45 AGL Energy Limited Annual Report 2012 Retail Energy: Merchant Energy: Operating EBIT of $549.7 million was up 21.3% on the prior corresponding period. Wholesale Electricity gross margin increased 25.4% to  $381.5 million. The non-recurrance of the severe summer weather events experienced in February 2011 was a key factor behind the  $77.2 million increase. Wholesale Gas gross margin increased 10.1% to $114.8 million. Eco-Markets gross margin increased 49.6% to  $66.4 million due to effective portfolio management and increased renewable generation. Fees from the development of wind farms fell  from $61.0 million in the prior corresponding period to $43.0 million this year. Operating EBIT of $332.8 million was up 9.1% on the prior corresponding period, due mainly to an increase of $58.6 million (9.8%) in gross  margin and increased customer numbers. Total customer accounts increased by 5.5% to 3.47 million. AGL increased customer numbers in all  states with dual fuel customer accounts growing by 10.2% during the year to 1.62 million. Average funds employed increased due largely to investments in assets whereby the contribution to EBIT will not commence until the assets  reach practical completion or gas production. Operating EBIT/Average funds employed increased 0.3 percentage points (ppts) due to a $73.9 million, or 11.3%, increase in Operating  EBIT. Partially offsetting the positive impact of an increase in Operating EBIT was an increase in average funds employed of $514.2 million  or 6.9%. Operating EBIT for the year ended 30 June 2012 was $730.4 million compared with $656.5 million for the prior corresponding period. The  Statutory and Operating EBIT by segment is presented in the following table: Underlying Profit is presented with reference to the Australian Securities and Investment Commission Regulatory Guide 230 “Disclosing  non-IFRS financial information” issued in December 2011. AGL’s policy for reporting Underlying Profit is consistent with this guidance and  the Directors have had the consistency of the application of the policy reviewed by the external auditor of AGL. Underlying Profit and Operating EBIT are the Statutory Profit and Statutory EBIT respectively adjusted for significant items and changes in  the fair value of financial instruments. AGL believes that Underlying Profit and Operating EBIT provide a better understanding of its financial  performance and allows for a more relevant comparison of financial performance between financial periods. AGL believes Underlying Profit and Operating EBIT are useful as they: > remove significant items that are material items of revenue or expense that are unrelated to the underlying performance of the business  thereby facilitating a more representative comparison of financial performance between financial periods and; > remove changes in the fair value of financial instruments recognised in the income statement to remove the volatility caused by  mismatches in valuing derivatives and the underlying asset differently. Year ended 30 June 2012 $m Year ended 30 June 2011 $m Statutory EBIT 201.4 819.1 Significant items 211.7 44.3 Changes in fair value of financial instruments 304.6 (218.8) Finance income included in Operating EBIT 12.7 11.9 Operating EBIT 730.4 656.5 The following table reconciles Statutory EBIT to Operating EBIT: EBIT (Statutory) EBIT (Operating) Year ended  30 June 2012  $m  Year ended  30 June 2011  $m  Year ended  30 June 2012  $m  Year ended  30 June 2011  $m  Retail Energy  332.8 301.0 332.8 305.1 Merchant Energy 224.2 658.9 549.7 453.2 Upstream Gas  (35.2) 14.3 0.6 14.3 Energy Investments (140.2) 35.6 24.5 40.5 Centrally managed expenses (180.2) (190.7) (177.2) (156.6) EBIT 201.4 819.1 730.4 656.5 Depreciation and amortisation 173.9 148.0 173.9 148.0 EBITDA 375.3 967.1 904.3 804.5 Average funds employed 7,917.2 7,403.0 7,917.2 7,403.0 EBIT/Average funds employed 2.5% 11.1% 9.2% 8.9%