6 As part of the celebrations of the  175th anniversary of the formation  of The Australian Gas Light Company,  AGL has been highlighting its long  history of adapting to changes in  energy technologies and customer  needs. The outcomes that have been  achieved this year demonstrate that  AGL is continuing in that proud tradition.  The future promises more change. Chairman’s  Report Jeremy Maycock, Chairman Strategy Financial Results The statutory net profit of your company was  $114.9 million, compared with $558.7 million  last year. This year’s result includes significant  items totalling $155.1 million, most of which  arise from the acquisition and funding of  the Loy Yang A power station in Victoria’s  Latrobe Valley. These items will not recur  in future years. A more useful comparison for shareholders  is AGL’s underlying net profit which increased  to $482.0 million, an increase of 11.8% on  the underlying net profit of $431.1 million  reported in 2011. Underlying profit is  the statutory profit adjusted to exclude  significant items and the effect of marking to  market certain electricity hedges AGL has in  place to manage the wholesale cost of buying  electricity in the National Electricity Market. This has been a year of transformation  for AGL as we continue our strategy  of vertical integration. There are two core elements to  AGL’s strategy. The first concerns the “demand” side of the  business. This relates to the energy products  and services we provide to our customers.  If AGL is to continue to grow over the long  term, it is crucial that we continue to expand  this side of the business as it is this which  underpins investment in our upstream  supply assets. This Annual Report details the considerable  progress made during 2012 in all these  areas. I will highlight just two items that  illustrate the disciplined approach AGL has  taken in making investment decisions to  improve shareholders’ returns. In our Retail business, the number of  new customer accounts increased by  approximately 180,000. Most of these  were new electricity customers acquired  in New South Wales as part of a three year  organic growth strategy we commenced  in January 2011. This followed AGL’s  decision, in late 2010, not to buy one  of the electricity retail businesses being  offered for sale by the New South Wales  government because the price that we  would have been required to pay would not  have represented value for shareholders.  That decision has been vindicated. Since  the launch of the organic growth strategy,  AGL has acquired approximately 200,000  new electricity customers in New South  Wales. The discounts and incentives we have  offered to encourage customers to switch  to AGL have been a small fraction of the  average cost that would have been incurred  had we purchased a retail business from  the New South Wales government. AGL has  also had the advantage of being able to fully  manage the new customer accounts using  our own SAP billing platform. The other concerns the “supply” side of  the business. Over the last few years, we  have been investing substantial amounts  of capital to increase our ownership of the  assets that produce gas and electricity to  meet our customers’ needs. This will allow  us to better manage the wholesale costs  of gas and electricity in the years ahead so  that we can remain a competitive supplier  of energy to our customers. In growing both the demand side and supply  side of the business, it is also important  that the investments we make earn a  satisfactory return for our shareholders.  This means we need to be disciplined in  determining the price we are prepared to  pay to acquire new assets. We need to form  considered views on the range of factors  that may affect investment returns over  the long term. These scenarios involve  financial considerations such as future  wholesale electricity prices, and future  demand for energy. They also include  non-financial considerations including, for  example, future State and Commonwealth  government policies on energy, and the  social and reputational effects of investing  in certain types of assets. On the supply side of the business, the most  significant strategic development was the  decision to buy the Loy Yang A power station. We expect the acquisition to be accretive  to earnings from FY2013. Before the Board  approved the largest transaction AGL  has undertaken since the demerger from  Alinta in 2006, it needed to be convinced  about a number of matters other than just  the immediate effect on earnings. These  included consideration of the effect the  A fundamental indicator of financial success  is the returns generated on funds employed.  A pleasing feature of this year’s result is the  improvement, from 8.9% to 9.3%, in the  return on funds employed in the business.  Although still below the level we would like  it to be to fully reward shareholders for the  risks of investing in the energy industry, the  improvement shows that we are heading in  the right direction. The Board has declared a fully franked final  dividend of 32 cents per share, an increase  on the final dividend of 31 cents per share  declared last year. Shareholders should also  note that it will be paid on all issued shares,  including those issued at a discount in June  2012. In other words, the new shares will  participate fully in the final dividend even  though the funds received by AGL from  the share issue were only deployed in the  business for a few days during the year. Returns to Shareholders