Australian Ethical Investment Ltd
Annual report to shareholders
for year ending 30 June 2006
australianethical
investment + superannuation
for investors, society and the environment
new head office
The company has purchased a building for use as its head
office. Block E of Trevor Pearcey House is in the Canberra
suburb of Bruce, an area of industries based on knowledge
and high technology. The building is being refurbished to
meet high standards of energy efficiency and comfort.
see pages 4 and 6
record profit
growing funds
For the 2005–06 year, Australian Ethical Investment Ltd,
including Australian Ethical Superannuation Pty Ltd, has
recorded a net profit after tax of $1 362 612. This represents
a 74 per cent increase over the previous year’s record profit
of $784 419.
Profit
see page 4
Growth in funds under management was strong, with good
inflow from trust and super investors and positive returns from
investments. Funds under management grew from $311 million
in June 2005 to $417 million in June 2006 (after distribution).
The distribution amount this year was $41 million, compared to
$48 million the previous year.
see page 4
$00,000
15
12
9
6
3
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2002 2003 2004 2005 2006
Past performance is not a reliable indicator of future performance.
$million
500
400
300
200
100
0
Funds under management
(after distribution)
June 02 June 03 June 04 June 05 June 06
ethical decision-making
more community grants
The board of directors is committed to the highest standards
of conduct and ethical practices in guiding the business
activities of Australian Ethical.
In 2005 Australian Ethical donated a total of $98 227 to 44
community organisations. In 2006 the company will grant
$170 132 to 50 groups. Since 1997 this program has made
available grants worth over $400 000.
see page 8
see page 6
higher dividends
sustainability reporting award
nethica
australianethical
stra
The dividend recommended by directors for the 2005–06
year is 85 cents per share (35 cents paid in March 2006,
50 cents to be paid in December 2006, subject to approval
by the annual general meeting). The previous year’s
dividend was 72 cents per share.
cents per
share
100
80
60
40
20
0
see page 2
Dividends
2002 2003 2004 2005 2006
The Association of Chartered Certified Accountants gave
Australian Ethical the award for continued high quality
sustainability reporting for a small to medium-sized enterprise.
A
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see page 6
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contents
Chair’s report
Chief executive officer’s report
Sustainability
Corporate governance statement
Directors’ report
Financial statements
Shareholder information
Corporate directory
Corporate vision and mission
2
4
6
8
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24
51
52
52
Australian Ethical Charter
inside back cover
lower costs
The company’s costs to income ratio has
fallen from 83 per cent in 2005 to 78 per cent
in 2006. Return on equity has increased from
16.4 per cent to 24.1 per cent.
see page 12
new ethical investments
N
V
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S
The company has maintained its commitment to promote ecologically sustainable
and ethical investment while obtaining good returns for shareholders, trust
T
investors and super members. New investments have been made in energy,
M
property, health care, transport and publishing:
E
N
T
wind energy producer, Babcock and Brown Wind Partners
Spanish wind turbine maker, Gamesa Corp Tecnologica
German solar companies, SolarWorld and Conergy
•
•
•
•
•
•
•
•
•
•
•
•
•
US geothermal energy company, Ormat Technologies
coal seam gas companies, Arrow Energy and Eastern Star Gas
aged care services provider, DCA Group
ING Community Living Fund
ING Healthcare Fund
Swiss hearing aid company, Phonak
L
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D
Danish hearing aid companies, William Demant Holdings and GN Store Nord
Dutch bicycle manufacturer, Accell
US bus operator, Laidlaw International
newspaper and magazine publisher, Fairfax (John) preference shares.
see Trusts – annual report 2006 at www.austethical.com.au
1
australianethical
Chair’s report
Five years of growth and gathering strength
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The board is pleased to report that the Australian
Ethical Investment group has had another good year
in terms of increased profits, strong growth in funds
under management, increased efficiencies of operations
and a strengthening of our deep green and sustainable
investment strategies fully consistent with our charter. The
chief executive officer’s report details the activities of the
past year.
The group’s capital position remains strong and the board
is recommending an increased dividend for 2005–06. Even
so, the board recommends that a portion of the increased
profits be retained to strengthen the group’s liquidity. The
cost of the acquisition of a building for the group’s head
office last year, plus the expected costs of the substantial
refurbishment of the building needed to meet our desired
energy and environmental ratings have been funded
from reserves, thereby depleting the group’s liquidity.
The retained profits will do much to restore liquidity to
satisfactory levels.
Shareholders may like to consider the striking progress of
the group over a longer period than a year. In mid-2001
Australian Ethical had about 28 staff (full-time equivalents)
investing around $150 million of investors’ funds. By mid-
2006, the company had three times as much money under
management while the number of staff had increased by
less than 50 per cent (to 41). Over the last five years,
customer support and careful control of expenditures have
led to efficiency gains and built the vibrant and profitable
company that we have today.
Overseas investments
Three years ago, the board decided to invest abroad
a portion of the funds under management to increase
diversification and potentially reduce risks for the trust
funds. This diversification has been sound in terms of good
returns and has also helped further the ethics, greenness
and sustainability aims of the charter.
The Australian Ethical Charter remains the starting
point for research into the inclusion or exclusion of
possible investments. The group has resisted investing in
companies, such as uranium and other mining companies
for example, that tempt other ethical fund managers. In
spite of this, or perhaps because of it, over the years the
trusts and super strategies have maintained sound and
sustainable returns.
The company has been able to increase activity and profit
without compromising ethics because of its intellectual
investment – in ideas and methods developed over
the years and in people with strong skills in social and
financial analysis. This has allowed growth in the value
of assets without the commitment of large additional
amounts of capital or natural resources. Since listing on the
Australian Stock Exchange in December 2002, the market
capitalisation of the company has grown from $11 million to
$26 million. Dividends have grown from 10 cents per share
in 2001 to 85 cents per share in 2006.
While the growth of the company is of special interest
to shareholders, it has significant benefits for other
stakeholders. Most directly, it creates jobs for the staff who
run the trusts and the super fund and generates returns for
the customers who invest in them. The group’s objectives
are broader still.
Broader responsibilities
The company’s mission is to earn a competitive return
while contributing to a just and sustainable society and the
protection of the natural environment. Our core business
is the use of funds under management for the benefit of
people and environments around the world. As the business
grows, these benefits grow.
Every year Australian Ethical donates 10 per cent of its
profit to community groups working in welfare and the
environment. This year’s community grants – $170 132 to
50 groups – will give more money to more groups than ever
before. From the beginning of the program in 1997 until the
latest round of grants, the company will have tithed over
$400 000 for these purposes.
Corporate giving and business success set a good
example. Businesses are increasingly recognising their
social responsibilities. Fund managers are offering more
sustainable options. In this way success creates new
challenges. The ethical marketplace is becoming more
crowded. Australian Ethical’s continuing advantage is that
few other companies take their broader responsibilities as
seriously as we do.
australianethical
The prudential and market-based regulations of the
Australian Prudential Regulation Authority and the
Australian Securities and Investments Commission have
greatly expanded over recent years and required the
group to devote substantial board, staff and financial
resources to compliance activities. Although the increase
in regulation has been well intended, the cost to small
fund managers has probably been disproportionate to
the benefits achieved. Your group has complied with this
barrage of regulation with good grace; it had no alternative,
but greater thought by the regulators needs now to be given
to reducing the regulatory burdens that add heavily to costs
and divert the attention of boards and management from
efficiency and initiative.
This year, at a cost estimated to be well over $100 000,
the company’s wholly owned subsidiary, Australian Ethical
Superannuation Pty Ltd, gained a licence to continue to
operate the superannuation fund that was started in 1998.
Such a costly overhead could only be borne by a company
much larger than the one that existed five years ago.
Smaller superannuation funds have left the business.
The year ahead
It is as unwise as ever to forecast with any confidence the
group’s profitability for the coming year. The board has
been considering a range of possibilities to expand the
group’s business and increase efficiency of operations.
Your board has continued to seek to appoint non-executive
directors to the board to move closer to compliance with
the Australian Stock Exchange guideline of a majority of
non-executive directors. The present composition of the
Australian Ethical Investment board is six directors, of which
three are non-executives. Clearly we are making progress
towards that guideline.
Throughout this period it has been my pleasure to work
with the directors and the dedicated staff of the group,
particularly the chief executive officer, Anne O’Donnell, and
see their efforts and commitment bear fruit.
Grants to community organisations
0
0
0
9
$
0
0
0
6
$
0
0
5
3
$
Australian Marine Conservation Society
Australians for Disability and Diversity Employment
Eden Aboriginal Evangelical Church
Médecins Sans Frontières
Alternative Technology Association
– Solar Power for East Timor
Australian Bush Heritage Fund
Clean Ocean Foundation
Engineers without Borders – WA Chapter
Lismore Soup Kitchen
The Coastwatchers Association
Australian Conservation Foundation
Barefoot Economy
Deadly Treadlies
Environmental Defenders Office – ACT
Hopestreet Cleaners with a Mission
Huon Valley Environment Centre
Southern Cross Kid’s Camps
TEAR Australia
The Wilderness Society
Tolga Bat Rescue
Water Aid
George Pooley
Chair
0
5
0
2
$
Animal Liberation – NSW
Anti-Slavery Project
Australia and New Zealand Solar Energy Society
Australian Seabird Rescue
Bicycle Federation of Australia
Wyalong & District Community Transport Group Inc
Brush Tailed Rock Wallaby Recovery team
Camp Icthus
Communities at Work
Conservation Council of the South East Region
and Canberra
Fair Trade Association of Australia and New Zealand
Foster Care of Australia’s Unique Native Animals
Friends of the Earth Australia
(Climate Justice campaign)
Greening Australia – SA
Hepburn Wildlife Shelter
International Women’s Development Agency
Kingfisher Centre
Migrant Resource Centre
Mineral Policy Institute
Murrumbateman Landcare Group
Najidah Association
Otis Foundation
Pedal Power
RSPCA Lonsdale Shelter – SA
The Climate Group
Total Environment Centre
Towamba Community Progress Association
Wildcare
NSW Wildlife Information and Rescue Service
(WIRES)
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australianethical
Chief Executive Officer’s report
Profit up again
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I am delighted to report that, for the financial year ended
30 June 2006, the Australian Ethical Investment group has
made another record profit. The consolidated net profit
is $1 362 612, up from $784 419 in 2005–06. This is an
increase of 74 per cent. The group’s profit has increased
every year since 2003.
Growth in funds under management was again strong, with
good investor inflow and positive returns from investments.
At 30 June 2006, funds under management, after a
distribution of $41 million, stood at $417 million. This is 34
per cent higher than at the same time the previous year.
The larger amount of funds produced more revenue
without significantly increasing costs. The company’s cost
to income ratio fell from 83 per cent in 2005 to 78 per cent
in 2006. As a result of the improved profit, return on equity
has increased from 16.4 per cent to 24.1 per cent.
The superannuation fund has grown rapidly, gaining
from the federal government’s introduction of choice of
funds at the start of the financial year and the budget tax
concessions in May 2006. During the year the trustee,
Australian Ethical Superannuation Pty Ltd, gained its
registrable superannuation entity licence.
The success and growth of our business depends very
much on the performance of the Australian Ethical trusts.
In the last financial year the trusts attracted new funds
and produced good returns in both absolute and relative
historical terms. They were bettered by some other
managed funds which were able to ride the boom in oil,
coal and uranium stocks without concern for the social
and environmental costs. We continue to be guided by our
charter in the selection of investments for the trusts.
Last year the company retained some of the profit to invest
in future growth of the business. The board of directors has
Return on equity
%
25
20
15
10
5
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2002 2003* 2004 2005 2006
Year ended 30 June
*Listing on the stock exchange expanded the capital base.
taken the same view this year and has decided not to pay
out all of the profit as dividends. Directors have declared a
final dividend (fully franked) of 50 cents per ordinary share.
Added to the interim dividend of 35 cents per share, the
total dividend for the 2005–06 financial year will be 85 cents
per share, an increase of 18 per cent over the previous
year. Funds will be retained to provide liquidity and a strong
capital base for future growth to meet operational demands.
New office
During the year the company purchased a building for
use as our head office. Trevor Pearcey House is in the
Canberra suburb of Bruce, a district containing industries
based on knowledge and high technology. The building
Treavor Pearcey House, located in Bruce in the ACT.
australianethical
is being refurbished to meet high standards of energy
efficiency and to provide our staff with a comfortable
and productive working environment. I am sure that any
shareholder who has visited our current premises would
agree the staff deserve such an environment after having
spent many years in an ageing school building. Howard
Pender has worked tirelessly on finding the building
and planning its renovation and I would like to take this
opportunity to thank him for his efforts. Contracts for the
building work have been entered into and we hope to be in
a position to move in the first half of 2007.
Outlook
In previous years we have had the luxury of starting
the financial year strongly in terms of inflow and capital
growth. This year we have experienced a somewhat slower
start. Funds under management reached $470 million in
September 2006. Share market movements have affected
returns and investor sentiment. We will continue to monitor
the situation closely and develop strategies as appropriate.
Some of the challenges facing the company are:
•
continuing growth in the resources sector and
associated expectations about fund performance
•
•
keeping investors informed about how the volatility of
markets affects their savings
finding and retaining talented staff in Canberra’s tight
labour market.
We continue to seek opportunities to grow the business and
reduce costs.
I would like to thank all the staff for their work in achieving
the outstanding results outlined above. I would also like to
thank you, our shareholders, for your continuing support
and I look forward to seeing you at the annual general
meeting on 23 November.
Anne O’Donnell
Chief Executive Officer
.
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The returns from managed funds will help many people achieve their dreams
of seeing the world – China, Mexico, India, Vietnam, Haiti – though they’ll
probably avoid visiting the sweatshops which helped fund their trip.
You can invest without exploiting workers who are out of sight.
australianethical
investment + superannuation
Units in the trusts are offered and issued by Australian Ethical Investment Ltd (‘AEI’) ABN 47
003 188 930, AFSL 229949. Interests in the superannuation fund are offered by AEI and issued
by the trustee of the fund, Australian Ethical Superannuation Pty Ltd ABN 43 079 259 733
RSEL L0001441. Product disclosure statements are available from our website or by calling
1800 021 227 and should be considered before deciding whether to acquire, or continue to
hold, units in the trusts or interests in the fund. Australian Ethical® is a registered trademark of
AEI.
austethical.com.au
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australianethical
Sustainability report
Award for sustainability reporting
Australian Ethical was a winner at the Association
of Chartered Certified Accountants 2005 awards for
sustainability reporting. At a ceremony in May Australian
Ethical received the award for continued high quality
sustainability reporting for a small to medium-sized
enterprise. This is the second award from the association in
three years.
The association recognises an excellent sustainability
report as one that clearly acknowledges and explains the
environmental and social impacts of an organisation’s
operations and products, and demonstrates the
organisation’s policies, targets and long-term objectives to
reduce any adverse environmental and social impacts.
Comments from the judging panel included:
‘Australian Ethical Investment reports at a very
comprehensive and meaningful level, and the quality of its
report is outstanding given the company’s small size.’
Deadly Treadlies is one example of a group receiving a
community grant this year. Hudson is a regular at Deadly
Treadlies, maintaining his BMX so he can ride to school,
to the skate park and to the town pool.
‘Lots of discussion around risk based approach and
governance systems supporting that.’
Community grants
‘Trend data on relevant environmental impacts on
performance adds to the credibility of the report.’
‘The report gives a good feel for the priorities of the
organisation, how they want to position themselves both
among peers and in the community.’
‘The report is a no frills approach which is refreshing in
some ways.’
Australian Ethical’s Sustainability Report 2005 is available
on the company’s website, www.austethical.com.au.
The 2006 sustainability report is being prepared. As with
our previous sustainability reports, the 2006 report makes
reference to the global reporting initiative 2002 sustainability
reporting guidelines. It will be available on the website later
in the year.
Stephen Hyam (left) of Australian Ethical Investment
and Philip Sloane from the Centre for Australian Ethical
Research at the Association of Chartered Certified
Accountants awards ceremony.
6
As part of Australian Ethical’s constitution, 10 per cent of
the company’s profit is donated back to the community
through the community grants scheme. In 2005, the
company donated a total of $98 227 to 44 non-profit charity,
benevolent and conservation organisations (see list of 2005
community grant recipients). The 2005 grants ranged in
size from $1200 to $6000. Our grants help these groups
continue their excellent work. Australian Ethical encourages
other listed companies to donate a proportion of their profits
back to the community.
In 2006, Australian Ethical has donated $170 132.
Recipients are listed on page 3. Further information on our
community grants scheme, including application guidelines
and selection criteria, can be found on the company
website.
Training and development
Australian Ethical is committed to the training and
development of its employees. Training and development
provides clear benefits to the employees, the company
and other stakeholders through increased social capital,
increased efficiency and enhanced productivity. Australian
Ethical reinforced its commitment to employee training and
development in 2006 by extending its reimbursement of
approved courses from 50 per cent to 100 per cent of fees,
up to a maximum of $2000 per year.
Employees are also encouraged to participate in the
company’s personal development program, whereby staff
may undertake personal development that suites their
particular needs. The personal development program
covers activities such as yoga, swimming and other sporting
events, gym membership, painting, public speaking, dance
and music.
Sustainability library
Staff survey
australianethical
In April, the Sustainability Committee established a resource
library for the use of staff. The library includes books and
DVDs on a wide range of sustainability issues, including
topics such as climate change, ethics, permaculture and
sustainable house design.
Sustainable office building
In December 2005 Australian Ethical announced that it had
exchanged contracts to purchase its own office building,
Block E of Trevor Pearcey House, Bruce, in Canberra.
Australian Ethical’s new home consists of four strata titled
units which have a combined net lettable area of 1006
square metres and 32 square metres of balcony. The
building is set in a technology park among other commercial
buildings. Australian Ethical plans to refurbish the building
to improve its efficiency in terms of energy and water used,
as well as increasing the comfort for Australian Ethical staff.
Some of the improvements planned include insulation,
double-glazed windows, improved natural lighting, dual
flush low-water-usage toilets and low-flow shower and hand
basin fixtures.
Australian Ethical’s new home will allow even better
reporting of the company’s environmental performance.
National ride to work day
A number of staff participated in the national ride to work
day, held on 5 October 2005, enjoying fresh juice and
muffins on arrival.
Climate change submission
In April 2006, Australian Ethical made a submission to the
ACT Office of Sustainability’s public consultation on climate
change strategy and energy policy. Australian Ethical made
five main recommendations:
•
•
•
•
the ACT Government should set the achievable target of
zero emissions by 2050
the ACT’s climate change strategy should focus on
reducing greenhouse gas emissions from buildings and
transport
the ACT Government should take a leading role in
educating the community about climate change
the ACT Government should adequately fund the
departments with primary responsibility for the
implementation of climate change policy
•
the ACT should declare itself a nuclear-free territory.
The submission can be downloaded from the company
website.
Australian Ethical seeks to encourage, care for and provide
educational opportunity for its workers, and respect their
individual needs and aspirations. In keeping with this goal,
Australian Ethical conducts regular staff surveys to address
the question: does the company practice what it preaches?
The 2006 survey included a range of questions relating
to the Australian Ethical Charter as well as areas covered
by the global reporting initiative including job security,
remuneration and benefits, work-life balance, training and
development, internal communication, and the company’s
social and environmental performance.
The survey was conducted by the Centre for Australian
Ethical Research in February 2006. The survey found
that overall, 76 per cent of staff were satisfied with
Australian Ethical (see chart). This is an improvement on
the overall satisfaction rating from the 2005 survey of 66
per cent. Staff rated Australian Ethical highly in a number
of areas including job satisfaction, flexibility of hours, and
supervisors’ communication and management capabilities.
Staff satisfaction with Australian Ethical
%
60
50
40
30
20
10
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Overall satisfaction
2005
2006
Not applicable
or very
dissatisfied
Somewhat
dissatisfied
Neutral
Somewhat
satisfied
Very satisfied
Rating
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Corporate governance statement 2006
This statement discloses the extent to which Australian
Ethical Investment Ltd (‘AEI’) has followed the best
practice recommendations set down by the ASX Corporate
Governance Council during the reporting period.
The Council’s Principles of Good Corporate Governance
and Best Practice Recommendations provide a framework
for good governance set out in ten core principles and 28
specific recommendations.
While the ASX Listing Rules only require exception
reporting against the specific recommendations, AEI has
provided information on its corporate governance practices
against all recommendations.
Lay solid foundations for management and
oversight
AEI has formalised the functions reserved to the board and
those delegated to management. Responsibility for any
function not delegated to management remains with the
Board.
The primary responsibilities of the Board include:
•
•
•
•
•
appointment and appraisal of the performance of the
CEO;
the approval of annual financial statements;
the establishment of the goals of the company and
strategic plans to achieve those goals;
the review and adoption of annual budgets for the
financial performance of the company and monitoring
the results on a regular basis; and
risk management, including ensuring that the company
has implemented adequate systems of internal controls,
together with appropriate monitoring of compliance
activities.
Structure the board to add value
Independent directors
The time in office, skills, experience and expertise of each
director in office as at the date of this report is included in
the directors’ report.
The company regards an independent director as a director
who is not a member of management (i.e. a non-executive
director) and who:
1.
is not a substantial shareholder1 of the company or
an officer of, or otherwise associated directly with, a
substantial shareholder of the company;
2.
has not within the last three years been employed in an
executive capacity by the company or another group
1 As defined in section 9 of the Corporations Act 2001
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4.
5.
6.
7.
member, or been a director after ceasing to hold
any such employment;
within the last three years has not been a principal
or employee of a material professional adviser
or a material consultant to the company or
another group member, or an employee materially
associated with the service provided;
is not a material supplier or customer of the
company or other group member, or an officer of
or otherwise associated directly or indirectly with a
material supplier or customer;
has no material contractual relationship with the
company or another group member other than as
a director of the company;
has not served on the Board for a period which
could, or could reasonably be perceived to,
materially interfere with the director’s ability to act
in the best interests of the company;
is free from any interest and any business or other
relationship which could, or could reasonably be
perceived to, materially interfere with the director’s
ability to act in the best interests of the company.
Unless there are specific qualitative factors relevant
to the relationship, the Board is generally of the view
that a quantitative materiality threshold arises at 10%
of the relevant amount – considered from both the
company’s perspective and that of the other party.
The Board of AEI did not comprise a majority of
independent directors during the reporting period. For
almost all the reporting period, the board comprised
a majority of executive directors (three out of the five
directors on the board through most of the reporting
period).
On 1 July 2006, an independent director was
appointed to the board. As at 1 July 2006 the board
had three independent directors. They were George
Pooley, Naomi Edwards and Pauline Vamos. Howard
Pender, Caroline Le Couteur and James Thier are the
executive directors.
This Board composition is a result of the way in
which the company has developed, the long-standing
commitment of the executive directors and the
contribution that they make to Board deliberations.
In particular, the executive directors have a strong
understanding of the Australian Ethical Charter and
the implementation of the Charter over a long period.
The executive directors play a pivotal role in pursing
the aims of the Charter at all levels of the business.
Since listing on the Australian Stock Exchange, the
Board has undergone change in its composition and
structure. Decisions on future Board composition will
be guided by whether the Board considers it has the
australianethical
right balance of director competencies for governance,
for furtherance of the Australian Ethical Charter and for
assisting with and monitoring company performance.
Over time, and assuming the availability of suitable
candidates, the Board expects to move towards a majority
of independent directors.
The Board is of the view that the Board’s current
composition well serves the interests of shareholders.
The Board carries out its responsibilities according to
its Constitution, regulatory requirements, and an overall
mandate, including the following:
•
•
•
•
•
•
the Board must comprise at least three and not more
then ten directors;
the Board is bound by the Australian Ethical Charter that
is set out in the AEI Constitution. The Charter sets out
23 ethical principles to be applied to the operations and
activities of the company;
each director is committed to the AEI Code of Conduct
that governs the conduct of employees and directors.
The Code is consistent with the recommendations
that form part of the Corporate Governance Council’s
Principles 3 and 10;
all available information on items to be discussed at a
Board meeting is provided to each director prior to that
meeting;
the Board has adopted a policy for the management of
conflicts of interest;
with the prior approval of the chairperson, each director
has the right to seek independent legal and other
professional advice at the company’s expense on any
aspect of the company’s operations or undertakings
in order to fulfil their duties and responsibilities as
directors.
Chair of the Board
The company’s chairperson is currently an independent
director.
Nomination committee
During the period the company had no nomination
committee. The Board does not intend to establish such a
committee because such a move would be inefficient, given
the company’s size. The functions normally performed by a
nomination committee will be performed by the Board as a
whole, or will be delegated to the chairperson of the Board.
Promote ethical and responsible decision making
Code of conduct
The company has a code of conduct which applies to all
staff. It is available on the company’s website.
Share trading
The company’s code of conduct covers share trading. It
requires that as a general rule “staff and directors should
not buy or sell AEI shares between the close of the financial
year or half-year and the publication of the company’s
results”.
In accordance with the Corporations Act 2001 and the
ASX Listing Rules, directors must advise the ASX of
any transactions conducted by them in securities of the
company which they own or in which they have a relevant
interest.
Directors, employees and their associates must not engage
in insider trading, nor the disclosing of inside information to
third parties. The company periodically conducts seminars
about its share trading policy and educates staff about the
offence of insider trading.
Safeguard integrity in financial reporting
CEO and CFO sign-off of financial reports
The company requires the Chief Executive Officer and the
Chief Financial Officer to state in writing to the Board that
the company’s financial reports present a true and fair view,
in all material respects, of the company’s financial condition
and operating results and are in accordance with relevant
accounting standards.
Audit committee
Throughout the period, the Board had an audit committee
consisting of two non-executive directors and the company
secretary.
The qualifications of those appointed to the audit committee
are provided in the directors’ report, as are the number
of meetings of the committee and attendances at those
meetings.
The audit committee does not consist of only non-executive
directors (the company secretary being a member and not
a director). During the course of the reporting period, audit
committee membership moved to a majority of independent
directors. The chairperson of the committee is Naomi
Edwards.
The audit committee provides a forum for effective
communication between the Board and the external
auditors. The role of the committee is to advise the
Board on the maintenance of an appropriate framework
of financial internal control and appropriate discharge of
‘trading company’ fiduciary obligations for the company and
its subsidiary, Australian Ethical Superannuation Pty Ltd.
A charter for the audit committee appears on the company’s
website.
The Board is of the view that notwithstanding that the
audit committee does not comply with all the Corporate
Governance recommendations on membership, it is
nonetheless able to perform its functions with independence
and diligence.
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In particular:
•
•
the committee includes the company secretary who is
responsible to the Board chairperson and the Board
generally on governance matters;
at a number of meetings the committee speaks directly
to the external auditor in the absence of executive
management.
The audit committee considers the performance and
independence of the external auditor over the course of a
reporting period. In selecting an external auditor the Board
seeks competence, industry experience, integrity and
independence. In normal circumstances, appointment of
the external auditor will typically continue for a significant
number of years. Rotation of external audit engagement
partners will occur in accordance with the rotation
requirements of the Corporations Act 2001.
Make timely and balanced disclosure
The company has written policies and procedures designed
to ensure compliance with the ASX Listing Rule disclosure
requirements. The disclosure policy appears on the
company’s website.
Respect the rights of shareholders
The company maintains a comprehensive and informative
‘investor relations’ section on its website which provides
shareholders (and others) with up to date information about
the corporate activities of the company. The website also
provides shareholders with guidance on a range of issues
concerning the management of their shareholdings.
AEI maintains a newsletter, ‘Aim High’, for unitholders and
shareholders and, since listing, has introduced a CEO
information sheet for shareholders. It has revised its Annual
General Meeting arrangements to promote participation and
dissemination of information and has ensured access to the
external auditor at these meetings.
AEI also produces a Sustainability Report for shareholders
and other stakeholders on the triple bottom line
performance of AEI (available on the AEI website).
The company complies with the corporate governance
guidelines for notices of meeting.
Recognise and manage risk
The Board is responsible for the company’s system of
internal controls. The Board monitors the operational
and financial aspects of the company’s activities and,
through the audit committee, the Board considers the
recommendations and advice of external auditors and other
external advisers on the operational and financial risks that
face the company.
The Board monitors that appropriate actions are taken to
ensure the company has an appropriate internal control
environment in place to manage the key risks identified. It
has appointed a director as Risk Management Officer and
established a formal ‘Statement on Risk Management’,
together with supporting documents, ‘AEI Guide for Risk
Management’ and section risk registers, that document the
major risks facing the company and the way in which these
risks are to be managed. The risk registers are updated
regularly and the criteria and working standards set out in
the guide are periodically reviewed.
A description of the company’s risk management policy
and internal compliance and control systems is on the
company’s website.
The chief executive officer and chief financial officer certify
to the Board that the integrity of the financial statements
are founded on a sound system of risk management and
internal compliance and control.
The chief executive officer, risk management officer and
compliance officer certify to the Board that its internal
control and risk management systems are operating
efficiently and effectively throughout the Group.
Encourage enhanced performance
Board and director evaluation
The directors undertake an annual self-assessment of
their collective and individual performance and seek
specific feedback from the senior management team. An
assessment was undertaken in the relevant period.
A questionnaire concerning board and individual
performance is completed by each director in respect
of themselves and for each other director and the
results collected by the Board chairperson. The Board
as a whole then considers and discusses the results
of the questionnaire at a Board meeting. The Board
chairperson also talks to each director individually about
their performance and generally on the evaluation and
comments received from their peers. The results of the
questionnaire are examined from both a qualitative and
quantitative perspective.
Where discussed at a board meeting, results and any
action plans are documented in Board minutes.
Key executive evaluation
The performance of executives is evaluated in accordance
with the company’s annual performance review guidelines.
For the chief executive officer, the review is conducted by
the Board chairperson. For other executives, the review is
undertaken by the chief executive officer.
The process is as follows:
•
•
•
receive 360° comments from staff (and directors if
applicable);
review comments once received and incorporate into
the annual review as considered appropriate. Emphasis
is to be on themes or perceptions rather than specific
comments;
complete a draft of the annual performance review and
provide to the executive for discussion;
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•
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discuss the annual performance review with the
executive – cover key responsibilities, overall
performance, key behaviours, review achievements
against previous year’s objectives, discuss objectives
for the coming year, discuss aspirations and areas for
improvement;
review competencies and qualifications to ensure they
remain applicable to the position. If not, a training
program must be developed to bring the executive to
the appropriate level; and
investigate what specific training may be suitable and
available.
In respect of the chief executive officer, the chairperson
presents the results of the review to the Board, the Board
has an opportunity to provide feedback to the chief
executive officer, and to consider recommendations from
the chair on the chief executive officer’s remuneration
package.
Remunerate fairly and responsibly
Remuneration policy
AEI’s remuneration policy is designed to accord with the
principles of the Australian Ethical Charter, as set out in the
constitution of the company. It is designed to ensure AEI
does not
“exploit people through the payment of low wages or the
provision of poor working conditions”
and to facilitate:
“the development of workers participation in the
ownership and control of their work organisations and
places”
AEI’s fundamental remuneration policy is to treat all staff in
an equitable fashion and not to have special remuneration
arrangements for particular staff. All permanent staff
(including the CEO and executive directors) receives a
cash salary and participate in the staff bonus and employee
share ownership scheme. Remuneration is not subject to
set performance hurdles.
All permanent staff are eligible to participate in the staff
bonus which is determined by the constitution. Each year
the bonus is set with reference to the profit of the company.
Each full time staff member receives the same amount,
part-time staff receive a pro-rata amount. The constitution
provides that the bonus can be (and often has been)
satisfied by the issue of shares.
Under the employee share ownership plan a pool of
options, which would if exercised, amount to 5% of
the existing ordinary share capital is issued to staff. All
permanent staff are eligible to participate in the plan. The
price at which the options can be exercised is set 10% in
excess of the market price of the shares. The number of
options received by an individual staff member depends on
their salary level. Options are not exercisable for a period of
three years from their date of grant.
AEI has a mix of full time and part time staff and
endeavours to provide flexible employment
arrangements within business needs.
AEI monitors employee’s salaries against the wider market
and reviews salary levels annually. The company adopts
an in-principle guideline of paying individual staff a total
fixed remuneration based on 80% to 120% range of the
50th percentile identified in a biennial salary survey, with an
unweighted average of 95% – 105% and with appropriate
macro economic indexation of comparator benchmarks over
time.
The guideline would not be implemented in such a way that
salaries would reduce where there was a market crash in
relevant salaries.
Remuneration committee
The Board has a remuneration committee. The members
of the remuneration committee are George Pooley
(independent director), Naomi Edwards (independent
director appointed to the committee in June 2006) and
Caroline Le Couteur (executive director). The charter for
the remuneration committee is available on the company’s
website.
Details of remuneration
Details of remuneration paid to directors and executives
during the reporting period is set out in the directors’ report.
The reporting distinguishes between the structure of non-
executive director remuneration and that of executive
directors.
Equity-based remuneration
Equity-based remuneration for executive directors has
previously been approved by shareholders. The employee
share ownership plan was approved by shareholders at the
annual general meeting held in November 2005.
Recognise the legitimate interests of stakeholders
The proper purpose of AEI is to promote ethical/socially
responsible investment. By the very nature of AEI, the
Board is committed to the highest standards of conduct and
ethical practices in guiding the business activities of AEI
and its subsidiary. This includes transparency in the way
in which it does business and clarity of communication to
its members and other stakeholders. Its code of conduct,
as mentioned earlier in this report, expects this of each
employee and each director.
The company has developed a corporate governance
section for its website. The Board has directed that detailed
and comprehensive information on the company’s corporate
governance arrangements and copies of relevant policies
and charters are to be placed on that website. It welcomes
comments and suggestions from stakeholders on any
element of its corporate governance program.
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Directors’ report
The directors of Australian Ethical Investment Limited,
the controlling entity, present their report on the company
and its controlled entity for the financial year ended
30 June 2006. In compliance with the Corporations Act
2001, the directors’ report as follows:
Directors
The name of each person who has been a director during
the year ended 30 June 2006 and to the date of this report
are:
Name
Time in office
George Pooley
Ray De Lucia
5 years
4 years
Caroline Le Couteur
15 years
James Thier
Howard Pender
Naomi Edwards
Pauline Vamos
15 years
15 years
1 year
<1 year
Resigned
10 October 2005
Commenced
1 July 2006
Directors have been in office since the start of the financial
year to the date of this report unless otherwise stated.
Company Secretaries
The names of each person who was a company secretary
of the company as at the end of the financial year are:
Name
Philip George
Mark Bateman
Principal activities
The principal activity of the controlling entity during the
financial year was to manage four public ethical investment
trusts. There was no significant change in the nature of
these activities during the year.
Operating results
The consolidated entity (Australian Ethical Investment
Limited and its wholly owned subsidiary, Australian Ethical
Superannuation Pty Ltd) has recorded a consolidated
net profit after income tax expense for the year ending
30 June 2006 of $1 362 612. This result is a 74% increase
on the result of $784 4191 for the previous financial year.
Review of operations
The 2006 result continues a trend of excellent results over
the last three years.
1 Comparative profit after tax figure which shows the impact of adopting
Australian equivalents to International Financial Reporting Standards. The
amount reported in June 2005 under previous Australian Generally Accepted
Accounting Principles was $810 900.
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Once again, the company has experienced continued
growth in funds under management and as a consequence
improved revenue and profitability. As at 30 June 2006
funds under management totaled $417M (ex. distribution).
This compares with funds under management of $311M
(ex. distribution) as at 30 June 2005. The distribution
amount for the current period was $41M, compared to a
distribution the previous year of $48M.
The costs to income ratio2 has reduced from 83% in the
previous year to 78% this year and return on equity has
increased from 16.4% to 24.1%.
The superannuation business (Australian Ethical
Superannuation Pty Ltd) again contributed significantly to
the excellent result and superannuation continues to be a
growth engine of the business. During the year, Australian
Ethical Superannuation Pty Ltd was granted a Registrable
Superannuation Entity licence and the superannuation
fund became a Registered Superannuation Entity. The
licence and registration were necessary to allow the
superannuation business to continue to operate past
1 July 2006. Changes to superannuation laws announced
in the 2006 Federal Government budget should further
strengthen the superannuation sector as a whole.
The company continues to apply the principles of the
Australian Ethical Charter in its investment and business
activities.
As required under the company’s constitution, an amount
of $170 132 has been provisioned as tithe for this year and
will be donated to a number of non-profit organisations for
useful charitable, benevolent or conservation purposes.
During the 2005/2006 financial year the company did
not make any significant changes to its core funds
management operations. There were no significant changes
in management or organisational structure.
During the year the company purchased Block E of Trevor
Pearcey House, Traeger Court, Fern Hill Park, Bruce,
Australian Capital Territory. The net lettable area of the
premises is 1000 square metres. The purchase price was
$2.365M (inclusive of GST). The lease at the company’s
current premises expires at the end of June 2007.
The company intends to undertake an environmentally
exemplary refurbishment of the premises at Trevor Pearcey
house prior to re-locating. Relocation is expected to occur
in the first half of 2007.
Other than the purchase of the building, there were no
unusual events or transactions which affected the financial
result for the period ended 30 June 2006.
2 Tithes expense is not included in costs when calculating this ratio.
Financial position
Directors’ indemnification
australianethical
The constitution of the controlling entity provides a general
indemnity for officers of the company against liabilities
incurred in that capacity, including costs and expenses in
successfully defending legal proceedings.
During the financial year, the company paid a premium in
respect of a contract insuring the directors of the company
(as named above), the company secretary, and all officers
of the company and of any related body corporate against
a liability incurred as such a director, secretary or officer
to the extent permitted by the Corporations Act 2001. The
contract of insurance prohibits disclosure of the nature of
the liability and the amount of the premium.
During the year the company entered into deeds of
indemnity, insurance and access with directors which
provides a general indemnity against liabilities incurred in
that capacity to the extent permitted by the Corporations Act
2001.
The deed obligates the company to use its reasonable
endeavours to obtain and maintain insurance for the benefit
of a director or officer of the company and any subsidiary, to
the extent that such coverage is available in the market on
terms which the company reasonably considers financially
prudent and on terms consistent with the practice of
comparable companies operating in similar markets.
The deed also provides that the company will pay on
behalf of the director or lend to the director the amount
necessary to pay the reasonable legal costs incurred by
the director in defending an action for a liability incurred as
a director of the company or a subsidiary on such terms
as the company reasonably determines. The director must
repay to the company such legal costs if they become legal
costs for which the company was not permitted by law
to indemnify the director. The company need not pay or
provide a loan to the director to the extent that the director
is actually reimbursed for legal costs as they fall due under
an insurance policy or otherwise.
The company has not otherwise, during or since the
financial year, indemnified or agreed to indemnify an officer
or auditor of the company or of any related body corporate
against a liability incurred as such an officer or auditor.
The company’s capital structure and policies remain
relatively simple. The company currently has no debt and
our capital is invested conservatively. During the year, a
significant portion of the company’s capital was invested
into real property, with the acquisition of Trevor Pearcey
House.
Maintenance of certain levels of capital are a condition of
the company’s Australian Financial Services License. As
the trusts and funds under management grow the company
is required to hold increasing levels of capital, up to a
maximum of $5.0M.
The company continues to review and examine its capital
needs.
Refurbishment of Trevor Pearcey House is expected to cost
between $1M and $2M and will focus on environmentally
sustainable improvements which engender staff comfort
and productivity. The company is also reviewing its product
offerings and is considering developing and offering some
new products over the coming years. The company plans to
retain some earnings to meet these requirements.
The company has a comprehensive risk management
process designed to deal with significant operational risks
as identified by management and the directors.
Business strategies, future prospects and
likely developments
At this time the company has no plans to make any
significant changes to its core operations in the coming
financial year.
The company is reviewing its product offerings and
depending on that analysis may, during the course of
the financial year, make decisions to commence the
development of new products to compliment its existing
offerings.
The company will continued to focus on building and
servicing its clients and streamlining its processes, ensuring
scalability of operations and seeking cost efficiencies.
Other information relating to business strategies and likely
developments has not been disclosed because it may
cause unreasonable prejudice to those activities.
Events subsequent to balance date
No matters or circumstances have arisen since the end
of the financial year which significantly affected or may
significantly affect the operations of Australian Ethical
Investment Ltd and its controlled entity, the results of
those operations or the state of affairs of Australian Ethical
Investment Ltd in financial years subsequent to the financial
year ended 30 June 2006, other than as outlined in this
report.
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Directors’ particulars
Qualifications, experience and special
responsibilities
George Pooley B.Sc.(Econ), M.A.
Non-Executive Chairperson
James Thier B.Sc.(Hons)
Executive Director
James has had academic experience as a researcher and
has taught in the faculties of economics, environmental
studies and geography at the University of NSW. He
has held senior positions in local government and within
peak bodies of the credit union movement. James is the
company’s business development manager. James is also
a director of Australian Ethical Superannuation Pty Ltd and
is on the Board’s investment and compliance committees.
James was recently awarded a Churchill Fellowship to
examine the mechanism of shareholder advocacy.
Howard Pender B.A.(Hons)
Executive Director
Howard received a university medal in economics from
the Australian National University. He worked at the
Commonwealth Treasury and then as Senior Economist
at Bankers Trust in Sydney. From 1992 to 1997, he was
a Visiting Fellow in the Centre for International and Public
Law at the Australian National University. Howard has been
a director of two other ASX listed companies. Howard is
a director of Australian Ethical Superannuation Pty Ltd
and is a member of the Board’s finance and investment
committees.
George has served as executive assistant to the Secretary
to the Treasury, as a Treasury representative at the
Australian Embassy in Washington DC, as a director
of the Export Finance and Insurance Corporation, as
executive director of the Foreign Investment Review Board,
and as a First Assistant Secretary responsible for policy
advice in respect of banking, coinage, non-banks etc.
From 1992 he was the Commissioner of the Insurance
and Superannuation Commission (since merged into
the Australian Prudential Regulation Authority). George
is now a part-time consultant, mainly on insurance and
superannuation matters. George is a director of Australian
Ethical Superannuation Pty Ltd, the controlled entity of
AEI, is chair of the Board’s compliance committee and is
a member of the Board’s audit, finance and remuneration
committees.
Caroline Le Couteur B.Ec., B.Bus., Grad.Dip.(Env. & Dev.
Man.), FAICD
Executive Director
Caroline has been committed to environmental conservation
and social justice throughout her life. She is a member
of the national council of the Australian Conservation
Foundation and has been a candidate for the Greens in
both ACT and Federal elections. Caroline has held senior
government positions in information management. She is
the company’s information technology manager and, until
September 2002, was also the funds administrator. Caroline
is the company’s risk management officer. Caroline is also
on the Board’s remuneration committee.
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Naomi Edwards BSc (Hons) FIA FIAA FNZSA
Non-Executive Director
Pauline Vamos BA LLB AACI
Non-Executive Director
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Naomi is a Fellow of the Institute of Actuaries and has a
high level of financial experience with practical conservation
and environmental links. Naomi was Partner in charge of
the financial services industry group within Deloitte Touche
Tohmatsu in Sydney and leader of the financial services
practice for Trowbridge Consulting for many years. She
has recently undertaken pro bono work providing actuarial
assistance for environmental and social organisations.
Naomi is a director of Australian Ethical Superannuation Pty
Ltd, chairs the Board’s audit committee and is a member of
the remuneration committee.
Pauline is a qualified lawyer and an Associate of the
Australasian Compliance Institute. She has over twenty
years experience in the financial services industry, in
particular financial planning, superannuation, funds
management and both life and general insurance. For the
six years prior to March 2004, Pauline was with ASIC and
played key roles in relation to the implementation of the
Managed Investments legislation and Financial Services
Reform. Pauline currently provides strategic compliance
solutions for various clients. Pauline is a member of the
Board’s Compliance Committee.
Directors’ meetings
The number of directors’ meetings (including meetings
of committees of directors of which not all directors are
members) and number of meetings attended by each of the
directors of the controlling entity during the financial year
are:
Board meetings
Audit Committee
Finance Committee
Investment
Committee
Remuneration
Committee
Compliance
Committee
No.
eligible
to attend
No.
attended
No.
eligible
to attend
No.
attended
No.
eligible
to attend
No.
attended
No.
eligible
to attend
No.
attended
No.
eligible
to attend
No.
attended
No.
eligible
to attend
No.
attended
James Thier
Howard
Pender
Caroline Le
Couteur
Naomi
Edwards
George
Pooley
Ray De Lucia
Pauline
Vamos
9
9
9
9
9
1
-
8
9
9
9
9
1
-
-
-
-
2
3
1
-
-
-
-
2
3
1
-
-
7
-
-
7
-
-
-
6
-
-
7
-
-
4
4
-
-
-
-
-
4
3
-
-
-
-
-
-
-
2
-
2
-
-
-
-
2
-
2
-
-
3
-
-
-
4
-
-
3
-
-
-
4
-
-
Directorships held in other listed entities in the
last three years
Name
Entity
Howard Pender
Advanced Energy Systems Limited
SoftLaw Corporation Limited
Ray De Lucia
MacarthurCook Limited
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Remuneration report
the company, there are only four executives that satisfy the
definition of company executive.
The information which follows through to the end of the
section titled Employment contracts of directors and senior
executives is subject to audit by the external auditor.
Remuneration policy
Directors
Names and positions of key management
personnel (directors and named executives) at
any time during the financial year
Parent entity directors
Name
Position
George Pooley
Ray De Lucia
Caroline Le
Couteur
James Thier
Howard Pender
Chairperson, non-
executive
Director,
non-executive
Resigned
10 October 2005
Director,
executive
Director,
executive
Director,
executive
Naomi Edwards
Director,
non-executive
Pauline Vamos was appointed as a non-executive director
on 1 July 2006.
Named executives
Name
Position
Anne O’Donnell
Chief executive officer
David Ferris
Investment manager
Mark Bateman
Chief financial officer
Philip George
Company secretary / legal counsel
Ruth Medd
Director of wholly-owned entity
AASB 124 “Related Party Disclosures” requires disclosure
of compensation of key management personnel. Key
management personnel is defined as persons having
authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly,
including any director (whether executive or otherwise) of
that entity.
The Corporations Act 2001 requires disclosure of the
remuneration of:
1.
each director of the company; and
2.
3.
each of the 5 named company executives who receive
the highest remuneration for that year;
if consolidated financial statements are required – each
of the 5 named relevant group executives who receive
the highest remuneration for that year.
With the exception of Ruth Medd, the abovenamed
directors and executives are key management personnel
of the company. Ruth Medd is a group executive. Within
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The aggregate amount of remuneration payable to directors
for the performance of their duties as directors is set by the
company in general meeting from time to time. In proposing
any motions on director remuneration to a general meeting,
the board has regard to market rates for directorships in
similar companies operating in similar industries. It also
has regard to recommendations from its Remuneration
Committee. Within the approved aggregate amount, fees
paid to individual directors for services as a director are
determined by the Board. Currently, the chair receives
a higher amount, with other directors receiving an equal
amount.
Under the constitution, directors are also entitled to be paid
reasonable expenses, remuneration for extra services,
retirement benefits and superannuation contributions.
There are currently no arrangements to pay any director a
retirement benefit.
Secretaries, senior managers, executive directors and
group executives
The company’s fundamental remuneration policy is to treat
all staff (including secretaries, senior mangers, executive
directors and group executives) in an equitable fashion and
not to have special remuneration arrangements (including
individual performance-based arrangements) for particular
staff. All permanent staff (including the CEO, executive
directors and secretaries) receive a cash salary and
participate in a staff bonus and employee share ownership
scheme. These arrangements do not apply to non-executive
directors.
Remuneration policy also accords with the Australian
Ethical Charter, as set out in the constitution of the
company. It is designed to ensure the company does not
“exploit people through the payment of low wages or the
provision of poor working conditions”
and to facilitate:
“the development of workers participation in the ownership
and control of their work organisations and places.”
The company reviews individual remuneration annually
and externally benchmarks remuneration levels every two
years. Individual staff remuneration is then considered
with reference to the benchmarks and in accordance with
guidelines approved by the Board. The board aims to
remunerate responsibly and fairly, with reference to the
market.
All permanent staff are eligible to participate in an annual
staff bonus. Under the company’s constitution, before
the directors recommend any dividend to be paid out of
australianethical
profits of any one year, they must pay a bonus3 to current
employees which is set by reference to the profit of the
company for that year. Each full time staff member receives
the same bonus amount and part-time staff (or those not
employed full-time through the full year) receive a pro-
rata amount. The company’s constitution provides that the
bonus can be (and often has been) satisfied by the issue of
shares, under the employee share ownership scheme.
Also under the employee share ownership scheme, a
pool of options which would, if exercised, amount to 5%
of the company’s existing ordinary share capital is issued
to staff. All permanent, non-probationary staff are eligible
to participate in the plan. The options4 are issued for nil
consideration and the price at which the options can be
exercised is set at 10% in excess of the market price of
the shares as at the date of grant. The number of options
received by an individual staff member depends on their
remuneration. Options are not exercisable for a period
of three years from their date of grant. At the end of the
three year period, options must be exercised within a three
month exercise window or they lapse. During the three
month exercise window, options can also be sold once, with
the transferee then needing to exercise during the three
month window, or the options lapse. In most circumstances,
options will also lapse where an employee’s employment
ceases before the options are exercisable. The options
confer no voting or dividend rights.
Performance-based remuneration and company
performance
The payment of the staff bonus is set by reference to the
profit of the company for a relevant year. Higher company
profits in a year correspondingly increase the aggregate
amount that directors could determine be paid to current
employees as a bonus.
Details of options issued under the employee share
ownership plan are set out under remuneration policy
above. Options are performance based in two ways. Firstly,
in most cases, staff must remain an employee for three
years from the date of grant of the options to be entitled
to exercise them. Option value can only be realised if an
employee contributes a significant further period of service
to the company. Secondly, option value can only be realised
if the market value of the underlying shares increase by
10% between the period of grant and the period when the
options can be exercised.
The remuneration policy discussed above has broadly been
in place for the current and the previous five financial years.
Dividends through the same period have increased from a
dividend out of the profits of the 2000/2001 year of 10 cents
per share to a dividend out of the 2004/2005 year profits of
3 See Note 1(k) in the attached financial report
4 See Note 26 in the attached financial report
72 cents per share. The dividend declared by the directors
for the 2005/2006 year is 85 cents per share.5
The company’s shares have traded on the ASX since
17 December 2002. Movements in closing share price at
the beginning and end of financial years since listing are as
follows:
Date
17 December 2002
30 June 2003
30 June 2004
30 June 2005
30 June 2006
Closing Daily Price6
$12.50
$11.30
$13.00
$17.20
$28.50
The company’s earnings over the last five years are as
follows:
Year
2001/2002
2002/2003
2003/2004
Adoption of AIFRS
2004/2005
2005/2006
Earnings
$353,276
$190,921
$459,761
$784,419
$1,362,612
Cash bonus compensation benefits
Details of cash bonuses paid to key management personal
are included in the remuneration tables set out below. The
bonuses were paid on 21 September 2005. The nature of
the cash bonuses and the criteria used to determine the
payment of the bonuses are detailed in the remuneration
policy and in the discussion on performance-based
remuneration and company performance.
5 An interim dividend of 35 cents per share was paid in March 2006, so the
final payment to shareholders will be 50 cents per share.
6 Where shares were not traded on the day specified, the price quoted is the
closing daily price when trades did occur on the day earlier than and closest
to the date specified.
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Remuneration details for the year ended 30 June 2006
Parent entity directors’ remuneration
Short-term employee
benefits
Post
employment
benefits
Other
long-term
benefits
Termination
benefits
Share-based
payment
Bonus
cash
Other
Super
Bonus
shares
Options
Total
$
$
$
$
$
$
$
$
Cash
salary and
fees
$
57,188
3,259
2006
George Pooley
Ray De Lucia
Caroline Le Couteur
131,882
James Thier
Howard Pender
Naomi Edwards
Total
2005
George Pooley
Ray De Lucia
Trevor Lee
-
-
-
-
-
-
-
124,586
2,153
113,237
28,420
-
-
458,572
2,153
45,964
12,974
5,000
Caroline Le Couteur
128,468
James Thier
Howard Pender
Naomi Edwards
Total
112,845
1,800
116,609
21,689
-
-
438,549
1,800
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,484
10,300
10,291
2,558
34,633
-
-
450
10,639
9,802
6,132
1,502
-
-
3,196
1,638
1,791
-
6,625
-
-
-
2,206
1,835
951
-
28,525
4,992
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,300
1,000
1,613
-
-
-
57,188
3,259
7,536
158,398
6,048
145,725
3,128
130,060
-
30,978
6,913
16,712
525,608
-
-
-
3,500
1,000
1,225
-
-
-
-
45,964
12,974
5,450
3,141
147,954
2,573
129,855
1,076
120,993
-
23,191
5,725
6,790
486,381
Named executives remuneration (including other key management personnel)
Short-term employee
benefits
Post
employment
benefits
Other
long-term
benefits
Termination
benefits
Share-based
payment
Cash
salary
and fees
$
Other
Super
Bonus
cash
Bonus
shares
Options
Total
$
$
$
$
$
$
$
$
2006
Anne O’Donnell
David Ferris
172,147
134,878
-
-
Mark Bateman
113,643
4,300
Philip George
140,622
2,718
Ruth Medd
Total
2005
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Christopher Lee
Ruth Medd
Total
24,710
-
586,000
7,018
147,608
129,520
131,505
78,760
29,569
17,500
534,462
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,225
11,764
10,008
12,330
1,459
50,786
12,695
11,025
10,766
6,545
2,449
1,035
4,817
3,044
3,287
2,926
-
14,074
3,229
2,849
3,191
1,641
-
-
44,515
10,910
-
-
-
-
-
-
-
-
-
-
-
-
-
4,300
10,100
206,589
4,135
-
-
-
8,773
7,076
5,208
162,594
138,314
163,804
-
26,169
8,435
31,157
697,470
3,500
3,500
3,500
-
3,291
-
3,581
3,189
2,498
-
-
-
170,613
150,083
151,460
86,946
35,309
18,535
13,791
9,268
612,946
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Options granted as remuneration(a) – disclosures required under AASB 124
Vested
no.
Granted
no.(a)
Grant date Value per option
at grant date(b)
$
Exercise
price
$
First exercise
date
Last
exercise/
expiry date
Parent entity directors
George Pooley
Ray De Lucia
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
-
-
-
2,218
1,688
981
-
-
-
2,243
1,800
931
4,887
4,974
-
-
21.09.05
21.09.05
21.09.05
-
Named executives (including other key management personnel)
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Ruth Medd
2,620
2,313
1,752
-
-
3,006
2,611
2,106
1,550
21.09.05
21.09.05
21.09.05
21.09.05
-
-
6,685
9,273
-
-
3.36
3.36
3.36
-
3.36
3.36
3.36
3.36
-
-
-
24.82
24.82
24.82
-
24.82
24.82
24.82
24.82
-
-
-
21.09.08
21.09.08
21.09.08
-
21.09.08
21.09.08
21.09.08
21.09.08
-
-
-
20.12.08
20.12.08
20.12.08
-
20.12.08
20.12.08
20.12.08
20.12.08
-
(a) Each option above is granted by Australian Ethical Investment Limited (AEI) and is for one ordinary share in AEI.
(b) Options were granted as part of remuneration and the recipient did not otherwise pay for the grant of the options.
Details of shareholdings – changes to shareholdings, including as a result of the exercise of options
granted as compensation
Balance
01.07.05
Share in lieu of
cash bonus
Options exercised/
shares issued(1)
Net change
other(2)
Balance
30.06.06(3)&(4)
Parent entity directors
George Pooley
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
41,869
60,110
51,107
-
-
190
44
71
-
-
Named executives (including other key management personnel)
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Ruth Medd
Total
3,125
2,031
2,268
375
-
190
183
-
-
-
2,218
1,688
981
2,620
2,313
1,752
-
-
-
-
-
-
(1,688)
(981)
-
(2,620)
(1,765)
(3,038)
-
-
44,277
60,154
51,178
-
-
3,315
2,762
982
375
-
160,885
678
11,572
(10,092)
163,043
(1) The amount paid for shares issued on exercise of options is $18.26 in all cases.
(2) Net change other refers to shares purchased or sold during the financial year.
(3) Shares issued are fully paid.
(4) Balance represents shareholdings by directors and named executives including their related parties as required by AASB 124 Related Party Disclosures.
Relevant interests required by the Corporations Act 2001 would result in the balance changing for James Thier to 45,480, Howard Pender to 49,147 and
Philip George to 250.
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Alterations to the terms of options
The terms of all options issued under the employee share
ownership plan (including those held by key management
personnel) were altered by ordinary resolution at the Annual
General Meeting held 24 November 2005. The resolution
passed at the meeting changed the condition that:
Options issued under these arrangements [being the
employee share ownership plan] are not transferable.
to:
Options issued under these arrangements are not
transferable, except that during the exercise period
they may be transferred from the employee to another
party. That party is entitled to exercise any option
so transferred (in accordance with these terms and
conditions) but cannot further transfer the options to any
other party or otherwise deal with the options other than
by way of exercising them.
No other terms or conditions were changed.
It is the view of the directors that the total of the fair value
of the options affected by the alteration immediately before
the alteration and the total of the fair value of the options
immediately after the alteration was the same. The change
was approved by shareholders so as to enable employees
to have an alternative mechanism to realise any option
value at the time of exercise, rather than to change the
underlying value of the options.
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Explanation of relative proportions of elements
of remuneration that are related to performance
Non-executive directors receive their total remuneration
as cash or superannuation contributions. No element is
dependent on performance.
The remuneration of executive directors, secretaries and
senior managers is not subject to individual performance
conditions. People holding these positions are entitled
to participate in the staff bonus and employee share
ownership scheme described above. These make up a
very small proportion of the overall remuneration of people
holding these positions.
Employment contracts of directors and senior
executives
For each individual whose remuneration has been disclosed
in this report and is employed under an employment
contract, the details of the employment contract are as
follows:
Duration
of
contract
Period of
termination
notice
required
Ongoing As per
minimum
requirements
under the
Workplace
Relations Act
1996
Termination
payment
provided for
under the
contract
None except
for accrued
leave and
any payment
in lieu of
notice
Name
Caroline Le
Couteur
James Thier
Howard Pender
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
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investment + superannuation
Units in the trusts are offered and issued by Australian Ethical Investment Ltd (‘AEI’) ABN 47 003 188 930,
AFSL 229949. Interests in the superannuation fund are offered by AEI and issued by the trustee of the
fund, Australian Ethical Superannuation Pty Ltd ABN 43 079 259 733 RSEL L0001441. Product disclosure
statements are available from our website or by calling 1800 021 227 and should be considered before
deciding whether to acquire, or continue to hold, units in the trusts or interests in the fund. Australian Ethical®
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20
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australianethical
Options granted as remuneration(1) – disclosures required under the Corporations Act 2001
Granted
no.
Grant
date
Value per
option at
grant date
$
Granted
as part of
remuneration(1)
$
Option
remuneration
as a %
of total
remuneration
Value of
options
exercised
in fin year
$
Value of
options
lapsed in
fin year(2)
$
Total
value
$
Parent entity directors
George Pooley
Ray De Lucia
-
-
-
-
Caroline Le Couteur
2,243
21.09.05
James Thier
1,800
21.09.05
Howard Pender
Naomi Edwards
931
21.09.05
-
-
4,974
-
-
3.36
3.36
3.36
-
-
-
-
7,536
6,048
3,128
16,712
Named executives (including other key management personnel)
Anne O’Donnell
3,006
21.09.05
David Ferris
2,611
21.09.05
Mark Bateman
2,106
21.09.05
Philip George
1,550
21.09.05
Ruth Medd
-
-
3.36
3.36
3.36
3.36
-
9,273
10,100
8,773
7,076
5,208
-
31,157
-
-
5%
4%
2%
-
5%
5%
5%
3%
-
-
-
-
-
-
14,949
9,689
5,631
30,269
15,039
15,590
10,056
40,685
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,485
15,737
8,759
-
46,981
25,139
24,363
17,132
5,208
-
71,842
(1) Values are based on a valuation performed on the options at grant date using the Black-Scholes model. None of the value of the options granted was
paid to the key management personnel in the financial year. Key management personnel may realise value from this option grant in the 2008/09 year
when the options are exercisable.
(2) None of the grant of options were forfeited by directors or other key management personnel during the year.
Estimates of the maximum and minimum possible total value of option grants
2006/07
2007/08
2008/09
Max
$
Min
$
Max
$
Min
$
Max
$
Min
$
Parent entity directors
George Pooley
Ray De Lucia
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
-
-
-
4,207
3,298
1,363
-
-
-
-
-
-
Named executives (including other key management personnel)
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Ruth Medd
4,455
3,972
3,120
-
-
-
-
-
-
-
3,141
2,573
1,076
3,581
3,189
2,498
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,536
6,048
3,128
10,100
8,773
7,076
5,208
-
-
-
-
-
-
-
-
-
-
-
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Holdings in registered schemes made available by
the company
Caroline Le Couteur holds 752.8466 units in the Australian
Ethical Balanced Trust.
Naomi Edwards holds 16,101.8794 units in the Australian
Ethical Equities Trust and 13,521.8004 units in the
Australian Ethical Large Companies Share Trust.
Issue of shares and options to executive directors
– ASX Listing Rule 10.14
The number of shares and options issued to executive
directors under the employee share ownership plan is
detailed in this Report. Shareholder approval for the issue
of shares and options to executive directors was obtained
under ASX listing rule 10.14 at the Annual General Meeting
held in November 2003.
Company secretary particulars
Philip George (BSc LLB)
Philip has experience in commercial law, corporate
governance and project management. He has been a
company secretary and legal counsel for listed companies
for over five years. He was a senior associate at the
national law firm Minter Ellison and conducted a commercial
legal practice in partnership for two years.
Mark Bateman (BBus, CPA)
Mark is a Certified Practising Accountant and is currently
on the CPA Australia SME and Corporate Committee
(ACT Division). Mark is also a member of the interim
Audit Committee of the Future Fund. Mark is Chief
Financial Officer of Australian Ethical Investment Ltd and is
responsible for the fiscal management of the consolidated
entity. Mark has worked in commerce as a financial
professional for over 12 years.
Options as at the date of this report
Options over unissued shares as at the date of this report
are as follows:
Options
Reference
Number of
options on issue
Exercise
Period
AEFAK
33,778
AEFAI
36,504
AEFAQ
43,664
Totals
113,946
15/10/06 to
14/1/07
23/9/07 to
22/12/07
21/9/08 to
20/12/08
Exercise
Price
$14.11
$16.28
$24.82
All options are over unissued shares in the company.
Unexercised options expire at the end of the exercise
period. No option holder has any right under the options
to participate in any other share issue of the company or of
any other entity.
Shares issued upon the exercise of options
The following ordinary shares of the company were issued
during the year ended 30 June 2006 on the exercise of
options granted under the company’s employee share
ownership plan. No further shares have been issued since
that date to the date of this report. No amounts are unpaid
on any of the shares.
Shares issued upon exercise of
options
Amount paid per
share
26,250
$18.26
Auditor’s declaration
A copy of the auditor’s independence declaration as
required under section 307C of the Corporations Act 2001
forms part of this report and follows at the end of the report.
Non-audit services
The directors, in accordance with advice from the audit
committee, are satisfied that the provision of the non-audit
services by the auditor during the year is compatible with
the general standard of independence for auditors imposed
by the Corporations Act 2001. The directors are satisfied
that the services disclosed in the financial report did not
compromise the external auditor’s independence because
the provision of non-audit services is minor and in most
cases is ancillary or related to audit activities. The directors
are not aware of any circumstances that would prevent
the external auditor from exercising objective and impartial
judgement in relation to the conduct of the audit.
Details of non-audit services provided by the auditor are set
out in Note 3 of the attached financial report.
Other specific information
Other specific information has been disclosed in the
attached financial report as referenced in the table below:
Disclosure
Dividends
Options – issued during the
financial year and since the end
of the financial year7
Financial Statement
Reference
Note 6
Note 26
Signed in accordance with a resolution of the Board of
Directors.
George Pooley
Director
Dated: 8 September 2006
7 The financial statements show options issued during the financial year. No
options have been issued since the end of the financial year to the date of
this report.
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AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2006 there have
been:
no contraventions of the auditor independence requirements as set out in the Corporations
i.
Act 2001 in relation to the audit; and
ii.
no contraventions of any applicable code of professional conduct in relation to the audit.
THOMAS DAVIS & CO.
P.L. WHITEMAN
PARTNER
Date 8 September 2006
Liability limited by a scheme approved under Professional Standards Legislation
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Financial statements
for year ended 30 June 2006
Balance Sheet as at 30 June 2006
Notes
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
8
9
10
11
12
10
13
14
16
15
16
17
17
17
1,479,234
1,038,994
2,518,405
139,708
1,824,746
813,495
3,037,021
157,845
373,231
1,016,042
1,042,972
2,518,405
94,243
779,529
3,037,021
111,404
5,176,341
5,833,107
4,028,851
4,943,996
2,613,153
174,484
315,246
3,102,883
282,903
200,000
217,603
700,506
2,613,153
490,484
309,396
282,903
516,000
217,603
3,413,033
1,016,506
8,279,224
6,533,613
7,441,884
5,960,502
1,352,010
356,008
219,970
975,873
309,615
170,378
1,433,154
1,033,658
356,008
219,970
309,615
170,378
1,927,988
1,455,866
2,009,132
1,513,651
30,896
46,557
77,453
-
30,861
30,861
30,896
46,557
77,453
-
30,861
30,861
2,005,441
1,486,727
2,086,585
1,544,512
6,273,783
5,046,886
5,355,299
4,415,990
4,628,423
4,113,706
4,628,423
4,113,706
93,948
1,551,412
6,273,783
38,630
894,550
5,046,886
93,948
632,928
38,630
263,654
5,355,299
4,415,990
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets
Other current assets
Total current assets
Non-current assets
Property, plant & equipment
Financial assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Short-term provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Other long-term provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
The accompanying notes form part of these financial statements.
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Income Statement for the year ended 30 June 2006
Notes
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
Revenue
4
9,661,723
7,422,277
7,768,390
6,087,500
Commissions paid to advisers
External services
Employee benefits expense
Depreciation
Occupancy costs
Communication costs
Other expenses
(271,327)
(236,900)
(2,018,108)
(1,634,208)
(101,281)
(913,490)
(69,973)
(766,608)
(3,986,460)
(3,306,173)
(3,972,997)
(3,287,705)
(143,407)
(280,710)
(456,324)
(347,044)
(93,071)
(233,722)
(413,131)
(268,561)
(143,407)
(275,792)
(426,969)
(296,154)
(93,071)
(229,801)
(370,224)
(225,118)
Profit before tithe and income tax expense
2,158,343
1,236,511
1,638,300
1,045,000
Tithes expense
1 (k)
(170,132)
(98,227)
(170,132)
(98,227)
Profit before income tax
Income tax expense
3
5
1,988,211
1,138,284
1,468,168
946,773
(625,599)
(353,865)
(393,144)
(244,587)
Profit for the year
17
1,362,612
784,419
1,075,024
702,186
Profit attributable to members of the parent
entity
1,362,612
784,419
1,075,024
702,186
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
7
7
150.3
145.1
89.6
88.7
The accompanying notes form part of these financial statements.
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investment + superannuation
Units in the trusts are offered and issued by Australian Ethical Investment Ltd (‘AEI’) ABN 47 003 188 930, AFSL
229949. Interests in the superannuation fund are offered by AEI and issued by the trustee of the fund, Australian Ethical
Superannuation Pty Ltd ABN 43 079 259 733 RSEL L0001441. Product disclosure statements are available from our
website or by calling 1800 021 227 and should be considered before deciding whether to acquire, or continue to hold, units
in the trusts or interests in the fund. Australian Ethical® is a registered trademark of AEI.
austethical.com.au
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Statement of Changes in Equity for the year ended 30 June 2006
Notes
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
Total equity at beginning of financial period
5,046,886
4,541,716
4,415,990
3,993,053
Available-for-sale investments
Valuation gains/(losses) taken to equity
Employee share options
Income tax on items taken directly to or
transferred directly from equity
(6,632)
59,961
1,989
-
26,481
-
(6,632)
59,961
1,989
-
26,481
-
Net income recognised directly in equity
55,318
26,481
55,318
26,481
Profit for the financial year
1,362,612
784,419
1,075,024
702,186
Total recognised income and expense for the
period
Transactions with equity holders in their
capacity as equity holders:
Contribution of equity, net of transaction
costs
Dividends provided for or paid
1,417,930
810,900
1,130,342
728,667
514,717
325,859
514,717
325,859
(705,750)
(631,589)
(191,033)
(305,730)
(705,750)
(191,033)
(631,589)
(305,730)
Total equity at the end of the financial period
17
6,273,783
5,046,886
5,355,299
4,415,990
Total recognised income and expense for the
financial year is attributable to:
Equity holders of the parent
Effect of changes in accounting policy:
Adjustment to reserves on adoption of AASB 2
Adjustment to retained earnings on adoption of
AASB 2
1,417,930
1,417,930
810,900
810,900
1,130,342
1,130,342
728,667
728,667
-
-
-
12,149
(12,149)
-
-
-
-
12,149
(12,149)
-
The accompanying notes form part of these financial statements.
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Cash flow statement for the year ended 30 June 2006
Notes
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
Cash flows from operating activities
Receipts from operations
10,066,362
7,748,477
8,009,981
6,265,276
Payment to suppliers & employees
(7,706,749)
(6,521,646)
(6,350,434)
(5,301,037)
Dividends received
Interest/distributions received
Income tax paid
Bonus
Tithe
Net cash provided by (used in)
operating activities
Cash flows from investing activities
Proceeds from sale of property, plant
& equipment
-
279,928
(643,963)
(108,998)
(98,227)
-
260,137
(252,855)
(82,945)
(58,262)
254,660
233,391
(449,319)
(108,998)
(98,227)
172,427
226,336
(178,262)
(82,945)
(58,262)
23 (b)
1,788,353
1,092,906
1,491,054
1,043,533
-
2,243
-
2,243
Proceeds from sale of investments
2,971,130
3,104,170
2,971,130
3,104,170
Purchase of property, plant &
equipment
Purchase of investments
Purchase of subsidiary shares
Loans to other entities
Repayment of loans
Net cash provided by (used in)
investing activities
Cash flows from financing activities
Proceeds from share issue
Share buy-back payment
Dividends paid
Net cash provided by (used in)
financing activities
(2,446,806)
(194,182)
(2,446,806)
(194,182)
(2,443,421)
(3,265,762)
(2,443,421)
(3,265,762)
-
-
11,657
-
(50,000)
-
-
-
11,657
(116,000)
(50,000)
-
(1,907,440)
(403,531)
(1,907,440)
(519,531)
479,325
-
(705,750)
(226,425)
326,387
(29,688)
(631,589)
(334,890)
479,325
-
(705,750)
(226,425)
326,387
(29,688)
(631,589)
(334,890)
Net increase (decrease) in cash held
(345,512)
354,485
(642,811)
189,112
Cash at beginning of financial year
1,824,746
1,470,261
1,016,042
826,930
Cash at end of financial year
23 (a)
1,479,234
1,824,746
373,231
1,016,042
The accompanying notes form part of these financial statements.
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Notes to the financial statements for the year ended 30 June 2006
Note 1 – Statement of significant
accounting policies
The financial report is a general purpose financial report
that has been prepared in accordance with Australian
Accounting Standards, Urgent Issues Group Interpretations,
other authoritative pronouncements of the Australian
Accounting Standards Board and the Corporations Act
2001.
The financial report covers the economic entity of Australian
Ethical Investment Limited and its wholly owned entity
Australian Ethical Superannuation Pty Ltd and Australian
Ethical Investment Limited as an individual parent entity.
Australian Ethical Investment Limited is a listed public
company and both the parent and wholly owned entity are
incorporated and domiciled in Australia.
The nature of the operations and principal activities of the
economic entity are described at note 20.
The financial report of Australian Ethical Investment
Limited and its wholly owned entity, and Australian Ethical
Investment Limited as an individual parent entity comply
with all Australian equivalents to International Financial
Reporting Standards (AIFRS) in their entirety.
The following is a summary of the material accounting
policies adopted by the economic entity in the preparation
of the financial report. The accounting policies have been
consistently applied, unless otherwise stated.
Basis of preparation
First time Adoption of Australian equivalents to International
Financial Reporting Standards
Australian Ethical Investment Limited and its wholly
owned entity, and Australian Ethical Investment Limited
as an individual parent entity have prepared financial
statements in accordance with the Australian equivalents to
International Financial Reporting Standards (AIFRS) from 1
July 2005.
In accordance with the requirements of AASB 1: First-
time Adoption of Australian equivalents to International
Financial Reporting Standards, adjustments to the parent
entity and wholly owned entity accounts resulting from the
introduction of AIFRS have been applied retrospectively
to 2005 comparative figures excluding cases where
optional exemptions available under AASB 1 have been
applied. These consolidated accounts are the first financial
statements of Australian Ethical Investment Limited to be
prepared in accordance with AIFRS.
The accounting policies set out below have been
consistently applied to all years presented. The parent
and wholly owned entity have however elected to adopt
the exemptions available under AASB 1 relating to AASB
132: Financial Instruments: Disclosure and Presentation,
and AASB 139: Financial Instruments: Recognition and
Measurement.
Reconciliations of the transition from previous Australian
GAAP to AIFRS have been included in Note 2 to this report.
Reporting Basis and Conventions
The financial report has been prepared on an accruals
basis and is based on historical costs modified by the
revaluation of selected financial assets for which the fair
value basis of accounting has been applied.
Accounting Policies
a) Principles of consolidation
A controlled entity is any entity Australian Ethical Investment
Limited has the power to control the financial and operating
policies of so as to obtain benefits from its activities.
All controlled entities have a June financial year-end.
All inter-company balances and transactions between
entities in the economic entity, including any unrealised
profits or losses, have been eliminated on consolidation.
Accounting policies of controlled entities have been
changed where necessary to ensure consistencies with
those policies applied by the parent entity.
The consolidated financial statements comprise the
financial statements of Australian Ethical Investment
Limited and its wholly owned entity Australian Ethical
Superannuation Pty Limited.
b) Income tax
The charge for current income tax expenses is based on
the profit for the year adjusted for any non-assessable or
disallowed items. It is calculated using tax rates that have
been enacted or are substantively enacted by the balance
sheet date.
Deferred tax is accounted for using the balance sheet
liability method in respect of temporary differences arising
between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. No deferred
income tax will be recognised from the initial recognition
of an asset or liability, excluding a business combination,
where there is no effect on accounting or taxable profit or
loss.
Deferred tax is calculated at the tax rates that are expected
to apply to the period when the asset is realised or liability
is settled. Deferred tax is credited in the income statement
except where it relates to items that may be credited
directly to equity, in which case the deferred tax is adjusted
directly against equity.
Deferred income tax assets are recognised to the extent
that it is probable that future tax profits will be available
against which deductible temporary differences can be
utilised.
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Note 1 – Statement of significant accounting policies – continued
The amount of benefits brought to account or which may
be realised in the future is based on the assumption that
no adverse change will occur in income taxation legislation
and the anticipation that the economic entity will derive
sufficient future assessable income to enable the benefit to
be realised and comply with the conditions of deductibility
imposed by the law.
Australian Ethical Investment Limited and its wholly owned
entity Australian Ethical Superannuation Pty Ltd have
formed an income tax consolidated group under the Tax
Consolidation System. The group notified the Australian
Tax Office (ATO) on 24 March 2004 that it had formed an
income tax consolidated group to apply from 1 July 2002.
The tax consolidated group has entered a tax sharing
agreement whereby each company in the group contributes
to the income tax payable in proportion to their contribution
to the net profit before tax of the tax consolidated group.
Under the tax sharing agreement Australian Ethical
Superannuation Pty Ltd agrees to pay its share of the
income tax payable to Australian Ethical Investment Limited
on the same day that Australian Ethical Investment Limited
pays the ATO for group tax liabilities.
c) Property, plant and equipment
Each class of property, plant and equipment is carried at
cost or fair value less, where applicable, any accumulated
depreciation and impairment losses.
Property
Leasehold land and buildings are carried at cost less any
accumulated depreciation and impairment losses.
Plant and equipment
Plant and equipment are carried at cost less any
accumulated depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed
annually by directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable
amount is assessed on the basis of the expected net cash
flows that will be received from the assets employment and
subsequent disposal. The expected net cash flows have
been discounted to their present values in determining
recoverable amounts.
Depreciation
The depreciation rates used for each class of assets are:
Class of fixed asset
Depreciation
Rates
Depreciation
Basis
Buildings
2.5%
Straight line
Furniture, fittings and
equipment
Software
10% to 81% Straight line/
Diminishing value
18.75% to
40%
Straight line/
Diminishing value
The assets’ residual values and useful lives are reviewed,
and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by
comparing proceeds with the carrying amount. These gains
and losses are included in the income statement. When re-
valued assets are sold, amounts included in the revaluation
reserve relating to that asset are transferred to retained
earnings.
d) Financial instruments
Recognition
Financial instruments are initially measured at cost on trade
date, which includes transaction costs, when the related
contractual rights or obligations exist. Subsequent to initial
recognition these instruments are measured as set out
below.
Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in
an active market and are stated at amortised cost using the
effective interest rate method.
Available-for-sale financial assets
The economic entity holds only available for sale financial
assets. Available for sale financial assets are assets not
classified as financial assets at fair value through profit and
loss, loans and receivables, or held-to-maturity investments.
Available-for-sale financial assets are reflected at fair value.
Unrealised gains and losses arising from changes in fair
value are taken directly to equity.
The depreciable amount of all fixed assets including
buildings, but excluding leasehold land, is depreciated
over their estimated useful lives to the economic entity
commencing from the time the asset is held ready for use.
Financial liabilities
Non-derivative financial liabilities are recognised at
amortised cost, comprising original debt less principal
payments and amortisation.
Fair value
Fair value is determined based on current bid prices for all
quoted investments. Valuation techniques are applied to
determine the fair value for all unlisted securities, including
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Note 1 – Statement of significant accounting policies – continued
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recent arm’s length transactions, reference to similar
instruments and option pricing models.
Impairment
At each reporting date, the group assess whether
there is objective evidence that a financial instrument
has been impaired. In the case of available-for sale
financial instruments, a prolonged decline in the value
of the instrument is considered to determine whether an
impairment has arisen. Impairment losses are recognised in
the income statement.
e) Impairment of assets
At each reporting date, the group reviews the carrying
values of its tangible and intangible assets to determine
whether there is any indication that those assets have
been impaired. If such an indication exists, the recoverable
amount of the asset, being the higher of the asset’s fair
value less costs to sell and value in use, is compared to the
asset’s carrying value. Any excess of the asset’s carrying
value over it recoverable amount is expensed to the income
statement.
Where it is not possible to estimate the recoverable amount
of an individual asset, the group estimates the recoverable
amount of the cash-generating unit to which the asset
belongs.
f) Employee benefits
Provision is made for the company’s liability for employee
benefits arising from services rendered by employees to
balance date. Employee benefits that are expected to be
settled within one year have been measured at the amounts
expected to be paid when the liability is settled, plus related
on-costs. Employee benefits payable later than one year
have been measured at the present value of the estimated
future cash outflows to be made for those benefits.
Share options
Share based compensation benefits are provided to
employees via the Australian Ethical Investment Limited
employee share ownership plan. Share options have been
granted annually to employees and details are disclosed in
the annual financial report.
Share options granted before 7 November 2002 and/or
vested before 1 January 2005
No expense is recognised in respect of these options. The
shares are recognised when the options are exercised and
the proceeds received allocated to share capital.
Share options granted on or after 7 November 2002 and
vested after 1 January 2005
The fair value of options granted under the Australian
Ethical Investment Limited employee share ownership
plan is recognised as an employee benefit expense with
a corresponding increase in equity. The fair value is
measured at grant date and recognised over the vesting
period.
30
At each balance sheet date, the entity revises its estimate
of the number of options that are expected to become
exercisable. The employee benefit expense recognised
each period takes into account the most recent estimate.
Upon the exercise of options, the balance of the options
reserve relating to those options is transferred to share
capital and the proceeds received, net of any directly
attributable transaction costs, are credited to share capital.
g) Provisions
Provisions are recognised when the group has a legal or
constructive obligation, as a result of past events, for which
it is probable that an outflow of economic benefits will result
and that outflow can be reliably measured.
h) Cash and cash equivalents
Cash and cash equivalents include cash on hand and
deposits held at call with banks.
i) Revenue
Revenue from the rendering of a service is recognised upon
the delivery of the service to the customers.
Interest revenue is recognised on a proportional basis
taking into account the interest rates applicable to the
financial assets.
All revenue is stated net of the amount of goods and
services tax (GST).
j) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST, except where the amount of GST incurred
is not recoverable from the Australian Tax Office. In these
circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of an item of the expense.
Receivables and payables in the balance sheet are shown
inclusive of GST.
Cash flows are presented in the cash flow statement on a
gross basis, except for the GST component of investing and
financing activities, which are disclosed as operating cash
flows.
k) Employee bonus and tithes expense
The Company’s Constitution states that “the directors
before recommending or declaring any dividend to be paid
out of the profits of any one year must have first:-
i.
paid or provisioned for payment to current employees,
or other persons performing work for the company, a
work related bonus or incentive payment, set at the
discretion of the directors, but to be no more than 30
percent (30%) of what the profit for that year would have
been had not the bonus or incentive payment been
deducted”
australianethical
Note 1 – Statement of significant accounting policies – continued
ii.
“gifted or provisioned for gifting an amount equivalent to
ten percent (10%) of what the profit for that year would
have been had not the above mentioned bonus and
amount gifted been deducted”.
The annual employee bonus may be taken in cash and/or
shares.
l) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the
profit attributable to equity holders of the company, by the
weighted average number of ordinary shares outstanding
during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in
the determination of basic earnings per share to take into
account the after income tax effect of the interest and other
financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares
assumed to have been issued for no consideration in
relation to dilutive potential ordinary shares.
m) Comparative figures
Where required, comparative figures have been adjusted
to conform with changes in presentation for the current
financial year.
Critical accounting estimates and judgements
The directors evaluate estimates and judgments
incorporated into the financial report based on historical
knowledge and best available current information.
Estimates assume a reasonable expectation of future
events and are based on current trends and economic data,
obtained both externally and within the group.
Key estimates
Future average salary increases have been estimated and
factored into the accrual for annual leave and the provision
for long service leave.
Key judgements
Australian Ethical Investment Limited has a loan receivable
recorded as an asset on its balance sheet for $188 343.
The directors have determined that no provision for doubtful
debt is required for this loan.
Note 2 – Impact of adoption of AIFRS
The impacts of adopting AIFRS on the total equity and profit after tax as reported under Australian Accounting Accounting
Standards applicable before 1 January 2005 (‘AGAAP’) are illustrated below.
(i) Reconciliation of total equity as presented under AGAAP to that under AIFRS
Economic Entity
Parent Entity
30 Jun 05
$
01 Jul 04
$
30 Jun 05
$
01 Jul 04
$
Total equity under AGAAP
5,046,886
4,541,716
4,415,990
3,993,053
Adjustments to equity:
Recognition of options expense under share based
payments (a)
(38,630)
(12,149)
(38,630)
(12,149)
Increase in options reserve (a)
Total equity under AIFRS
38,630
12,149
38,630
12,149
5,046,886
4,541,716
4,415,990
3,993,053
(a) Share based payment costs (options) are charged to the income statement under AASB 2 ‘Share-based Payment’ but not under AGAAP.
(ii) Reconciliation of profit after tax under AGAAP to that under AIFRS
Profit after tax as previously reported under AGAAP
Recognition of options expense under share based payments (a)
Profit after tax under AIFRS
810,900
(26,481)
784,419
728,667
(26,481)
702,186
(a) Share based payment costs (options) are charged to the income statement under AASB 2 ‘Share-based Payment’ but not under AGAAP.
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Note 2 – Impact of adoption of AIFRS – continued
(iii) Adjustment to basic and diluted earnings per
share
Basic earnings per share as
previously reported
Diluted earnings per share as
previously reported
Adjusted basic earnings per share
after accounting policy change for
share based payments
Adjusted diluted earnings per share
after accounting policy change for
share based payments
Year ended
30 Jun 05
92.6
91.7
89.6
88.7
Note 3 – Auditors’ remuneration
Remuneration of the auditors for:
Audit services
Auditing the financial report
Auditing the Australian Ethical Superannuation Fund
Auditing the sustainability report
Non-audit services
Tax and other accounting advice
Internal control review
Note 4 – Revenue
Operating activities
Management fees net of rebates
Entry fees
Other fees
Dividend from wholly owned subsidiary
Interest/distributions
Wholly owned entity fee
Other revenue
Non-operating activities
Gain on disposal of financial assets
(iv) Transitional exemption
The economic entity has elected to apply the exemption
under AASB 1 from restatement of comparatives for AASB
132 Financial Instruments: Disclosure and Presentation
and AASB 139 Financial Instruments: Recognition and
Measurement. It has therefore continued to apply the
previous Australian generally accepted accounting
principles (AGAAP) to the comparative information of
financial instruments within the scope of AASB 132
and AASB 139 for the year ended 30 June 2005. The
adjustment required for differences between previous
AGAAP and AASB 132 and AASB 139 have been
determined and recognised at 1 July 2005.
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
52,400
16,500
8,600
11,550
24,600
4,100
46,900
10,000
-
8,600
4,100
5,500
15,000
2,750
-
5,100
15,000
2,000
-
-
7,274,591
5,681,009
4,020,460
3,255,805
1,508,963
1,088,198
457,117
337,024
309,873
-
-
266,741
-
-
509,935
457,117
254,660
263,337
366,721
337,024
172,427
232,940
2,163,664
1,676,983
109,312
49,305
97,350
45,600
9,659,856
7,422,277
7,766,523
6,087,500
1,867
-
1,867
-
Total revenue
9,661,723
7,422,277
7,768,390
6,087,500
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Note 5 – Income tax expense
a) The components of tax expense comprise:
Current tax
Deferred tax
b) The prima facie tax payable on profit from ordinary activities
before income tax is reconciled to the income tax expense as
follows:
Prima facie tax payable on profit from ordinary activities before
income tax at 30% (2005:30%)
Economic entity
Parent entity
Other members of the income tax consolidated group net of
intercompany transactions
Add: tax effect of:
Other non-allowable items
Share options expensed during year
Under provision for income tax in prior year
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
690,357
404,421
452,052
295,143
(64,758)
(50,556)
(58,908)
(50,556)
625,599
353,865
393,144
244,587
596,463
341,485
-
-
-
-
-
-
440,450
232,455
284,032
109,278
860
17,988
12,237
740
7,944
3,696
816
17,988
12,237
643
7,944
3,696
627,548
353,865
703,946
405,593
Less: tax effect of:
Rebateable fully franked dividends
Non-assessable income
Franking and foreign tax credits
-
(635)
(1,314)
Income tax expense attributable to entity
625,599
353,865
Allocation of income tax expense to wholly owned entity under the
tax sharing agreement
-
-
-
-
-
(76,398)
(51,728)
(635)
(1,314)
-
-
625,599
353,865
(232,455)
(109,278)
Income tax expense attributable to entity
625,599
353,865
393,144
244,587
The applicable weighted average effective tax rates are as follows:
31%
31%
27%
26%
Effective tax rates have not changed significantly from last year.
We don’t have to have a radioactive future.
Invest in renewable energy from
the sun, wind and hot rocks.
Units in the trusts are offered and issued by Australian Ethical Investment Ltd (‘AEI’) ABN 47 003 188 930, AFSL
229949. Interests in the superannuation fund are offered by AEI and issued by the trustee of the fund, Australian Ethical
Superannuation Pty Ltd ABN 43 079 259 733 RSEL L0001441. Product disclosure statements are available from our
website or by calling 1800 021 227 and should be considered before deciding whether to acquire, or continue to hold,
units in the trusts or interests in the fund. Australian Ethical® is a registered trademark of AEI.
australianethical
investment + superannuation
austethical.com.au
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Note 6 – Dividends
Distributions paid
Final fully franked dividend of 42 (2005: 42) cents per share
franked at the tax rate of 30% (2005:30%)
Interim fully franked dividend of 35 (2005: 30) cents per share
franked at the tax rate of 30% (2005:30%)
Declared (2005: proposed) final fully franked dividend of 50 (2005:
42) cents per share franked at the tax rate of 30% (2005: 30%)
Balance of franking account at year end adjusted for franking
credits which will arise from income tax payments in the following
year.
Subsequent to year-end, the franking account would be reduced by
the declared dividend reflected above as follows:
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
384,955
364,965
384,955
364,965
320,795
266,624
320,795
266,624
705,750
631,589
705,750
631,589
458,280
373,273
458,280
373,273
983,028
595,136
196,406
-
786,622
595,136
Note 7 – Earnings per share
(a) Earnings used to calculate basic EPS and dilutive EPS
(b) Weighted average number of ordinary shares outstanding
during the year used in calculation of basic EPS
Weighted average number of options outstanding
Weighted average number of ordinary shares outstanding during
the year used in calculation of dilutive EPS
1,362,612
906,720
784,419
875,930
32,291
8,404
939,011
884,334
Note 8 – Cash and cash equivalents
Cash on hand
Cash at bank
Deposits at call
300
300
16,534
21,423
300
115
300
1,672
1,462,400
1,803,023
372,816
1,014,070
1,479,234
1,824,746
373,231
1,016,042
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Deposits at call is money invested in high interest bank account. Interest is calculated daily based on daily bank deposit
rates
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Note 9 – Trade and other receivables
Trade receivables
Other
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
988,512
792,656
833,799
647,306
50,482
20,839
50,482
20,839
Amounts receivable – wholly owned entity
-
-
158,691
111,384
1,038,994
813,495
1,042,972
779,529
Note 10 – Financial assets
Available-for-sale financial assets
Loans
Less non-current portion
Current portion
a. Available-for-sale financial assets comprise:
Money market deposit at cost
Mortgage backed security at fair value
Bank note at fair value
Corporate bond at fair value
Units in unit trust at fair value
Shares in wholly owned entity at cost
2,504,546
3,037,021
2,820,546
3,353,021
188,343
200,000
188,343
200,000
2,692,889
3,237,021
3,008,889
3,553,021
174,484
200,000
490,484
516,000
2,518,405
3,037,021
2,518,405
3,037,021
500,000
-
500,000
-
501,765
1,537,021
501,765
1,537,021
504,145
1,500,000
504,145
1,500,000
603,054
395,582
-
-
-
-
603,054
395,582
-
-
316,000
316,000
2,504,546
3,037,021
2,820,546
3,353,021
The money market deposit is at a fixed interest rate of 6.15%, has a maturity date of 31 October 2006 and is investment
grade rated by S&P.
The mortgage backed security is at a floating interest rate of BBSW + 0.39, has a maturity date of 26 October 2009 and is
investment grade rated by S&P.
The bank note is at a floating interest rate of BBSW + 0.70, has a maturity date of 20 May 2008 and is investment grade
rated by S&P.
The corporate bond is at a fixed interest rate of 7.0%, has a maturity of 26 April 2007 and is investment grade rated by
S&P.
b. Loans comprise
Loan to other entity
The loan is provided to an independent entity.
The loan is at a fixed interest rate of 9.0% and matures 1 August 2015.
188,343
188,343
200,000
200,000
188,343
200,000
188,343
200,000
Note 11 – Other current assets
Other
Prepayments
2,843
136,865
139,708
1,450
156,395
157,845
2,843
91,400
94,243
1,450
109,954
111,404
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Note 12 – Property, plant and equipment
Land and buildings
Leasehold land at:
At cost
Total land
Buildings at:
At cost
Less accumulated depreciation
Total buildings
Total land and buildings
Plant and equipment
At cost
Accumulated depreciation
Total plant and equipment
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
230,000
230,000
2,137,962
(22,642)
2,115,320
2,345,320
-
-
-
-
-
-
230,000
230,000
2,137,962
(22,642)
2,115,320
2,345,320
-
-
-
-
-
-
791,661
710,250
791,661
710,250
(523,828)
(427,347)
(523,828)
(427,347)
267,833
282,903
267,833
282,903
Total property, plant and equipment
2,613,153
282,903
2,613,153
282,903
Movements in carrying amounts
Land
Balance at the beginning of year
Additions
Disposals
Carrying amount at the end of year
Buildings
Balance at the beginning of year
Additions
Disposals
Depreciation expense
Carrying amount at the end of year
Plant and equipment
230,000
230,000
-
-
-
2,137,962
-
(22,642)
2,115,320
-
-
-
-
-
-
-
-
-
230,000
230,000
-
-
-
2,137,962
-
(22,642)
2,115,320
-
-
-
-
-
-
-
-
-
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Balance at the beginning of year
282,903
200,002
282,903
200,002
Additions
Disposals
Depreciation expense
107,847
180,810
107,847
180,810
(2,152)
(4,838)
(2,152)
(4,838)
(120,765)
(93,071)
(120,765)
(93,071)
Carrying amount at the end of year
267,833
282,903
267,833
282,903
Total
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282,903
2,613,153
282,903
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Note 13 – Deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Employee benefits
Tithe
Audit fees
Amounts recognised directly in equity
Financial asset revaluations
Movements
Opening balance at 1 July
Credited (charged) to the income statement
Credited (charged) to equity
Closing balance at 30 June
Note 14 – Trade and other payables
Trade payables
Sundry payables and accrued expenses
Employee bonus
Amounts payable to wholly owned entity
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
246,048
187,235
246,048
187,235
51,939
15,270
30,368
313,257
217,603
1,989
315,246
217,603
217,603
167,047
95,654
1,989
50,556
-
-
-
51,939
9,420
30,368
307,407
217,603
1,989
309,396
217,603
217,603
167,047
89,804
1,989
50,556
-
-
-
315,246
217,603
309,396
217,603
242,383
896,393
213,234
213,852
617,212
144,809
-
-
121,841
790,688
213,234
307,391
129,777
525,081
144,809
233,991
1,352,010
975,873
1,433,154
1,033,658
Note 15 – Deferred tax liabilities
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Stamp duty on leasehold property
Movements
Opening balance at 1 July
Credited/(charged) to the income statement
Closing balance at 30 June
30,896
30,896
-
30,896
30,896
-
-
-
-
-
30,896
30,896
-
30,896
30,896
-
-
-
-
-
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Note 16 – Provisions
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
219,970
219,970
170,378
170,378
219,970
219,970
170,378
170,378
46,557
46,557
30,861
30,861
46,557
46,557
30,861
30,861
Current
Employee benefits – long service leave
Non-current
Employee benefits – long service leave
Note 17 – Movements in equity
Issued capital
Ordinary shares
Balance at 1 July
888,746 (2005 - 868,965) shares
4,113,706
3,787,847
4,113,706
3,787,847
Issue of share capital
Shares issued during the year under the employee share ownership plan:
1,563 on 21 September 2005 (share bonus)
17,275 on 31 October 2005 (options exercised)
8,975 on 29 November 2005 (options exercised)
1,971 on 23 September 2004 (share bonus)
19,781 on 7 March 2005 (options exercised)
Shares bought back during the year
1,180 on 1 October 2004
667 on 5 October 2004
124 on 6 October 2004
Balance 30 June
916,559 (2005 - 888,746) shares
35,392
315,442
163,883
-
-
-
35,392
315,442
163,883
-
-
-
-
-
29,160
326,387
(17,794)
(10,005)
(1,889)
-
-
-
29,160
326,387
(17,794)
(10,005)
(1,889)
-
-
-
-
-
4,628,423
4,113,706
4,628,423
4,113,706
At 30 June 2006 there were 916,559 fully paid ordinary shares which have no par value.
For detailed information relating to the Australian Ethical Investment Limited employee share ownership plan, including
details of options issued, exercised and lapsed during the financial year and the options outstanding at year-end, refer to
note 26 Share-based payments.
For information related to share options issued to key management personnel during the financial year refer to the
remuneration report contained within the Directors’ report.
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of
shares held. At the shareholders meeting each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on a show of hands.
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Note 17 – Movements in equity – continued
Reserves
Available-for-sale financial assets revaluation reserve
Balance 1 July
Revaluation - gross
Deferred tax
Balance 30 June
Share-based payments reserve
Balance 1 July
Option expense
Transfer to share capital (options exercised)
Balance 30 June
Total Reserves
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
-
(6,632)
1,989
(4,643)
38,630
59,961
-
-
-
-
-
-
12,149
26,481
-
(6,632)
1,989
(4,643)
38,630
59,961
-
-
-
-
-
-
12,149
26,481
98,591
38,630
98,591
38,630
93,948
38,630
93,948
38,630
The “Available-for-sale financial assets revaluation reserve” records revaluations to fair value of available for sale financial
assets.
The “Share-based payments reserve” records items recognised as expenses on valuation of employee share options.
Retained earnings
Balance 1 July
Changes in accounting policy
Restated balance
Profit for the period
Total for the period
Dividends
Balance 30 June
Total Equity
894,550
753,869
263,654
205,206
-
(12,149)
-
(12,149)
894,550
741,720
263,654
193,057
1,362,612
784,419
1,075,024
702,186
1,362,612
784,419
1,075,024
702,186
(705,750)
(631,589)
(705,750)
(631,589)
1,551,412
894,550
632,928
263,654
6,273,783
5,046,886
5,355,299
4,415,990
Note 18 – Events after the balance sheet date
Since the end of the financial year, no material events that may have an impact on these financial statements have
occurred.
The financial report was authorised for issue on the directors’ declaration date by the board of directors.
Note 19 – Economic dependence
The economic entity is dependent upon management fees received in its capacity as Responsible Entity of the Australian
Ethical Trusts and as Trustee of the Australian Ethical Superannuation Fund.
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Note 20 – Segment reporting
The company was established in 1986 and is the Responsible Entity of the Australian Ethical Trusts.
The company’s subsidiary is Trustee of the Australian Ethical Superannuation Fund.
Note 21 – Capital commitments
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
Premises Rental licence commitments
65,028
56,652
65,028
56,652
Payable
– not later than 12 months
65,028
56,652
65,028
56,652
The licence agreement provides for 4 months for termination. The above amounts represent 4 months rent.
Note 22 – Contingent liabilities
Liabilties and assets of trusts and superannuation fund
Liabilities of the trusts and superannuation fund for which the economic entity and parent entity are Responsible Entity and
Trustee but not shown in the financial statements of the economic entity or parent entity were:
Current liabilities
Payables
Provisions
Total liabilities
3,321,381
5,499,381
2,824,216
5,103,746
43,712,715
51,079,088
40,954,235 47,950,427
47,034,096
56,578,469
43,778,451 53,054,173
Rights of indemnities for liabilities incurred by the economic entity
and parent entity not recorded in the financial statements were:
47,034,096
56,578,469
43,778,451 53,054,173
The trusts and superannuation fund hold sufficient assets to meet these liabilities as and when they fall due.
The assets of the trusts and superannuation fund are not available to meet any liabilities of the economic entity or parent
entity acting in their own right.
Note 23 – Cash flow information
(a) Reconciliation of cash
Cash at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance
sheet as follows:
Cash on hand
Cash at bank
Deposits at call
300
300
16,534
21,423
300
115
300
1,672
1,462,400
1,803,023
372,816
1,014,070
1,479,234
1,824,746
373,231
1,016,042
(b) Reconciliation of cash flow from operations with net profit from ordinary activities after income tax expense
Net profit from ordinary activities after income tax expense
1,362,612
784,419
1,075,024
702,186
Non-cash flows in operating profit
Depreciation
Provisions
(Profit) loss on sale of property, plant & equipment
(Profit) loss on sale of investment
Share options expensed
Staff bonus paid in shares
143,407
93,071
143,407
93,071
65,288
168,521
65,288
168,521
2,152
(1,867)
59,961
35,392
2,595
-
26,481
29,160
2,152
(1,867)
59,961
35,392
2,595
-
26,481
29,160
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Note 23 – Cash flow information – continued
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
Changes in assets and liabilities
(Increase) decrease in trade & other receivables
(225,499)
(206,133)
(219,782)
(212,997)
(Increase) decrease in prepayments & other assets
(Increase) decrease in deferred tax assets
Increase (decrease) in trade & other payables
Increase (decrease) in current tax liability
Increase (decrease) in deferred tax liability
18,136
(95,653)
347,135
46,393
30,896
(23,571)
(50,556)
117,353
151,566
-
17,161
(14,200)
(89,803)
(50,556)
370,493
2,732
30,896
147,706
151,566
-
Net cash provided by (used in) operating activities
1,788,353
1,092,906
1,491,054
1,043,533
(c) Non-cash financing and investing activities
Shares in Australian Ethical Investment Limited, to the value of $35,392 (2005: $29,160) were issued in lieu of staff bonus.
Note 24 – Related party transactions
Australian Ethical Investment Limited is the ultimate parent entity and owns 100% of Australian Ethical Superannuation Pty
Ltd.
Australian Ethical Investment Limited acts as the Responsible Entity for the Australian Ethical Trusts (Australian Ethical
Balanced Trust, Australian Ethical Equities Trust, Australian Ethical Income Trust and Australian Ethical Large Companies
Share Trust).
Australian Ethical Superannuation Pty Ltd acts as trustee for the Australian Ethical Superannuation Fund.
Transactions between related parties are on normal commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated.
Australian Ethical Superannuation Pty Ltd
a) Transactions between Australian Ethical Investment Limited and its wholly owned entity, Australian Ethical
Superannuation Pty Ltd during the financial year consisted of:
(i) Transactions whereby Australian Ethical Investment Limited
provides management services to the wholly owned entity on a
cost recovery basis
(ii) Transactions between Australian Ethical Investment Limited
and its wholly owned entity under the tax consolidation and
related tax sharing agreement referred to in note 1(b).
(iii) Transactions whereby Australian Ethical Investment Limited
collects management fee income on behalf of wholly owned entity
and on-pays this management fee income to the wholly owned
entity on a monthly basis.
(iv) Transactions whereby Australian Ethical Investment Limited
receives a dividend from the wholly owned entity referred to in
note 4.
-
-
-
-
-
-
-
-
2,163,664
1,676,983
232,453
109,278
3,285,781
2,442,457
254,660
172,427
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Note 24 – Related party transactions – continued
b) Outstanding balances at balance date:
Amounts receivable from wholly owned entity:
Management services
Taxation
Amounts payable to wholly owned entity:
Management fee income
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
-
-
-
-
-
-
34,568
124,122
30,922
80,462
307,391
233,991
Australian Ethical Trusts
a) Transactions between Australian Ethical Investment Limited, as Responsible Entity, and the Australian Ethical Trusts
during the financial year consisted of:
(i) Transactions whereby Australian Ethical Investment Limited
provides investment services to the Australian Ethical Trusts in
accordance with the Trust Deed.
Australian Ethical Balanced Trust
Australian Ethical Equities Trust
Australian Ethical Income Trust
3,132,193
2,335,421
3,132,193
2,335,421
2,407,875
2,112,588
2,407,875
2,112,588
199,962
183,328
199,962
183,328
Australian Ethical Large Companies Shares Trust
1,668,138
1,113,486
1,668,138
1,113,486
(ii) Transactions whereby Australian Ethical Investment Limited
provides accounting services to the Australian Ethical Trusts in
accordance with the Trust Deed.
Australian Ethical Balanced Trust
Australian Ethical Equities Trust
Australian Ethical Income Trust
Australian Ethical Large Companies Shares Trust
109,596
87,684
39,468
61,392
77,850
56,832
31,002
32,322
109,596
87,684
39,468
61,392
77,850
56,832
31,002
32,322
(iii) Transactions whereby Australian Ethical Investment Limited
seeks expense reimbursement from the Australian Ethical Trusts
in accordance with the Trust Deed.
Australian Ethical Balanced Trust
Australian Ethical Equities Trust
Australian Ethical Income Trust
Australian Ethical Large Companies Shares Trust
(iv) Transaction whereby Australian Ethical Investment Limited
purchased units in the Australian Ethical Balanced Trust
(v) Transaction whereby Australian Ethical Investment Limited
received a distribution payment from the Australian Ethical
Balanced Trust
53,644
50,198
4,418
37,367
400,000
6,564
(vi) Transactions whereby Australian Ethical Investment Limited
sold interest bearing securities to the Australian Ethical Balanced
Trust
2,066,913
44,771
48,108
4,370
26,472
53,644
50,198
4,418
37,367
400,000
6,564
2,066,913
-
-
-
44,771
48,108
4,370
26,472
-
-
-
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Note 24 – Related party transactions – continued
b) Outstanding balances at balance date:
Amounts receivable from the Australian Ethical Trusts in relation
to investment services, accounting services and reimbursable
expenses:
Australian Ethical Balanced Trust
Australian Ethical Equities Trust
Australian Ethical Income Trust
Australian Ethical Large Companies Shares Trust
Value of units held by Australian Ethical Investment Limited in the
Australian Ethical Balanced Trust
Distribution receivable from AEBT
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
334,290
244,126
24,435
184,589
395,582
32,914
260,907
208,875
20,798
126,837
-
-
334,290
244,126
24,435
184,589
395,582
32,914
260,907
208,875
20,798
126,837
Australian Ethical Superannuation Fund
a) Transactions between the economic entity and the Australian Ethical Superannuation Fund during the financial year
consisted of:
(i) Transactions between Australian Ethical Superannuation Pty
Limited and the Australian Ethical Superannuation Fund related
to the rebate of investment services.
31,651
17,254
Outstanding balances at balance date:
Amounts payable to the Australian Ethical Superannuation Fund:
Rebate of investment services fee
6,119
2,896
-
-
Terms and conditions
No provision for doubtful debts have been raised in relation to any outstanding balances and no expense has been
recognised in respect of bad or doubtful debts due from related parties.
Outstanding balances are unsecured and are repayable in cash.
-
-
-
-
Note 25 – Key management personnel compensation
a) Key management personnel
Names and positions of key management personnel (directors and named executives) at any time during the financial year
Parent Entity Directors
Name
George Pooley
Ray De Lucia
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
Position
Chairperson, non-executive
Director, non-executive
Director, executive
Director, executive
Director, executive
Director, non-executive
Pauline Vamos was appointed as a non-executive director on 1 July 2006
Resigned 10 October 2005
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Note 25 – Key management personnel compensation – continued
a) Key management personnel – continued
Other key management personnel
Name
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Position
Chief executive officer
Investment manager
Chief financial officer
Company secretary / legal counsel
b) Key management personnel compensation
Economic Entity
Parent Entity
2006
$
2005
$
2006
$
2005
$
Short term employment benefits
1,029,033
957,311
957,025
893,776
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Total compensation
83,960
20,699
72,005
15,902
79,148
20,699
67,865
15,902
-
-
-
-
63,217
35,574
63,217
35,574
1,196,909
1,080,792
1,120,089
1,013,117
The company has taken advantage of Schedule 5B of the Corporations Regulations 2001 and has transferred details
required by AASB 124: Related Party Disclosures paragraphs Aus25.4 to Aus 25.7.2 to the remuneration report contained in
the directors’ report.
c) Equity instrument disclosures relating to key management personnel
Option Holdings
Number of options held by key management personnel.
Balance
01.07.05
Granted as
remuneration
Options
exercised
Net
change
other
Balance
30.06.06
Total
vested
30.06.06
Total
exercisable
30.06.06
Total
unexercisable
30.06.06
Parent Entity Directors
George Pooley
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
7,377
5,820
2,699
-
-
Other key management personnel
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
8,287
7,362
5,712
-
2,243
1,800
931
-
-
3,006
2,611
2,106
1,550
-
(2,218)
(1,688)
(981)
-
(2,620)
(2,313)
(1,752)
-
Total
37,257
14,247
(11,572)
-
-
-
-
-
-
-
-
-
-
7,402
5,932
2,649
-
-
8,673
7,660
6,066
1,550
39,932
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,402
5,932
2,649
-
-
8,673
7,660
6,066
1,550
39,932
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Note 25 – Key management personnel compensation – continued
c) Equity instrument disclosures relating to key management personnel – continued
Shareholdings
Number of Shares held by key management personnel.
Balance
01.07.05
Share in lieu of
cash bonus
Options exercised/
shares issued(1)
Net change
other(2)
Balance
30.06.06(3)&(4)
Parent Entity Directors
George Pooley
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
41,869
60,110
51,107
-
-
Other key management personnel
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Total
3,125
2,031
2,268
375
190
44
71
190
183
-
-
-
-
2,218
1,688
981
2,620
2,313
1,752
-
-
-
-
-
(1,688)
(981)
-
(2,620)
(1,765)
(3,038)
-
44,277
60,154
51,178
-
-
3,315
2,762
982
375
160,885
678
11,572
(10,092)
163,043
(1) The amount paid for shares issued on exercise of options is $18.26 in all cases.
(2) Net change other refers to shares purchased or sold during the financial year.
(3) Shares issued are fully paid.
(4) Balance represents shareholdings by key management personnel including their related parties as required by AASB 124: Related Party Disclosures.
Note 26 – Share based payments
The following share-based payment arrangements existed at 30 June 2006:
On 15 October 2003, 42,947 share options were granted to non-probationary employees under the Australian Ethical
Investment Limited employee share ownership plan. The options were issued for nil consideration, are not exercisable for 3
years from the date of issue, have an exercise price of $14.11 each and a 3 month window in which to be exercised, and in
most circumstances will lapse if the holder is no longer an employee of Australian Ethical Investment Limited. The options
hold no voting or dividend rights.
On 23 September 2004, 39,173 share options were granted to non-probationary employees under the Australian Ethical
Investment Limited employee share ownership plan. The options were issued for nil consideration, are not exercisable for 3
years from the date of issue, have an exercise price of $16.28 each and a 3 month window in which to be exercised, and in
most circumstances will lapse if the holder is no longer an employee of Australian Ethical Investment Limited. The options
hold no voting or dividend rights.
On 21 September 2005, 43,664 share options were granted to non-probationary employees under the Australian Ethical
Investment Limited employee share ownership plan. The options were issued for nil consideration, are not exercisable for 3
years from the date of issue, have an exercise price of $24.82 each and a 3 month window in which to be exercised, and in
most circumstances will lapse if the holder is no longer an employee of Australian Ethical Investment Limited. The options
hold no voting or dividend rights.
On 21 September 2005, 1,563 ordinary shares were issued under the employee share ownership plan. The shares carry
full dividend and voting rights and are not transferable for a period of 3 years, or until an employee leaves the company’s
employment whichever first occurs (In the comparative year 1,971 ordinary shares, with the same terms, were granted on
23 September 2004).
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Note 26 – Share based payments – continued
Economic Entity
Parent Entity
2006
2005
2006
2005
Number
of
options
Number
of
options
Weighted
average
exercise
price
$
Weighted
average
exercise
price
$
Number
of
options
Number
of
options
Weighted
average
exercise
price
$
Weighted
average
exercise
price
$
101,865
16.13
107,113
16.16
101,865
16.13
107,113
16.16
Outstanding at the
beginning of the year
Granted
Forfeited
Exercised
Expired
43,664
(2,297)
(26,250)
(3,036)
24.82
16.12
18.26
18.26
18.91
39,173
(20,542)
(19,781)
(4,098)
101,865
16.28
16.18
16.50
16.50
16.13
43,664
(2,297)
(26,250)
(3,036)
113,946
24.82
16.12
18.26
18.26
18.91
39,173
(20,542)
16.28
16.18
(19,781)
16.50
(4,098)
101,865
16.50
16.13
Outstanding at year end
113,946
Exercisable at year end
-
-
-
-
-
-
-
-
There were 26,250 options exercised during the year ended 30 June 2006. These options had a weighted average share
price of $24.34 at exercise date.
The options outstanding at 30 June 2006 had a weighted average exercise price of $18.91 and a weighted average
remaining contractual life of 1.59 years. Exercise prices range from $14.11 to $24.82 in respect of options outstanding at
30 June 2006
Options granted during the financial year
The weighted average fair value of the options granted during the year was $3.36.
This price was calculated by using the Black Scholes option pricing model applying the following inputs:
Weighted average exercise price
Weighted average life of the option
Underlying share price
Expected share price volatility
Risk free interest rate
$24.82
3.25 years
$23.00
22.50%
5.08%
Included under employee benefits expense in the income statement is:
$35,392 (2005: $29,160) relating to equity-settled share-based payment transactions for staff bonus; and
$59,961 (2005: $26,481) relating to options issued under the employee share ownership plan.
Note 27 – Financial instruments
(a) Financial risk management
The economic entity’s financial instruments consist of cash and cash equivalents (note 8), trade and other receivables (note
9), financial assets (note 10) and trade and other payables (note 14).
The main purpose of these financial instruments is to finance the economic entity’s operations. The economic entity has
various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its
operations.
(b) Interest rate risk
The economic entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a
result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets
and and financial liabilities is as follows:
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Note 27 – Financial instruments – continued
(b) Interest rate risk – continued
Weighted average
effective interest rate
Floating interest rate
Fixed interest rate within
1 year
2006
%
5
7
2005
%
5
6
2006
$
2005
$
2006
$
2005
$
1,478,934
1,824,446
-
-
2,504,546
3,037,021
3,983,480
4,861,467
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Fixed interest rate within
1 to 5 years
2006
$
2005
$
188,343
188,343
-
-
-
-
200,000
200,000
-
-
-
-
Non-interest bearing
Total
2006
$
300
2005
$
2006
$
2005
$
300
1,479,234
1,824,746
1,038,994
813,495
1,038,994
813,495
-
-
2,692,889
3,237,021
1,039,294
1,352,010
1,352,010
813,795
975,873
975,873
5,211,117
5,875,262
1,352,010
1,352,010
975,873
975,873
Cash and cash equivalents
Trade and other receivables
Financial assets
Total financial assets
Trade and other payables
Total financial liabilities
Cash and cash equivalents
Trade and other receivables
Financial assets
Total financial assets
Trade and other payables
Total financial liabilities
(c) Credit risk
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised
financial assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the balance
sheet and notes to the financial statements.
(d) Net fair values
For other assets and other liabilities the net fair value approximates their carrying value.
Note 28 – Change in accounting policy
a) The economic entity has adopted the following Accounting Standards for application on or after 1 January 2005:
– AASB 132: Financial Instruments: Disclosure and Presentation; and
– AASB 139: Financial Instruments: Recognition and Measurement
The changes resulting from the adoption of AASB 132 relate primarily to increased disclosures required under the Standard
and do not affect the value of amounts reported in the financial statements.
The adoption of AASB 139 has resulted in differences in the recognition and measurement of the economic entities
available-for-sale financial assets. Available for sale financial assets are revalued to fair value at reporting date. All
adjustments resulting from changes in fair value are taken directly to equity. Previously financial assets were valued at cost.
This change in accounting policy has resulted in a reduction in financial assets of $6,632, an increase in deferred tax assets
of $1,989 and a reduction in available for sale financial assets reserve of $4,643 for the year ended 30 June 2006.
The economic entity has elected not to adjust comparative information resulting from the introduction of AASB 139 after
applying the exemption available under AASB 1: First-time Adoption of Australian equivalents to International Financial
Reporting.
b) The following Australian Accounting Standards issued or amended, which are applicable to Australian Ethical Investment
Limited, but are not yet effective and have not been adopted in preparation of the financial statements statements at
reporting date are:
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AASB
Amendment
AASB Standard Affected
Nature of change in
accounting policy and
impact
Application
date of the
standard
Application
date of the
company
2004-3
AASB 1: First-time Adoption of AIFRS
No change, no impact
1-Jan-06
1-Jul-06
AASB 101: Presentation of Financial Statements No change, no impact
1-Jan-06
1-Jul-06
AASB 124: Related Party Disclosures
No change, no impact
1-Jan-06
1-Jul-06
2005-10
AASB 139: Financial Instruments: Recognition
and Management
No change, no impact
1-Jan-07
1-Jul-07
AASB 101: Presentation of Financial Statements No change, no impact
1-Jan-07
1-Jul-07
AASB 114: Segment Reporting
No change, no impact
1-Jan-07
1-Jul-07
AASB 117: Leases
AASB 132: Financial Instruments: Disclosure and
Presentation
No change, no impact
1-Jan-07
1-Jul-07
No change, no impact
1-Jan-07
1-Jul-07
AASB 133: Earnings per Share
No change, no impact
1-Jan-07
1-Jul-07
AASB 1: First-time Adoption of AIFRS
No change, no impact
1-Jan-07
1-Jul-07
AASB 4: Insurance Contracts
No change, no impact
1-Jan-07
1-Jul-07
AASB 1023: General Insurance Contracts
No change, no impact
1-Jan-07
1-Jul-07
AASB 1038: Life Insurance Contracts
No change, no impact
1-Jan-07
1-Jul-07
New Standard AASB 7: Financial Instruments: Disclosure
1-Jan-07
1-Jul-07
No affect on amounts
recognised but will impact
the type of information
disclosed in relation to
financial instruments.
All other pending Standards issued between the previous financial report and the current reporting date have no
application to the company.
AASB
Amendment
AASB Standard Affected
2005-1
AASB 139: Financial Instruments: Recognition and Management
2005-4
AASB 139: Financial Instruments: Recognition and Management
AASB 132: Financial Instruments: Disclosure and Presentation
AASB 1: First-time Adoption of AIFRS
AASB 1023: General Insurance Contracts
AASB 1038: Life Insurance Contracts
2005-5
AASB 1: First-time Adoption of AIFRS
AASB 139: Financial Instruments: Recognition and Management
2005-6
AASB 3: Business Combinations
2005-9
AASB 4: Insurance Contracts
AASB 1023: General Insurance Contracts
AASB 139: Financial Instruments: Recognition and Management
AASB 132: Financial Instruments: Disclosure and Presentation
2006-1
AASB 121: The Effects of Changes in Foreign Exchange Rates
New Standard AASB 119: Employee Benefits
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DIRECTORS’ DECLARATION
The Directors of Austalian Ethical Investment Limited declare that:
1.
the financial statements and notes, as set out on pages 24 to 48 and the additional disclosures included in the directors’
report designated as audited are in accordance with the Corporations Act 2001:
a.
comply with accounting standards and the Corporations Regulations 2001; and
b.
give a true and fair view of the financial position as at 30 June 2006 and of the performance for the financial year
ended on that date of the company and economic entity;
2.
the Chief Executive Officer and Chief Finance Officer have each declared that:
a.
the financial records of the company for the financial year have been properly maintained in accordance with
section 286 of the Corporations Act 2001;
b.
the financial statements and notes for the financial year comply with the Accounting Standards; and
c.
the financial statements and notes for the financial year give a true and fair view.
3.
in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and
when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
George Pooley
Director
Dated this 8 September 2006
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INDEPENDENT AUDIT REPORT TO THE MEMBERS
Scope
We have audited the financial report of Australian Ethical Investment Limited and controlled entities for the financial year
ended 30 June, 2006 as set out on pages 24 to 48. As permitted by the Corporations Regulations 2001 the Company has
disclosed information about the remuneration of Directors and Executives (“remuneration disclosures”), as required by
Accounting Standard AASB 124 Related Party Disclosures, under the heading “Remuneration Report” contained in pages
16 to 21 of the Directors’ Report, and not in the financial report.
The financial report includes the consolidated financial statements of the consolidated entity comprising the Company
and the entity it controlled at the year’s end or from time to time during the financial year. The Company’s Directors are
responsible for the financial report and the Remuneration Disclosures contained in the Directors’ Report in accordance with
the Corporations Regulations 2001. We have conducted an independent audit of this financial report in order to express an
opinion on it to the members of the Company.
Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether
the financial report is free of material misstatement and the remuneration disclosures in the Directors Report comply
with Accounting Standard AASB 124. Our procedures included examination, on a test basis, of evidence supporting the
amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting
estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial report
is presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements in
Australia and statutory requirements so as to present a view which is consistent with our understanding of the Company’s
and the consolidated entity’s financial position, and performance as represented by the results of their operations and their
cash flows and whether the remuneration disclosures comply with Accounting Standard AASB 124.
The audit opinion expressed in this report has been formed on the above basis.
Audit Opinion
In our opinion:
1.
the financial report of Australian Ethical Investment Limited is in accordance with:
a.
the Corporations Act 2001, including:
i.
giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June, 2006
and of their performance for the year ended on that date; and
ii.
complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
b.
other mandatory professional reporting requirements in Australia; and
2.
The Remuneration disclosures that are contained on pages 16 to 21 of the Directors’ Report comply with Accounting
Standard AASB 124.
THOMAS DAVIS & CO.
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P.L. WHITEMAN
PARTNER
SYDNEY,
8 September, 2006
Liability limited by a scheme approved under Professional Standards Legislation
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Shareholder information
The shareholder information set out below was current as
at 25 September 2006.
20 Largest Shareholders
Substantial Shareholders
Substantial shareholders of ordinary shares are specified in
the table of the top 20 shareholders set out below.
Ordinary Shares
Name
Percentage
%
Substantial
Shareholder
Number
of
Ordinary
Shares
Voting Rights
Ordinary Shares
The voting rights attaching to ordinary shares are fully set
out in the company’s Constitution. In brief, at meetings of
members each member entitled to vote may vote in person
or by proxy or attorney, and:
•
•
on a show of hands has 1 vote; and
on a poll has 1 vote for every share held.
Options
No voting rights attach to any options on issue.
Distribution of Shareholdings
Ordinary Shares
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,000 – OVER
Totals
Non-marketable parcel
Holders
Units
144,065
172,133
63,559
389,311
148,194
%
15.7%
18.8%
6.9%
42.4%
16.2%
917,262
100%
17
516
75
10
14
1
616
2
Options issued under the Employee Options
Scheme
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,000 – OVER
Totals
Holders
Units
%
12
24
11
1
0
48
4,881
65,930
77,378
11,582
3.1%
41.3%
48.4%
7.2%
0
0
159,771
100.0%
Select Managed
Funds Limited
148,194
16.2%
Mr Howard Pender
49,147
45,607
5.4%
5.0%
Yes
Yes
Yes
James Andrew
Thier
Caroline Margaret
Le Couteur
Mr Trevor Roland
Lee
Mrs Judith
Margaret Burton
Gang – Gang Pty
Ltd
Ms Judith Clark
Mr Bruce Allan
McGregor &
Mrs Ann Marion
McGregor
Dr Edward Arthur
Iceton
HB Sarjeant &
Assoc Pty Ltd
Mr Alistair David
Clark
Mrs Jane Frances
Hickling
Daisy Thier
Mr Peter Alexander
Anderson
Mr Michel Beuchat
& Mrs Ann Beuchat
Ms Susie Edwards
Mr Philip Julian
Eriksen & Mr Julian
Hans Eriksen
Mrs Hanneliese
Claire Graf
Mr Rodney
Matthew Myer
44,277
4.8%
39,174
4.3%
34,233
3.7%
33,984
3.7%
29,571
24,447
3.2%
2.7%
16,500
1.8%
16,301
1.8%
16,263
1.8%
14,500
1.6%
14,674
10,833
1.6%
1.2%
9,667
1.1%
7,941
7,583
0.9%
0.8%
7,347
0.8%
7,332
0.8%
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australianethical
Corporate directory
Australian Ethical Investment Ltd
ABN 47 003 188 930
Company secretary
Philip George
Telephone:
Facsimile:
Email:
Mail:
02 6201 1994
02 6201 1987
pgeorge@austethical.com.au
GPO Box 2435
Canberra ACT 2601
Postal address
GPO Box 2435
Canberra ACT 2601
Registered office / place of business
Suite 66, Canberra Business Centre
Bradfield Street
Downer ACT 2602
Australia
www.austethical.com.au
Share registry
Registries Ltd
ABN 14 003 209 836
Street:
Level 2, 28 Margaret Street
Sydney NSW 2000
Telephone:
Facsimile:
Mail:
Email:
02 9290 9600
02 9279 0664
PO Box R67
Royal Exchange
Sydney NSW 1223
registries@registriesltd.com.au
www.registriesltd.com.au
Using the Registries Ltd website, shareholders are able
to view balances, transaction history and recent dividend
payments. They can also view and update email addresses,
annual report elections and tax file numbers. Various
forms are also available for download to assist in the
management of shareholdings.
Stock exchange listing
Australian Stock Exchange Limited
ASX code:
AEF
Corporate vision and mission
Australian Ethical’s vision
By its operations Australian Ethical will promote a sea-
change in community-wide practice such that all investment
will be undertaken with an ethical purpose as well as in
pursuit of competitive return for chosen risk.
Australian Ethical’s mission
Australian Ethical’s mission is to provide those investors
who share our social and environmental aims (as set out
in our charter) with the means to earn a competitive return
for chosen risk whilst at the same time contributing to a just
and sustainable human society and the protection of the
natural environment.
In order to fulfil our mission our goals are:
•
•
to select every investment with which we are involved in
accord with the Australian Ethical Charter;
•
to earn a competitive return for the chosen level of risk
upon every portfolio with which we are involved;
•
to conduct our own operations in accord with the items
of the Australian Ethical Charter, in particular we seek
to:
•
•
•
•
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nurture staff participation and control of Australian
Ethical;
achieve a high standard of administrative service for
investors in our products;
ameliorate wasteful or polluting practices in our own
business operations;
envourage, care for and provide educational
opportunity for our fellow workers, respect their
individual needs, aspirations and idiosyncrasies;
and ensure our promotional material is
comprehensive, transparent and readily understood.
to generate and disseminate information regarding
standards of corporate behaviour and to engage in
dialogue with the corporate sector in terms of the items
set out in the Australian Ethical Charter.
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The Australian Ethical Charter©
australianethical
The trusts shall seek out investments which provide for and support:
a.
the development of workers’ participation in the ownership and control of their work
organisations and places;
b.
the production of high quality and properly presented products and services;
c.
the development of locally based ventures;
d.
the development of appropriate technological systems;
e.
the amelioration of wasteful or polluting practices;
f.
the development of sustainable land use and food production;
g.
the preservation of endangered eco-systems;
h.
activities which contribute to human happiness, dignity and education;
i.
j.
the dignity and well being of non-human animals;
the efficient use of human waste;
k.
the alleviation of poverty in all its forms;
l.
the development and preservation of appropriate human buildings and landscapes.
The trusts shall avoid any investment which is considered to unnecessarily:
i.
pollute land, air or waters;
ii.
destroy or waste non-recurring resources;
iii.
extract, create, produce, manufacture, or market materials, products, goods or services
which have a harmful effect on humans, non-human animals or the environment;
iv.
market, promote or advertise, products or services in a misleading or deceitful manner;
v.
create markets by the promotion or advertising of unwanted products or services;
vi.
acquire land or commodities primarily for the purpose of speculative gain;
vii.
create, encourage or perpetuate militarism or engage in the manufacture of armaments;
viii.
entice people into financial over-commitment;
ix.
exploit people through the payment of low wages or the provision of poor working
conditions;
x.
discriminate by way of race, religion or sex in employment, marketing, or advertising
practices;
xi.
contribute to the inhibition of human rights generally.
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