Australian Ethical Investment Ltd
Annual report to shareholders
for year ending 30 June 2007
australianethical
investment + superannuation
R
® Registered trademark of Australian Ethical Investment Limited.
for investors, society and the environment
australianethical
Financial summary
to 30 June 2007
as at
30 June 2007
30 June 2006
30 June 2005
30 June 2004
5 174
4 879
2 293
76
7 684
1819.2
Current assets ($’000)
Non-current assets ($’000)
Current liabilities ($’000)
Non-current liabilities ($’000)
Net assets ($’000)
2000
1800
1600
1400
1200
1000
800
600
400
200
0
200
180
160
140
120
100
80
60
40
20
0
600
550
500
450
400
350
300
250
200
150
100
50
0
0
0
0
1
$
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n
o
i
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i
m
$
Profit after tax (NPAT)
1362.6
784.4
459.8
190.9
2003
2004
2005
2006
2007
Year ending 30 June
Basic earnings per share
194.8
150.3
89.6
52.9
23.3
2003
2004
2005
2006
2007
Year ending 30 June
Funds under management
552
417
311
267
213
2003
2004
2005
2006
2007
As at 30 June
5 176
3 103
1 928
77
6 274
5 833
701
1 456
31
5 047
5 074
517
974
75
4 542
13
12
11
10
9
8
7
6
5
4
3
2
1
0
30
27
24
21
18
15
12
9
6
3
0
200
180
160
140
120
100
80
60
40
20
0
Revenue
12.09
9.66
7.42
5.90
4.70
2003
2004
2005
2006
2007
Year ending 30 June
Return on equity
26.1
24.1
16.4
10.4
5.3
2003
2004
2005
2006
2007
Year ending 30 June
Dividends paid
192
85
72
52
22
2003
2004
2005
2006
2007
Year ending 30 June
n
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$
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2005 fi gures in the above tables and graphs have been adjusted where necessary as for fi rst time adoption of Australian
equivalents to International Financial Reporting Standards (AIFRS).
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Contents
Chair’s report
Chief executive officer’s report
Sustainability report
Corporate governance statement 2007
Directors’ report
Financial statements
Shareholder information
Corporate directory
Corporate vision and mission
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53
53
The Australian Ethical Charter
The Company will order its affairs so as to
provide for and to 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;
the dignity and well being of non-human animals;
i.
j.
The Company will also order its affairs so
as to avoid activity 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;
the efficient use of human waste;
viii.
entice people into financial over-commitment;
k.
the alleviation of poverty in all its forms;
l.
the development and preservation of appropriate human
buildings and landscapes.
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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Chair’s report
An excellent year and a sound outlook
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The board is pleased to report that the Australian Ethical
Investment group has had another strong year in terms
of profit and growth in funds under management, with a
record dividend declaration of $1.92 per share. The growth
in return to our shareholders has been achieved without
any compromise to our deep green investment strategy
or our commitment to the Australian Ethical Charter. Our
balance sheet remains strong with the ability to finance our
change in superannuation administrator and to extend our
marketing reach over 2008 as discussed below.
Climate change
In 2007 we have seen climate change become a
mainstream concern. While overdue, this concern is
positive for focusing consumer, government and corporate
attention. Perhaps the Stern report of October 2006
created the tipping point in climate change awareness
when it stated that ‘climate change is the greatest and
widest ranging market failure ever seen’. More positively, it
reports that the benefits of strong, early action considerably
outweigh the costs.
Australian Ethical has for a long time been a major investor
in companies that are helping to prevent climate change.
World Trust
After many years with an unchanged product offering, we
launched a new retail product, the Australian Ethical World
Trust, in July. The World Trust aims to provide investors
with long-term growth through investment in overseas
companies which meet our Charter. The World Trust
enables investors to support a wide range of socially and
environmentally attractive activities that are not available for
investment in Australia. Providing a specialised international
product gives investors more choice in achieving an ethical
and appropriately diversified investment strategy.
The World Trust makes its investments through our
new international wholesale trust, the Australian Ethical
International Equities Trust.
Staff and management worked very hard to launch the new
products on time, and the board has been pleased with
interest in the World Trust to date.
Trevor Pearcey House
In March 2007, we moved into our refurbished premises at
Block E Trevor Pearcey House in the Canberra suburb of
Bruce. The refurbishment is a significant statement to the
commercial building sector of how energy and resource
intensity can be significantly reduced with appropriate
forethought. The fact that the building is a refurbishment
rather than a new building demonstrates that the existing
cohort of conventional commercial buildings can be
reworked to produce better environmental and productivity
outcomes. An application has been lodged with the Green
Building Council of Australia for a Green Star rating. So far
our building has won two prizes – a highly commended
in the United Nations Association of Australia World
Environment Day Awards and the Commercial Winner
and Overall Winner in the Keep Australia Beautiful ACT
Sustainable Cities Awards.
Community grants
Our company’s growing profits means greater returns to
the community through our community grants program. The
2006–07 record profit translates into a grant of $225 000. In
2007, for the first time, a major project grant of $50 000 was
made to The Australia Institute. The Institute will develop
teaching materials on climate change for secondary
schools. We chose to support this major project as it ties in
with our charter commitment to education, the environment
and to achieving long term positive change in society.
Our commitment to supporting grass roots community
groups also continues. In 2007 grants were made to 40
organisations involved in a wide range of conservation and
charitable activities in Australia and overseas.
Corporate governance
The board has focused considerable effort in strengthening
our company’s corporate governance. With the departure
of Pauline Vamos to take on a full-time role at ASFA, we
have initiated a major review of our corporate governance
at board level, including:
•
•
actively seeking at least one additional independent
director;
a skills audit of current and prospective directors;
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performance assessments of current directors;
investigating ways to improve board, committee and
management function;
a continuing commitment to our stated objective of
achieving a majority of independent directors, assuming
the availability of suitable candidates.
Year ahead – strategic plans
In March 2007, the board and senior management
conducted a review of the Australian Ethical group’s
strategy. As a result of this review, we are aiming to
broaden our marketing reach beyond our traditional support
base. Strategies are in place to target a more mainstream
retail market and the associated adviser distribution
channels. Greater resources will also be allocated to
attracting institutional investment. This is a new direction
in terms of our marketing effort, but not in terms of our
commitment to being Australia’s most ethical and deep
green fund manager.
Grants to community organisations
Major project grant
The Australia Institute: teaching materials on climate
change for Australian schools
National Trust of Australia (ACT) – St John’s Church
Heritage Conservation Fund: conservation of the
Golden Sun Moth and its habitat
Engineers Without Borders
Friends of the Earth Australia: anti-nuclear
campaigns
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ACT Eden-Monaro Cancer Support Group
Barefoot Economy
Australian Marine Conservation Society
Camp Quality
Australians for Disability and Diversity Employment
Pedal Power ACT
WIRES (NSW Wildlife Information, Rescue and
Education Service)
Bicycle Federation of Australia
NRMA CareFlight
WaterAid Australia
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5
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0
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australianethical
I am very much looking forward to my new role as chair.
The staff, management and board of Australian Ethical are
hard working, innovative and passionate about our group’s
goals. It is an exciting time for the group as we push to
implement our growth strategies. Wise use of the planet’s
resources has never been more important, and by growing
our customer base and our funds under management we
will contribute positively to this goal.
Naomi Edwards
Chair
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Aid/Watch
Animal Liberation NSW
Animals Asia Foundation (Australia)
Asylum Seeker Resource Centre
Australian Crohn’s & Colitis Association
Australian Drug Foundation
Canberra Environment and Sustainability Resource
Centre
Chrysalis Insight Incorporated
Conservation Council south east region and Canberra
Edgar’s Mission
Fair Trade Association of Australia and New Zealand
Head High
Hepburn Wildlife Shelter
HopeStreet Urban Compassion
International Women’s Development Agency
Kids Under Cover
Mineral Policy Institute
National Parks Association of New South Wales
Rainforest Rescue
Respite Care Bega Valley
New Internationalist Publications
Prison Fellowship Australia (Victoria)
Vulcana Women’s Circus
Darling Range Wildlife Shelter
Marine Stewardship Council (Asia Pacific)
The Friends of Oolong
Wildlife Preservation Society of Queensland
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Chief Executive Officer’s report
Strong performance
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The Australian Ethical Investment group continued to
perform strongly in the second half of the 2006–07 financial
year. I am very pleased to report a consolidated net profit
of $1 819 177. This trading result represents an increase
of 34% over the previous financial year’s net profit of
$1 362 612. The result continues the group’s trend of an
increased profit every year since 2003.
Growth in funds under management was again strong with
good investor inflow and positive returns from investments.
At 30 June 2007, funds under management, after a
distribution of $59 million, stood at $552 million.
Increasing funds under management is essential for the
company as it results in increased revenue and assists
in building economies of scale. The company’s cost to
income ratio continues to fall with a decrease from 77.4%
in 2005–06 to 76.1% in 2006–07. This is a particularly
pleasing result given the increased employment costs we
have experienced. As a result of the improved profit, return
on equity has increased from 24.1% to 26.1%.
The continued success and growth of our business is
dependant on the performance of the Australian Ethical
trusts. 2006–07 saw solid returns across all of the
Australian Ethical trusts. The Australian Ethical Equities
Trust was the star performer with a return of 36.9%,
buoyed by a strong performance from its small company
investments. The other three Australian Ethical trusts
also performed strongly against their peer groups. The
Australian Ethical World Trust was launched in July 2007
and we have been pleased with the response to date. We
remain committed to investing in quality companies taking
into account ethical, governance and financial strength and
ensuring our returns are commensurate with the risk profile
of the individual trust.
Historically the Australian Ethical Retail Superannuation
Fund has experienced significant and steady growth. This
strong growth continued during the financial year as people
took advantage of choice of funds and recent changes to
legislation.
Last year the directors took the decision to retain some of
the profits to invest in the future growth of the company and
to rebuild liquidity following the purchase of Block E Trevor
Pearcey House. These aims have now been achieved.
Mindful of the significant franking credits held by the
company, the directors have decided that shareholders will
be paid a final dividend (fully franked) of $1.52 per ordinary
share. Added to the interim dividend of 40 cents per share,
the total dividend for the 2006–07 financial year will be
$1.92 per share, an increase of 126% over the previous
year.
As many of you would be aware we refurbished Block E of
Trevor Pearcey House to meet high standards of energy
efficiency and to provide our staff with a comfortable
and productive working environment. We are now well
settled into our new home and I am pleased to advise it is
everything we hoped for in terms of amenity and resource
efficiency.
Outlook
As previously flagged, we are keen to attract increased
non-retail investment and are working through strategies
which will allow us to do this better. Rest assured this will
not be at the expense of our existing retail customers who
continue to be great supporters of the Australian Ethical
trusts.
The share market can be a volatile creature. This has been
amply demonstrated in recent months by the reaction of
global financial markets to the poor lending practices of
American sub-prime mortgage providers. Australian Ethical
does not invest in any sub-prime mortgage debt in our
fixed interest portfolio. We have no obvious exposure to
‘at risk’ issuers of sub-prime mortgages. However, sharp
movements in markets inevitably affect investor sentiment
and it seems likely that we are yet to see the full extent of
the fallout from these problems. Other challenges facing
the company include keeping investors informed about how
the volatility of markets affects their savings and finding and
retaining talented staff in Canberra’s tight labour market.
We have made considerable progress in attaining greater
efficiencies in our business. The transfer of trust assets to
a single custodian is largely complete. We plan to transition
the administration of the superannuation fund to a new
service provider in 2008. This move will have a significant
impact in reducing the cost of that service in future years
and enabling an improvement in service standards.
Funds under management stood in excess of $600 million
in early September 2007 but recent volatility has taken a
toll on capital growth and it has not been as strong as we
would have liked. Management and the board have put
considerable effort into developing a marketing strategy
to attract new inflows and we are hopeful this will produce
long-term results. In the mean time I am cautiously
optimistic about our outlook for the current year.
I would like to thank all the staff for their work in achieving
yet another great result. I would also like to thank you
Sustainability report
Australian Ethical is committed to conducting our own
operations in accordance with the Australian Ethical
Charter. During the year, there were a number of
sustainability highlights, two of which are detailed
below. Further information on Australian Ethical’s social,
environmental and economic performance will be provided
in the company’s 2007 sustainability report.
Our new home
In March 2007, Australian Ethical moved into its refurbished
business premises, Block E of Trevor Pearcey House. The
office refurbishment was undertaken within the ethos of
the Australian Ethical Charter, and designed to achieve
environmental benefits and resource efficiency as well as
increased staff comfort and productivity. Here are some
facts and figures about our new home:
australianethical
our shareholders for your on-going support and I look
forward to seeing you at the annual general meeting on
22 November.
Anne O’Donnell
Chief Executive Officer
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purchased strata title 2006, occupied March 2007
net lettable area: about 1000m2
we envisage it will be sufficient for about 65 staff
designated parking spaces for small cars and
motorbikes
enclosed bicycle storage for staff and visitor bicycle
racks.
Project cost
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about $4 million in total including refurbishment
$2.3 million for purchase of base building
Staff health, comfort and control
Four dimensions of the refurbishment reflect this aim:
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better access to natural light
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four internal ‘stacks’ with glass brick sides to allow
natural light into (and to allow hot air to exit from) the
middle of the first floor
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Trevor Pearcey house
The Building
Block E, Trevor Pearcey House, Traeger Court, 34 Thynne
Street, Bruce ACT 2617
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part of the Fern Hill Technology Park, about 5km from
the Canberra CBD
one block in a complex of five near identical, square two
storey blocks. Prior to refurbishment it was a standard
20-year-old commercial office building
The kitchen, showing the internal ‘stacks’.
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opened barrel vault roof, installed louvered windows
and a cathedral ceiling
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limited internal office partitioning
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better access to natural ventilation
•
openable windows – over 90% of the floor space is
naturally ventilated
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more comfortable feeling of warmth/‘coolth’
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building is now heated by hydronic radiators
downstairs the slab has been exposed and insulated
to avoid the need for mechanical cooling
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improved indoor air quality
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use of paints and sealants with low volatile organic
compounds (VOC)
low VOC emissions from reconditioned (post-
consumer) carpet
•
very low formaldehyde (E0) composite wood products.
Environmental savings
Studies into green buildings have clearly shown their
environmental benefits. These include a reduction in
waste going to landfill through the reuse and recycling of
materials, a reduction in energy and water consumption
and lower greenhouse gas emissions. Occupants of
green buildings benefit from improved air quality and a
more natural office environment, translating into greater
productivity, and less staff turnover.
The reception area
Ratings
An application for a Green Star Office Design rating has
been submitted.
The Green Star rating system, an initiative of the Green
Building Council of Australia, evaluates the environmental
design and performance of Australian buildings based on
a number of criteria, including energy and water efficiency,
quality of indoor environments and resource conservation.
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Keep Australia Beautiful 2007 ACT
Sustainable Cities Award.
Awards
In June 2007, Australian Ethical received a ‘special
commendation’ in the United Nations Association of
Australia World Environment Day Awards 2007 – Szencorp
Green Building Award.
In August 2007, Australian Ethical was awarded ‘Overall
Winner’ in the Keep Australia Beautiful 2007 ACT
Sustainable Cities Awards. The award recognises the
sustainable refurbishment of our Trevor Pearcey House
premises.
Refurbishment features
Energy usage
Features intended to save energy and reduce ongoing
green house gas emissions:
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passive cooling and ventilation combined with a wider
thermal comfort band (19–26°C) reducing demand on
mechanical systems
double glazing
external walls are reverse brick veneer – thermal mass
on the inside is insulated (75mm) from the outside air
temperature
R5 insulation under the metal deck roof
improvements to the shading panels
exposing the ground floor slab
evacuated tube solar water heating.
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Community grants program
As prescribed in the company’s constitution, 10% of profit
must be donated to charitable, benevolent and conservation
purposes. Recipients of the grants are involved in a wide
range of environmental, charitable and community activities,
which the company seeks to support as an important
contribution to a positive and sustainable society. In 2007
a record $224 964 has been paid to 41 organisations, an
increase that is close to $55 000 from the previous year.
The board has reviewed the structure of the grants for
2007 and future years. The grants now consist of two
components – the payment of two major project grants
per year and around 25 smaller grants. The large major
project grants will typically be made to one social and one
conservation project each year. However, as 2007 is the
first year in which a major project grant is being paid, only
one project has been selected and 40 organisations have
received grants as outlined on page 5.
As the company is increasingly able to support the
community with larger grants, the board wants to ensure
that it supports larger projects that have a lasting tangible
impact. Significant projects that can be supported over a
number of years are sought. A grant committee has been
established to short list potential projects, and invite and
review applications.
The major project grant for 2007 is The Australia Institute’s
‘Teaching materials on climate change for Australian
schools’ project, which involves the production and
dissemination of a series of discrete teaching materials
on the scientific, economic, political and ethical aspects
of climate change for students in the early years of high
school.
The building is designed to be passively cooled in summer
by a night purge. When the night temperature drops
well below the internal temperature the windows open
automatically to draw cool air into the building. Hot air is
exhausted via the stacks and the louvered windows in the
barrel vault.
Water usage
Water efficient features incorporated into the building:
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taps upgraded to 4L per minute, showerheads to 5A
fittings – 6L per minute
upgrade of the existing single flush toilets to dual flush
with a 9/4.5L system.
urinals upgraded with a Sani-Sleeve low water use
system reducing water use by 95%
rainwater tanks collecting from the roof and plumbed for
use in flushing the toilets
garden drip irrigation with moisture sensor.
Waste
Some of the uses of recycled material:
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glass blocks used in the original structure were reused
for the stacks and wall partition;
250m2 of carpet tiles were reused
all ceiling tiles used were already on the site
noise insulation in the ceiling from the old fit out was
reused in partition walls
metal shade structures were re-modelled and repainted,
in some cases had new mesh installed
floor tiles in the old computer room were painted and
reused for wall decoration
reused large quantities of v-jointed plasterboard, doors
and some air conditioning ducting from original fit-out
materials which could not be reused were, in general,
sent to recycling.
Recycling rate for the project of >80% by weight.
Clive Hamilton of The Australia Institute,
major project grant winner for 2007.
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Corporate governance statement 2007
This statement discloses the extent to which Australian
Ethical Investment Ltd 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, Australian
Ethical has provided information on its corporate
governance practices against all recommendations.
Lay solid foundations for management
and oversight
Australian Ethical 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:
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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 (that is, 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;
1 As defined in section 9 of the Corporations Act 2001
2.
3.
4.
5.
6.
7.
has not within the last three years been employed in an
executive capacity by the company or another group
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 Australian Ethical did not comprise a majority
of independent directors during the reporting period. For
five months of the reporting period, the board comprised
a majority of executive directors (three out of five
directors on the board). For the remaining months of the
reporting period, the board comprised an equal number of
independent and executive directors (three of each).
Pauline Vamos has resigned effective 31 August 2007. With
Pauline’s resignation the board comprises three executive
directors and two independent directors. The independent
directors are Naomi Edwards and Justine Hickey. 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 Securities Exchange, the
board has undergone change in its composition and
structure.
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Decisions on future board composition will be guided by
whether the board considers it has the 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 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 Australian Ethical 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 Australian Ethical
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 chair, 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 chair was an independent director
throughout the reporting period.
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 chair 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). The chair 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.
In particular:
•
the committee includes the company secretary who
is responsible to the chair of the board and the board
generally on governance matters;
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•
at a number of meetings the committee speaks directly
to the external auditor in the absence of executive
management.
•
to review on a quarterly basis the company’s risk
registers and recommend to the board any changes to
those risk registers.
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 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 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.
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.
Respect the rights of shareholders
The company maintains a comprehensive and informative
‘shareholder centre’ 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.
Australian Ethical produces a newsletter, Aim High, for
trust and superannuation investors, and since listing the
company has introduced a shareholder newsletter. 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.
Australian Ethical also produces a sustainability report for
shareholders and other stakeholders on the triple bottom
line performance of Australian Ethical (available on the
company’s 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.
Recently the board has delegated to its Compliance and
Risk Committee the responsibility:
•
to oversee and monitor the implementation of the
company’s risk management systems;
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 chair. The board as a whole then
considers and discusses the results of the questionnaire
at a board meeting. The board chair 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 chair. 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 on themes or perceptions rather than specific
comments;
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•
•
•
•
complete a draft of the annual performance review and
provide to the executive for discussion;
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 chair 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
Australian Ethical’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 Australian Ethical 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’
Australian Ethical’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 chief executive officer and
executive directors) receive 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.
Australian Ethical has a mix of full-time and part-time
staff and endeavours to provide flexible employment
arrangements within business needs.
Australian Ethical 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 at the end of the reporting
period were Naomi Edwards and Pauline Vamos. 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 Australian Ethical is to promote
ethical/socially responsible investment. By the very nature
of Australian Ethical, the board is committed to the highest
standards of conduct and ethical practices in guiding the
business activities of Australian Ethical 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 on 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’ report and financial statements were
lodged with the Australian Securities Exchange on
31 August 2007).
Other than as described, there were no other significant
changes in the nature of the controlling entities activities
during the year.
The directors of Australian Ethical Investment Ltd, the
controlling entity, present their report on the company
and its controlled entity for the financial year ended
30 June 2007. 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 2007 and to the date of this report
are:
Name
Time in office
George Pooley
5 years
Resigned
13 October 2006
Caroline Le Couteur
16 years
James Thier
Howard Pender
Naomi Edwards
Pauline Vamos
16 years
16 years
2 years
1 year
Justine Hickey
<1 year
Notice of
resignation,
effective
31 August 2007
Appointed
1 March 2007
Directors have been in office since the start of the financial
year to the date of this report unless otherwise stated.
Company secretaries
The name of each person who was a company secretary of
the company as at the end of the financial year are:
Name
Philip George
Principal activities
The principal activity of the controlling entity during the
financial year was to manage four public offer ethical
investment trusts (registered managed investment
schemes). The controlling entity’s wholly owned subsidiary,
Australian Ethical Superannuation Pty Ltd, was trustee
of the Australian Ethical Retail Superannuation Fund
during the financial year. During the course of the year,
the controlling entity established two further registered
managed investment schemes – the Australian Ethical
International Equities Trust and the Australian Ethical World
Trust. The International Equities Trust is a wholesale trust
which aims to offer exposure to high quality companies
listed on global share markets and aims to provide long-
term growth through such investments. The World Trust is
a public offer trust that will hold units in the International
Equities Trust.
Operating results
The consolidated entity (Australian Ethical Investment
Ltd 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 2007 of $1 819 177. This result is a 34% increase
on the result of $1 362 612 for the previous financial year.
Review of operations
The 2007 result continues a trend of excellent results.
The company has continued to experience growth in funds
under management and as a consequence improved
revenue and profitability. As at 30 June 2007, funds
under management totalled $552M (ex. distribution). This
compares with funds under management of $417M (ex.
distribution) as at 30 June 2006. The aggregate distribution
amount paid for the current period was $59M, compared to
a distribution the previous year of $41M.
The costs to income ratio1 has reduced from 78% in the
previous year to 76% this year and return on equity has
increased from 24.1% to 26.1%.
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. The June 2007 inflow for the
Australian Ethical Retail Superannuation Fund was over five
times the average monthly inflow experienced for the 11
months to May 2007.
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 $224 964 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.
Except as described under Principal activities above, during
the 2006–07 financial year the company did not make
any significant changes to its core funds management
operations. Gary Leckie replaced Mark Bateman as chief
financial officer in February 2007. There were no other
significant changes in management or organisational
structure.
During the year the company relocated to Block E, Trevor
Pearcey House, Traeger Court, 34 Thynne Street, Bruce
ACT 2617. The relocation followed an environmentally
exemplary refurbishment of the premises at Trevor Pearcey
House. Refurbishment costs including fit-out totalled $1.8M.
1Tithes expense is not included in costs when calculating this ratio.
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Other than the refurbishment of the building and the inflows
into the superannuation fund in June 2007, there were no
unusual events or transactions which affected the financial
result for the period ended 30 June 2007.
ordinary share paid in March 2007. The total dividend for
the year will be $1.92 per share, an increase of 126%
over the 85 cents per ordinary share paid in respect of the
previous financial year.
Financial position
The company’s capital structure and policies remain
relatively simple. The company currently has no debt and
capital not required for working purposes is held as an
investment in Trevor Pearcey House and an investment
portfolio comprising triple A securities, senior bank debt and
corporate rated debt.
Maintenance of a certain level of capital is a condition of
the company’s Australian Financial Services Licence. The
company currently meets the $5M capital requirement
above which no extra capital is required as a result of
increased funds under management.
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
To date a significant portion of the investment in the
Australian Ethical trusts has come from retail clients.
Following a review of strategic options in early 2007 the
directors have taken the decision to put resources into
broadening the appeal of the Australian Ethical products.
Expenditure related to this expansion of focus is likely to
impact on our cost to income ratio given the expected time
lag between work carried out and the inflow of funds. We
can expect some deviation from the downward trend which
the costs to income ratio has experienced over the past
three years.
The company will continue to focus on building and
servicing its clients and streamlining its processes, ensuring
scalability of operations and seeking cost efficiencies. The
company reviews its product offerings annually and this
analysis forms the basis of decisions regarding product
offerings.
At this time the company has no plans to make any
significant changes to its core operations in the coming
financial year.
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
Pauline Vamos has advised the company that she will
resign from all positions with the company with effect from
31 August 2007, to take up full-time employment.
The directors have declared that a final dividend of $1.52
per ordinary share (fully franked) be paid to shareholders.
This is in addition to the interim dividend of 40 cents per
The board notes that the declaration and quantum of any
future dividend will depend on the company’s ongoing
performance and capital requirements. In particular, no
inference should be drawn about the quantum of any future
dividend based on the quantum of 2006–07 dividend, or on
the dividend payout ratio for the 2006–07 year.
No other 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 2007, other than as outlined in this
report.
Directors’ indemnification
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 and officers
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 officer or lend to the director or officer
the amount necessary to pay the reasonable legal costs
incurred by the director or officer in defending an action for
a liability incurred as a director or officer of the company
or a subsidiary on such terms as the company reasonably
determines. The director or officer 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 or officer. The company need not pay or provide
a loan to the director or officer to the extent that the director
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or officer is actually reimbursed for legal costs as they fall
due under an insurance policy or otherwise.
Howard Pender B.A.(Hons)
Executive Director
The company has not otherwise, during or since the
financial year, indemnified or agreed to indemnify a director,
officer or auditor of the company or of any related body
corporate against a liability incurred as such director, officer
or auditor.
Directors’ particulars
Qualifications, experience and special
responsibilities
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.
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 investment and compliance committees. James has
recently undertaken a Churchill Fellowship to examine the
mechanisms of shareholder advocacy.
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 finance and investment committees.
Naomi Edwards B.Sc. (Hons) FIA FIAA FNZSA
Non-Executive Director
Naomi is a Fellow of
the Institute of Acturies
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 audit committee and is a member of the
investment and remuneration committee.
Pauline Vamos B.A. LLB
AACI
Non-Executive Chairperson
Pauline is a qualified lawyer
and an Associate of the
Australasian Compliance
Institute. She has over 20
years experience in the
financial services industry, in
particular financial planning,
superannuation, funds
management and both life
and general insurance. For
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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 director of
Australian Ethical Superannuation Pty Ltd, the controlled
entity of AEI, is chair of the compliance committee, chair of
the remuneration committee and is a member of the audit
and finance committees.
Justine Hickey B.Com. GAICD SAFin ASIP(UK)
Non-Executive Director
Justine has over 15 years experience in investment and
funds management, as an equities portfolio manager
and in senior management. She was Head of Equities
at Suncorp Investment Management in Brisbane until
2004 and previously a Portfolio Manager at Flemings
Investment Management
(now JP Morgan) in the
UK. Justine is a director
of Hyperion Flagship
Investments Ltd and chairs
the Youth Enterprise Trust
Foundation – which supports
disadvantaged youth. She
also is a member of the
investment committees of
Dalton Nicol Reid and the
University of Melbourne.
Justine chairs the
investment 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
George
Pooley
Caroline Le
Couteur
James Thier
Howard
Pender
Naomi
Edwards
Pauline
Vamos
Justine
Hickey
2
8
8
8
8
8
2
2
8
6
8
6
8
2
1
-
-
-
3
2
-
1
-
-
-
3
2
-
1
-
-
7
-
5
-
1
-
-
7
-
5
-
-
-
5
5
-
-
2
-
-
3
5
-
-
2
1
2
-
-
3
1
-
1
2
-
-
3
1
-
-
-
4
-
-
4
-
-
-
3
-
-
3
-
Directorships held in other listed entities in the
last three years
Name
Entity
Howard Pender
SoftLaw Corporation Limited
Pauline Vamos
Plan B Group Holdings Limited
Justine Hickey
Hyperion Flagship Investments Limited
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Remuneration report
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.
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
Chairperson, non-
executive
Resigned
13 October 2006
Caroline Le
Couteur
James Thier
Howard Pender
Naomi Edwards
Pauline Vamos
Justine Hickey
Director,
executive
Director,
executive
Director,
executive
Director,
non-executive
Chairperson, non-
executive
Director, non-
executive
Appointed
1 March 2007
Executives
Name
Position
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Ruth Medd
Gary Leckie
Chief executive
officer
Investment
manager
Chief financial
officer
Company
secretary/ legal
counsel
Director of wholly-
owned entity
Resigned
2 February 2007
Chief financial
officer
Appointed
2 February 2007
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 five named company executives who
receive the highest remuneration for that year;
if consolidated financial statements are required – each
of the five named relevant group executives who receive
the highest remuneration for that year.
With the exception of Ruth Medd, the above named
directors and executives are key management personnel of
the company. Ruth Medd is a group executive.
Remuneration policy
Directors
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’
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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 2001–02 year of 20 cents
per share to a dividend out of the 2005–06 year profits of
85 cents per share. The dividend declared by the directors
for the 2006–07 year is 192 cents per share.4
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
30 June 2007
Closing daily price5
$12.50
$11.30
$13.00
$17.20
$28.50
$48.00
The company’s earnings over the last five years are as
follows:
Year
2002–03
2003–04
Adoption of AIFRS
2004–05
2005–06
2006–07
Earnings
$190 921
$459 761
$784 419
$1 362 612
$1 819 177
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
profits of any one year, they must pay a bonus2 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 options3 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.
2See Note 1(k) in the attached financial report
3See Note 25 in the attached financial report
4An interim dividend of 40 cents per share was paid in March 2007, so the
final payment to shareholders will be 152 cents per share.
5Where 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 2007
Parent entity directors’ remuneration
Short-term employee benefits
Post
employment
benefits
Other
long-term
benefits
Termination
benefits
Share-based
payment
Cash salary
and fees
$
Bonus
cash
$
Other
Super
$
$
$
$
Bonus
shares
$
Options
Total
$
$
2007
George Pooley
19,749
-
Caroline Le Couteur
142,449
5,500
James Thier
Howard Pender
Naomi Edwards*
Pauline Vamos
Justine Hickey*
143,516
-
138,954
3,575
39,300
52,223
17,314
-
-
-
Total
553,505
9,075
-
-
-
-
-
-
-
-
-
12,017
11,804
11,633
3,150
4,205
741
-
3,431
2,016
2,089
-
-
-
43,550
7,536
-
-
-
-
-
-
-
-
-
-
-
19,749
7,907
171,304
3,759
5,928
167,023
-
-
-
-
6,082
162,333
-
-
-
42,450
56,428
18,055
3,759
19,917
637,342
*Naomi Edwards had a one off contract with the company to assist in establishing a product profitability model. Justine Hickey had a one off contract with the
company to provide consulting service on an integrated IFSA project. The terms and conditions of these contracts are no more favourable than those that is
reasonable to expect the entity would have adopted if dealing at arm’s length with an unrelated individual. Naomi Edwards also received sponsorship money
totalling $2,500 in relation to a conservation and social justice event.
2006
George Pooley
Ray De Lucia
57,188
3,259
Caroline Le Couteur
131,882
-
-
-
James Thier
Howard Pender
Naomi Edwards
Total
124,586
2,153
113,237
28,420
-
-
458,572
2,153
-
-
-
-
-
-
-
-
-
11,484
10,300
10,291
2,558
34,633
-
-
3,196
1,638
1,791
-
6,625
Named executives remuneration (including other key management personnel)
-
-
-
-
-
-
-
-
-
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
Short-term employee
benefits
Post
employment
benefits
Other
long-term
benefits
Termination
benefits
Share-based
payment
Cash salary
and fees
$
Bonus
cash
$
Other
Super
$
$
$
$
Bonus
shares
$
Options
Total
$
$
2007
Anne O’Donnell
190,804
5,500
David Ferris
Mark Bateman
Philip George
Ruth Medd
Gary Leckie
Total
2006
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Ruth Medd
20
Total
158,681
140,481
162,880
28,500
-
5,500
5,500
-
118,374
5,500
799,720 22,000
172,147
134,878
113,643
140,622
24,710
-
-
4,300
2,718
-
586,000
7,018
-
-
-
-
-
-
-
-
-
-
-
-
-
17,259
13,843
7,076
14,088
1,800
10,257
64,323
15,225
11,764
10,008
12,330
1,459
50,786
5,659
5,046
-
3,503
-
2,849
17,057
4,817
3,044
3,287
2,926
-
14,074
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,043
231,265
5,290
-
-
-
-
9,307
7,916
9,754
192,167
160,973
195,725
-
30,300
5,974
142,954
5,290
44,994
953,384
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
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Cash bonus compensation benefits
Details of cash bonuses paid to key management personal are included in the remuneration tables set out above. The
bonuses were paid on 22 September 2006. 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.
Options granted as remuneration – 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
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
Pauline Vamos
Justine Hickey
2,646
2,074
857
-
-
-
-
1,910
1,432
1,469
-
-
-
-
-
22.09.2006
22.09.2006
22.09.2006
-
-
-
5,577
4,811
Named executives (including other key management personnel)
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Ruth Medd
Gary Leckie
2,802
2,498
1,962
-
-
2,909
2,248
1,912
2,356
22.09.2006
22.09.2006
22.09.2006
22.09.2006
-
-
819
1,443
22.09.2006
8,081
10,868
-
4.14
4.14
4.14
-
-
-
4.14
4.14
4.14
4.14
-
4.14
-
32.50
32.50
32.50
-
-
-
32.50
32.50
32.50
32.50
-
-
-
22.09.2009
22.12.2009
22.09.2009
22.12.2009
22.09.2009
22.12.2009
-
-
-
-
-
-
22.09.2009
22.12.2009
22.09.2009
22.12.2009
22.09.2009
22.12.2009
22.09.2009
22.12.2009
-
-
32.50
22.09.2009
22.12.2009
(a) Each option above is granted by Australian Ethical Investment Ltd (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.
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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 us 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.
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Details of shareholdings – changes to shareholdings, including as a result of the exercise of options
granted as compensation
Balance
01.07.06
Share in lieu of
cash bonus
Options exercised/
shares issued(1)
Net change
other(2)
Balance
30.06.07(3)&(4)
Parent entity directors
George Pooley
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
Pauline Vamos
Justine Hickey
44,277
60,154
51,178
-
-
-
-
127
-
-
-
-
-
-
Named executives (including other key management personnel)
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Ruth Medd
Gary Leckie
Total
3,315
2,762
982
375
-
-
179
-
-
-
-
-
163,043
306
-
2,646
2,074
857
-
-
-
-
-
2,802
2,498
1,962
819
13,658
-
-
(200)
(370)
700
-
-
-
-
(1,962)
-
-
(819)
(2,651)
-
46,923
62,155
51,665
-
-
700
6,117
5,439
982
375
-
-
174,356
(1) The amount paid for shares issued on exercise of options is $14.11 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 47,681, Howard Pender to 49,634 and
Philip George to 250.
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. Options granted during the financial year, when valued using a Black-Scholes valuation
methodology as at grant date, 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:
Name
Duration of
contract
Period of termination notice
required
Termination payment provided for
under the contract
As per minimum requirements
under the Workplace Relations
Act 1996
None except for accrued leave and any
payment in lieu of notice
Caroline Le Couteur
Ongoing
James Thier
Howard Pender
Anne O’Donnell
David Ferris
Gary Leckie
Philip George
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Options granted as remuneration – 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(2)
$
Value of
options
lapsed in
fin year(3)
$
Total
value(4)
$
Parent entity directors
George Pooley
-
-
Caroline Le Couteur
1,910
22.09.2006
James Thier
Howard Pender
Naomi Edwards
Pauline Vamos
Justine Hickey
1,432
22.09.2006
1,469
22.09.2006
-
-
-
4,811
-
-
-
-
4.14
4.14
4.14
-
-
-
Named executives (including other key management personnel)
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Ruth Medd
Gary Leckie
2,909
22.09.2006
2,248
22.09.2006
1,912
22.09.2006
2,356
22.09.2006
-
-
1,443
22.09.2006
10,868
4.14
4.14
4.14
4.14
-
4.14
-
7,907
5,928
6,082
-
-
-
19,917
12,043
9,307
7,916
9,754
-
5,974
44,994
-
5%
4%
4%
-
-
-
5%
5%
5%
5%
-
4%
-
81,735
64,066
14,046
-
-
-
159,847
45,925
40,942
32,157
-
-
13,423
-
-
-
-
-
-
-
-
-
-
-
89,642
69,994
20,128
-
-
-
179,764
57,968
50,249
128,501
168,574
-
-
-
9,754
-
19,397
305,942
132,447
128,501
(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 2009–10 year when
the options are exercisable.
(2) Values are based on the number of options exercised by Directors/ Executives multiplied by the difference between the share price at exercise date and the
exercise price. Under the terms of the share based payment arrangement exercise date and therefore share price can vary between option holders.
(3) Mark Bateman forfeited 100% of options granted, upon leaving the employment of Australian Ethical Investment Ltd. The amounts listed in this column do
not represent remuneration paid to Director/ Executives.
(4) This column is required by s300A1(e)(v) of the Corporations Act 2001. It requires the aggregation of amounts in the above table notwithstanding that one
amount is a Black-Scholes estimation of value received, one amount is the difference between share sale price and option exercise price, and one amount
is a Black-Scholes estimate of value forgone as at date of an employees cessation of employment.
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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.
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Estimates of the maximum and minimum possible total value of option grants
2007–08
2008–09
2009–10
Max
$
Min
$
Max
$
Min
$
Max
$
Min
$
Parent entity directors
George Pooley
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
Pauline Vamos
Justine Hickey
3,141
2,573
1,076
-
-
-
-
-
-
-
-
-
-
-
Named executives (including other key management personnel)
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Ruth Medd
Gary Leckie
3,581
3,189
-
-
-
1,594
-
-
-
-
-
-
-
-
-
-
-
-
7,536
6,048
3,128
10,100
8,773
5,208
4,660
-
-
-
-
-
-
-
-
-
-
-
-
-
7,907
5,928
6,082
-
-
-
-
-
12,043
9,307
9,754
5,974
-
-
-
-
-
-
-
-
-
-
-
-
Maximum amounts are calculated using Black-Scholes estimation as at option grant date in respect of options exercisable in
future years.
Holdings in registered schemes made available by
the company
Caroline Le Couteur holds 828.6873 units in the Australian
Ethical Balanced Trust.
Naomi Edwards holds 17,877.9573 units in the Australian
Ethical Equities Trust and 15,475.9946 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 2006.
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 six years. He was a senior associate at the national
law firm Minter Ellison and conducted a commercial legal
practice in partnership for two 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
AEFAI
34,506
AEFAQ
41,558
AEFAS
41,396
Totals
117,460
Exercise
period
23.9.07 to
22.12.07
21.9.08 to
20.12.08
22.09.09 to
21.12.09
Exercise
price
$16.28
$24.82
$32.50
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 2007 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.
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Shares issued upon exercise of
options
Amount paid per
share
33,778
$14.11
Other specific information
Other specific information has been disclosed in the
attached financial report as referenced in the table below:
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 2 of the attached financial report.
Disclosure
Dividends
Options – issued during the
financial year and since the end
of the financial year6
Financial statement
reference
Note 5
Note 25
Signed in accordance with a resolution of the Board of
Directors.
Howard Pender
Director
Dated: 31 August 2007
6The 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.
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 2007 there have been:
no contraventions of the auditor independence requirements as set out in the
i.
Corporations 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.
Date 31 August 2007
Liability limited by a scheme approved under Professional Standards Legislation
P.L. WHITEMAN
PARTNER
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Financial statements
for year ended 30 June 2007
Balance Sheet as at 30 June 2007
Notes
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
7
8
9
10
11
9
12
13
15
14
15
16
16
16
1,672,464
1,487,185
1,830,430
183,644
1,479,234
1,038,994
2,518,405
139,708
643,525
1,379,251
1,830,430
162,275
373,231
1,042,972
2,518,405
94,243
5,173,723
5,176,341
4,015,481
4,028,851
4,328,138
2,613,153
4,328,138
2,613,153
158,000
392,435
174,484
315,246
474,000
391,385
490,484
309,396
4,878,573
3,102,883
5,193,523
3,413,033
10,052,296
8,279,224
9,209,004
7,441,884
1,681,284
1,352,010
1,869,901
1,433,154
279,307
331,953
356,008
219,970
279,307
331,953
356,008
219,970
2,292,544
1,927,988
2,481,161
2,009,132
33,248
42,371
75,619
30,896
46,557
77,453
33,248
42,371
75,619
30,896
46,557
77,453
2,368,163
2,005,441
2,556,780
2,086,585
7,684,133
6,273,783
6,652,224
5,355,299
4,949,532
4,628,423
4,949,532
4,628,423
200,687
2,533,914
7,684,133
93,948
1,551,412
6,273,783
200,687
1,502,005
6,652,224
93,948
632,928
5,355,299
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 2007
Notes
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
Revenue
3
12,086,455
9,661,723
9,870,632
7,768,390
Commissions paid to advisers
External services
Employee benefits expense
Depreciation
Occupancy costs
Communication costs
Other expenses
(260,467)
(271,327)
(61,390)
(2,422,346)
(2,018,108)
(1,077,421)
(101,281)
(913,490)
(4,976,651)
(3,986,460)
(4,956,578)
(3,972,997)
(225,320)
(316,447)
(597,178)
(407,195)
(143,407)
(280,710)
(456,324)
(347,044)
(225,320)
(310,894)
(543,537)
(380,558)
(143,407)
(275,792)
(426,969)
(296,154)
Profit before tithe and income tax expense
2,880,851
2,158,343
2,314,934
1,638,300
Tithes expense
1 (k)
(224,964)
(170,132)
(224,964)
(170,132)
Profit before income tax
2,655,887
1,988,211
2,089,970
1,468,168
Income tax expense
Profit for the year
Profit attributable to members of the parent
entity
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
4
16
6
6
(836,710)
(625,599)
(384,218)
(393,144)
1,819,177
1,362,612
1,705,752
1,075,024
1,819,177
1,362,612
1,705,752
1,075,024
194.8
185.6
150.3
145.1
The accompanying notes form part of these financial statements.
Ethical investment is... smart.
Wise up to ethical investment. Our smart portfolio includes:
• Fairfax Media (Australia) • Scholastic Corporation (USA) •
• Benesse Corporation (Japan) • Pearson (UK) •
1800 021 227 (cid:129) austethical.com.au
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.
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Statement of changes in equity for the year ended 30 June 2007
Notes
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
Total equity at beginning of financial period
6,273,783
5,046,886
5,355,299
4,415,990
Available-for-sale investments:
Valuation gains/(losses) taken to equity
Transferred to profit or loss on sale
Employee share options
Income tax on items taken directly to or
transferred directly from equity
3,811
7,464
96,607
(1,143)
(6,632)
-
59,961
1,989
3,811
7,464
96,607
(1,143)
(6,632)
-
59,961
1,989
Net income recognised directly in equity
106,739
55,318
106,739
55,318
Profit for the financial year
1,819,177
1,362,612
1,705,752
1,075,024
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
1,925,916
1,417,930
1,812,491
1,130,342
321,109
514,717
321,109
514,717
(836,675)
(705,750)
(515,566)
(191,033)
(836,675)
(515,566)
(705,750)
(191,033)
Total equity at the end of the financial period
16
7,684,133
6,273,783
6,652,224
5,355,299
Total recognised income and expense for the
financial year is attributable to:
Equity holders of the parent
1,925,916
1,417,930
1,812,491
1,130,342
1,925,916
1,417,930
1,812,491
1,130,342
The accompanying notes form part of these financial statements.
Ethical investment is... global.
Find out more about our World Trust – ethical on a global scale.
1800 021 227 (cid:129) austethical.com.au
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
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Cash flow statement for the year ended 30 June 2007
Notes
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
Cash flows from operating activities
Receipts from operations
12,535,315
10,066,362
9,679,684
8,009,981
Payment to suppliers & employees
(9,467,091)
(7,706,749)
(7,770,366)
(6,350,434)
Dividends received
Interest/ distributions received
Income tax paid
Bonus
Tithe
Net cash provided by (used in)
operating activities
Cash flows from investing activities
-
286,760
(992,589)
(192,285)
(173,132)
-
279,928
(643,963)
(108,998)
(98,227)
942,248
232,674
(644,781)
(192,285)
(173,132)
254,660
233,391
(449,319)
(108,998)
(98,227)
22 (b)
1,996,978
1,788,353
2,074,042
1,491,054
Proceeds from sale of investments
1,192,683
2,971,130
1,192,683
2,971,130
Purchase of property, plant &
equipment
Purchase of investments
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
(1,974,986)
(2,446,806)
(1,974,986)
(2,446,806)
(500,000)
(2,443,421)
(500,000)
(2,443,421)
15,070
11,657
15,070
11,657
(1,267,233)
(1,907,440)
(1,267,233)
(1,907,440)
392,921
(92,761)
(836,675)
(536,515)
479,325
-
(705,750)
(226,425)
392,921
(92,761)
(836,675)
(536,515)
479,325
-
(705,750)
(226,425)
Net increase (decrease) in cash held
193,230
(345,512)
270,294
(642,811)
Cash at beginning of financial year
1,479,234
1,824,746
373,231
1,016,042
Cash at end of financial year
22 (a)
1,672,464
1,479,234
643,525
373,231
The accompanying notes form part of these financial statements.
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Notes to the financial statements for the year ended 30 June 2007
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, other authoritative pronouncements
of the Australian Accounting Standards Board and the
Corporations Act 2001.
The financial report covers the consolidated entity of
Australian Ethical Investment Ltd and its wholly owned
entity Australian Ethical Superannuation Pty Ltd and
Australian Ethical Investment Ltd as an individual parent
entity. Australian Ethical Investment Ltd 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
consolidated entity are described at note 19.
The financial report of Australian Ethical Investment Ltd and
its wholly owned entity, and Australian Ethical Investment
Ltd 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 consolidated entity in the
preparation of the financial report. The accounting policies
have been consistently applied, unless otherwise stated.
Basis of preparation
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
Ltd 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 consolidated 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
Ltd and its wholly owned entity Australian Ethical
Superannuation Pty Ltd.
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.
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 consolidated 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 Ltd and its wholly owned
entity Australian Ethical Superannuation Pty Ltd have
formed an income tax consolidated group under the Tax
Consolidation System. Australian Ethical Investment Ltd
is responsible for recognising the current and deferred
tax assets and liabilities for the tax consolidated group.
The group notified the Australian Taxation 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 Ltd on
the same day that Australian Ethical Investment Ltd pays
the ATO for group tax liabilities.
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Notes to the financial statements for the year ended 30 June 2007
Note 1 – Statement of significant accounting policies – continued
c) Property, plant and equipment
d) Financial instruments
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 shown at cost less any
accumulated depreciation and any accumulated impairment
losses.
Any accumulated depreciation at the date of revaluation is
eliminated against the gross carrying amount of the asset
and the net amount is restated to the re-valued amount of
the asset.
Plant and equipment
Plant and equipment are measured on the cost basis less
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 depreciable amount of all fixed assets including
buildings, is depreciated over their estimated useful lives to
the consolidated entity commencing from the time the asset
is held ready for use.
The depreciation rates used for each class of assets are:
Class of fixed asset
Depreciation
rates
Depreciation
basis
Buildings
2.5–20%
Straight line
Furniture, fittings and
equipment
10% to
37.5%
Software
18.75% to
40%
Straight line/
diminishing value
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.
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.
Available-for-sale financial assets
The consolidated 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.
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
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
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Notes to the financial statements for the year ended 30 June 2007
Note 1 – Statement of significant accounting policies – continued
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 Ltd
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 Ltd 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.
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.
Employee bonus
The group recognises a liability and an expense for
bonuses and profit-sharing based on a formula that takes
into consideration the profit attributable to the company’s
shareholders after certain adjustments. The group
recognises a provision where contractually obliged or where
there is a past practice that has created a constructive
obligation.
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
results 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 ATO. 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) 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.
ii.
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’
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’.
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
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Notes to the financial statements for the year ended 30 June 2007
Note 1 – Statement of significant accounting policies – continued
assumed to have been issued for no consideration in
relation to dilutive potential ordinary shares.
Key estimates – annual leave and long service leave
provision
australianethical
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.
Note 2 – 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 and risk review
Note 3 – 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
Future average salary increases have been estimated at
4%. This increase has been incorporated into the annual
leave and long service leave provision.
Key judgements
Australian Ethical Investment Ltd has a loan receivable from
the Centre for Australian Ethical Research recorded as an
asset on its balance sheet for $173 272. The directors have
determined that no provision for doubtful debt is required for
this loan.
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
30,500
-
4,600
52,400
16,500
8,600
27,000
46,900
-
-
4,600
8,600
3,450
16,500
5,500
15,000
3,000
15,000
5,100
15,000
9,429,699
7,274,591
4,935,178
4,020,460
1,837,914
1,508,963
484,170
509,935
453,283
457,117
453,283
457,117
-
-
942,248
254,660
275,292
309,873
221,205
263,337
-
-
2,752,623
2,163,664
90,267
109,312
81,925
97,350
12,086,455
9,659,856
9,870,632
7,766,523
-
-
1,867
1,867
-
-
1,867
1,867
Total revenue
12,086,455
9,661,723
9,870,632
7,768,390
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Notes to the financial statements for the year ended 30 June 2007
Note 4 – Income tax expense
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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% (2006:30%)
Consolidated 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
Less: tax effect of:
Rebateable fully franked dividends
Non-assessable income
Franking and foreign tax credits
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
915,888
690,357
468,196
452,052
(79,178)
(64,758)
(83,978)
(58,908)
836,710
625,599
384,218
393,144
796,766
596,463
-
-
-
-
-
-
626,991
440,450
452,641
232,455
1,455
28,982
11,119
860
17,988
12,237
1,413
28,982
11,119
816
17,988
12,237
838,322
627,548
1,121,146
703,946
-
(738)
(874)
-
(282,675)
(76,398)
(635)
(1,314)
(738)
(874)
(635)
(1,314)
Income tax expense attributable to entity
836,710
625,599
836,859
625,599
Allocation of income tax expense to wholly owned entity under the
tax sharing agreement
-
-
(452,641)
(232,455)
Income tax expense attributable to entity
836,710
625,599
384,218
393,144
The applicable weighted average effective tax rates are as follows:
32%
31%
18%
27%
The decrease in the weighted average effective tax rate for 2007 for the parent entity is a result of the wholly owned entity
paying a large fully franked dividend to the parent .
Ethical investment is... moving people effi ciently.
Get moving with our efficient transport investments:
• Shimano (Japan) • Accell (The Netherlands) •
• Stagecoach (UK) • SMRT Corp (Singapore) •
1800 021 227 (cid:129) austethical.com.au
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.
34
Notes to the financial statements for the year ended 30 June 2007
Note 5 – Dividends
australianethical
Distributions paid
Final fully franked dividend of 50 (2006: 42) cents per share
franked at the tax rate of 30% (2006:30%)
Interim fully franked dividend of 40 (2006: 35) cents per share
franked at the tax rate of 30% (2006:30%)
Declared final fully franked dividend of 152 (2006: 50) cents per
share franked at the tax rate of 30% (2006: 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:
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
458,631
384,955
458,631
384,955
378,044
320,795
378,044
320,795
836,675
705,750
836,675
705,750
1,436,566
458,280
1,436,566
458,280
1,543,029
983,028
615,671
196,406
927,358
786,622
Note 6 – Earnings per share
(a) Earnings used to calculate basic EPS and dilutive EPS
1,819,177
1,362,612
(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
934,002
906,720
45,960
32,291
979,962
939,011
Note 7 – Cash and cash equivalents
Cash on hand
Cash at bank
Deposits at call
300
300
32,114
16,534
300
3,165
300
115
1,640,050
1,462,400
640,060
372,816
1,672,464
1,479,234
643,525
373,231
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.
Note 8 – Trade and other receivables
Trade receivables
Other
1,446,758
988,512
1,114,818
833,799
40,427
50,482
40,427
50,482
Amounts receivable – wholly owned entity
-
-
224,006
158,691
1,487,185
1,038,994
1,379,251
1,042,972
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australianethical
Notes to the financial statements for the year ended 30 June 2007
Note 9 – 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
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
1,815,158
2,504,546
2,131,158
2,820,546
173,272
188,343
173,272
188,343
1,988,430
2,692,889
2,304,430
3,008,889
158,000
174,484
474,000
490,484
1,830,430
2,518,405
1,830,430
2,518,405
500,000
408,502
502,030
-
404,626
-
500,000
501,765
504,145
603,054
395,582
500,000
500,000
408,502
501,765
502,030
504,145
-
603,054
404,626
395,582
-
316,000
316,000
1,815,158
2,504,546
2,131,158
2,820,546
The money market deposit is at a fixed interest rate of 6.45%, has a maturity date of 21 August 2007 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.
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.
173,272
173,272
188,343
188,343
173,272
188,343
173,272
188,343
Note 10 – Other current assets
Other
Prepayments
22,160
161,484
183,644
2,843
136,865
139,708
22,160
140,115
162,275
2,843
91,400
94,243
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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
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Notes to the financial statements for the year ended 30 June 2007
Note 11 – Property, plant and equipment
australianethical
Land and buildings
Leasehold land
At cost
Total land
Buildings
At cost
Accumulated depreciation
Total buildings
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
230,000
230,000
230,000
230,000
230,000
230,000
230,000
230,000
2,784,117
2,079,077
2,784,117 2,079,077
(83,191)
(22,642)
(83,191)
(22,642)
2,700,926
2,056,435
2,700,926 2,056,435
Total land and buildings
2,930,926
2,286,435
2,930,926 2,286,435
Plant and equipment
At cost
Accumulated depreciation
Total plant and equipment
1,991,339
850,546
1,991,339
850,546
(594,127)
(523,828)
(594,127)
(523,828)
1,397,212
326,718
1,397,212
326,718
Total property, plant and equipment
4,328,138
2,613,153
4,328,138
2,613,153
Movements in carrying amounts
Land
Balance at the beginning of year
230,000
-
230,000
-
Additions
Disposals
230,000
-
-
230,000
-
-
Carrying amount at the end of year
230,000
230,000
230,000
230,000
Buildings
Balance at the beginning of year
Additions
Disposals
Depreciation expense
2,056,435
-
2,056,435
-
705,040
2,079,077
705,040 2,079,077
-
-
-
-
(60,549)
(22,642)
(60,549)
(22,642)
Carrying amount at the end of year
2,700,926
2,056,435
2,700,926 2,056,435
Plant and equipment
Balance at the beginning of year
Additions
Disposals
Depreciation expense
326,718
282,903
326,718
282,903
1,244,747
166,732
1,244,747
166,732
(9,482)
(2,152)
(9,482)
(2,152)
(164,771)
(120,765)
(164,771)
(120,765)
Carrying amount at the end of year
1,397,212
326,718
1,397,212
326,718
Total
4,328,138
2,613,153
4,328,138
2,613,153
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Notes to the financial statements for the year ended 30 June 2007
Note 12 – 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 13 – Trade and other payables
Trade payables
Sundry payables and accrued expenses
Employee bonus
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
313,517
246,048
313,517
246,048
67,488
11,430
51,939
15,270
67,488
10,380
51,939
9,420
392,435
313,257
391,385
307,407
-
1,989
-
1,989
392,435
315,246
391,385
309,396
315,246
217,603
309,396
217,603
79,178
(1,989)
95,654
1,989
83,978
(1,989)
89,804
1,989
392,435
315,246
391,385
309,396
300,249
1,143,015
238,020
242,383
896,393
213,234
195,764
121,841
974,252
790,688
238,020
213,234
Amounts payable to wholly owned entity
-
-
461,865
307,391
1,681,284
1,352,010
1,869,901
1,433,154
Note 14 – Deferred tax liabilities
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Stamp duty on leasehold property
Amounts recognised in equity
Available-for-sale financial assets
Movements
Opening balance at 1 July
Credited/ (charged) to the income statement
Credited/ (charged) to equity
Closing balance at 30 June
30,896
30,896
30,896
30,896
2,352
33,248
-
30,896
2,352
33,248
-
30,896
30,896
-
30,896
-
-
30,896
-
30,896
2,352
33,248
-
30,896
2,352
33,248
-
30,896
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Notes to the financial statements for the year ended 30 June 2007
Note 15 – Provisions
australianethical
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
331,953
331,953
219,970
219,970
331,953
219,970
331,953
219,970
42,371
42,371
46,557
46,557
42,371
42,371
46,557
46,557
Current
Employee benefits – long service leave
Non-current
Employee benefits – long service leave
Note 16 – Movements in equity
Issued capital
Ordinary shares
Fully paid ordinary shares at the beginning of the financial year
916,559 (2006 – 888,746) shares
4,628,423
4,113,706
4,628,423
4,113,706
Issue of share capital
Shares issued during the year under the employee share ownership plan:
703 on 22 September 2006 (share bonus)
24,146 on 31 October 2006 (options exercised)
2,781 on 28 November 2006 (options exercised)
6,851 on 15 January 2007 (option exercised)
1,563 on 21 September 2005 (share bonus)
17,275 on 31 October 2005 (options exercised)
8,975 on 29 November 2005 (options exercised)
Shares bought back during the year
5,931 on 31 October 2006
Balance 30 June
945,109 (2006 - 916,559) shares
20,949
340,700
39,240
96,667
-
-
-
-
20,949
340,700
39,240
96,667
-
-
-
-
-
-
-
35,392
315,442
163,883
-
-
-
35,392
315,442
163,883
(176,447)
-
(176,447)
-
4,949,532
4,628,423
4,949,532
4,628,423
At 30 June 2007 there were 945 109 fully paid ordinary shares which have no par value.
For detailed information relating to the Australian Ethical Investment Ltd 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 25
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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australianethical
Notes to the financial statements for the year ended 30 June 2007
Note 16 – Movements in equity – continued
Reserves
Available-for-sale financial assets revaluation reserve
Balance 1 July
Gross gains/ (losses)
Revaluation – gross
Deferred tax
Balance 30 June
Share-based payments reserve
Balance 1 July
Option expense
Balance 30 June
Total Reserves
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
(4,643)
7,464
3,811
(1,143)
5,489
-
(4,643)
-
(6,632)
1,989
(4,643)
7,464
3,811
(1,143)
(6,632)
1,989
5,489
(4,643)
98,591
96,607
195,198
38,630
59,961
98,591
98,591
96,607
195,198
38,630
59,961
98,591
200,687
93,948
200,687
93,948
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
Profit for the period
Total for the period
Dividends
Balance 30 June
Total Equity
1,551,412
894,550
632,928
263,654
1,819,177
1,362,612
1,705,752
1,075,024
1,819,177
1,362,612
1,705,752
1,075,024
(836,675)
(705,750)
(836,675)
(705,750)
2,533,914
1,551,412
1,502,005
632,928
7,684,133
6,273,783
6,652,224
5,355,299
Note 17 – 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 18 – Economic dependence
The consolidated 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 Retail Superannuation Fund.
Note 19 – 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 Retail Superannuation Fund.
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Notes to the financial statements for the year ended 30 June 2007
Note 20 – Capital commitments
australianethical
Premises Rental licence commitments
Payable
– not later than 12 months
Consolidated entity
Parent entity
2007
$
-
-
2006
$
65,028
65,028
2007
$
-
-
2006
$
65,028
65,028
The licence agreement provides for 4 months for termination. The comparative amount represents 4 months rent.
Note 21 – Contingent liabilities
Liabilties and assets of trusts and superannuation fund
Liabilities of the trusts and superannuation fund for which the consolidated entity and parent entity are responsible entity and
trustee but not shown in the financial statements of the consolidated entity or parent entity were:
Current liabilities
Payables
Provisions
Total liabilities
Rights of indemnities for liabilities incurred by the consolidated
entity and parent entity not recorded in the financial statements
were:
4,556,376
3,321,381
3,790,889
2,824,216
64,692,694 43,712,715
58,707,157
40,954,235
69,249,070 47,034,096
62,498,046
43,778,451
69,249,070 47,034,096
62,498,046
43,778,451
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 consolidated entity or
parent entity acting in their own right.
Note 22 – 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
32,114
16,534
1,640,050
1,462,400
1,672,464
1,479,234
300
3,165
640,060
643,525
300
115
372,816
373,231
(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
1,819,177
1,362,612
1,705,752
1,075,024
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
225,320
107,797
9,442
11,178
96,607
20,949
143,407
65,288
2,152
(1,867)
59,961
35,392
225,320
107,797
9,442
11,178
96,607
20,949
143,407
65,288
2,152
(1,867)
59,961
35,392
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Notes to the financial statements for the year ended 30 June 2007
Note 22 – Cash flow information – continued
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
Changes in assets and liabilities
(Increase) decrease in trade & other receivables
(448,190)
(225,499)
(236,395)
(219,782)
(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
(43,936)
18,136
(79,178)
(95,653)
354,513
347,135
(76,701)
-
46,393
30,896
(68,032)
(81,989)
461,987
(176,585)
(1,989)
17,161
(89,803)
370,493
2,732
30,896
Net cash provided by (used in) operating activities
1,996,978
1,788,353
2,074,042
1,491,054
(c) Non-cash financing and investing activities
Shares in Australian Ethical Investment Ltd, to the value of $20 949 (2006: $35 392) were issued in lieu of staff bonus.
Note 23 – Related party transactions
Australian Ethical Investment Ltd is the ultimate parent entity and owns 100% of Australian Ethical Superannuation Pty Ltd.
Australian Ethical Investment Ltd acts as the responsible entity for the Australian Ethical Trusts (Australian Ethical Balanced
Trust, Australian Ethical Equities Trust, Australian Ethical Income Trust, Australian Ethical Large Companies Share Trust,
Australian Ethical International Equities Trust and Australian Ethical World Trust).
Australian Ethical Superannuation Pty Ltd acts as trustee for the Australian Ethical Retail Superannuation Fund.
Transactions between related parties are on 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 Ltd and its wholly owned entity, Australian Ethical Superannuation
Pty Ltd during the financial year consisted of:
(i) Transactions whereby Australian Ethical Investment Ltd
provides management services to the wholly owned entity on a
cost recovery basis
(ii) Transactions between Australian Ethical Investment Ltd 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 Ltd
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 Ltd
receives a dividend from the wholly owned entity referred to in
note 3.
-
-
-
-
-
-
-
-
2,752,622
2,163,664
452,641
232,453
4,521,499
3,285,781
942,248
254,660
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Notes to the financial statements for the year ended 30 June 2007
Note 23 – Related party transactions – continued
australianethical
b) Outstanding balances at balance date:
Amounts receivable from wholly owned entity:
Management services
Taxation
Amounts payable to wholly owned entity:
Management fee income
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
-
-
-
-
-
-
-
34,568
224,006
124,122
461,865
307,391
Australian Ethical Trusts
a) Transactions between Australian Ethical Investment Ltd, as responsible entity, and the Australian Ethical Trusts during
the financial year consisted of:
(i) Transactions whereby Australian Ethical Investment Ltd 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
3,980,112
3,132,193
3,980,112
3,132,193
3,062,362
2,407,875
3,062,362
2,407,875
242,336
199,962
242,336
199,962
Australian Ethical Large Companies Shares Trust
2,309,552
1,668,138
2,309,552
1,668,138
Australian Ethical International Equities Trust
11,081
-
11,081
-
(ii) Transactions whereby Australian Ethical Investment Ltd 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
Australian Ethical International Equities Trust
109,596
109,596
109,596
109,596
87,684
39,468
61,392
-
87,684
39,468
61,392
-
87,684
39,468
61,392
-
87,684
39,468
61,392
-
(iii) Transactions whereby Australian Ethical Investment Ltd 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
Australian Ethical International Equities Trust
53,633
51,031
4,077
43,916
14
53,644
50,198
4,418
37,367
-
53,633
51,031
4,077
43,916
14
53,644
50,198
4,418
37,367
-
(iv) Transaction whereby Australian Ethical Investment Ltd
purchased units in the Australian Ethical Balanced Trust
-
400,000
-
400,000
(v) Transaction whereby Australian Ethical Investment Ltd
received a distribution payment from the Australian Ethical
Balanced Trust
6,237
6,564
6,237
6,564
(vi) Transactions whereby Australian Ethical Investment Ltd sold
interest bearing securities to the Australian Ethical Balanced Trust
-
2,066,913
-
2,066,913
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Notes to the financial statements for the year ended 30 June 2007
Note 23 – Related party transactions – continued
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Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
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
412,430
354,366
27,400
334,290
244,126
24,435
412,430
354,366
27,400
334,290
244,126
24,435
Australian Ethical Large Companies Shares Trust
258,332
184,589
258,332
184,589
Australian Ethical International Equities Trust
12,204
-
12,204
-
Value of units held by Australian Ethical Investment Ltd in the
Australian Ethical Balanced Trust
404,626
395,582
404,626
395,582
Distribution receivable from AEBT
26,591
32,914
26,591
32,914
Australian Ethical Retail Superannuation Fund
a) Transactions between the consolidated entity and the Australian Ethical Retail Superannuation Fund during the financial
year consisted of:
(i) Transactions between Australian Ethical Superannuation Pty
Ltd and the Australian Ethical Retail Superannuation Fund related
to the rebate of investment services.
26,978
31,651
Outstanding balances at balance date:
Amounts payable to the Australian Ethical Retail Superannuation Fund:
Rebate of investment services fee
1,332
6,119
-
-
-
-
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 24 – 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
Pauline Vamos
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
Justine Hickey
Position
Chairperson, non-executive
Chairperson, non-executive
Director, executive
Director, executive
Director, executive
Director, non-executive
Director, non-executive
Resigned 13 October 2006
Appointed as non-executive 1 July 06,
and as Chairperson 13 October 2006
Appointed 1 March 2007
Subsequent to year end Pauline Vamos has resigned as Chairperson and as a director of the company with effect from
31 August 2007.
44
Notes to the financial statements for the year ended 30 June 2007
Note 24 – Key management personnel compensation – continued
australianethical
a) Key management personnel – continued
Other key management personnel
Name
Anne O’Donnell
David Ferris
Mark Bateman
Gary Leckie
Philip George
Position
Chief executive officer
Investment manager
Chief financial officer
Chief financial officer
Company secretary/ legal counsel
b) Key management personnel compensation
Resigned 2 February 2007
Appointed 2 February 2007
Consolidated entity
Parent entity
2007
$
2006
$
2007
$
2006
$
Short term employment benefits
1,355,800
1,029,033
1,264,631
957,025
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Total compensation
106,073
24,593
-
83,960
20,699
-
98,873
24,593
-
79,148
20,699
-
73,960
63,217
73,960
63,217
1,560,426
1,196,909
1,462,057
1,120,089
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
01.07.06
Granted as
remuneration
Options
exercised
Net
change
other
Balance
30.06.07
Total
vested
30.06.07
Total
exercisable
30.06.07
Total
unexercisable
30.06.07
Parent entity directors
George Pooley
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
Pauline Vamos
Justine Hickey
7,402
5,932
2,649
-
-
-
-
1,910
1,432
1,469
-
-
-
-
-
(2,646)
(2,074)
(857)
-
-
-
Named executives (including other key management personnel)
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Ruth Medd
Gary Leckie
Total
8,673
7,660
6,066
1,550
-
3,481
43,413
2,909
2,248
1,912
2,356
-
(2,802)
(2,498)
-
-
1,443
(819)
(1,962)
(6,016)
15,679
(13,658)
(6,016)
39,418
-
-
-
-
-
-
-
-
-
-
-
-
6,666
5,290
3,261
-
-
-
-
8,780
7,410
-
-
3,906
4,105
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,666
5,290
3,261
-
-
-
8,780
7,410
3,906
-
-
4,105
39,418
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Notes to the financial statements for the year ended 30 June 2007
Note 24 – 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
01.07.06
Share in lieu of
cash bonus
Options exercised/
shares issued1
Net change
other2
Balance
30.06.073&4
Parent entity directors
George Pooley
Caroline Le Couteur
James Thier
Howard Pender
Naomi Edwards
Pauline Vamos
Justine Hickey
44,277
60,154
51,178
-
-
-
-
127
-
-
-
-
-
-
Named executives (including other key management personnel)
Anne O’Donnell
David Ferris
Mark Bateman
Philip George
Ruth Medd
Gary Leckie
Total
3,315
2,762
982
375
-
-
179
-
-
-
-
-
163,043
306
-
-
-
-
-
-
2,646
2,074
857
2,802
2,498
1,962
819
13,658
-
-
(200)
(370)
700
-
-
-
-
(1,962)
-
-
(819)
(2,651)
46,923
62,155
51,665
700
6,117
5,439
982
375
-
-
-
-
-
174,356
1The amount paid for shares issued on exercise of options is $14.11 in all cases.
2Net change other refers to shares purchased or sold during the financial year.
3Shares issued are fully paid.
4Balance represents shareholdings by key management personnel including their related parties as required by AASB 124: Related Party Disclosures.
Note 25 – Share based payments
The following share-based payment arrangements existed at 30 June 2007:
On 23 September 2004, 39 173 share options were granted to non-probationary employees under the Australian Ethical
Investment Ltd 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 Ltd. 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 Ltd 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 Ltd. The options hold
no voting or dividend rights.
On 22 September 2006, 45 825 share options were granted to non-probationary employees under the Australian Ethical
Investment Ltd 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 $32.50 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 Ltd. The options hold
no voting or dividend rights.
On 22 September 2006, 703 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 1,563 ordinary shares, with the same terms, were granted on
21 September 2005).
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Notes to the financial statements for the year ended 30 June 2007
Note 25 – Share based payments – continued
australianethical
Consolidated entity
Parent entity
2007
2006
2007
2006
Number
of
options
Weighted
average
exercise
price
$
Number
of
options
Weighted
average
exercise
price
$
Number
of
options
Weighted
average
exercise
price
$
Number
of
options
Weighted
average
exercise
price
$
113,946
18.91
101,865
16.13
113,946
18.91
101,865
16.13
Outstanding at the
beginning of the year
Granted
Forfeited
Exercised
Expired
Outstanding at year-end
118,995
Exercisable at year-end
-
-
45,825
(6,998)
(33,778)
32.50
25.56
14.11
43,664
(2,297)
(26,250)
(3,036)
24.82
16.12
18.26
18.26
18.91
45,825
(6,998)
(33,778)
32.50
25.56
14.11
118,995
-
-
43,664
(2,297)
(26,250)
(3,036)
24.82
16.12
18.26
18.26
18.91
25.11
113,946
25.11
113,946
-
-
-
-
-
-
There were 33 778 options exercised during the year ended 30 June 2007. The weighted average share price calculated as
at exercise dates of these options was $33.73.
The options outstanding at 30 June 2007 had a weighted average exercise price of $25.11 and a weighted average
remaining contractual life of 1.55 years. Exercise prices range from $16.28 to $32.50 in respect of options outstanding at
30 June 2007.
The weighted average fair value of the options granted during the year was $4.14.
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
$32.50
3.25 years
$29.00
22.50%
5.69%
Included under employee benefits expense in the income statement is:
$20 949 (2006: $35 392) relating to equity-settled share-based payment transactions for staff bonus; and
$96 607 (2006: $59 961) relating to options issued under the employee share ownership plan.
Note 26 – Financial instruments
(a) Financial risk management
The consolidated entity’s financial instruments consist of cash and cash equivalents (note 7), trade and other receivables
(note 8), financial assets (note 9) and trade and other payables (note 13).
The main purpose of these financial instruments is to finance the consolidated entity’s operations. The consolidated entity’s
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 consolidated 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 financial liabilities is as follows:
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Notes to the financial statements for the year ended 30 June 2007
Note 27 – Financial instruments – continued
(b) Interest rate risk – continued
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Weighted average
effective interest rate
Floating interest rate
Fixed interest rate within
1 year
2007
%
6
7
2006
%
5
7
2007
$
2006
$
2007
$
1,672,164
1,478,934
-
-
1,815,158
2,504,546
3,487,322
3,983,480
15,272
15,272
-
-
-
-
2006
$
-
-
13,859
13,859
-
-
-
-
-
-
Fixed interest rate within
1 to 5 years
2007
$
2006
$
-
-
-
158,000
158,000
174,484
174,484
-
-
-
-
Non-interest bearing
Total
2007
$
300
2006
$
2007
$
2006
$
300
1,672,464
1,479,234
1,487,185
1,038,994
1,487,185
1,038,994
-
-
1,988,430
2,692,889
1,487,485
1,039,294
5,148,079
5,211,117
1,681,284
1,352,010
1,681,284
1,352,010
1,681,284
1,352,010
1,681,284
1,352,010
Cash and cash equivalents
Trade and other receivables
Financial assets
Total financial assets
Trade and other payables
Total financial liabilities
Cash
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 27 – Change in accounting policy
The following Australian Accounting Standards issued or amended, which are applicable to Australian Ethical Investment
Ltd, but are not yet effective and have not been adopted in preparation of the financial statements at reporting date are:
AASB
Amendment
2005-10
Standard Affected
AASB 139: Financial Instruments: Recognition
and management
Nature of change in
accounting policy and
impact
Application
date of the
standard
Application
date of the
company
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
48
New Standard AASB 7: Financial Instruments: Disclosure
No change, no impact
1-Jan-07
1-Jul-07
australianethical
Directors’ declaration
The Directors of Austalian Ethical Investment Ltd declare that:
1.
the financial statements and notes, as set out on pages 26 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 2007 and of the performance for the year ended
on that date of the company and consolidated entity;
2.
the Chief Executive Officer and Chief Finance Officer have each declared:
a.
the financial records of the company for the financial year have been properly maintained in 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.
Howard Pender
Director
Dated this 31 August 2007
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Independant auditor’s report to the members of Australian
Ethical Investment Limited
We have audited the accompanying financial report of Australian Ethical Investment Limited (the company) and Australian
Ethical Investment Limited and controlled entity (the consolidated entity), which comprises the balance sheet as at 30 June
2007, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date,
a summary of significant accounting policies and other explanatory notes and the directors’ declaration of the consolidated
entity comprising the Company and the entity it controlled at the year’s end or from to time during the financial year.
As permitted by the Corporations Regulations 2001, the company has disclosed information about the remuneration
of directors and executives (remunerations disclosures), required by Accounting Standard AASB 124: Related Party
Disclosures, under the heading ‘Remuneration Report’ in pages 18 to 24 of the directors’ report and not in the financial
report.
Director’s Responsibility for the Financial Report
The Directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance
with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001.
This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of
the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors
also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that compliance with
the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the
financial statements and notes, complies with International Financial Reporting Standards.
The directors also are responsible for preparation and presentation of the remuneration disclosures contained in the
directors’ report in accordance with the Corporations Regulations 2001.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements
relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report
is free from material misstatement and that the remuneration disclosures in the directors’ report comply with Accounting
Standard AASB 124.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement
of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial
report and the remuneration disclosures in the directors’ report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
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Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditors Opinion
In our opinion:
a.
the financial report of Australian Ethical Investment Limited and Australian Ethical Investment Limited and Controlled
Entity is in accordance with the Corporations Act 2001, including:
i.
ii.
giving a true and fair view of the Company’s and Consolidated Entity’s financial position as at 30 June, 2007
and of their performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001.
b.
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1; and
c.
the remuneration disclosures that are contained on pages 18 to 24 in the directors’ report comply with Accounting
Standard AASB 124.
THOMAS DAVIS & CO.
P.L. WHITEMAN PARTNER
Chartered Accountants
Sydney,
31 August 2007
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 21 September 2007.
Twenty largest shareholders
Substantial shareholders
Substantial shareholders of ordinary shares are specified in
the table of the top twenty 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 – 1000
1001 – 5000
5001 – 10 000
10 001 – 100 000
100 000 – over
Totals
Non-marketable parcel
Holders
Units
%
632
76
12
14
1
735
1
165 483
168 922
88 167
389 275
133 262
17.509
17.873
9.329
41.188
14.100
945 109
100.000
7
Options issued under the employee options
scheme
Range
1 – 1000
1001 – 5000
5001 – 10 000
10 001 – 100 000
100 000 – over
Totals
Holders
Units
%
5
29
5
0
0
2527
80 748
34 185
0
0
2.151
68.745
29.104
0.000
0.000
39
117 460
100.000
SMF Funds
Management Ltd
160 060
16.94
Mr Howard Pender
49 634
47 681
5.25
5.05
Yes
Yes
Yes
Gang-Gang Pty Ltd
23 310
17 216
2.47
1.82
James Andrew
Thier
Caroline Margaret
Le Couteur
Mr Trevor Roland
Lee
Mrs Judith
Margaret Burton
Ms Judith Clark
Mr Bruce Allan
McGregor &
Mrs Ann Marion
McGregor
HB Sarjeant &
Assoc Pty Ltd
Dr Edward Arthur
Iceton
Daisy Thier
Denholm
Investments Pty
Ltd
Mr Peter Alexander
Anderson
Mr Michel Beuchat
& Mrs Ann Beuchat
Mr Philip Julian
Eriksen & Mr Julian
Hans Eriksen
Mrs Jane Frances
Hickling
Ms Susie Edwards
Mr Alistair David
Clark
Est Mrs Hanneliese
Claire Graf
46 923
4.96
39 174
4.14
33 683
3.56
24 912
24 447
2.64
2.59
16 500
1.75
14 474
13 690
1.53
1.45
10 833
1.15
9 667
1.02
9 292
0.98
9 000
0.95
7 941
7 622
0.84
0.81
7 347
0.78
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Corporate directory
Australian Ethical Investment Ltd
ABN 47 003 188 930
Company secretary
Philip George
Telephone:
Facsimile:
Email:
02 6201 1994
02 6201 1987
pgeorge@austethical.com.au
Postal address
GPO Box 2435
Canberra ACT 2601
Registered office / place of business
Trevor Pearcey House (Block E)
Traeger Court
34 Thynne Street
Bruce ACT 2617
www.austethical.com.au
Share registry
Registries Limited
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 Securities Exchange
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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