designed to enforce segregation of duties. •User access management controls operation: We assessed the Group’s evaluation of the user access rights, including privileged user access rights, granted to application systems. We checked for evidence of resolution of exceptions. We also assessed the operating effectiveness of management approval controls over the granting and removal of access rights, including privileged access rights.          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 the Remuneration Report. The remaining other information is expected to include: About IOOF, Our Diversified Business Model, Chairman’s Commentary, CEO and Managing Directors Commentary, 2020 Results At A Glance, 2020 Strategic Priorities, Environmental, Social & Governance Report, IOOF Foundation 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; and •Assessing the Group and Company's ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. 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 and Company 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 the 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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. 66

IOOF | annual report 2020   Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of IOOF Holdings Ltd for the year ended 30 June 2020, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities 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 the Directors’ report for the year ended 30 June 2020.  Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.     KPMG  KPMG    Chris Wooden  Rachel Milum Partner Partner Melbourne Melbourne 31 August 2020 31 August 2020           Consolidated statement of comprehensive income
For the year ended 30 June 2020

Revenue

Expenses

Share of profits/(losses) of associates accounted for using the equity method

Finance costs

Profit/(Loss) before tax

Income tax benefit/(expense)

Statutory fund

Statutory fund revenue*

Statutory fund expenses*

Income tax (expense)/benefit – statutory*

Statutory fund contribution to profit, net of tax

Profit/(Loss) for the year from continuing operations

Discontinued operations

Profit/(Loss) for the year from discontinued operations

Profit for the year

Other comprehensive income

Net change in fair value of financial assets through other comprehensive income

Exchange differences on translating foreign operations

Income tax on other comprehensive income

Other comprehensive income for the year, net of income tax

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 – continuing and discontinued operations: 

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)

2020

$’000

2019**

$’000

1,168,930

1,058,763

(1,067,351)

(1,091,494)

(479)

(14,259)

86,841

(28,212)

21,583

(31,624)

10,041

–

30

(12,881)

(45,582)

15,589

62,269

(52,110)

(10,159)

–

58,629

(29,993)

89,776

148,405

63,400

33,407

95,677

(50)

(28,711)

66,916

7,888

(6)

(2,374)

5,508

215,321

38,915

146,964

1,441

148,405

213,880

1,441

215,321

42.0

41.9

16.8

16.8

28,560

4,847

33,407

34,068

4,847

38,915

8.1

8.1

(8.5)

(8.5)

Note

2-3

2-4

4-1

2-6

5-1

5-1

5-1

2-2

2-8

2-8

2-8

2-8

Notes to the consolidated financial statements are included on pages 72 to 130.

*  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.

**  Restated – refer to note 2–2.

67

IOOF | annual report 2020   Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of IOOF Holdings Ltd for the year ended 30 June 2020, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities 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 the Directors’ report for the year ended 30 June 2020.  Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.     KPMG  KPMG    Chris Wooden  Rachel Milum Partner Partner Melbourne Melbourne 31 August 2020 31 August 2020          Consolidated statement of financial position
As at 30 June 2020

Note

1–1(d)

1–1(d)

1–1(d)

1–1(d)

4–1

4–5

2–6

4–2

4–3

2–2

1–1(d)

1–1(d)

3–2

4–4

2–6

2020

$’000

374,730

612,777

–

2019*

$’000

97,442

328,691

800,000

1,116,773

1,047,137

–

16,265

994

12,946

134,443

49,738

343,958

1,596,042

4,258,666

–

3,897

15,307

1,182

21,509

36,010

–

364,707

936,891

3,652,773

52,474

4,258,666

3,705,247

120,566

90,235

1,065,340

1,038,118

572,252

756,314

–

931

–

426,503

453,332

5,895

1,121

5,752

2,515,403

2,020,956

2–2

–

27,434

2,515,403

2,048,390

1,743,263

1,656,857

3–3

3–5

1,965,824

1,963,109

91,272

(313,604)

25,225

(339,140)

1,743,492

1,649,194

(229)

7,663

1,743,263

1,656,857

Assets

Cash

Receivables

Debt note

Other financial assets

Current tax assets

Prepayments

Deferred acquisition costs

Associates

Property and equipment

Deferred tax assets

Intangible assets

Goodwill

Assets classified as held for sale

Total assets

Liabilities

Payables

Other financial liabilities

Loans and borrowings

Provisions

Deferred tax liabilities

Deferred revenue liability

Lease incentives

Liabilities directly associated with assets classified as held for sale

Total liabilities

Net assets

Equity

Share capital

Reserves

Accumulated losses

Total equity attributable to equity holders of the Company

Non-controlling interest

Total equity

Notes to the consolidated financial statements are included on pages 72 to 130.

*Restated – refer to note 2–2.

68

IOOF | annual report 2020Consolidated statement of changes in equity
For the year ended 30 June 2020

For the year ended  
30 June 2020

Ordinary 
shares

Treasury 
shares

Reserves Accumulated
losses

Total

Non–
controlling
interest

Total 
equity

$’000

1,970,999

$’000

(7,890)

$’000

25,225

$’000

$’000

(339,140)

1,649,194

$’000

7,663

$’000

1,656,857

Balance at 1 July 2019

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 paid

Share-based payments expense

Transfer from employee equity-
settled benefits reserve on 
exercise of performance rights

Treasury shares transferred to 
recipients during the year

Transfer of lapsed performance 
rights to retained earnings

Divestment of non-controlling 
interest

–

–

–

–

–

2,715

–

–

–

–

–

–

–

146,964

146,964

1,441

148,405

66,916

–

66,916

–

66,916

66,916

146,964

213,880

1,441

215,321

–

(122,514)

(122,514)

(16)

(122,530)

2,932

(2,715)

–

–

–

(2,867)

2,867

–

–

–

–

–

(1,086)

1,086

–

–

2,932

–

–

–

–

–

–

–

–

2,932

–

–

–

(9,317)

(9,317)

Total transactions with owners

(152)

Balance at 30 June 2020

1,970,847

2,867

(5,023)

(869)

(121,428)

(119,582)

(9,333)

(128,915)

91,272

(313,604)

1,743,492

(229)

1,743,263

Notes to the consolidated financial statements are included on pages 72 to 130.

69

IOOF | annual report 2020Consolidated statement of changes in equity
For the year ended 30 June 2020

For the year ended  
30 June 2019

Ordinary 
shares

Treasury
 shares

Reserves

Accu-
mulated 
losses

Total

Non-
controlling
interest

Total 
equity

$’000

1,971,648

$’000

(4,625)

$’000

19,413

$’000

$’000

$’000

$’000

(184,169)

1,802,267

10,420

1,812,687

–

28,560

28,560

4,847

33,407

5,508

–

5,508

–

5,508

5,508

28,560

34,068

4,847

38,915

–

–

4,828

(4,000)

(184,055)

(184,055)

–

–

–

–

–

4,828

–

–

–

–

–

–

–

(7,914)

–

(6,947)

(1,201)

(191,002)

(1,201)

–

–

–

–

–

544

4,828

–

–

–

(7,914)

544

(4,649)

4,649

–

–

(524)

524

Total transactions with owners

(649)

Balance at 30 June 2019

1,970,999

304

(183,531)

(187,141)

(7,604)

(194,745)

25,225

(339,140)

1,649,194

7,663

1,656,857

Balance at 1 July 2018

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 paid

Return of capital to non-
controlling interest

Share-based payments expense

Transfer from employee equity-
settled benefits reserve on 
exercise of performance rights

Treasury shares transferred 
to recipients during the year

Transfer of lapsed performance 
rights to retained earnings

Purchase of treasury shares

Additional non-controlling interest 
arising upon acquisition

–

–

–

–

–

–

4,000

–

–

–

–

–

–

–

–

–

–

(7,914)

–

(3,265)

(7,890)

Notes to the consolidated financial statements are included on pages 72 to 130.

70

IOOF | annual report 2020Consolidated statement of cash flows
For the year ended 30 June 2020

Note

2020

$’000

2019

$’000

Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends from associates
Net stockbroking purchases
Legal settlements paid
Legal settlements recovered
Remediation costs
Coupon interest received on debt note
Income taxes paid – corporate
Contributions received – statutory
Withdrawal payments – statutory
Dividends and distributions received – statutory
Proceeds from divestment of financial instruments – statutory
Payments for financial instruments – statutory
Amounts (advanced to)/borrowed from other entities – statutory
Income taxes paid – statutory
Net cash (used in)/provided by operating activities
Cash flows from investing activities
Dividends and distributions received
Interest received
Acquisition transition costs
Interest and other costs of finance paid
Redemption/(purchase) of certificates of deposit
Redemption/(purchase) of debt note
Proceeds on divestment of subsidiaries
Acquisition of subsidiary, net of cash acquired
Purchase of shares in associates
Net proceeds on purchase and divestment of financial and other assets
Receipt of deferred purchase consideration
Net proceeds from/(payment for) swaps
Payments for property and equipment
Payments for intangible assets
Repayment of loan principal (related parties)
Net cash (used in)/provided by investing activities
Cash flows from financing activities
Borrowings repaid
Drawdown of borrowings
Purchase of treasury shares
Capital return to non-controlling interest
Repayment of lease liabilities
Dividends paid:
– members of the Company
– non-controlling members of subsidiary entities
Net cash (used in)/provided by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash divested classified in assets held for sale at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Reclassification to assets held for sale
Cash and cash equivalents at the end of year

Notes to the consolidated financial statements are included on pages 72 to 130.

2–5

1,325,331
(1,134,441)
351
(30)
(5,636)
3,342
(15,817)
9,381
(42,708)
119,027
(117,582)
1,839
150,373
(125,818)
(17,010)
(5,170)
145,432

1,473
4,373
(26,598)
(10,089)
–
800,000
93,007
(678,768)
(500)
85,015
–
(30,176)
(8,195)
(13,076)
7,298
223,764

(84,952)
115,000
–
–
(14,324)

(122,514)
(16)
(106,806)
262,390
97,442
14,963
(65)
–
374,730

1,211,456
(991,342)
358
612
(47,928)
37,070
(4,071)
67,910
(111,269)
112,292
(139,398)
6,200
291,688
(239,209)
(3,432)
(18,754)
172,183

1,238
9,448
(18,485)
(16,372)
407,443
(800,000)
41,251
(8,176)
(2,750)
1,287
351
–
(26,199)
(3,775)
47
(414,692)

(240,619)
670,000
(7,914)
(1,201)
–

(184,055)
(6,947)
229,264
(13,245)
125,619
–
31
(14,963)
97,442

71

IOOF | annual report 2020Notes to the financial statements

For the year ended 30 June 2020

IOOF Holdings Ltd (the “Company” or “Parent”) is a listed public company incorporated in Australia. The IOOF Group comprises 
the Company and its subsidiaries, and the consolidated Group’s interest in associates. 

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 cash flow 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 included within the Directors’ Report.

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, through the risk 
management policies, Risk Appetite Statement, and tolerances 
set, approved, and monitored by the Board. 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 Enterprise 
Risk and Compliance 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. 

Liquidity risk relates to the IOOF Group having insufficient liquid 
assets to cover cash flow requirements. The Group manages 
liquidity risk by maintaining sufficient liquid assets and an ability 
to access a committed line of credit. The liquidity requirements for 
the Group’s licensed entities are regularly reviewed and carefully 
monitored in accordance with their licence requirements.

72

The COVID-19 environment impacted on operating cash flows 
in the fourth quarter of 2020. The ASX All Ordinaries closed the 
financial year at 10.4% lower than 30 June 2019, which directly 
impacts FUMA and revenues. Substantial cash outflows were 
experienced due to the Early Access to Superannuation 
scheme, particularly in the ex-ANZ pensions and investments 
(P&I) business. The Group made payments totalling 
approximately $743 million in relation to this scheme.

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, includes the benefit funds and the controlled trusts. 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. Further information in 
relation to the benefit funds is included in Note 5.

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. 

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.

IOOF | annual report 2020(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 financial assets at fair value 
through other comprehensive income (OCI).

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. Financial 
assets at fair value through OCI are exposed to price risk as the 
share price fluctuates.

IOOF Group sensitivity

At 30 June 2020, had the price of the units/shares held by 
the IOOF Group in unlisted unit trusts/shares in other entities 
increased/decreased by 5% (2019: 1%) with all other variables 
held constant, gains / losses recorded through profit or loss 
would increase / decrease by $32,416,000 (2019: $6,748,000), 
and financial assets at fair value through OCI reserves would 
increase / decrease by $4,879,000 (2019: $291,000).

(ii) Currency risk

The IOOF Group’s exposure to foreign exchange risk in 
relation to the financial instruments of its foreign activities in 
New Zealand and Hong Kong is immaterial.

(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.

IOOF Group sensitivity

At 30 June 2020, if interest rates had changed by +/- 50 basis 
points (2019: +/- 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 $1,548,000 
(2019: $2,233,000). Equity would have been higher/lower 
by the same amount.

(b) Credit risk

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, debt 
note, 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. 
The Company had a concentration of credit risk to ANZ for 
the value of the debt note in 2019 ($800m). There is no such 
concentration in 2020.

Expected credit loss assessment

As at 30 June 2020, $9,786,000 trade receivables of the IOOF 
Group were past due but not impaired (2019: $2,873,000). 
The amount of the impairment provision was $420,000 
(2019: $585,000).

Collectability of trade receivables is reviewed on an ongoing 
basis. The IOOF Group recognises loss allowances for expected 
credit losses on financial assets measured at amortised cost. 
When determining whether the credit risk of a financial asset 
has increased significantly since initial recognition and when 
estimating expected credit losses, the IOOF Group considers 
reasonable and supportable information that is relevant and 
available without undue cost or effort. This includes both 
quantitative and qualitative information and analysis, based 
on the IOOF Group’s historical experience and informed credit 
assessment and including forward-looking information. 

73

IOOF | annual report 2020The IOOF Group considers a financial asset to be in default 
when the borrower is unlikely to pay its credit obligations 
to the IOOF Group in full, without recourse by the IOOF Group 
to actions such as realising security, or the financial asset is 
more than 90 days past due. The maximum period considered 
when estimating expected credit losses is the maximum 
contractual period over which the IOOF Group is exposed 
to the credit risk.

Expected credit losses are a probability-weighted estimate 
of credit losses. Credit losses are measured as the present value 
of all cash shortfalls (i.e. the difference between the cash flows 
due to the entity in accordance with the contract and the cash 
flows that the IOOF Group expects to receive). Expected credit 
losses are discounted at the effective interest rate of the 
financial asset. Loss allowances for financial assets measured 
at amortised cost are deducted from the gross carrying 
amount of the assets.

Impaired receivables

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

2020

2019

$'000

585

(165)

$'000

607

(22)

Carrying value at 30 June

420

585

Ageing of trade receivables 
that were not impaired at 
30 June

Neither past due nor impaired

69,448

Past due 31-60 days

Past due 61-90 days

Past due 91-120 days

Trade receivables past due 
but not impaired

4,507

3,526

1,753

79,234

9,786

45,950

1,402

468

1,003

48,823

2,873

(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 
two 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.

These funds are not available to shareholders. Balances relating 
to statutory funds in the table below are disclosed inclusive 
of amounts collected/receivable from or paid/payable to 
IOOF Group entities.

(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. The IOOF Group continuously monitors actual 
and forecast financial results to determine compliance with 
banking covenants.

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.

74

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 20202020

Carrying Amount

Contractual cash flows

Financial liabilities

Payables – corporate

Payables – statutory

Total payables

Ex-ANZ Advice Licensee (AL) remediation 
provision – corporate(1)

IOOF adviser remediation provision 
– corporate(1)

Ex-ANZ P&I remediation provision 
– corporate(1)

Current

Non-
Current

Total

$'000

$’000

$’000

1 year 
or less

$’000

118,689

1,748

120,437

139,427

129

–

129

76,347

118,818

118,689

1,748

120,566

215,774

1,748

120,437

139,427

1-5
 years

$’000

129

–

129

76,347

81,492

135,408

216,900

81,492

135,408

107,459

90,417

197,876

107,459

90,417

Other provisions

56,273

–

56,273

56,273

–

Other financial liabilities – corporate

Ex-ANZ AL remediation settlements liability

Contingent consideration

Other financial liabilities – statutory

Insurance contract liabilities

Investment contract liabilities

30,978

5,626

16,963

1,198

47,941

6,824

30,978

5,626

16,963

1,198

187,079

823,496

–

–

187,079

823,496

187,079

823,496

–

–

Total other financial liabilities

1,047,179

18,161

1,065,340

1,047,179

18,161

Borrowings – corporate

–

457,858

457,858

–

457,858

1,388,535

687,903

2,076,438

1,388,535

687,903

Financial assets available to meet the above financial liabilities

Financial assets at amortised cost

Cash – corporate

Cash restricted ORFR – corporate

Cash – statutory

Total cash

Receivables – corporate

Trade receivables

Other receivables

Ex-ANZ AL remediation indemnity

Security bonds

Receivables – statutory

Trade receivables

Other receivables

Dividends and distributions receivable

225,360

145,630

3,740

374,730

78,508

234,022

170,389

–

306

8,880

23,343

–

–

–

–

–

3,778

93,301

250

–

–

–

225,360

145,630

3,740

225,360

145,630

3,740

374,730

374,730

78,508

237,800

263,690

250

306

8,880

23,343

78,508

234,022

170,389

–

306

8,880

23,343

–

–

–

–

–

3,778

93,301

–

–

–

–

5+ 
years

$’000

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

250

–

–

–

Total

$’000

118,818

1,748

120,566

215,774

216,900

197,876

56,273

47,941

6,824

187,079

823,496

1,065,340

457,858

2,076,438

225,360

145,630

3,740

374,730

78,508

237,800

263,690

250

306

8,880

23,343

Total receivables

515,448

97,329

612,777

515,448

97,079

250

612,777

Fair value through profit or loss

Unlisted unit trusts – corporate

Unlisted unit trusts – statutory

–

925,257

902

–

Equity investments at FVOCI – corporate

–

139,406

Loans and other receivables

902

925,257

139,406

–

902

925,257

–

–

–

139,406

902

925,257

139,406

–

51,208

–

–

–

Loans to policyholders – statutory

51,208

–

51,208

51,208

Total other financial assets

976,465

140,308

1,116,773

976,465

902

139,406

1,116,773

1,866,643

237,637

2,104,280

1,866,643

97,981

139,656

2,104,280

Net financial assets/(liabilities)

478,108

(450,266)

27,842

478,108

(589,922)

139,656

27,842

(1)  Maturity of remediation provisions is not based on contractual maturity but rather expected payment dates.

75

IOOF | annual report 20202019

Carrying Amount

Contractual cash flows

Current

Non-
Current

Total

$'000

$’000

$’000

Financial liabilities

Payables – corporate

Payables – statutory

Total payables

Ex-ANZ AL remediation provision – corporate

IOOF adviser remediation provision 
– corporate

Other financial liabilities – corporate

Ex-ANZ AL remediation settlements liability

Contingent consideration

Other financial liabilities – statutory

Insurance contract liabilities

Investment contract liabilities

86,360

3,875

90,235

24,116

31,881

2,073

837

202,434

820,337

–

–

–

144,694

191,284

12,437

–

–

–

1 year 
or less

$’000

86,360

3,875

90,235

24,116

31,881

1-5
 years

$’000

5+ 
years

$’000

–

–

–

–

–

–

96,463

127,523

48,231

63,761

86,360

3,875

90,235

168,810

223,165

14,510

837

2,073

837

202,434

820,337

202,434

820,337

8,291

4,146

–

–

–

–

–

–

Total

$’000

86,360

3,875

90,235

168,810

223,165

14,510

837

202,434

820,337

Total other financial liabilities

1,025,681

12,437

1,038,118

1,025,681

8,291

4,146

1,038,118

Borrowings – corporate

–

426,503

426,503

–

426,503

–

426,503

1,171,912

774,919

1,946,831

1,171,912

658,780

116,139

1,946,831

Financial assets available to meet the above financial liabilities

Financial assets at amortised cost

Cash – corporate

Cash – statutory

Total cash

Receivables – corporate

Trade receivables

Other receivables

Ex-ANZ AL remediation 
indemnity

Security bonds

Receivables – statutory

Trade receivables

Other receivables

Dividends and distributions receivable

91,687

5,755

97,442

46,260

59,095

26,189

–

–

–

–

681

91,687

5,755

97,442

46,260

59,776

157,131

183,320

91,687

5,755

97,442

46,260

59,095

26,189

–

250

250

–

1,978

10,540

26,567

–

–

–

1,978

10,540

26,567

1,978

10,540

26,567

–

–

–

–

681

–

–

–

–

–

91,687

5,755

97,442

46,260

59,776

104,754

52,377

183,320

–

–

–

–

250

250

–

–

–

1,978

10,540

26,567

Total receivables

170,629

158,062

328,691

170,629

105,435

52,627

328,691

Fair value through profit or loss

Debt note – corporate

Other financial assets

Fair value through profit or loss

Unlisted unit trusts – corporate

Unlisted unit trusts – statutory

800,000

–

800,000

800,000

–

–

963,373

641

–

641

–

641

963,373

963,373

Equity investments at FVOCI – corporate

Loans and other receivables

Loans to directors and executives of 
associated entities – corporate

Loans to policyholders – statutory

Total other financial assets

–

–

41,627

41,627

7,298

7,298

–

–

34,198

997,571

–

34,198

49,566

1,047,137

34,198

997,571

–

–

–

41,627

800,000

641

963,373

41,627

7,298

7,298

–

34,198

–

–

–

–

641

48,925

1,047,137

Net financial assets/(liabilities)

893,729

(567,290)

326,439

893,729

(552,704)

(14,586)

326,439

2,065,642

207,628

2,273,270

2,065,642

106,076

101,552

2,273,270

76

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020(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.

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.

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 financial assets:
•  cash;
•  debt note;
•  financial assets at fair value through profit or loss;
•  financial assets at fair value through other 

comprehensive income; and

• 

loans and receivables.

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.

Debt note

The debt note was initially recognised at cost, and 
subsequently revalued to fair value through profit or loss 
at balance date. Fair value is determined using a discounted 
cash flow methodology, which incorporates unobservable 
inputs such as discount rates, counterparty credit, and 
probability-adjusted revenues expected to be received 
under the arrangement. The debt note was redeemed on 
31 January 2020 to fund the acquisition of the Pensions and 
Investments businesses from ANZ.

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.

Equity investments at Fair Value through Other 
Comprehensive Income

Equity investments at fair value through other comprehensive 
income (FVOCI) 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.

Equity investments at FVOCI are recognised initially at fair 
value plus any directly attributable transaction costs, and are 
revalued through other comprehensive income (OCI) each 
reporting period. Dividends are recognised in profit or loss 
unless it clearly represents a recovery of part of the cost of the 
investment. Other net gains and losses are recognised in OCI 
and are never reclassified to profit or loss.

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 if it is held to collect contractual 
cash flows and its contractual terms give rise to cash flows that 
are solely payments of principal and interest on the principal 
amount outstanding.

Certificates of deposit

Certificates of deposit held during the prior year include 
deposits with original maturities of more than three months.

77

IOOF | annual report 2020Financial liabilities

Alternative investment assets classification

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.

Alternative investments are made up of cash held with the 
Custodian and investments in alternative portfolios which have 
been designated as fair value through profit or loss. Alternative 
investments include investments in hedge funds, unlisted real 
estate funds and private equity funds. 

The IOOF Group has the following non-derivative 
financial liabilities:
•  payables;
•  borrowings (including finance leases); and
•  other financial liabilities.

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.

Payables

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 Funds Under 
Management, Administration, Advice and Supervision (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.

Alternative investments

Total return swap liability on alternative investments 
measurement

The total return swap liability is initially recognised at cost and 
subsequently measured at fair value. Changes in the fair value 
of financial liabilities are recognised through the Statement of 
comprehensive income. The maturities of financial instruments 
table includes the net amount of the total return swap an 
alternative investments at 30 June 2020. The value of the 
amount payable on the total return swap on alternative 
investments at 30 June 2020 is $783.1m. The value of the 
alternative investments at 30 June 2020 is $783.1m. 

78

Alternative investment assets recognition 
and de-recognition 

Regular way purchases and sales of financial assets are 
recognised on trade date – the date on which the Group 
commits to purchase or sell the asset. Financial assets are 
derecognised when the rights to receive cash flows from 
the financial assets have expired or have been transferred 
and the Group has transferred substantially all the risks and 
rewards of ownership.

Alternative investment assets initial recognition 
and measurement

Alternative investments are initially recognised and 
subsequently measured at fair value which is determined 
as the redemption price at the balance sheet date.

Total return swap liability on alternative investments 
classification

Total return swaps liability is made up of fully funded total 
return swaps, which are designated at fair value through 
profit or loss.

Assets and liabilities relating to statutory funds

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.

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 9 and AASB 15. There are differences between the 
valuation requirements of the accounting standards and those 
of the Life Insurance Act 1995.

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020Assets relating to statutory funds

(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:
• 
•  distributed at the discretion of the insurer; and
•  are based on the performance of a specified pool of assets.

likely to be a significant portion of the total benefits;

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.

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.

Liabilities relating to statutory funds

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 9 and AASB 15. There are differences between the 
valuation requirements of the accounting standards and those 
of the Life Insurance Act 1995.

Contract classification relating to statutory funds

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 with a discretionary participation feature 
(‘DPF’) 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.

79

IOOF | annual report 20201-2 Financial Instruments

Fair value hierarchy

The fair values of financial assets and liabilities are equal to the carrying amounts shown in the statement of financial position. 
The table below analyses financial instruments carried at fair value, by valuation method.

30 June 2020

Financial assets measured at fair value

FVOCI – corporate

Unlisted unit trusts – corporate

Unlisted unit trusts – statutory

Financial liabilities measured at fair value

Contingent consideration – corporate

30 June 2019

Financial assets measured at fair value

FVOCI – corporate

Unlisted unit trusts – corporate

Unlisted unit trusts – statutory

Debt note – corporate

Financial liabilities measured at fair value

Contingent consideration – corporate

Level 1

$'000

139,406

–

–

139,406

–

–

41,627

–

–

–

Level 2

$'000

–

902

925,257

926,159

Level 3

$'000

Total

$'000

–

–

–

–

139,406

902

925,257

1,065,565

–

–

6,824

6,824

6,824

6,824

–

641

963,373

–

41,627

964,014

–

–

–

–

–

–

–

800,000

800,000

837

837

41,627

641

963,373

800,000

1,805,641

837

837

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 2020.

80

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020Reconciliation of movements in level 3
financial instruments

Opening balance as at 1 July

Issuance/(redemption) of debt note

Take up of deferred consideration liability

Unwinding of discount

Settlement of contingent consideration

Closing balance as at 30 June

Debt note

Contingent consideration

2020

$'000

800,000

(800,000)

–

–

–

–

2019

$'000

–

800,000

–

–

–

800,000

2020

$'000

837

–

6,802

–

(815)

6,824

2019

$'000

392

–

2,907

8

(2,470)

837

There were no transfers into or out of Level 3 of the fair value hierarchy during the year ended 30 June 2020, except as disclosed 
in the table above.

Level 3 financial assets consist of:
•  A debt note carried at fair value in prior year. The debt note is valued via a discounted cash flow, which incorporates 

unobservable inputs such as discount rates, counterparty credit, and probability-adjusted revenues expected to be received 
under the arrangement. An increase in the discount rate used in isolation would result in a decrease to the fair value of the debt 
note. An increase in the probability adjusted revenues in isolation would result in an increase in the fair value of the debt note. 
The debt note was redeemed on 31 January 2020 to fund the acquisition of the Pensions and Investments businesses from ANZ.

Level 3 financial liabilities consist of:
•  Deferred purchase consideration in respect of client lists purchased by the IOOF Group, which is valued at best estimate of the 

amount payable under the relevant contracts. The amount of deferred consideration payable is linked to the retention of clients, 
which is an unobservable output and may decrease the value of the liability.

81

IOOF | annual report 2020Section 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

Financial advice and distribution

The IOOF Group has the following six strategic divisions, which 
are its reportable segments. All segments’ operating results are 
regularly reviewed by the IOOF Group’s Chief Executive Officer 
to make decisions about resources to be allocated to the 
segment and assess its performance, and for which discrete 
financial information is available.

The provision of financial planning advice and stockbroking 
services supported by services such as investment research, 
training, compliance support and access to financial products.

Portfolio and estate administration

The provision of administration and management services 
through master trust platforms, which offer a single access 
point to a range of investment products.

Financial advice and 
distribution

Portfolio and estate 
administration

Investment management

Ex-ANZ wealth management

Ex-ANZ pensions

 and investments

Corporate 

and other

Total

Management and service fees revenue

External other fee revenue

2020

$’000

261,893

17,278

2019

$’000

285,737

15,690

Service fees and other direct costs

(192,837)

(195,442)

2020

$’000

382,740

8,714

(88,843)

(73)

(18)

105,967

302,538

4,508

(1,285)

3,223

84,455

(2,123)

191,522

3,978

145

31

–

–

–

7,135

(98,243)

211,430

–

–

–

–

86,334

3,304

(1,241)

2,063

94,142

(3,025)

179,514

3,383

101

(499)

(103,572)

(106,863)

(115,005)

(998)

(635)

(8,692)

–

(3)

(20,172)

48,427

(1,749)

(15)

(2,571)

–

45

(25,162)

59,361

(1,085)

(34)

(9,488)

(812)

–

(26,918)

58,088

2019

$’000

399,260

8,427

(96,014)

(155)

311,518

–

–

–

2,689

(82,255)

231,952

–

–

–

(108,932)

(1,903)

–

(5,082)

(715)

–

(35,932)

79,388

2020

$’000

98,327

7,337

2019

$’000

95,694

7,049

(36,601)

(36,696)

–

69,063

–

66,047

–

–

–

–

–

–

–

–

(2,612)

66,451

(2,903)

63,144

–

–

–

(10,537)

(601)

–

(1,262)

–

–

–

–

–

(10,698)

(1,146)

–

(653)

–

–

(16,396)

37,655

(15,538)

35,109

945

12,501

118,475

2020

$’000

184,148

14,837

(198,040)

–

–

–

–

–

19,547

20,492

2,899

170

20

(119)

(19)

(1,025)

–

172

8,207

(19,078)

2019*

$’000

145,861

6,290

(139,650)

–

38

–

38

–

–

12,539

6,204

390

(1)

(14)

(49)

(56)

–

134

7,776

(14,802)

2020**

$’000

165,119

2,929

(49,573)

–

–

–

–

–

–

–

–

167

(17,768)

100,874

600

10,223

(242)

(2,720)

2019

$’000

71,987

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

2020

$’000

242

242

–

–

–

–

–

–

–

657

899

1,014

2,144

–

(41,362)

(129)

(13,329)

–

–

–

2019

$’000

–

353

401

754

–

–

–

–

–

137

891

867

5,917

–

15

–

–

–

(12,817)

(13,411)

31,293

(21,596)

50,391

18,424

(32,339)

17,986

(26,146)

2020

$’000

1,092,227

51,337

(565,894)

(73)

577,597

3,304

(1,241)

2,063

121,648

(121,648)

579,660

7,896

12,638

(479)

(2,932)

(14,259)

(23,187)

(812)

169

(50,266)

124,046

4,788

128,834

2019

$’000

926,552

37,809

(467,401)

(173)

496,787

4,546

(1,285)

3,261

87,281

(87,281)

500,048

11,049

78,439

30

(4,797)

(12,881)

(8,362)

(715)

179

(72,466)

183,301

14,688

197,989

(49,875)

(41,725)

(64,031)

(39,005)

(384,382)

(307,223)

Deferred acquisition costs

Gross Margin

Stockbroking revenue

Stockbroking service fees expense

Stockbroking net contribution

Inter-segment revenue(i)

Inter-segment expenses(i)

Net Operating Revenue

Other revenue

Finance income 

Share of profits of associates

Operating expenditure

Share-based payments expense

Finance costs

Depreciation of property & equipment

Amortisation of intangible assets 
– IT Development

Non-controlling interest

Income tax expense

UNPAT from continuing operations

Discontinued operations

UNPAT

(i)   Segment revenues, expenses and results include transfers between segments. Such transfers are priced on a commercial basis and are eliminated on consolidation.
For the period 1 October 2018 to 30 June 2019.
* 
**  For the period 1 February 2020 to 30 June 2020.

82

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020Investment management

Corporate and other

The management and investment of monies on behalf of 
corporate, superannuation, institutional clients and private 
individual investor clients.

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.

Ex-ANZ wealth management advice licensees

Ex-ANZ Wealth Management Advice Licensees (ex-ANZ ALs) 
acquired from ANZ during 2019, which provide financial 
planning advice services.

Ex-ANZ pensions and investments

Ex-ANZ Pensions and Investments (P&I) businesses which 
have platform businesses across retail and corporate. This is 
also inclusive of the debt note revenue up until its redemption 
on 31 January 2020.

Information regarding the results of each reportable 
segment (excluding the benefit funds) 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. 

Financial advice and 

distribution

Portfolio and estate 

administration

Investment management

Ex-ANZ wealth management

Ex-ANZ pensions
 and investments

Corporate 
and other

Total

Service fees and other direct costs

(192,837)

(195,442)

(36,601)

(36,696)

2020

$’000

261,893

17,278

–

86,334

3,304

(1,241)

2,063

94,142

(3,025)

179,514

3,383

101

(499)

(998)

(635)

(8,692)

–

(3)

(20,172)

48,427

2019

$’000

285,737

15,690

(18)

4,508

(1,285)

3,223

84,455

(2,123)

191,522

3,978

145

31

(1,749)

(15)

(2,571)

–

45

(25,162)

59,361

2020

$’000

98,327

7,337

2019

$’000

95,694

7,049

2020

$’000

382,740

8,714

(88,843)

(73)

2019

$’000

399,260

8,427

(96,014)

(155)

311,518

105,967

302,538

69,063

66,047

7,135

(98,243)

211,430

2,689

(82,255)

231,952

(2,612)

66,451

(2,903)

63,144

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(5,082)

(715)

(1,262)

(653)

(35,932)

79,388

(16,396)

37,655

(15,538)

35,109

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(1,085)

(34)

(9,488)

(812)

–

(26,918)

58,088

(103,572)

(106,863)

(115,005)

(108,932)

(1,903)

(10,537)

(601)

(10,698)

(1,146)

Management and service fees revenue

External other fee revenue

Deferred acquisition costs

Gross Margin

Stockbroking revenue

Stockbroking service fees expense

Stockbroking net contribution

Inter-segment revenue(i)

Inter-segment expenses(i)

Net Operating Revenue

Other revenue

Finance income 

Share of profits of associates

Operating expenditure

Share-based payments expense

Finance costs

Depreciation of property & equipment

Amortisation of intangible assets 

– IT Development

Non-controlling interest

Income tax expense

UNPAT from continuing operations

Discontinued operations

UNPAT

2020

$’000

184,148

14,837

(198,040)

–

945

–

–

–

19,547

–

20,492

2,899

170

20

2019*

$’000

145,861

6,290

(139,650)

–

12,501

38

–

38

–

–

12,539

6,204

390

(1)

(49,875)

(41,725)

(119)

(19)

(1,025)

–

172

8,207

(19,078)

(14)

(49)

(56)

–

134

7,776

(14,802)

2020**

$’000

165,119

2,929

(49,573)

–

118,475

–

–

–

167

(17,768)

100,874

600

10,223

–

(64,031)

–

(242)

(2,720)

–

–

(13,411)

31,293

2019

$’000

–

–

–

–

–

–

–

–

–

–

–

–

71,987

–

–

–

–

–

–

–

2020

$’000

–

242

–

–

242

–

–

–

657

–

899

1,014

2,144

–

(41,362)

(129)

(13,329)

–

–

–

2019

$’000

–

353

401

–

754

–

–

–

137

–

891

867

5,917

–

2020

$’000

1,092,227

51,337

(565,894)

(73)

577,597

3,304

(1,241)

2,063

121,648

(121,648)

579,660

7,896

12,638

(479)

2019

$’000

926,552

37,809

(467,401)

(173)

496,787

4,546

(1,285)

3,261

87,281

(87,281)

500,048

11,049

78,439

30

(39,005)

(384,382)

(307,223)

15

(12,817)

–

–

–

(2,932)

(14,259)

(23,187)

(812)

169

(50,266)

124,046

4,788

128,834

(4,797)

(12,881)

(8,362)

(715)

179

(72,466)

183,301

14,688

197,989

(21,596)

50,391

18,424

(32,339)

17,986

(26,146)

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.

83

IOOF | annual report 2020Reconciliation of reportable segment revenues and expenses

Profit attributable to Owners of the Company

Discontinued operations

Profit/(Loss) from continuing operations attributable to Owners of the Company

Underlying net profit after tax pre-amortisation (UNPAT) adjustments:

Amortisation of intangible assets

Acquisition costs – Acquisition advisory

Acquisition costs – Integration preparation

Acquisition costs – Finance costs

Termination payments

Profit on divestment of assets

Non-recurring professional fees paid

Unwind of deferred tax liability recorded on intangible assets

Impairment of goodwill

IOOF AL remediation costs

Governance uplift costs

Other

Income tax attributable

UNPAT from continuing operations

UNPAT from discontinued operations

UNPAT

Note

2-2

2-4

2-4

2-4

2-4

2-4

2-3

2-4

2-4

2-4

2-4

2020

$'000

146,964

(88,166)

58,798

36,749

6,010

24,955

65

2,865

(1,528)

6,426

(9,717)

4,344

1,511

4,461

1,444

(12,337)

124,046

4,788

128,834

2019

$'000

28,560

(58,374)

(29,814)

37,651

2,488

20,766

416

2,043

(368)

2,027

(9,881)

–

235,278

–

875

(78,180)

183,301

14,688

197,989

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 operations

(a) AET Corporate Trust business

On 1 November 2018, the IOOF Group completed the 
divestment of the AET Corporate Trust business to Sargon 
Capital Pty Ltd (Sargon) for an upfront consideration of $41.3m 
and a deferred component of $10.3m dependent on the 
novation of certain contract revenue to Sargon. An additional 
$1.6m consideration relating to a net asset adjustment was 
received in January 2019. At 30 June 2019, the deferred 
consideration was written back as it was considered unlikely 
that the performance hurdles would be met and the deferred 
consideration would be received. This continues to be the case 
at 30 June 2020.

The recovery of legal claims relates to recoveries as a result of 
agreed settlements with PwC, HLB Mann Judd, IOOF’s insurers 
and insurance broker, in respect of the cross-claims brought by 
Australian Executor Trustees Limited against those parties as 
part of the proceedings related to Provident Capital Limited.

(b) Ord Minnett business

On 27 June 2019, the Directors announced the divestment 
of the Group’s 70% holding in Ord Minnett Holdings Pty Ltd 
(Ord Minnett). The disposal is consistent with the Group’s 

84

long-term strategy to focus on its core wealth management 
capabilities. The Group entered into a contract with a 
consortium of private investors led by current Ord Minnett 
management to dispose of its stake in Ord Minnett for sale 
consideration of $115m, $10m of which was received in the 
previous financial year as a non-refundable deposit. The Group 
recognised a post-tax profit on sale of $83.7m in respect of 
the Ord Minnett business upon completion of the transaction. 
Completion of the sale occurred on 24 September 2019.

(c) Investment in Perennial Value Management

On 10 October 2019, the IOOF Group divested its equity 
accounted investment in Perennial Value Management 
Limited. The book value of the Group’s investment in PVM 
was $7.8m at the time of divestment.

(d) IOOF New Zealand business

On 16 April 2020, the IOOF Group announced that IOOF 
New Zealand Ltd had entered into an agreement to sell all 
client rights relating to the IOOF Integral Master Trust to 
Britannia Financial Services Limited. IOOF New Zealand Ltd 
closed effective 15 April 2020.

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020(e) Analysis of profit for the year from discontinued operations

Revenue, expenses and associated income tax in the financial statements and notes have been restated to a continuing basis, 
where applicable, and therefore exclude the below results of the discontinued operations.

Results of discontinued operations

Revenue

Expenses

Legal settlement recovery

Results from operating activities

Income tax

Results from operating activities, net of tax

Gain on sale of discontinued operation

Income tax on gain on sale of discontinued operation

Gain on disposal of discontinued operation, net of tax

Profit for the period

Profit for the period attributable to:

Owners of the entity

Non-controlling interest

Profit for the period

Basic earnings per share (cents per share)

Diluted earnings per share (cents per share)

Cash flows from discontinued operations

Net cash provided by/(used in) operating activities

Net cash (used in)/provided by investing activities

Net cash provided by/(used in) financing activities

Net cash flow for the period

Profit for the period from discontinued operations

Underlying net profit after tax pre-amortisation (UNPAT) adjustments:

Amortisation of intangible assets

Termination payments

Profit on divestment of assets

Impairment of non-current assets

Unwind of deferred tax liability recorded on intangible assets

Provident legal settlement/(provision)

Income tax attributable

UNPAT from discontinued operations

Year ended

Year ended

30 June 2020 30 June 2019

$'000

$'000

49,739

(42,046)

–

7,693

(2,241)

5,452

83,614

710

84,324

89,776

88,166

1,610

89,776

25.2

25.1

59,462

(843)

–

58,619

88,166

375

562

(83,614)

117

(73)

–

(745)

4,788

169,541

(167,370)

36,000

38,171

(18,746)

19,425

58,968

(14,993)

43,975

63,400

58,374

5,026

63,400

16.5

16.5

(28,998)

24,024

(500)

(4,974)

58,374

1,553

61

(58,959)

24,249

(319)

(36,000)

25,729

14,688

85

IOOF | annual report 2020(f) Assets and liabilities of discontinued operations

Assets and liabilities of disposal group

The net assets of the AET Corporate Trust disposal group at the date of disposal are shown below.

Assets

Cash

Receivables

Prepayments

Plant & equipment

Intangible assets

Deferred tax assets

Total assets

Liabilities

Payables

Provisions

Deferred tax liabilities

Total liabilities

Net assets and liabilities

Consideration received in cash

Income tax paid

Cash and cash equivalents disposed of

Net cash inflow

1-Nov-18

$'000

1,605

3,127

53

5

279

188

5,257

453

456

4

913

4,344

41,316

(14,993)

(1,605)

24,718

As described above, the IOOF Group disposed of its Ord Minnett business effective 24 September 2019. The IOOF Group entered into 
an agreement with a consortium of private investors and the fair value less costs to sell of the business was higher than the aggregate 
carrying amount of the related assets and liabilities. Therefore, no impairment loss was recognised on reclassification of the asset and 
liabilities as held for sale nor at 30 June 2019. The major classes of assets and liabilities of the Ord Minnett business at 30 June 2019 
were as follows:

Assets

Cash

Receivables

Current tax asset

Deferred tax assets

Property, plant & equipment

Other intangible assets

Other assets

Total assets

Liabilities

Trade payables

Provisions

Other liabilities

Total liabilities

Net assets of Ord Minnett business attributable to non-controlling interests

Net assets of Ord Minnett business classified as held for sale

86

30-Jun-19

$'000

14,963

13,310

219

2,623

2,093

9,555

9,711

52,474

7,546

19,573

315

27,434

(7,512)

17,528

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 20202-3 Revenue

Management and service fees revenue 

Stockbroking revenue

External other fee revenue

Finance income

Interest income on loans to Directors of associated entities

Interest income from non-related entities

Dividends and distributions received

Net fair value (losses)/gains on other financial assets at fair value through profit or loss

Other revenue

Profit on divestment of assets

Other

Total revenue

Accounting policies

Policy 
note

(i)

(ii)

(ii)

(iii)

2020

2019

$'000

1,092,227

3,304

51,337

86

11,180

1,419

(47)

12,638

1,528

7,896

9,424

$'000

926,552

4,546

37,809

249

76,825

1,256

109

78,439

368

11,049

11,417

1,168,930

1,058,763

Revenue is measured based on the consideration specified in a contract with a customer. The IOOF Group recognises revenue when 
it transfers control over a good or service to a customer.

(i) Management and service fees revenue

The IOOF Group provides 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 as 
performance obligations are satisfied over time.

Management and service fees revenue from the provision of financial advisory services together with revenue from the rendering 
of services are recognised as performance obligations are satisfied over time.

(ii) Stockbroking revenue and external other fee revenue

Other fee revenue and stockbroking revenue from the rendering of services are recognised as a performance obligation 
satisfied over time.

(iii) 

Finance income

Finance income comprises interest income on funds invested (including financial assets at fair value through OCI), dividend income, 
gains on the divestment of financial assets at fair value through OCI 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. 

87

IOOF | annual report 20202-4 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 (excluding superannuation)

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 costs – Acquisition advisory

Acquisition costs – Integration preparation

Acquisition costs – Finance costs

Termination payments

Depreciation of property and equipment

Amortisation of intangible assets

Amortisation of intangible assets – IT development

Deferred acquisition costs

Non-recurring professional fees

Governance uplift

IOOF AL remediation costs

Impairment of goodwill

Other

Total expenses

Policy 
note

(i)

(ii)

(ii)

(iii)

(iv)

(v)

(v)

(vi)

2020

2019

$'000

$'000

529,585

1,241

36,309

567,135

442,098

1,285

25,303

468,686

266,684

195,321

18,525

39,787

17,305

9,342

21,341

6,788

4,594

16

15,139

36,619

9,695

10,602

15,651

18,109

6,020

67

384,382

307,223

2,932

6,010

24,955

65

2,865

23,187

36,749

812

73

6,426

4,461

1,511

4,344

1,444

4,797

2,488

20,766

416

2,043

8,362

37,645

715

173

2,027

–

235,278

–

875

115,834

315,585

1,067,351

1,091,494

88

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020Accounting 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.

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.

(ii) Salaries and related employee expenses

Employee defined contribution plan expense

These entitlements include salaries, wages, superannuation, 
bonuses, overtime, allowances, annual and long service leave, 
but exclude share-based payments. The accounting policies 
for the four 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.

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.

(iii) 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.

89

IOOF | annual report 2020(vi) 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.

The fair value at grant date is independently determined where 
considered appropriate.

Shares held by the IOOF Equity Plans 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.

Further information is include in Note 6-2.

(iv) Termination payments

Termination benefits or redundancy costs are recognised as 
an expense when the IOOF Group is committed demonstrably 
to a formal detailed plan without possibility of withdrawal, 
or providing termination benefits as a result of an offer made 
to encourage voluntary redundancy.

(v) 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, amongst other impairment indicators, 
the Directors review the value of assets to ensure they have 
not fallen below their carrying value. Should an asset’s value 
fall below its carrying value an additional one-off impairment 
charge is made against profit.

90

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 20202-5 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.

Profit for the year

Depreciation of property and equipment

Amortisation of intangible assets

Impairment of goodwill

Impairment of other non-current assets

Loss/(profit) on divestment of assets

Profit on divestment of subsidiary

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 transition 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 policyholder liabilities

Increase/(decrease) in other liabilities

Increase/(decrease) in deferred taxes

Net cash provided by operating activities

2020

$'000

148,405

24,507

37,935

4,344

550

(106)

(84,325)

14,338

(1,953)

(1,473)

351

(565)

2,932

31,030

(740)

(84,636)

(944)

20,972

191

8,872

(189)

66,315

(8,317)

(12,196)

-

(19,866)

145,432

2019

$'000

33,407

9,045

39,919

9,490

14,759

(109)

(48,959)

12,884

(5,516)

(1,238)

358

(986)

4,828

23,670

(111)

(2,422)

(13,429)

(2,243)

370

2,134

(292)

190,230

(93,418)

7,889

218

(8,295)

172,183

91

IOOF | annual report 2020 
2-6 Income taxes

Current tax expense

Current year

Adjustment for prior years

Taxable losses not recognised

Deferred tax expense

Origination and reversal of temporary differences

Adjustments recognised in the current year in relation to the deferred tax of prior years

Recognition of tax losses and deferred tax balances

2020

$'000

2019

$'000

42,887

65,058

(668)

126

(93)

47

42,345

65,012

(14,602)

(80,397)

(32)

(172)

(80,601)

(15,589)

425

44

(14,133)

28,212

2019

$'000

Total income tax (benefit)/expense

Income tax recognised in other 
comprehensive income

Financial assets through OCI

Exchange differences on translating 
foreign operations

2020

$'000

Before tax

Tax expense

Net of tax

Before tax

Tax expense

Net of tax

95,677

(50)

(28,703)

(8)

66,975

(58)

7,888

(6)

(2,366)

(8)

5,522

(14)

95,627

(28,711)

66,917

7,882

(2,374)

5,508

Reconciliation of effective tax rate

Profit/(Loss) 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 profits of associates

Assessable associate and subsidiary dividends

Revenue tax loss not recognised

Imputation and foreign tax credits

Recognition of deferred tax balances

Other

Under/(over) provided in prior years

2020

%

30.0%

1.7%

0.8%

1.5%

0.2%

0.2%

0.1%

(0.7%)

0.1%

(1.2%)

(0.3%)

32.5%

$’000

86,841

26,052

1,489

718

1,303

144

216

126

(613)

44

(1,023)

(244)

28,212

2019

%

30.0%

(2.2%)

3.0%

– %

0.0%

(0.1%)

(0.1%)

1.1%

0.4%

2.0%

0.4%

$’000

(45,582)

(13,538)

982

(1,381)

–

(9)

65

47

(516)

(172)

(907)

(160)

34.5%

(15,589)

For statutory reporting purposes, IOOF Group had an effective tax rate of 32.5% on its continuing operations for the year ended 
30 June 2020 (2019: 34.5%) compared to a statutory corporate tax rate of 30%. This rate difference is primarily due to impairment of 
goodwill, research and development (R&D) tax offsets, and tax offsets for fully franked dividend income, prior period amendments, 
and non-deductible subsidiary acquisition costs. For the year ended 30 June 2019, the rate difference was primarily due to 
impairment of goodwill, research and development (R&D) tax offsets, tax offsets for fully franked dividend income, prior period 
amendments and non-deductible subsidiary acquisition costs. Excluding these items the IOOF Group’s effective tax rate would be 
30% across both periods.

92

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020Deferred 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

Capital gains on disposal of subsidiaries

Right of use lease liability

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:

Unrealised gains – corporate

Unrealised gains – statutory*

Customer relationships

Property and equipment

Customer remediation indemnity

Other

Deferred tax liability balance as at 30 June

Set-off of deferred tax assets 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

Credited/(charged) to profit or loss – statutory*

Temporary differences directly attributable to equity

Discontinued operations

Reclassification to held for sale

Carrying amount at the end of the year

Unrecognised deferred tax assets

Tax losses

Potential tax benefit at the Australian tax rate of 30%

2020

$'000

2019

$'000

20,838

206,995

9,854

21

32,735

1,524

271,967

(222,229)

49,738

38,642

(6,740)

79,689

28,292

64,730

17,616

222,229

(222,229)

–

(5,895)

67,062

14,132

15,352

(28,692)

(12,221)

–

49,738

5,325

1,598

17,758

121,625

94

9,679

 – 

2,056

151,212

(151,212)

–

9,951

8,612

88,166

(964)

50,643

699

157,107

(151,212)

5,895

(73,756)

696

80,601

(4,111)

(2,361)

(4,341)

(2,623)

(5,895)

4,905

1,472

*  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.

93

IOOF | annual report 2020Accounting 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 
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:
•  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-consolidated 
group are taxed as a single entity.

Tax transparency

The IOOF Group is committed to tax transparency 
and integrity. It has been a signatory to the Board of 
Taxation’s Voluntary Tax Transparency Code (the Code), 
since January 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 Group’s Australian and global operations.

Information about international related 
party dealings

The IOOF Group has previously conducted foreign activities 
in New Zealand, via IOOF New Zealand, and in Hong Kong, via 
share broking business, Ord Minnett (now both discontinued 
operations). Each of those entities is subject to the local tax 
regime. 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.

Tax contribution analysis

The IOOF Group contributed a total of $120.2m (2019: 
$160.6m) in taxes to Australian, New Zealand and Hong 
Kong governments (state and federal) in the 2020 tax year. 
$119.9m or 99.75% (2019: $160.2m or 99.75%) 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.

94

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 20202020 tax
contribution
by type (total
$120.2m)

 Income Tax $45.1m
 GST $53m
  Payroll Tax $17.1m
  Fringe Benefits Tax $1.1m
 Other $3.9m

2020 tax
contribution by
country (total
$120.2m)

 Australia $119.9m
 New Zealand $0.25m
  Hong Kong $0.006m

Further taxes paid by the IOOF Group on behalf of others, including employees and members, are not directly borne by the IOOF 
Group. These include income tax, GST, pay-as-you-earn withholding taxes, and local duties, which total a further $95m (2019: $133m).

2-7 Dividends

After 30 June 2020 the following fully franked dividends were declared by the directors. The dividends have not been provided for 
and there are no income tax consequences.

Final 2020 dividend

Cents per
share

11.5

Total

$'000

40,374 

Date of payment

Franked/
unfranked

22 September 2020

 Franked 

Dividend franking account

30 per cent franking credits available to shareholders of IOOF Holdings Ltd  
for subsequent financial years

2020

$'000

2019

$'000

73,263

93,032

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 
$17,303,000 (2019: $28,587,000).

The following dividends were declared and paid by the IOOF Group during the current and preceding financial year:

2020

Interim 2020 dividend

Special 2020 dividend

Final 2019 dividend

2019

Interim 2019 dividend

Final 2018 dividend

Cents per
share

16.0

7.0

12.0

35.0

25.5

27.0

52.5

Total

$'000

56,172

24,575

42,129

122,876

89,524

94,791

184,315

Date of payment

Franked/
unfranked

16-Mar-20

27-Sep-19

27-Sep-19

 Franked 

 Franked 

 Franked 

15-Mar-19

4-Sep-18

 Franked 

 Franked 

The total dividends declared relating to earnings for the year ended 30 June 2020 amounted to 34.5 cents per share 
(2019: 37.5 cents per share).

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. 

95

IOOF | annual report 20202-8 Earnings per share

Basic earnings per share

From continuing operations

From discontinued operations

Total basic earnings per share

Diluted earnings per share

From continuing operations

From discontinued operations

Total diluted earnings per share

2020

2019

Cents per
share

Cents per
share

16.8

25.2

42.0

16.8

25.1

41.9

(8.5)

16.7

8.1

(8.5)

16.6

8.1

Basic and diluted earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share 
are as follows:

Profit for the year attributable to owners of the Company

Earnings used in the calculation of basic and diluted EPS

Profit for the year from discontinued operations used in the calculation of basic and diluted EPS from 
discontinued operations

2020

$'000

146,964

146,964

88,166

2019

$'000

28,560

28,560

58,374

Earnings used in the calculation of basic and diluted EPS from continuing operations

58,798

(29,814)

Weighted average number of ordinary shares

Weighted average number of ordinary shares (basic)

Effect of unvested performance rights

Weighted average number of ordinary shares (diluted)

Accounting policies

2020

2019

No. ’000

No. ’000

350,122

681

350,456

982

350,803

351,438

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 2020, there were no options outstanding (2019: nil).

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.

96

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020Section 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 deposits and debt note;
•  subsidiaries;
•  financial assets at fair value through other 

comprehensive income;

•  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.

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 Holdings 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 5-4 Capital adequacy position.

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.

On 27 October 2019, the IOOF Group amended the 
Syndicated Facility Agreement (SFA) with lenders to reduce 
the available facilities to reflect the reduced consideration 
for the ANZ P&I business. The amended SFA consists of the 
following facilities: 
•  $240m revolving cash advance facility with a 3 year 
repayment term from 27 September 2018 (being the 
SFA effective date).

•  $375m revolving cash advance facility with a 5 year 

repayment term from the SFA effective date.

•  Multi-option facility with a 3 year repayment term from the 
SFA effective date, comprising a contingent liability facility.

The current interest-bearing borrowings have a 
debt duration profile of approximately 2.5 years 
(calculated on a facility limit basis). 

97

IOOF | annual report 2020The overall net debt to equity ratio stood at 25% at 30 June 2020 (30 June 2019: 0%) reflecting a net $430.9m in borrowings 
(including lease liabilities), principally $460m under the SFA. All banking covenants have been met at 30 June 2020.

Subsequent to the end of the financial year, the IOOF Group has renegotiated the terms of its borrowings. This has extended the 
repayment term of its 3 year facility to be a 4 year repayment term from the SFA effective date.

Proceeds from SFA borrowings were initially applied towards the subscription of a debt note with a face value of $800m from ANZ. 
The debt note was redeemed on 31 January 2020 and applied against the consideration owing for the ANZ P&I businesses. 

Cash advance & working capital facility

Lease liabilities

Total 30 June

(a) Cash advance & working capital facility

2020

$'000

457,858

114,394

572,252

2019

$'000

426,503

–

426,503

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

The financial liability under the facility has a fair value equal to its carrying amount.

Revolving Cash Advance Facility

Opening balance 1 July

Net borrowings drawn/(repaid)

Amortised capitalised establishment fees

Closing balance 30 June

(b) Lease liabilities

Lease liabilities

Opening balance 1 July

Lease liabilities recognised on adoption of AASB 16

Net lease liabilities acquired/(repaid)

Interest charge

Closing balance 30 June

(c) Other facilities

2020

$'000

615,000

460,000

155,000

2020

$'000

426,503

30,000

1,355

457,858

2019

$'000

770,000

430,000

340,000

2019

$'000

–

430,000

(3,497)

426,503

2020

$'000

2019

$'000

–

81,750

35,459

(2,815)

114,394

–

–

–

–

–

In addition to the revolving cash advance and working capital facilities, the IOOF Group has additional contingent liability 
facilities. The aggregate of the contingent liability facilities is $55m (2019: $71.3m) of which $51.9m was used at 30 June 2020 
(30 June 2019: $67.8m).

98

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020Accounting 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.

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.

351,076,027 fully paid ordinary shares (2019: 351,076,027)

861,715 treasury shares (2019: 1,237,144)

Ordinary shares

On issue at 1 July

Transfer from employee equity-settled benefits reserve on exercise of 
performance rights

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

Treasury shares returned from recipients during the year

On issue at 30 June

Accounting policies

Ordinary shares

2020

$'000

2019

$'000

1,970,847

1,970,999

(5,023)

(7,890)

1,965,824

1,963,109

2020

2019

No. ’000

$’000

No. ’000

$’000

351,076

1,970,999

351,076

1,971,648

–

–

2,715

(2,867)

–

–

4,000

(4,649)

351,076

1,970,847

351,076

1,970,999

(1,237)

–

447

(72)

(862)

(7,890)

–

3,558

(691)

(5,023)

(485)

(1,240)

488

–

(1,237)

(4,625)

(7,914)

4,649

–

(7,890)

350,214

1,965,824

349,839

1,963,109

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 Plans 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 Plans Trust is controlled by the IOOF Group and is therefore consolidated. Dividends received 
on treasury shares are eliminated on consolidation.

99

IOOF | annual report 20203-4  Capital commitments and contingencies

The only capital commitments entered into by the IOOF Group are operating lease commitments disclosed in section 4–6 Leases.

Other commitments

Guarantees and underwriting commitments

Rental bond guarantees

ASX settlement bond guarantee

ASIC bond guarantees

Other guarantees

2020

$'000

2019

$'000

18,267

10,773

–

–

382

18,649

500

40

454

11,767

Two subsidiaries of the IOOF Group have contractual agreements with its planners to provide a put option “Buyer of Last Resort 
Facility” should a planner wish to sell their business and on the satisfaction of certain specific requirements. The terms and conditions 
provide that where the specific requirements have been met, a predetermined purchase price will be payable for the business as 
agreed by all parties over a predetermined period. Where certain terms and conditions have not been met, the predetermined 
purchase price will be discounted accordingly. As at 30 June 2020, the IOOF Group had received requests from planners which 
satisfied requirements to exercise its obligation. The resale value of such businesses purchased may differ from the cost to the IOOF 
Group. Where confirmation notices have been received, the IOOF Group has a fixed obligation to purchase the businesses at market 
value, the aggregate value of this fixed obligation is $5.32m (2019: $3.00m).

Contingent liabilities of the IOOF Group exist in relation to claims and/or possible claims which, at the date of signing these accounts, 
have not been resolved. For example, on 28 February 2020 IOOF Group was served with a class action proceeding filed by Shine 
Lawyers in the Federal Court of Australian on behalf of certain shareholders of IOOF – please refer to the ASX announcement on that 
date for further information. 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.

3-5  Reserves

Equity investment revaluation reserve (i)

Business combinations reserve (ii)

Foreign currency translation reserve (iii)

Operating risk financial reserve (iv)

Share-based payments reserve (v)

2020

$'000

91,300

(326)

(27)

2,655

(2,330)

91,272

2019

$'000

24,326

(326)

30

2,655

(1,460)

25,225

Nature and purpose of reserves

(i) 

 Equity investment revaluation reserve comprises the cumulative net change in fair value of equity securities designated at FVOCI, net of tax.

(ii) 

 Business combinations reserve reflects historic acquisitions of non-controlling interests, net of tax.

(iii)   Foreign currency translation reserve comprises foreign currency differences arising from the translation of the financial statements of the IOOF Group’s foreign 

operations, net of tax.

(iv)   The operating risk financial reserve is held for certain superannuation products that were previously held under Australian Executor Trustees Limited and have been 

transferred to I.O.O.F. Investment Management Limited as Superannuation Trustee in the prior year. Other similar reserves exist within the IOOF Group, however these 
are generally held by the relevant funds.

(v)   The equity-settled employee benefits reserve arises on the grant of performance rights and share options to executives and senior employees under the employee 

share plan. Amounts are transferred out of the reserve and into issued capital when the shares are transferred to employees. 

100

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020Section 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 IOOF 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 owned 52.4% of the equity interests in 2019 but had 42.4% of the voting rights and dividend entitlements. The IOOF Group 
determined that it did not have control but had significant influence because it had representation on the board of the investee. 
This investment was divested on 10 October 2019.

In addition, the IOOF Group owns 56.7% (2019: 56.7%) of the equity interests of Thornton Group (SA) Pty Ltd. The IOOF Group has 
determined that it does not have control of this investee as it has no controlling interest over the appointment of the Board and as 
a result does not have power over the investee to direct its operations.

The IOOF Group owns 10.7% (2019: 12.1%) of the equity interests of Grow Super. Despite not owning 20%, the Group has determined 
that it has significant influence because it has representation on the board of the investee and participates in management decisions.

The table below discloses material associates individually:

Associate

Country of
incorporation

Ownership interest

Carrying value

IOOF Group's 
share of profit/(loss)

Perennial Value 
Management Ltd*

Australia

Thornton Group (SA) 
Pty Ltd

Australia

Grow Super

Australia

Other associates

2020

%

–

56.7

10.7

2019

%

52.4

56.7

12.1

2020

$'000

–

6,179

3,789

2,978

12,946

2019

$'000

6,800

6,129

4,155

4,425

21,509

2020

$'000

–

180

(866)

207

(479)

2019

$'000

–

127

(298)

201

30

* 

Investment was divested in the current year. Share of profit of $1,043 thousand (2019: $956 thousand) has been reclassified to discontinued operations.

All significant associates have a 30 June financial year end.

The following table summarises the 2019 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. 
This investment was divested on 10 October 2019.

101

IOOF | annual report 2020Beneficial 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%)

Total profit and total comprehensive income (42.4%)

Dividends received by the IOOF Group

2020

$'000

0.0%

–

–

–

–

–

–

–

–

–

–

–

–

–

–

2019

$'000

42.4%

19,477

8,219

(7,050)

(361)

20,285

8,591

(1,791)

–

6,800

24,787

2,258

956

956

–

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 $351,000 (2019: $358,000) from its associates.

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.

102

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 20204-2 Intangible assets (other than goodwill)

Cost

Accumulated amortisation

Carrying value at 1 July 2018

Acquisition through business 
combination

Additions

Divestments

Amortisation expense attributable 
to continuing operations

Amortisation expense attributable 
to discontinued operations

Reclassification to held for sale

Carrying value at 30 June 2019

Acquisition through business
combination

Additions

Divestments

Impairment

Amortisation expense attributable 
to continuing operations

Amortisation expense attributable 
to discontinued operations

2020

$'000

667,577

(323,619)

343,958

Other
 intangibles

$'000

3,878

–

3,070

–

(1,401)

–

–

5,547

–

10,839

–

(207)

(1,300)

2019

$'000

652,248

(287,541)

364,707

Total

$'000

408,310

1,382

4,758

(269)

(38,360)

(1,559)

(9,555)

364,707

5,031

12,362

(7)

(550)

(37,561)

–

(24)

Brand
names

$'000

66,945

–

–

–

–

(6,773)

59,371

–

–

–

–

(801)

–

(34,534)

(801)

IT 
development

Computer
 software

Customer 
relationships

$'000

1,284

–

1,654

–

(715)

–

–

2,223

–

1,490

–

–

(812)

–

$'000

4,267

–

1

(9)

(909)

(44)

(24)

$'000

331,936

1,382

33

(260)

(1,515)

(2,758)

3,282

294,284

–

33

(7)

–

(913)

(24)

5,031

–

–

(343)

(33,735)

–

Carrying value at 30 June 2020

2,901

2,371

265,237

58,570

14,879

343,958

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 carrying value. Should an asset’s value fall below its carrying 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.

103

IOOF | annual report 2020Amortisation

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:
•  brand names 20 years
• 
IT development 3 – 5 years
•  computer software 2.5 – 10 years

•  other 5 – 10 years
•  customer relationships 10 – 20 years
•  contract agreements 9 – 10 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

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.

In 2020, impairment has been recognised in relation to certain customer relationships and other intangible assets. Reduced cash flows 
associated with the customer relationships and other intangible assets led to their expected value in use and fair value less costs to 
sell declining to below the carrying value of the intangible assets.

Indefinite life intangible assets (other than goodwill)

The indefinite life intangible assets (other than goodwill) relate to brand names. The below table excludes $7.1m (2019: $7.9m) 
of intangibles which have a finite life. The aggregate carrying amounts of indefinite-life intangible assets allocated to each CGU 
are as follows:

Shadforth

Lonsdale

2020

$'000

51,000

500

51,500

2019

$'000

51,000

500

51,500

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 14.3% (2019: 13.3%) 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.

104

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 20204-3 Goodwill

Cost

Accumulated impairment

Net carrying value of goodwill

Carrying value at 1 July

Acquisition through business combination

Impairment of goodwill

Carrying value at 30 June

2020

$'000

2019

$'000

1,693,817

1,030,321

(97,775)

(93,430)

1,596,042

936,891

663,495

(4,344)

936,891

940,226

6,155

(9,490)

1,596,042

936,891

* 

Purchase price allocation has not been completed for the acquisition of the ex-ANZ P&I businesses. The net asset adjustment is still being finalised in connection with 
this acquisition. Therefore, the goodwill acquired in this acquisition is provisional.

Impairment of $4.3m has been recognised in 2020 in relation to goodwill allocated to the Consultum CGU (2019: impairment of 
$9.5m in relation to goodwill allocated to Perennial Investment Partners Limited). Reduced profitability from lower revenue led 
to its expected fair value less costs to sell and value in use declining to below the carrying value of the goodwill balance. 

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 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

As a result of the COVID-19 pandemic, assessing fair value as at the reporting date involves uncertainties around the underlying 
assumptions given the constantly changing nature and early stage of the situation. The length of time it will take the measures 
implemented by the Australian government to manage the effects of the COVID-19 pandemic on the broader economy and the 
global and domestic markets is still unknown.

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.

105

IOOF | annual report 2020The aggregate carrying amounts of goodwill allocated to each CGU are as follows:

2020

2019

Value in Use element

Cash 
inflows
yrs 1-5

Cash 
outflows
yrs 1-5

Cash flows 
– perpetuity

Ex-ANZ Wealth*

Shadforth

Portfolio and estate administration

DKN

Multi manager

IOOF Ltd

Consultum

Bridges

Australian Executor Trustees

$'000

659,822

431,191

347,509

80,339

39,735

11,970

–

5,703

19,773

$'000

80

431,191

347,509

80,339

39,735

11,970

4,344

1,950

19,773

1,596,042

936,891

C

 B 

 B 

 B 

 B 

 D 

 A 

 B 

 B 

C

 E 

 E 

 E 

 E 

 D 

 E 

 E 

 E 

 2.0% growth from yr 5 

 2.0% growth from yr 5 

 2.0% growth from yr 5 

 2.0% growth from yr 5 

 2.0% growth from yr 5 

 2.0% growth from yr 5 

 2.0% growth from yr 5 

 2.0% growth from yr 5 

 2.0% growth from yr 5 

* 

Purchase price allocation has not been completed for the acquisition of the ex-ANZ P&I businesses. The net asset adjustment is still being finalised in connection with 
this acquisition. Therefore, the goodwill acquired in this acquisition is provisional.

A  Reserve Bank of Australia forecast GDP growth rate1

B  Blended rate of the 2021 budgeted rates by asset class and business unit

C  2021-2023 budget for the ex-ANZ P&I businesses, inflated thereafter in accordance with note E below

D  Observed Australian friendly societies annual compounding growth for March 2014 to March 20192

E  Blended rate of the underlying Australian forecast inflation levels and the applicable Reserve Bank of Australia GDP growth rate3

The recoverable amounts for goodwill allocated to all CGUs have been determined based on value-in-use calculations using 2020 
actual balances to forecast 2021 and beyond cash flows. While the impacts of the COVID-19 pandemic on cash flows in the medium 
to long term are still uncertain, the assessment undertaken to determine the recoverable amount for goodwill allocated to all CGUs 
includes reduced forecast revenues for all CGUs and a COVID-19 specific alpha affecting the discounting of all future cash flows and 
the terminal values of CGUs.

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 14.3% (2019: 13.3%) 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. Any reasonably possible 
changes to assumptions used in management’s assessment is not expected to result in impairment.

Management has applied a post tax WACC increment of 3.5% for Consultum (2019: 3.5%) to reflect a specific company risk premium. 
This incremental amount is judgement based and consistent with accepted valuation industry practice.

The results of the annual impairment testing included management’s view of the current impact of COVID-19 on the Group’s 
performance, including impacts on growth rates and discount rates.

1  Source – RBA Statement of Monetary Policy

2  Source – ABS 5655.0 Managed Funds Australia

106

3  Source – RBA Statement of Monetary Policy

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 20204-4 Provisions

Employee entitlements

Ex-ANZ AL remediation provision

IOOF AL remediation provision

Ex-ANZ P&I remediation provision

Other

Balance at 1 July 2019

Acquisition through business 
combination

Provisions made/(reversed)  
during the year

2020

$'000

69,491

215,774

216,900

197,876

56,273

756,314

2019

$'000

59,312

168,810

223,165

–

2,045

453,332

 Employee
entitle-
ments 

 Ex-ANZ 
AL remed-
iation 1

 IOOF AL
remediation 

 Ex-ANZ 
P&I 
remediation

 Other2

 Total 

$'000

59,312

7,268

$'000

168,810

–

35,089

80,395

$'000

223,165

–

–

$'000

–

203,173

$'000

2,045

618

$'000

453,332

211,059

(1,243)

55,767

170,008

Provisions utilised during the year

(32,173)

(33,431)

Derecognised on disposal of subsidiary

(5)

–

(6,265)

–

(4,054)

–

(2,157)

(78,080)

–

(5)

Balance at 30 June 2020

69,491

215,774

216,900

197,876

56,273

756,314

1   Provisions totalling $168.1m were recognised in respect of the ex-ANZ ALs acquired on 1 October 2018. These provisions relate to customer remediation during the 
period that the relevant entities were owned by ANZ. The sale agreement indemnified the acquired entities in relation to customer remediation and accordingly, 
a corresponding receivable from ANZ has been recognised.

2   Other provisions includes $54.5m in relation to the judgement in the Kerr v Australian Executor Trustees (SA) Ltd proceedings. This amount is held in escrow pending 
the appeal outcome. The escrow lodgement was made by the Group’s insurers and an offsetting receivable has also been recognised. There is no cash flow impact 
arising from this provision.

Accounting policies

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.

Client remediation provision

ASIC, as part of its Wealth Management Project, has conducted investigations into financial advice fees paid pursuant to ongoing 
service arrangements, focused on major Wealth Management institutions with financial advice arms. The IOOF Group has a significant 
number of self-employed and salaried financial advisers and, having noted the ongoing impact of the investigation on clients, 
has voluntarily undertaken its own review. The review seeks to determine whether fee paying clients under its licenses were: a) 
provided with agreed services and/or advice; b) supported with documentation evidencing appropriate provision of service and/or 
advice; and c) received advice appropriate to their circumstances.

The IOOF Group engaged an expert consultant to design the review methodology and estimate financial compensation impact for 
this matter, in line with observed industry practice to date. IOOF Group has used sampling of cohorts of financial advisers, based on 
key risk indicators, to establish possible incidents of inappropriate advice or instances of fees for no service (or no evidence of service). 
The results of that sampling have been extrapolated across the financial adviser cohorts in accordance with observed likelihood of 
occurrence within that cohort. Where client compensation is probable and able to be reliably estimated, provisions have been taken. 
Compensation costs include return of service fees, estimated client loss for inappropriate advice, interest for time value of money at 
ASIC’s directed rate of RBA cash rate + 6% and committed costs to resource the compensation program.

107

IOOF | annual report 2020As of 30 June 2020, the IOOF Group has provisions of 
$630,550,000 (2019: $391,975,000) in respect of client 
remediation and related costs. Of this amount, $215,774,000 
is indemnified by the ANZ Banking Group (2019: $168,810,000) 
and an offsetting receivable has also been recognised. 
An increase in the ex-ANZ AL remediation provision of $80m 
was required. In addition, the provision was drawn down 
by client remediation payments and program costs paid 
throughout the year. The increase was driven by a change in 
methodology relating to adviser categorisation, now aligning 
to that used by IOOF ALs, and is offset by a corresponding 
increase in the equivalent receivable from ANZ. The provision 
remains under the financial cap of the remediation program 
arrangements with ANZ. There is no material cash flow impact 
arising from that component of the provision. Additionally, 
$203,173,000 was taken on upon acquisition of the ex-ANZ P&I 
businesses relating to other areas of remediation.

Determining the amount of the provision, which represents 
management’s best estimate of the costs of settling the 
identified matters, requires the exercise of significant 
judgement. It will often be necessary to form a view on a 
number of different assumptions, including the number of 
impacted clients, the average refund per client, and associated 
remediation costs. Consequently, the appropriateness of 
the underlying assumptions is reviewed on a regular basis 
against actual experience and other relevant evidence, and 
adjustments are made to the provisions where appropriate.

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 certain 
other litigation.

108

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 20204-5 Property and equipment

Cost

Accumulated depreciation

Office
 equipment

Leasehold 
improve-
ments

Balance at 1 July 2019

Recognition on initial application 
of AASB 16

Additions

Disposals

Reduction in right-of-use asset upon 
sublease of property

Depreciation expense

Depreciation expense attributable to 
discontinued operations

Impairment expense attributable 
to discontinued operations

$'000

3,190

–

633

(6)

–

(760)

(31)

–

2020

$'000

217,443

(83,000)

134,443

Land and 
buildings

Right-of-use
 assets – 
premises

$'000

1,543

–

–

–

–

$'000

–

75,998

39,024

–

(1,101)

IT assets

$'000

19,622

–

$'000

11,655

–

1,380

5,976

(11)

–

(9)

–

(1,838)

(4,770)

(14)

(15,805)

–

–

–

–

–

–

(116)

(117)

2019

$'000

96,142

(60,132)

36,010

 Total 

$'000

36,010

75,998

47,013

(26)

(1,101)

(23,187)

(147)

(117)

Balance at 30 June 2020

3,026

11,186

20,819

1,529

97,883

134,443

(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.

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 and right of use assets 3–10 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date, and adjusted if appropriate.

109

IOOF | annual report 20204-6 Leases

From 1 July 2019, the Group has recognised right-of-use assets for operating leases, except for short-term and low-value leases.

Operating lease commitments

Prior to the recognition of lease assets and liabilities on balance sheet, the Group disclosed commitments in relation to operating 
leases contracted for at the reporting date, but not recognised as liabilities. In 2020, commitments relate to short-term leases and 
leases of low value assets. Those commitments are payable as follows:

Within one year

Later than one year but not later than five years

Later than five years

Amounts recognised in the statement of financial position

The statement of financial position shows the following amounts relating to leases:

Right of use assets – premises1

Lease liabilities – current2

Lease liabilities – non-current2

30 June 2020 30 June 2019

$'000

228

2

–

230

$'000

8,786

43,896

29,068

81,750

30 June 2020

1 July 2019

$'000

97,883

18,746

95,648

114,394

$'000

75,998

8,786

72,964

81,750

1  Right of use assets are presented within Property and Equipment in the statement of financial position.

2 

Lease liabilities are presented within Borrowings in the statement of financial position.

The following table sets out a maturity analysis of lease liabilities, showing the undiscounted lease payments to be made after the 
reporting date.

Within one year

Later than one year but not later than five years

Later than five years

Amounts recognised in the profit or loss

The statement of comprehensive income shows the following amounts relating to leases:

Income from subleasing right-of-use assets

Interest charge

Depreciation charge

Lease expense – short term leases

110

30 June 2020

$'000

21,521

76,427

22,404

120,352

30 June 2020 30 June 2019

$'000

458

2,815

15,805

901

19,521

$'000

331

–

–

14,778

14,778

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020The Group assesses whether a contract is or contains a lease 
at inception of the contract. The Group recognises a right-of-
use asset and a corresponding lease liability with respect to 
all lease arrangements in which it is the new lessee, except 
for certain short-term leases (defined as leases with a lease 
term of 12 months or less) and leases of low value assets. For 
these leases, the Group recognises the lease payments as an 
operating expense on a straight-line basis over the term of the 
lease unless another systematic basis is more representative of 
the time pattern in which economic benefits from the leased 
assets are consumed.

The lease liability is initially measured at the present value of 
the lease payments that are not paid at the commencement 
date, discounted by using the rate implicit in the lease. If 
this rate cannot be readily determined, the Group uses its 
incremental borrowing rate. The incremental borrowing rate 
is determined with reference to the following factors:
• 
• 
lessee specific credit risk; and
•  secured borrowings adjustment.

length of the lease;

The lease liability is subsequently measured by increasing the 
carrying amount to reflect interest on the lease liability (using 
the effective interest method) any by reducing the carrying 
amount to reflect the lease payments made. The Group 
remeasures the lease liability (and makes a corresponding 
adjustment to the related right-of-use asset) whenever:
•  the lease term has changed or there is a change in the 

assessment of exercise of a purchase option, in which case 
the lease liability is remeasured by discounting the revised 
lease payments using a revised discount rate.

•  the lease payments change due to changes in an index 
or rate or a change in expected payment under a 
guaranteed residual value, in which cases the lease liability 
is remeasured by discounting the revised lease payments 
using the initial discount rate (unless the lease payments 
change is due to a change in floating interest rate, in which 
case a revised discount rate is used).

•  a lease contract is modified and the lease modification is 
not accounted for as a separate lease, in which case the 
lease liability is remeasured by discounting the revised lease 
payments using a revised discount rate.

The right-of-use assets comprise the initial measurement of the 
corresponding lease liability, lease payments made at or before 
the commencement day and any initial direct costs. They are 
subsequently measured at cost less accumulated depreciation 
and impairment losses.

Right of use assets are depreciated over the shorter period 
of lease term and useful life of the underlying asset. If a lease 
transfers ownership of the underlying asset of the cost of the 
right-of-use asset reflects that the Group expects to exercise 
a purchase option, the related right-of-use asset is depreciated 
over the useful life of the underlying asset. The depreciation 
starts at the commencement date of the lease.

Impact of initial application of AASB 16 Leases

General impact of application of AASB 16 Leases

The Group has applied AASB 16 for the first time for the 
financial reporting period commencing 1 July 2019.

AASB 16 introduced new or amended requirements with 
respect to lease accounting. It introduced significant changes 
to the lessee accounting by removing the distinction between 
operating and finance leases, and requiring the recognition of 
a right-of-use asset and a lease liability at commencement for 
all leases, except for short-term leases and leases of low value 
assets. In contrast to lessee accounting, the requirements for 
lessor accounting have remained largely unchanged.

The Group has applied AASB 16 using the modified 
retrospective application of AASB 16 in accordance with 
AASB 16:C5(b). Consequently, the Group has not restated 
the comparative information. The impact of the adoption 
of AASB 16 on the Group’s consolidated financial statements 
is described below.

Impact of the new definition of a lease

The Group has made use of the practical expedient 
available on transition to AASB 16 not to reassess whether 
a contract is or contains a lease. Accordingly, the definition 
of a lease in accordance with AASB 117 Leases and IFRIC 4 
will continue to apply to those leases entered or modified 
before 1 July 2019. The change in definition of a lease mainly 
relates to the concept of control. AASB 16 distinguishes 
between leases and service contracts on the basis of whether 
the use of an identified asset is controlled by the customer. 
Control is considered to exist if the customer has:
•  The right to obtain substantially all of the economic 
benefits from the use of an identified asset; and

•  The right to direct the use of that asset.

The Group has applied the definition of a lease and related 
guidance set out in AASB 16 to all lease contracts entered 
into or modified on or after 1 July 2019 (whether it is a lessor 
or a lessee in the lease contract). In preparation for the 
first-time application of AASB 16, the Group carried out an 
implementation project. The project showed that the new 
definition in AASB 16 does not change significantly the scope 
of contracts that meet the definition of a lease for the Group.

111

IOOF | annual report 2020Impact on Lessee Accounting

Former operating leases

AASB 16 has changed how the Group accounts for leases 
previously classified as operating leases under AASB 117, 
which were off-balance sheet. On initial application of AASB 16, 
for all leases (except as noted below), the Group has:

a  Recognised right-of-use assets and lease liabilities in 

the consolidated statement of financial position, initially 
measured at the present value of the future lease payments;

b  Recognised depreciation of right-of-use assets and 

interest on lease liabilities in the consolidated statement 
of profit or loss;

c  Separated the total amount of cash paid into a principal 

portion (presented within financing activities) and interest 
(presented within operating activities) in the consolidated 
cash flow statement.

Lease incentives (e.g. rent-free period) have been recognised 
as part of the measurement of the right-of-use assets and 
lease liabilities whereas under AASB 117 they resulted in 
the recognition of a lease liability incentive, amortised as 
a reduction of rental expenses on a straight-line basis.

Under AASB 16, right-of-use assets are tested for impairment 
in accordance with AASB 136 Impairment of Assets. This has 
replaced the previous requirement to recognise a provision 
for onerous lease contracts.

For short-term leases (lease term of 12 months or less) and 
leases of low-value assets, the Group has opted in some 
instances to recognise a lease expense on a straight-line 
basis as permitted by AASB 16.

Former finance leases

The main difference between AASB 16 and AASB 117 with 
respect to assets formerly held under a finance lease is the 
measurement of residual value guarantees provided by a 
lessee to a lessor. As the Group does not have any finance 
leases in place, this change has not had any effect on the 
Group’s consolidated financial statements.

Impacts on transition

The Group previously classified leases as operating or finance 
leases based on its assessment of whether the lease transferred 
substantially all of the risks and rewards of ownership. Under 
AASB 16, the Group as a lessee recognises right-of-use assets 
and lease liabilities for contracts that convey a right to control 
the use of an identified asset for a period of time in exchange 
for consideration. 

The Group applied the modified retrospective 
transition approach, resulting in the cumulative effect 
of adopting AASB 16 as an adjustment to opening 
retained earnings at 1 January 2019, with no restatement 
to comparative information.

At transition, for leases classified as operating leases 
under AASB 117:
•  Lease liabilities were measured at present value of 

the remaining lease payments, discounted using the 
determined incremental borrowing rate, as appropriate 
for each identified lease arrangement, as at 1 July 2019;
•  Right-of-use assets were measured at an amount equal to 
the lease liability, adjusted by the amount of any prepaid 
or accrued lease payments; and

• 

In addition, the Group elected to apply the option to 
adjust the carrying amount of the right-of-use assets for 
any onerous lease provisions that had been recognised 
on the Group balance sheet as at 30 June 2019.

The impact on transition is summarised below:

Right-of-use assets presented in property, plant 
and equipment

Lease incentives

Lease liabilities

1 July 2019

$'000

75,998

5,752

(81,750)

–

When measuring lease liabilities for leases that were previously 
classified as operating leases, the Group discounted lease 
payments using its incremental borrowing rate at 1 July 2019. 
The weighted-average rate applied is 2.75%.

Transitional practical expedients

The Group elected to apply the following transition 
practical expedients:

i  Exemption for certain lease arrangements with a 

short-remaining-term from the date of initial application;

ii  Discount rates applied to a portfolio of leases with similar 

characteristics; and

iii  The exclusion of initial direct costs for the measurement 
of the right-of-use asset at the date of initial application.

112

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020Section 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. 
Details of the assets and liabilities of the statutory funds are included in Section 1. Statutory funds are not available 
to shareholders.

5-1 Statutory fund contribution to profit or loss, net of tax

Statutory fund revenue

Interest income

Dividends and distributions received

Net fair value (losses)/gains 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/(decrease)

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 (benefit)/expense

Statutory fund contribution to profit or loss, net of tax

Accounting policies

Statutory

2020

$'000

913

37,375

(54,727)

5,145

15,355

14,924

2,598

21,583

10,352

5

2019

$'000

1,006

47,170

5,183

2,104

37,945

(33,447)

2,308

62,269

9,917

5

21,178

42,032

36

53

31,624

(10,041)

–

33

123

52,110

10,159

–

Investment contracts with discretionary participation feature (DPF)

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.

113

IOOF | annual report 2020Insurance contract liabilities and claims expense

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 Group, 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.

5-3 Disclosures on asset restrictions, 
managed 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.

(ii) Managed Funds and other fiduciary duties

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.

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.

5-2 Actuarial assumptions and methods

The effective date of the actuarial report on the policy liabilities 
and capital adequacy reserves is 30 June 2020. The actuarial 
report for IOOF Ltd was prepared by Mr Andrew Mead, FIAA, 
and was dated 26 August 2020. 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.

Processes used to select assumptions

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.

114

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 20205-4 Capital adequacy position

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 IOOF Ltd 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

(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

2020

$'000

15,083

6,688

8,395

226%

15,083

–

15,083

–

–

–

–

2019

$'000

16,027

7,241

8,786

221%

16,027

–

16,027

–

–

–

–

15,083

16,027

For detailed capital adequacy information on a statutory fund basis, users of this annual financial report should refer to the financial 
statements prepared by IOOF Ltd.

115

IOOF | annual report 2020Section 6 – Other disclosures

6-1 Parent entity financials

As at and throughout the financial year ended 30 June 2020, 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

2020

$'000

160,795

160,795

2019

$'000

165,610

165,610

29,404

8,227

2,478,995

2,410,135

7,873

465,942

8,562

435,065

1,970,847

1,970,999

1,908

40,298

2,777

1,294

2,013,053

1,975,070

Contingent liabilities of IOOF Holdings Ltd 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. IOOF Holdings Ltd 
does not consider that the outcome of any other current proceedings, either individually or in aggregate, is likely to materially affect 
its operations of financial position.

Guarantees and underwriting commitments

Rental bond guarantees

2020

$'000

2019

$'000

1,621

3,977

116

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 20206-2 Share-based payments

The IOOF Group operates a number of employee share and option schemes operated by the IOOF Equity Plans 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.

Options granted under the plan carry no dividend or voting rights. All plans are equity-settled. There were no options granted in 
2020 (2019: nil).

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.

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 Executive STIs awarded from 2018 
onwards. On vesting of performance rights, ordinary shares are transferred to the employee’s name or held in trust. The employee 
receives all dividends on the ordinary shares while held in trust.

Opening balance at 1 July 2019

Forfeited or lapsed during the year

Exercised or transferred during the year

Granted during the year

Outstanding at 30 June 2020

Exercisable at 30 June 2020

Performance
Rights

Rights

Deferred
Shares

Shares

No.

838,919

(231,190)

(462,481)

698,122

843,370

–

No.

358,788

(72,052)

(167,247)

57,592

177,081

–

Total

Rights &
Shares

No.

1,197,707 

(303,242)

(629,728)

755,714 

1,020,451 

 – 

117

IOOF | annual report 2020Disclosure of share-based payment plans

Series – Recipient

Performance rights

2017-01 Executives

2017-03 Executives

2017-04 Other Key Stakeholders

2018-01 Executives

2018-04 Other Key Stakeholders

2019-01 Executives

2019-04 Other Key Stakeholders

2019-05 Other Key Stakeholders

2019-06 Other Key Stakeholders

2020-01 Other Key Stakeholders

2020-02 Executives and Others

2020-03 Other Key Stakeholders

Deferred shares

2017-05 Managing Director

2018-03 Other Key Stakeholders*

2018-05 Managing Director

2018-06 Executives

2019-02 Other Key Stakeholders*

2020-01 Other Key Stakeholders*

Exercise
price

Opening
balance
1 July 2019

Granted

Forfeited
or lapsed

Exercised

Closing
balance
30 June 2020

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

150,000

30,000

29,567

155,000

15,891

279,000

46,961

132,500

–

–

–

–

838,919

35,420

89,777

36,632

154,939

42,020

–

358,788

1,197,707

–

–

–

–

–

–

–

7,500

270,322

57,592

329,000

33,708

698,122

–

–

–

–

–

57,592

57,592

(75,000)

–

–

(45,000)

(1,895)

(105,000)

(1,844)

–

–

–

–

(2,451)

(75,000)

(30,000)

(29,567)

–

–

–

–

–

(270,322)

(57,592)

–

–

(231,190)

(462,481)

(35,420)

–

–

(89,777)

(36,632)

–

–

–

–

(77,470)

–

–

(72,052)

(167,247)

–

–

–

110,000

13,996

174,000

45,117

140,000

–

–

329,000

31,257

843,370

–

–

–

77,469

42,020

57,592

177,081

755,714

(303,242)

(629,728)

1,020,451

*Upon vesting, shares are held in trust for 18 months and may be forfeited in the event of compliance breaches.

There are no options outstanding at 30 June 2020.

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

2019-01 Executives

2019-02 Other Key Stakeholders

2019-04 Other Key Stakeholders

2019-05 Other Key Stakeholders

2019-06 Other Key Stakeholders

2020-01 Other Key Stakeholders

2020-02 Executives and Others

2020-03 Other Key Stakeholders

Fair
value

$4.93

$7.58

$3.54

$4.93

$5.57

$5.90

$6.47

$3.38

Grant date
share
price

$8.00

$7.84

$4.73

$8.00

$5.99

$6.08

$8.01

$3.95

Expected
volatility

Expected life
(years)

Dividend 
yield

Risk-free
interest rate

24%

24%

37%

24%

n/a

62%

44%

54%

3

1

3

3

n/a

1

3

3

6.80%

6.90%

11.40%

6.80%

n/a

6.17%

4.68%

7.09%

2.20%

2.10%

2.00%

2.20%

n/a

0.58%

0.70%

0.28%

118

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020The following share-based payment arrangements were in existence during the current and comparative reporting years:

Performance Rights Series – Recipient

2020-03 Other Key Stakeholders

2020-02 Executives and Others

2020-01 Other Key Stakeholders*

2019-06 Other Key Stakeholders

2019-05 Other Key Stakeholders

2019-04 Other Key Stakeholders

2019-03 Managing Director

2019-02 Other Key Stakeholders*

2019-01 Executives

2018-07 Other Key Stakeholders

2018-04 Other Key Stakeholders

2018-02 Managing Director

2018-01 Executives

2017-04 Other Key Stakeholders

2017-03 Executives

2017-02 Managing Director

2017-01 Executives

Exercise
price

Earliest
vesting 
date

Last tranche
vesting date

Performance
 related 
vesting
 conditions

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

nil

30-Jun-22

30-Jun-22

8-Apr-20

n/a

n/a

8-Apr-20

20-Sep-19

20-Sep-19

30-Jun-21

30-Jun-21

n/a

24-Apr-19

30-Jun-21

n/a

n/a

n/a

n/a

n/a

20-Sep-18

20-Sep-18

30-Jun-20

n/a

30-Jun-20

30-Jun-19

31-Dec-19

n/a

n/a

n/a

30-Jun-20

30-Jun-19

n/a

n/a

30-Jun-19

30-Jun-19

n/a

TSR

n/a

n/a

TSR

n/a

Lapsed

n/a

TSR

n/a

n/a

Lapsed

TSR

n/a

TSR

Lapsed

TSR

*Shares are held in trust for 18 months and may be forfeited in the event of compliance breaches.

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

Former Managing Director

Chief Executive Officer

Executives

Other Key Stakeholders*

Attributable to discontinued operations

*Other key stakeholders include other Group employees.

Accounting policies

2020

$'000

–

281

436

2,215

2,932

–

2,932

2019

$'000

(204)

446

2,102

2,484

4,828

(31)

4,797

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.

119

IOOF | annual report 2020Shares 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.

6-3 

IOOF Group subsidiaries

Set out below is a list of material subsidiaries of the IOOF Group. 

Country of incorporation

Ownership interest

2020

%

2019

%

Parent entity

IOOF Holdings Ltd

Material subsidiaries

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 Plans Trust

IOOF NZ Ltd

IOOF Service Co Pty Ltd

IOOF Investment Services Ltd

Lonsdale Financial Group Limited

SFG Australia Limited

Financial Acuity Limited

Shadforth Financial Group Limited

Actuate Alliance Services Pty Ltd

Financial Investment Network Group Pty Limited

RI Advice Group Pty Ltd

FSP Group Pty Limited

Millennium 3 Financial Services Group Pty Ltd

Millennium 3 Financial Services Pty Ltd

Millennium3 Professional Services Pty Ltd

Financial Lifestyle Solutions Pty Limited

Financial Services Partners Management Trust

Ord Minnett Limited

Ord Minnett Financial Planning Pty Limited

Ord Minnett Management Limited

OnePath Custodians Pty Limited

OnePath Administration Pty Limited

OnePath Investment Holdings Pty Limited

Oasis Asset Management Limited

Oasis Fund Management Limited

Mercantile Mutual Financial Services Pty Limited

Global One Alternative Investments Management Pty Ltd

120

OnePath Funds Management Limited

Australia

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

New Zealand 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

Australia 

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

–

–

–

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

70

70

70

–

–

–

–

–

–

–

–

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020If the acquisition had occurred on 1 July 2019, management 
estimates that the consolidated revenue from continuing 
operations for the Group would have been $1,444.1m and 
consolidated profit from continuing operations for the year 
would have been $107.6m. In determining these amounts, 
management has assumed that the fair value adjustments, 
determined provisionally, that arose on the date of acquisition 
would have been the same if the acquisition had occurred 
on 1 July 2019.

Prior year acquisition

On 1 October 2018, the Advice Licensees (ALs) formerly owned 
by ANZ joined the IOOF Group following the completion of a 
share sale agreement between IOOF and ANZ. The ALs provide 
services to clients including strategic financial advice and risk 
insurance solutions.

The IOOF Group acquired all of the ordinary shares in the 
parent entity of the ALs for a total cash consideration of $25.1m.

In the period from acquisition to 30 June 2019, the ALs 
contributed revenue of $158.8m and a loss of $16.1m to 
the IOOF Group’s UNPAT results. This excludes integration 
preparation costs of $20.8m in relation to the acquisition of 
the ALs and scheduled acquisition of the ANZ P&I business.

If the acquisition had occurred on 1 July 2018, management 
estimates that the consolidated revenue from continuing 
operations for the Group would have been $1,116.2m and 
consolidated loss from continuing operations for the year 
would have been $47.2m. In determining these amounts, 
management has assumed that the fair value adjustments, 
determined provisionally, that arose on the date of acquisition 
would have been the same if the acquisition had occurred 
on 1 July 2018.

Unconsolidated structured entities

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 and seed capital. 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 fees revenue 
in note 2-2. 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.

6-4  Acquisition of subsidiary

Final completion of the acquisition of the ANZ P&I businesses 
occurred on 31 January 2020. The purchase price allocation 
has not been completed for the acquisition. The net asset 
adjustment is still being negotiated in connection with 
this acquisition.

In the period from acquisition to 30 June 2020, the ex-ANZ 
P&I businesses contributed revenue of $178.9m and a 
profit of $31.3m to the IOOF Group’s UNPAT results. This 
excludes integration preparation costs of $25.0m incurred 
during the year.

121

IOOF | annual report 2020The following summarises the major classes of consideration transferred, and the recognised amounts of assets acquired and liabilities 
assumed at the acquisition date for current and prior year acquisitions:

Consideration transferred

Cash

Deferred consideration

Total consideration

Cash balances acquired

Consideration, net of cash acquired

2020

$'000

810,209

–

810,209

(214,048)

596,161

2019

$'000

23,000

2,128

25,128

(24,240)

888

The impact on cash flows for the IOOF Group for the year was an outflow of $596.2m (pcp $0.9m).

Acquisition-related costs

The IOOF Group has incurred acquisition-related costs of $31.0m (pcp: $23.7m) in the financial year, on acquisition advisory, 
integration preparation and finance costs in relation to the acquisition of the ANZ P&I businesses (pcp: acquisition of the ANZ ALs). 
These costs have been included in the Other Expenses in note 2-4.

Identifiable assets acquired and liabilities assumed

The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.

Cash

Receivables

Prepayments

Investments accounted for using the equity method

Other financial assets

Property and equipment

Deferred tax assets

Payables

Borrowings

Current tax liabilities

Provisions

Non-controlling interest

2020

$'000

214,048

48,390

–

–

974,023

–

64,133

(938,687)

–

–

(211,440)

–

2019

$'000

24,240

3,744

579

368

–

1,600

1,033

(2,103)

(618)

242

(3,493)

(544)

Total identifiable net assets acquired

150,467

25,048

* 

The $168.1m customer remediation provision acquired with the ex-ANZ ALs is wholly offset by the indemnity receivable under the sale agreement.

Goodwill and intangibles

Goodwill and intangibles have been recognised as a result of the acquisition as follows:

Total consideration

Fair value of assets assumed

Goodwill and intangibles acquired

2020

$'000

810,209

(150,467)

659,742*

2019

$'000

25,128

(25,048)

80

* 

Purchase price allocation has not been completed for the acquisition of the ex-ANZ P&I businesses. The net asset adjustment is still being negotiated in connection 
with this acquisition.

122

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 20206-5 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

Transaction advisory services

Risk and compliance review

Other services

2020

$

2019

$

4,460,243

1,759,440

6,219,683

3,147,729

1,016,270

4,163,999

336,232

590,948

204,930

344,155*

1,476,265

82,551

567,189

–

29,040

678,780

7,695,948

4,842,779

*  Other non-audit services includes remuneration advisory services and debt advisory services, as well as minor other non-audit services provided during 2020.

All amounts payable to the Auditors of the Company were paid by an IOOF Group subsidiary.

6-6 Key management personnel

The key management personnel compensation comprised:

Short-term employee benefits

Post-employment benefits

Share-based payments

Termination benefits

Key management personnel compensation reconciles to disclosures in the remuneration report as follows:

Executive key management personnel

Non-executive Directors

Total

2020

$

2019

$

4,804,751

4,662,992

201,070

704,279

967,689

200,385

1,279,181

1,268,129

6,677,789

7,410,687

2020

$

5,580,543

1,097,246

2019

$

6,406,756

1,003,931

6,677,789

7,410,687

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.

123

IOOF | annual report 20206-7 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

Interest free loans

Perennial Value Management Limited

Interest bearing loans

Perennial Value Management Limited

Financial
year

Opening
balance
1 July 2019

Closing
balance
30 June 2020

Interest paid/
payable
during year

Highest
balance
during year

$

1,944,381

2,286,717

$

–

1,944,381

$

 – 

 – 

$

1,944,381

2,286,717

5,794,350

6,402,062

–

5,794,350

69,442

228,939

5,836,966

6,505,622

2020

2019

2020

2019

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 made on commercial terms and conditions and unsecured interest free loans were repaid during the year.

(c) Investment in related entities

Through one of its subsidiaries, the IOOF Group (excluding benefit funds) holds investments in managed investment schemes that 
meet the definition of related parties.

Investment in related party schemes

(d) Transactions with key management personnel

(i) Key management personnel compensation

2020

$

2019

$

263,583

279,662

Details of key management personnel compensation are disclosed in section 6–6 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 2020 and 2019 financial years.

124

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020Section 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 2020 
or later years. How these changes are expected to impact the financial position and performance of the IOOF 
Group is explained in this section.

7-1 Reporting entity

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 2020 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 31 August 2020.

(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;

•  equity investments at fair value through other 

comprehensive income are measured at fair value; and
•  assets (or disposal groups) that are classified as held for sale 
in accordance with AASB 5 Non-current Assets Held for Sale 
and Discontinued Operations are measured in accordance 
with that Standard.

The statement of financial position is presented in 
order of liquidity.

(c) Functional and presentation currency

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 1–1 – Contingent consideration;
•  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;

•  note 3–4 & 4–4 – contingencies and provisions; and
•  note 6–4 acquisition of subsidiary.

125

IOOF | annual report 20207-3 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, except as identified at note 7–4.

(b) Basis of consolidation

The consolidated financial statements incorporate the assets 
and liabilities of all subsidiaries of the Company as at 30 June 
2020 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 1-1 Assets and 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.

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 Plans 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.

(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.

126

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020(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.

(d) 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 and liabilities at fair value through OCI

Impairment losses on equity investments at fair value through 
OCI 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.

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 debt investment at fair value through OCI 
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 debt investment at fair value through OCI 
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. Recoverable amount is the higher of 
fair value less costs of disposal and value in use. 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 for which the estimates of future 
cash flows have not been adjusted. 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.

(i) 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.

127

IOOF | annual report 2020Cash 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.

(f) Leases

The following policy applies to the year ended 30 June 2019.

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.

(g) Non-current assets held for sale

Non-current assets and disposal groups are classified as held 
for sale if their carrying amount will be recovered principally 
through a sale transaction rather than through continuing 
use. This condition is regarded as met only when the asset 
(or disposal group) is available for immediate sale in its present 
condition subject only to terms that are usual and customary 
for sales for such asset (or disposal group) and its sale is highly 
probable. Management must be committed to the sale, which 
should be expected to qualify for recognition as a completed 
sale within one year from the date of classification.

When the IOOF Group is committed to a sale plan involving 
loss of control of a subsidiary, all of the assets and liabilities of 
that subsidiary are classified as held for sale when the criteria 
described above are met.

Non-current assets (and disposal groups) classified as held 
for sale are measured at the lower of their previous carrying 
amount and fair value less costs to sell.

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.

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.

(e) 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.

128

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020The IOOF Group is in the process of assessing the potential 
impact of its consolidated financial statements and the 
impact has not yet been determined, however will be 
relevant for IOOF Ltd. The IOOF Group plans to adopt 
AASB 17 in the consolidated financial statements for the 
year ended 30 June 2023.

7-5 Subsequent events

The Directors have declared the payment of a final dividend 
of 11.5 cents per ordinary share franked to 100% based on tax 
paid at 30%, to be paid on 22 September 2020.

On 31 August 2020 the IOOF Group announced that it has 
entered into transaction agreements with National Australia 
Bank (NAB) to acquire 100% of NAB’s wealth management 
business (MLC) for $1,440 million, (subject to completion 
adjustments) and upfront integration and transaction costs 
(approximately $90 million). The acquisition is expected to be 
completed before 30 June 2021 and is subject to a number 
of conditions precedent including regulatory approvals from 
APRA and ACCC. This acquisition will be funded through a 
combination of:
•  $1,040 million fully underwritten institutional placement 
and accelerated non-renounceable entitlement offer, 
launched on 31 August 2020;

•  $250 million of incremental senior debt via an underwritten 

syndicated debt facility; 

•  $200 million in a subordinated loan note issued to NAB; and
•  $40 million of existing IOOF cash.

The existing $670 million syndicated facility is expected to 
remain in place and IOOF will seek consent from its lender 
group in relation to the acquisition. As part of the transaction, 
IOOF will expand its total debt facilities by $250 million in 
total facility limits. IOOF is confident of receiving lender group 
support for this transaction. To ensure funding certainty, 
IOOF has engaged Citi and NAB to underwrite $920 million of 
total debt facilities as a backstop to the syndicated facility.

7-4 Adoption of new and revised Standards

New and amended Standards that are effective 
for the current year

The IOOF Group has adopted the following new or amended 
standards in preparing these consolidated financial statements.

Impact of initial application of AASB 16 Leases

The Group has applied AASB 16 for the first time for the 
financial reporting period commencing 1 July 2019. The 
impact of the initial application of AASB 16 has been detailed 
at section 4-6 Leases.

New and revised Standards in issue but not 
yet effective

At the date of authorisation of these financial statements, the 
IOOF Group has not applied the following new and revised 
IFRS Standards that have been issued but are not yet effective:

AASB 17

Insurance Contracts

Annual Improvements to 
IFRS Standards 2015–2017 
Cycle

Amendments to IFRS 3 Business 
Combinations, IFRS 11 Joint 
Arrangements, IAS 12 Income 
Taxes and IAS 23 Borrowing Costs

AASB 10 Consolidated 
Financial Statements and 
AASB 128 (amendments)

Sale or Contribution of Assets 
between an Investor and its 
Associate or Joint Venture

AASB 3

Definition of a Business 
(Amendments to IFRS 3)

AASB 101 and AASB 108

Definition of Material 
(Amendments to IAS 1 and IAS 8)

The directors do not expect that the adoption of the 
Standards listed above will have a material impact on the 
financial statements of the IOOF Group in future periods, 
except as noted below:

AASB 17 Insurance Contracts

AASB 17 replaces AASB 4 Insurance Contracts and similarly 
applies to insurance contracts. The classification of insurance 
contracts is similar to AASB 4 Insurance Contracts however 
unbundling rule changes may mean some contract 
components now need to be measured under AASB 17.

The new standard contains a lower level of aggregation/
smaller portfolios, changes to contract boundaries and 
valuation approaches, the application of Contractual Service 
Margins to policies valued under certain methodologies, 
changes in treatment to reinsurance and an ability to use 
Other Comprehensive Income for changes in asset values.

129

IOOF | annual report 2020The $200 million of subordinated loan note issued to NAB has 
the following key components:
•  Coupon of 1% per annum. Steps up to 4% pa if the 

subordinated loan note is not redeemed prior to 42 months 
post completion

•  Five year maturity date with an early redemption start 
period of the later of three years from Completion and 
30 September 2024

•  Redemption amount equal to principal plus accrued 
interest plus additional amount equal to any uplift in 
notional securities over a reference price (being a 15% 
premium to the theoretical ex-rights price for the Equity 
Offer) and subject to adjustment

•  Structurally subordinated to senior secured creditors

On 7 August 2020, the IOOF Group sold approximately 
14.2 million shares of its total minority holding of 19.7 million 
shares in Australian Ethical Investment Ltd (ASX:AEF) for total 
cash consideration of $74.5 million (purchase cost $5.2 million). 
This sale has reduced IOOF’s stake to approximately 5.5 million 
shares (4.9%) of AEF. The proceeds from the divestment will be 
used to reduce debt and provide strategic flexibility for growth 
opportunities. The impact on underlying net profit after tax 
is immaterial. 

Subsequent to the end of the financial year, the IOOF Group 
has renegotiated the terms of its borrowings. This has 
extended the repayment term of its 3 year facility to be a 
4 year repayment term from 27 September 2018, which is the 
SFA effective date.

On 21 August 2020, ASIC commenced proceedings against 
RI Advice Group Pty Limited (RI Advice), a wholly-owned 
subsidiary of IOOF. ASIC makes complaints relating to 
RI Advice’s management of cybersecurity and cyber 
resilience risk, some of which relate back to events from 
2016. No provision has been recorded at this point as 
ultimately the quantum of penalty (if any) is not reliably 
estimable at this point.

As part of the Advice 2.0 strategy, it is estimated that the 
Group will acquire practices through Buyer of Last Resort 
agreements due to the conversion of Bridges to a fully salaried 
network. The estimated spend is $15 million to $20 million 
for the 2021 financial year. In addition, on 28 August 2020, 
the Board approved the 100% acquisition of Wealth Central 
for $30 million, an online client engagement tool that creates 
a better and more transparent advice experience as well 
as delivering practitioners a more streamlined exchange 
of client data. 

IOOF evaluates potential opportunities for investments or 
divestments on a regular basis. IOOF has received an approach 
from a third party (who has commenced due diligence), 
relating to the potential divestment of its professional trustee 
services business, Australian Executor Trustees Limited. While 
discussions are on-going, there is no assurance that any 
divestment will occur, or if so, on what terms. 

The existence of COVID-19 was confirmed in early 2020 and 
in March 2020 was declared a pandemic by the World Health 
Organisation. This has resulted in significant volatility in global 
and domestic financial markets. Refer to Note 1–1 for the 
sensitivity analysis of risks.

At the date of signing of the financial statements, there is still 
significant uncertainty on the likely duration and the ultimate 
impact COVID-19 will have on world economies. Given the 
high degree of estimation uncertainty, management cannot 
reasonably assess or quantify the potential short or longer 
term financial impact on the Company.

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 2020 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.

130

IOOF | annual report 2020 Notes to the financial statements For the year ended 30 June 2020Shareholder information

Share Capital

IOOF has on issue 649,324,356 fully paid ordinary shares held by 58,808 holders as at 30 September 2020.

Voting Rights

IOOF’s fully paid ordinary shares carry voting rights of one vote per share.

Twenty largest shareholders as at 30 September 2020

The following table sets out the top 20 registered holders of shares.

Rank Holder Name

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

CITICORP NOMINEES PTY LIMITED

J P MORGAN NOMINEES AUSTRALIA PTY LIMITED

THE TRUST COMPANY (AUSTRALIA) LIMITED 

NATIONAL NOMINEES LIMITED

BNP PARIBAS NOMS PTY LTD 

BNP PARIBAS NOMINEES PTY LTD 

CS THIRD NOMINEES PTY LIMITED 

AIGLE ROYAL SUPERANNUATION PTY LTD 

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2

HSBC CUSTODY NOMINEES

CS FOURTH NOMINEES PTY LIMITED 

CITICORP NOMINEES PTY LIMITED  

MILTON CORPORATION LIMITED

WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED

SAM GANNON PTY LTD 

MR BRUCE WILLIAM NEILL

MRS SALLY KELAHER

THANECORP AUSTRALIA PTY LTD 

MR IAN GREGORY GRIFFITHS

Total Securities of Top 20 Holdings

Total of Securities

Balance as at  
30 Sept 2020

% of issued
capital

142,078,160

108,719,618

70,234,391

24,414,295

23,525,027

20,232,536

15,146,319

9,276,793

7,000,000

6,357,403

5,479,136

4,312,171

4,236,455

3,303,924

2,700,000

2,265,506

2,101,428

1,928,518

1,759,942

1,750,419

456,822,041

649,324,356

21.88%

16.74%

10.82%

3.76%

3.62%

3.12%

2.33%

1.43%

1.08%

0.98%

0.84%

0.66%

0.65%

0.51%

0.42%

0.35%

0.32%

0.30%

0.27%

0.27%

70.4%

131

IOOF | annual report 2020 Shareholder information

Distribution of members and their holdings

The following table summarises the distribution of our listed shares as at 30 September 2020.

Range

1-1,000

1,001-5,000

5,001-10,000

10,001-100,000

100,001-9,999,999,999

Totals

No of Holders

32,793

19,234

4,046

2,575

160

58,808

No of Units

12,824,190

46,040,541

29,680,100

58,162,449

502,617,076

649,324,356

% Issued Capital

1.98%

7.09%

4.57%

8.96%

77.41%

100.00%

There were 7,191 shareholders holding less than a marketable parcel of shares based on a market price of $3.09 at the close of trading 
on 30 September 2020 and there were 19 per cent of shareholders with registered addresses outside Australia. 

Substantial Shareholdings

Substantial shareholders as at 30 September 2020 are shown below, with the date of their last notice lodged in accordance with  
section 671B of the Corporations Act:

Holder name

Date of 
last notice

No of 
Ord Shares

% of Issued Share Capital 
as at date of last notice

Sumitomo Mitsui Trust Holdings, Inc (SMTH) and its Subsidiaries

Franklin Resources, Inc. and its affiliates

23/9/20

31/7/20

55,739,417

31,892,554

8.58%

9.08%

Share register and other enquiries

If you have any questions in relation to your shareholding, share transfers or dividends, please contact our share registry:

Boardroom Pty Limited 
ABN: 14 003 209 836 
Level 7, 411 Collins Street  
Melbourne VIC 3000 

1300 737 760 (Australia only)

Phone: 
Phone:  +61 3 9492 9204
Fax: 
+61 2 9279 0664
Website:  www.boardroomlimited.com.au 

Please include your shareholder reference number (SRN) or holder identification number (HIN) in all correspondence to  
the share registry.

132

IOOF | annual report 2020IOOF | annual report 2020

133

134

IOOF | annual report 2020Share registry 

Boardroom Pty Limited 
Level 12, 225 George Street 
Sydney NSW 2000

Auditor 

KPMG 
Tower Two, Collins Square, 727 Collins Street  
Docklands VIC 3008

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 30 September 2020)

Directors 

Mr Allan Griffiths 
B.Bus, DipLi 
Chairman

Mr Renato Mota 
B.Com (Hons), B.Bus 
CEO

Mr Andrew Bloore

Ms Elizabeth Flynn 
LLB, Grad Dip App Corp Gov, FAICD,FFin, FGIA, FCG

Mr John Selak 
Dip Acc, FCA, FAICD

Ms Michelle Somerville 
B.Bus (Accounting), MApp Finance, FCA, GAICD

Company Secretary 

Ms Adrianna Bisogni 
B.A LL.B (Hons) GAICD

Notice of Annual General Meeting 

In light of the current restrictions on public 
gatherings, and in line with temporary amendments 
to the Corporations Act in response to the coronavirus 
pandemic, this year’s Annual General Meeting will 
be conducted as a virtual meeting on Wednesday, 
25 November 2020 at 9:30am (AEDT).

Further information and guidance on how shareholders 
may participate in this year’s virtual AGM will be available 
with the Notice of Meeting and on IOOF’s website: 
www.ioof.com.au/agm

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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